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2021 (9) TMI 140 - AT - Income TaxDeduction u/s.80P(2)(d) - interest income and dividend income claimed as deduction on deposits and investments with co-operative banks not to be allowed to the assessee either under section 80P(2)(a)(i) or 80P(2)(d) - HELD THAT:- The Hon’ble Karnataka High Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER vs. TOTAGARS CO-OPERATIVE SALE SOCIETY [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] took a view and held that interest income earned on deposits whether with any other bank will be in the nature of income from other sources and not income from business and therefore the deduction u/s.80P(2)(d) of the Act cannot be allowed to the assessee. The Hon’ble Court followed decision of Hon’ble Gujarat High Court in the case of SBI [2016 (7) TMI 516 - GUJARAT HIGH COURT] held that interest income is not income from business but was income chargeable to tax under the head income from other sources and therefore there was no question of allowing deduction u/s.80P(2)(d). If there are statutory compulsions that the money should be invested in a particular manner to run business of the Assessee then the interest income arising from such investments whether can be said to have business nexus and therefore should be considered as income derived from the business of providing credit facility to the members, requires examination. This aspect requires examination by the AO as it has not been raised before the CIT. We therefore modify the order of the CIT(A) by remanding the issue examination afresh. Deduction u/s.80P(2)(d) - what is the quantum of interest income that should be brought to tax by the AO, in case the deduction is denied to the Assessee u/s.80P(2)(d)? - As decided in THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD. [2021 (6) TMI 460 - ITAT BANGALORE] tribunal held that the Assessee should be allowed expenses and the entire gross interest cannot be taxed - AO will afford opportunity of being heard to the assessee and filing appropriate evidence, if desired, by the assessee to substantiate its case, before deciding the issue in the set aside proceedings. Appeal of the assessee is treated as partly allowed for statistical purpose.
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