2021 (10) TMI 280 - AT - Income Tax

ITAT rectifies error in deduction calculation for interest income from cooperatives, aligns with High Court ruling

The Lunawada Taluka Primary School Teachers Co-op. Credit Society Ltd. Versus ITO, Ward-2 Panchmahal Circle Godhra. And M/s. Vir Transport Operator Co-op. Credit and Services Society Vs. ITO, Ward-2 Dahod.

The Appellate Tribunal ITAT Ahmedabad rectified an apparent error in its order regarding the computation of deduction under section 80P(2)(d) of the ... Rectification of mistake u/s 254 - Deduction u/s 80P(2)(d) computation - inclusion of net interest income earned from co-operative societies - assessee contended that the Tribunal has directed the AO to compute net interest income from the cooperative societies, and thereafter grant deduction under section 80P(2)(d) - HELD THAT:- Tribunal has committed an error which is apparent one by directing the AO to compute only net interest income for the purpose of section 80P(2)(d) of the Act. The gross income is to be considered for deduction under section 80P(2)(d) of the Act. In view of the above decision of SURAT VANKAR SAHAKARI SANGH LTD. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] we expunge the words “net interest” used by us in the finding extracted (supra) and in its place expression “gross interest income” is to be read in the order of the Tribunal. In other words, the ld.AO would grant deduction under section 80P(2)(d) of the Act of whole interest income i.e. gross interest income. MA allowed. Issues involved:1. Rectification of apparent error in the order of the Tribunal regarding the computation of deduction under section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned from cooperative societies.Comprehensive Analysis:The judgment by Appellate Tribunal ITAT Ahmedabad involved three Misc. Applications addressing errors in the Tribunal's order related to deduction computation under section 80P(2)(d) of the Income Tax Act, 1961 for interest income from cooperative societies. The Tribunal had directed the AO to grant deduction under section 80P(2)(d) for the interest income earned from cooperative societies, considering the net interest income. However, the counsel for the assessee argued that the latest decision of the Hon’ble Gujarat High Court necessitated the consideration of gross interest income for deduction purposes under section 80P(2)(d) of the Act. The counsel relied on various decisions to support this argument, emphasizing that the expression 'whole of such income' in section 80P(2)(d) implied the consideration of gross income for deduction calculation.The dispute further escalated as the ld.DR contended that the Tribunal's decision was thorough and error-free. The Tribunal, after considering both sides' contentions and examining the records, clarified the scope of rectification under section 254(2) of the Income Tax Act. It highlighted that rectification could only be made for obvious patent mistakes, not those requiring extensive arguments or reasoning. The Tribunal referred to the Hon’ble Gujarat High Court's decision in a similar case, emphasizing the importance of considering gross interest income for deduction under section 80P(2)(d) of the Act.The Tribunal cited the Hon’ble Gujarat High Court's judgment in the case of Surat Vankar Sahakari Sangh Ltd., which established that gross interest income should be granted as a deduction under section 80P(2)(d) of the Act. The Court emphasized that the provision did not require adjustment based on the nature of the investment or any interest paid to the cooperative society. It clarified that the deduction should be allowed for the entire interest income derived from cooperative societies. The Tribunal, in alignment with the High Court's decision, corrected the error in the Tribunal's order, replacing 'net interest' with 'gross interest income' for deduction computation under section 80P(2)(d) of the Act.In conclusion, the Tribunal allowed all Misc. Applications, revising the Tribunal's order to consider the gross interest income for deduction under section 80P(2)(d) of the Income Tax Act, 1961. The judgment provided clarity on the correct interpretation of the provision, aligning with the decisions of the Hon’ble High Courts and ensuring consistent application of the law in similar cases.