2022 (7) TMI 1001 - AT - Income Tax

Estimation of profit - assessee failed to submit complete details about this work contract - HELD THAT - As assessee failed to demonstrate as to how this contract has generated 2.94% of the profit only. The Assessing Officer after going through all the details rejected the claim of the assessee and estimated the profit at 8%. He accordingly worked out an addition - After going through the well-reasoned finding of both the lower authorities, we do not find any reason to interfere with the same, because according to the finding of the Assessing Officer, no details were submitted by the assessee. Accordingly, this ground of the assessee s appeal is dismissed. Disallowing the deduction of interest income - investment made out of the surplus funds with Jharkhand State Co-operative Bank - Whether interest income earned from that investment is eligible for deduction or not - HELD THAT - A perusal of sub-Section (d) would indicate that in respect of any income by way of interest or dividend derives by the co-operative society from its investment with any other co-operative society, the whole of such income shall be eligible for deduction. The whole of income earned from co-operative society by an assessee by way of the interest or dividend shall be eligible for deduction u/s 80P(2)(d) of the Act. The Jharkhand State Cooperative Bank, happens to be a society first and thereafter a bank. Therefore, interest income earned from this bank on investment of surplus fund will qualify for grant of deduction u/s 80P(2)(d) of the Act. We accordingly, delete this disallowance and allow this ground of the appeal.

Summary

Issues:
1. Addition of Rs.3,75,972 as profit by Assessing Officer.
2. Disallowance of deduction of interest income amounting to Rs.50,99,394.

Analysis:
1. The first issue pertains to the addition of Rs.3,75,972 as profit by the Assessing Officer. The assessee, a cooperative society, received a contract from M/s. Tata Motors Ltd. for maintaining horticulture, showing a profit of 2.94% in the accounts. The Assessing Officer deemed this profit insufficient, estimating it should be at least 8% of the total receipt. The Assessing Officer rejected the claim as the assessee failed to provide evidence for the low profit. The First Appellate Authority upheld this addition. The Tribunal found that the assessee failed to submit complete details about the work contract, leading to the rejection of the claim. Since no evidence was submitted by the assessee, the Tribunal dismissed this ground of appeal.

2. The second issue involves the disallowance of a deduction of interest income amounting to Rs.50,99,394. The dispute revolved around whether interest income earned by the assessee from investments with Jharkhand State Co-operative Bank is eligible for deduction under section 80P(2)(d) of the Income Tax Act. The First Appellate Authority disallowed the deduction, except for interest income earned on statutory deposits. The Tribunal analyzed section 80P(2)(d) and concluded that income derived from investments with a cooperative society qualifies for deduction. As the Jharkhand State Cooperative Bank is a society first and then a bank, interest income earned from this bank on surplus fund investments is eligible for deduction under section 80P(2)(d). Consequently, the Tribunal allowed this ground of appeal, partially favoring the assessee.

In conclusion, the Tribunal dismissed the first issue regarding the addition of profit but partially allowed the appeal on the second issue, permitting the deduction of interest income earned from investments with the Jharkhand State Co-operative Bank.