2024 (4) TMI 1251 - AT - Income Tax

Disallowing sec.80P deduction claim - interest income realized from parking of alleged surplus funds in nationalized bank(s) viz. Bank of Baroda Central Bank of India and IDBI Bank involving varying sums - both the learned lower authorities have treated the same to be income from other sources u/sec.56 of the Act since not derived from credit facilities provided to members in the regular course of business - HELD THAT - The instant issue is no more res integra in light of The Vaveru Co-operative Rural Bank Ltd. 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT that interest income(s) derived from such nationalized/other bank(s) also qualifies for sec.80P deduction. Faced with this situation I accept the assessee s instant sole substantive grievance in principle and leave it open for the learned Assessing Officer to finalise his consequential computation in very terms. Ordered accordingly. Delay of 266 days in filing of the instant appeal is condoned as per assessee s solemn averments in light of Collector Land Acquisition vs. MST Katiji 1987 (2) TMI 61 - SUPREME COURT having settled the law long back that all such technical aspects must make a way for the cause of substantial justice.

Summary

The Appellate Tribunal (ITAT Nagpur) addressed the assessee's appeal for AY 2014-15 against the National Faceless Appeal Centre's order under section 143(3) of the Income Tax Act, 1961. The key issue was the disallowance of deduction claimed under section 80P(2)(a)(i) on interest income of Rs.10,11,031/- earned from deposits of idle funds with nationalized banks (Bank of Baroda, Central Bank of India, IDBI Bank). The Assessing Officer had treated this interest income as "income from other sources" under section 56, denying the deduction on reliance of the Supreme Court's decision in Totagars Co-operative Sales Society Ltd. vs. ITO, 322 ITR 283 (SC).The Tribunal noted that the issue is no longer res integra following the Andhra Pradesh High Court's ruling in The Vaveru Co-operative Rural Bank Ltd. vs. CCIT [2017] 396 ITR 371 (AP), which held that interest income from deposits with nationalized banks qualifies for deduction under section 80P. Accordingly, the Tribunal accepted the assessee's contention that such interest income is eligible for deduction and remanded the matter to the Assessing Officer for consequential computation.The Tribunal also condoned the delay of 266 days in filing the appeal, invoking the principle from Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC) that technicalities should not obstruct substantial justice.In conclusion, the appeal was allowed, directing the Assessing Officer to grant the section 80P deduction on the interest income as per the principles laid down in Vaveru Co-operative Rural Bank Ltd.