The Erumely Service Co-op Bank Ltd, Kottayam V. The Principal Commissioner of Income Tax, Kottayam

ITA 8/COCH/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7267 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 14-01-2016
• Court: TRIBUNAL
• Department Lawyers: SHANTHOM BOE
• Keywords: Business income; Transfer pricing; Proportionate interest
• Section: 56; 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : COCHIN BENCH : KOCHI. [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMB ER AND SHRI GEORGE GEORGE. K., JUDICIAL MEMBER] ./I.T.A. NO. 08/COCH/2016. / ASSESSMENT YEAR : 2008-2009. M/S. THE ERUMELY SERVICE CO-OPERATIVE BANK LTD, NO.K.113, ERUMELY (P.O) KOTTAYAM 686 509. [ PAN AACCT 8991Q ] VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOTTAYAM. ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. PRASANTH SRINIVAS, C.A. /RESPONDENT BY : SHRI. SHANTHOM BOE, CIT, D. R /DATE OF HEARING : 20 - 03 - 201 7 /DATE OF PRONOUNCEMENT : 22 - 03 - 201 7 !' !' !' !' / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER DATED 11.08.2015 OF PRINCIPAL COMMISSIONER OF INCOME TAX, KOTTAYAM PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. APPEAL HAS BEEN FILED BY THE ASSESSEE WITH A DELAY OF NINETY SIX DAYS. IN THE PETITION SEEKING CONDONATI ON OF THE DELAY, IT IS ITA NO. 08/COCH/2016 :- 2 -: STATED BY THE ASSESSEE THAT THEY WERE NOT HAVIN G ANY PROFESSIONAL EMPLOYEES FOR HANDLING THEIR TAX MATTERS. AS PER T HE ASSESSEE, ONLY WHEN IT ENGAGED A CHARTERED ACCOUNTANT FOR TAX AUDI T, THE NEED FOR FILING AN APPEAL AGAINST THE ORDER OF THE PRINCIPA L COMMISSIONER OF INCOME TAX, U/S.263 OF THE ACT WAS BROUGHT TO ITS N OTICE. AS PER LD. AUTHORISED REPRESENTATIVE DELAY WAS NOT INTENTIONA L BUT ONLY DUE TO LACK OF PROFESSIONAL ADVICE. 3. OPPOSING THE CONDONATION PETITION, LD. DEPARTMENTA L REPRESENTATIVE SUBMITTED THAT THE REASONS GIVEN BY THE ASSESSEE WERE VAGUE. 4. WE HAVE HEARD THE CONTENTIONS WITH REGARD TO THE CONDONOTION PETITION. REASON CITED BY THE ASSESSEE IS THAT IT CAME TO KNOW OF THE REQUIREMENT TO FILE AN APPEAL AGAINST T HE ORDER U/S.263 OF THE ACT ONLY AFTER IT APPOINTED A CHARTERED ACCOUN TANT FOR TAX AUDIT AND TRANSFER PRICING AUDIT. IN THE FACTS AND CIRCU MSTANCES OF THE CASE, WE ARE OF THE OPINION THAT SUFFICIENT AND REASONABL E CAUSE HAS BEEN SHOWN BY THE ASSESSEE FOR THE DELAY. DELAY IS CO NDONED. APPEAL IS ADMITTED. ITA NO. 08/COCH/2016 :- 3 -: 5. FACTS APROPOS ARE THAT ASSESSEE HAD ORIGINALLY DEC LARED NIL INCOME IN THE RETURN FILED FOR THE IMPUGNED ASSESSM ENT YEAR AFTER CLAIMING DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. ASS ESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 14.12.2010 ACCEP TING NIL INCOME RETURNED BY THE ASSESSEE. THEREAFTER ON 30.11.201 2 A NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASSESSEE FOR REOPENIN G THE ASSESSMENT. REOPENING WAS RESORTED FOR A REASON THAT ASSESSEE HAD CREDITED INTEREST INCOME OF RS.29,70,416/- AS A PART OF ITS BUSINESS RECEIPT IN ITS PROFIT AND LOSS ACCOUNT. AS PER LD. ASSESSING OFFIC ER SUCH INTEREST ON TERM DEPOSITS HAD TO BE ASSESSED UNDER THE HEAD I NCOME FROM OTHER SOURCES THEREBY RESTRICTING THE CLAIM FOR DEDUCTI ON U/S.80P OF THE ACT. IN PURSUANCE TO SUCH NOTICE, ASSESSEE FILED A RETU RN WHEREIN IT DECLARED A NET PROFIT OF RS.10,59,889/- AGAINST L OSS OF RS.17,30,373/- SHOWN IN THE PROFIT AND LOSS ACCOUNT FILED ALONGWI TH THE ORIGINAL RETURN. LD. ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS NOTED THAT ASSESSEE WAS IN RECEIPT OF INTEREST FROM VARIOUS INSTITUTIONS FOR DEPOSITS PLACED BY IT IN SUCH INSTITUTIONS. AS PER LD. ASSESSING OFFICER SUCH INTEREST INCLUDED A SUM RS.5,44,500/- RECEIVED FROM TREASURY, KOTTAYAM. IT SEEMS THE BALA NCE OF INTEREST WAS RECEIVED BY THE ASSESSEE FROM VARIOUS CO-OPERA TIVE SOCIETIES. LD. ASSESSING OFFICER PROPOSED TO CONSIDER INTEREST INC OME OF ITA NO. 08/COCH/2016 :- 4 -: RS.5,44,500/- UNDER THE HEAD INCOME FROM OTHER S OURCES. THOUGH THE ASSESSEE SUBMITTED THAT SUCH DEPOSITS WERE PLA CED AS PER THE DIRECTIONS OF THE GOVERNMENT, LD. ASSESSING OFFICER TOOK A VIEW THAT THERE WAS NO SUCH INSTRUCTION FROM GOVERNMENT AVAIL ABLE ON RECORD. RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN TH E CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS. ITO 322 ITR 283, LD. ASSESSING OFFICER HELD THAT INTEREST ON DEPOSITS WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S. 80P(2) OF THE ACT, SINCE THIS WAS NO T ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE. ACCORDING TO HIM, INTERE ST WOULD BE ALLOWABLE AS A DEDUCTION ONLY IF IT WAS RECEIVED FR OM OTHER CO- OPERATIVE SOCIETIES U/S. 80P(2)(D) OF THE ACT. ASS ESSEE DID REQUEST LD. ASSESSING OFFICER TO SET OFF A PORTION OF ITS INTER EST EXPENDITURE PAID TO ITS DEPOSITORS, AGAINST SUCH INTEREST INCOME. AS PER ASSESSEE INTEREST EARNING DEPOSITS PLACED BY IT IN TREASURY WAS OUT OF DEPOSITS RECEIVED BY IT FROM ITS MEMBERS. CLAIM OF THE ASSE SSEE WAS THAT IT HAD PAID INTEREST OF RS.1,25,12,800/- TO ITS DEPOSI TORS DURING THE RELEVANT PREVIOUS YEAR AGAINST TOTAL DEPOSITS OF RS .15,57,94,539/- AS ON 31.03.2008. LD. ASSESSING OFFICER WORKED OUT A PROPORTIONATE INTEREST EXPENDITURE OF RS.2,60,975/- AND ALLOWED I T AS A DEDUCTION AGAINST THE INTEREST INCOME OF RS.5,44,500/-. BALA NCE OF RS.2,83,525/- WAS CONSIDERED UNDER THE HEAD INCOME FROM OTHER S OURCES AND HELD ITA NO. 08/COCH/2016 :- 5 -: AS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) (A) OR 80P (2)(D) OF THE ACT. 6. ON 07.04.2015, A NOTICE U/S.263 OF THE ACT WAS ISS UED BY THE COMMISSIONER OF INCOME TAX TO THE ASSESSEE. IN THE SAID NOTICE, IT WAS MENTIONED THAT ASSESSEE WAS GIVEN DEDUCTION OF RS.50,000/- U/S.80P(2) (C) (II) OF THE ACT, THOUGH ITS TRADING BUSINESS INCURRED A LOSS OF RS.1,11,097.76. SECONDLY AS PER LD. CIT AN AMOUNT OF RS.2,60,975/- WAS WRONGLY ALLOWED AS INTEREST EXPEN DITURE AGAINST INTEREST INCOME OF RS.5,44,500/- WHILE COMPUTING IN COME UNDER THE HEAD INCOME FROM OTHER SOURCES. AS PER LD. CIT , ASSESSEES INTEREST EXPENDITURE OF RS.2,60,975/- ALLOWED FOR SET OFF, INCLUDED THOSE RELATING TO THE PERIOD 01.04.2001 TO 31.03.2007 ALS O. ACCORDING TO LD. CIT THESE WERE PRIOR PERIOD EXPENDITURE, AND NOT AL LOWABLE SINCE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING. AS PER LD. CIT, INTEREST EXPENDITURE WHICH COULD BE CONSIDER ED FOR SET OFF, WAS ONLY FOR THE PERIOD 01.04.2007 TO 08.10.2007, WHI CH CAME TO RS.20,075/-. IN OTHER WORDS, ACCORDING TO HIM, AGAI NST ALLOWABLE EXPENDITURE OF RS.20,075/- AGAINST INTEREST INCOME , LD. ASSESSING OFFICER HAD ALLOWED RS. 2,40,900/-. THUS, ACCORDI NG TO THE LD. CIT, ORDER OF THE LD. ASSESSING OFFICER WAS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE, ON ABOVE TWO COUNTS. ITA NO. 08/COCH/2016 :- 6 -: 7. IN ITS REPLY, ASSESSEE STATED THAT INTEREST INCOME OF CO- OPERATIVE SOCIETIES GIVING CREDIT FACILITIES TO ITS MEMBERS HAD TO BE CONSIDERED AS INCOME FROM BANKING BUSINESS. RELYIN G ON THE JUDGMENT OF APEX COURT IN THE CASE OF KARNATAKA STA TE CO-OPERATIVE APEX BANK, ASSESSEE SUBMITTED THAT INTEREST INCOME COULD NOT BE CONSIDERED IN ISOLATION. AS PER ASSESSEE THE CASE OF TOTGARS CO- OPERATIVE SALE SOCIETY LTD (SUPRA) WAS NOT APPLICABLE TO IT, SINCE THE SAID SOCIETY WAS A MARKETING SOCIETY AND NOT A CRED IT SOCIETY. IN ANY CASE AS PER ASSESSEE, INTEREST OF RS.5,44,500/- RE CEIVED BY IT ON 08.10.2007 FROM THE TREASURY KOTTAYAM WAS FOR A P ERIOD OF 78 MONTHS ON A DEPOSIT MADE ON 31.03.2001. CLAIM OF T HE ASSESSEE WAS THAT IF INTEREST EXPENDITURE OF SIX MONTHS ALONE W ERE TO BE RECKONED, INTEREST INCOME ALSO HAD TO BE LIMITED TO THE SAME PERIOD. IN OTHER WORDS, AS PER THE ASSESSEE, IT SHOULD BE GIVEN THE SAME TREATMENT FOR INTEREST INCOME AS WELL AS INTEREST EXPENDITURE. 8. HOWEVER, LD. CIT NOT IMPRESSED BY THE ABOVE EXPLA NATION. HE WAS OF THE OPINION THAT THE ASSESSMENT ORDER WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON BOTH THE COUNTS. ACCORDING TO HIM, ASSESSEE WAS NOT ELIGIBLE FOR DE DUCTION U/S.80P(2) (C)(II) OF THE ACT SINCE IT WAS HAVING TRADING BUSI NESS LOSS. FURTHER, AS PER LD. CIT DEDUCTION OF INTEREST EXPENDITURE ALLO WED TO THE ASSESSEE, WHILE COMPUTING ITS INCOME UNDER THE HEAD INCOME FROM OTHER ITA NO. 08/COCH/2016 :- 7 -: SOURCES WAS INCORRECTLY CALCULATED SINCE SUCH IN TEREST ALLOWED INCLUDED INTEREST RELATING TO THE PERIOD 01.04.2001 TO 31.03.2007. HE DIRECTED THE LD. ASSESSING OFFICER TO MODIFY THE AS SESSMENT. 9. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRON GLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT ASSESSEE HAD ALREADY FILED AN APPE AL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) ASSAILING CHAN GE OF HEAD OF INTEREST INCOME TO INCOME FROM OTHER SOURCES. FURTHER, AS PER LD. AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER HAD APPLIED HIS MIND AND ALLOWED DEDUCTION OF INTEREST EXPENDITURE U/S. 57 OF THE ACT HAVING CONSIDERED THE INTEREST INCOME UNDER INCOM E FROM OTHER SOURCES. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LD. ASSESSING OFFICER HAD ADOPTED ONE OF THE POSSIBLE COURSE OF A CTION AND HENCE HIS ORDER COULD NOT BE TREATED AS ERRONEOUS. LD. AUTHO RISED REPRESENTATIVE SUBMITTED THAT PRINCIPAL COMMISSIO NER OF INCOME TAX WAS SIMPLY ADOPTING A DIFFERENT METHOD FOR CALCULAT ING INTEREST ALLOWABLE U/S.57 OF THE ACT. AS PER LD. AUTHORISED REPRESENTATIVE THERE WAS CLEAR APPLICATION OF MIND BY THE LD. ASSE SSING OFFICER IN THE ORIGINAL COURSE OF PROCEEDINGS AND PRINCIPAL COMMI SSIONER OF INCOME TAX WAS ONLY TRYING TO SUBSTITUTE A LAWFUL VIEW TA KEN BY THE LD. ASSESSING OFFICER WITH HIS VIEW. RELIANCE WAS PLACE D ON THE JUDGMENT OF APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS. CIT 243 ITR ITA NO. 08/COCH/2016 :- 8 -: 83 THAT OF HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS. P.D. ABRAHAM (2014) 88 CCH 306 AND THAT OF CO-ORDINATE BENCH IN THE CASE OF M/S. PLATINO CLASSIC MOTORS INDIA (P) LTD VS. DC IT ( IN ITA NO.315/COCH/2015) DATED 19.05.2016. FURTHER, AS PER LD. AUTHORISED REPRESENTATIVE BY VIRTUE OF CIRCULAR NO.18/2015 DA TED 02.11.2015 INTEREST INCOME IN THE HANDS OF A CO-OPERATIVE SOCI ETY ENGAGED IN BANKING BUSINESS WAS TO BE CONSIDERED BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. IN ANY CASE, AS PER LD. AUTHORISED REPRESENTATIVE WHEN INTEREST EXPENDITURE WAS TO BE APPORTIONED IN THE RATIO 6/78, THE SAME RATIO SHOULD HAVE BEEN APP LIED FOR INTEREST INCOME ALSO. 10. AS FOR THE DISALLOWANCE OF CLAIM U/S.80P(2)(C) (II ) OF THE ACT, NO ARGUMENTS WERE ADVANCED BY THE LD. AUTHORIS ED REPRESENTATIVE. 11. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. CIT. AS PER LD. DEPA RTMENTAL REPRESENTATIVE CIRCULAR OF THE CBDT COULD NOT OVER RIDE THE STATUTE AND INTERPRETATION GIVEN BY COURTS. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. PROCEEDINGS UNDER SECTION 263 OF THE ITA NO. 08/COCH/2016 :- 9 -: ACT WAS INITIATED FOR TWO REASONS. FIRST WAS FOR A LLOWING DEDUCTION OF RS.50,000/- TO THE ASSESSEE U/S.80P(2) (C) (II) OF THE ACT, WHEN IT HAD A TRADING LOSS OF RS.1,11,097.76. ASSESSEE HAS NO GRIEVANCE ON THIS. ITS GRIEVANCE IS LIMITED TO REVISIONARY POWERS EXER CISED BY THE LD. CIT ON INTEREST EXPENDITURE CLAIMED AND ALLOWED AGAINST INTEREST INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS NOT DISPUTED THAT ASSESSEE HAD RECEIVED INTEREST INCOM E OF RS.5,44,500/- ON ITS DEPOSITS PLACED WITH TREASURY. DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ASSESSEE HAD GIVEN A REPLY ON THIS PROPOSAL OF THE LD. ASSESSING OFFICER. PERTINENT PART OF THE SAID REPLY IS REPRODUCED HEREUNDER:- WITHOUT PREJUDICE TO OUR CLAIM OF DEDUCTION U/S.8 0P(2) (A) (I) FOR THE WHOLE INTEREST INCOME ON DEPOSITS WITH OTHER INSTITUTIONS WE HAVE TO STATE THAT THE DEPOSIT WITH TREASURY IS PART OF THE AMOUNT WE HAVE ACCEPTED AS INTEREST BEA RING DEPOSITS FROM MEMBERS. SO, WE ARE ELIGIBLE TO CLAI M THAT PORTION OF INTEREST AS EXPENSE, WHICH WE HAVE PAID TO THE DEPOSITORS. IN FACT, BANK DEPOSITED RS.5,00,000/- AT TREASURY O N 31.03.2007 FOR 78 MONTHS AT 12% PER ANNUM AT COMPOU ND INTEREST AND IT WAS MATURED ON 08.10.2007. ON MAT URITY WE GOT RS.5,44,500/- AS INTEREST AND IT IS INCLUDED UN DER INTEREST RECEIVED ON DEPOSITS. AS PER THE AUDITED ACCOUNTS, DURING THE FY 2007-08 WE PAID RS.1,25,12,800/- AS INTEREST ON DEPOSITS AND THE TOTAL DEPOSIT ACCEPTED FROM MEMBER S AS ON 31.03.2008 WAS RS15,57,94,539/-. THUS THE AVERAGE R ATE OF INTEREST COMES TO 8.03%. HENCE, WE ARE ELIGIBLE TO GET DEDUCTION @8.03% PER ANNUM ON RS.5,00,000/- FOR 78 MONTHS AS COST OF FUNDS DEPOSITED. THIS COMES TO RS.2,60,975/- WHICH MAY BE DEDUCTED FROM THE INTERE ST RECEIVED ON TREASURY DEPOSITS. OVER AND ABOVE THAT WE ARE ELIGIBLE FOR DEDUCTION OF RS.50,000/- U/S. 80P(2) ( C) ALSO . ITA NO. 08/COCH/2016 :- 10 -: A READING OF THE ABOVE REPLY CLEARLY INDICATE THAT ASSESSEE HAD BROUGHT TO THE NOTICE OF THE LD. ASSESSING OFFICER THE TENURE OF THE DEPOSITS ON WHICH IT HAD EARNED INTEREST OF RS.5,4 4,500/-. IT HAD ALSO STATED THAT SUCH DEPOSITS WERE MADE OUT OF FUNDS RE CEIVED FROM ITS MEMBERS ON WHICH IT PAID INTEREST OF RS.1,25,12,80 0/-, DURING THE RELEVANT PREVIOUS YEAR. CRUX OF THE REPLY OF THE AS SESSEE WAS THAT IF INTEREST INCOME FOR 78 MONTHS WAS TO BE CONSIDERED FOR ASSESSMENT IN ONE GO, THEN COST OF FUNDS ALSO WAS TO RECKONED FOR 78 MONTHS. WHAT LD. ASSESSING OFFICER HAS STATED IN THE ASSESS MENT ORDER DATED 24.01.2014 WHICH IS SUBJECT MATTER OF REVISION BY T HE PRINCIPAL COMMISSIONER OF INCOME TAX IS REPRODUCED HEREUNDER: - THEREFORE, THE INTEREST INCOME OF RS.5,44,500/- AS DISCUSSED ABOVE BEING INTEREST INCOME ARISING ON T HE SURPLUS VESTED IN DEPOSITS WHICH SURPLUS WAS NOT RE QUIRED FOR BUSINESS PURPOSES IS TREATED AS INCOME FROM OTH ER SOURCES TO BE TAXED UNDER SECTION 56 OF THE ACT. HOWEVER, THE ASSESSEE VIDE LETTER DATED 27.12.2013 HAS MADE A REQUEST TO CONSIDER ITS CLAIM OF A PORTION O F INTEREST EXPENSE WHICH THE ASSESSEE HAD PAID TO T HE DEPOSITORS. AS PER THE AUDITED ACCOUNTS, THE ASSESS EE PAID RS.1,25,12,800/- AS INTEREST ON DEPOSITS AND DEPOSITS ACCEPTED FROM MEMBERS AS ON 31.03.2008 WAS RS.15,57,94,539/-. THE PROPORTIONATE INTEREST EXPEN SE THAT IS ALLOWABLE U/S.57 OF THE ACT AMOUNTS TO RS.2,60,975/-. THE BALANCE INCOME ASSESSABLE UNDER INCOME FROM OTHER SOURCES WILL BE RS. THE ASSESSEE HAS ALSO MADE A CLAIM FOR DEDUCTION OF RS.50,000/- U/S. 80P(2)(C) OF THE ACT. ITA NO. 08/COCH/2016 :- 11 -: THUS, WHEN THE LD. ASSESSING OFFICER ALLOWED CLAIM OF EXPENDITURE TO THE ASSESSEE, CALCULATING THE PRORATA INTEREST AS A RATIO OF THE TOTAL INTEREST PAID BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR, HE WAS AWARE THAT, THAT THE INTEREST INCOME WAS FOR 78 MONTHS. WE CANNOT SAY THAT IT WAS AN ERRONEOUS VIEW OF LAW BY THE LD. ASSESSING OFFICER. WHEN INTEREST INCOME WAS CONSIDERED BY TH E LD. ASSESSING OFFICER FOR THE WHOLE TENURE OF THE DEPOSITS INCLUD ING PERIOD PRIOR TO THE BEGINNING OF THE PREVIOUS YEAR, INTEREST EXP ENDITURE ALSO HAD TO BE RECKONED FOR THE SAME PERIOD. THE VIEW OF THE P RINCIPAL COMMISSIONER OF INCOME TAX THAT INTEREST EXPENDITUR E ALONE HAD TO BE RESTRICTED TO THE PROPORTIONATE AMOUNT FOR SEVEN M ONTHS IN THE RELEVANT PREVIOUS YEAR, WOULD BE AGAINST THE MATCHI NG PRINCIPLES. IN OTHER WORDS, IT WOULD RESULT IN A SITUATION WHERE I NTEREST INCOME IS RECKONED FOR 78 MONTHS BUT EXPENDITURE ONLY FOR 07 MONTHS. WE CAN SURELY SAY THAT LD. PRINCIPAL COMMISSIONER OF INCOM E TAX WAS TRYING TO SUBSTITUTE A LEGALLY PERMISSIBLE VIEW TAKEN BY THE LD. AO WITH ANOTHER VIEW WHICH WAS NOT A RATIONAL ONE. HONBLE APEX COU RT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD (SUPRA) HAS CLEARLY HELD THAT REVISIONARY POWERS U/S.263 OF THE ACT CANNOT BE INVOKED FOR SU BSTITUTING A LAWFUL VIEW TAKEN BY THE LD. ASSESSING OFFICER, WITH ANOTH ER VIEW. HENCE, WHILE UPHOLDING THE REVISION ORDER IN SO FAR AS IT CONCERNED ALLOWANCE ITA NO. 08/COCH/2016 :- 12 -: U/S.80P(2)(C) (II) OF THE ACT IS CONCERNED, WE MOD IFY AND DELETE THAT PORTION RELATING TO TREATMENT OF INCOME AND EXPENDI TURE UNDER THE HEAD INCOME FROM OTHER SOURCES ON THE INTEREST INCOME EARNED BY THE ASSESSEE FROM ITS DEPOSITS IN TREASURY, KOTTAY AM. ORDER OF THE LD. CIT STANDS MODIFIED TO THIS EXTENT. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-03-2017. SD/- SD/- ( GEORGE GEORGE. K) # # # # !$ !$ !$ !$ / JUDICIAL MEMBER (ABRAHAM P. GEORGE) !$ !$ !$ !$ / ACCOUNTANT MEMBER COCHIN &! / DATED:22ND MARCH, 2017 KV !' ' (' / COPY TO: !' ' (' / COPY TO: 1 . / APPELLANT 3. ) () / CIT(A) 5. ',- / DR 2. / RESPONDENT 4. ) / CIT 6. -. / / GF BY ORDER . (ASSISTANT REGISTRAR I.T.A.T., COCHIN.