TMI Blog2019 (7) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that held that there is no application of section 14A as far as the deduction under section 80A to 80U under Chapter VIA of the Act. In view of the aforesaid, no error, not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. No interference is warranted. This appeal, therefore, fails and is hereby dismissed. - R/TAX APPEAL NO. 35 of 2019 - - - Dated:- 15-7-2019 - MR J. B. PARDIWALA AND MR A. C. RAO, JJ. For The Appellant (s) : MRS KALPANAK RAVAL (1046) For The Opponent (s) : None ORAL ORDER ( PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1 This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act, 1961 ) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Surat dated 3rd August 2018 in the ITA No.1211 1076/Ahd/2015/SRT for the assessment year 2010-11. 2 The Revenue has proposed the following two questions of law: ( A) Whether on the facts and circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the order of the A.O. and the submissions made by the A.R. Of the appellant. I am inclined to agree with the A.R. that there is a clear distinction between the exempt income u/s. 10 and the deductions allowable under chapter VIA. The A.O. has failed to understand the distinction between the exempt income which governed by chapter III of the Act being not from part of total income and the deduction under chapter VIA which are available from gross total income as computed in the manner laid down in the Act. It is an undisputed fact that interest and dividend earned by the appellant cooperative society from investment made year to year with other cooperative societies are already credited as income in its profit and loss A/c and in that way, form part of the gross total income not found claimed as exempt income. The learned AO has failed to consider these vital aspects in right and proper perspectives and unwarrantedly applied Rule 8D read with section 14A of the Act. In my considered view, there is no lawful ground to apply Rule BD read with section 14A of the Act in the present case where there is no element of exempt income, but the interest and dividend income made from the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Punjab State Cooperative Milk Producers Federation Ltd. advances made by the assessee to its member cooperative societies for the purpose of procurement of milk etc. in the course of its business and the same has been treated as investment for the deduction u/s.80P(2)(d) instead of 80P 2(a)(I) of the Act. Thus, facts are distinguishable, hence the AO has erroneously applied the said judgment. It was further submitted that CIT(A) has fully allowed deduction u/s.80P(2)(d) in the succeeding year I.e. assessment year 201112, 201314. It was also submitted that the Department has lawfully accepted and allowed the deduction claim u/s.80P(2)(d) of the Act while passing regular assessment u/s.143(3) dated 07.12.2016 for the assessment year 201415. 10. We have considered the rival submissions and perused the material on record. It is seen that the assessee society had earned income by way of dividend and interest from investment made with other cooperative societies as provided in section 71 of Gujarat Cooperative Societies Act. This investment had been made since long back from the year 1951 1952 to March 2006 out of surplus fund of the society. Thus, the divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit facilities to its members. Section 80P(2)(d)In respect of any income by way interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income. After considering the factual as well as legal position on this issue, the appellant had not incurred any expenditure on the earning of the dividend and interest from other cooperative society as this investment was made long back. No new investment had been made by the appellant during the year under consideration. Thus, we confirm the order of the CIT(A) in all the years. 11. In the light of above, it is seen that the issue under consideration is covered by decision of Tribunal in the appellants own case. The Id.AR placed reliance in the case of CIT vs Kribhco [2012] 349 ITR 618 (Del) wherein it was held that no disallowance can be made u/s.14A in respect of income on which deduction is allowed u/s.80P. Section 14A is no applicable in case of special deduction given under chapter VIA. It has been further relied that in the case of Punjab State Federation Cooperative Housing Building Societies Ltd. vs. ITO [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in computing the total income. Such deductions, in no manner, can be compared with the exempted income, which does not form part of the total income as provided in sections 10 to 13A under Chapter III of the Act. Section 14A was introduced retrospectively with effect from 1.4.1962 by Finance Act, 2001, for the purpose of computing the total income under Chapter IV. And, any expenditure incurred by the assessee in relation to exempted income, for the purpose of computing the total income, while applying section 14A, no deduction shall be allowed. However, there is a clear absence of any reference of deduction to be made in computing the total income as per provision of Chapter IVA in section 14A. Undoubtedly, as provided under Chapter VIA while computing the total income of the assessee from his gross total income in accordance with and subject to the provision of this chapter, the deductions specified are permissible. As a resultant effect, the taxable income of the assessee would surely get reduced and yet there is marked difference between the exempted income and the deduction provided under Chapter VIA. We notice that the investment in shares made by the assessee which earn ..... 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