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2020 (7) TMI 715 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - interest income earned from investment of funds in commercial banks and cooperative banks/societies - CIT-A upholding action of AO such interest income is not eligible for deduction under that section - HELD THAT:- Assessee is not a banking company and the expression “ business of banking” cannot be given a spacious meaning to unrealistically expand the term beyond, the assessee is not eligible for deduction u/ s 80P(2)(a)(i). Accordingly, we hereby hold that the interest earned from the fixed deposits made out of the surplus funds is not eligible for the claim of deduction u/s 80P(2)(a)(i). Deduction u/s 80P(2)(d) - alternative plea for deduction - whether the co- operative bank wherein the assessee made deposits out of this surplus fund be considered as a co-operative society, for if a co-operative bank is considered to be a co-operative society than only the interest earned by the assessee on the deposits would be eligible for deduction u/s 80P(2)(d)? - HELD THAT:- We find that co- operative society is a broad and larger umbrella under which the co-operative banks do perform. All co-operative societies may not be banks but all co-operative banks are deemed to be co-operative societies. According to banking Regulations Act, a co-operative society bank as the same meaning of the co- operative society. We have also given a thought as to the interest earned by the surplus funds. As per the Income Tax Act, there is no such stipulation or prerequisite as to the nature of the funds. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. The revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. Referring to cases TOTAGARS CO-OPERATIVE SALE SOCIETY, [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and [2010 (2) TMI 3 - SUPREME COURT] we hereby hold that the assessee is eligible for deduction u/ s 80P(2)(d) on the income earned by the way of interest from the co-operative societies. Expenditure u/s 57 - assessee has taken a plea that the expenditure incurred in earning of interest from the commercial banks be allowed while computing the taxable income - HELD THAT:- The assessee is eligible for the expenditure u/s 57 incurred in earning the interest income which is taxable under the head “income from other sources” as per Section 56.
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