The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri P M Jagtap, vice president and Ms Suchitra Kamble, the judicial member has held that interest in FDR can be treated as income from other sources under section 56 if the claim of 80P got rejected.
The assessee, Shri Kalyan Co-op Credit Society Ltd engaged in the business of accepting deposits and providing credit facilities to its members. The assessee filed its return for the financial year under consideration on 25.08.2014 declaring total income at Rs. Nil after claiming deduction under Section 80P of the Income Tax Act, 1961 to the extent of Rs.22,45,102/-.
The Assessing Officer observed that the assessee co-op society earns interest on funds which are invested with Banks as well as from its members but claimed deduction under Section 80P of the Act on the income including the entire interest income whereas Section 80P(2)(a)(i) implies that the deduction is available on profit & gains of business attributable to the activity of providing credit facilities to its members.
The Assessing Officer held that since the amount of Rs.10,09,672/- aroused on the funds invested in deposits with banks or in other securities, the said income falls in the category of “income from other sources” under Section 56 of the Act not eligible for deduction under Section 80P of the Act and disallowed the assessee’s claim of deduction under Section 80P to the extent of Rs.10,09,672/- earned from FDR with SBI and treated the same as income from other sources under Section 56 of the Act.
It was observed that if the claim of 80P has been rejected, income from FDRs is treated as income from other sources under Section 56 of the Act. The expenses related to the interest income earned by the assessee have to be allowed as it was permissible under the Statute of law.
The Tribunal remanded back the issue for examination to the file of the Assessing Officer and partly allowed the appeal for statistical purposes. The appellant was represented by Shri Bhavin Marfatia and the respondent was represented by Shri Atul Pandey.
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