2018 (10) TMI 1971 - AT - Income Tax

Disallowance of deduction claimed u/s. 80P(2)(a)(i) - cooperative society engaged in the business of providing credit facilities to its members which earns interest income on the surplus funds parked with the nationalized banks - HELD THAT - As in ITAT, Ahmedabad 2018 (8) TMI 2098 - ITAT AHMEDABAD on the similar facts and circumstances has restored the issue to the file of the A.O by following decision of State Bank of India Co-operative Society 2016 (7) TMI 516 - GUJARAT HIGH COURT wherein it has been held that cooperative society engaged in the business of providing credit facilities to its members which earns interest income on the surplus funds parked with the nationalized banks, is not eligible for deduction/s. 80P(2)(a)(i) - Therefore, we hold that the orders of the authorities below in denying deduction u/s. 80P(2)(a)(i)of the Act is quite correct and in accordance with the ratio of decision of Hon'ble High Court and there is no reason before us to interfere with the same and thus, we confirm the same. We find it justified and necessary to observe that any expenditure incurred by the assessee for earning such income, which has not been claimed and allowed, could be allowed to the assessee meaning thereby the AO has to determine the net interest income as well as net miscellaneous income earned by the assessee and only thereafter that net income has to be excluded from the claim of deduction u/s. 80P - direct the AO to examine and recalculate the correct amount of disallowance as per directions noted herein above. The issue is restored to the file of the A.O for limited purposes.

Summary

Issues:
Disallowance of deduction claimed u/s. 80P(2)(a)(i) of the Income Tax Act, 1961.

Analysis:

Issue 1: Disallowance of deduction u/s. 80P(2)(a)(i)

The Assessee filed an appeal against the order of Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14, challenging the disallowance of Rs. 86,704 on account of deduction claimed u/s. 80P(2)(a)(i). The Assessee argued that the disallowance was unjustified and should be deleted. The Assessee's Representative referred to a similar case decided by ITAT 'D' Bench, Ahmedabad, emphasizing the need for the Assessing Officer (AO) to determine the net interest income and net miscellaneous income earned by the assessee before disallowing the deduction under section 80P. The Departmental Representative supported the disallowance but acknowledged the lack of sufficient verification by the AO. The Tribunal, after considering the submissions, referred to a decision of the Hon'ble Jurisdictional High Court of Gujarat, holding that a cooperative society earning interest income on surplus funds parked with nationalized banks is not eligible for deduction u/s. 80P(2)(a)(i). Consequently, the Tribunal upheld the orders of the authorities below, denying the deduction u/s. 80P(2)(a)(i) to the Assessee.

The Tribunal directed the AO to reexamine and recalculate the correct amount of disallowance, considering the net interest income and net miscellaneous income earned by the Assessee. The issue was restored to the file of the AO for limited purposes. The Tribunal emphasized that any expenditure incurred by the Assessee for earning such income, which was not claimed and allowed, could be considered for allowance. The appeal of the Assessee was dismissed with directions to the AO as mentioned above.

In conclusion, the Tribunal confirmed the disallowance of the deduction claimed u/s. 80P(2)(a)(i) based on the decision of the Hon'ble Jurisdictional High Court of Gujarat. The Tribunal directed the AO to reexamine the issue and recalculate the disallowance amount, considering the net interest income and net miscellaneous income earned by the Assessee.