2021 (3) TMI 159 - AT - Income Tax

Deduction u/s 80P - disallowing its interest income as not entitled for 80P deduction since derived from deposits made in scheduled banks - HELD THAT - In decision in Vavveru Co-operative Rural Bank Ltd., Vs. CIT 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT holds the very nature of income as eligible for Section 80P deduction held that original source of the investments made by the petitioners in nationalised Banks is admittedly the income that the petitioners derived from the activities listed in sub Clauses (i) to (vii) of Clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not anyone of the two expressions, namely, derived from or directly attributable to . Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence direct the Assessing Officer to delete the impugned disallowance thereby treating that the assessee as eligible for Section 80P deduction. - Decided in favour of assessee.

Summary

Issues:
- Delay in filing appeals
- Disallowance of interest income for Section 80P deduction

Delay in filing appeals:
The judgment involves four assessee's appeals for different assessment years arising from the CIT(A)-2, Hyderabad's order passed under section 143(3) read with section 147 of the Income Tax Act, 1961. The appeals faced a delay of 411 days due to reasons beyond the control of the assessee, related to the management committee's term expiration and subsequent delays in elections and pandemic-related disruptions. The tribunal, citing a landmark decision of the Supreme Court, condoned the delay for the cause of substantial justice as the department did not rebut the reasons provided.

Disallowance of interest income for Section 80P deduction:
The substantive grievance in all four cases challenged the disallowance of interest income for Section 80P deduction, totaling different amounts for each assessment year. The revenue contended that the interest income, derived from fixed deposits in nationalized banks, was rightly disallowed as not eligible for the deduction. However, the tribunal considered the issue in light of the hon'ble jurisdictional high court's decision, emphasizing the eligibility of income for Section 80P deduction based on the nature of the income and the activities of the cooperative society.

The tribunal referred to the high court's decision, which clarified that income not attributable to specific activities listed under Section 80P could still qualify for deduction under other clauses of the section. It highlighted that the temporary parking of funds in nationalized banks and earning interest did not disqualify cooperative societies from claiming deductions. The tribunal, following the detailed discussion and reasoning from the high court decision, directed the Assessing Officer to delete the disallowance and treat the assessee as eligible for Section 80P deduction.

In conclusion, the tribunal allowed the appeals of the assessee, directing the deletion of the disallowance of interest income for Section 80P deduction in all four cases. The order was pronounced in the open court on 24th February 2021.