Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (4) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (4) TMI 624 - HC - Income TaxTransfer to reserve fund - whether the amount transferred to reserve fund account as per provisions of Sec. 67 of the Gujarat State Cooperative Societies Act, 1957 was not a diversion of income at source by overriding title? - transfer to reserve fund cannot be treated as business expenditure and allowed deduction u/s 28/37 as held by Tribunal - Held that:- The two questions, at the instance of the assessee, stands concluded by the decision of the Apex Court in the case of Associated Power Co. Ltd. Vs. Commissioner of Income tax (1995 (11) TMI 5 - SUPREME Court). Furthermore, as can be seen from provisions of Section 67(2) of the Cooperative Societies Act the question of control of the State Government by specifying the mode of investment or the mode of use of the reserve fund can arise only in the eventuality when the society does not use the reserve fund in the business of the society. It is only in the event the society does not choose to use the reserve fund for the business of the society that the question about investing the reserve fund in the specified category of investments and thereafter utilizing the same for the objects specified by the State Government can arise. Hence, not only is there no diversion of income by overriding title but in fact there is no outgoing of funds from the domain of the assessee society. In fact, the profits at the specified percentage are set apart so as to be available to the society for use in the business of the society at a later point of time. Once the society is in a position to use the funds lying in the reserve fund for the business of the society as and when the society so chooses, there can be no question of keeping out such profits from the purview of taxation. Accordingly, the amount transferred to the reserve fund account as per provisions of Section 67 of the Gujarat Cooperative Societies Act, 1961 was not diversion of income at source by overriding title nor can such transfer be treated as a business expenditure deductible either under Section 28 or Section 37 of the Act. See Gujarat CO-OP. Milk Marketing Federation Ltd Versus DY. Commissioner Of Income-Tax [2015 (4) TMI 621 - GUJARAT HIGH COURT] - Decided in favour of the Revenue.
|