2018 (3) TMI 1826 - AT - Income Tax

Eligible deduction u/s 80P 2 - interest earned by the appellant on Deposits made by the appellant - HELD THAT - In the case of PCIT and Another Vs. Totagars Co-operative Sale Society 2017 (7) TMI 1049 - KARNATAKA HIGH COURT it was noted that the amount which was invested was not the own money of the assessee but it was liability of the assessee society and therefore the issue was decided against the assessee whereas in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO 2015 (2) TMI 995 - KARNATAKA HIGH COURT it was noticed that the money deposited in bank was not liability of the assessee and it was assessee s own money and therefore the issue was decided in favour of the assessee. In the present case a categorical finding was given by CIT(A) that the amount deposited in bank was surplus of the assessee and this is not the case of the revenue that amount was liability of the assessee. In the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra) it was noted that the amount which was invested was not the own money of the assessee but it was liability of the assessee society and therefore the issue was decided against the assessee whereas in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra) it was noticed that the money deposited in bank was not liability of the assessee and it was assessee s own money and therefore the issue was decided in favour of the assessee. In the present case a categorical finding was given by CIT(A) that the amount deposited in bank was surplus of the assessee and this is not the case of the revenue that amount was liability of the assessee. Hence decide the issue in favour of the assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Eligibility of deduction under section 80P [2] of the Income Tax Act.
3. Interpretation of judgments by the Hon'ble Karnataka High Court regarding interest income on deposits with banks.

Condonation of Delay:
The appeal was filed late by the assessee, with a delay of 77 days. The assessee provided reasons for the delay, citing the unavailability of the Chartered Accountant due to preoccupation with tax audit. The Accountant later directed the assessee to approach new counsel for filing the appeal. The Revenue argued that no reasonable cause was shown for the delay. The Accountant Member considered the facts and decided to condone the delay of 77 days, admitting the appeal.

Eligibility of Deduction under Section 80P [2]:
The assessee claimed eligible deduction under section 80P [2] of the Act amounting to a specific sum under section 80P [2][d] for interest earned on deposits made by the appellant. The Commissioner of Income-tax [Appeals] denied this deduction, leading to an appeal. The Accountant Member examined the provisions of section 80P, emphasizing that the interest income earned by the appellant from deposits was out of the monies of the members of the appellant society. The Accountant Member found the denial of the deduction by the Commissioner unjustified, allowing the deduction in favor of the assessee.

Interpretation of Judgments by Hon'ble Karnataka High Court:
The dispute revolved around the interpretation of judgments by the Hon'ble Karnataka High Court regarding interest income on deposits with banks. The Accountant Member compared two judgments by the High Court, noting that the conclusions differed due to the distinct factual scenarios. The Accountant Member highlighted that in the present case, the CIT(A) found the deposited amount to be the surplus of the assessee, not a liability. Following the judgment in a specific case, the Accountant Member ruled in favor of the assessee, allowing the appeal.

In conclusion, the appeal was allowed based on the Accountant Member's analysis of the delay condonation, eligibility of deduction under section 80P [2], and the interpretation of relevant judgments by the Hon'ble Karnataka High Court.