TMI Blog2022 (1) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 57(iii). Expenses which have been erred directly by the assessee in the earning of such income should only be eligible for deduction under section 57 of the Act. To put it differently, the expenses such as electricity, rental, audits, printing and stationery which cannot be said to have been incurred wholly and exclusively for the purpose of earning the interest income. Thus, we are not in agreement with the contention of the assessee. But it is also equally important to note that there is no mechanism provided under the provisions of section 57 of the Act for making the disallowance on ad hoc manner. Thus we direct the AO to work out the interest income on the deposits from the bank after deducting the corresponding expenses incurred by the assessee in generating the interest income. To our understanding such expenses have to be brought on record by the assessee based on cogent materials. Furthermore, if the assessee has made deposits in the banks out of the money borrowed from the members, then the corresponding interest cost borne by the assessee should be allowed as deduction. Deduction u/s 80P(2)(c) - In case of co-operative credit society, incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 7,74,110/- 4. The facts in brief are that the assessee in the present case is a co-operative society and engaged in the activity of providing credit facilities to the members. In the year under consideration the assessee apart from interest income earned from credit facilities provided to its member also earned interest of ₹ 7,74,110/- from the fixed deposit made with State Bank of India. The surplus fund was deposited with the banks in order to generate the interest income as well as to maintain the liquidity for the repayment of the deposits accepted from the members. As per the AO, the impugned amount of interest income was not arising to the assessee from the activities of providing credit facility to the members. Thus the AO held that the interest income of ₹ 7,74,110/-/- earned on the fixed deposits with SBI is not eligible for deduction under section 80P(2)(a)(i) of the Act and the same is taxable as income from other source under section 56 of the Act. 5. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO. 6. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the non-members along with its members is not warranted under the Act and only that part of profit and gains that is attributable and/or pertains to the non-members shall not be allowed as deduction under Section 80P(2)(a)(i) of the Act. The pertinent observation of the Hon'ble Court is reproduced as under: Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to nonmembers, profits attributable to such loans obviously cannot be deducted. 8.3 Thus, the 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. 8.4 Now coming to alternate appeal of the assessee. The assessee in the ground of appeal before us has submitted that the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the interest income. Thus, we are not in agreement with the contention of the assessee. But it is also equally important to note that there is no mechanism provided under the provisions of section 57 of the Act for making the disallowance on ad hoc manner. Thus we direct the AO to work out the interest income on the deposits from the bank after deducting the corresponding expenses incurred by the assessee in generating the interest income. To our understanding such expenses have to be brought on record by the assessee based on cogent materials. Furthermore, if the assessee has made deposits in the banks out of the money borrowed from the members, then the corresponding interest cost borne by the assessee should be allowed as deduction. 8.7 Thus, in view of above discussion the appeal of the assessee is partially allowed subject to the discussion made in previous paragraph. 8.8 Coming to next issue with regard to basic deduction of ₹ 50000 as prayed by the assessee in the ground of appeal before us. The provisions of section 80P(2)(c) of the Act, provides that a co-operative society engaged in activities other than those specified in clause (a) or clause (b) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I.T. Act 1961. The case was selected for scrutiny assessment and accordingly notice u/s 143(2) was issued to the assessee. 3. The Ld. AO has not allowed deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. 4. The Hon. GIT (Appeals) -5 has also not allowed deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. 11. At the outset we note that the issues raised by the Assessee in its ground of appeal for the A.Y 2014-15 are identical to the issues raised by the Assessee in ITA No. 996/AHD/2019 for the assessment year 2013-14. Therefore, the findings given in ITA No. 996/AHD/2019 shall also be applicable for the year under consideration i.e. A.Y 2014-15. The appeal of the Assessee for the assessment 2013-14 has been decided by us vide paragraph Nos. 8 to 8.12 of this order partially in favour of the Assessee for detail discussion refer the aforementioned paragraph. The ld. DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the year under consideration i.e. AY 2014-15. Hence, the ground of appeal filed by the Assessee is partly allowed. 12. In the combined result, both the appeal of the assessee are p ..... 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