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2015 (10) TMI 2833 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - Addition u/s 56 - bank interest received by the assessee - HELD THAT:- As assessee was a co-operative society engaged in the business of providing credit facility to its members. The assessee claims that it was engaged in the business of banking and consequently, the income earned by the assessee from its activities including the interest received from Union Bank of India against the FDR’s kept with the said bank, was income from business, which was eligible for deduction under section 80P(2)(a)(i) - Assessing Officer held that the interest income was assessable as income from other sources, in view of the ratio laid down by the Hon’ble Supreme Court in Totgars Co-Op. Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] In view of the ratio laid down by the Hon’ble Supreme Court in Totgars Co-Op. Sale Society Ltd. Vs. ITO (supra), the interest income from surplus fund / short deposits with the bank was assessable as income from other sources, which in turn, is taxable under section 56 of the Act. The said income assessed under the head ‘Income from other sources’ is not eligible for deduction under section 80P(2)(a)(i) of the Act. The plea of the assessee that it was required to keep the funds in specified securities with the banks does not entitle the assessee to claim it as expenditure since the same being assessed as income from business being eligible for deduction under section 80P(2)(a)(i) of the Act. Accordingly, we uphold the order of CIT(A) in this regard. Alternate plea of the assessee is that it has only positive income Assessing Officer had not disallowed any of the expenses in the hands of assessee - In view thereof, we find no merit in the directions of CIT(A) to the Assessing Officer to examine the claim of expenses made by the assessee and also the same as inadmissible under section 56 of the Act. On the other hand, in case the interest income of Rs.31,62,825/- is assessed under section 56 of the Act as income from other sources and there is net loss of Rs.20,94,884/- assessable in the hands of assessee as income from business, then in view of the provisions of the Act, the assessee is entitled to the claim the benefit of set off of business loss against the income from other sources of the instant assessment year. Accordingly, we direct the Assessing Officer to allow the claim of the assessee after due verification and in accordance with law. Appeal of the assessee is partly allowed.
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