2020 (2) TMI 138 - AT - Income Tax

Deduction of interest income from scheduled bank u/s 80P(2)(a)(i) - HELD THAT - Issue settled by the Hon ble Jurisdictional High Court in the case of State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT and the assessee is not entitled for such deduction. This proposition was not even disputed by the assessee. Only thing which requires to be done is re-determination or quantification of amount which is to be disallowed out of interest income from the scheduled bank. AO shall work out the net interest income from the deposits with scheduled bank, and thereafter exclude that amount from the computation of deduction claimed under section 80P(2)(a)(i) of the Act. As far as interest income from cooperative bank/society is concerned in view of the decision of co-ordinate Bench, such income will qualify for grant of deduction under section 80P(2)(d) of the Act. The ld.AO shall work out net amount of such interest income, and thereafter grant deduction under section 80(2)(d) of the Act.

Summary

Issues:
- Appeal against orders of ld.CIT(A)-4, Baroda for the Asstt.Year 2014-15
- Allowability of deduction of interest income under section 80P(2)(d)
- Compliance with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963
- Eligibility of deduction under section 80P(2)(d) for interest income from cooperative banks/societies
- Admissibility of deduction under section 80P(2)(a)(i) for interest income from scheduled banks
- Quantification and computation of interest income for deduction purposes

Analysis:

The judgment pertains to three appeals filed by assessees against orders of ld.CIT(A)-4, Baroda for the Asstt.Year 2014-15. The appeals concern the allowability of deduction of interest income under section 80P(2)(d) and compliance with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963. The ld. counsel for the assessees argued that the interest income from cooperative banks/societies should be allowed as a deduction under section 80P(2)(d) based on various decisions favoring the assessees. The Tribunal had previously allowed a Miscellaneous Application (MA) filed by the assessee, restoring a ground for adjudication afresh. The grievances of the assessees were related to the exclusion of interest income from the computation of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act.

Upon careful review of the record, it was noted that both assessees were credit cooperative societies earning interest income from nationalized banks and cooperative societies/banks. The ld. counsel contended that while interest income from scheduled banks was not eligible for deduction under section 80P(2)(a)(i), interest income from cooperative banks/societies should be allowed as a deduction under section 80P(2)(d). The Tribunal referred to a previous decision where it was held that interest income received from investments in cooperative banks was eligible for deduction under section 80P(2)(d) of the Act. The Tribunal found merit in the claim of the assessees for deduction under section 80P(2)(d) in respect of income earned from cooperative banks.

The judgment clarified that interest income from scheduled banks was not eligible for deduction under section 80P(2)(a)(i) based on a decision by the Hon'ble Jurisdictional High Court. However, interest income from cooperative banks/societies qualified for deduction under section 80P(2)(d). The ld.AO was directed to determine the net interest income from scheduled banks and exclude that amount from the deduction claimed under section 80P(2)(a)(i). As for interest income from cooperative banks/societies, the net amount was to be calculated for granting deduction under section 80P(2)(d) of the Act.

In conclusion, the appeals of the assessees were allowed for statistical purposes, with directions provided for the quantification and computation of interest income for deduction purposes. The judgment was pronounced on 9th January 2020 at Ahmedabad by the Appellate Tribunal ITAT Ahmedabad.