Punjab State Cooperative Milk Producer's Federation Ltd. V. Commissioner of Income Tax-II, Chandigarh and another

ITA/235/2008

AI Insights

The case involves the Punjab State Cooperative Milk Producer's Federation Ltd., the appellant, contesting the decision of the Income Tax Appellate Tribunal which reversed the earlier decision in favor of the assessee regarding deductions under Section 80P(2)(d) of the Income Tax Act, 1961. The primary legal contention was whether the Tribunal was correct in allowing the deduction for interest income derived from member cooperative societies and whether expenses could be attributed and deducted when these are not identifiable and are part of common accounts. The High Court's decision referenced a prior ruling which established that expenses attributable to earning non-taxable income should be deducted from the income before calculating deductions under Section 80P(2)(d).

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 676384 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 31-08-2012
• Assessment Year: misc
• Other Referred Cases: The Punjab State Cooperative Milk Producers Federation Ltd. v. Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: URVASHI DHUGGA
• Assessee Lawyers: M R SHARMA
• Keywords: Assessment Year; Cooperative Society; Deduction; Income Tax; Interest income
• Section: 143(2); 14A; 260A; 80P(2)(d)

Judgement Text

"ITA No. 235 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 235 of 2008 Date of Decision: 31.8.2012 The Punjab State Cooperative Milk Producer's Federation Ltd. ....Appellant. Versus Commissioner of Income Tax-II, Chandigarh and another ...Respondents. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE G.S. SANDHAWALIA. PRESENT: Mr. M.R. Sharma, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for respondents. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 7.8.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal) in ITA No. 342/Chandi/2007, for the assessment year 2003-04, claiming the following substantial question of law:- i) Whether in the facts and circumstances of the case the orders (Annexure P-1) and (Annexure P-2) are legally sustainable? ii) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal is ITA No. 235 of 2008 -2- right in law in allowing deduction under section 80P (2)(d) of the Income Tax Act, 1961, in respect of interest income derived by the appellant being a cooperative society from member cooperative societies amounting to Rs.1,25,64,824/- being limited to the income out of total income of Rs.7,77,35,632/- after deducting any expenses? iii) Whether the Tribunal is correct in law in holding that while computing the interest income derived from another cooperative societies for the purposes of computing deduction u/s 80P(2)(d) the expenses can be determined/attributed and deducted more so when these are not identifiable and are part and parcel of common accounts? iv) Whether in the facts and in the circumstances of the case the ITAT order directing the deduction of expenses attributable to the earning of interest income for the purpose of determining deduction u/s 80P(2)(d) is legally sustainable, the same being based on mere presumptions and surmises? v) Whether in the facts and in the circumstances of the case the order of the ITAT holding that the provision of section 14A are applicable to the deductions u/s 80P(2)(d) are legally sustainable in law, more particularly when the provision for determination of such expenses has been made by the Finance Act, ITA No. 235 of 2008 -3- 2006 w.e.f. 1.4.2007 i.e. for the assessment year 2007-08 and the present being assessment year 2003-04? 2. Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed its return of income on 1.12.2003 for the financial year relevant to the assessment year 2003- 04 declaring nil income after claiming deduction under Section 80P(2) (d) of the Act amounting to ` 1,25,64,824/-. After issuance of notice under Section 143(2) of the Act, the assessment was completed by the Assessing Officer vide order dated 22.2.2006 (Annexure P-2) disallowing the claim of the assessee under Section 80P(2)(d) of the Act at ` 1,25,64,824/-. Against the order of the Assessing Officer, the assessee filed appeal before the Commissioner of Income Tax (Appeals) who vide order dated 25.1.2007 (Annexure P-3) allowed the appeal. Feeling dissatisfied, the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 7.8.2007 (Annexure P-1) allowed the appeal of the revenue. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the parties. 4. The appeal was admitted on 23.9.2008 and was ordered to be heard along with ITA No. 530 of 2006. 5. Learned counsel for the appellant very fairly accepted that the issue raised herein stands concluded by the decision of this Court in the case of the assessee in The Punjab State Cooperative Milk Producers Federation Ltd. v. Commissioner of Income-Tax and ITA No. 235 of 2008 -4- another [2011] 336 ITR 495 (P&H), wherein it has been held that under Section 14A of the Act, any expenditure incurred by the assessee for earning income which does not form part of total income under the Act shall not be an allowable expenditure. The assessee is entitled to deduction under Section 80P(2)(d) of the Act after deducting the expenditure attributable to the earning of such income. 6. In view of the above, the substantial questions of law are answered against the assessee and in favour of the revenue. The appeal is accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE August 31, 2012 (G.S. SANDHAWALIA) gbs JUDGE "