2023 (2) TMI 1062 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - proportionate adjustments disallowance - interest earned from nominal members - assessee received interest on investments in BDCC Bank on RFD of which the assessee claimed deduction u/s 80P(2)(a)(i) whereas the AO has disallowed proportionate adjustments as calculated by him in his order - HELD THAT - Since the case was not properly presented before the lower authorities also noted that in the grounds of appeal, the assessee has quoted three judgments which are as under The Mavilayi Service Coop Bank Ltd Others 2021 (1) TMI 488 - SUPREME COURT , Tumkur Merchants Souharda Credit Cooperative Ltd 2015 (2) TMI 995 - KARNATAKA HIGH COURT , Guttigedarara Credit Cooperative Society Ltd Vs Income Tax Officer 2015 (7) TMI 874 - KARNATAKA HIGH COURT Considering the grounds of appeal raised by the assessee interest of justice, the case is remitted back to the AO for a fresh consideration in the light of the above three judgments and the assessee is directed to file necessary documents in support of his claim and not to seek unnecessary adjournments for early disposal of the case. Needless to say that reasonable opportunity of being heard to be given to the assessee. AO will decide the issue as per law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Confirmation of order by CIT(A) NFAC opposed to law and facts
2. Treatment of interest earned from nominal members
3. Eligibility of proportionate interest earned under section 80P(2)(a)(i)

Issue 1:
The appeal was filed against the order passed by the National Faceless Appeal Centre (NFAC) confirming the Assessing Officer's decision. The grounds of appeal included the contention that the order was against the law and facts of the case. The AO disallowed interest received from associate members under section 80P(2)(a)(i) and held that it was not eligible for deduction. The AO also disallowed a proportionate amount of expenditure related to income earned from investments. The CIT(A) decided the issue ex-parte as the assessee did not respond to notices or provide credible evidence. The Tribunal remitted the case back to the AO for fresh consideration in light of relevant judgments, directing the assessee to submit necessary documents. The appeal was allowed for statistical purposes.

Issue 2:
The second issue pertained to the treatment of interest earned from nominal members. The AO disallowed interest earned from associate members under section 80P(2)(a)(i) of the Act. The assessee argued that this treatment was against the Supreme Court principle laid down in a specific case. The Tribunal noted the grounds of appeal raised by the assessee, which included references to relevant judgments. The case was remitted back to the AO for a fresh consideration, emphasizing the importance of supporting documents and compliance with the law.

Issue 3:
The third issue revolved around the eligibility of proportionate interest earned under section 80P(2)(a)(i). The AO disallowed a proportionate amount of expenditure related to income earned from investments. The CIT(A) decided the issue ex-parte due to the lack of response from the assessee. The Tribunal remitted the case back to the AO for a fresh consideration in light of specific judgments cited by the assessee. The importance of providing necessary documents and ensuring compliance with the law was highlighted for the early disposal of the case.