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2018 (2) TMI 2117
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.... is engaged in construction of dwelling units, which are being sold to several persons, who are becoming members of this assessee. Sizable transfer fee has been received and the deductions have been claimed, which are not allowed by the Assessing Officer. 4) It is contended by the counsel for the appellant that the interest receipt is covered under Section 80P (2) (a) (i) of the Income-tax Act and, hence, the interest receipt cannot be added to the income of this assessee. Thus, the addition of interest income made by the Assessing Officer at Rs. 6,85,079/- and receipt towards transfer fee at Rs. 9,60,470/-, for the assessment year 2002-03 are de hors the provision of Income-tax Act. These aspects of the matter have not been properly appreciated by the learned Commissioner of Income Tax (Appeals)as well as Income Tax Appellate Tribunal and hence, the orders passed by the Assessing Officer; the Commissioner of Income Tax (Appeals) as well as the Income Tax Appellate Tribunal deserve to be quashed and set aside. 5) Counsel for the respondents submitted that this appellant-assessee has been engaged in construction of dwelling units and selling it to the public at large and is ge....
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....idential flats and to sell it to the public at large. There are no fixed or definite members of this appellant. (ii) It further appears from the facts that those who are purchasing the flats from this appellant, they have to pay the sale price as well as transfer fee. Hence, the transfer fee is a part & parcel of the sale price. In the present case, such transfer fee accumulated for the assessment year 2002-03 is at Rs. 9,60,470/-. This is not exempted at all, looking to the nature of activity of this appellant. This transfer fee has been received by this appellant from a new member on their joining to the Society. Thus, firstly the flat is purchased, thereafter the purchaser becomes member of the Society. The main object of this Society is to construct the residential flats and to sell them to the public at large. Thus, the transfer fee is a part & parcel of the sale price. This aspect of the matter has been properly appreciated by the Income Tax Appellate Tribunal under the Income-tax Act. (iii) It further appears from the facts that sizable interest receipt has been claimed by this assessee as exempted under Section 80P (2) (a) (i) of the Income-tax Act on the ....
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....s who contribute their labour, or as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in the business of supplying milk, oilseeds, fruits or vegetables raised or grown by its members to - (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business. (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the act....
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.... Explanation.- For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the banking Regulation Act, 1949 (30 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities." (Emphasis supplied) The interest receipt is only incidental and the Society cannot be said to be in the business of providing credit facility to its so-called members. The prime object of this assessee is purely a commercial in nature of construction of residential flats and selling of the same to the public at large and, hence, this appellant-Society is not eligible for deduction under the aforesaid Section of the Income-tax Act. This aspect of the matter has been properly appreciated by the Assessing Officer, as well as by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal while passing the impugned orders. (iv) It has b....
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.... to the words "profits and gains of business" mentioned in Section 80P (2) of the Act. 17. In the present case, as stated above, the assessee Society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". Such interest income cannot be said also to be attributable to the activities of the Society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members. When the assessee Society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under Section 80P (2) (a) (i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as "investment". 19. An alternative submission was advanced by the assessee(s) stating that, if interest income in question is held to be covered by Sectio....
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....economic life of the country. It was done pursuant to the declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (see Bajaj Tempo Ltd. v. CIT). It is also trite that such a provision has to be construed as to effectuate the object of the legislature and not to defeat it (see CIT v. Mahindra and Mahindra Ltd.). Therefore, it hardly needs to be emphasised that all those cooperative societies which fall within the purview of Section 80P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) gives exemption of whole of the amount of profits and gains of business attributable to any one or more of such activities which are mentioned in sub-section (2). 19. Since we are concerned here with sub-clause (i) of clause (a) of sub-section (2), it recognises two kinds of cooperative societies, namely: (i) those carrying on the business of banking and; (ii) those providing credit facilities to its members. 20. In Kerala State Coop. Mktg. Federation Ltd. v. CIT, this Court, while dealing with classes of societie....
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....ion, it has to be exempted from tax notwithstanding that the condition of other heads of exemption are not satisfied. A reading of the provisions of Section 80P of the Act would indicate the manner in which the exemption under the said provisions is sought to be extended. Whenever the legislature wanted to restrict the exemption to a primary cooperative society, it was so made clear as is evident from clause (f) with reference to a milk cooperative society that a primary society engaged in supplying milk is entitled to such exemption while denying the same to a federal milk cooperative society." The aforesaid judgment of the High Court correctly analyses the provisions of Section 80P of the Act and it is in tune with the judgment of this Court in Kerala State Coop. Mktg. Federation Ltd." (Emphasis supplied) (vi) Section 44AD of the Income-tax Act reads as under: - "44AD.(1) Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts paid or payable to the assessee in ....