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TMI Blog2002 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... iety deriving income from sale of fertilizers, agricultural commodities, pesticides, controlled sugar, etc. It also derives income from tractor, matador, truck, godown rent, interest and receipts. On the basis of computation furnished by the assessee, the assessee had claimed relief under section 80P(2) at Rs. 4,75,999. The Income-tax Officer, however, required it to furnish the working of the net income from the business done with the members only. The assessee, in compliance with the directions of the Income-tax Officer, has given working of the income earned in dealings with the members at Rs. 76,723. The Income-tax Officer restricted the relief to that extent only. It was contended before the Income-tax Officer that as the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted in the Act to clarify the position of law relating to expenditure relating to exempted income. After the insertion of section 14A, the expenditure can be allowed only in respect of the income which is taxable under the Act and if any expense is incurred in respect of non-taxable income or which is exempt, that expenditure should not be allowed. Before the insertion, of section 14A, there was a dispute on allowability of the expenditure relating to exempted income and various courts have made some observations in this regard. In Rajasthan State Warehousing Corporation v. CIT [2000] 242 ITR 450 (SC), their Lordships have laid down some guidelines in respect of allowable expenditure in case of exempt income if the business is indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Federation Ltd. v. CIT [1981] 128 ITR 189, at page 209, the Punjab and Haryana High Court observed as under: "It cannot be disputed that the assessee is entitled to claim expenditure which he incurred wholly or exclusively for the purposes of the business in view of the provisions of section 37 of the Act. The assessee was pursuing various activities. The Income of the assessee in respect of profits and gains of business carried on by the assessee, as specified in section 81(i), clauses (a) to (f), is not liable to payment of tax, whereas the income from the other activities pursued by it is liable to tax. Their Lordships of the Supreme Court in the abovementioned authorities laid down the principle that if the business of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the income earned from a part of the business from dealings with the members of the society and the income which is derived from the dealings with the non-members of the society, therefore, in the case in hand, it cannot be said that the business of the assessee is not segregable or indivisible in respect of the exempted income. When the business of the assessee is segregable for the purpose of exempted income, the Income-tax Officer has rightly restricted the income for the purpose of section 80P(2) which was earned in dealings with the members of the society. In this case, the assessee itself has given the working of the profit earned and restricted its income to the tune of Rs. 76,723, from the activity, i.e., marketing of agri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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