Repayment of charitable loan can be application of income, and revision fails where the assessment view is plausible.

Repayment of a loan originally borrowed to acquire assets used for charitable activities can constitute application of income where the funds were used for the charitable objects. On that basis, the Tribunal held that the Assessing Officer had taken a plausible view in allowing the claim, so the assessment order was not erroneous or prejudicial to the interests of the Revenue. Revisionary jurisdiction was therefore not warranted, and the revision order was quashed while the assessment order was restored.

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Issues: Whether repayment of loan, originally borrowed for acquiring assets used for charitable activities, constituted application of income; and whether the revision under section 263 was sustainable.

Analysis: The assessee had borrowed funds for acquiring assets used in charitable activities and had claimed depreciation on those assets. In the relevant year, repayment of that loan was claimed as application of income. The Tribunal accepted that such repayment was a permissible application of income, following the ratio of the cited precedent. Since the assessment order had properly considered the issue, it was neither erroneous nor prejudicial to the interests of the Revenue, and invocation of revisionary jurisdiction was unwarranted.

Conclusion: The revisionary order was unsustainable and was quashed. The assessee succeeded.

Final Conclusion: The assessment order was restored and the assessee's appeal was allowed.

Ratio Decidendi: Repayment of a loan borrowed for acquiring assets used for charitable purposes can constitute application of income, and where the Assessing Officer has taken a plausible view on the issue, revision under section 263 of the Income-tax Act, 1961 is not justified.

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