Interest on Security Deposit with MSEDCL eligible for Income Tax Deduction: ITAT [Read Order]

The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest on security deposit with MSEDCL is eligible for income tax deduction under section 80P(2) of the Income Tax Act, 1961.

Earlier, the Assessing Officer disapproved the assessee’s claim of deduction under section 80P(2)(a) on commission income of Rs.60,363/- earned from MSEDCL and interest at Rs.20,000/- from MSEDCL on security deposit.

The assessee challenged the decision before the Tribunal.

ITAT Vice President R S Syal held that the denial of deduction under section 80P(2) on the interest income of Rs.20,000/- on security deposit which was parked with MSEDCL for carrying on the business of collection of MSEDCL bills was incorrect.

Allowing the claim of the assessee, the Tribunal held that “In view of the fact that the activity of collection of bills has been held by the Tribunal in Banganga Nagri Sah. Patsanstha Ltd. (supra) as a business activity, whose income is eligible for deduction u/s.80P(2), the instant interest income of Rs.20,000/- on security deposit with MSEDCL for carrying on the business of bill collection, which is a part and parcel of the overall activity of such business, cannot be accorded a different character. I, therefore, order to grant deduction on interest on security deposit with MSEDCL amounting to Rs.20,000/-.”

To Read the full text of the Order CLICK HERE

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