TaxTMI 
TaxTMI 
2010 (1) TMI 940
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.... ITA No. 420/Chd/2007 which is directed against the order of the CIT(A) dt. 6th Feb., 2007 pertaining to the asst. yr. 2002-03. This order of the CIT(A) is arising from an order passed by the AO to give effect to the order of the Tribunal dt. 27th April, 2006 in ITA No. 1068/Chd/2005 in assessee's own case for the impugned assessment year. 2. The issue before the Tribunal was whether deduction under s. 80P(2)(d) of the Act was permissible to the assessee in respect of the gross interest received from the member co-operative societies or net interest computed in accordance with the provisions of the Act. The Tribunal in its order dt. 27th April, 2006 (supra) held that the assessee is entitled to deduction under s. 80P(2)(d) in resp....
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....e to earning the stated interest income. Comparing the impugned interest income vis-a-vis total receipts of business, ratio was computed at 13.82 per cent and accordingly the head office expenses of Rs. 44,67,905 (i.e. 13.82 per cent of Rs. 3,23,29,274) were considered as expenses attributable to earn the stated interest income of Rs. 7,95,37,490. In the net result, total expenses attributable to earning of interest income of Rs. 7,95,37,490 or advances given to the member co-operative societies, was computed at Rs. 5,44,95,760 (Rs. 5,27,00,855 plus Rs. 44,67,905). Thus, an amount of Rs. 2,50,41,730 (Rs. 7,95,37,490 minus Rs. 5,44,95,760) was computed as deduction allowable to the assessee under s. 80P(2)(d) of the Act. The aforesaid determ....
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....loan is attributable to the earning of income, thus out of the interest paid on the working capital loan at Rs. 4,39,14,541 - Rs. 53,28,465 i.e. Rs. 3,85,86,076 comes to Rs. 1,85,21,316 being 48 per cent of the interest paid which can be at the most, attributed to the earning of the income under consideration." 4. Further, the assessee also challenged the amount of head office expenses attributed by the AO to the earning of interest income. The CIT(A) has considered the submissions and concluded as under:- "In brief, the AO is directed to apportion the interest paid as indicated, include the interest received on margin money deposited with the bank as income attributable from its business of producing and marketing milk ....
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....tion allowed under s. 80P(2)(d) Rs. 4,98,64,196 Restricted to Rs. 4,98,64,196 Nil" Against the aforesaid, the Revenue is in appeal before us. 5. The first and the foremost submission addressed by the learned CIT-Departmental Representative is that the CIT(A) was not justified in holding that only 48 per cent of the interest expenditure is attributable to the earning of interest from member co-operative societies. It is pointed out that the total loans advanced to the member co-operative societies was Rs. 1,08,64,81,652 and the total working capital loan raised was Rs. 56,83,69,066 and it could be seen that the entire amount of loan can be said to have been utilized for advancing loans to the member co-operative societi....
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....duction under s. 80P(2)(d) of the Act. However, the deduction permissible is on net income after deduction of expenses attributable to the earning of such income. The AO, while giving effect to the order of the Tribunal, considered two elements of expenditure as attributable to earning of the interest income from member co-operative societies. The first element is the interest expenditure incurred and the second element is the head office expenses incurred. The AO treated Rs. 5,00,27,855 of interest expenditure and Rs. 45,67,905 of head office expenses as attributable to earning of interest income of Rs. 7,97,37,490 from member co-operative societies, thereby net income of Rs. 2,59,41,730 was computed as income eligible for deduction under ....
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....t in the fitness of things to approve of the stand of the AO that the entire working capital loan raised is used for advancing of loans to the member co-operative societies. It is evident from the PandL a/c of the assessee that it is earning income from varied streams like sale of milk and milk products etc., service charges from milk unions, sale of agricultural produce, agricultural income, etc. Therefore, if at all a presumption is to be entertained, it is that the working capital loan has been utilized for varied activities which have generated receipts of income in the hands of the assessee. Moreover, the learned counsel for the assessee has explained and which has been accepted by the learned Departmental Representative, that interest....