2019 (3) TMI 385 - AT - Income Tax

Deduction u/s 80P - commission received from MSEB - Income attributable to the Business Income - HELD THAT - Similar issue was decided by the Pune Bench of the Tribunal in the case of Dronagiri Nagri Sahakari Patsanstha Maryadit 2018 (6) TMI 1576 - ITAT PUNE in favour of the assessee stating that Income from MSEB commission is held to be business activity as per decision cited by the assessee in the case of Ahmednagar District Co-operative Bank Ltd. 1990 (4) TMI 119 - ITAT PUNE . - Decided in favour of assessee

Summary

Issues:
1. Rejection of genuine claim of appellant Credit Society regarding MSEB Commission Income and denial of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961.
2. Disallowance of legitimate expenditure against the earning of MSEB Gross Commission.
3. Interpretation of whether commission income is taxable or exempt under section 80P.
4. Application of legal precedents in determining eligibility for deduction under section 80P.

Analysis:

Issue 1:
The assessee, a Cooperative Society, filed an appeal against the CIT(A)'s order for the Assessment Year 2014-15, contesting the rejection of its claim for MSEB Commission Income and denial of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer added the commission received from MSEB to the assessee's income, treating it as taxable. However, the assessee argued that the commission should be considered exempt income for the purpose of deduction under section 80P, citing a precedent from the Pune Bench of the Tribunal.

Issue 2:
The assessee also challenged the disallowance of legitimate expenditure of ?1,76,564 against the earning of MSEB Gross Commission. The assessee contended that these expenses should be allowed before calculating the net taxable income under the sources of income, enhancing the deduction u/s 80P(2)(a)(i) by the same amount. The Assessing Officer had allowed only ?30,485 on a heterogeneous basis instead of a homogenous basis, which the assessee argued was incorrect.

Issue 3:
The Tribunal referred to a similar case before the Pune Bench where the issue of Electricity Commission was decided in favor of the assessee, allowing relief under section 80P. The Tribunal emphasized the need to consider the nature of income from MSEB commission as a business activity, entitling the assessee to relief under section 80P as per law. The Tribunal relied on legal precedents to support the assessee's claim that the commission income should be treated as exempt for deduction purposes.

Issue 4:
The Tribunal, following the parity of reasoning from previous judgments and settled legal propositions, allowed the claim of the assessee. It referenced the Apex Court's decision on Bank Interest and a CBDT Circular to support its decision. The Tribunal concluded that the claim of the assessee was valid, and hence, the appeal of the assessee was allowed, pronouncing the order on March 1, 2019.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and providing relief under section 80P based on established legal principles and precedents.