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THE SURAT VANKAR SAHAKARI SANGH LTD. Versus ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5.

2016 (7) TMI 1217 - GUJARAT HIGH COURT

Entitlment under sec. 80P(2)(d) of the entire interest received from the cooperative Bank? - Held that:- Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment .....

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rom its investment in any other co-operative society. - In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. Questions raised in the present appeals are answered in favour of the assessee and against the revenue - TAX APPEAL NO. 93 of 2008 With TAX APPEAL NO. 94 of 2008 With TAX APPEAL NO. 95 of 2008 With TAX APPEAL NO. 96 of 2008 - Dated:- 12-7-2016 - MR.JUSTICE KS JHAVERI AND MR.JUSTICE G.R.UDHWANI MR MANISH J SHAH, ADV .....

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of 2008 01/05/07 3849/Ahd/2002 1992-93 95 of 2008 01/05/07 3850/Ahd/2002 1993-94 96 of 2008 01/05/07 3851/Ahd/2002 1994-95 2. These matters were admitted by this Court for consideration of the following substantial question of law: TAX APPEAL No. 93 OF 2008 Whether the assessee co-operative society was entitled under sec. 80P(2)(d) of the entire interest of ₹ 10,17,976/- received by it from the cooperative Bank? TAX APPEAL No. 94 OF 2008 Whether the assessee co-operative society was entit .....

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the four appeals, the common issue is grant of net deduction u/s 80P(2)(d) of the Act, in respect of interest and dividend received by the assessee from co-operative societies i.e. bank in this case. The Assessing Officer allowed deduction u/s 80P(2)(d) to the extent of net interest instead of gross interest as claimed by the assessee and disallowed the excess claim of deduction in this regard for all the years under consideration. The amount disallowed by the Assessing Officer and deduction gr .....

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Shah, learned advocate appearing for the assessee has drawn the attention of this Court to Sections 28, 36(1), 56, 57 and 80P of the Act and contended that same deductions were allowed in the previous years. He submitted that in view of the decision of the Apex Court in the case of Excel Industries reported in 358 ITR 295, the respondent could not have taken a stand different than previous year . He has also relied upon the following decisions: (I) Bai Bhuriben Lallubhai vs. Commissioner of Inc .....

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d that the assessee was entitled to deduction under section 80P(2) (d) in respect of the whole amount of interest from investments received by it. He submitted that the revenue has already accepted the said decision and has not challenged the same and therefore the stand taken by the revenue in the present case is contradictory in itself. He has drawn the attention of this Court to the decision of the Apex Court in the case of Union of India and Others vs. Kaumudini Narayan Dalal and Another rep .....

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the attention of this court to the deductions granted by the Assessing Officer and submitted that the funds were borrowed for business purpose and therefore the assessee cannot get benefit of both the sections. He has relied upon the decisions in the following cases: (I) Sabarkantha Zilla Kharid V. Sangh Ltd. vs. Commissioner of Income tax reported in 203 ITR 1027: (II) Commissioner of Income Tax vs. Surat District Cooperative Milk Producers Union Ltd reported in [1995] 211 ITR 726 (Guj) (III) C .....

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out deducting the expenditure incurred in earning the income. He submitted that the authorities below have come to a concurrent finding and therefore this Court may not entertain the present appeal. 7. Heard learned advocates for both the sides. So far as the contention regarding the benefit given to the assessee for earlier years is concerned, we are of the opinion that the same is required to be accepted. The Apex Court in the case of Kaira District Co-operative Milk Producers Union Ltd. (supr .....

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not challenged the decision of the Tribunal rendered in the case of Petlad Taluka Purchase and Sales Union (supra) and thereby has accepted the same. The Apex Court in the case of Kaumudini Narayan Dalal (supra) has already held that it was not open to the revenue to accept the earlier judgement in the case of one assessee and challenge its correctness without just cause in the case of other assessees. Similarly, the Tribunal failed to appreciate that the point was otherwise covered in favour o .....

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he decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar (supra), the Kerala High Court has held as under: 4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by .....

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ugh the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Sectio .....

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ioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5. 8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab & Haryana High Court has held as under: 5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the ass .....

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r facility of reference, it is reproduced as under : "80P. (2)(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income." 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : ". . . In a taxing Act, o .....

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70 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the coopera .....

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