INCOME TAX ACT, 1961

Section 80P(2)

Deduction under section 80P(2) - Interest income received from another co-operative bank - Allowability -

Assessee-society was engaged in business of providing credit facilities exclusively to its members and claimed deduction under section 80P of interest income earned from Co-operative Bank. AO allowed net interest deduction after deducting proportionate expenses for earning such interest income received from another Co-operative Bank. Held: As evident from accounts, assessee was not enjoying any credit facilities from any financial institution. In order to develop the habit of savings, assessee was collecting thrift deposit from salaries on monthly basis since its inception and these funds were utilized for the business purpose of assessee. There was no merit in the action of AO to disallow expenses @ 87.54%. It is well settled that section 80P(2)(d) allows whole deduction of an income by way of interest or dividends derived by Co-operative Societies from its investment with any other Co-operative Society. There was no basis to restrict the disallowance to 50% as held by CIT(A) and apportioning of the expenditure to interest income was not justified.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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