2024 (1) TMI 693 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P(2)(d) - interest income received by the assessee cooperative society on deposits placed with Yamuna Nagar Central Co-op Bank Ltd. - HELD THAT - In the present case, there is no dispute that the assessee is a Co- Operative Society. There is also no dispute that Yamuna Nagar Central Co-op Bank Ltd. is also a Co-operative society. Further, during the course of assessment proceedings, we find that the AO while examining the claim of the assessee under Section 80P observed that out of total claim of Rs 76,77,246/-, the assessee has claimed Rs 50,25,234/- under section 80P(2)(d) of the Act. AO noted that said claim under section 80P(2)(d) consist of dividend income from KHRIBHCO, IFFCO and HAFED, interest income on deposits placed with HDFC Bank, ICICI Bank, AXIS Bank and Yamuna Nagar Central Co-operative Bank Ltd and referring to the provisions of section 80P(2)(d) of the Act, a show-cause was issued as to why claim of deduction in respect of interest income on deposits placed with HDFC Bank, ICICI Bank, AXIS Bank should not be disallowed and thereafter, after considering the submissions of the case, has returned a finding that such interest income has not been earned from any other Cooperative society but from Scheduled commercial banks and the deduction so claimed from Scheduled commercial banks was denied and while doing so, the AO has allowed the claim of deduction in respect of Yamuna Nagar Central Cooperative Bank Ltd, being the deduction in respect of interest income on deposits with any other Co-operative Society. We therefore find that the AO has duly examined the facts of the present case and has allowed the deduction in respect of interest income received from the Yamuna Nagar Central Co-op Bank Ltd. as being in compliance with the provisions of Section 80P(2)(d) of the Act. Where the facts in the present case and legal position is not in dispute, we therefore don t understand how the ld PCIT in the same breath hold that the assessee shall not be eligible for claim of deduction under section 80P(2)(d) of the Act. In the instant case, we therefore find that it is not relevant to examine whether interest income is earned from any specified co-operative activity or it is a case of deployment of surplus funds by the assessee society so long as the interest income is earned from deposits placed with a co-operative society. Where the AO has allowed the claim of the assessee under section 80P(2)(d) of the Act after due examination of the facts of the case, he has rightly followed the dicta laid down by the Hon ble Jurisdictional High Court and therefore, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of Revenue. We find that there is no legal and justifiable basis to invoke the provisions of section 263 by the ld PCIT and therefore, the order so passed u/s 263 is hereby set-aside and that of the AO who has rightly allowed the deduction u/s 80(P)(2)(d) is sustained. Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Deduction under Section 80P(2)(d) on interest income.
3. Substitution of opinion by the Principal Commissioner of Income Tax (PCIT).
4. Consideration of submissions by the PCIT.
5. Correctness of the assessment order.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee argued that the Principal Commissioner of Income Tax (PCIT) wrongly assumed jurisdiction under Section 263 to set aside the assessment order dated 13.03.2021, as the order was neither erroneous nor prejudicial to the interest of Revenue. The PCIT held that the Assessing Officer (AO) erred in not correctly appreciating the decision of the Hon'ble Supreme Court and other High Courts, and thus the assessment order was erroneous and prejudicial to the interest of Revenue.

2. Deduction under Section 80P(2)(d) on Interest Income:
The assessee, a cooperative society, claimed a deduction under Section 80P(2)(d) for interest income received from deposits with Yamuna Nagar Central Co-op Bank Ltd. The AO allowed this deduction, but the PCIT contended that the AO did not properly consider the relevant judicial decisions and the nature of the funds (idle/surplus) used for earning the interest. The Tribunal found that the AO had duly examined the facts and allowed the deduction in compliance with Section 80P(2)(d).

3. Substitution of Opinion by the PCIT:
The assessee argued that the PCIT merely substituted her opinion over the plausible opinion taken by the AO, which was arbitrary and unjustified. The Tribunal agreed with the assessee, noting that the AO had followed the relevant judicial precedents and the provisions of Section 80P(2)(d).

4. Consideration of Submissions by the PCIT:
The assessee contended that the PCIT failed to consider the various replies and submissions placed on record correctly. The Tribunal observed that the AO had thoroughly examined the claim of deduction under Section 80P(2)(d) during the assessment proceedings and had allowed the deduction based on a detailed analysis of the facts and applicable legal provisions.

5. Correctness of the Assessment Order:
The Tribunal held that the AO's order was not erroneous or prejudicial to the interest of Revenue. The AO had correctly allowed the deduction under Section 80P(2)(d) after due examination of the facts and legal position. The Tribunal found no legal and justifiable basis for the PCIT to invoke the provisions of Section 263.

Conclusion:
The Tribunal set aside the order passed by the PCIT under Section 263 and sustained the AO's order, allowing the deduction under Section 80P(2)(d). The appeal of the assessee was allowed.

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