TMI Blog2011 (12) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is exclusively a banking business society. Therefore, it is a question still open and yet to be adjudicated upon by the assessing authority in present proceedings u/s 147/148. Assessee is left free to establish its case before the assessing authority. - Decided against the assessee. - S.B. CIVIL WRIT PETITION NO. 8537 OF 2011 - - - Dated:- 5-12-2011 - DR. VINEET KOTHARI, J. Dinesh Mehta for the Petitioner. K.K. Bissa for the Respondent. ORDER 1. The petitioner, a cooperative society known as Pushtikar Laghu Vyaparik Pratishthan Bachat Evam Sakh Sahkari Samiti Limited, has approached this Court by way of present writ petition challenging the reassessment/reopening proceedings under section 147/148 of the Income Tax Act by impugned notice under section 148 of the Act dtd.18.3.2008 for assessment year 2004-2005. 2. The Assessing Authority - Dy. Commissioner, Income Tax, Circle-2, Jodhpur gave the said notice and supplied the reasons for issuance of said notice upon demand by the assessee vide his letter dtd.11.4.2011 which reasons according to the Assessing Authority are as under: "Reasons for Re-Opening the Case u/s 147 of the I.T. Act, 1961 M/s Pusht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing are the objectives and functions of the Society: a. Promote social and economic betterment of members through self help and mutual aid in accordance with co-operative principles specified in the First Scheduled of the act. b. To make available funds for members for establishing business, trading activities, meeting social, domestic and religious requirements. This fund is available for members, non-members and other similar financial institution" 5. The learned counsel for the petitioner, Mr. Dinesh Mehta mainly raised following two contentions before this Court for assailing the impugned notice under Section 147/148 of the Act : (i) The said notice dtd.18.3.2011 for assessment year 2004-2005 is barred by limitation of 4 years prescribed under Section 147 of the Act. (ii) The petitioner Society admittedly being banking company, its total income is deductible under Section 80P(2)(a)(i) of the Act and therefore, the impugned reassessment notice purportedly issued to impose tax on the interest income of Rs. 11,99,288/- earned by the petitioner Society by way of interest on fixed deposits with various banks is not justified and assessing authority apparently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the nature of income being connected with nature of banking business of the petitioner society as claimed by the assessee cannot be undertaken. He also submitted that there is no question of misapplying the Supreme Court decision in the case of present assessee. It is open to the assessee to contend and establish before the assessing authority the relevant facts to establish his claim of deduction under Section 80P(2) of the Act in respect of such interest income on fixed deposits made by him with various banks including private banks. He, therefore, prayed for dismissal of the writ petition. 8. Having heard the learned counsels, this Court is of the opinion that both the questions raised by the writ petitioner namely, of limitation and of deductibility of the interest income under Section 80P(2) of the Act are mixed questions of facts and law which deserve to be and are yet to be adjudicated upon by the assessing authority and therefore, it would be premature for this Court at this stage to pronounce upon both the issues. 9. The relevant provisions of Section 147 to 151 of the Act to the extent relevant for the present controversy are reproduced below for ready reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment amounts to or is likely to amount to rupees one lakh rupees or more for that year; 151. Sanction for issue of notice (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice." 10. The Hon'ble Supreme Court in the aforesaid recent decision in the case of Totgars' Co-operative Sale Society Ltd. (supra) dealing with the case of interest earned by the Cooperative Society engaged in the business of providing credit facilities to its members and marketing agriculture produce of its members seized with the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined under Section 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in Section 80P (2) of the Act. In the present case, as stated above, assessee-Society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members. When the assessee-Society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under Section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-Society is not carrying on Banking business. We are confining this judgement to the facts of the present case. To say that the source of income is not relevant for deciding the applicability of Section 80P of the Act would not be correct because we need to give weightage to the words "the whole of the amount of profits and gains of business"; attributable to one of the activities specified in Section 80P(2)(a) of the Act. An important point needs to be mentioned. The words "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society. In this particular case, the evidence shows that the assessee- Society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of "Other Income" which has been rightly taxed by the Department under Section 56 of the Act. 11. The rival contentions raised by the learned counsels in the present writ petition about the limitation as well as taxabi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
