Dakshin Kalikata Sansad Vs ITO (ITAT Kolkata)
Salary for Managing Multiple Bank A/cs Allowable u/s 57—CIT(A)’s Arbitrary Restriction Removed; Entire ₹7.50 Lakh Allowed
The Assessee, a historic society registered in 1949 & holding 12A registration since 2003, filed return declaring income of ₹38,410 for AY 2018-19. The case was selected for scrutiny. The Assessee earned interest income of ₹41,48,848 from bank FDs/SB accounts (not covered by mutuality) and claimed ₹41,06,443 as deduction u/s 57.
Assessment Order
AO held that interest was taxable and disallowed the entire ₹41,06,443 u/s 57, treating the salary expenditure as unrelated to earning interest. AO assessed income at ₹41,44,848.
CIT(A) Order
CIT(A) accepted that some expenditure is allowable following earlier years (AY 2013-14 & AY 2017-18), but allowed only ₹3,42,446, being salary of one employee (Shri G.C. Nandy). Balance salary ₹4,07,914 was disallowed without any basis.
Assessee’s Case Before ITAT
Assessee argued:
- Interest income exceeded ₹41 lakh,
- The Society operated multiple bank accounts,
- From AY 2016-17 onwards three employees were engaged in finance/banking operations,
- In earlier years, salary for three employees was accepted either by AO or CIT(A),
- Hence entire ₹7,50,360 should be allowed u/s 57(iii).
Tribunal’s Findings
The Tribunal found:
- It is an admitted fact that the Society maintains several bank accounts,
- The Department itself did not dispute that three employees handled banking work from AY 2016-17 onwards,
- CIT(A) failed to justify why only one employee’s salary was allowable,
- Salary expenditure was wholly & exclusively incurred for earning interest income—condition of s.57(iii) satisfied.
Accordingly, Tribunal held that there was no reason to restrict the claim, and directed the AO to allow the full amount of ₹7,50,360 (i.e., allowed the remaining disallowed ₹4,07,914 also).
Result: Entire salary expenditure ₹7,50,360 allowed u/s 57(iii).
FULL TEXT OF THE ORDER OF ITAT KOLKATA
