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2021 (12) TMI 554 - AT - Income TaxRevision u/s 263 by CIT - interest income received from investments with Cooperative banks is entitled to deduction u/s 80P(2)(a)(i) - Alternatively as contended that if interest income is to be assessed as income from other sources, necessarily, the cost incurred for earning such interest income ought to be allowed as deduction u/s 57 - HELD THAT:- As we find in the case of Totagars Co-operative Sale Society [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] had categorically held that interest income received on investment of surplus funds with Co-operative banks is to be assessed as income from other sources and not income from business (Thereby denying the claim of deduction u/s 80P(2)(a)(i) of the Act) - as further held by the Hon’ble High Court that only those interest income received from Co-operative Societies alone (not from Co-operative Banks) is entitled to deduction u/s 80P(2)(d) of the Act. For alternative claim of the assessee, we find an identical issue was considered by the Hon’ble jurisdictional High Court in the case of Totagars Co-operative Sale Society Ltd. [2015 (4) TMI 829 - KARNATAKA HIGH COURT] The 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 Act prescribes for taxing only the net income (i.e. total income minus the expenses incurred for earning such income), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of the Hon’ble jurisdictional High Court in the case of Totagars Sale Co-operative Society[supra]. Claim of deduction u/s 80P(2)(c)- W e noticed that the assessee is having income from distribution of food grains and kerosene under PDS scheme. The net profit arrived from PDS scheme is ₹ 1,08,554, which does not qualify for deduction u/s 80P(2)(a)(i) of the Act. However, the said income is allowable for deduction u/s 80P(2)(c) of the Act (u/s 80P(2)(c) the amount of deduction is restricted to ₹ 50,000). In the instant case, the A.O. had granted deduction u/s 80P(2)(c) of the Act by restricting it to ₹ 50,000. Therefore, the CIT(A) is not justified in directing the A.O. to deny the benefit of deduction u/s 80P(2)(c) of the Act (which the A.O. correctly granted deduction of ₹ 50,000). Appeal filed by the assessee is allowed for statistical purposes.
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