PCIT cannot use revision powers on cooperative society's interest income exemption under section 80P due to debatable nature

ITAT Pune held that PCIT cannot exercise revision powers u/s 263 regarding exemption of interest income earned by cooperative society from deposits with other cooperative banks or banks. The Tribunal found this constitutes a debatable issue with divergent HC opinions on eligibility for exemption u/s 80P(2)(a)(i). Following Malabar Industrial Co. Ltd precedent, revision powers cannot be exercised on debatable matters. The Tribunal consistently held such interest income qualifies for deduction u/s 80P(2)(a)(i), making any remand futile. Appeal allowed.

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Issues Involved:
The judgment involves appeals filed by two different assessees for the assessment year 2018-19 challenging the orders of the Learned Pr. Commissioner of Income Tax passed under section 263 of the Income Tax Act, 1961.

ITA No.642/PUN/2023, A.Y. 2018-19:
The appellant, a Co-operative Society, sought exemption of income earned on deposits with other banks under section 80P(2)(a)(i)/80P(2)(d) of the Act. The ld. PCIT set aside the assessment order, stating that interest income earned from non-members does not qualify for exemption. The issue before the Tribunal was the validity of the assumption of jurisdiction under section 263 by the ld. PCIT. The Tribunal referred to various High Court decisions showing a difference of opinion on the eligibility of such income for exemption. It was held that the interest income earned on fixed deposits qualifies for deduction under section 80P(2)(a)(i) of the Act. The Tribunal concluded that the power of revision cannot be exercised on a debatable issue, and the ld. PCIT was not justified in exercising the power of revision under section 263. The appeal filed by the assessee was allowed.

ITA No.598/PUN/2023, A.Y. 2018-19:
The facts and issues in this appeal were identical to ITA No.642/PUN/2023. The decision made in ITA No.642/PUN/2023 was applied mutatis mutandis to this appeal, and the appeal of the assessee in ITA No. 598/PUN/2023 for A.Y. 2018-19 was also allowed.

Conclusion:
Both appeals of the two different assessees were allowed by the Tribunal. The order was pronounced on the 11th day of July, 2023.

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