TMI Blog2021 (12) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) of the Act. There remains no ambiguity that income received by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i) of the Act - profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) of the Act. In view of the above, we do not find any merits in the argument advanced by the learned counsel for the assessee. Determine the income which is not eligible for deduction under section 80P(2)(a)(i) - The income on the deposits from the bank has been treated as income from other sources but the gross income cannot be excluded from the deduction available to the assessee under the provisions of section 80P(2)(a)(i) - It is the net interest income on the deposits from the bank which needs to be excluded from the amount of deduction claimed under section 80P(2)(a)(i) and the same should be brought to tax under the head income from other sources under the provisions of section 56 - To determine, the net income on the deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has shown interest income amounting to ₹ 14,15,454.00 which was received from the non-members. The impugned income of interest was earned by the assessee from the co-operative banks as well as from the nationalized bank. As per the AO the impugned income is not eligible for deduction under section 80P(2)(a)(i) of the Act which was so claimed by the assessee. Accordingly, the AO disallowed the same and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT (A) who found that the above amount of interest income was inclusive of the interest of ₹ 64,320.00 and 1,53,418.00 which was received from co-operative banks and the same was eligible for deduction under section 80P(2)(d) of the Act. Thus, the learned CIT (A) allowed the same as deduction under section 80P(2)(d) the of the Act. 5. Likewise the learned CIT (A) was also pleased to allow the deduction of ₹50,000 being basic deduction provided under section 80P(2)(c) of the Act which is available to a co-operative society. 5.1 The learned CIT (A) for the balance amount of interest held that such interest is not eligible for deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non-members that will not be subject to deduction under section 80P(2)(a)(i) of the Act. In holding so we draw support and guidance from the judgment of the Hon ble Gujarat High Court in the case of State Bank of India versus CIT reported in 72 Taxmann.com 64 wherein it was held as under: The Income Tax Appellate Tribunal was also justified in holding that interest income of ₹ 16,14,579/- and ₹ 32,83,410/-respectively on deposits placed with State Bank of India was not exempt under section 80P(2)(a)(i) of the Income Tax Act, 1961. 9.1 In view of the above, it is only the interest derived from the credit 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 State Bank of India 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) of the Act. 9.2 In view of the above, there remains no ambiguity that income received by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i) of the Act. 9.3 Now coming to the case law cited by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the bank which needs to be excluded from the amount of deduction claimed under section 80P(2)(a)(i) of the Act and the same should be brought to tax under the head income from other sources under the provisions of section 56 of the Act. To determine, the net income on the deposits from the bank, amount of expenses incurred in generating such interest income should be allowed as deduction from the gross income of interest in pursuance to the provisions of section 57 of the Act. The relevant provisions of section 57 of the Act read as under: (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; 9.6 The above provisions require to deduct the expenses from the income which have been incurred wholly and exclusively for the purpose of earning such income. There is no concept of proportionate expenses envisaged under the provisions of section 57 of the Act as discussed above. The provisions require to deduct only those expenses which have been incurred wholly and exclusively for the purpose of earning such income. Thus in such facts and circumstances we are of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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