The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that interest income from co-operative bank credited to reserves in the balance sheet is eligible for deduction under section 80P(2)(d) of the Income Tax Act.
The aforesaid observation was made by the Mumbai ITAT, when an appeal was preferred before it by the assessee, challenging the impugned order, passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [CIT(A)], for the assessment year 2016–17.
The only grievance of the assessee, in the present appeal being against the addition of interest received from Co-operative Bank to the extent of the same being directly credited to the Reserves and Surplus in the balance sheet, the brief facts of the case were that the assessee was a co-operative housing society and a non-profit making entity, formed with the objective of maintaining and protecting building occupied by its members. And for the year under consideration, the assessee had filed its return of income, declaring a total income of Rs.40,80,570.
Thereafter, the return of income filed by the assessee was selected for scrutiny, and statutory notices under Section 143(2) and 142(1) of the Income Tax Act along with the questionnaire were issued and served on the assessee. The Assessing Officer (AO) vide order passed under Section 143(3) of the Income Tax Act, had disallowed the deduction claimed by the assessee under Section 80P(2)(d) of the Income Tax Act, in respect of interest income of Rs.54,74,228 received from Co-operative Bank and as was disclosed in the return of income. The AO also disallowed the interest income of Rs.1,45,16,552 directly credited by the assessee to the Reserves and Surplus in the balance sheet as per the Co-operative Societies Act.
On appeal, the CIT(A) vide impugned order granted the relief in respect of interest income of Rs.54,74,228 claimed as deduction under Section 80P(2)(d) of the Income Tax Act, by the assessee and as was disclosed in the return of income.
However, as regards the ground of the assessee pertaining to the addition of interest income which was transferred to the respective repair and/or sinking fund in the balance sheet, the appeal filed by the assessee was dismissed by the CIT(A), on the basis that neither the said claim was borne from the return of income nor the same was claimed as deduction under section 80P(2)(d) of the Income Tax Act. And, it is being aggrieved by the same, that the assessee has filed the present appeal before the Mumbai ITAT.
Hearing the opposing contentions of both sides, as was presented by Shri Vijay Mehta, on behalf of the Assessee and by Shri Chetan Kacha, on behalf of the Revenue, the ITAT observed:
“We find that vide rectification order dated 16/11/2018 passed under section 154 of the Act, forming part of the paper book from pages 41-42, the learned CIT(A) granted the relief to the assessee allowing deduction under section 80P(2)(d) of the Act on the entire interest income received by the assessee from the Cooperative Bank, including the amount credited to the balance sheet. There is no material available on record to show that the aforesaid findings of the learned CIT(A) have been overruled.”
Finally, the ITAT coram of S. Rifaur Rahman, the Accountant Member, and Sandeep Singh Karhail, the Judicial Member, thus held:
“Therefore, in view of the above, we are of the considered opinion that the assessee is entitled to deduction under section 80P(2)(d) of the Act on the entire amount of interest income of Rs.1,99,90,770 received from the Co-operative Bank. As a result, grounds raised by the assessee are allowed.”
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