2019 (9) TMI 48 - AT - Income Tax

Deduction u/s. 80P - interest income earned from banks as income under the head income from the other source - HELD THAT - Interest income earned from bank deposits is assessable as profits and gains of business in the hands of assessee and accordingly deduction u/s. 80P(2)(a)(i) of the Act is allowable thereon. See Gandhinglaj Taluka Sahakari Patpedhi Ltd 2015 (12) TMI 287 - ITAT MUMBAI

Summary

Issues:
Assessment of interest income earned from banks under income from other sources and denial of deduction u/s. 80P of the Act.

Analysis:
The judgment involves appeals against the orders passed by Ld CIT(A)-2, Jalandhar for the assessment years 2014-15 and 2015-16 concerning the assessment of interest income earned from banks by a cooperative society. The Assessing Officer treated the interest income as non-business income, denying deduction u/s. 80P of the Act. The Ld CIT(A) upheld this decision, leading to the appeals before the Tribunal.

The appellant argued that the interest income should be considered as profits and gains of business, citing a decision by the Mumbai SMC Bench of the Tribunal in a similar case. The Tribunal had distinguished a Supreme Court decision and followed an Andhra Pradesh High Court decision, holding that interest income earned by a credit cooperative society is assessable as business income, making it eligible for deduction u/s. 80P(2)(a)(i) of the Act.

Upon review, the Tribunal found an identical issue considered by the Mumbai SMC Bench in another case, where it ruled in favor of the assessee. Additionally, the Amritsar SMC bench had a similar view in a separate case. The Tribunal concurred with these decisions, holding that interest income from bank deposits is assessable as business income, allowing deduction u/s. 80P(2)(a)(i) of the Act.

The judgment further referenced a case involving a cooperative credit society under the Maharashtra Co-operative Society Act, where the assessing officer initially rejected the deduction u/s. 80P but the CIT(A) reversed this decision as the society was not considered a bank. However, the CIT(A) assessed interest income from fixed deposits as income from other sources, denying deduction u/s. 80P(2)(a)(i) based on a Supreme Court decision.

In a detailed analysis, the Tribunal referred to a Karnataka High Court decision supporting the deduction of interest income from bank deposits as profits and gains of business for a cooperative society. This view was also upheld by the Andhra Pradesh High Court. Consistently, the Tribunal held that the interest income in question should be treated as business income, allowing deduction u/s. 80P(2)(a)(i) of the Act.

In conclusion, the Tribunal allowed both appeals, setting aside the orders of the Ld CIT(A) and directing the AO to allow the deduction u/s. 80P of the Act on the interest income earned from bank deposits for the relevant assessment years.