2022 (7) TMI 79 - AT - Income Tax

Revision u/s 263 by CIT - Eligibility for deduction u/s 80P - assessee being credit society was eligible for deduction under section 80P(2)(i)(a) of the Act for interest income earned from credit facilities provided to its members only. However, the interest income from fixed deposit made with Co-operative bank is not allowable deduction under section 80P(2)(a)(i) - HELD THAT - As the different Hon ble High Courts have taken different view with respect to the deduction of the interest income earned by the assessee from the co-operative bank. Some of the judgements are in favour of the assessee and some of them are against the assessee. It is also an admitted fact that the Hon ble High Court of Gujarat is in favour of the assessee with respect to the interest on deposits made with the co-operative bank. As per SABARKANTHA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD 2014 (6) TMI 977 - GUJARAT HIGH COURT it is transpired that the AO has taken one of the possible view for allowing the deduction to the assessee under the provisions of section 80P(2)(d)/80P(2)(a)(i)(a) of the Act. Where two view are possible on the issue and the AO has taken one of the possible view, but the PCIT do not agree with the view adopted by the AO, in such scenario, the order of the AO cannot be held erroneous. We find no error in the order of AO so as to justify the initiation of proceedings under section 263 of the Act by the Ld. Pr. CIT. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quashed the same. Hence, the ground of appeal of the assessee is hereby allowed.

Summary

Issues Involved:
Jurisdiction under section 263 of the Income Tax Act for assessment year 2012-13.

Detailed Analysis:

1. Assessment Jurisdiction under Section 263:
The Assessee appealed against the order of the Principal Commissioner of Income Tax, Rajkot, challenging the assumption of jurisdiction under section 263 of the Income Tax Act. The grounds of appeal included contentions regarding the jurisdictional error and lack of proper inquiries by the Assessing Officer (AO) regarding the eligibility of deductions claimed under section 80P(2)(a)(i)/(d) of the Act. The Assessee argued that the issue was duly examined during assessment proceedings under section 143(3) of the Act, and the case was reopened specifically for verification of the deductions. The Tribunal granted an early hearing date based on administrative orders prioritizing appeals against section 263 orders.

2. Eligibility of Deductions under Section 80P:
The core issue revolved around the eligibility of deductions claimed by the Assessee under section 80P(2)(a)(i)/(d) of the Act concerning interest income earned from fixed deposits with Co-operative Banks. The AO had accepted the Assessee's claim, but the Principal Commissioner held that the interest income from fixed deposits did not qualify for deductions under section 80P(2)(a)(i) as it was not derived from providing credit to members. The Principal Commissioner cited legal precedents and statutory provisions to support the disallowance, asserting that the AO's decision was erroneous and prejudicial to revenue interests.

3. Judicial Precedents and Discrepancies:
The Assessee cited judgments from different High Courts supporting the eligibility of interest income from Co-operative Banks for deductions under section 80P(2)(d) of the Act. The Assessee argued that the AO's decision was based on a plausible interpretation of the law, and therefore, the assessment could not be deemed erroneous. The Tribunal noted conflicting views among High Courts on the issue but relied on a Gujarat High Court judgment to support the Assessee's position. The Tribunal emphasized that when two reasonable views exist, the AO's decision cannot be considered erroneous unless it is unsustainable in law.

4. Conclusion and Tribunal Decision:
After considering the arguments and legal precedents, the Tribunal concluded that the AO had taken a valid view in allowing the deductions claimed by the Assessee under section 80P(2)(d)/(a)(i) of the Act. The Tribunal found no error in the AO's order that warranted the initiation of section 263 proceedings by the Principal Commissioner. Therefore, the Tribunal allowed the Assessee's appeal, quashing the revisional order passed by the Principal Commissioner. The Tribunal pronounced the order in favor of the Assessee on 31/05/2022 at Ahmedabad.