2019 (2) TMI 1268 - AT - Income Tax

Tribunal Grants Deduction for Interest on Fixed Deposits

Shri APD Jain Pathshala Sewakanchi Sahakari Patsanstha Ltd. Versus The Income Tax Officer, Ward – 2 (4), Solapur

Shri APD Jain Pathshala Sewakanchi Sahakari Patsanstha Ltd. Versus The Income Tax Officer, Ward – 2 (4), Solapur - TMI Issues Involved:1. Deduction under Section 80P of the Income-tax Act, 1961 for interest on bank deposits with nationalized banks.2. Adherence to the precedent set by the Pune ITAT in similar cases.3. Just and equitable relief.4. Awarding of costs for not following Pune ITAT decisions.5. Deletion of interest under Section 234B.Detailed Analysis:1. Deduction under Section 80P of the Income-tax Act, 1961 for Interest on Bank Deposits with Nationalized Banks:The primary issue in the appeal was the claim for deduction under Section 80P(2) of the Act on the interest income from fixed deposits with nationalized banks amounting to Rs. 2,25,441/-. The Tribunal noted that this issue had been decided in favor of the assessee in several cases, including the case of ITO Vs. M/s. Maharashtra Bank Employees Co-op. Credit Society Ltd., where the Tribunal held that interest income from fixed deposits with scheduled banks, if invested as per statutory requirements, is eligible for deduction under Section 80P(2)(a)(i).The Tribunal emphasized that the assessee, a co-operative society, was statutorily required to invest part of its profits in reserve funds, which were then parked in fixed deposits with the Bank of Maharashtra. This investment was a condition for carrying on the business activities of the society, making the interest earned business income eligible for deduction under Section 80P(2)(a)(i).2. Adherence to the Precedent Set by the Pune ITAT in Similar Cases:The Tribunal highlighted that the CIT(A) erred by not following the precedent set by the Pune ITAT in similar cases. The Tribunal referred to the decision in Jijamata Mahila Sahakari Bigar Sheti Sahakari Patsanstha Ltd. Vs. ITO, where it was held that interest income from statutory investments is eligible for deduction under Section 80P(2)(a)(i). The Tribunal reiterated that the binding precedent should have been followed to ensure consistency and fairness in judicial decisions.3. Just and Equitable Relief:The appellant sought just and equitable relief. The Tribunal, by allowing the appeal and directing the Assessing Officer to grant the deduction under Section 80P(2)(a)(i) for the interest on fixed deposits, provided the relief sought by the appellant. This decision aligns with the principles of equity and justice, ensuring that the assessee's statutory rights are upheld.4. Awarding of Costs for Not Following Pune ITAT Decisions:The appellant also prayed for awarding costs due to the CIT(A)'s failure to follow the Pune ITAT's decisions. While the Tribunal did not explicitly address the awarding of costs, the decision to allow the appeal and direct the Assessing Officer to grant the deduction implicitly acknowledges the appellant's grievance regarding the non-adherence to precedent.5. Deletion of Interest under Section 234B:The appellant sought the deletion of interest charged under Section 234B. The Tribunal did not specifically address this issue in the detailed analysis. However, by allowing the primary ground of appeal regarding the deduction under Section 80P(2)(a)(i), the Tribunal provided substantial relief to the appellant, which may indirectly affect the computation of interest under Section 234B.Conclusion:The Tribunal concluded that the interest income from fixed deposits with nationalized banks, invested as per statutory requirements, qualifies for deduction under Section 80P(2)(a)(i) of the Act. The Tribunal directed the Assessing Officer to allow the deduction, following the same parity of reasoning as in previous decisions of the Pune ITAT. The appeal was allowed, providing the appellant with the just and equitable relief sought.