TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 164
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.... nexus between the interest/dividend income earned from the Co-op. Societies and the interest expenditure incurred by the assessee on borrowed funds on the ground that there is no proof of the investment of such interest bearing funds to earn the said income without appreciating the fact that the assessee has failed to substantiate the above in full measure with proper evidences. Grounds of ITA No.3386/Ahd/2010 (A.Y. 07-08) "1. On the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in concluding that there is no nexus between the interest/dividend income earned from the Co-op. Societies and the interest expenditure incurred by the assesses on borrowed funds on the ground that there is no proof of the investment of such interest bearing funds to earn the said income without appreciating the fact that the assessee has failed to substantiate the above in full measure with proper evidences. 2. On the facts and in the circumstances of the ease and in law. the CIT(A) has erred in deleting the addition made by the AO at Rs.1,74,82,509/-on excess deduction claimed u/s.80P(2)(d), despite the fact that the assessee had failed to n....
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....business of procurement, processing and marking of milk productions, cattle food etc. The assessee society claimed deduction u/s.80P(2)(d) of the Act gross interest and dividend income earned from other co-operative societies of Rs.1,55,75,371/- in A.Y. 06-07, Rs.1,74,82,509/- in A.Y. 07-08 & Rs.2,16,10,539/- in A.Y. 08-09. The ld. A.O. observed that the assessee had earned total interest of dividend income as under: Asst. Year Deduction u/s.80P(2)(d) Interest expenditure incurred 2006-07 Rs.1,55,75,378/- Rs.1,38,66,436/- 2007-08 Rs.1,74,82,509/- Rs.2,07,17,824/- 2008-09 Rs.2,16,10,539/- Rs.2,07,17,824/- Ld. A.O. observed that the appellant had shown total interest and dividend income of Rs.2,88,18,922/- in A.Y. 06-07 and incurred interest expenses at Rs.1,38,66,436/- which were shown in the debit side of the p&l account. The appellant had claimed deduction u/s. 80P(2)(d) on the gross figure of interest and dividend income of Rs.1,55,75,371/- but ignored interest expenses at Rs.1.38 crore. The ld. A.O. analyzed the Section 80AB including the chapter C on deduction in respect of certain income and concluded that deduction under chapter VIA is with reference to the incom....
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....from other cooperative societies. 49,20,450/- 2. Interest income from deposits with The Surat Dist. Co-op. Bank Ltd. 1,06,54,921/- Total Deduction claimed u/s 80P(2)(d) 1,55,75,371/- 6.1 Interest expenses debited to profit and loss account is Rs.1,38,66,351/-. The break up is given on para 5 above. There are two issues for determination, first whether the deduction u/s.80P(2)(d) is available on the gross amount or the net amount, second whether in the facts of the case, there is any expenditure attributable to the income earned by way of dividend and interest income from other cooperative societies. As far as first issue is concerned, the law is very clear. Section 80AB stipulates that where any deduction is required to be allowed under any section included in Chapter VIA, the amount of income computed in accordance with the provision of this Act which alone be deemed to be the amount of income which is derived and received by the assessee and which is included in his gross total income. Therefore, as clearly elaborated by the assessing officer, there is no doubt that the assessee is eligible to avail deduction on the net income i.e. after allowing expenses from ....
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....tention on page no.4 and argued that the particulars of the bank deposit and interest expenses were not given to the A.O. He relied upon the case of Punjab State Cooperative Milk Producer's Federation Ltd. vs. CIT-II [2011] 336 ITR 495 (Punj. & Har.), wherein it was held that deduction u./s. 80P(2)(d) is allowable after excluding expenditure attributable to the earning of eligible income. Thus, he requested to set aside the order to the A.O. Ld. CIT(A) was not right on allowing the appeal on the basis of no nexus between interest free fund and invested in exempt income. Similar argument for A.Y. 07-08 and 08-09 was put forth at the time of hearing for deleting the addition made by the A.O. in A.Y. 06-07 at Rs.81,31,580/-, in A.Y. 07-08 at Rs.1,74,42,509/- & in A.Y. 08- 09 at Rs.2,15,30,155/-. 4(i). At the outset, ld. Counsel for the appellant contended that the appellant society had earned income by way of dividend and interest from investment made with other co-operative society as provided in Section 71 of the Gujarat Co-operative Society Act. This investment had been made since long back from the year 1951-52 to March 2006 out of surplus fund of the society. It was further argu....
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.... earning. But Hon'ble Gujarat High Court in Special Civil Application No. 18592/2011 held that there was no failure on the part of the petitioner to disclose fully and duly all the material facts necessary for assessment. Therefore, reopening is bad in law and SLP filed by the Revenue has been dismissed by the Hon'ble Supreme Court. He further argued that Chapter VIA constitutes a separate code dealing with deduction to be made in computing total income. Chapter VIA reference to special deduction for the nature of activity which are distinct, different, independent and separate to each other has specified under subsection 2 of Section 80P of the Act which inter alia covers the deduction u/s. 80P(2)(a)(i) for the activity of providing credit facility to its member by the cooperative society and also the deduction u/s. 80P(2)(d) for the income by way of interest and dividend from the investment in other co-operative society. He relied upon CIT vs. Iqbalpur Co.op. Cane Development Union Ltd. (2009) 315 ITR 441 (Uttarakhand). He further argued that there is a restriction imposed u/s. 80P aiming to ensure that the deduction does not exceed the net income under particular source. The lan....
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....iety from its investments with any other co-operative society, the whole of such income. After considering the factual as well as legal position on this issue, the appellant had not incurred any expenditure on the earning of the dividend and interest from other co-operative society as this investment was made long back. No new investment had been made by the appellant during the year under consideration. Thus, we confirm the order of the CIT(A) in all the years. 6. Ground no.6 in A.Y. 07-08 is against deleting the addition made by the A.O. on account of excess depreciation of Rs.2,95,924/-. The facts of the case is that the appellant had added assets at Rs. 86,17,183/- in the block of computers. The appellant had claimed depreciation 60% on assets added to the computers. On this issue, the A.O. gave reasonable opportunity of being heard and bifurcating the non computer item separately and he allowed the depreciation @ 10% on electrical items and made addition of Rs.2,95,924/-. 7. The CIT(A) allowed the appeal by observing that the computer peripherals purchase and put to use by the appellant society or the part and parcel of the electric data processing unit i.e. computer hardwa....