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2023 (3) TMI 1137 - AT - Income TaxDeduction u/s 80P - interest received from BDCC bank - AO upheld that the income by way of interest earned on deposit or investment on ideal surplus funds does not change its characteristics irrespective of the fact that whether such interest income earned from scheduled bank or a cooperative bank, thus clause (d) of Section 80P(2) of the Act would not apply in the case of the assessee - HELD THAT - The assessee is a primary agricultural credit society and its income is derived from trading in food grains, fertilizers and providing credit facilities to it members. It has received interest from BDCC bank on which it has claimed deduction under Chapter VIA but the AO has denied the claim and the CIT(A) has also confirmed the order of the AO that the assessee is not eligible to claim deduction under Section 80P(2) of the act on interest received from BDCC bank. Respectfully following the above judgement in assessee s own case 2021 (11) TMI 1145 - ITAT BANGALORE the matter needs to be examined in the light of the above as observed in the above judgement. Therefore the case is remanded back to the file of the AO for a fresh consideration. Needless to say that reasonable opportunity be given to the assessee and the assessee is also directed not to seek unnecessary adjournments for early disposal of the appeal. Appeal filed by the assessee is allowed for statistical purposes.
Issues Involved:
1. Validity of the assessment order under Section 143(3) of the Income Tax Act. 2. Eligibility of interest income for deduction under Section 80P(2)(a)(i) of the Income Tax Act. 3. Applicability of interest charges under Sections 234A and 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of the Assessment Order under Section 143(3): The assessee argued that the assessment order dated 25-11-2019 was arbitrary and opposed to the facts of the case and the principles of natural justice, rendering it void. The Tribunal did not specifically address this issue in the judgment, implying that the primary focus was on the substantive issues related to deductions and interest charges. 2. Eligibility of Interest Income for Deduction under Section 80P(2)(a)(i): The core issue was whether the interest income from investments made in compliance with the Karnataka Co-operative Societies Act qualifies for deduction under Section 80P(2)(a)(i). The assessee, a primary agricultural credit society, claimed a deduction for interest income earned from deposits with the BDCC Bank. The Assessing Officer (AO) treated the interest income as "income from other sources," thereby denying the deduction under Section 80P(2)(a)(i). The AO relied on the Supreme Court's judgment in Totagars Co-operative Sale Society (2017) 395 ITR 611 (Kar), which held that interest income earned from surplus funds does not qualify for deduction under Section 80P. The assessee contended that the interest income was part of its business income and eligible for deduction under Section 80P(2)(a)(i). The assessee cited its own case for AY 2014-15, where the Tribunal allowed the deduction, and other similar cases decided in favor of the assessee. The Tribunal observed that the assessee's interest income was earned from investments made with Central Co-operative Banks, in compliance with the Karnataka Co-operative Societies Act. The Tribunal referred to the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd., which clarified that Section 80P(2)(a)(i) should be interpreted liberally and reasonably in favor of the assessee. The Tribunal noted that if the investments were made to comply with statutory requirements, the interest income should be considered as business income eligible for deduction under Section 80P(2)(a)(i). 3. Applicability of Interest Charges under Sections 234A and 234B: The assessee also contested the interest charges levied under Sections 234A and 234B. However, the Tribunal did not provide a separate analysis or ruling on this issue, focusing instead on the primary issue of the eligibility of interest income for deduction under Section 80P(2)(a)(i). Conclusion: The Tribunal allowed the appeal for statistical purposes, remanding the case back to the AO for fresh consideration. The AO was directed to re-examine the case in light of the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd., ensuring compliance with the principles laid down therein. The Tribunal emphasized that the AO should consider the interest income as business income if the investments were made to comply with statutory requirements, thereby allowing the deduction under Section 80P(2)(a)(i). The Tribunal also instructed that reasonable opportunity be given to the assessee during the reassessment process.
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