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2016 (11) TMI 1614 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee is a primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 - HELD THAT:- In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate, which has been issued by the Registrar of Cooperative Societies, to the above effect, is placed on record. The Hon’ble jurisdictional High Court in assessee own case and other batch of cases had held that primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 are entitled to the benefit of deduction u/s 80P(2)(i)(a) of the Act. Since there is a certificate issued by the Registrar of Cooperative Societies stating that the assessee is a primary agricultural credit society, we hold that the assessee is entitled to the benefit of deduction u/s 80P(2)(a) of the I T Act. Ad-hoc disallowance of 5% out of the total interest paid by the assessee on the deposits received from its members - AO while making the ad-hoc disallowance 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.
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