2023 (1) TMI 783 - HC - Income Tax

Revision u/s 263 - claim of deduction u/s 80P - Tribunal quashing the order passed u/s 263 - HELD THAT -Tribunal took note of the decision of the high Court of Karnataka in the case of GUTTI GEDERARA COOPERATIVE SOCIETY LTD 2015 (7) TMI 874 - KARNATAKA HIGH COURT and held that when the amount which is deposited in the bank was not an amount due to members and it was not the liability of the society to the members then the interest earned from the deposits in the bank was held to be eligible for deduction under Section 80P (2)(a)(i) of the Act. Tribunal has also extensively gone into the manner in which the assessing officer completed the assessment by conducting inquiry after issuing a questionnaire on the deduction claimed by the assessee under Section 80P(2)(a)(i) and also taking note of the detailed report filed by the assessee. Tribunal noted that the documents placed by the assessee before it clearly demonstrates the nature of activity carried on by the assessee resulting in different business income which is covered by the Tribunal of 80P(2)(a)(i). In this regard reliance was placed on High Court of Bombay in the case of GABRIEL INDIA LTD 1993 (4) TMI 55 - BOMBAY HIGH COURT Further as to the justification on the part of the PCIT to invoke its power under Section 263 Tribunal took guidance from the decision of the High Court at Delhi in the case of ITO Vs.DG HOUSING PROJECTS LTD. 2012 (3) TMI 227 - DELHI HIGH COURT wherein it was held that in the case wrong opinion for finding on merit, the CIT has to come to the conclusion himself decided that the order is erroneous by conducting necessary inquiry. Further, it was pointed out that CIT while exercising jurisdiction under Section 263 of the Act should record a finding that the assessment order is erroneous and prejudicial to the interest of revenue and it is not sufficient to allege that the investigation was inadequate. On facts, the learned Tribunal formed that the PCIT has not carried out any enquiry of his own and merely set aside the assessment and remanded it to the Assessing Officer to pass a fresh assessment order on the issue of claim of deduction under Section 80B(2)(a)(i) of the Act and this being contrary to the decision rendered in the case of DG Housing Projects Limited, allowed the appeal and quashed the order passed under Section 263 of the Act. Thus, we find that the learned Tribunal had rightly taken note of the legal position and granted relief to the assessee. Hence, we are of the view that there is no error in the order passed by the Tribunal for us to interfere and much less, there is no substantial question of law arising for consideration.

Summary

Issues:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Eligibility of interest income for deduction under Section 80P of the Income Tax Act, 1961.

Jurisdiction under Section 263 of the Income Tax Act, 1961:
The High Court considered the appeal filed by the revenue challenging the order passed by the Income Tax Appellate Tribunal. The Tribunal noted that during the assessment proceeding, the assessing officer issued a questionnaire under Section 142(1) of the Act to the assessee regarding the claim of deduction under Section 80P. The assessing officer restricted the deduction under Section 80P to the business income after considering the reply submitted by the assessee. The Principal Commissioner of Income Tax (PCIT) invoked jurisdiction under Section 263 primarily based on the decision in a specific case regarding interest income from surplus funds. The assessee submitted a detailed reply citing relevant case laws to support their position. The Tribunal analyzed the submissions and found that the PCIT's decision was not justified as it did not conduct a proper inquiry and merely remanded the assessment back to the assessing officer without sufficient grounds. The Tribunal referred to various judgments to support its decision, ultimately quashing the order passed under Section 263.

Eligibility of interest income for deduction under Section 80P of the Income Tax Act, 1961:
The Tribunal extensively reviewed the facts and arguments presented by both parties regarding the eligibility of interest income for deduction under Section 80P. The assessee relied on specific judgments to support their claim, emphasizing that the interest income from deposits with banks should qualify for deduction under Section 80P. The Tribunal distinguished the case cited by the PCIT and found that the facts aligned more with another case where interest income was considered eligible for deduction under Section 80P. Additionally, the Tribunal examined the assessing officer's inquiry process and the documents provided by the assessee to determine the nature of the income. By referencing relevant case laws, the Tribunal concluded that the assessing officer's assessment was appropriate, and the interest income in question should indeed qualify for deduction under Section 80P. The Tribunal's decision was further supported by the legal position and precedents, leading to the dismissal of the appeal.

In conclusion, the High Court upheld the Tribunal's decision, finding no error or substantial question of law warranting interference. The appeal was dismissed, and the order passed under Section 263 was quashed.