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2022 (4) TMI 394 - AT - Income TaxRevision u/s 263 - Deduction u/s.80P(2)(a)(i) - HELD THAT - Adverting to the view taken by the Pr. CIT that the interest income earned by the assessee society on its deposits with scheduled banks would not be eligible for deduction u/s.80P(2)(a)(i) we are unable to persuade ourselves to subscribe to the view so arrived at by the Pr. CIT. In our considered view the issue in hand i.e., as to whether or not interest income on deposits with the scheduled banks would be eligible u/s.80P(2)(a)(i) has been subjected to two schools of thoughts at the relevant point of time when the assessment order was passed by the AO. In so far the interest income arises from short-term deposit of money for which there are no takers at the relevant point of time, the same had been held to be duly eligible for deduction u/s.80P(2)(a) (i). We are of the considered view, that now when the issue in hand is a debatable one and the AO had taken one of the plausible view, therefore, the same could not be held as erroneous in so far it is prejudicial to the interest of the revenue by the Pr. CIT in exercise of his jurisdiction u/s.263 - we are of the considered view that now when the AO had taken one of the plausible view qua the issue in hand i.e. entitlement of the assessee co-operative society for deduction of interest income earned on deposits with scheduled banks u/s. 80P(2)(a)(i) of the Act, therefore, the same could not have been revised by the Pr. CIT u/s.263 - We, thus, in terms of our aforesaid observations set-aside the order passed by the Pr. CIT u/s.263 qua the aforesaid issue in hand. Deduction of delayed deposit of employees share of contribution towards PF u/s.36 (i)(va) - Deduction for payment of employees contribution cannot be disallowed in case the contribution to the employee s welfare fund was credited on or before the due date of filing of return of income by the assessee. Backed by the aforesaid position of law, we are of the considered view that the Pr. CIT had wrongly held that the failure on the part of the AO to add back the delayed deposit of the employees share of contribution towards PF that was disallowable u/s.36(1)(va) of the Act, had rendered his order as erroneous in so far it was prejudicial to the interest of the revenue u/s 263 of the Act. We, thus, in terms of our aforesaid observations not being able to persuade ourselves to subscribe to the view taken by the Pr. CIT qua the aforesaid issue in hand, thus, set-aside the same to the said extent. We not being able to uphold the order passed by the Pr.CIT u/s. 263 as regards either of the aforesaid three issues on the basis of which he had held the assessment order passed by the AO u/s. 143(3), dated 09.02.2016 was erroneous in so far it was prejudicial to the interest of the revenue, thus, set aside the order passed by him u/s.263 and restore the order passed by the AO u/s.143(3).
Issues Involved:
1. Legality of the Pr. CIT's order under Section 263 of the Income-tax Act, 1961. 2. Eligibility of deduction under Section 80P(2)(a)(i) for transactions with nominal members. 3. Eligibility of deduction under Section 80P(2)(a)(i) for interest income from deposits with scheduled banks. 4. Disallowance of delayed deposit of employees' contribution towards Provident Fund under Section 36(1)(va). Detailed Analysis: Issue 1: Legality of the Pr. CIT's order under Section 263 of the Income-tax Act, 1961 The main contention is whether the Pr. CIT was justified in revising the assessment order under Section 263, deeming it erroneous and prejudicial to the interests of the revenue. The assessee argued that the original assessment order was neither erroneous nor prejudicial and that the Pr. CIT's invocation of Section 263 was unwarranted. Issue 2: Eligibility of deduction under Section 80P(2)(a)(i) for transactions with nominal members The Pr. CIT argued that nominal members are not real members, thus transactions with them should not qualify for the deduction under Section 80P(2)(a)(i). The assessee countered that under the Maharashtra Co-operative Societies Act, 1960, nominal members are considered members. The Tribunal observed that the Supreme Court's judgment in Citizen Co-operative Society Ltd. was distinguishable because it dealt with a different state act where nominal members were not included. Therefore, the Tribunal held that transactions with nominal members are eligible for deduction under Section 80P(2)(a)(i), setting aside the Pr. CIT's view. Issue 3: Eligibility of deduction under Section 80P(2)(a)(i) for interest income from deposits with scheduled banks The Pr. CIT held that interest income from deposits with scheduled banks was not eligible for deduction under Section 80P(2)(a)(i). The Tribunal noted that there were two schools of thought on this issue and that the Assessing Officer had taken a plausible view. The Tribunal referred to the Karnataka High Court's judgment in Tumkur Merchants Souharda Cooperative Ltd., which allowed such deductions. Given the debatable nature of the issue, the Tribunal ruled that the Pr. CIT could not invoke Section 263 to revise the assessment order. Issue 4: Disallowance of delayed deposit of employees' contribution towards Provident Fund under Section 36(1)(va) The Pr. CIT argued that the Assessing Officer failed to disallow the deduction for delayed deposits of employees' PF contributions, rendering the order erroneous. The Tribunal referred to the Supreme Court's judgment in CIT vs. Alom Extrusions Ltd., which allowed such deductions if payments were made before the due date of filing the return. The Tribunal also cited the Bombay High Court's judgment in CIT vs. Ghatge Patil Transports Ltd., which supported the same view. Thus, the Tribunal concluded that the Pr. CIT's view was incorrect and set aside this part of the order as well. Conclusion: The Tribunal set aside the Pr. CIT's orders under Section 263 for both assessment years 2013-14 and 2014-15, restoring the original assessment orders passed by the Assessing Officer. The appeals of the assessee were allowed in full, with the Tribunal ruling that the original assessment orders were neither erroneous nor prejudicial to the interests of the revenue.
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