ITAT Indore Judgments — June 2024

The Tribunal held that the interest income earned on reserves maintained by the assessee in compliance with Section 43(2) of the M.P./Chhattisgarh Co-operative Societies Act, 1960, is in the nature of business income and eligible for deduction under Section 80P(2)(a)(i). The Tribunal noted that the AO denied the deduction on interest income earned from Bhopal Cooperative Central Bank and State Bank of India. The Tribunal distinguished the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. by stating that in the present case, the invested funds were not liabilities but profits not immediately required for lending. Therefore, the interest income is attributable to the business of banking. The Tribunal set aside the issue of quantum of interest eligible for deduction to the AO for verification and computation, considering the profits for the year and opening balance, to allow deduction on interest on such reserves. The Tribunal did not explicitly address the issue of interest under Sections 234A, 234B, and 234C, but the operative part of the order implies that the appeals are partly allowed based on the Section 80P issue.

The Tribunal condoned the delay due to the assessee's age, ill health, and circumstances beyond her control. The Tribunal found that the matter required fresh adjudication at the AO's level to verify the source of investment.

The Tribunal condoned the delay in filing the appeal, citing sufficient cause and the principle of substantial justice. The matter was remanded to the CIT(A) for a fresh adjudication on merits after providing the assessee with an opportunity of hearing.

The Tribunal held that there was a complete lack of enquiry by the AO regarding the allowability of various provisions, rendering the assessment order erroneous. However, regarding the LAN networking and electrical expenses, the AO was directed to verify if the assessee had made a suo-moto disallowance.