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2021 (11) TMI 103 - AT - Income TaxDisallowance of deduction u/s 80P - CIT(A) held that the assessee was having substantial dealings with non-members (nominal members) thus not entitled to any deduction - HELD THAT:- Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] had held that the co-operative societies providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) - Section 80P(4) now specifically excludes only co-operative banks which are co-operative societies engaged in the business of banking i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. The Hon’ble Apex Court had enunciated various principles in regard to deduction u/s 80P of the I.T.Act. On identical factual situation, Tribunal in the case of M/s.Ravindra Multipurpose Cooperative Society Ltd [2021 (9) TMI 342 - ITAT BANGALORE]had remanded the issue to the files of the A.O. for de novo consideration. The Tribunal directed the A.O. to follow the dictum laid down by the Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (supra). Thus we restore the issue of claim of deduction u/s 80P of the I.T.Act to the files of the A.O. for de novo consideration. As regards the claim of deduction u/s 80P(2)(d) of the I.T.Act, the CIT(A) has not adjudicated the same for the reason that the assessee has violated the principle of mutuality. If the assessee receives / earns interest / dividend income out of investments with co-operative society, the same is entitled to deduction u/s 80P(2)(d) of the I.T.Act. With these observations, we direct the A.O. to examine the claim of deduction u/s 80P(2)(d) of the I.T.Act, afresh. If interest income is to be assessed income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 - We find an identical issue was considered in the case of Totgars Co-operative Sales Society Ltd. [2015 (4) TMI 829 - KARNATAKA HIGH COURT] - assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income, this plea of the assessee has to be necessarily entertained. Thus issue of deduction u/s 57 of the I.T.Act is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources’. If so, the same shall be allowed as deduction u/s 57.Appeal filed by the assessee is allowed for statistical purposes.
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