2022 (12) TMI 1013 - AT - Income Tax

Tribunal directs Assessing Officer to quantify proportionate expenditure for taxable interest income calculation

Shree Yogeshwar Co. Op. Credit Society Ltd. Versus The Income Tax Officer, Patan Ward-4, Unjha

Shree Yogeshwar Co. Op. Credit Society Ltd. Versus The Income Tax Officer, Patan Ward-4, Unjha - TMI Issues:1. Delay in filing the appeal by the Assessee.2. Allowance of proportionate amount of interest expenses while computing taxable interest from nationalized banks.Analysis:1. The appeal was filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals) under section 143(3) r.w.s. 263 of the Income Tax Act, 1961, pertaining to the Assessment Year 2013-14. The registry initially noted a delay of 513 days in filing the appeal. However, due to the Covid-19 pandemic and subsequent Supreme Court directions, the delay was considered as there was no delay in filing the appeal by the Assessee.2. The grounds of appeal raised by the Assessee primarily focused on the deduction of proportionate interest expenses while calculating taxable interest from nationalized banks. The Co-ordinate Bench of the Tribunal had previously considered a similar issue in the Assessee's own case for the Assessment Year 2012-13. The Tribunal referred to a Karnataka High Court judgment, stating that only net interest income, reduced by administrative and proportionate expenses, should be brought to tax under section 56. Following this precedent, the Assessee was deemed entitled to deduction of proportionate expenditure incurred in mobilizing funds, and the matter was remitted back to the Assessing Officer for appropriate calculation and orders.3. The first ground of appeal, concerning interest income received from a Nationalized Bank, was held not eligible for deduction under section 80P of the Act, based on the Tribunal's decision and a Gujarat High Court ruling. However, the second ground, related to proportionate interest expenses, was partially allowed based on the Karnataka High Court judgment, directing the Assessing Officer to quantify the proportionate expenditure incurred by the Assessee and pass appropriate orders after due examination.4. Ultimately, the appeal filed by the Assessee was partly allowed, with the Tribunal pronouncing the order on 21-12-2022. The decision highlighted the importance of considering proportionate expenses while calculating taxable interest income from nationalized banks, in line with relevant legal precedents and judgments.This detailed analysis of the judgment showcases the legal intricacies involved in addressing the issues raised by the Assessee and the Tribunal's application of relevant laws and precedents to reach a decision.