TaxTMI 
TaxTMI 
2008 (9) TMI 493
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....s follows: 3. The assessee is a co-operative society registered under the Co-operative Societies Act. The assessee filed returns for the assessment years 1991-92 to 1999-2000. The return of the income for the assessment year 1991-1992 was filed on September 27, 1991 disclosing the income of Rs.1,25,94,454 under the head of "Income from business" and claiming exemption for the same under section 80P(2)(a)(i) of the Act and the total income returned was "nil". The return of income was processed under section 143(1)(a) the Act on September 9, 1992, accepting the return, statement of income audit report under section 44AB of the Act, printed trading and profit and loss account and balance-sheet which were filed along with the return of income. The business carried on by the assessee was marketing of agricultural produce of the members of the society. The business activity other than marketing of the agricultural produce resulted in net loss. The assessment was reopened with issue of notice under section 148 of the Act May 31, 2001. The assessee filed a letter dated June 7, 2001 requesting to treat the return filed under section 139(l) of the Act as the return in response t....
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....ture. 6. Being aggrieved by the said order of the Assessing Officer order, the assessee preferred an appeal before the first appellate authority-Commissioner of Income-tax (Appeals) Hubli, and the first appellate authority by order in Appeal Nos.214/215/216/217/27/213A//26/218/HBL/CIT(A)/HBL/-2002-03 and 2003-04 allowed the appeal accepting the contentions of the assessee that the income received from deposits and securities is attributable to profits gains of the assessee and therefore, entitled to exemption under section 80(P)(2)(a)(i) of the Act and set aside the order passed by the assessing authority. 7. Being aggrieved by the order passed by the first appellate authority, the Revenue preferred appeal in I. T. A. No. 1460/Bang/2003. The assessee has also filed cross-objections being aggrieved by the finding given by the first appellate authority regarding the validity of the notice issued under section 148 of the Act. The Income-tax Appellate Tribunal by order dated November 9, 2004 allowed the appeal filed by the Revenue and dismissed the cross by holding that the Assessing Officer was justified in reopening the assessment under section 147 of the Act and proper notic....
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....see, certain investments have been made in securities like Kisan Vikas Patra and other bonds and also deposits in banks. The assessee is carrying on the business of providing credit facilities to its members and therefore, the appellant-society being an assessee engaged in providing credit facilities to his members, the interest received on deposits in business and securities is attributable to the business and securities is attributable to the business of the assessee as its job is to provide credit facilities to its members and marketing of agricultural products of its members. 13. The learned counsel submitted that the word "attributable" is wider than the words "derived from" and when the income received from securities and deposits is considered in relation to the objects of the assessee society, and the business run by it, it is clear that the interest received on security and deposits in bank is attributable to profits and gains of business and therefore, the Commissioner of Income-tax has rightly held that the said income qualifies for exemption under section 80P(2) and the Tribunal was not justified in reversing the said finding and in restoring the order passed by the As....
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....y where the interest received from security' and deposits is attributable to the business profits and gains of the assessee, the same would qualify for exemption under section 80P(2)(a)(i) of the Act. 15. The learned counsel further submitted that what is invested by the assessee in securities and funds is not in respect of the statutory deposits as the assessee is not doing any banking business and what was invested is the surplus funds available with the assessee which has nothing to do with the object of providing credit facilities to members or marketing agricultural produce of the members of the assessee and therefore, the said income is not attributable to the business of the assessee and does not qualify for exemption under section 80P(2)(a)(i) and therefore, the order passed by the Income-tax Appellate Tribunal restoring the assessment order is justified and does not call for interference in this appeal. 16. We have given anxious consideration to the contentions of the learned counsel appearing for the parties in the light of the principles laid down in the decisions relied upon by the learned counsel for the parties. 17. It has to be stated at the outset that many of th....
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....is not helpful to him to support the case of the appellant. Further, it is also not the case of the assessee that the statutory deposits are required to be made by the assessee as required by the assessee doing banking business by making deposits in RBI in which case also the interest earned from the said deposits can be attributable to the business of banking and in the present case it is clear from the perusal of the material on record that the assessee is claiming benefit of section 80P of the Act on the ground that it is a society registered under the Co-operative Societies Act and the object of the society is to arrange for the sale of agricultural produce of the members to the best advantage and to advance loans to the members on the security of their produce, raw or processed. The assessee has also other objects which are not relevant for discussion having regard to the provisions of section 80P of the Act and the contention of the asses see before the Assessing Officer was that income received from the deposits in banks and securities is attributable to the business of advancing loans to members on security of the produce and therefore, qualifies for deduction as income fro....
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....g cash credits and, therefore, there is no merit in the contention of the learned counsel for the appellant that the interest is earned out of the statutory deposits. The assessee is admittedly not doing any banking business. What is invested in security and term deposits with the bank is the surplus funds in the possession of the assessee and as the assessee is not doing ant- banking business, interest accrued from securities and deposits in banks other than co-operative societies were taken as relatable to profits and gains of the society as the said investment does not in any way affect the working capital is not a part of the circulating capital, but only out of the surplus funds available to the society and the assessee has not proved that there is no obligation on the part of the assessee to hold any securities as the part of the business and what is invested in securities and deposits is the surplus funds available with the assessee and it would not in any way affect the circulating capital of the society and, therefore, it is clear that the finding arrived at by the Income- tax Appellate Tribunal that the interest received from securities and deposit except deposits with th....
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....148 of the Act without obtaining prior approval of the Additional Commissioner of Income-tax is without jurisdiction. It is the case of the assessee that in view of the amendment of the Act with effect from June 1, 2001, the reopening of the cases is restricted to six years in place of ten years which has to gain passing advantage if any notices were got served on May 31, 2001, even before sending it to the approval of the Additional Commissioner of Income as mandatory under section 151 of the Act. 27. The said contention was repelled by the Revenue by contending that the notice has been issued only after obtaining approval of the Additional Commissioner of Income-tax and communication of the said approval was received by letter and therefore, there is compliance with section 151 of the Act. 28. The Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal on verification of the original records found that there was no merit in the contention of the assessee as the original records reveal that the previous permission of the Additional Commissioner of Income-tax has been obtained before issuing notice to the assessee and only the communication of the said a....