2015 (10) TMI 592 - AT - Income Tax

Eligibility of claim for deduction u/s.80P(2)(a)(i) - Held that - Interest earned on short-term deposits and SB account balances which were from surplus funds, could be attributable to carrying on the business of banking. However in the case before us, there is nothing on record to show whether the deposits placed by the assessee were for short-term or long term. In such circumstances, we are of the view that the issue requires a fresh look by the AO, so as to correctly consider the allowability of the claim, after assimilating the facts correctly. We therefore set aside the orders of the authorities below and remit it back to Ld. AO for consideration afresh in accordance with law. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Claim for deduction u/s.80P(2)(a)(i) disallowed on interest earned from other banks.

Analysis:
1. The appellant's claim for deduction u/s.80P(2)(a)(i) of the Income-tax Act, 1961 was disallowed by the Assessing Officer (AO) on the interest earned from fixed deposits placed with other banks. The AO contended that the interest earned on such deposits did not qualify for the deduction under the Act based on a judgment of the Hon'ble Apex Court.

2. The CIT (A) upheld the AO's decision, stating that interest earned on deposits placed with other banks falls under the head "income from other sources" as per the judgment of the Hon'ble Apex Court.

3. The appellant argued before the ITAT that a judgment by the Hon'ble jurisdictional High Court favored the deduction u/s.80P(2)(a)(i) for interest income. The appellant highlighted that the interest income was from surplus funds and cited relevant case laws to support their claim.

4. The ITAT noted that the deposits generating interest were made from surplus funds available with the appellant. Referring to relevant sections of the law, the ITAT emphasized the term "attributable to" in determining the eligibility for deduction under Section 80P. The ITAT concluded that a fresh assessment by the AO was necessary to accurately assess the allowability of the claim based on the specific facts of the case.

5. The ITAT set aside the orders of the lower authorities and remitted the case back to the AO for a fresh consideration in line with the law. The appeal of the assessee was allowed for statistical purposes.

In conclusion, the judgment addressed the disallowance of a deduction under Section 80P(2)(a)(i) of the Income-tax Act on interest earned from deposits placed with other banks. The ITAT emphasized the importance of correctly determining the attribution of income to assess the eligibility for the deduction, leading to a decision to remit the case for a fresh assessment by the AO.