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TMI Blog2023 (12) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... te, Standing Counsel ORDER PER GEORGE GEORGE K, VICE PRESIDENT: This appeal at the instance of the assessee is directed against CIT(A)'s order dated 16.08.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called 'the Act'). The relevant Assessment Year is 2017-18. 2. Brief facts of the case are as follows: Assessee is a co-operative society registered under the Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority (FAA). The CIT(A) confirmed the view taken by the AO by holding that the interest income that is received from investments with cooperative banks / scheduled banks are to be assessed under the head 'income from other sources' and the nature of their income cannot be changed to 'business income'. 4. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Totgars Co-operative Sale Society Ltd., Vs. ITO reported in (2015) 58 taxmann.com 35 (Karnataka) had categorically held that where an assessee, a co-operative society, earns interest on deposits kept with scheduled banks; only the net interest income can be taxed under section 56 of the Act (i.e., the interest income reduced by the administrative expenses and other proportionate expenses to earn t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entitled for proportionate expenditure cost incurred in mobilizing the deposit placed in the Bank/s. What can be taxed is only the net income which the appellant earns after deducting cost and expenditure incurred and administrative expenses incurred by the assessee. 12. Accordingly, we answer the question of law and hold that the Tribunal was not right in coming to the conclusion that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Hon'ble High Court, we restore the matter to the AO. The AO is directed to calculate the cost of funds for earning the interest income which has to be assessed under section 56 of the Act and allow the same as deduction under section 57 of the Act. It is ordered accordingly. 9. In the result, appeal filed by the assessee is allowed for statistical purposes. Pronounced in the open court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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