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2018 (5) TMI 246 - AT - Income TaxDisallowance of deduction claimed u/s 80P for the interest on FDR - Held that - The O.D. facility obtained were used for providing credit facilities to its Members. The assessee also filed Certificate that Bombay Mercantile Cooperative Bank Ltd., is a Cooperative Society. The findings of the Tribunal in the case of assessee for A.Y. 2008- 2009 have already been reproduced above in which it was held that Bombay Mercantile Cooperative Bank Ltd., have been assessed as a Cooperative Society and its income was allowed to be exempt under section 80P(2)(a)(i) of the I.T. Act by the Mumbai Bench. It was, therefore, held that fixed deposits placed with this Bank falls within the exemption granted by Section 80P(2)(d) of the I.T. Act and assessee was also eligible for deduction under section 80P(2)(a)(i) of the I.T. Act. CIT(A) in the case of the same assessee for A.Y. 2013-2014 vide order dated 15.02.2018 following the order of the Tribunal for A.Y. 2008- 2009 allowed the claim of assessee. therefore, there were no justification for Ld. CIT(A) in not following the order of the Tribunal in the case of same assessee for A.Y. 2008-2009. As in the case of Agrawal Warehousing and Leasing Ltd 2002 (7) TMI 86 - MADHYA PRADESH High Court held that the Ld. CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. The conditions of Section 80P(2)(a)(i) and also 80P(2)(d) are satisfied by assessee. - Decided in favour of assessee
Issues Involved:
1. Disallowance of deduction claimed under section 80P for interest on FDR and saving bank interest. 2. Classification of interest income as 'Income from Other Sources' versus 'Business Income'. Issue-wise Detailed Analysis: 1. Disallowance of Deduction Claimed under Section 80P: The primary issue in both appeals was the disallowance of deduction claimed by the assessee under section 80P of the Income Tax Act for interest earned on Fixed Deposit Receipts (FDR) and saving bank interest. The Assessing Officer (A.O.) disallowed the deduction, treating the interest as 'Income from Other Sources' rather than business income. The assessee, a Cooperative Urban Thrift & Credit Society, argued that its income from the Bombay Mercantile Cooperative Bank Ltd. was exempt under section 80P(2)(d) as it was engaged in providing credit facilities to its members. The assessee contended that its income had been regularly exempted in previous years, including scrutiny assessments, and the same should apply here. The A.O. relied on the Supreme Court's decision in Totgar’s Cooperative Sale Society Ltd. vs. ITO, which was distinguished by the assessee on the grounds that their main business was providing credit facilities, not sales or marketing. The ITAT, Delhi Bench, in the case of the same assessee for A.Y. 2008-2009, had previously held that interest income from FDRs kept with Bombay Mercantile Cooperative Bank Ltd. was eligible for deduction under section 80P(2)(d). This decision was based on the fact that the bank was a cooperative society, and the funds were used for providing credit facilities to members. The Tribunal noted that the A.O. had not brought any new facts to distinguish the current case from the earlier one. 2. Classification of Interest Income: The second issue was whether the interest income should be classified as 'Income from Other Sources' or as 'Business Income'. The assessee argued that the interest income was directly linked to its main business of providing credit facilities to its members. The funds in FDRs were surplus funds, always available for utilization in the business, and the interest earned was used to provide credit facilities. The A.O. had treated the interest income as taxable under 'Income from Other Sources', which was contested by the assessee. The Tribunal found that the facts of the case were consistent with the earlier decision for A.Y. 2008-2009, where it was held that the interest income from FDRs was attributable to the business of providing credit facilities and thus eligible for deduction under section 80P(2)(a)(i). The Tribunal also noted that the Bombay Mercantile Cooperative Bank Ltd. was a cooperative society, and the interest income qualified for exemption under section 80P(2)(d). Conclusion: The Tribunal concluded that the authorities below were not justified in refusing the deduction under section 80P. The appeals for both A.Y. 2010-2011 and A.Y. 2011-2012 were allowed, setting aside the orders of the lower authorities and deleting the entire addition. The Tribunal emphasized the rule of consistency and the fact that the earlier decision had become final, as the Department's appeal was dismissed by the Delhi High Court, albeit on the ground of tax effect. The conditions of section 80P(2)(a)(i) and 80P(2)(d) were satisfied by the assessee, leading to the allowance of the appeals.
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