2011 (1) TMI 1404 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80P(2) of the I.T. Act.
2. Admissibility of income-tax refund and other income for deduction u/s 80P(2).

Summary:

(A) Revenue's Appeal; ITA No.2985/Ahd/2008

Issue 1: Deduction u/s 80P(2)
The Revenue contended that the CIT(A)-IV, Surat erred in restricting the addition of Rs. 94,53,213/- to Rs. 11,63,444/- made by the Assessing Officer (AO) on account of deduction u/s 80P(2). The AO had recalculated the eligible deduction u/s 80P, determining the net amount of Rs. 93,97,213/- after deducting expenses of Rs. 4,91,47,302/- from the eligible receipts of Rs. 5,85,44,515/-. The CIT(A) restricted the non-eligible deduction to Rs. 11,63,444/- (income-tax refund of Rs. 6,30,820/- and other income of Rs. 5,32,624/-). The Tribunal found the Revenue's ground misplaced as the AO had assessed the income at Rs. 17,46,753/- and not Rs. 94,53,213/-. The Tribunal dismissed the Revenue's appeal.

(B) Assessee's Appeal; ITA No.3129/Ahd/2008

Issue 1: Deduction on Gross vs. Net Income
The assessee argued that the CIT(A) erred in holding that the deduction u/s 80P(2)(a) is allowable only on the net income and not on the gross income. The Tribunal upheld the AO's decision, stating that the deduction u/s 80P is only for the income defined in sub-section (2) of section 80P and not the entire gross total income. The Tribunal dismissed this ground of the assessee.

Issue 2: Admissibility of Income-tax Refund and Other Income
The assessee contested the disallowance of deduction u/s 80P for income-tax refund of Rs. 6,30,820/- and other income of Rs. 5,32,624/-. The Tribunal held that income-tax refund is not eligible for deduction u/s 80P(2) as it is beyond the scope of the provision. The Tribunal upheld the AO's disallowance of the income-tax refund deduction.

For the other income, the Tribunal allowed deductions for locker rent, share transfer fee, and insurance refund as these are eligible for deduction u/s 80P. However, the Tribunal restored the issue of penalty interest of Rs. 4,58,217/- to the AO for further investigation. The Tribunal disallowed the deduction for the sale of a motor cycle, stating it had no nexus with the banking activity.

Conclusion:
The Revenue's appeal was dismissed, and the Assessee's appeal was partly allowed. The order was signed, dated, and pronounced in the Court on 13/1/2011.