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2024 Supreme(Online)(ITAT) 2109
INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
George George K, VP, Chandra Poojari, AM
Assessee – Appellant
Versus
PCIT – Respondent
ITA No.930/Bang/2023
For the Appellants/Petitioners: Shri. V. Srinivasan
For the Respondents: Shri. D. K. Mishra
Interest income from statutory bank deposits is operational income under Income Tax law, eligible for deductions, quashing erroneous revisions.
Headnote:(A) Income Tax Act, 1961 - Section 263 - Assessment Year 2018-19 - Appeal against order of revision by PCIT claiming deductions under sections 80P(2)(a)(i) and 80P(2)(d) - Assessment held to be erroneous and prejudicial to Revenue - Chair held statutory compulsion existed for interest income assessment as business income. (Paras 19, 20)
(B) Deduction - Assessee’s investments with the SCDCC Bank mandated by cooperative laws were argued to be operational income - Revisionist argued otherwise based on prior decisions against such classifications. Court reinforced appellate courts' limitation over lower court's views unless proven erroneous. (Paras 19)
Facts of the case:
Assessee, a co-operative society, claimed deductions for interest income under statutory obligations, but PCIT challenged assessment asserting it as income from other sources contrary to prior rulings in its favor. (Paras 1-2, 3)
Findings of Court:
Assessment order found justified on statutory grounds, with interest gained from statutory mandates equating to operational income under sec 80P. (Paras 19)
Issues: Main questions involved the classification of interest income from SCDCC Bank deposits and the validity of revisions by PCIT in light of earlier favorable decisions. (Paras 10, 19)
Ratio Decidendi: Court validated AO’s findings classifying income from statutory bank deposits as business income eligible for section 80P deductions, quashing PCIT's revision order as unwarranted. (Paras 19-20)
Result: Appeal filed by the assessee is allowed.
| Table of Content |
|---|
| 1. classification of interest income from statutory deposits as operational income. (Para 1 , 3 , 5 , 10 , 19) |
| 2. arguments against pcit's assessments and revisions. (Para 2 , 4 , 6 , 12 , 14) |
| 3. the court's findings and conclusions on statutory obligations. (Para 8 , 9 , 15 , 18 , 20) |
ORDER
Per George George K, Vice President:
This appeal at the instance of the assessee is directed against PCIT’s order dated 03.11.2023, passed under section 263 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2. The grounds raised read as follows:
1. The order of the learned P.C.I.T passed u/s. 263 of the Act in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned P.C.I.T failed to appreciate that there was no error much less an error prejudicial to the interest of the revenue in the order passed by the learned Assessing Officer warranting revision u/s.263 of the Act and consequently, the order passed by the P.C.I.T. requires to be cancelled.
3. The learned P.C.I.T. is not justified in holding that the order of assessment passed u/s. 143[3] of the Act, dated 15/06/2021 was erroneous and prejudicial to the interest of revenue on the ground that the same was not passed in accordance with the decision of the Hon'ble Supreme Court and Jurisdictional High Court of Karnataka prejudicial to the interests of the assessee under the facts and in the circumstances of the appellant's case.
4. The learned PCIT ought to have appreciated that the interest income earned by the appellant on deposits in SDCC bank and other nationalized banks was regarded as income under the head "Other Sources" and therefore, the appellant had neither claimed as deduction u/s. 80P[2][a][i] or u/s. 80P[2][d] of the Act in first instance at all and therefore, the assessment order passed by the learned A.O. u/s. 143(3) cannot be considered as prejudicial to the interest of revenue under the facts and in the circumstances of the appellant's case.
5. Without prejudice to the above, the learned PCIT ought to have appreciated that the interest income earned by the appellant was in the nature of operational income in as much as the interest earned was from out of the funds of the business of providing credit facilities to the members of the appellant for which detailed submissions were made before the learned A.O., who had accepted that the said interest was liable for assessment under the head "Business" and not under the head "Other Sources" and therefore, there was no error in the deduction allowed to the appellant u/s 80P[2][a][i] of the Act by the learned A.O. vide the order of assessment passed u/s. 143[3] of the Act, dated 15/06/2021 under the facts and in the circumstances of the appellant's case.
6. Without prejudice, the learned P.C.I.T is not justified in law in directing the learned A.O to deny the alternate claim for deduction u/s 80P[2][d] of the Act to the extent of interest income earned from co-operative banks which are nothing but co-operative societies in possession of a license from the RBI under the facts and in the circumstances of the appellant's case.
7. Without prejudice to the above, the learned PCIT ought to have directed the learned A.O. to allow the deduction u/s. 57 of the Act towards cost of funds should the interest income be assessed under the head "other sources" under the facts and in the circumstances of the appellant's case.
8. For the above and other grounds that may be urged at the time of hearing of the appeal. your appellant humbly prays that the appeal may be allowed and Justice rendered.
3. Brief facts of the case are as follows:
Assessee is a co-operative society registered under the Karnataka Co- operative Societies Act, 1959. For the Assessment Year 2018-19, return of income was filed on 27.09.2018 declaring total income of Rs.3,54,560/-, after claiming deduction under section 80P of the A
