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2019 (5) TMI 1188 - AT - Income TaxEligibility for deduction u/s 80P(2)(a(i) - interest income earned by the assessee from banks and sub-treasuries - HELD THAT - The assessee had made investments in the course of banking activities and such interest income was received on investments made with co-operative banks and other scheduled banks. The co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited 2016 (7) TMI 1405 - ITAT COCHIN had held that such interest income received should be assessed as income from business instead of income from other sources . In view of the coordinate Bench order of the Tribunal, we hold that the CIT(A) is justified in holding that interest income received should be assessed as income from business . As regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT and examine the activities of the assessee-society before grant of deduction u/s 80P - Appeal filed by the Revenue is allowed for statistical purposes. .
Issues: Whether interest income earned by the assessee from banks and sub-treasuries is eligible for deduction u/s 80P(2)(a(i) of the I.T.Act?
Analysis: 1. Background: The assessee, a cooperative society engaged in banking, filed a return for the assessment year 2014-2015 declaring a gross total income of 'Nil' after claiming deduction u/s 80P of the I.T.Act. The assessment was completed under section 143(3) of the I.T.Act, where interest income from banks and treasuries was treated as income from other sources, denying the deduction u/s 80P(2)(a)(i) of the I.T.Act. 2. First Appellate Authority: The CIT(A) ruled in favor of the assessee, considering the interest income as 'income from business' based on a Tribunal's order in a similar case. The Revenue challenged this decision before the Tribunal, raising substantial legal questions regarding the nature of the interest income and the applicability of section 80P(2)(a)(i) to the assessee's case. 3. Tribunal's Decision: After hearing both parties, the Tribunal acknowledged the Tribunal's earlier order that interest income should be treated as 'income from business.' However, it directed the Assessing Officer to evaluate the activities of the assessee-society in light of the law laid down by the Larger Bench of the jurisdictional High Court in a specific case before granting the deduction u/s 80P of the I.T.Act. The Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the need for a detailed examination before granting the deduction. 4. Conclusion: The Tribunal's decision clarified the treatment of interest income earned by the assessee from banks and sub-treasuries, emphasizing the need for a thorough assessment of the activities before allowing the deduction under section 80P of the I.T.Act. The judgment provided guidance on the appropriate categorization of income and highlighted the importance of following legal precedents and conducting detailed evaluations in such tax matters.
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