2018 (12) TMI 1926 - AT - Income Tax

Denial of deduction u/s.80P - interest income received by the assessee from Nationalised Banks - HELD THAT - The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit 2015 (8) TMI 1085 - ITAT PUNE has allowed deduction u/s 80P of the Act in similar circumstances in the contrary views expressed in Tumkur Merchants Souharda Credit Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT allowing the deduction u/s. 80P on interest income and the Hon ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. 2014 (9) TMI 833 - DELHI HIGH COURT not allowing deduction u/s.80P on interest income earned from banks under similar circumstances. Both the Hon ble High Courts have taken into consideration the ratio laid down in the case of Totgar s Cooperative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT . There being no direct judgment from the Hon ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Thus respectfully following the precedent, we overturn the impugned order in not allowing deduction u/s.80P on the interest income and direct to grant deduction on such interest income. - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - assessee paid commission to Pigmy agents - HELD THAT - There can be no reason to stop the assessee from taking a fresh legal plea before the Tribunal which was inadvertently not taken up before the ld. CIT(A). Since this matter has not been examined by the ld. CIT(A) on merits, we are of the considered opinion that it would be in the fitness of things if the ld. CIT(A) is directed to examine the assessee s case on this issue. Needless to say, the assessee will be allowed reasonable opportunity of hearing.

Summary

Issues:
1. Denial of deduction u/s.80P of the Income-tax Act, 1961 for interest income from FDRs with nationalized banks.
2. Disallowance of &8377; 2,70,834/- u/s. 40(a)(ia) of the Act for commission payments.

Issue 1: Denial of deduction u/s.80P for interest income from FDRs with nationalized banks:

The case involved appeals for assessment years 2012-13 and 2014-15 concerning the denial of deduction u/s.80P of the Income-tax Act, 1961 for interest income earned from fixed deposit receipts (FDRs) placed with nationalized banks. The assessee, a Co-operative Society, claimed deduction on interest income from FDRs with IDBI Bank and Axis Bank. The Assessing Officer (AO) and the first appeal negated the deduction claim. The key issue was whether interest income from FDRs with nationalized banks is eligible for deduction u/s.80P of the Act. The Tribunal referred to a precedent set by the Pune Bench in a similar case, where deduction u/s.80P was allowed based on the decision of the Hon'ble Karnataka High Court. Considering the absence of a direct judgment from the jurisdictional High Court, the Tribunal followed the precedent and overturned the impugned order, directing to grant deduction on the interest income.

Issue 2: Disallowance u/s. 40(a)(ia) of the Act for commission payments:

The second issue in the appeal for assessment year 2014-15 pertained to the disallowance of &8377; 2,70,834/- u/s. 40(a)(ia) of the Act for commission payments made to Pigmy agents. The AO disallowed the amount not covered under the Tax Deducted at Source (TDS) certificate and paid to six commission agents. The assessee did not challenge this issue before the ld. CIT(A) but raised an additional ground before the Tribunal. The Tribunal decided to allow the assessee to present a fresh legal plea before the ld. CIT(A) since the issue was not examined on merits by the ld. CIT(A). The Tribunal directed the ld. CIT(A) to re-examine the case on this issue, ensuring the assessee's reasonable opportunity of hearing.

In conclusion, the Appellate Tribunal ITAT Pune, in the cited judgment, addressed the denial of deduction u/s.80P for interest income from FDRs with nationalized banks and the disallowance u/s. 40(a)(ia) for commission payments. The Tribunal allowed the appeal for A.Y. 2012-13 and partly allowed the appeal for A.Y. 2014-15, emphasizing the importance of following legal precedents and providing opportunities for fresh legal pleas to be heard at the appropriate levels of appeal.