The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that interest earned from savings accounts in a Co-operative bank cannot be treated as income or dividends from investments.
Karumandurmedu MPCS Ltd., the assessee claimed a deduction under section 80P(2)(d) of the Income Tax Act, 1961, for the assessment years 2020-21 and 2021-22. The deduction was related to interest income of Rs. 1,72,880 received from a Co-operative Bank.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The amount of Rs. 1,58,273 was from fixed deposits (FDs) and Rs. 14,607 from a savings account. The Centralized Processing Centre (CPC) disallowed the entire deduction claimed under section 80P(2)(d) of the Income Tax Act because a portion of the interest income specifically Rs. 14,607 earned from a savings account maintained in a co-operative bank, did not qualify as income derived from investments.
On appeal, the Commissioner of Income Tax (Appeals) CIT(A) allowed the deduction for the amount earned from FDs but confirmed the disallowance of Rs. 14,607 related to the savings account.
Aggrieved by the CIT(A) order, the assessee challenged the order before the Chennai, Bench of ITAT arguing that the entire interest earned from the Co-operative Bank should be deductible under section 80P(2)(d) as income derived from investments in a co-operative society.
On the contrary, the revenue counsel argued that the amount in the savings account is not considered an investment. Therefore, the interest earned on this amount should not be eligible for deduction under section 80P(2)(d) of the Income Tax Act, 1961.
The two-member bench comprising Viswanethra Ravi (Judicial Member) and Jagadish (Accountant Member) noted that the deduction under section 80P(2)(d) applies to income from interest or dividends received by a co-operative society from its investments in other co-operative societies.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The tribunal noted that the interest earned from the FDs was considered an investment, it emphasized that interest earned from a savings bank account maintained in a co-operative bank cannot be treated as income or dividend from investment.
The Tribunal observed that the assessee could not provide any additional material evidence to prove that the savings account balance was an investment. Therefore, the tribunal upheld the decision of the CIT(A) allowing the deduction of Rs. 1,58,273 from FDs but disallowing the deduction of Rs.14,607 earned from the savings account. The appeal of the assessee was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
