BANK EMPLOYEE'S CONSUMER AND CREDIT CO-OP. SOCIETY LTD.,,JAMNAGAR. vs. INCOME TAX OFFICER, WARD-2(5), , JAMNAGAR.

आदेश / O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)- Jamnagar [CIT(A) in short] vide appeal no.CIT(A)/Jam/187/16-17 dated 23.03.2018 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 11.11.2016 relevant to Assessment Year (AY) 2014-15.

ITA No.215/Rjt/2018 Bank Employee’s Consumer and Credit Co-op Society Ltd. vs. ITO Asst.Year –2014-15 - 2 - 2. The grounds of appeal raised by the assessee are as under:- The grounds of appeal are without prejudice to each other. 1. The Hon. Commissioner of Income Tax (Appeals)/Jam as well as the Learned Assessing Officer have erred in law as well as on facts by not allowing deduction of Rs.20,37,775/- U/s 80P(2)(a)(i) of the I. T. Act, 1961. 2. The Hon. Commissioner of Income Tax (Appeals)/Jam as well as the Learned Assessing Officer have erred in law as well as on facts by Not allowing deduction U/s. 80P(2)(a)(i) of the I. T. Act, 1961 in respect of interest income from Employees being Rs.43,200/-. 3. Hon. Commissioner of Income Tax (Appeals)/Jam as well as the Learned Assessing Officer have erred in law as well as on facts by Not allowing deduction U/s. 80P(2)(a)(i) of the I. T. Act, 1961 in respect of Interest Income on Investments with UCO Bank in respect of Staff PF FDRs being Rs.4,77,937/-. 4. The Hon. Commissioner of Income Tax (Appeals)/Jam as well as The Learned Assessing Officer have erred in law as well as on facts by Not allowing deduction U/s.80P(2)(a)(i) of the I. T. Act, 1961 in respect of interest income of Rs.15,16,638/- on Short Term Investments of Surplus Fund in Fixed Deposits with UCO Bank. 5. Without prejudice to any of our grounds of appeal, The Hon. Commissioner of Income Tax (Appeals)/Jam as well as the learned assessing officer have erred in law as well as on facts by not allowing related direct as well as indirect expenses to earn such so called non-deductible Income. As Gross Income of such non qualifying nature of income cannot be taxed, related direct as well as indirect expenses to earn such income ought to have been reduced from Such Gross Income and net income derived thereafter ought to have been disallowed U/s.80P(2)(a)(i) of The I.T. Act, 1961. The appellant craves leave to add, alter, amend, or withdraw any one or more grounds of appeal. 3. The solitary issue involved in the grounds of appeal relates to whether interest income earned on fixed deposits with the nationalized

ITA No.215/Rjt/2018 Bank Employee’s Consumer and Credit Co-op Society Ltd. vs. ITO Asst.Year –2014-15 - 3 - bank would qualify for deduction under section 80P(2)(a)(i) of the Income Tax Act.

From the above we note that the issue for the claim of the expenses incurred in connection with interest income has already been adjudicated in favor of assessee in various judicial pronouncements. In this connection we find support & guidance from the order of this Tribunal in the case of Shreeji Co-operative Credit Society Ltd vs. ITO pertaining to the assessment year 2013-14 in ITA No.2751/Ahd/2016 vide order dated 15-02-2018 wherein it was held as under: “3. At the outset, the ld. Counsel for the assessee fairy conceded that issue in dispute is squarely covered against the assessee by decision of the Hon’ble Jurisdictional High Court in the case of State Bank of India vs. CIT, 389 ITR 578 wherein Hon’ble Court held that interest earned from investment made in any bank is not deductible under section 80P(2)(d). In this view of the matter, we dismiss the appeal of the assessee. However, any expenditure incurred by the assessee for earning such income could be allowed to it. In other words, the ld. AO has to determine the net interest earned by the assessee on such investment with bank, and only thereafter that income has to be

ITA No.215/Rjt/2018 Bank Employee’s Consumer and Credit Co-op Society Ltd. vs. ITO Asst.Year –2014-15 - 4 - excluded from the admissibility of deduction under section 80P(2) of the Act. 4. In the result, appeal of the assessee is partly allowed for statistical purpose.” The facts of the case on hand are identical as discussed in the above case. Therefore, respectfully following the same, we direct the AO to exclude the amount of net interest income from the deduction claimed u/s 80P(2)(a)(i) of the Act. Thus the AO will allow the expenses incurred by the assessee in the earning of such interest income not eligible for deduction under section 80P(2)(a)(i) of the Act. Hence, grounds of appeal filed by the assessee are allowed for statistical purposes.

This Order pronounced in Open Court on 13/07/2018

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ITA No.215/Rjt/2018 Bank Employee’s Consumer and Credit Co-op Society Ltd. vs. ITO Asst.Year –2014-15 - 5 -

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Jamnagar. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot