2023 (10) TMI 21 - AT - Income Tax

Deductible u/s 80P(2)(a)(i) - assessee is a Co-Operative Society - AO was of the view that other income earned by the assessee society is not eligible for deduction u/s 80(P)(2)(a)(i) as such income is not derived from the business of banking or providing credit facilities to its members - HELD THAT - The fact shows that assessee is a member of credit co-operative society registered as Resource Society under the Maharashtra Co-operative Society Act and is specially classified as credit resource society. The lower authorities have also admitted that assessee is carrying on the business of banking or providing credit facilities to its members, therefore, the activity of the assessee is classified under Section 80(P)(2)(a)(i) of the Act and it is wholly amount of profits and gains attributable to such activity is deductible under Section 80P(2)(a)(i) ORDER - Under 80(P)(2)(d) any income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society wholly of such income is deductible under 80(P)(2)(d) of the Act. Assessee has stated it has received interest and dividend from co-operative banks and therefore, the above deduction is available to the assessee under 80P(2)(d) of the Act. The deduction is correctly denied under Section 80P(2)(d) of the Act. ₹35,000/- is a reversal of provision of audit fees. The deduction of the audit fee expenditure is allowable to the assessee as profits and gains of business attributable to business of co-operative banking. The reversal of fees is also part of the business income of the assessee. Therefore, ₹35,000/- should be granted to the assessee as deduction under Section 80P(2)(a)(i) of the Act. With respect to electricity bill counter income and office rent and tax deposit are not at all related to the carrying on business of banking or providing credit facilities and therefore, both of this income are correctly treated by the lower authorities not as eligible business income u/s 80 P (2) (a) (i) of the Act . The electricity bill counter income is other business income of the co-operative society and office rent and tax deposit is a rental income which is required to be taxed at income from house property or other income. Accordingly, deduction under Section 80P is not allowable on both this income. Electricity bill counter income is required to be assessed as a separate business other than the business of banking to its members after granting deduction of expenditure incurred wholly and exclusively for that business. Similarly office rent and tax deposit is also required to be taxed as income from house property or income from other sources with applicable deductions allowable. However, while granting the deductions, the expenses which has already been included as profits and gains of business under Section 80(P)(2)(a) of the Act are not required to be disturbed. Assessee appeal partly allowed.

Summary

Issues:
The judgment involves the denial of deduction claimed under Section 80P(2)(a)(i) of the Income-tax Act, 1961, for various income sources received by the Co-Operative Society.

Summary:
The appellant, a Co-Operative Society, challenged the appellate order passed by the National Faceless Appellate Centre, Delhi, regarding the denial of deductions claimed under Section 80P(2)(a)(i) of the Act for specific income sources. The assessment under the Faceless Assessment Scheme determined the total income of the appellant at a certain amount, leading to the appeal.

The Assessing Officer considered certain incomes as "income from other sources," leading to the denial of deductions under Section 80P(2)(a)(i) of the Act. The appellant contended that some of the incomes were attributable to its business of providing credit facilities and thus eligible for the deduction.

Upon appeal, the CIT (A) allowed deductions for certain incomes related to the business of providing credit facilities to members but disallowed deductions for other incomes not directly related to this business activity. The appellant further argued for the eligibility of specific incomes for deduction under Section 80P(2)(a)(i) or Section 80(P)(2)(d) of the Act.

The Tribunal analyzed the contentions and held that certain incomes, like interest and dividend from Co-operative banks, were eligible for deductions under the Act. However, other incomes like electricity bill counter income and office rent were not directly related to the business of providing credit facilities and thus not eligible for deductions under Section 80P.

In conclusion, the Tribunal partly allowed the appeal, granting deductions for specific incomes directly attributable to the business of providing credit facilities while denying deductions for other unrelated incomes. The judgment was pronounced on a specified date.