2024 (6) TMI 1018 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) and 80P2)(d) - interest / dividend income earned from co-operative bank - HELD THAT - As assessee has raised the contention in the grounds that interest received from certain co-operative banks is on account of compliance with Rule 28 of the Karnataka Co-operative Societies Rules, 1960, therefore, it constitutes income from business of providing credit facilities to its members and hence the same is eligible for deduction u/s 80P(2)(a)(i) of the Act. This identical contention of the assessee has also been dealt with in the case of Vasavamba Co-operative Society Ltd. 2021 (8) TMI 706 - ITAT BANGALORE wherein had restored the matter to the AO for fresh examination because if there are statutory compulsions that the money should be invested in a particular manner to run business of the Assessee then the interest income arising from such investments have business nexus and should be considered as income derived from the business of providing credit facility to the members. This aspect requires examination by the AO. Thus we direct the AO to examine whether interest income is earned out of investments which are in compliance under the relevant Karnataka Co-operative Societies Rules and Act. If the same is found to be out of compulsions, the interest income derived would be entitled to deduction under section 80P(2)(a)(i) of the Act. Deduction u/s 80P(2)(a)(iii) - commission earned from Mangalore Agriculturists Souhardha Sahakari Ltd - AO disallowed the claim of deduction due to the absence of any details furnished to establish the entire facts - HELD THAT Assessee has wrongly claimed deduction u/s 80P(2)(a)(iii) of the Act instead of claiming deduction under section 80P(2)(e) of the Act. Assessee has also not furnished the necessary documents before the AO. Consequently, the claim of deduction was not granted by the AO. In the interest of justice and equity, we are of the view that this issue needs to be examined afresh by the AO. Therefore, as regards the claim of deduction of Rs.1,71,568/- whether assessee is entitled to deduction under any of the limbs under section 80P of the Act shall be examined afresh. Assessee shall furnish necessary materials / evidences to substantiate its claim. It is ordered accordingly. Deduction u/s 80P(2)(e) - income earned from storing the pledged agricultural produce against loans given - AO disallowed the claim of deduction due to the absence of details to establish the entire facts - HELD THAT - Assessee had made claim for deduction under section 80P(2)(e) of the Act before the income-tax authorities. The claim of deduction was denied by the AO since complete facts were not produced before him. Before the Tribunal, assessee submits that it is entitled to deduction under section 80P(2)(a)(i) of the Act since assessee gives loans on agricultural produce to its members which is incidental to its business; hence, eligible for deduction under section 80P(2)(a)(i) of the Act. We are of the view that the issue raised in ground also requires to be adjudicated since full details were not available before the AO. Appeal filed by the assessee is allowed partly for statistical purposes.

Summary

Issues Involved:
The judgment involves issues related to the deduction claimed under various sections of the Income Tax Act, 1961, specifically under section 80P, with respect to interest, dividend income, commission income, and income from letting of godowns.

Issue No.1: Deduction claimed under section 80P(2)(a)(i) and 80P(2)(d) of the Act
The Appellate Tribunal upheld the CIT(A)'s decision regarding the deduction claimed under section 80P(2)(a)(i) and 80P(2)(d) of the Act. The Tribunal confirmed that interest income earned on investments made with co-operative banks is not eligible for deduction under these sections.

Issue No.2: Deduction under section 80P(2)(a)(iii) of the Act
The Tribunal found that the assessee wrongly claimed deduction under section 80P(2)(a)(iii) instead of section 80P(2)(e) of the Act. The Tribunal directed the Assessing Officer to reexamine whether the assessee is entitled to deduction under any relevant section of 80P.

Issue No.3: Deduction under section 80P(2)(e) of the Act
The Tribunal noted that the claim for deduction under section 80P(2)(e) was disallowed due to lack of supporting details. The matter was remanded to the Assessing Officer for a fresh examination to determine if the activity qualifies for deduction under this section.

In conclusion, the Appellate Tribunal allowed the appeal filed by the assessee for statistical purposes, directing further examination by the Assessing Officer on specific issues related to the deduction claims under different sections of the Income Tax Act.