2020 (6) TMI 405 - AT - Income Tax

Tribunal consolidates appeals, remands deduction claim, reexamines interest income, leaves validity of reopening assessments open for future

M/s. Udaya Souhardha Pattina Sahakari Niyamitha Versus Income Tax Officer, Ward 5 (2) (4), Bangalaore

M/s. Udaya Souhardha Pattina Sahakari Niyamitha Versus Income Tax Officer, Ward 5 (2) (4), Bangalaore - TMI Issues:- Validity of reopening of assessments in AY 2011-12 and 2015-16- Eligibility of the assessee for deduction under Section 80P of the Income Tax Act- Taxability of interest earned by the co-operative society on surplus funds invested in Short Term Deposits- Manner of computation of interest income under Section 56 of the ActValidity of Reopening of Assessments:The learned Authorised Representative contended that the assessment orders for AYs 2011-12 and 2015-16 were passed under section 143(3) r.w.s. 147 of the Income Tax Act due to reopening of assessments by issuing notice under Section 148. The issues contested in all three years were deemed identical. The Authorised Representative argued against the validity of the reopening of assessments and the additions made in all three years. The Tribunal, with the agreement of both parties, decided to hear all three appeals together based on the representation that the issues raised were settled by decisions of the jurisdictional High Court of Karnataka and the Supreme Court.Eligibility for Deduction under Section 80P:The Assessing Officer rejected the claim for deduction under Section 80P of the Act, asserting that the assessee, a credit co-operative society, was engaged in banking activities, rendering it ineligible for the deduction. The AO also highlighted that the entity was registered under a different name and had nominal members, leading to the rejection of the deduction claim. The CIT (Appeals) upheld this decision. However, the Authorised Representative cited relevant court decisions supporting the eligibility of co-operative societies registered under the Karnataka Souharda Sahakari Act for Section 80P deduction. The Tribunal, considering these legal developments, decided to remand the issue back to the Assessing Officer for reevaluation in light of the court decisions.Taxability of Interest Income on Surplus Funds:The Assessing Officer disallowed the deduction under Section 80P, specifically concerning interest earned by the co-operative society on surplus funds invested in Short Term Deposits. The AO relied on a Supreme Court decision to support this disallowance. The Authorised Representative referenced court judgments indicating that the manner of taxability of interest income had been revisited and reversed by the High Court and Supreme Court in related cases. Consequently, the Tribunal directed the matter to be re-examined by the Assessing Officer in line with the recent legal interpretations.Manner of Computation of Interest Income under Section 56:The Tribunal found it appropriate to restore all issues to the Assessing Officer for fresh examination considering the legal decisions rendered by the High Court and Supreme Court. Consequently, the orders passed by the CIT (Appeals) were set aside, and the matters were remanded for reevaluation. The Tribunal refrained from adjudicating on the validity of reopening assessments, leaving the issue open for future consideration. As a result, the appeals were treated as allowed for statistical purposes, and the stay petitions were dismissed as infructuous.This detailed analysis of the judgment from the Appellate Tribunal ITAT Bangalore covers the key issues of validity of reopening assessments, eligibility for deduction under Section 80P, taxability of interest income on surplus funds, and computation of interest income under Section 56 of the Income Tax Act. The Tribunal's decision to remand the matters to the Assessing Officer for fresh examination based on recent legal precedents reflects a thorough consideration of the complex legal issues involved in the case.