TMI Blog2011 (3) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be noticed that section 80P was inserted in place of section 81 which was simultaneously deleted by Finance (No. 2) Act, 1967, with effect from 1-4-1968 Regarding Section 14A - on consideration of facts involved therein had concluded that there was no expenditure which had been incurred by the assessee for earning the income and the same did not form part of total income - Decided against the assessee - IT APPEAL NO. 530 OF 2006 - - - Dated:- 28-3-2011 - ADARSH KUMAR GOEL AND AJAY KUMAR MITTAL, JJ. M.R. Sharma for the Appellant. Ms. Urvashi Dhugga for the Respondent. JUDGMENT Ajay Kumar Mittal, J. This order will dispose of two appeals, Income-tax Appeal Nos. 530 of 2006 and 516 of 2008 as the counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant-society is an Apex body of Co-operative Societies and District Co-operative Milk Producers Unions are its members. The appellant is engaged in the marketing and sale of milk products of its member societies. As per the bye-laws of the appellant- Federation, deductions were admissible to it under section 80P(2)(a)(i) of the Act on the income derived by it from its members by way of interest on its investments as loan and advances for their working capital. The appellant filed its return of income for the assessment year 2002-03, on 29-10-2002 declaring taxable income as Nil. The return was processed under section 143(1) of the Act on 8-2-2003. The assessee claimed that the entire income derived on account of interest from co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said deduction was, however, held allowable to the assessee in respect of net income after deducting the expenses incurred for earning such income. 8. The assessee still dissatisfied has preferred the present appeal. 9. We have heard learned counsel for the parties and have perused the record. 10. Learned counsel for the assessee submitted that the authorities below have erred in directing that the expenses incurred for earning income which was deductible under section 80P(2)(d) of the Act was to be reduced from such income. The counsel placed reliance on CIT v. King Export [2009] 318 ITR 100 (Punj. Har.) and CIT v. Doaba Co-operative Sugar Mills Ltd. [1998] 230 ITR 774/96 Taxman 509 (Punj. Har.). On the other hand, learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such business. But the controversy which relates to the said provision is, whether the income-tax not payable thereunder, falls to be calculated either with reference to the full amount of profits and gains of the co-operative society's business, as contended on behalf of the assessee or with reference to the net amount of profits and gains of the co-operative society's business, as otherwise computable under the provisions of the Income-tax Act for the purpose of charging income-tax thereon, as contended on behalf of the Revenue. If the relevant provisions of the income-tax Act providing for charging a person including a co-operative society with income-tax on "profit and gains" of such person's business show that it is the net profits an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come (see Circular No. 14 of 2001, dated 22-11-2001). In other words, section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income. In many cases the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of section 14A, the expenditure incurred in respect of exempt income was being claimed against taxable income. The mandate of section 14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail the tax incentive by way of exemption of exempt income without making any apportionment of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of chargeability to tax under those heads. Sections 15 to 59 quantify the total income chargeable to tax. The permissible deductions enumerated in sections 15 to 59 are now to be allowed only with reference to income which is brought under one of the above heads and is chargeable to tax. If an income like dividend income is not a part of the total income, the expenditure/deduction though of the nature specified in sections 15 to 59 but related to the income not forming part of total income could not be allowed against other income includible in the total income for the purpose of chargeability to tax. The theory of apportionment of expenditures between taxable and non-taxable has, in principle, been now widened under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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