The Tax Publishers2022 TaxPub(DT) 1025 (Bang-Trib)

INCOME TAX ACT, 1961

Section 80P(2)(a)(i)

Interest income earned out of investment with co-operative banks was not entitled for deduction under section 80P(2)(a)(i) nor under section 80P(2)(d). However, as regards assessee's plea that it was to be given deduction under section 57 in respect of expenditure for earning interest income, the fundamental principle under IT Act being that only net income has to be taxed (i.e., after deducting expenditure incurred for earning such income, issue was remanded to AO for verification afresh.

Deduction under section 80P(2)(a)(i) - Co-operative society - Allowability as regards interest income earned from Mysore and Chamaraa Nagar District Co-operative Central Bank (MCDC Bank) and Canara Bank -

Assessee, a co-operative society registered under Karnataka Co-operative Societies Act, 1959, provided credit facilities to its members. It claimed deduction under section 80P(2)(a)(i). According to the CIT, AO wrongly allowed deduction under section 80P(2)(a)(i) as regards interest income earned from Mysore and Chamaraa Nagar District Co-operative Central Bank (MCDC Bank) and Canara Bank. Assessee pleaded that if interest income was to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income was to be allowed as deduction under section 57. Held: Interest income earned out of investment with co-operative banks was not entitled for deduction under section 80P(2)(a)(i) nor under section 80P(2)(d). However, as regards assessee's plea that it was to be given deduction under section 57 in respect of expenditure for earning interest income, the fundamental principle under IT Act being that only net income has to be taxed (i.e., after deducting expenditure incurred for earning such income, issue was remanded to AO for verification afresh.

Relied:Totagars Co-operative Sale Society Ltd. v. ITO (2015) 58 Taxmann.com 35 (Karn) (judgment dt. 25-3-2015), Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (2021) 431 ITR 1 (SC) : 2021 TaxPub(DT) 273 (SC), Vasavamba Co-operative Society Ltd. v. Pr. CIT ITA No.453/Bang/ 2020 (order dt. 13-8-2021) and Pr.CIT & Anr. v. Totagars Co-operative Sale Society (2017) 395 ITR 611 (Karn-H) : 2017 TaxPub(DT) 1748 (Karn-HC).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2015-2016



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