TMI Blog2017 (4) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... net interest income is to be excluded from the claim of deduction under section 80P(2) of the Act. Respectfully following the judgment in case of State Bank of India Vs. CIT [2016 (7) TMI 516 - GUJARAT HIGH COURT] we set aside by the orders of the Revenue authorities and restore this issue to the file of the AO for re-adjudication. The ld.AO shall work out net interest income earned by the assessee from the FDRs. with nationalized banks. He thereafter disallow that amount only from the exemption admissible to the assessee under section 80P(2). We make it further clear that the assessee is a credit cooperative society. It is entitled for deduction under section 80P(2)(1) on the interest income earned by it from its members. The interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of banking including providing credit facilities to the members, it is not entitled for deduction under section 80P(2) of the Act. On appeal, the ld.CIT(A) re-appreciated the facts and circumstances and put reliance upon judgment of the Hon ble Gujarat High Court in the case of CIT Vs. Jafari Momin Vikas Cooperative Credit Society Ltd. and allowed the claim of the assessee. 5. We have gone through the record carefully. A perusal of the impugned order would indicate that neither the AO nor the CIT(A) has made any analytical study. For appreciating this aspect, let us take note of para-5 of the assessment order, which reads as under: 5. After scrutiny of the submission/details filed and facts of the case it is noticed that the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come earned from its members by providing credit facilities as well as the income earned from FDRs., with nationalized banks. His order is totally silent on this issue. On appeal to the ld.CIT(A) this situation has been aggravated more. The ld.CIT(A) though devoted 11 pages to arrive at a conclusion that the assessee is entitled for deduction under section 80P, but nowhere made analytical examination of the facts of the present case. He simply reproduced the assessment order and the judgment of Jafari Momin Vikas Cooperative Credit Society Ltd. He has devoted more energy towards taking cognizance of the facts from the said Jafari Momin Vikas Cooperative Credit Society Ltd. In other words, there is no head-and-tail in the order and no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thrift and providing credit facility to them. The assessee society has launched various deposits schemes such as term deposits, recurring deposits, aid to family scheme, members retiring benefit fund etc. It has provided loans to members, such as consumer goods loan, car vehicle loan, food-grain loan and general purposes loan. The assessee society had made deposits with nationalized banks which has resulted interest income of ₹ 16,14,579/-. It claimed deduction of this amount under section 80P(2) of the Act. 9. In the background of the above facts, the Hon ble Court has observed that deduction under section 80P(2) is not available. Finding recorded in para-13 and 14 of the judgment is worth to note. It reads as under: 13. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in respect of funds not immediately required for business purposes. The Supreme Court has held that interest on such investments, cannot fall within the meaning of the expression profits and gains of business and that such interest income cannot be said to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members. The court has held that when the assessee society provides credit facilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as investment are ineligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80P(2)1) is not available on the interest income earned on surplus money deposited with Nationalised Banks. But if assessee has incurred any expenditure, which is attributable to the earning of interest income, then, the AO shall examine that aspect and exclude the interest expenditure if any incurred by the assessee for earning this interest from bank. In other words, the only net interest income is to be excluded from the claim of deduction under section 80P(2) of the Act. Respectfully following the judgment of Hon ble Gujarat Court we set aside by the orders of the Revenue authorities and restore this issue to the file of the AO for re-adjudication. The ld.AO shall work out net interest income earned by the assessee from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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