Amalsad Vibhag Vividh Karyakari Sahkari Khedut Mandli Ltd. Vs PCIT (ITAT Surat)
ITAT Surat held that interest paid in respect of business profit attributable to section 80P(2) of the Income Tax Act is allowable. Accordingly, AO directed to consider direct nexus of interest paid with interest income attributable under section 80P(2).
Facts- The assessee, a co-operative society (AOP), filed its return of income (ROI) for the AY 2018-19 on 29.09.2018 declaring “nil” income after claim of deduction u/s 80P under Chapter VI-A of Rs.1,46,60,327/-.
PCIT noticed that assessee had received gross interest income of Rs.3,35,16,510/- and dividend income of Rs.57,02,035/- totalling to Rs.3,92,18,545/- from Valsad District Central Cooperative Bank. He also found that assessee had claimed interest expenditure of Rs.2,41,38,304/- by paying interest towards loans taken from co-operative banks against overdraft on fixed deposits. The assessee had shown net interest income of Rs.1,50,80,241/- by netting the differential amount of interest (Rs.3,92,18,510 – Rs.2,41,38,304). Since the interest expenditure related to overdraft loans against fixed deposits was not directly incurred for earning the interest income, PCIT observed that the interest expense was not allowable under section 57 of the Act.
Conclusion- Held that order of the Ld.PCIT to set aside the order is upheld but the AO should consider the nexus of interest paid with the interest income and if the interest income is part of the business profit attributable to one of the activities mentioned in clause-(i) to (vii) of Section 80P(2)(a), allow the interest paid in respect of such business profit. After excluding such interest paid, the remaining interest expenditure should be disallowed. This ground of assessee’s appeal is partly allowed.
