Appeal allowed: Bank interest income deductible under section 80P

The Tribunal allowed the appellant's appeal, finding that the interest income earned on deposits with a bank is attributable to the business of banking and therefore eligible for deduction under section 80P of the Income Tax Act. Relying on previous decisions and the absence of contrary binding decisions, the Tribunal held in favor of the appellant, disapproving the order of the ld.CIT(A) and allowing the claim for deduction under section 80P.

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Issues Involved:
Claim of deduction under section 80P of the Income Tax Act for interest income.

Analysis:
The appellant appealed against the order of the ld.CIT(A) upholding that interest income is taxable as "income from other sources" instead of business income. The primary issue revolved around the claim of deduction under section 80P of the Act. The appellant contended that the interest earned on deposits with the bank is attributable to carrying on the business of banking and hence eligible for deduction under section 80P. The Co-ordinate bench of the Tribunal in a similar case had already decided in favor of the assessee, emphasizing that the interest income is liable to be deducted under section 80P(1) of the Act. The Tribunal referred to the decision of the Hon'ble Karnataka High Court in a related case, which supported the deduction of interest income. The Tribunal found the facts of the case identical to the precedent and, in the absence of any contrary binding decision, allowed the claim of the assessee under section 80P.

The appellant further relied on a decision by the ITAT Bench and a judgment of the Hon'ble Karnataka High Court to support the claim for deduction under section 80P. The ITAT, Ahmedabad Bench, and the Hon'ble Karnataka High Court had previously ruled in favor of similar claims. After considering the submissions and case laws cited, the Tribunal found no reason to deviate from the established view and allowed the claim of the assessee under section 80P. Consequently, the Tribunal disapproved the order of the ld.CIT(A) on this issue and allowed the appeal of the assessee. The judgment was pronounced in the Court on 26th February 2016 at Ahmedabad.

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