Section 263 revision fails where exemption under section 10(23C)(iiiab) was allowed on a tenable view and later rules were applied retrospectively.

Revision under section 263 was not justified where the Assessing Officer had examined the exemption claim under section 10(23C)(iiiab) and adopted a legally tenable view based on the institution's financing pattern. Interest earned on government grants was treated as part of the grant for determining substantial Government financing, and Rule 2BBB could not be applied retrospectively to the year in question. On these facts, the assessment was neither erroneous nor prejudicial to the interests of Revenue, so the revisionary order was quashed and the exemption claim was upheld.

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Issues: Whether the Commissioner was justified in invoking revision under section 263 by holding that the assessment allowing exemption under section 10(23C)(iiiab) was erroneous and prejudicial to the interests of Revenue.

Analysis: The assessment order had examined the relevant facts and accepted the exemption claim after considering the financing pattern of the institution. The interest earned on government grants was treated as part of the grant for the purpose of determining whether the institution was substantially financed by the Government. The threshold introduced through Rule 2BBB could not be applied retrospectively to the assessment year in question. On the facts, the assessment order was neither erroneous nor prejudicial to the interests of Revenue, and the Commissioner's contrary view rested on an incorrect exclusion of interest income and an impermissible retrospective application of the rule.

Conclusion: The invocation of revision under section 263 was not sustainable and was quashed.

Final Conclusion: The assessee's exemption claim under section 10(23C)(iiiab) stood upheld, and the revisionary interference was set aside.

Ratio Decidendi: For section 263 to be validly invoked, the assessment order must be both erroneous and prejudicial to the interests of Revenue; where the Assessing Officer adopts a legally tenable view on exemption and the Commissioner seeks to disturb it by retrospectively applying a later rule and excluding interest on grants, revision is not warranted.

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