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Facts
The assessee claimed deduction u/s 80P on interest income of Rs. 96,82,827. However, the AO assessed this interest income as income from other sources, which was confirmed by NFAC. The assessee contended that even if it's treated as income from other sources, expenses incurred to earn this income should be allowed u/s 57(iii).
Held
The Tribunal held that even if the interest income is treated as income from other sources, the assessee is entitled to relief for expenditure incurred to earn this income under section 57 of the Act. The issue was remitted to the AO for reconsideration.
Key Issues
Whether expenditure incurred for earning interest income, assessed as income from other sources, is allowable under section 57 of the Income Tax Act, 1961.
Sections Cited
80P, 56, 57(iii), 57
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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal by assessee is directed against the order of NFAC for the assessment year 2018-19 dated 6.3.2024 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”).
Facts of the case are that assessee seeking deduction u/s 80P of the Act at Rs.96,82,827/- out of business income of the assessee. However, this amount of interest income has been assessed by ld. AO as income from other sources. Same has been confirmed by NFAC. Against this assessee is in appeal before us.
Now the contention of the ld. A.R. is that even if it is assessed as income from other sources u/s 56 of the Act, the assessee is entitled for expenditure incurred for earning this income u/s 57(iii) of the Act with regard to cost of funds.
Shrinidhi Urban Co-operative Credit Society Ltd., Bagalkote Page 2 of 3 4. We have heard the rival submissions and perused the materials available on record. In our opinion, there is a force in the argument of ld. A.R. even if the interest income of the assessee is from other sources, relief to be granted to the assessee towards expenditure incurred to earn this income u/s 57 of the Act. Accordingly, we remit this issue to the file of ld. AO for reconsideration in the light of order of this Tribunal in the case of Kotekar Vyavasaya Seva Sahakara Sangha Niyamitha in for the assessment year 2017-18 dated 1.5.2024 wherein the Tribunal held as under: 6.1 Without prejudice to the above, we make it clear that if the interest earned by assessee from the banks is considered under the head “Income from other sources”, relief to be granted to the assessee u/s 57 of the Act in accordance with law. Accordingly, the issue is restored to the file of ld. AO for de-novo consideration with the above observations.
4.1 Accordingly, the issue is remitted to the file of ld. AO for reconsideration to compute the income u/s 56 of the Act. Consequently, the relief to the granted to the assessee. Ordered accordingly. 5. In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 6th June, 2024