ITAT Allows Appeal; 52-Day Delay Excused, Reassesses Interest Income Deduction from Banks for Fair Cost Calculation.

The ITAT condoned a 52-day delay in filing the appeal due to valid reasons, allowing the appeal to proceed on merit. It upheld the disallowance of deduction u/s 80P(2)(d) for interest income from nationalized/co-operative banks but directed the AO to consider costs incurred, ensuring only net interest income is disallowed. The ITAT set aside the issue to the AO for recalculating costs incurred, emphasizing fairness. Interest income from co-operative societies was deemed eligible for deduction u/s 80P(2)(d). The appeal was allowed for statistical purposes, focusing on accurate assessment and adherence to legal provisions.

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Issues:
1. Condonation of delay in filing appeal.
2. Deduction u/s 80P(2)(d) of the Act for interest income from co-operative banks/societies.
3. Consideration of cost incurred against interest income.
4. Setting aside the issue to the file of the AO for calculation of cost incurred.
5. Eligibility of interest income from co-operative society for deduction u/s 80P(2)(d) of the Act.

Analysis:

Issue 1: Condonation of delay in filing appeal
The assessee filed an appeal against the order passed by NFAC, Delhi for the assessment year 2017-18. The delay of 52 days in filing the appeal was condoned by the ITAT due to valid reasons presented by the assessee, including technical issues in accessing the order and oversight by an employee. The delay was condoned in the interest of justice, allowing the appeal to be adjudicated on merit.

Issue 2: Deduction u/s 80P(2)(d) of the Act for interest income
The AO disallowed the deduction claimed by the assessee u/s 80P(2)(d) for interest income from commercial banks/co-operative banks/co-operative societies. The CIT(A) upheld the AO's order but directed consideration of costs incurred by the assessee against the income. The ITAT noted that interest income from nationalized banks/co-operative banks is not eligible for deduction u/s 80P(2)(d), but the cost incurred against such income should be considered. The net interest income should be disallowed, not the gross interest income, for calculating the deduction.

Issue 3: Consideration of cost incurred against interest income
The ITAT set aside the issue to the AO for calculating the cost incurred by the assessee against the impugned income after giving an opportunity to the assessee. It emphasized that only the net interest income should be disallowed for the deduction u/s 80P(2)(d) of the Act, ensuring fairness and justice in the assessment.

Issue 4: Setting aside the issue for calculation of cost incurred
The ITAT directed the AO to calculate the cost incurred by the assessee against the impugned income, providing an opportunity for the assessee to present relevant details. This step was taken to ensure proper assessment and adherence to the provisions of law, maintaining transparency and accuracy in determining the deduction u/s 80P(2)(d).

Issue 5: Eligibility of interest income from co-operative society
The interest earned by the assessee from the co-operative society was deemed eligible for deduction u/s 80P(2)(d) of the Act. The ITAT highlighted the importance of considering principles laid down by the Supreme Court in similar cases for calculating interest income from co-operative societies. The ground of appeal regarding interest income from the co-operative society was allowed for statistical purposes.

In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, emphasizing the correct calculation of interest income and costs incurred for the deduction u/s 80P(2)(d) of the Act. The judgment aimed to ensure fairness, justice, and adherence to legal provisions in the assessment of the assessee's income.

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