2004 (11) TMI 28

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....on 80P(2)(c) of the Income-tax Act, 1961?" The facts of the case in brief are as follows: The respondent-assessee is a co-operative society. The assessment year involved in the case is 1977-78. During the year under consideration, the sugar factory was under construction. No business was done. The assessee received interest on deposits with banks and post offices. A return of net loss of Rs. 7,643 was filed. The deduction claimed by the assessee towards the expenses was disallowed by the Income-tax Officer. He computed the interest income after rejecting the claim put forward by the assessee with regard to the deduction towards the expenses on the ground that the expenditure incurred was in the nature of capital expenditure. The assessee'....

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....divided in two parts- firstly the exempted activities according to clauses (a) to (f) of section 81(i) and certain other activities which are not exempt, the profits and gains attributable to such non-exempt activities must necessarily be taxed, the Supreme Court in the case of Broach District Co-operative Cotton Sales, Ginning and Pressing Society Ltd. v. CIT [1989] 177 ITR 418 has held that the object of section 81(i) was to encourage and promote the growth of a co-operative society and consequently a liberal construction must be given to the operation of that provision. The Supreme Court has given a broad meaning of the expression "marketing" appearing in clause (c) of section 81(i). Section 80P of the Act grants deduction to a co-opera....

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.... Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 has held that the expression "attributable to" is much wider than the expression "derived from". The expression "attributable to" suggests that the Legislature intended to cover receipts from sources other than the actual conduct of the business of the assessee. The relevant paragraph in Cambay Electric Supply [1978] 113 ITR 84 (SC) reads as follows (page 771 of 118 ITR): "The expression 'attributable to' suggests that the Legislature intended to cover receipts from sources other than the actual conduct of the business of the assessee. The investment of the statutory percentage of its profits in Government securities was a condition of the carrying on of the busi....