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TMI Blog2018 (6) TMI 1787X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding co-operative banks. On such investment, the assessee is receiving interest and dividend which has been claimed as deduction u/s.80P(2)(d) of the Act. It is evident that there is no direct nexus between such expenses and interest and dividend. The prorate allocation of interest expenditure resulting its part disallowance of deduction has been done without examined the issue in details. Therefore, in absence of any expenses directly or indirectly co-related to such income, the part disallowance of deduction is not satisfied. In view of this matter, we do not find any fault in the order of CIT(A), hence, same is upheld. Claim of deduction u/s. 80P(2)(d) of the Act on the interest income earned from Co-operative banks - HELD THAT:- It is undisputed fact that the assessee is a Credit Co-operative Society and received advances and loans from its members, on which interest was being received and paid. We find that the Surat Bench of the Tribunal (camp at Surat), on the similar issue, in assessee s own case[ 2017 (4) TMI 1545 - ITAT SURAT] for the A.Y. 2009-10 held the issue in favour of the assessee by dismissing the appeal filed by the Revenue. We find that there is no direct ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income of ₹ 5,58,09,858.90/- and after claiming deductions in respect of the expenses allowable as per the Income Tax Act, shown income from business and profession at ₹ 1,40,52,159/-. Thereafter, the assessee claimed deduction u/s.80P of the Act on the said income and declared taxable income at ₹ 80,870/-. And also the assessee claimed following income as eligible income for deduction u/s.80P of the Income Tax Act. A Basic deduction ₹ 50,000/- B Interest and dividend from other co-op. socieites ₹ 3,34,23,194/- Total ₹ 3,34,73,194/- 4. The AO further observed that the assessee earned gross interest income of ₹ 4,45,74,034/- during the year under consideration. As per him whatever is accepted as deposits from the members by the assessee were given to the members of the assessee society as loan and the excess amounts were deposited in the bank etc. and earned interest income from such loans and deposits. On the deposits accepted by the assessee from its members, interest was paid and simultaneously, on the amount of loans given to the members and deposits in the bank, the assessee has earned interest income. Thus, as per AO, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to member 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 investments made with other Co-operative societies. The prorata allocation of interest expenses resulting in part disallowance of deduction has been done without examining the issue in details or appreciating the facts in its correct prospective. Therefore, in absence of any expenses directly or indirectly co-related to such income, the part disallowance of the deduction is not justified. On the identical facts, Hon'ble Jurisdictional ITAT in the case DCIT Vs. The Surat Dist. Co-operative Mills Producer Union Ltd. ITA No.367 & 3386/Ahd/2010 & ITA No.1739/Ahd/2011 vide order dated 02.08.2013 has dealt with the issue and after discussing the various decisions of different Courts and Benches of ITATs, has held as under:- "5. We have heard the rival contentions and perused the material on record. It is undisputed fact that the appellant had invested surplus fund right from 1951 with other co-operative society. On such investment the appellant had been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of ₹ 2,53,22,819/- and dividend income of ₹ 81,00,375/- received from other Cooperative societies. However, in the computation of income, appellant has restricted the deduction at ₹ 1,40,52,159/- which is it's net income. Section 80AB of the Act stipulates that where any deduction is required to be allowed under any section included in Chapter VI-A, the amount of income computed in accordance with the provisions of this Act alone be deemed to be the amount of income which is derived and received by the assessee and which is included in his gross total income. Thus, the appellant is eligible to avail deduction on the net income i.e. after allowing expenses from the gross amount, as deduction under any section in Chapter VI-A which includes 80P(2)(d) of the Act. The net income in the case of appellant is ₹ 1,40,52,159/- which is allowable as deduction u/s.80P(2)(d) of the Act. 5.2 In view of above discussion, I hold that the appellant is eligible for deduction u/s.80P(2)(d) of the Act at ₹ 1,40,52,159/- in place of ₹ 22,24,361/- allowed by AO. 6. On the other hand, Ld.Senior Departmental Representative (DR) for the Revenue relied heavily on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial pronouncements, written submission made before the ld.CIT(A), audit reports etc. We have noticed that the assessee has been statutorily investing its surplus fund from the year 1992 with other Co-operative Societies which include Co-operative Banks and 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. We find that the provision of section 80P(4) is not applicable to the assessee, because section 80P(4) says that provision of this section shall not apply in relation to Co-op Bank other than Primary Agricultural Credit Societies or a primary Co-operative 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. vs. Assistant Commissioner of Income Tax (2016) 72 taxmann.com 169 (Guj) in which the Hon'ble High Court of Gujarat held as under :- "8. Section 80P(2)(d) of 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 soc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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