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2018 (12) TMI 1912 - AT - Income TaxDeduction u/s 80P - interest income earned from Co-operative banks - Nexus between expenditure factually incurred to earn income of dividend - HELD THAT:- We find that there is not direct specific or definite expenditure factually incurred to earn income of dividend and or intent from investments with other co-operative societies eligible for deduction u/s.80P(2)(d) of the Act. hence, the action of the AO in assuming expenditure alleged to have incurred or deemed to have incurred for earning dividend, without bring any evidence or record to prove the nexus between expenditure disallowed and dividend/interest income earned from investment with other co-operative societies in wholly arbitrary imaginary, hence, not sustainable in law. It is seen that the assessee has been statutorily investing its surplus fund from the year 1992 with other co-operative societies including 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 - 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 . We find that there is no direct nexus between expenditure related to part disallowance, hence, findings of CIT(A) are upheld. It is further apparent that the assessee is entitled to deduction u/s.80P(2)(d) in respect of the interest income earned from Co-operative Societies are eligible for deduction. Therefore, we do not find any infirmity in the order of ld. CIT(A), and we upheld the same, accordingly, the above ground Nos. 1 to 6 raised by the Revenue are dismissed.
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