2016 (7) TMI 1134 - AT - Income Tax

Nature of income - interest income treated as business income - Held that - Considering the submissions of the assessee s counsel is that the assessee society is maintaining operational funds and to meet any eventuality towards repayment of deposit the cooperative society is maintaining some liquidated funds as short term deposits with banks. Hence adhering to the doctrin stair desises, we hold that the assessee should be granted benefit of deduction under section 80P(2)(a)(i). Accordingly, the interest on deposits would qualify for deduction under the said section. Accordingly, we set aside the orders of authorities below and decide the issue in favour of the assessee

Issues Involved:
1. Treatment of interest income as business income or income from other sources.
2. Application of section 80P of the Income Tax Act.
3. Interpretation of judicial precedents and their applicability.
4. Deletion of certain additions made by the assessing officer.
5. Consideration of ITAT and High Court decisions in similar cases.

Issue 1 - Treatment of Interest Income:
The appeal questioned the treatment of interest income of ?39,38,620 as business income. The Revenue argued that it should be considered income from other sources. The Tribunal found in favor of the assessee, citing precedents and distinguishing the case based on the nature of funds and activities. Referring to a similar case, the Tribunal concluded that the interest income on deposits with a cooperative society should be treated as exempt under section 80P(2)(a)(i) and not taxable under section 56 of the Act.

Issue 2 - Application of Section 80P:
The Tribunal upheld the benefit of deduction under section 80P(2)(a)(i) for the interest income, reversing the decision of the CIT(A) and holding that it did not fall under the category of exempted income under section 80P of the Act. The decision was based on the nature of funds maintained by the cooperative society and the purpose of maintaining liquidated funds for repayment of deposits.

Issue 3 - Interpretation of Judicial Precedents:
The Tribunal considered various judicial precedents, including decisions of the ITAT and the Supreme Court, to determine the tax treatment of interest income. It analyzed the facts of the present case in comparison to the cases cited, emphasizing the distinction in the nature of funds and surplus amounts. The Tribunal followed the doctrine of stare decisis and granted the benefit of deduction under section 80P(2)(a)(i) based on the operational funds maintained by the cooperative society.

Issue 4 - Deletion of Additions by AO:
Regarding the deletion of additions made by the assessing officer, the Tribunal found that there was no evidence presented by the assessee to prove that the receipts were attributable to banking activities. Consequently, the Tribunal ordered the restoration of the AO's decision on this issue.

Issue 5 - Consideration of Previous Decisions:
The Tribunal noted that similar appeals decided in favor of the assessee had been considered by the Jurisdictional High Court, which affirmed the Tribunal's view. Based on this background and the discussion, the Tribunal found no fault in the CIT(A)'s order.

In conclusion, the appeal by the Revenue was partly allowed, with the Tribunal ruling in favor of the assessee on the treatment of interest income and the application of section 80P, while restoring the AO's decision on certain additions. The Tribunal's decision was based on a thorough analysis of legal provisions, judicial precedents, and factual circumstances specific to the case.

← Previous Next →