Tribunal partially allows appeal, deletes interest income addition, upholds deduction denial, refers expense estimation back.

The Tribunal partly allowed the appeal of the assessee, directing the deletion of the addition of interest income not included in the limited scrutiny scope and upholding the denial of deduction under section 80P(2)(a)(i) for certain incomes. The Tribunal also restored the issue of estimating expenses for earning interest income to the CIT(A) for a reasonable estimation.

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Issues Involved:
1. Addition of Interest Income of Rs. 55,008/- not included in limited scrutiny scope.
2. Denial of deduction under section 80P(2)(a)(i) on gross Interest Income of Rs. 1,66,327/-.
3. Limitation of deduction of expenditure incurred for earning interest income.
4. Disallowance of deduction under section 80P for Rs. 68,673/- on income from UGVCL Bill Collection services.
5. Addition of interest income from Axis Bank of Rs. 55,008/- and related expenditure deduction.

Summary:

1. Addition of Interest Income of Rs. 55,008/- not included in limited scrutiny scope:
The Tribunal noted that the present case was a limited scrutiny assessment, where the scope did not include examining whether any income remained undisclosed. The addition of Rs. 55,008/- as interest income by the AO was beyond the scope of the limited scrutiny assessment. The Tribunal cited several decisions supporting this view and concluded that the addition was not sustainable in law. Therefore, the Tribunal directed the deletion of the addition, allowing ground no. 4 of the assessee.

2. Denial of deduction under section 80P(2)(a)(i) on gross Interest Income of Rs. 1,66,327/-:
The Tribunal examined the denial of deduction under section 80P(2)(a)(i) on various incomes, including interest from banks and UGVCL, and commission income. The Tribunal upheld the CIT(A)'s decision that the assessee was not entitled to deduction on interest earned from banks (Rs. 46,239/-) based on the jurisdictional High Court decision. Regarding interest from UGVCL and commission income, the Tribunal agreed with the CIT(A) that these incomes did not qualify for deduction under section 80P(2)(a)(i) as they were not from providing credit facilities to members. The Tribunal dismissed grounds no. 1 to 3 of the assessee.

3. Limitation of deduction of expenditure incurred for earning interest income:
The Tribunal addressed the issue of limiting the deduction of expenditure incurred for earning interest income on an ad-hoc basis of 5%. The Tribunal found merit in the assessee's contention that the estimation should be based on a reasonable basis. The Tribunal restored the issue back to the CIT(A) to estimate the expenses on a reasonable basis, allowing ground no. 4.1 for statistical purposes.

4. Disallowance of deduction under section 80P for Rs. 68,673/- on income from UGVCL Bill Collection services:
The Tribunal upheld the CIT(A)'s decision that the assessee was not entitled to deduction under section 80P(2)(a)(i) for income derived from UGVCL on Bill Collection services. The Tribunal agreed that the said incomes did not qualify as income from providing credit facilities to members, which is the requirement for deduction under section 80P(2)(a)(i). The Tribunal dismissed the related grounds of appeal.

5. Addition of interest income from Axis Bank of Rs. 55,008/- and related expenditure deduction:
The Tribunal set aside the addition of Rs. 55,008/- from Axis Bank interest income as it was beyond the scope of limited scrutiny. The Tribunal also restored the issue of estimating expenses incurred for earning such income back to the CIT(A) for a reasonable estimation.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes. The Tribunal directed the deletion of the addition of Rs. 55,008/- as interest income, upheld the denial of deduction under section 80P(2)(a)(i) for certain incomes, and restored the issue of estimating expenses to the CIT(A).

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