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2022 (12) TMI 30 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - interest income received by the assessee on investments made with co-operative banks - HELD THAT:- Tribunal in the case of M/s.Vasavamba Cooperative Society Ltd. [2021 (8) TMI 706 - ITAT BANGALORE] after considering the judicial pronouncements on the issue had held that interest income earned out of investments made from surplus funds would be taxable under the head `income from other sources’ and would not be eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. It was further held by the Tribunal insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, only those interest received from investments with co-operative societies alone would be entitled to deduction. Thus we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction. Assessee’s claim that 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 - 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 (i.e., gross receipt minus allowable expenditure), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of Totagars Sale Co-operative Society Limited [2015 (4) TMI 829 - KARNATAKA HIGH COURT]. Accordingly, the 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 of the I.T.Act. The assessee is directed to co-operate with the department and furnish the necessary evidence for expeditious disposal
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