Interest income from scheduled banks disallowed, cooperative banks deductions allowed under Income Tax Act. Proportionate disallowance upheld.

The Tribunal confirmed the disallowance of interest income from scheduled banks but allowed deductions for interest income from cooperative banks under sections 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961. Proportionate disallowance was upheld in certain instances, and a statutory standard deduction under section 80P(2)(c) was allowed. The Tribunal partly allowed all three appeals for statistical purposes.

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Issues Involved:
1. Quantification of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961.
2. Eligibility of interest income from scheduled banks for deduction under section 80P(2)(a)(i).
3. Eligibility of interest income from cooperative banks for deduction under section 80P(2)(d).
4. Proportionate disallowance of deductions claimed.
5. Allowance of statutory standard deduction under section 80P(2)(c).

Issue-wise Detailed Analysis:

1. Quantification of Deduction under Section 80P(2)(a)(i) and 80P(2)(d):
The primary issue in these appeals is the quantification of deductions under sections 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act, 1961. The assessee, a cooperative society, claimed deductions on interest income earned from deposits with scheduled and cooperative banks. The Assessing Officer (AO) disallowed the deduction following the decision of the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT, 72 taxmann.com 64 (Guj), resulting in an addition of Rs. 40,83,504/-. The CIT(A) upheld this disallowance.

2. Eligibility of Interest Income from Scheduled Banks for Deduction under Section 80P(2)(a)(i):
The assessee argued that only net interest income should be excluded from the eligibility amount for the deduction. The Tribunal, referencing the Hon’ble Gujarat High Court's decision in State Bank of India (supra), held that interest income from scheduled banks does not qualify for deduction under section 80P(2)(a)(i). The AO was directed to work out the net interest income from deposits with scheduled banks and exclude that amount from the computation of the deduction claimed under section 80P(2)(a)(i).

3. Eligibility of Interest Income from Cooperative Banks for Deduction under Section 80P(2)(d):
The Tribunal noted that interest income from cooperative banks qualifies for deduction under section 80P(2)(d), as established by various decisions, including the Tribunal's own earlier orders. The AO was instructed to work out the net amount of interest income from cooperative banks and grant the deduction accordingly.

4. Proportionate Disallowance of Deductions Claimed:
In ITA No.2906/Ahd/2017, the AO made an addition of Rs. 2,98,907/- on the grounds that the assessee claimed deductions for income earned from deposits with scheduled banks without specifying the exact amount. The Tribunal directed the AO to re-adjudicate the issue, excluding only the net interest income from nationalized banks from the computation of income admissible under section 80P(2).

In ITA No.285/Ahd/2018, the assessee agreed to a proportionate disallowance of the deduction claimed, based on the ratio of nationalized bank interest to total income. The AO's disallowance of Rs. 6,27,200/- was upheld by the Tribunal.

5. Allowance of Statutory Standard Deduction under Section 80P(2)(c):
The Tribunal allowed the assessee's claim for a standard deduction of Rs. 50,000/- under section 80P(2)(c), recognizing it as a statutory deduction. The AO was directed to allow this claim in accordance with the law.

Conclusion:
The Tribunal's consolidated order addressed the quantification of deductions under sections 80P(2)(a)(i) and 80P(2)(d), confirming the disallowance of interest income from scheduled banks while allowing deductions for interest income from cooperative banks. Proportionate disallowance was upheld where applicable, and statutory deductions under section 80P(2)(c) were allowed. All three appeals were partly allowed for statistical purposes.

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