TaxTMI 
TaxTMI 
2022 (1) TMI 987
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....tter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-inafter referred to as "the Act") relevant to the Assessment Years 2013-14 & 2014-15. 2. The assessee has raised following grounds of appeal: 1. The assessee is a co-operative credit society carrying on the business of banking and providing credit facilities to its members and is covered u/s. SOP of the I.T. Act, 1961. 2. The assessee has filed its return of income on 07.01.2014 declaring total income at Rs. Nil/-. The return was processed u/s, 143(1) of the 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 sectio....
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....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. 7. The learned DR before us vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 80P(2)(a)(i) of the Act provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity. In other words, the income from the activity of financing from the members is only eligible for deduct....
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....However, if it is found that there are instances of loans being given to the non-members, profits attributable to such loans obviously were not liable to be deducted. The essence of this decision is that absolute denial of deduction under Section 80P(2)(a)(i) of the Act to the assessee's (cooperative societies) engaged in the providing credit facilities 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....
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....rom the deduction available to the assessee under the provisions of section 80P(2)(a)(i) of the Act. 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) 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(iii) of the Act. The provisions of section 57 of the Act reads as under: (iii) any other expenditure (not being in the ....
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....als. 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 Rs. 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 section 80P(2) (either independently of or in addition to all or any of the activities so specified), followi....
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.... and the consequent income attributable to such activities would be covered under section 80P(2)(c). Hence, we direct the AO to allow the deduction under section 80P(2)(c) of the Act. Thus the ground of appeal of the assessee is allowed. 8.12 In the result, the appeal filed by the assessee is partially allowed. Coming to ITA No. 1051/Ahd/2019 an appeal by the assessee corresponding to A.Y. 2014-15 10. The assessee has raised following grounds of appeal 1. The assessee is a co-operative credit society carrying on the business of banking and providing credit facilities to its members and is covered u/s. SOP of the I.T. Act, 1961. 2. The assessee has filed its return of income on 17.09.2014 declaring total income at ....