- (1.) The present appeal has been filed by the Department under Section 260A of the Income-Tax Act, 1961 against the judgment and order dated 30.05.2005, passed by the Income Tax Appellate Tribunal, Lucknow in Appeal No. I.T.A. No. 290/2/2001, for the assessment year 1993-94. On 11.11.2005, a Coordinate Bench of this Court has admitted the appeal on the following substantial question of law:- "Whether on the fact and circumstances of law, the learned Income Tax Appellate Tribunal was justified in holding that deduction u/s 80P(2)(d) of the Income Tax Act, 1961 is allowable in respect of whole of the amount of interest income received by the Cooperative Society and not on Net Income which has been arrived after allowing the permissible deductions in earning such interest income."
(2.) The brief facts of the case are that the assessee is a Cooperative Society rendered variety of services to its member against collection of annual subscription from them. The assessee has filed the return of loss. While passing the order under Section 143(3) of the Act, on 29.02.1996, the Assessing Officer (AO) observed that the deduction under Section 80P(2)(d) would be available to the assessee in respect of net income of interest received cooperative societies/cooperative Bank, which will have to be worked out after determining and deducting the expenses debited to the income and expenditure account relatable to the earning of such income. However, the Tribunal observed that the exemption is allowable on interest income as a whole without any adjustment. Being aggrieved, the Department has filed the present appeal.
(3.) With this background, Sri D.D. Chopra, learned counsel for the Department has justified the order passed by the AO. He also submits that the deduction is allowable on the net amount of income from interest. For this purpose, he relied on the ratio laid down in the case of CIT vs. Dugdh Utpadak Sahkari Sangh Ltd., 2005 277 ITR 35.;