2021 (5) TMI 446 - AT - Income Tax

Tribunal Invalidates Revision Order, Allows Deduction for Interest Income

The Tribunal held that the revision order under section 263 was not valid as the Assessing Officer had taken a reasonable view. Additionally, it affirmed ... Revision u/s 263 - Deduction u/s 80P(2)(d) - assessee submits that the assessee earned interest from its investment in cooperative bank - HELD THAT:- Considering the legal position that when there are conflicting decisions of non-jurisdictional High Courts, on similar issue, the decision of Jurisdictional High Court is having binding precedent. Thus, keeping in view of the decision Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] wherein the assessee-co-operative society is held eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank, we conclude that the order passed by assessing officer is not erroneous. Hence, the grounds of appeal raised by assessee are allowed. Issues Involved:1. Validity of the revision order under section 263 of the Income-tax Act.2. Eligibility of interest income from deposits with cooperative banks for deduction under section 80P(2)(d) of the Income-tax Act.Issue-wise Detailed Analysis:1. Validity of the revision order under section 263 of the Income-tax Act:The primary issue is whether the Principal Commissioner of Income Tax (PCIT) was justified in revising the assessment order under section 263 of the Income-tax Act. The PCIT issued a show cause notice to the assessee, noting that the interest income of Rs. 6.14 crore earned from deposits with cooperative and private banks did not qualify for exemption under section 80P(2)(d). The PCIT held that the assessment order dated 18.02.2016 was erroneous and prejudicial to the interests of the Revenue.The assessee contended that the Assessing Officer (AO) had examined the issue in detail during the assessment proceedings and allowed the deduction under section 80P(2)(d) after considering all relevant evidence. The assessee argued that the AO's decision was based on a reasonable and possible view, and thus, the revision under section 263 was not valid.The Tribunal noted that the AO had indeed made inquiries regarding the deduction under section 80P(2)(d) during the assessment proceedings and had taken a reasonable view. The Tribunal emphasized that for a revision under section 263 to be valid, it must be shown that the assessment order was both erroneous and prejudicial to the interests of the Revenue. Since the AO had taken a permissible view, the Tribunal held that the revision order under section 263 was not justified.2. Eligibility of interest income from deposits with cooperative banks for deduction under section 80P(2)(d) of the Income-tax Act:The second issue revolves around whether the interest income earned by the assessee from deposits with cooperative banks qualifies for deduction under section 80P(2)(d). The PCIT relied on the Supreme Court's decision in Totagars Co-operative Sale Society and the Karnataka High Court's decision in CIT vs. Totagars Cooperative Sale Society (2017), which held that cooperative societies are not eligible for deduction of interest earned on deposits with cooperative banks under section 80P(2)(d).The assessee argued that the interest income from cooperative banks was eligible for deduction under section 80P(2)(d), citing various Tribunal and High Court decisions, including the jurisdictional Gujarat High Court's decision in Surat Vankar Sahakari Sangh vs. ACIT, which held that cooperative societies are eligible for deduction on interest income from deposits with cooperative banks.The Tribunal considered the conflicting decisions from different High Courts and emphasized the binding nature of the jurisdictional High Court's decision. The Tribunal noted that the Gujarat High Court had held that interest income from deposits with cooperative banks is eligible for deduction under section 80P(2)(d). Therefore, the Tribunal concluded that the AO's decision to allow the deduction was not erroneous.Conclusion:The Tribunal held that the revision order under section 263 was not valid as the AO had taken a reasonable and permissible view. Furthermore, the Tribunal affirmed that the interest income from deposits with cooperative banks qualifies for deduction under section 80P(2)(d), in line with the jurisdictional High Court's decision. Consequently, the appeal of the assessee was allowed.