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2022 (11) TMI 823 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - deduction with respect to the interest income earned from the bank - HELD THAT:- The provisions of section 80P(2)(a)(i) of the Act provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity - the income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) - If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i) - In holding so draw support and guidance from the judgment of the Hon’ble Gujarat High Court in the case of State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT] It is only the interest derived from the credit facilities provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the nationalized/commercial bank i.e. Bank of Baroda is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) - there remains no ambiguity that income received by the assessee on the money deposited with the Bank of Baroda is not eligible for deduction under section 80P(2)(a)(i) Whether gross amount of interest should be reduced from the claim made by the assessee for the deduction under section 80P(2)(a)(i) of the Act? - As direct interest expenses if any incurred by the assessee against such interest income on the fixed deposits made with the nationalized bank should be considered for calculating the net income which is not eligible for deduction under the provisions of section 80P(2)(a)(i) of the Act. Thus, hold that there is no infirmity in the order of the learned CIT (A), requiring any interference except the allowability of interest expenses against the interest income. Hence,uphold the same to the extent discussed above. Hence, the ground of appeal of the assessee is partly allowed.
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