Vir Transport Operators Copo Credit & Services Society Limited Vs DCIT (ITAT Ahmedabad)
No One-to-One Nexus Needed – Co-op Society Wins: ITAT Allows ₹62.57 Lakh Proportionate Expense u/s 57
Assessee, a registered co-operative credit society, filed return declaring Rs.13,48,070/- & claimed deduction of Rs.1,19,38,736/- u/s 80P. During scrutiny, AO noted interest income of Rs.27,28,675/- from deposits with co-operative banks & disallowed deduction u/s 80P(2)(d), treating it taxable u/s 56. AO also disallowed Rs.62,57,776/- claimed u/s 57 as proportionate expenditure against other interest income of Rs.1,02,78,326/-, holding that no supporting evidence for bifurcation & nexus was furnished. Assessment was framed at Rs.1,03,34,521/-.
CIT(A) deleted disallowance u/s 80P(2)(d) but confirmed denial of deduction u/s 57, stating that Assessee failed to establish bifurcation of expenses between surplus & running funds, nexus of expenditure with income taxable u/s 56, & documentary proof of genuineness. CIT(A) treated levy of interest as consequential & penalty initiation u/s 270A as premature.
Before Tribunal, Assessee produced audited accounts, tax audit report, computation, ledgers, expenditure schedules & a detailed scientific working demonstrating proportionate expenditure. Assessee showed allowable expenses of Rs.2,08,20,033/- after removing disallowables, with an expenditure-to-income ratio of 61.04%, leading to proportionate expenses of Rs.20,24,026/- relatable to interest from scheduled banks & Rs.42,33,750/- relatable to interest from co-operative banks. It was argued that interest income from deployment of funds is integral to statutory liquidity management & business operations of a credit society, hence expenditure has proximate business nexus. Reliance was placed on co-ordinate bench ruling in Ashapura Co-op Credit Society Ltd (ITA 490/Ahd/2025).
