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TMI Blog2016 (11) TMI 1614X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of interest paid had brought the same to tax under the head income from business - HELD THAT:- AO while making the ad-hoc disallowance of interest paid had brought the same to tax under the head income from business . Once the same is brought to tax as income from business , the said income is entitled to the benefit of deduction u/s 80P(2)(i)(a) of the Act. The CBDT, in the recent circular no.37/2016 dated 2nd Nov 2016 has considered higher deduction u/s 80P on the enhanced profit as a result of disallowance of expenditure. The CBDT had clarified that, as a result of expenditure disallowance, there is a enhanced profit and the same is brought to tax as business income, deduction under Chapter VI-A need to be allowed on the enhanced profit. We hold that the CIT(A) is justified in granting benefit of deduction u/s 80P(2)(i)(a) as regard to interest that was disallowed. Accordingly, ground is rejected. - ITA No 358/Coch/2016 (Asst Year 2012-13 ) - - - Dated:- 17-11-2016 - S/Shri B P Jain and George George K, JJ. Assessee By Sh Matew Joseph Revenue By Sh A Dhanraj, Sr DR ORDER George George K, This appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered under the Kerala Cooperative Societies Act, 1969. The return of income for the assessment year 2012-13 was filed on 26.2.2013 disclosing the taxable income at ₹ 4,65,980/- after claiming deduction amounting to ₹ 79,57,892/- u/s 80P of the I T Act. The assessment was completed u/s 144 of the I T Act vide order dated 13.3.2015. The Assessing Officer completed the assessment by making certain additions and rejecting the claim of benefit of deduction u/s 80P(2)(a)(i) of the Act. 5 Aggrieved by the disallowance u/s 80P(2)(a)(i), the assessee preferred appeal to the first appellate authority. Before the CIT(A), it was contended that for the AYs 2010-11, 2011-12 and 2013-14, the Division Bench of the Hon ble jurisdictional High Court in the case of the Chirakkal Service Cooperative Bank Ltd others in ITA No.212 of 2013 ( Judgment dated 15th February 2016) in which the assessee was also a party, had decided the matter in favour of the assessee. The CIT(A), after going through the arguments, evidences on record and taking note of the judgment of the Hon ble jurisdictional High Court (supra) held that the assessee is entitled to the benefit of deduction u/s 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reference to, among other things, the registration of a society under any State law relating to co-operative societies for the time being; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualise as due reciprocative legislative exercise by the Parliament recognising the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act, it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes, the rate 'of interest on such loans and advances to be at the rate fixed by the Registrar of co-operative societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I T Act. Accordingly, the ground nos 2 to 5 are dismissed. It is ordered accordingly. 8 As regards ground no 6, the brief facts are as follows: The Assessing Officer had made a ad-hoc disallowance of 5% out of the total interest paid by the assessee on the deposits received from its members. The amount of such disallowance was ₹ 44,97,108/-. The Assessing Officer had added the same under the head business income . On further appeal by the assessee, the disallowance made by the Assessing Officer was confirmed by the CIT(A) for the reason that the entire details of deposits were not submitted before the Assessing Officer and therefore, the Assessing Officer was justified in making the ad-hoc disallowance of interest @5% out of the total interest payment. The CIT(A), however, granted deduction u/s 80P on the enhanced income on account of disallowance of interest expenditure. The relevant finding of the CIT(A) in this regard read as follows: 13. The addition made of ₹ 44,97,108/- by the Assessing Officer has been upheld in paras 6 7 of this order. However, the said addition is eligible for deduction u/s 80P. The following case laws ..... X X X X Extracts X X X X X X X X Extracts X X X X
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