TaxTMI 
TaxTMI 
2025 (10) TMI 525
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.... 2. The first interconnected issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of deduction under section 80P of the Act claimed on interest income. 3. Briefly stated facts are that the assessee, a cooperative society, registered under the Karnataka Souharda Sahakari Act, 1997 is engaged in the activities such as accepting deposits, providing credit facilities to its members. During the year under consideration, the assessee earned interest income of Rs. 24,59,101/- from deposits made with banks which are detailed as under: S. No. PARTICULARS AMOUNT 1 Vijya Bank RS Nagar 17,15,308.00 2 Vijya Bank Bilekahlli 4,61,695.00 3 BDCC Term Deposit 2,82,108.00 Total....
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....rmed the disallowances made by the AO. 5. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before me. 6. The learned AR for the assessee before me argued that contended that the interest income should be eligible for deduction under Section 57 of the Act, as the funds deposited in banks were sourced from members' interest-bearing deposits, and the interest paid to members on these deposits was a legitimate business expense. The learned AR in this regard provided specific details, citing a deposit of Rs. 2,86,46,933/- with Vijaya Bank, where the funds came from members' interest-bearing deposits. Since, the interest rate paid to members was 8% per annum, the total interest paid amounted to Rs. 22,91....
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....er Section 57 of the Act merits consideration. The assessee has demonstrated that the deposits in banks were sourced from members' interest-bearing deposits, and the interest paid to members constitutes a legitimate expense incurred to earn the interest income. The financial records, including the balance sheet and profit and loss account, support this claim. However, it noted that this aspect has not been verified by the lower authorities. Therefore, for the sake of justice and fair-play, I hereby set aside the issue to file of the AO. The AO is directed to verify the claim of the assessee with respect to the allowances of cost against the earning of interest income in accordance with the provision of section 57 of the Act. Hence, the ....
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....emonetization. Consequently, the cash deposits were treated as unexplained under Section 68 of the Act and were added to the assessee's total income. 11. Aggrieved by this decision, the assessee filed an appeal before the learned CIT(A), who upheld the addition made by the AO. 12. Being aggrieved by the order the learned CIT(A), the assessee is in appeal before us. 13. The learned AR for the assessee before us argued that the source of the deposits was duly explained, yet the amount was treated as unexplained money under Section 68 of the Act merely on the ground that the SBNs were accepted after 8th November 2016, when they were no longer legal tender. The ld. AR also contended that in similar facts, various Tribunals had deleted ....
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....re worthless paper immediately after 9th November 2016. 15.2 Furthermore, we find that in the case of Anantpur Kalpana v. ITO (138 taxmann.com 141), this Tribunal has ruled on similar facts and circumstances in favour of the assessee as follows: 9." I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that ....
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.... as unexplained money under Sections 68/69A of the Act solely on the ground that they were accepted after the announcement of demonetization. 15.4 However, it is important to note that the assessee has an obligation to substantiate the source of the money received during the demonetization period. In the present case, the assessee has claimed that the cash in SBNs were received from its members as loan repayments or deposits, and it has maintained all necessary records to support this claim. Notably, the lower authorities have not pointed out any specific defects or discrepancies in the assessee's records. Accordingly, I find merit in the assessee's contention. But I find that there was no verification carried out by the Revenue about ex....