TaxTMI 
TaxTMI 
2011 (3) TMI 615
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....This appeal under section 260A of the Income-tax Act, 1961 (for short "the Act") has been filed by the assessee against the order dated 27-4-2006, passed by the Income-tax Appellate Tribunal Chandigarh Bench, Chandigarh (in short "the Tribunal") in ITA No. 1068/Chandi/2005, relating to the assessment year 2002-03. 3. The appeal was admitted on 13-11-2007 for determination of the following substantial questions of law by this Court : "(1) Whether the Tribunal is correct in law in holding that while computing the interest income derived from another co-operative societies for the purposes of computing deduction under section 80P(2)(d), the expenses can be attributed and deducted more so when these are not identifiable? (2....
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....e, however, restricted its claim in that behalf to Rs. 4,98,64,196 only. 5. The Assessing Officer on a consideration of the entire matter concluded in the assessment order dated 30-3-2005 that the working capital advances did not qualify the test of 'investments' as enshrined in section 80P(2)(d) of the Act, and the deduction claimed by the assessee under the said provision could not be allowed. The Assessing Officer, thus, ordered that the income of the appellant-federation was assessable at Rs. 4,98,64,196. It was unambiguously observed that the assessee would not be entitled to deduction under the provisions of section 80P(2)(d) of the Act on account of interest on working capital to milk unions. 6. The assessee carried appeal befo....
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....fied in disallowing the expenses incurred in relation to income not includible in the total income and directing the same to be excluded from the income earned by the assessee while computing deduction under section 80P(2)(d) of the Act. Learned counsel for the Revenue placed reliance on judgments of the Supreme Court in Sabarkantha Zilla Kharid V. Sangh Ltd. v. CIT [1993] 203 ITR 1027/69 Taxman 619 and CIT v. Walfort Share & Stock Brokers (P.) Ltd. [2010] 192 Taxman 211 (SC). 11. We have given our thoughtful consideration to the submissions made by the counsel for the parties and find force in the contention raised on behalf of the Revenue. 12. The assessee is entitled to deduction under section 80P(2)(d) of the Act after excluding t....
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....ch is includible in such person's total income liable to charge of income-tax, it must flow therefrom, as a necessary corollary thereof, that the "profits and gains" for which exemption from income-tax is envisaged under section 81(i)(d) of the income-tax Act, ought to be net profits and gains, i.e., income of business computed in accordance with the provisions of the Income-tax Act which is includible in such person's total income for charging income-tax thereon." 13. It may be noticed that section 80P was inserted in place of section 81 which was simultaneously deleted by Finance (No. 2) Act, 1967, with effect from 1-4-1968. 14. Further, section 14A was inserted in the Act by Finance Act, 2001 with effect from 1-4-1962. The said sec....
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....in incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was being used to reduce the tax payable on the non-exempt income by debiting the expenses, incurred to earn the exempt income, against taxable income. The basic principle of taxation is to tax the net income, i.e., gross income minus the expenditure. On the same analogy the exemption is also in respect of net income. Expenses allowed can only be in respect of earning of taxable income. This is the purport of section 14A. In section 14A, the first phrase is "for the ....