2021 (11) TMI 1071 - AT - Income Tax

Deduction u/s 80P - Disallowance of deduction on the interest received from Bombay Mercantile Bank Ltd. and Ramgharia Co-operative Bank Ltd. - whether it is a case of parking of surplus funds? - CIT-A deleted the addition - HELD THAT - It is pertinent to note that in the earlier years on the identical issue revenue s appeal were dismissed and there is no distinguishing factors pointed out by the Ld. DR in the present appeal as well. Therefore the matter is squarely covered by the decision of the Tribunal in assessee s own case for earlier years 2018 (5) TMI 246 - ITAT DELHI - Authorities below were not justified in refusing to grant deduction under section 80P of the I.T. Act in favour of the assessee.

Summary

Issues:

1. Disallowance of deduction claimed under section 80P of the Income Tax Act, 1961 on interest received from two banks.

Analysis:

Issue 1: Disallowance of deduction claimed under section 80P

The appeal was filed by the revenue against the order passed by the CIT (A) for Assessment Year 2013-14. The AO disallowed the deduction claimed under section 80P on interest income earned by the assessee from two banks. The AO added the interest income to the assessable income. The CIT (A) partly allowed the appeal of the assessee. The revenue contended that the disallowance should not have been deleted as it pertained to parking of surplus funds, citing relevant court decisions. The assessee argued that the Tribunal had previously dismissed a similar contention by the revenue and that the CIT (A) rightly granted partial relief. The Tribunal noted that the issue was previously decided in favor of the assessee for earlier years and no distinguishing factors were presented in the current appeal. The Tribunal referred to its earlier decision and held that the interest income was attributable to the business activities of the assessee and eligible for deduction under section 80P. Therefore, the appeal of the revenue was dismissed, and the entire addition was deleted in favor of the assessee.

This judgment provides clarity on the interpretation of section 80P regarding the deduction of interest income earned by cooperative societies. It emphasizes that interest income derived from surplus funds parked in banks is attributable to the business activities of the cooperative society and qualifies for deduction under section 80P. The decision underscores the importance of consistency in applying legal principles across cases and highlights the significance of previous judicial precedents in determining tax liabilities.