Tribunal grants deduction for interest income under section 80P(2)(a)(i)

The Tribunal allowed the appeal, directing the Assessing Officer to permit the deduction for interest income under section 80P(2)(a)(i) of the Act. The decision was based on the finding that the interest income is attributable to the business of providing credit facilities to members and hence qualifies for the exemption. The judgment was pronounced on 3.4.2018.

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Issues:
1. Eligibility of gross interest income from fixed deposits for exemption u/s. 80P(2)(a)(i) of the Act.

Analysis:
The appeal was against the order holding that gross interest income of Rs. 23.32 lakhs from fixed deposits with cooperative banks is not eligible for exemption u/s. 80P(2)(a)(i) of the Act. The Assessing Officer disallowed the deduction under section 80P(4) as the assessee is a credit cooperative society. The learned CIT(A) allowed the deduction for income from loans to members but disallowed it for interest income from fixed deposits. The assessee relied on a Tribunal decision and the Hon'ble Karnataka High Court's judgment to support the eligibility for deduction on interest income from fixed deposits.

The learned CIT(A) relied on a Coordinate Bench order to disallow the deduction for interest income from fixed deposits. However, the Tribunal referred to the Hon'ble Karnataka High Court's judgment, emphasizing that interest income is attributable to the business of providing credit facilities to members and hence eligible for deduction u/s. 80P(2)(a)(i) of the Act. The Tribunal followed the decision in a similar case and set aside the CIT(A)'s order, directing the Assessing Officer to allow the deduction for interest income.

In conclusion, the Tribunal allowed the appeal, directing the Assessing Officer to permit the deduction for interest income u/s. 80P(2)(a)(i) of the Act. The alternative grounds raised by the assessee were not addressed due to the favorable decision on the main issue. The judgment was pronounced on 3.4.2018.

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