2021 (7) TMI 631 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - interest income received by assessee is not eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. as the same is not related to any banking activity - HELD THAT - The Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT 2021 (1) TMI 488 - SUPREME COURT had held that when the assessee is registered as a Co-operative Society under the respective State Acts, the interest income received for providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) . We remit the issues raised in this appeal to the file of A.O. The A.O. is directed to examine the deduction u/s 80P(2)(a)(i) of the I.T.Act in the light of the dictum laid down in the case of Mavilayi Service Cooperative Bank Ltd. v. CIT (supra) - Appeal filed by the assessee allowed for statistical purposes.

Summary

Issues:
1. Reopening of concluded assessment under section 263 of the Income Tax Act.
2. Eligibility of interest income for deduction under section 80P(2)(a)(i) of the Income Tax Act.

Issue 1: Reopening of Concluded Assessment:
The appeal was against the order of the Commissioner of Income Tax (CIT) dated 19.03.2020, under section 263 of the Income Tax Act, for the assessment year 2015-2016. The appellant challenged the CIT's decision to reopen the concluded assessment, claiming it to be erroneous and prejudicial to the Revenue's interest. The appellant argued that the CIT's order was contrary to the decisions of the High Court and the Tribunal in similar cases. The Tribunal reviewed the facts and held that the interest income earned by the appellant was attributable to its business income and qualified for deduction under section 80P(2)(a)(i) of the Act.

Issue 2: Eligibility of Interest Income for Deduction:
The primary issue revolved around whether the interest income of the appellant, amounting to ?4,69,497, qualified for deduction under section 80P(2)(a)(i) of the Income Tax Act or was taxable under the head 'Income from other sources.' The CIT contended that the interest income was not related to any banking activity and, therefore, not eligible for the deduction. The appellant argued that the interest earned on investments made from its own funds was incidental to its business and exempt under section 80P of the Act. The Tribunal referred to the judgment of the Hon'ble Apex Court in Mavilayi Service Co-operative Bank Ltd. v. CIT, which clarified that interest income received by cooperative societies for providing credit facilities to members is entitled to deduction under section 80P(2)(a)(i) of the Act.

The Tribunal, considering the recent judgment of the Hon'ble Apex Court, remitted the issues raised in the appeal to the Assessing Officer (AO) for re-examination. The AO was directed to evaluate the deduction under section 80P(2)(a)(i) in light of the dictum laid down in the Mavilayi Service Cooperative Bank Ltd. case. Consequently, the appeal filed by the assessee was allowed for statistical purposes, and the order was pronounced on July 14, 2021.