Section 57: Interest earned taxable on net Basis after reducing expenses

Interest earned by society on deposits made with banks was taxable on net basis after reducing admin expenses thereon

[2015] 58 taxmann.com 35 (Karnataka)

HIGH COURT OF KARNATAKA

Totgars Co-Operative Sale Society Ltd.

v.

Income-tax officer, Ward -1, Sirsi

Section 57, read with section 56 and section 80P(1) of the Income-tax Act, 1961 - Income from other sources - Deductions (Administrative and other expenses) - Assessment years 1991-92 to 1999-2000 - Assessee was a co-operative society engaged in business of marketing agricultural produce and was also providing credit facilities to its members - It claimed benefit of deduction under section 80P(2)(a)(i) in respect of interest, earned on deposits kept with scheduled banks, Indra Vikas Patra, NSC etc. - Assessing Officer rejected assessee's claim and brought said interest income to tax under section 56 as 'Income from other sources' - Tribunal confirmed Assessing Officer's order - Assessee filed instant appeal seeking direction to pass fresh order by giving permissible deduction under section 57 - Whether on facts, only net interest income, i.e., interest income reduced by administrative expenses and other proportionate expenses to earn said income had to be brought to tax under section 56 - Held, yes [Para 12] [Partly in favour of assessee]