2022 (9) TMI 341 - AT - Income Tax

Revision u/s 263 by CIT - Eligibility of deduction u/s 80P on interest income - appellant society earned interest income on investments made with cooperative banks - PCIT was of the opinion that the cooperative bank does not fall under the purview of a cooperative society and therefore the interest income earned from such cooperative bank does not qualify for deduction u/s 80P(2)(d) - HELD THAT - The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited 2021 (12) TMI 1259 - ITAT PUNE . Similarly, as regards to the disallowance of provision for expenses, without going into the merits of the disallowance sought to be made by the ld. PCIT, it would suffice to say that disallowance, if any, shall increase the business profits of the appellant cooperative society. The business profits so inflated shall qualify for exemption u/s 80(2)(a)(i) of the Act. Therefore, even assuming for a moment that the provisions for exemption warrant addition, it does not result into an enhancement of assessed income warranting a revision.Issues which are subject matter of revision, are either covered in favour of the assessee by judicial precedents nor results into any enhancement of assessed income warranting a revision. Thus we are of the considered opinion that the order of revision passed by the ld. PCIT u/s 263 of the Act cannot be sustained in the eyes of law. Hence, the grounds of appeal raised by the assessee stand allowed.

Summary

Issues:
Jurisdiction under section 263 - Validity of assumption of jurisdiction.

Analysis:

Issue: Jurisdiction under section 263 - Validity of assumption of jurisdiction

The appeal was filed against the order of the Principal Commissioner of Income Tax-1, Aurangabad, passed under section 263 of the Income Tax Act, 1961 for the assessment year 2014-15. The appellant, a cooperative society, earned interest income from investments made with cooperative banks and claimed exemption under section 80P(2) of the Act. The Principal Commissioner found that the interest income from cooperative banks did not qualify for deduction under section 80P(2)(d) as the cooperative bank was not considered a cooperative society. Additionally, a provision for expenses was made by the appellant, with part of it being disallowed. The Principal Commissioner set aside the assessment order for a fresh assessment, considering it erroneous and prejudicial to revenue interests.

Upon review, the ITAT Pune found that the interest income earned from cooperative banks by the cooperative society qualified for deduction under section 80P(2)(d) and exemption under section 80P(2)(a)(i). Citing judicial precedents, the ITAT Pune highlighted that such interest income was attributable to the activities of the society and eligible for exemption. Regarding the provision for expenses, the ITAT Pune noted that any disallowance would increase the business profits of the appellant, which would still qualify for exemption under section 80P(2)(a)(i). Therefore, even if the provision was to be disallowed, it would not result in an enhancement of the assessed income warranting revision under section 263.

Ultimately, the ITAT Pune held that the order of revision passed by the Principal Commissioner under section 263 could not be sustained in the eyes of the law. The grounds of appeal raised by the assessee were allowed, and the appeal was allowed in favor of the appellant.

In conclusion, the ITAT Pune's detailed analysis focused on the validity of the assumption of jurisdiction under section 263, emphasizing the eligibility of interest income from cooperative banks for deduction and exemption under relevant sections of the Income Tax Act. The judgment highlighted the importance of judicial precedents in determining the applicability of exemptions and deductions, ultimately leading to the allowance of the appeal filed by the assessee.