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2019 (11) TMI 1374 - AT - Income TaxEligibility of deduction claimed u/s 80P(2)(d) - interest income received from investment made with co-operative banks - HELD THAT - Claim of the assessee u/s 80P(2)(d) of the Act appears to be in consonance with the plain language of the Act. We thus find merit in the claim of the assessee for deduction u/s 80P(2)(d) of the Act in respect of income earned from K.D.C.C. Bank. - Decided in favour of assessee Eligibility of basic deduction u/s 80P(2)(c) on the taxable interest earned from nationalized banks and not covered for deduction under s.80P(2)(a)(i) of the Act from the gross total income - HELD THAT - In the light of the decision of Hon ble Allahabad High Court in Chief CIT (Admn.) vs. Kisan Sahkari Chini Mills Ltd. 2004 (11) TMI 28 - ALLAHABAD HIGH COURT , Clause (c) of Section 80P(2) of the Act would cover entire income of a cooperative society not covered by Clause (a) and (b). The income earned by the assessee on deposits of nationalized banks was treated as taxable income of the assessee in view of its ineligibility towards deduction under s.80P(2)(a)(i) of the Act. Consequently, the assessee is entitled for basic deduction as provided under s.80P(2)(c) of the Act against such interest income.
Issues Involved:
1. Assessee's appeal concerning disallowance under section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Eligibility of deduction under section 80P(2)(d) of the Act for interest income from cooperative banks. 3. Eligibility of basic deduction under section 80P(2)(c) of the Act for interest income from nationalized banks. 4. Revenue's appeal regarding verification of pre-rata/proportionate expenditure from interest income. Assessee's Appeal - Ground No. 3: The issue revolves around the eligibility of deduction under section 80P(2)(d) of the Act for interest income received from investments made with cooperative banks. The assessee argued that the investment made with a cooperative bank, K.D.C.C. Bank, falls under the purview of section 80P(2)(d) of the Act. Citing relevant case law, the assessee contended that the interest income from such investments should be allowed as a deduction. The tribunal found merit in the assessee's claim, stating that it aligns with the provisions of the Act, and consequently allowed Ground No. 3 of the appeal. Assessee's Appeal - Ground No. 4: This issue pertains to the eligibility of basic deduction amounting to ?50,000 under section 80P(2)(c) of the Act for taxable interest earned from nationalized banks. The assessee argued that the interest income from nationalized banks, taxed under 'income from other sources,' qualifies for deduction under section 80P(2)(c) as it does not fall under sections 80P(2)(a)(i) or 80P(2)(b). Referring to relevant court decisions, the tribunal concluded that the income from nationalized banks, being ineligible for deduction under section 80P(2)(a)(i), is eligible for the basic deduction provided under section 80P(2)(c). Consequently, Ground No. 4 of the assessee's appeal was allowed. Revenue's Appeal: The Revenue's appeal centered on directing the Assessing Officer to verify the assessee's claim of pre-rata/proportionate expenditure from the interest income and allow the said claim after due verification. However, during the hearing, the assessee pointed out the applicability of a CBDT circular revising monetary limits for tax effects. As the tax effect on the disputed issues did not exceed the revised limit of ?50 lakhs, the tribunal dismissed the Revenue's appeal citing the CBDT Circular No. 17 of 2019. The Revenue's appeal was deemed not maintainable under the revised thresholds, but the Revenue was given the option to seek restoration of the appeal if the circular was found inapplicable. Consequently, the appeal of the Revenue was dismissed. In conclusion, the tribunal partially allowed the assessee's appeal while dismissing the Revenue's appeal based on the revised monetary limits set by the CBDT Circular No. 17 of 2019. The issues related to deduction under sections 80P(2)(d) and 80P(2)(c) were decided in favor of the assessee, highlighting the eligibility of interest income from cooperative and nationalized banks for deductions under the Income Tax Act, 1961.
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