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2006 (4) TMI 188 - AT - Income TaxIncome From Co-Operative Societies - Applicability of u/s 14A - Income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society is deduction is permissible u/s 80P ? whether the deduction is to be computed with reference to the gross interest received from the member co-operative societies or the net interest as included in the gross total income of the assessee - HELD THAT:- It is evident from the decision of the Hon'ble Supreme Court in the case of U.P. Co-operative Federation Ltd.[1989 (2) TMI 3 - SUPREME COURT], the advances made by the assessee to the member co-operative societies for the purpose of procurement of milk etc. in the course of its business falls within the category of 'investments' and interest thereon accordingly qualifies for deduction u/s 80P(2)(d). We may also usefully refer to the decision of Haryana Co-operative Sugar Mills Ltd.[1989 (2) TMI 42 - PUNJAB AND HARYANA HIGH COURT], In this case it was held that the amount deposited by one co-operative society with another, whether for long-term or short-term would be an investment within the meaning of section 80P(2)(d). We are, therefore, of the considered view that the interest earned by the assessee on the advances given to the member co-operative societies for procurement of milk qualifies for deduction u/s 80P(2)(d) of the Income-tax Act, 1961. We hold accordingly. Admittedly, the income referred to in section 80P(2)(d) is included in the gross total income but once the said income is excluded by virtue of section 80P(2)(d) it no longer can be said to be included in the total income. Since deduction u/s 80P(2)(d) is allowed to the assessee out of the gross total income, the income described in section 80P(2)(d) no longer is included in the total income notwithstanding the fact that the said income is included in the gross total income. We accordingly hold that section 14A is applicable even in respect of the incomes which are excluded from the total income by virtue of deductions under Chapter VI-A. This view gets further support from the prescribed form of return of income. Sl. No. 18 provides for the gross total income, Sl. No. 19 provides for deductions under Chapter VI-A and Sl. No. 20 provides for the total income. It is therefore, evident that total income as per the return does not include the income referred to in section 80P(2)(d). Therefore, the provisions of section 14A inserted with effect from 1-4-1962 are clearly attracted in this case. We are, therefore, of the considered view that deductions permissible to the assessee u/s 80P(2)(d) is in respect of the net income after excluding the expenses attributable to the income referred to in section 80P(2)(d). In case some expenditure is indivisible, vis a vis other receipts of business, the same shall have to be apportioned between the various. types of receipts and deductions u/s 80P(2)(d) computed accordingly. We hold that assessee is entitled to deduction u/s 80P(2)(d) in respect of interest received on advances provided to the member co-operative societies. So, however, the deduction permissible to the assessee is in respect of the net income after deduction of expenses attributable to the earning of such income. We hold accordingly. Thus, we would like to clarify that after the insertion of section 14A, any decision to the contrary is inapplicable to the proposition involved in this appeal. In the result, the appeal of the assessee is partly allowed.
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