Law:

Section:

Deduction under section 80P(2)(d) is allowable on net income from interest Section 80P, read with section 80AB, of the Income-tax Act, 1961 - Deductions - Income of co-operative societies - Assessment years 1971-72 and 1979-80 - Whether deduction under section 80P(2)(d) is subject to provisions of section 80AB, which have been held to be declaratory and retrospective in operation, and, therefore, deduction under section 80P(2)(d) would not be allowed on gross amount of income from interest but on net amount - Held, yes FACTS The respondent-co-operative society claimed deduction under section 80P(2)(d) on the gross amount of interest received during the relevant assessment years. The ITO found that the payment of interest on loan taken by the respondent exceeded the receipts and, therefore, no separate deduction under section 80P(2)(d) could be given. In appeal before the Commissioner (Appeals), the deduction was allowed on the gross amount. The revenue's appeal before the Tribunal failed. On reference : HELD Even though section 80P(2)(d ) provides deduction of the whole of interest income, it is subject to the provisions of section 80AB, which was inserted by the Finance (No. 2) Act, 1980 with effect from 01-04-1981. Section 80B(5) is of no relevance as it defines gross total income. It does not specify as to whether deduction of the gross income or net income has to be given under Chapter VI-A. [Para 7] It might be mentioned that the Legislature by the Finance (No. 2) Act, 1980 had introduced sections 80AA and 80AB into the Act by the reason of the interpretation placed by the Apex Court upon section 80M in the case of Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243/ 1 Taxman 335 . Section 80AA was introduced with retrospective effect from 01-04-1968 and section 80AB was introduced with effect from 01-04-1981. [Para 12] Provisions of section 80AB have been held to be declaratory and retrospective in operation. [Para 16] Therefore, the Tribunal was not legally correct in holding that the deduction under section 80P(2)(d) was allowable on the gross amount of income from interest. CASE REVIEW CIT v. Doaba Co-operative Sugar Mills Ltd. [1998] 230 ITR 774/…

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