2017 (12) TMI 1838

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....1. The learned CIT (Appeals)-3 has erred in erred in law and on the facts in confirming the order of the Assessing Officer holding that the amount of interest income earned on fixed deposits made with nationalized banks and co operative bank is not profits and gains attributable to the activity of providing credit facilities to members and hence not eligible for deduction under section 80P of the Act and thereby considering the amount of interest of Rs.1,59,761/- as income from other sources liable to be taxed under section 56 of the Act. 2. The AO has disallowed the claim of deduction u/s.80P of the Act on the interest income earned from nationalized banks by observing as under: "During the course of assessment proceedings, on ....

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....by the society. The income of Rs.1,59,671/- is required to be assessed u/s.56 as Income from other sources. The above facts were brought to the notice of the A.R. of the assessee & requested to justify how the above interest income is eligible for deduction u/s.80P(2)(a)(i)/80P(2)(d) of the Act. Vide submission, the society has tried to justify its claim of deduction u/s.80P of the Act also explained that out funds received from the members, the investment in FDRs were made & tried to prove the direct & proximate connection with source of funds used in keeping FOR since the society is engaged in activity form providing credit facility to its members. The AR of the society is relied on various notification issued by Government of Gu....

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.... on the interest income of Rs.1,59,671/-. Accordingly, from earning of interest from non cooperative organization i.e. nationalized bank of Rs.1.59,671 /-, is taxed as income from other sources & accordingly added to the returned income of the assessee." 3. Against the said order assessee preferred first statutory appeal before the ld. CIT(A) who dismissed the appeal of the assessee. 4. We have gone through the relevant record and impugned order. In this case, interest amount of Rs.1,20,422/-, Rs.39,209/- & Rs. 471/- was received form Allahabad bank, Bank of Baroda and Baroda center Co-op. Bank respectively. From the details, it can be seen that the receipts of interest of Rs.1,20,422/- & Rs.39,209/- (totaling to Rs. 1,59,671/-) has b....