TMI Blog1995 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961, of interest and not net receipts ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in granting exemption of Rs. 2,49,948 to the assessee ? " The relevant facts for the purpose of considering the controversy in dispute are that the assessee is a co-operative society formed under the Co-operative Societies Act and has received the income of Rs. 4,99,895. Deduction under section 80P(2)(d) of the Income-tax Act, 1961, was claimed. The Income-tax Officer examined the details of various expenses and sources of income and found that they are not separately identifiable and, therefore, applied a percentage of the expenses in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cloth to the assessee's constituents on which it received commission and interest was a business of the society wholly separate and distinct from its other business. It was not connected with the other business carried on by the society. The society could have kept an entirely a separate account of its activity pertaining to the commission and interest received by it. The contention of the assessee that no part of the expenditure which was incurred by the society could be said to pertain to its income from commission of the business, was not accepted and it was found that the supply of controlled cloth to the assessee's constituents on which it received commission was a wholly separate other business. The society could have kept entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under various heads of income as envisaged under section 14 of the Income-tax Act. The next income computed by the Income-tax Officer from commission and interest and dividend has to be taken at 50 per cent. thereof by treating 50 per cent. of the expenditure as attributable to such earnings. Incomes so arrived at will not be exempt from tax up to the stage these enter the gross total income. It is only after the gross total income which is the sum total of income computed under various heads is computed that deductions under section 80P have to be considered. The deduction under section 80P(2)(a) has to be made as a whole of the amount of profits and gains of business attributable to such activities. In these circumstances, the Tribunal ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income. So far as determining the eligibility for exemption is concerned, it is not in dispute that the expenses pertain to income which is taxable and non-taxable. A composite account has been maintained by the assessee and a separate account with regard to expenditure and income on both types of income has not been maintained. It was in these circumstances that the Income-tax Officer has determined the total income after appor tioning the expenses to both sources of income. The words " total income " have been defined under section 2(45) which means the total amount of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o problem. If separate books of account have not been maintained and expenses have been incurred jointly for earning both the incomes then such expenses relatable to earn the non-exempted activities must be estimated. The income exempted under section 80P(2) has to be arrived at separately in order to determine the income under section 80P(2) and it can never be envisaged that the total income which has been so received could be allowed without deducting the expenditure incurred in earning the income. The use of the words " the whole of the amount of profits and gains of business attributable to any one or more of such activities " appearing at the end of sub-section (2) of section 80P could be only for such income which is attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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