TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 2117
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...., 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 getting the sale price along with the transfer fees....
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....e 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 ground that this appellant is giving credit facility to its members. This co....
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.... 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 activities so specified), so much of its profits and gains attributable to such activities as does not exceed,- (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and (ii) in an....
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....ank" 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 been held by Hon'ble The Supreme Court in the case of Tatgars' Cooperative Sale Society vs. Income Tax Officer, Karnataka reported in (2010) 3 SCC 223, at paragraphs 15, 16, 17, 19 and 21 as under: - "15. At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduct....
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....uch 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 Section 56 of the Act, even then, the assessee Society is entitled to the benefit of Section 80P (2) (a) (i) of the Act in respect of such interest income. We find no merit in this submission. Section 80P (2) (a) (i) of the Act cannot be placed on a par with Explanation (baa) to Section 80HHC, Section 80HHD (3) and Section 80-HHE (5) of the Act. Each of the said sec....
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....dly 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 societies covered by Section 80P of the Act, held as follows: (SCC p. 52, paras 6-7) "6. The classes of societies covered by Section 80P of the Act are as follows: (a) engaged in business of banking and providing credit facilities to its members; * * * 7. We may notice that the provision is introduced with a view to encouraging and promoting growth of cooperative sector in the economic life of the country and in pursuance of t....
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....gaged 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 the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assesse in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession". Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or payable exceed an amount of forty lakh rupees. (2) ... ... ... ... (3) ... ... ... ... (4) ... .......