2023 (11) TMI 245 - AT - Income Tax

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

Shri Bangadas Swami Shikshan Vikas Mandal Sevak Sahakari Patasanstha Maryadit Versus PCIT-3, Pune

ITAT Pune held that PCIT cannot exercise revision powers u/s 263 regarding exemption of interest income earned by cooperative society from deposits with ... Revision u/s 263 - exemption of interest income earned by the assessee co-operative society from other co-operative banks or other banks - debatable issue - diversified view on topic - HELD THAT:- There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i). As decided in M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit [2018 (12) TMI 1926 - ITAT PUNE] interest income earned on fixed deposits with bank partake of the business income which is eligible for deduction u/s 80P(2)(a)(i) Fact of existence of debate on the issue of taxability of the interest income earned on the deposits made with other co-operative banks or other banks proved. Therefore, in the light of the law settled in the case of Malabar Industrial Co. Ltd [2000 (2) TMI 10 - SUPREME COURT] the power of revision cannot be exercised by the ld. PCIT in exercising of power vested with him u/s 263 in respect of debatable issue. Even assuming for a moment, there is failure on the part of the Assessing Officer to examine the issue of taxability of interest earned on deposits made with co-operative banks or other banks, in our considered opinion, the power of revision cannot be exercised by ld. PCIT in view of the fact that even on remand to the Ao, AO is barred from taking a view against the assessee in view of the consistent view taken by this Tribunal that such interest income qualifies for deduction u/s 80P(2)(a)(i). Thus, the order of remand by this Tribunal would be futile exercise, nothing but a useless formality. We are of the considered opinion that PCIT was not justified in exercising the power of revision vested with him u/s 263 of the Act in the facts of the present case. Accordingly, the appeal filed by the assessee stands allowed. 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.