2019 (1) TMI 1564 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - interest income earned on deposits with banks - deduction calmed was not allowed by the Revenue authorities for the reason that the income which was claimed as deduction was interest income which was earned by the assessee on deposits and interest income had to be regarded as income from other sources . - HELD THAT - Claim for deduction under section 80P(2)(a) in respect of interest income earned from out of bank deposits is restored to the file of the AO for denovo adjudication after examining the facts in the light of the judgments of the Hon ble Apex Court in the case of The Totagars Cooperative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT and in the case of Tumkur Merchants Souharda Co-operative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT wherein held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d) of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007-08 to 2011- 12 and in AY 1991-92 to 1999-2000 decided by the Hon ble Supreme Court. Therefore whether the source of funds were Assessee s own funds or out of liability was not subject matter of the decision of the Hon ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Co-operative Ltd. (supra) still holds good. Hence on this aspect the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgments quoted above - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Delay in filing appeals before the Tribunal, Condonation of delay, Deduction claimed under section 80P(2)(a)(i) of the Income-Tax Act, 1961, Nature of interest income, Interpretation of relevant legal provisions, Applicability of Supreme Court and High Court decisions, Restoration of issue to the Assessing Officer for fresh decision.

Delay in filing appeals before the Tribunal:
The Assessee filed an appeal against the orders of the CIT(Appeals) with a delay of 343 days. The reason for the delay was that the former counsel advised against further appeal, but the statutory auditor later recommended filing an appeal. The Tribunal condoned the delay, considering it reasonable, and admitted the appeals for adjudication.

Deduction claimed under section 80P(2)(a)(i) of the Income-Tax Act:
The Assessee, a co-operative society, contested the disallowance of deduction under section 80P(2)(a)(i) for interest income earned on deposits. The Revenue authorities disallowed the deduction, citing that interest income should be categorized as 'income from other sources' as per a Supreme Court decision. The Tribunal examined conflicting High Court decisions and directed the issue to be reconsidered by the Assessing Officer.

Nature of interest income - Interpretation of relevant legal provisions:
The dispute centered on whether interest income from deposits could be considered as income derived from the business of a co-operative society for the purpose of claiming deductions under section 80P(2)(a)(i). The Tribunal analyzed various legal precedents to determine the appropriate classification of such interest income and its eligibility for deduction under the Income-Tax Act.

Applicability of Supreme Court and High Court decisions:
The Tribunal considered the decisions of the Supreme Court and the Karnataka High Court in similar cases involving the classification of interest income for co-operative societies. It noted the distinction between the source of funds and the applicability of specific provisions of the Income-Tax Act in determining the allowance of deductions. The Tribunal emphasized the need for a thorough review of the facts in light of relevant judicial pronouncements.

Restoration of issue to the Assessing Officer for fresh decision:
Based on the analysis of legal precedents and the specific circumstances of the case, the Tribunal allowed the appeals by the Assessee for statistical purposes. It directed the issue of deduction under section 80P(2)(a)(i) to be remanded to the Assessing Officer for a fresh decision after considering the judgments of the Supreme Court and the Karnataka High Court. The Assessing Officer was instructed to provide the Assessee with an opportunity to present additional evidence before making a new determination on the matter.