2022 (9) TMI 475 - AT - Income Tax

Exemption u/s. 80P(2)(a)(i) - Taxability of interest income earned by cooperative society from Syndicate Bank - appellant society earned interest income on FDs with Syndicate Bank - Admittedly, these fixed deposits were not made for the purpose of procurement of bank guarantee for its business purpose - HELD THAT - Fixed deposits were not made for the purpose of procurement of bank guarantee for its business purpose. The material on record clearly does not indicate the source of the investments. It is settled position of law that if the FDs are placed out of the surplus generated by the cooperative society, such interest income, partakes the same character as the business income of the cooperative society. In the present case, the material on record does not indicate the source of funds for making FDs in Syndicate Bank. Therefore, we are of the considered opinion that the matter requires to be remanded to the file of the Assessing Officer to decide the issue of eligibility of the interest income for exemption under the provisions of section 80P of the Act in terms of the decision of this Tribunal in NASHIK ROAD NAGARI SAHKARI PATSANSTHA LIMITED 2021 (12) TMI 1259 - ITAT PUNE - Thus, the grounds of appeal filed by the assessee stands partly allowed.

Summary

Issues:
1. Taxability of interest income earned by cooperative society from Syndicate Bank.
2. Condonation of delay in filing the appeal.

Issue 1: Taxability of interest income earned by cooperative society from Syndicate Bank:

The appellant, a cooperative society, filed an appeal against the order of the ld. Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Assessing Officer had denied the claim for exemption of interest on Fixed Deposit Receipts (FDRs) with Syndicate Bank, stating that the FDRs were made as long-term investments by the appellant society. The ld. CIT(A) confirmed the addition, reasoning that there was no evidence to show that the investments were made from business surplus. The appellant society contended that the interest income should be treated as business income. The ITAT Pune referred to a previous decision and held that if the FDRs were placed from the surplus generated by the cooperative society, the interest income would be considered as business income. As the source of the investments was not clear in the present case, the matter was remanded to the Assessing Officer to determine the eligibility of the interest income for exemption under section 80P of the Income Tax Act. Consequently, the appeal filed by the assessee was partly allowed.

Issue 2: Condonation of delay in filing the appeal:

The appellant had filed the appeal with a delay of 21 days, citing the serious illness of the Manager of the appellant society as the reason for the delay. The appellant requested condonation of the delay, which was supported by the ld. CIT-DR. The ITAT Pune considered the submissions and decided to condone the delay, allowing the appeal to proceed on merits.

In conclusion, the ITAT Pune partially allowed the appeal filed by the cooperative society concerning the taxability of interest income earned from Syndicate Bank. The delay in filing the appeal was condoned, and the matter was remanded to the Assessing Officer for further assessment based on the source of investments.