2022 (11) TMI 669 - AT - Income Tax

Deduction u/s. 80P(2)(a)(i) - Interest earned from saving bank account - in the instant case alleged interest is neither earned on any surplus/idle funds nor from any fixed deposits. The said sum is in the nature of saving bank interest - HELD THAT - Since the alleged sum is earned from saving bank account, which is akin to the business activities carried out by the assessee the alleged interest is not earned from any surplus or idle funds and it is part of the business income and therefore, the judgment of the Hon ble Apex Court in the case of Totgars Co-op Sale Society Ltd 2010 (2) TMI 3 - SUPREME COURT is not applicable on the facts of the instant case. Thus the alleged sum is eligible for deduction u/s. 80P(2)(a)(i) of the Act and should not be treated as income from other sources . Therefore, reverse the findings of the ld. CIT(A) and allow all the grounds raised by the assessee for the AY 2017-18.

Summary

Issues:
1. Condonation of delay in filing appeals.
2. Deduction u/s 80P(2)(a)(i) of the Income-tax Act for interest income from saving bank account.

Analysis:

Issue 1: Condonation of delay in filing appeals
The appeals by the assessee for the assessment years 2017-18 & 2018-19 were time-barred by 105 days. The delay was attributed to the illness of the assessee's Treasurer, who handles tax matters, compounded by COVID-19 restrictions. The Appellate Tribunal, considering the Supreme Court's judgment, excluded the period of limitation from 15.03.2020 to 28.02.2022 for calculating the delay. Consequently, the delay was condoned, and both appeals were admitted for adjudication on merits.

Issue 2: Deduction u/s 80P(2)(a)(i) for interest income from saving bank account
In the appeal for the assessment year 2017-18, the assessee, a cooperative credit society, challenged the denial of deduction u/s 80P(2)(a)(i) for interest income of Rs. 91,091 from a saving bank account. The Assessing Authority treated this income as taxable under other sources. The Tribunal found that the interest was essential for the society's business activities, earned from the saving bank account used for fund transactions with members. As it was not from surplus funds, the interest was considered business income eligible for deduction u/s 80P(2)(a)(i), overturning the CIT(A)'s decision.

In the appeal for the assessment year 2018-19, a similar issue arose where the deduction u/s 80P(2)(a)(i) for interest income of Rs. 13,52,434 from a saving bank account was denied. The Tribunal noted that the CIT(A) did not adequately consider the documents and details submitted by the assessee. Therefore, the matter was remanded to the CIT(A) for fresh adjudication, allowing all grounds raised by the assessee for statistical purposes.

In conclusion, the Tribunal allowed the appeal for the assessment year 2017-18, granting the deduction for interest income from the saving bank account. For the assessment year 2018-19, the matter was remanded to the CIT(A) for reconsideration, directing a fair assessment based on the submissions and findings from the previous appeal.