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Facts
The assessee, a co-operative thrift and credit society, invested surplus funds in deposits and saving bank accounts. The tax authorities disallowed the interest earned on these funds under Section 80P of the Income Tax Act.
Held
The Tribunal held that interest income from such investments, when treated as 'income from other sources', is eligible for deduction of expenses under Section 57 of the Act, a view supported by Supreme Court and High Court decisions. The grounds are restored to the AO for examination.
Key Issues
Whether interest income from deposits and savings accounts, treated as 'income from other sources', is eligible for deduction of expenses under Section 57 of the Income Tax Act.
Sections Cited
143(3), 144B, 80P, 56, 57
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Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
PER ANUBHAV SHARMA, JM : All captioned appeals are preferred by the assessee against the order, all dated 16.10.2023 of Ld. Commissioner of Income-Tax, National Faceless Appeal Centre (“NFAC”), Delhi (hereinafter referred to as the ld. First Appellate Authority for short) in DIN & Page | 1 Order No. ITBA/NFAC/S/250/2023-24/1057107433(1), ITBA/NFAC/S/250/2023-24/1057108250(1) and ITBA/NFAC/S/250/2023-24/1057108738(1) arising out of the different assessment orders dated 30.11.2019 and 10.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) and dated 26.09.2022 passed u/s 143(3) r.w.s. 144B of the Act pertaining to Assessment Years 2016-17, 2017-18 and 2020-21 respectively.
On hearing both the sides in regard to the grounds, we find that primarily the controversy revolves around the issue wherein Ld. Tax Authority below had made the disallowance u/s 80P of the Act in regard to the interest of FDRs and interest on saving bank accounts. The appellant is a co-operative thrift and credit society engaged in the activity of providing credit facilities to its members.
At the outset, it can be observed that there is delay in filing the appeals for which application condonation of delay is filed on the basis that the earlier Chief Executive Officer has given his personal e-mail and he had retired and New Chief Executive Officer was not aware of the correspondences received from the Tax Department and it was only when new Chartered Accountant was engaged, the assessee became aware of the impugned orders. Considering the fact that the assessee is a society of employees and not a regular business entity, the justification for delayed filing of the appeal deserves to be accepted. Accordingly, the appeals are admitted for hearing.
Further, we find that there is no dispute to the fact that during the relevant AYs, assessee invested surplus funds in deposits or saving bank accounts. Hon’ble Supreme Court in the case of M/s. The Totgars Co-operative Sale Society Limited vs ITO, Karnataka [2010] 322 ITR 283 (SC) while examining the issue whether interest income from such deposits would qualify for deduction as business income u/s 80P(2)(a)(i) of the Act has held that to the extent, such interest income can be attributed either to the activity, the same is allowable otherwise taxable as income from other sources u/s 56 of the Act. We find that Ld. Tax Authorities have considered the same. However, in the light of the provision of section 57 of the Act, deduction of expenses on account of interest income assessed as “income from other sources” is eligible to assessee. In case of Haryana State Co-operative Housing Venture Page | 3 Ltd. vs CIT [2017] (5) TMI 299 (P & H High Court), Hon’ble Punjab & Haryana High Court while taking into consideration that decision in the case of M/s. The Totgars Co-operative Sale Society Limited vs ITO, Karnataka (supra) has held that once the income of the assessee is treated as “income from other sources” by the Revenue authorities, the assessee would be entitled to claim deduction u/s 57 of the Act in respect of expenses incurred for earning that income. In that case, Hon’ble High Court remitted back the issue to the AO to decide the claim of the assessee for deduction u/s 57 of the Act. Similar was the direction in the case of Capital Co- operative Thrift and Credit Society vs ITO, Ward-40(4), 43(6), Civic Centre, Delhi [2025] (1) TMI 1180-ITAT DELHI by Co-ordinate Bench decision dated 22.01.2025.
In the light of the aforesaid, we are inclined to allow the appeals of the assessee for statistical purposes. The grounds are restored to the file of AO to examine the contentions of the assessee in regard to the entitlement to claim deduction u/s 57 of the Act while passing the consequential orders. Accordingly, all appeals filed by the assessee are allowed for statistical purposes.
In the result, all captioned appeals of the assessee are allowed for statistical purposes.