2019 (7) TMI 1031 - AT - Income Tax

Tribunal allows deduction under sec. 80P despite negative income, remits matter for further assessment.

DCIT, Circle-2 (1), Vijayawada. Versus M/s. The Andhra Pradesh State Co-operative Marketing Federation Ltd.

The Tribunal set aside the Assessing Officer's decision disallowing the deduction u/sec. 80P for the assessee due to negative business income. The ... Deduction u/sec. 80P - earning of income relating to the letting of godowns, the correct income derived from the business or profession - CIT-A observed that the assessee had received the income from letting out of godowns to the extent of ₹ 1.11 crores and earned the dividend income of ₹ 3.43 crores thus entitled for deduction - HELD THAT:- As per the computation of income the assessee had earned free interest income of ₹ 15.96 crores and except for income from other sources, the income from business and profession resulted in loss. The assessee admitted income from house property, but did not show any income from letting out of godowns or warehouses. For a query from the Bench, ld.AR submitted that the income received from letting out of godown was included in the income from house property or income from business, but he could not specifically show or confirm in which head of income it was included/clubbed. As per the act the Income received from letting out of godown or warehouses is allowable deduction u/sec. 80P(2)(e) - AR submitted that the assessee had received the interest the income of ₹ 15.96 crores and paid the interest of ₹ 51.02 crores and argued that if the interest payment on loans related to the deposits is excluded from business income it would result in positive income. However, during the appeal hearing, ld.AR could not furnish matching details of interest payment, the interest receipts with the loans and deposits. Therefore, we are of considered opinion that the above information is required to decide whether the assessee derived income from business or not? Therefore, in the interest of justice we are of the considered view that the issue needs to be remitted back to the file of the Assessing Officer to examine the earning of income relating to the letting of godowns, the correct income derived from the business or profession. AO should exclude the interest related to the loans for arriving the income business or profession. Therefore, we set aside the order of the AO on the issue of disallowance made u/s 80P and remit the matter back to the file of the AO to decide the issue afresh on merits and as per law. - Appeal of the assessee is allowed for statistical purpose Issues:Deduction u/sec. 80P disallowed by Assessing OfficerAnalysis:The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of deduction u/sec. 80P for the Assessment Year 2014-15. The Revenue contended that since the profits and gains of business or profession were negative, the assessee was not entitled to the deduction u/s 80P. The Revenue also argued that interest expenditure and income should not be treated as business income, as the interest expenditure was reimbursed by the Government of AP. The Revenue further contended that only expenditure directly related to interest receipts should be allowed as a set-off. The primary issue revolved around the eligibility of the assessee for the deduction u/sec. 80P due to the negative business income.The assessee had filed its return of income admitting total income but claimed a deduction u/sec. 80P. The Assessing Officer disallowed the deduction due to the negative business income, stating that deduction is only allowable from the source of business and profession. The Commissioner of Income Tax (Appeals) observed that the assessee derived profit from business, allowing the deduction u/sec. 80P(2)(e) of the Act. The Commissioner deleted the addition and allowed the appeal of the assessee based on the positive business income shown by the assessee.During the appeal hearing, the Departmental Representative argued that since the business income resulted in a loss, the assessee was not entitled to claim the deduction u/sec. 80P(2)(e). On the other hand, the assessee's representative contended that the gross total income was positive, and the assessee had received income from letting out godowns, making them eligible for the deduction u/sec. 80P. The representative argued that interest income from financial institutions was not immediately required for the business and should be considered separately. The Tribunal found discrepancies in the details provided and remitted the issue back to the Assessing Officer for a thorough examination of the income derived from the business or profession, emphasizing the exclusion of interest related to loans for determining business income.The Tribunal set aside the order of the Assessing Officer and remitted the matter back for a fresh decision. The appeal of the assessee was allowed for statistical purposes, with instructions for the Assessing Officer to provide sufficient opportunity for the assessee to present their case. The decision was pronounced in open court on July 17, 2019.