2018 (7) TMI 1566 - AT - Income Tax

Deduction u/s.80P(2)(a)(i) & Section 80P(2)(d) - Interest and dividend income received from the Banaskantha Dist.Central Co-operative Bank Ltd. - Held that - Taking into consideration the entire facts of the matter and the decision cited by the Ld. AR, we are of the considered view that the assessee is entitled to deduction u/s.80(2)(a)(i) & 80P(2)(d) of ₹ 22,52,868/- & ₹ 4,44,200/- being interest and dividend income respectively derived from the deposits with the Banaskantha Dist.Central Cooperative Bank Ltd. and thus accordingly delete the impugned disallowance of ₹ 22,51,000/-.

Summary

Issues Involved:
1. Interpretation of provisions under Section 80P(2)(a)(i) & 80P(2)(d) of the Income Tax Act, 1961 regarding deduction of interest and dividend income.
2. Validity of the order passed by the Commissioner of Income Tax (Appeals) confirming the Assessing Officer's decision.
3. Application of interest charged under Sections 234A/B/C of the Act.

Analysis:

Issue 1: Interpretation of Provisions under Section 80P(2)(a)(i) & 80P(2)(d):
The case involved a Credit Co-operative Society claiming deduction under Section 80P(2)(a)(i) & 80P(2)(d) for interest and dividend income received from a Co-operative Bank. The Assessing Officer disallowed the deduction, considering the bank as a cooperative bank and not a cooperative society. The Appellate Tribunal referred to a similar case where deduction was allowed for interest income from the same bank. The Tribunal held that the assessee was entitled to the deduction under Section 80P(2)(a)(i) & 80P(2)(d) for the interest and dividend income derived from the Co-operative Bank. The Tribunal relied on precedents and concluded in favor of the assessee, allowing the deduction.

Issue 2: Validity of the Commissioner's Order:
The Commissioner of Income Tax (Appeals) had confirmed the Assessing Officer's decision disallowing the deduction claimed by the assessee. The Tribunal found that the Commissioner's decision was not in line with the precedents and legal interpretations. The Tribunal, after considering the arguments presented by the assessee's representative and the Departmental Representative, overturned the Commissioner's decision and allowed the deduction claimed by the assessee. The Tribunal directed the Assessing Officer to compute the interest under Sections 234A/B/C of the Act accordingly.

Issue 3: Application of Interest Charged under Sections 234A/B/C:
The Tribunal, after allowing the deduction under Section 80P(2)(a)(i) & 80P(2)(d), directed the Assessing Officer to compute the interest under Sections 234A/B/C of the Act and provide the benefit to the assessee. The Tribunal's decision implied that the assessee was entitled to the interest under the specified sections of the Act.

In conclusion, the Appellate Tribunal, after a thorough analysis of the legal provisions and precedents, allowed the appeal filed by the assessee, overturned the decision of the Commissioner of Income Tax (Appeals), and directed the Assessing Officer to compute the interest under Sections 234A/B/C of the Act in favor of the assessee.