Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (12) TMI 271 - AT - Income TaxDeduction u/s. 80P(2)(a)(i)/80P(2)(d) on the interest income received from the co-operative banks/bank deposits denied - Alternatively if the assessee is not eligible for claim of deduction u/s. 80P(2) then the cost of funds should be allowed to the assessee - HELD THAT:- Assessee has received interest from co-operative banks to which the revenue authorities have not been allowed deduction u/s 80P(2)(a)(i)/80P(2)(d) observing the latest judgment in the case of Totgars Co- operative Sales Society [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] in which it has been held that the income by way of interest earned by the assessee co-operative society during the Assessment Years 2007- 2008 to 2011-12 on the investments made in the co-operative bank are not eligible for deductions under Section 80P(2)(d) & character of the income does not change irrespective of the investments made in Co-operative Banks or otherwise and would always remain income from other sources and that only operational income would qualify for deduction u/s 80P. We hold that the assessee is not eligible for deduction u/s 80P on the interest income earned on its investments with the Co-operative Banks. Arguments of the ld. AR that the surplus funds or those funds invested by the assessee and interest income received on such deposits are eligible for deduction u/s 80P is also not sustainable because the income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus, clause (d) of Section 80P(2) of the Act would not apply in the facts and circumstances of the present case. Since during the course of arguments, the Ld.AR of the assessee took alternative ground that the cost of funds for earning the interest income has to be allowed, we concur with the Ld.AR of the assessee, that benefit of the cost of funds towards earning of the interest income has to be allowed. We noted that entire interest received has been taxed as income from other source. We are of the view that the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income. Accordingly, the case is restored to the file of the A.O. with a direction 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 (cost of funds) shall be allowed as deduction u/s 57 of the I.T.Act. This alternative ground is partly allowed for statistical purpose.
|