2003 (3) TMI 654 - AT - Income Tax

Summary

Issues:
1. Whether interest income under section 244A of the I.T. Act constitutes business income eligible for deduction under section 80P(2)(a)(i).

Detailed Analysis:
The primary issue in this case was whether the interest income received under section 244A of the I.T. Act constitutes business income eligible for deduction under section 80P(2)(a)(i). The appellant, a cooperative society engaged in banking, claimed exemption on interest income of Rs. 44,99,699 under section 80P(2)(a)(i). The Assessing Officer disallowed the claim, stating that the interest income was not derived from banking activities. The appellant contended that the interest income was part of its main business activities, including lending money, investments, and advances to members, and therefore constituted business income. The CIT(A) observed that the issue was debatable and not free from doubt, beyond the scope of section 143(1)(a) adjustments, and deleted the adjustment made by the Assessing Officer.

Furthermore, the appellant cited previous years' decisions where it was held that interest income under section 244A constitutes business income eligible for deduction under section 80P(2)(a)(i). The CIT(A) noted conflicting views on the matter and emphasized that the Assessing Officer's role was limited to making prima facie adjustments on indisputable matters. The Tribunal's order in a previous year's case in favor of the appellant strengthened the argument that the issue was debatable and not suitable for adjustment under section 143(1)(a). Ultimately, the Tribunal upheld the CIT(A)'s decision, rejecting the revenue's appeal and affirming that the interest income was indeed eligible for deduction under section 80P(2)(a)(i) as business income derived from banking activities.

In conclusion, the judgment clarified the eligibility of interest income under section 244A for deduction under section 80P(2)(a)(i) as business income derived from banking activities. The decision highlighted the debatable nature of the issue, the limited scope of the Assessing Officer's adjustments under section 143(1)(a), and the significance of previous rulings supporting the appellant's position.