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2018 (11) TMI 204 - AT - Income TaxDenial of claim of deduction u/s 80P(2)(a)(i) - interest income earned as income from other sources u/s 56 - Revenue contented that while deciding the assessee s appeal for A.Y. 2008-09, the amendment made to the Section w.e.f. A.Y. 2007-08 has not been considered by the Tribunal - Held that - Before us, no material has been placed by Revenue to demonstrate that Revenue has preferred appeal against the order of Tribunal for A.Y. 2008-09 and that the higher Judicial Forum has set aside / stayed the order for A.Y. 2008-09. Further, Revenue has neither pointed out any distinguishing feature in the facts of the present case and that of earlier year. Therefore, relying on the decision of the Tribunal in assessee s own case for A.Y. 2008-09 and for similar reasons hold that assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act on the interest income on fixed deposits kept with nationalized banks and private sector banks. - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal for A.Y. 2013-14. 2. Taxability of interest income earned on investments with nationalized banks. 3. Eligibility for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal for A.Y. 2013-14: The assessee filed an appeal for A.Y. 2013-14 with a delay of 3 days. The assessee submitted a sworn affidavit explaining the reasons for the delay, which was not intentional. The Revenue did not seriously object to the condonation. The Tribunal, after considering the reasons stated in the affidavit, condoned the delay and admitted the appeal for hearing. 2. Taxability of Interest Income Earned on Investments with Nationalized Banks: During the assessment proceedings, the Assessing Officer (AO) noted that the assessee earned interest income of ?14,44,054/- from Fixed Deposits (FDRs) maintained with nationalized and private sector banks. The AO categorized this interest income as "income from other sources" under Section 56 of the Income Tax Act and denied the deduction under Section 80P(2)(a)(i). The assessee's appeal to the Commissioner of Income Tax (Appeals) [CIT(A)] was dismissed, upholding the AO's view by relying on various judicial decisions including the Supreme Court's decision in the case of Totgar’s Co-operative Sale Society Ltd. 3. Eligibility for Deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961: The assessee contended that the interest income is attributable to its business of providing credit facilities to its members and should be eligible for deduction under Section 80P(2)(a)(i). The Tribunal noted that the issue was covered by its own decision in the assessee’s case for A.Y. 2008-09, where it was held that the interest income from fixed deposits with banks other than cooperative banks/societies is eligible for deduction under Section 80P(2)(a)(i). The Tribunal also considered various judicial precedents, including the decisions of the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. and the Cochin Bench of the Tribunal in Muttom Service Cooperative Aplappuzha Bank Ltd., which supported the assessee's claim. The Tribunal observed that the decisions relied upon by the CIT(A) did not consider the specific facts and the nature of the assessee's business. It was noted that the interest income was earned from investments made out of operational funds, which were not surplus but necessary for maintaining liquidity. Therefore, the Tribunal concluded that the interest income is attributable to the business of providing credit facilities to its members and is eligible for deduction under Section 80P(2)(a)(i). Conclusion: The Tribunal allowed the appeals for both A.Y. 2012-13 and A.Y. 2013-14, holding that the assessee is entitled to deduction under Section 80P(2)(a)(i) on the interest income earned from fixed deposits with nationalized and private sector banks. The Tribunal emphasized consistency with its previous decisions and the broader interpretation of the term "attributable to" in the context of Section 80P(2)(a)(i).
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