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2019 (3) TMI 381 - AT - Income TaxDeduction u/s. 80P - CIT(A) denied deduction in exercise of its power of enhancement - maintainability of deduction u/s 80P(2)(d) in the hands of the credit co-operative society towards interest earned from deposit placed with co-operative banks, more so, in the light of insertion of s. 80P(4) of the Act by Finance Act, 2006 - HELD THAT:- For the purposes of Section 80P the principle of mutuality has been obliterated in view of insertion of Section 2(24) (viia) of the Act by Finance Act, 2006 and such principles thus no longer serve as strict guiding principle to test the relief eligible under S. 80P(2)(d). Therefore, the plea raised on behalf of the Revenue towards absence of principle of mutuality in such deposits with co-operative banks is a damp squib. Thus, the assessee being a co-operative society as contemplated under s. 80P(1) of the Act, cannot be deprived of benefit of S.80P(2)(d) despite purported absence of mutuality in investment with a co-op bank. We, thus, concur with plea of assessee for allowability of deduction on interest income derived from co operative society in the form of Co-operative bank on first principles. - Decided in favour of assessee. assessee to demonstrate on facts that the investee co-operative bank in question is recognised as a co-operative society indeed within the meaning of Section 2(19) of the Act. A self declaration from the respective co-op. bank in this regard or any other suitable document may discharge the onus of the assessee towards the status of the co-op. bank. Similarly, the assessee is entitled to avail deduction of resultant ‘income’ derived and not gross receipt of interest under S. 80P(2)(d) of the Act in accord with basic rationale of taxation. Hence, all expenses/losses attributable to such interest income are required to be necessarily deducted and only resultant interest income is eligible for deduction under S. 80P(2)(d) of the Act. The AO would thus be at liberty to ascertain these factual aspects for which the assessee shall provide suitable assistance. Allowance of pro-rata expenditure against the interest income from investment in co operative banks - HELD THAT:- Assessee is entitled for deduction under s.80P(2)(d) for resultant income derived from investments placed with co-operative banks, we do not seek to delineate further. Therefore, AO may allow claim of deduction under s. 80P(2)(d) of the Act on net income from interest after reduction of all incidental expenses incurred to earn such income. The issue is thus remitted back to AO for quantification of deduction of interest income in accordance with law on being satisfied that the receiver co-operative bank satisfies to be a co-operative society equally. Interest income derived by the assessee society from investment with private bank - HELD THAT:- It neither qualified under s. 80P(2)(a)(i) of the Act in the light of the ratio of The Citizen Co-Operative Society Ltd. (2018 (1) TMI 290 - SUPREME COURT OF INDIA) nor under s.80P(2)(d) of the Act. Thus, the assessee is not entitled for deduction or interest derived from the private bank. - Decided against assessee
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