JYOTHI PATTIN SOUHARD SAHAKARI NIYAMITHI,GADAG vs. INCOME TAX OFFICER GADAG, GADAG

The brief facts as coming out from the orders of the authorities below are that the assessee is a co-operative society and engaged in the business of banking / providing credit facilities to the members of society. For the impugned assessment order, it has filed its return of income on 27/08/2015 Nil income. The return of income filed by the assessee was processed u/s. 143(1) of the IT Act and thereafter selected for scrutiny. During the course of assessment proceedings, the assessing officer observed that the assessee has claimed deduction of section 80P with respect to the interest income earned by the assessee. The assessing officer granted deduction of 80P(2)(d) to the assessee. Thereafter, PCIT vide its order dated 16/06/2017 revised the order of AO u/s. 263 of the IT Act and directed the assessing officer to assess the interest income under the head income from other sources and allowed the corresponding expenses pertaining to the earning of such income i.e. cost of fund. Thereafter, the assessing officer passed the impugned assessment order and called for the details from the assessee with respect to the cost of funds attributable to the interest income earned by the assessee. However, the assessee could not file any details and the assessing officer could not allow the benefits of the cost of funds to the assessee.

Aggrieved with the order of the AO, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A) after discussing the entire case laws as well as the provisions of the Income Tax Act, directed the AO to allow proportionate deduction of expenses attributable to the earning of interest income on the fixed deposits made with the banks.