The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the income earned from commercial activity cannot be claimed as a deduction under Section 80P of the Income Tax Act, 1961.
The assessee, Jetalpur Seva Sahkari Mandali Ltd. filed a return of income for the Assessment year 2017-18 declaring a total income of Rs.21,52,910/-. The return was processed under Section 143(1) of the Income Tax Act and the case was selected for scrutiny for the large claim of deduction under Chapter VI.
The Assessing Officer (AO) observed that from the computation of income, it appeared that the assessee had claimed a deduction under Section 80P of Rs.33,21,232/-. This included interest income of Rs.9,43,000/- received from its Petrol Pump branch business. The assessee was asked to justify as to how interest from the petrol pump was eligible for deduction under Section 80P of the Income Tax Act.
The assessee replied that the main activity of the head office division is to provide finance so that the interest income from the Pump Division of Rs.9,43,000/- is claimed as a deduction under Section 80P(2)(a) of the Income Tax Act.
The Authorized Representative (AR) submitted that there was a delay of 103 days in filing the appeal. The reason for such delay was found to be genuine therefore the delay was condoned.
It was also submitted that the head officer division carried out different activities for its members such as selling fertilizers, seeds, and agriculture instruments to its farmer members and providing different types of credit finance to its farmer members only. These activities fall within the scope of deduction under Section 80P of the Income Tax Act.
The Departmental Representative contended that the interest is clearly derived from the commercial activity of the Pump Division which is not an exemption under Section 80P of the Income Tax Act.
Further, submitted that the assessee is not a Consumer Co-operative Society since members not consuming articles such as Petrol & Diesel supplied by the assessee, therefore, the Commissioner of Income Tax (Appeal) has rightly confirmed the order of the Assessing Officer by disallowing deduction under Section 80P(2)(a)(i) of the Income Tax Act.
The single-bench member, consisting of Suchitra Kamble (Judicial member), concluded that the activities conducted by the Pump Division are subject to full taxation and do not fall within the scope of Section 80P of the Income Tax Act.
Therefore, the present assessee’s case in respect of Pump Division has rightly denied the deduction claimed under Section 80P of the Income Tax Act by the Assessing Officer as well as by the Commissioner of Income Tax (Appeal). Thus, the appeal of the assessee was dismissed.
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