2016 (12) TMI 1731 - AT - Income Tax

Addition made on account of interest income from investment in Co-Operative Societies u/s. 80P(2)(d) - A.O. computed the disallowance u/s. 14A r.w.r. 8D - Held that - The issue is squarely covered in favour of the assessee and against the revenue by the decision of the Tribunal in assessee s own case for A.Y. 2008-09 2013 (11) TMI 364 - ITAT AHMEDABAD as held that Provisions of Section 14A have wrongly been invoked in this case Decided against the Revenue.

Summary

Issues: Revenue's challenge to deletion of addition of interest income under section 80P(2)(d) of the Act and applicability of section 14A for disallowance.

Analysis:
1. The Revenue challenged the deletion of an addition of interest income under section 80P(2)(d) of the Act by the Ld. CIT(A). The Revenue contended that the Ld. CIT(A) erred in deleting the addition of ?2,22,25,108 made on account of interest income from investment in Co-Operative Societies, ignoring the provisions of section 80P(2)(d) r.w.s. 36(1)(iii) of the Act.

2. The assessee, a Co-op. Society engaged in various activities, including procuring and processing milk, manufacturing milk products, and supplying tea. During the assessment proceedings, the Assessing Officer (A.O.) invoked section 14A concerning the deduction claimed by the assessee. As the assessee did not specify expenses related to investments, the A.O. computed a disallowance under section 14A r.w.r. 8D of the Act, amounting to ?2,12,25,108.

3. The assessee appealed to the Ld. CIT(A), arguing against the disallowance under section 14A. The Ld. CIT(A) accepted the assessee's claim and deleted the additions made by the A.O. The Revenue, aggrieved by this decision, approached the Appellate Tribunal.

4. The Tribunal noted that the issue was similar to a previous decision in the assessee's own case for A.Y. 2008-09. The Tribunal considered the balance sheet figures and the argument that the assessee had sufficient own funds, making the invocation of section 14A unnecessary. The Tribunal also highlighted that the deductions claimed by the assessee were not like exempted income, as they were part of the total income computation.

5. Citing a decision of ITAT Chennai Bench, the Tribunal concluded that the provisions of section 14A were wrongly invoked in this case. The Tribunal affirmed the Ld. CIT(A)'s decision and dismissed the Revenue's appeal. As no distinguishing decision was presented by the Revenue, the Tribunal declined to interfere with the Ld. CIT(A)'s findings, ultimately dismissing the Revenue's appeal.

6. The Tribunal's decision was based on the interpretation of relevant provisions, the assessee's financial position, and the nature of deductions claimed. The judgment emphasized that section 14A should apply to income exempt under the Act, not to deductions made in computing total income. The Tribunal's decision in the assessee's favor was consistent with the principles established in previous cases, leading to the dismissal of the Revenue's appeal.