1992 (3) TMI 108 - AT - Income Tax

Summary

Issues:
1. Whether the assessee's dividend income qualifies for deduction under section 80P of the Income-tax Act.
2. Whether the Commissioner's order under section 263 was justified.

Detailed Analysis:
Issue 1: The assessee, a Co-operative Society, derived dividend income from investments with entities other than Co-operative Societies. The Commissioner contended that such income did not qualify for exemption under section 80P(2)(d) as it was not from Co-operative Societies. The Commissioner directed the Income-tax Officer to withdraw the deduction granted under section 80P for the dividend income. The assessee argued that the dividend income was attributable to its banking business and should be exempt under section 80P. The Tribunal analyzed the nature of the assessee's business, which involved raising funds and lending long-term loans for land development, constituting a banking activity. The Tribunal referred to relevant case laws supporting the assessee's position and concluded that the dividend income was indeed attributable to banking activity and qualified for deduction under section 80P.

Issue 2: The Commissioner's order under section 263 was challenged by the assessee, contending that clauses (d) and (a) of section 80P(2) were not mutually exclusive. The Tribunal agreed with the assessee, stating that the clauses should be interpreted to advance the object of the legislation. The Tribunal held that the Commissioner erred in proceeding under section 263 and quashed the impugned order. The Tribunal allowed the appeals, vacated the Commissioner's order, and restored the original assessment orders for the relevant years.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the dividend income derived from investments with entities other than Co-operative Societies was attributable to the banking business of the Co-operative Society and qualified for deduction under section 80P. The Commissioner's order under section 263 was deemed unjustified, and the original assessment orders were reinstated for the assessment years in question.