2023 (4) TMI 209 - AT - Income Tax

Deduction u/s 80P - assessee claimed that the interest income should be allowed after adjustment of expenditure - HELD THAT - In section 80P(2)(a)(i), the assessee is entitled to deduction related interest earned from nominal member. The verification is required related to investment to nominal member as per the activity of the trust in purview of Karnataka Co-op Society Act. We remit back the issue to the AO for adjudication in light of the observation of the bench. The assessee is not more eligible for u/s. 80P related to interest income. But the assessee is eligible for the deduction related to proportionate expenditure on income, which was earned u/s. 57 of the Act. The assessee shall be entitled for proportionate expenditure cost incurred in mobilising the deposit placed in the bank. We fully relied on case of Totgars Co-operative Sale Society Ltd, 2015 (4) TMI 829 - KARNATAKA HIGH COURT - Related to the submissions of challan for deduction of tax at source is also liable for verification before the lower authority. We remit back the matter to the AO for further verification and allow the assessee for legitimate claim of expenses related to the income earned u/s. 57 -The ground relating to deduction u/s 80P(2)(a)(i) of the Act is remitted back to the file of AO for fresh consideration. Disallowance u/s 40(a)(ia) - Assessee has already filed necessary proof for withholding the taxes at sources, this requires examination at the end of AO. Accordingly, the issue is remitted back to the file of AO for reconsideration.

Summary

Issues involved:
The appeal against the order of the Commissioner of Income-tax (Appeals) for assessment year 2017-18. The issues raised include the validity of the impugned order, adjudication of all grounds of appeal, eligibility to claim deduction u/s. 80P(2)(a)(i), disallowance u/s. 40(a)(ia) for non-deduction of tax at source.

Issue 1: Validity of Impugned Order
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) for assessment year 2017-18. The impugned order was originated from the order of the Income Tax Officer, Ward -3, Tumkur, passed under section 143(3) of the Income Tax Act, 1961. The appellant contended that the impugned order was opposed to law and facts of the case, prejudicial to their interest.

Issue 2: Eligibility for Deduction u/s. 80P(2)(a)(i)
The appellant, a Credit Cooperative Society registered under Karnataka Cooperative Society Act, 1959, claimed deduction u/s. 80P. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify the eligibility of the appellant to claim deduction u/s. 80P(2)(a)(i), which the appellant argued was outside the purview of section 250. The Tribunal remitted the issue back to the AO for adjudication in light of the observations made.

Issue 3: Disallowance u/s. 40(a)(ia)
The appellant faced disallowance u/s. 40(a)(ia) for alleged non-deduction of tax at source. The appellant maintained that the tax was duly deducted and deposited, supporting their claim with a calculation for adjustment of interest income. The Tribunal remitted the issue back to the AO for reconsideration, as the appellant had provided proof of withholding taxes at source.

Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, remitting the issues of eligibility for deduction u/s. 80P(2)(a)(i) and disallowance u/s. 40(a)(ia) back to the Assessing Officer for fresh consideration. The Tribunal emphasized the need for verification and proper adjudication of the claims made by the appellant.