2023 (6) TMI 729 - AT - Income Tax

Deduction u/s. 80P(2)(a) - receipt of interest income from the Pump Division of Mandali - HELD THAT - As admitted position that the Pump Division of the assessee society is not carrying out the activities beneficial to its farmer members. The activities carried out by the Pump Division are fully taxable and not coming under the purview of Section 80P. Therefore, the present assessee s case in respect of Pump Division has been rightly denied the deduction claimed under Section 80P of the Act by the Assessing Officer as well as by the CIT(A). Therefore, appeal of the assessee is dismissed.

Summary

Issues involved:
The appeal involves issues related to the disallowance made by the Assessing Officer under Section 80P of the Income Tax Act, 1961 for the Assessment Years 2017-18 and 2018-19.

For A.Y. 2017-18:
The Assessee claimed a deduction under Section 80P for interest income received from its Petrol Pump branch business. The Assessing Officer disallowed the claimed amount of Rs. 9,43,000 under Section 80P. The CIT(A) upheld the disallowance.

The Assessee contended that the interest income from the Pump Division should be eligible for deduction under Section 80P as the main activity of the Head Office Division is to provide finance. The Assessee argued that the interest expenses and income were correctly claimed and justified the transactions between the divisions.

The Revenue argued that the interest income derived from the commercial activity of the Pump Division is not exempt under Section 80P. The Revenue contended that the activities of the Pump Division do not benefit farmer members, and hence, the deduction was rightly disallowed.

The Tribunal held that the activities of the Pump Division were taxable and not eligible for deduction under Section 80P. The Tribunal noted that the distinction between the divisions and the utilization of funds for commercial activities did not align with the requirements of Section 80P. Therefore, the appeal of the Assessee was dismissed for A.Y. 2017-18.

For A.Y. 2018-19:
The facts and issues for A.Y. 2018-19 were found to be identical to those of A.Y. 2017-18. The appeal for A.Y. 2018-19 was also dismissed in line with the decision for A.Y. 2017-18.

In conclusion, both appeals filed by the Assessee were dismissed for the Assessment Years 2017-18 and 2018-19.

The order was pronounced on 14th June 2023 by the Appellate Tribunal ITAT Ahmedabad.