TMI Blog2017 (11) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperative society from its investment in any other cooperative society. Therefore, we do not agree with the argument advanced by the learned counsel for the Revenue. In our opinion, the learned Tribunal was right in allowing deduction under Sec.80P(2)(d) of the Income Tax Act, 1961. ince, the issue on merit has been decided in favour of the assessee no penalty can be levied and as such the Tribunal has committed no error of law in setting aside the penalty under Section 271 (1)(c) of the Income Tax Act. - Decided in favour of assessee. - D. B. Income Tax Appeal No. 173 / 2017 - - - Dated:- 8-8-2017 - K. S. Jhaveri And Inderjeet Singh, JJ. For the Appellant : Ms. Parinitoo Jain ORDER Defect is waived. Application No. 24558/2017 stands disposed of. 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee and dismissed the appeal of the department. 2. Counsel for the appellant has framed the following questions of law:- i) Whether the Tribunal was legally justified in cancelling the penalty levied u/s 271(1)(c) without deciding the appeal on merits specifically w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. ETC. vs. Commissioner of Income Tax: (1998) 147 CTR 0029. The Supreme Court in the judgment aforesaid in Paragraphs 5 7 has observed as under:- 5. We have carefully considered the rival submissions of the parties perused the material placed on record and also the judgements relied upon by them. We find that the AO and the CTT(A) have rejected the claim of the assessee of allowing deduction u/s 80P(2)(iv) in view of the decision of Hon'ble Supreme Court in the case of Assam Co-operative Apex Marketing Federation Ltd. 201 ITR 338 (supra). We also find that this judgement has been impliedly overruled by the Apex Court in the case of Kerala State Cooperative Marketing Federation Ltd. Others 231 ITR 814 (supra), wherein at Page No. 825 it was held as under:- We hold that the society engaged in the marketing of agricultural produce of its members would mean not only such societies which deal with the produce raised by the members who are individuals or societies which members thereof who may have purchased such goods from the agriculturists. Thus, we allow the civil appeal by setting aside the order made by the High Court and answering the question referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The expression members is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression members in Section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the co-operative society claiming exemption, has been formed. It is, therefore, necessary to construe the expression members in Section 80P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: Section 2(n). Member means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to members anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and therefore, the view taken by the Assessing Officer and the CIT (Appeals) requires confirmation tribunal decision may be reversed. 7. Per contra, counsel for the respondent has relied upon the decision of the Supreme Court in Kerala State Cooperative Marketing Federation Ltd. And Ors. (supra) more particularly para no.14 which reads as under:- 14. The attention of this Court does not seem to have been drawn to the aforesaid decision while deciding Assam Cooperative Society's case. With respect, we, therefore, hold that the view taken therein requires reconsideration as stated earlier by us. In the result, the order of the Kerala High Court following the decision of this Court in Assam Cooperative Societies is reversed. We hold that the society engaged in the marketing of agricultural produce of its members would mean not only such societies which deal with the produce raised by the members who are individuals or societies which are members thereof who may have purchased such goods from the agriculturists. Thus, we allow the civil appeal by setting aside the order made by the High Court and answering the question referred to us in the affirmative in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions in favour of the assessee, in the affirmative and hold that the Tribunal was right in coming to the conclusion that short-term call deposits were investments within the meaning of Sec. 80P(2)(d) of the Act and qualified for deduction under that provisions for both the years in question. The parties are left to bear their own costs. 11. In Kota Cooperative Marketing Society Ltd. vs. Commissioner of Income Tax: (1994) 207 ITR 608 (Raj.) in para no.2 which reads as under:- 2. The brief facts of the case are that the assessee has filed the return initially in which the deduction under s. 80P of the IT Act, 1961, was claimed on proportionate basis as the assessee was having income which was partly taxable and partly non-taxable. Subsequently, the said return was revised and the assessee claimed deduction from the gross amount of income, of the amount of income derived from its members without deducting therefrom proportionate administrative and managerial expenses. The assessee derives its income mainly from supply of fertilizers to its members, marketing of agricultural produce, agricultural implements, etc. The assessee is also running a rice mill. In the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness is a single and indivisible one or separate businesses are being carried on by the assessee. 12. In Surat Vankar Sahakari Sangh Ltd. Vs. Assistant Commissioner of Income Tax: (2016) 72 taxmann.com 169 (Gujarat) in para no.8.1 8.2 which reads as under:- 8.1 Similarly, in the case of Doaba Cooperative Sugar Mills Ltd. (supra), the Punjab and 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 Sec. 80P(2)(d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Cooperative Bank and has also received interest from the said cooperative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Sec.80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under: 80P.(2)(d) in respect of any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed u/s 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. 13. We heard both the counsel. 13.1 In view of the decision of Supreme Court in Kerala State Co-operative Marketing Federation Ltd. (supra), we are of the opinion that view taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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