2021 (12) TMI 406 - AT - Income Tax

Deduction u/s 80P - assessee has earned interest income from nationalized bank, i.e., other than its Members or other Co-operative Societies - HELD THAT - Any interest income earned from its Members or any investments made with the co-operative societies will qualify for the grant of deduction under Section 80P(2) and 80P(2)(d) of the Act. AO has worked out exclusion of income from the eligible amount under some formula without disclosing what is exact interest amount earned from nationalized bank, what are the expenditure and how he has worked out the disallowance - findings of the learned Assessing Officer for both the assessment years. It is totally not discernable. AO further nowhere recorded the basic facts. In Assessment Year 2013-14, in paragraph No.3.1, he simply observed that assessee has gross receipt of ₹ 1,09,06,710/-; while the interest earned on deposits with other banks other than Co-Operative Society or Banks is shown at ₹ 43,78,709/-. It is pertinent to observe that if investment has been made with the Co-operative Bank, then it will qualify for deduction under Section 80P(2)(d) of the Act. Therefore, we allow both these appeal statistically and remit the issue to the file of the Assessing Officer for re-adjudication. The learned Assessing Officer shall examine the issue afresh in the light of judgment in the case of State Bank of India vs. CIT 2016 (7) TMI 516 - GUJARAT HIGH COURT and keeping in mind the provisions of Section 80P(2)(d) of the Act. It is also to be kept in mind that a co-operative bank first happens to be a society; therefore, interest income earned from investment with co-operative bank would qualify for grant of deduction under Section 80P(2)(d) of the Act. The issues in both the appeals are remitted back to the file of the Assessing Officer. Appeals filed by the assessee are allowed for statistical purposes.

Summary

Issues:
Appeals against CIT(A) orders for Assessment Years 2013-14 & 2014-15 - Addition of interest income from nationalized bank under Section 80P(2)(a)(i) - Exclusion of income without disclosing exact figures - Eligibility for deduction under Section 80P(2) and 80P(2)(d) - Re-adjudication based on Gujarat High Court judgment and Section 80P(2)(d).

Analysis:

1. Issue of Addition of Interest Income:
The appeals were made against the CIT(A) orders confirming the addition of interest income earned from a nationalized bank under Section 80P(2)(a)(i) for Assessment Years 2013-14 & 2014-15. The Assessing Officer calculated the excluded amounts without specifying the exact interest income earned from the nationalized bank. The Tribunal noted that interest income from members or cooperative societies qualifies for deduction under Section 80P(2) and 80P(2)(d) of the Act.

2. Lack of Disclosure and Exclusion Calculation:
The Tribunal observed that the Assessing Officer did not provide clear details on the interest income earned from the nationalized bank, the related expenditures, or the methodology used for the exclusion calculation. The lack of transparency in the assessment process raised concerns about the accuracy and fairness of the exclusion made by the Assessing Officer. The Tribunal emphasized the importance of disclosing precise figures and following proper procedures in such assessments.

3. Remittal for Re-Adjudication:
Due to the deficiencies in the assessment process and the lack of clarity in the exclusion calculation, the Tribunal decided to allow the appeals for statistical purposes and remit the issues back to the Assessing Officer for re-adjudication. The Tribunal directed the Assessing Officer to re-examine the matter considering the judgment of the Gujarat High Court in the State Bank of India vs. CIT case and the provisions of Section 80P(2)(d) of the Act. It highlighted that interest income from investments with cooperative banks qualifies for deduction under Section 80P(2)(d).

4. Guidance for Re-Adjudication:
The Tribunal clarified that its observations and directions were meant to guide the Assessing Officer in conducting a fresh assessment in accordance with the law. It emphasized that the re-adjudication should be done diligently, taking into account the specific provisions of the Act and relevant judicial precedents. The Tribunal aimed to ensure a fair and accurate assessment process in line with legal requirements.

5. Final Decision and Conclusion:
The Tribunal pronounced the order allowing the appeals for statistical purposes and instructed the Assessing Officer to re-examine the issues related to the exclusion of interest income from the nationalized bank. The Tribunal's decision aimed to uphold the principles of transparency, accuracy, and adherence to legal provisions in the assessment process. The re-adjudication process was directed to be conducted with due diligence and consideration of relevant legal precedents for a fair resolution of the matter.

This detailed analysis of the judgment highlights the key issues, the Tribunal's observations, the reasons for remittal, and the guidance provided for the re-adjudication process, ensuring a thorough understanding of the legal decision.