2020 (2) TMI 210 - AT - Income Tax

Quantification of deduction admission u/s 80P(2)(a)(i) and 80P(2)(d) - HELD THAT - In Vir Transport Operator Co-op Credit Services Society Ltd . 2018 (12) TMI 1313 - ITAT AHMEDABAD held only thing which requires to be done is redetermination or quantification of amount which is to be disallowed out of interest income from the scheduled bank. The ld.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 coordinate 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). Assessee has filed its return of income at NIL after claiming deduction under section 80P(2)(a)(i) - addition has been made on the ground that the assessee has claimed deduction with respect to income earned from deposits made with scheduled bank - HELD THAT - Direct the AO to re-adjudicate the issue and only exclude net interest income from nationalised bank from computation of income admissible under section 80P(2) of the Act. The AO shall adjudicate this issue after providing due opportunity of hearing to the assessee. Deduction u/s 80P(2) for deduction of interest income earned from scheduled bank - HELD THAT - Assessee is covered by the decision of Hon ble jurisdictional High Court in the case of State Bank of India Employees Coop Credit Ltd. 2016 (7) TMI 516 - GUJARAT HIGH COURT wherein it has been held by that cooperative society would not be eligible under section 80P(2) of the Act for deduction of interest income earned from scheduled bank. Further, assessee has agreed to proportionate disallowance to the extent of bank interest to total income. Disallowance which the assessee has received from its members towards form fee, cannot doubted to be not attributable to and/or arising from assessee s day-to-day activities of the assessee. Therefore, allow this claim of the assessee and delete disallowance. Allowance of standard deduction claimed by the assessee under section 80P(2)(c) of the Act, the same being statutory deduction, the assessee will be entitled for the same.

Summary

Issues Involved:
1. Quantification of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961.
2. Eligibility of interest income from scheduled banks for deduction under section 80P(2)(a)(i).
3. Eligibility of interest income from cooperative banks for deduction under section 80P(2)(d).
4. Proportionate disallowance of deductions claimed.
5. Allowance of statutory standard deduction under section 80P(2)(c).

Issue-wise Detailed Analysis:

1. Quantification of Deduction under Section 80P(2)(a)(i) and 80P(2)(d):
The primary issue in these appeals is the quantification of deductions under sections 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961. The assessee, a cooperative society, claimed deductions on interest income earned from deposits with scheduled and cooperative banks. The Assessing Officer (AO) disallowed the deduction following the decision of the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT, 72 taxmann.com 64 (Guj), resulting in an addition of ?40,83,504/-. The CIT(A) upheld this disallowance.

2. Eligibility of Interest Income from Scheduled Banks for Deduction under Section 80P(2)(a)(i):
The assessee argued that only net interest income should be excluded from the eligibility amount for the deduction. The Tribunal, referencing the Hon’ble Gujarat High Court's decision in State Bank of India (supra), held that interest income from scheduled banks does not qualify for deduction under section 80P(2)(a)(i). The AO was directed to work out the net interest income from deposits with scheduled banks and exclude that amount from the computation of the deduction claimed under section 80P(2)(a)(i).

3. Eligibility of Interest Income from Cooperative Banks for Deduction under Section 80P(2)(d):
The Tribunal noted that interest income from cooperative banks qualifies for deduction under section 80P(2)(d), as established by various decisions, including the Tribunal's own earlier orders. The AO was instructed to work out the net amount of interest income from cooperative banks and grant the deduction accordingly.

4. Proportionate Disallowance of Deductions Claimed:
In ITA No.2906/Ahd/2017, the AO made an addition of ?2,98,907/- on the grounds that the assessee claimed deductions for income earned from deposits with scheduled banks without specifying the exact amount. The Tribunal directed the AO to re-adjudicate the issue, excluding only the net interest income from nationalized banks from the computation of income admissible under section 80P(2).

In ITA No.285/Ahd/2018, the assessee agreed to a proportionate disallowance of the deduction claimed, based on the ratio of nationalized bank interest to total income. The AO's disallowance of ?6,27,200/- was upheld by the Tribunal.

5. Allowance of Statutory Standard Deduction under Section 80P(2)(c):
The Tribunal allowed the assessee's claim for a standard deduction of ?50,000/- under section 80P(2)(c), recognizing it as a statutory deduction. The AO was directed to allow this claim in accordance with the law.

Conclusion:
The Tribunal's consolidated order addressed the quantification of deductions under sections 80P(2)(a)(i) and 80P(2)(d), confirming the disallowance of interest income from scheduled banks while allowing deductions for interest income from cooperative banks. Proportionate disallowance was upheld where applicable, and statutory deductions under section 80P(2)(c) were allowed. All three appeals were partly allowed for statistical purposes.