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TMI Blog2017 (4) TMI 1545X X X X Extracts X X X X X X X X Extracts X X X X ..... or a Primary Co-op agricultural and Rural Development Bank. Regarding eligibility for receiving interest received from the co-operative bank we have noticed from the judicial pronouncement in the case of Surat Vankar Sahakari Sangh Ltd. v. Assistant Commissioner of Income Tax [ 2016 (7) TMI 1217 - GUJARAT HIGH COURT] . As noticed from the finding of the Ld.CIT(A) that the assessee has claimed the gross amount u/s. 80P(2)(d) which includes interest income and dividend income received from other Co-operative societies. However, in the computation of income, assessee has restricted the deduction which was net income. CIT(A) is justified in his decision that the net income in the case of assessee allowable as deduction u/s. 80P(2)(d). In view of the above stated facts and detailed findings of the Ld.CIT(A) given in his order, we disinclined to interfere in the decision of Ld. CIT(A) - Decided against revenue. - ITA No. 2166/Ahd/2014 - - - Dated:- 18-4-2017 - Shri Rajpal Yadav And Shri Amarjit Singh, JJ. Appellant by: Shri Ashish Pophere, Sr. D.R. Respondent by: Shri Mitesh Modi with Shri Akhary Modi, A.R. ORDER AMARJIT SINGH, J. This revenue s appeal fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 18th September, 2009. Subsequently, the case was selected under scrutiny by issuing notice u/s. 143(2) of the act on 29th August, 2011. During the course of assessment proceedings, the assessing officer observed that assessee has earned gross income of ₹ 6,88,20,648/- and after allowing deduction of expenses declared income from business and provision of ₹ 1,36,41,639/-. Thereafter, the assessee claimed deduction u/s. 80P of the act and declared nil income in the return of income. The assessing officer noticed that the following income was shown as eligible for claiming deduction u/s. 80P of the act. a b Basic deduction Interest and dividend from other coop, societies ₹ 50,000/ ₹ 4,05,40,653/- Total ₹ 4,05,90,653/- The assessing officer has bifurcated the interest income/expenses, along with income/expenditure under the different other heads as under:- Expenditure Amount Income Amount Interest on deposits 4,66,56,566/- Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer observed that assessee was not having any funds for investment to earn interest income and whatever deposit received from the members were provided loan out to the other member. The excess amount was deposited in the bank from which the assessee has earned interest income. He further observed that whatever assessee has accepted from the members it has paid interest and on the amount of loan given to its members and on the amount deposited in the bank it has earned interest income. He observed that there was direct nexus between the entire expenses claimed and entire income received. The assessing officer stated that the assessee has shown interest and salary expenses of ₹ 56,18,652/- and also shown other income of ₹ 2,82,79,995/- which was not eligible for deduction u/s. 80P of the act. The assessing officer further noticed that assessee has earned total income of ₹ 6,88,20,648/- including the so called eligible income for deduction u/s 80 P of the act ₹ 4,05,40,653 .He also stated that the assessee has increased expenses of ₹ 5,51,79,009/- and the net income of the assessee was only ₹ 1,36,41,639/- but it has claimed deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and total expenses as shown by appellant and finally the allowable deduction is worked out by him at ₹ 21,45,140/-. Thus, the AO has not allowed the deduction on the interest and dividend received from Co-operative banks and also on gross amount of interest and dividend received from other Co-operative societies. This stand taken by AO does not find support from the facts of the case. As submitted, the appellant society has been statutorily investing its surplus fund from the year 1992 with other Co-operative Societies which include Co-operative Banks. On such investments, the appellant has been receiving interest and dividend which has been claimed as deduction u/s. 80P(2)(d) of the Act. It is not a case where this income has derived out of investments made during the year for which the appellant has incurred any expenditure directly or indirectly. An analysis of interest expenses would show that the same has been incurred by way of interest paid to members societies saving accounts, FD accounts and other deposits. It is evident from the details of interest expenses that there is no direct or indirect nexus between such expenses and interest and dividend earned from invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety, the whole of such income. After considering the factual as well as legal position on this issue, the appellant had not incurred any expenditure on the earning of the dividend and interest from other co-operative society as this investment was made long back. No new investment had been made by the appellant during the year under consideration. Thus, we confirm the order of the CIT(A) in all the years. In view of above, Hon'ble ITAT confirmed the order of CIT(A) who had deleted the addition made by AO by disallowing the deduction claimed on account of interest received from other Co-operative societies. Thus, in the case of appellant also, the proportionate disallowance of interest and dividend cannot be held sustainable. 5.1 The next issue, to be decided, is that whether deduction u/s. 8OP(2)(d) is available on the gross amount or the net amount. The appellant has claimed the gross amount of ₹ 4,05,40,653/- u/s. 80P(2)(d) which includes interest income of ₹ 3,24,40,278/- and dividend income of ₹ 81,00,375/- received from other Co-operative societies. However, in the computation of income, appellant has restricted the deduction at ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act allows whole deduction of an income by way of interest or dividends 'derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other cooperative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of ₹ 4,00,919 on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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