2015 (4) TMI 1237 - AT - Income Tax

Entitle to deduction u/s 80P(2)(d) against the gross interest income by applying the provisions of section 14-A read with rule 8D - Held that - As decided in assessee s own case in assessment year 2010-11 we decide this issue principally against the assessee. However, the Assessing Officer should re-compute the disallowance after verifying the calculation of disallowance u/s 14A read with Rule 8D after verification of the figures submitted by the Assessee. Not allowing deduction u/s 80P(2)(c) - Held that - After considering the rival submissions we find that though some submissions have been made but no evidence was brought before us to show that activities of the society was not within the activities mentioned in section 80P(2)(a) & (b), therefore, we find nothing wrong with the order of Ld. CIT(A) and confirm the same.

Summary

Issues Involved:
1. Legality of the order of the Assessing Officer upheld by the Commissioner of Income Tax (Appeals), Chandigarh.
2. Attribution of expenses to income entitled to deduction under Section 80P(2)(d) and application of Section 14A read with Rule 8D.
3. Application of Section 14A read with Rule 8D to deductions under Chapter VI-A.
4. Denial of deduction under Section 80P(2)(c).

Issue-wise Detailed Analysis:

1. Legality of the Order:
The appellant contended that the order of the Assessing Officer, as upheld by the Commissioner of Income Tax (Appeals), Chandigarh, was "bad in law and is beyond all the cannons of law and justice." However, this ground was deemed of a general nature and did not require separate adjudication.

2. Attribution of Expenses and Application of Section 14A read with Rule 8D:
The appellant argued against the attribution of expenses amounting to Rs. 4,53,11,101 to the income entitled to deduction under Section 80P(2)(d) by applying the provisions of Section 14A read with Rule 8D. The Assessing Officer had reduced the expenditure attributable to earning such interest based on previous Tribunal decisions against the assessee from assessment years 2002-03 to 2006-07, which were also upheld by the Hon'ble Punjab & Haryana High Court. The Tribunal found that the issue was covered against the assessee by its earlier decision, confirmed by the High Court. The Tribunal also addressed the dismissal of the Special Leave Petition (SLP) by the Supreme Court, clarifying that such dismissal does not imply a merger of the High Court's order with the Supreme Court's order. Hence, the Tribunal decided the issue against the assessee but directed the Assessing Officer to re-compute the disallowance after verifying the calculation of disallowance under Section 14A read with Rule 8D.

3. Application of Section 14A read with Rule 8D to Deductions under Chapter VI-A:
The appellant contended that the application of Section 14A read with Rule 8D to deductions under Chapter VI-A was incorrect, especially since the Supreme Court had dismissed the department's SLP, implying affirmation of the Delhi High Court's decision in the case of CIT Vs. KRIBHCO. The Tribunal reiterated its stance from the previous issue, emphasizing that the Supreme Court's dismissal of an SLP by a non-speaking order does not result in a merger of the lower court's order with the Supreme Court's order. Therefore, the Tribunal followed the jurisdictional High Court's order and decided the issue against the assessee, directing the Assessing Officer to re-compute the disallowance under Section 14A read with Rule 8D.

4. Denial of Deduction under Section 80P(2)(c):
The appellant claimed a deduction under Section 80P(2)(c) amounting to Rs. 50,000, which was denied by the Assessing Officer on the grounds that the deduction was allowable only to cooperative societies engaged in specific activities. The assessee's activities did not fall within the specified activities under Section 80P(2)(a) & (b). The Tribunal found no evidence to show that the activities of the society were outside the specified activities and upheld the order of the Commissioner of Income Tax (Appeals), confirming the denial of the deduction.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with directions to the Assessing Officer to re-compute the disallowance under Section 14A read with Rule 8D after verification. The Tribunal upheld the denial of the deduction under Section 80P(2)(c) due to the lack of evidence supporting the appellant's claim. The order was pronounced in the Open Court on 10.04.2015.