M/S. KAMAL MAHILA NAGARI SAHAKARI PETPEDHI MARYADIT,PANVEL vs. THE INCOME TAX OFFICER, NFAC

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ITA 507/PUN/2023Status: DisposedITAT Pune19 May 2023AY 2018-195 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that proportionate interest expenses should be allowed as a deduction from the gross interest income earned from nationalized banks. Consequently, the net interest income originally offered by the assessee would be taxed.

What were the facts?

The assessee, a cooperative society, claimed deduction under Section 80P(2)(d) and offered net interest income from nationalized banks after deducting expenses. The Assessing Officer added the entire gross interest income, leading to double taxation.

What were the issues?

Whether interest income from nationalized banks is eligible for deduction of proportionate interest expenses, and if disallowing such expenses leads to double taxation.

Which sections of the Income-tax Act were involved?

Section 80P(2)(d),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC BENCH, PUNE

Before: SHRI R.S. SYAL

For Appellant: Shri Nikhil S. Pathak
For Respondent: Shri Suresh Gaikwad

आदेश / ORDER

PER R.S. SYAL, VP:

1.

This appeal by the assessee arises out of the order dated 16-11-2011 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2018-19.

2.

The appeal is time barred by 616 days. The assessee has filed an affidavit explaining the reasons for the delay. I am satisfied

M/s. Kamal Mahila Nagari Sahakari Patpedhi Maryadit with the reasons. The delay is condoned and the appeal is admitted for disposal on merits.

3.

Briefly stated, the facts of the case, are that the assessee is a cooperative society which furnished its return claiming deduction u/s.80P(2)(d). Interest income, inter alia, included interest from deposits with nationalized banks at a gross amount of Rs.2,51,149/-. After deducting expenses amounting to Rs.1,56,943/- therefrom, the assessee offered for taxation such interest income at Rs.94,206/- on net basis. The Assessing Officer made addition of Rs.2,51,149/- towards interest income. The ld. CIT(A) noted that the action of the AO led to the double taxation of Rs.94,206/-, firstly by suo motu offering to tax by the assessee and then the disallowance of the full amount on gross basis also including the net interest income. Aggrieved thereby, the assessee has approached the Tribunal.

4.

I have heard both the sides and gone through the relevant material on record. It is seen from the assessee’s Profit and loss account, a copy placed at page 8 onwards of the paper book, that it earned interest on loans, interest from banks and interest on M/s. Kamal Mahila Nagari Sahakari Patpedhi Maryadit investments all totalling to Rs.6,56,01,410/- on gross basis.

Simultaneously, the assessee paid interest on various deposits all totalling to Rs.4,09,92,369/-, giving percentage of interest expense to the interest income at 62.49%. This percentage was applied across the board on all types of gross interest incomes for computing interest income eligible for deduction u/s 80P(2)(d).

That was accepted by the AO and not controverted on behalf of the Revenue before the Tribunal as well. Naturally, when it came to the interest from nationalized banks, the assessee did not claim deduction u/s 80P(2)(d) on the same, but offered the income to tax on the same pattern by reducing the gross income by 62.49% towards interest expenses and offered net income of Rs.94,206/-.

The action of the ld. CIT(A) has ultimately resulted into denying the deduction towards interest expenses from the gross interest received from Nationalised banks at Rs.2,51,149/- and charging the gross amount of interest to tax. Once the calculation of interest expense and interest income has been approved by the AO and also applied in computing the deduction u/s.80P(2)(d) on other eligible interest income, such a deduction towards expenses needs to be M/s. Kamal Mahila Nagari Sahakari Patpedhi Maryadit allowed towards interest earned from banks as well for the purpose of inclusion in the total income. I, therefore, order to reduce the amount of proportionate interest expenses of Rs.1,56,943/- from the gross interest income from nationalized banks, which would eventually mean that net interest income earned from Nationalised banks would be taxed at Rs.94,206/-. It was this amount originally offered by the assessee in its computation of total income.

5.

In the result, the appeal is allowed to this extent. Order pronounced in the Open Court on 19th May, 2023.

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