2011 (2) TMI 1543 - AT - Income Tax

Summary

Issues involved: Appeal by Revenue against CIT(A) order for A.Y. 2005-06 regarding disallowance u/s 40(a)(ia) and exemption u/s 80P(2)(a)(i) of the Act.

Disallowance u/s 40(a)(ia): The issue revolved around whether the disallowance made u/s 40(a)(ia) becomes taxable when attributable to banking activities of Credit Sanstha enjoying exemption u/s 80P(2)(a)(i) of the Act. The appellant argued that such additions are unwarranted due to the exemption u/s 80P. Citing a Tribunal decision, it was emphasized that the interest earned by the assessee would be exempt under this section. Similar views were supported by other Tribunal and High Court decisions. The Revenue, however, relied on the A.O.'s order.

Exemption u/s 80P(2)(a)(i): The CIT(A) held that once deduction u/s 80P(2)(a)(i) is allowable, any addition made due to disallowance of expenditure debited to the P & L a/c should also be covered under section 80P. The Tribunal concurred, stating that the disallowance amount was incidental to banking activities falling under section 80P(2)(a)(i). The order of the CIT(A) was upheld, supported by the citation relied upon by the appellant's counsel.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. The judgment was pronounced on 28th February 2011.