2020 (12) TMI 1313 - AT - Income Tax

Exemption u/s.80P - interest income received from the staff of the Assessee s Society - HELD THAT - Assessee s Society has existed only for the members of the Telecom Employees Co-operative Society and not for the benefit of the staff of the Telecom Employees Co-operative Society. The Telecom Employees Co-operative Society is an altogether different from the staff of the Assessee. Therefore the claim made by the Assessee u/s.80P is not an eligible claim and therefore the Assessing Officer as well as the learned Commissioner of Income Tax (Appeals) rightly denied the claim of the Assessee u/s.80P of the Income Tax Act 1961. In this appeal the issue has been decided against the Assessee and in favour of the Revenue. Treatment of interest income as income from other sources - expenditure incurred by the Assessee to earn the interest income - HELD THAT - The case of the Assessee is that the Assessing Officer has treated the interest income earned by the Assessee has income from other sources and estimated the expenditure only. In the Assessment Order the Assessing Officer has not properly considered the expenditure incurred by the Assessee to earn the interest income and simply estimated the interest expenditure. It is not correct. Thus we set aside the order passed by CIT (Appeals) on this count and remit back the matter back to the Assessing Officer to adjudicate the issue afresh in accordance with law de novo.

Summary

Issues:
1. Eligibility of interest income for Section 80P of the Income Tax Act, 1961.
2. Treatment of interest income as income from other sources and allowance of expenditure incurred.

Issue 1: Eligibility of interest income for Section 80P of the Income Tax Act, 1961:
The case involved an Assessee, a Co-operative Society established by Telecom and BSNL employees, claiming exemption under Section 80P of the Income Tax Act, 1961 for interest income received from its staff. The Assessing Officer rejected the claim stating that the staff were not members of the Society. The Commissioner of Income Tax (Appeals) upheld this decision. The Assessee argued that staff automatically became members, making the interest income eligible for Section 80P. However, it was contended that the Society was created for the benefit of members only, not staff. The Tribunal found that the Society existed solely for members, not staff, and therefore, the interest income from staff was not eligible for Section 80P. Consequently, the claim was denied, and the appeal was dismissed.

Issue 2: Treatment of interest income as income from other sources and allowance of expenditure incurred:
The second ground of appeal addressed the treatment of interest income as income from other sources by the Assessing Officer, who did not allow the expenditure incurred by the Assessee. The Assessee argued that the expenditure was not properly considered and requested a fresh examination by the Assessing Officer. The Tribunal agreed that the Assessing Officer's treatment was incorrect and remitted the matter back for a fresh assessment of the expenditure incurred to earn the interest income. As a result, the appeal was partly allowed for statistical purposes in this regard.

In summary, the Tribunal ruled against the Assessee regarding the eligibility of interest income for Section 80P of the Income Tax Act, 1961, and partly allowed the appeal concerning the treatment of interest income as income from other sources and the allowance of expenditure incurred. The decision was pronounced on 2nd December 2020 in Chennai.