2024 (7) TMI 338 - AT - Income Tax

Eligibility for deduction u/s 80P - interest income earned from investments held by the assessee with banks, specifically co-operative banks - assessee is a society registered under the provisions of Society Registration Act, 1860 and engaged in providing fertilizers pesticides etc., to its members - HELD THAT - Following the direction of Hon ble Apex Court, the remanded matter by a consolidate order 2022 (9) TMI 1597 - ITAT LUCKNOW we set-aside the impugned orders of first appellate authority and remand the matter back to the file of Ld. AO with a direction to deal with these two bullet issues (1) proportionate deduction of management expense interest paid against the gross interest earned and (2) deduction of interest u/s 80P(2)(d) of the Act and decide the same in accordance with law in the light of judicial precedents referred herein above. Needless to state that the appellant shall be given three effective opportunities of being heard in each these cases separately. Ground stands allowed for statistical purposes.

Issues involved:
Appeals against orders passed by National Faceless Appeal Centre and Income Tax Officer regarding deduction under section 80P of the Income Tax Act for assessment years 2016-17 and 2017-18.

Detailed Analysis:
The judgment involves twin appeals by the assessee challenging separate orders passed by the National Faceless Appeal Centre and the Income Tax Officer concerning deduction under section 80P of the Income Tax Act for the assessment years 2016-17 and 2017-18. The appeals were heard together due to similar facts and issues involved. The respondent assessee, a registered society engaged in providing fertilizers and pesticides to its members, claimed deductions under section 80P, which were denied by the Income Tax Officer during scrutiny. The first appellate authority also ruled against the assessee, leading to the current appeals before the ITAT Lucknow. The main issue revolved around the entitlement of the appellant assessee for deduction under section 80P(2)(d) in relation to interest income earned from investments with banks, specifically co-operative banks. The arguments presented by both parties were considered in light of the legal provisions and precedents. The judgment referred to previous decisions by the Allahabad High Court and the Supreme Court, emphasizing the need for a fresh adjudication by the Tribunal based on additional documents and statutory rules provided by the parties.

The judgment highlighted the requirement for cooperative societies to invest a certain percentage of their profits in statutory reserves, as mandated by the U.P. Co-operative Societies Act. Citing the decision of the Allahabad High Court in a similar case, the ITAT concluded that interest earned by cooperative societies on such investments is attributable to their business activities. Additionally, a judgment by the Raipur Tribunal supported the eligibility of interest earned from deposits with cooperative and nationalized banks for deduction under section 80P(2)(a) of the Act. However, the ITAT noted the absence of specific figures regarding interest earned on fixed deposits attributable to statutory reserves in the present cases. Therefore, the matter was remanded back to the Assessing Officer for a fresh adjudication, considering the judgments referred to and the additional documents submitted before the Supreme Court. The parties were granted sufficient opportunity to present their case during the reassessment process.

In conclusion, the ITAT allowed the appeals partly, setting aside the orders of the first appellate authority and remanding the matter back to the Assessing Officer for a detailed examination of the deduction issues under section 80P. The assessee was granted three opportunities to be heard separately on each issue. The judgment was pronounced in open court, allowing the appeals for statistical purposes.

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