Chitra Venkataraman, J.@mdashThe Revenue is on appeal as against the common order passed by the Income Tax Appellate Tribunal relating to assessment years 1993-94 to 1996-97. The following common substantial questions of law were raised for consideration in this Tax Case Appeal.
(i) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the application of the judgment of the Supreme Court in the case of
(ii) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the interest earned by the Assessee on Kisan Vikas Patra and NSC etc. is income from business eligible for deduction u/s 80P(2)(a)(ii) and not income from other sources?
2. The Assessee herein is a co-operative society engaged in the production and sale of Kancheepuram Silk Sarees woven by members. The Assessee herein invested its funds in various Government securities viz., Kisan Vikas Patra, Indra Vikas Patra etc. as directed by the Deputy Director of Handlooms and Textiles, Kancheepuram on the orders received from the District Collector. The said direction was given in the context of the Assessee claiming credit facility from the Central Government and the State Government with reference to the business activities. Thus, to make their investments in these Government securities, the Assessee borrowed money from the bank. On the interest derived on these investments, which were made out of business compulsion, the Assessee claimed that they were attributable to the business. Consequently, the Assessee was entitled to the benefit of Section 80P(2) of the Income Tax Act. The Assessee filed a petition u/s 154 of the Income Tax Act for rectification of the order passed u/s 143(3) read with 250 of the Income Tax Act, by placing reliance on the decision of the Apex Court reported in
3. The Assessee filed appeals before the Commissioner of Income Tax (Appeals), who dismissed the Assessee''s plea holding that the issue was debatable one and hence, the petition filed u/s 154 of the Income Tax Act was not maintainable. However, the Commissioner of Income Tax (Appeals), referred to the order passed in the case of the Kancheepuram Silk Weavers Co-operative Production and Sale Society Limited and pointed out that the Assessee, who went in for credit facilities with the Government, had no choice except to make this investments in the Government securities. The investments thus prompted by the business exigencies is clearly substantiated the letter of the Deputy Director of Handlooms and Textiles. Thus, the Commissioner of Income Tax (Appeals) viewed that even though the income is attributable to the business and derived from the business, by reason of scope of Section 154 of the Income Tax Act, the Assessee was not entitled to the relief. Aggrieved by the same, the Assessee went on appeal before the Income Tax Appellate Tribunal.
4. It is seen from the order of the Tribunal that, apart from reiterating the contentions taken before the Commissioner of Income Tax (Appeals), the Assessee placed reliance on the CBDT circular No. 68 dated 17.11.1971 directing that where an Assessee moves an application u/s 154 of the Act, placing reliance on the later decision of the Supreme Court pronouncing the correct legal position, the application had to be acted upon. The Tribunal pointed out that as far as the present case is concerned, no further investigation of facts was necessary to consider the claim. Hence, applying the decision of the Supreme court reported in
5. As far as the first question of law as to the invoking of jurisdiction u/s 154 of the Act is concerned, learned standing counsel stated before this Court that in the light of the decision of the Apex Court reported in
6. As far as the second substantial question of law is concerned, as already pointed out, the investment made by the Assessee in Government securities was evidently on account of compulsion of the law. In terms of the scheme on credit facility offered by the State Government, the Assessee acted on the directions of the Deputy Director of Handlooms and Textiles and made investments in the Government securities. This was done by drawing money from the bank. Thus, rightly the Tribunal held that the investment made by the Assessee was linked to the business exigency stands clearly established for getting the credit facility from the State Government.
7. Section 80P is a specific provision relating to deduction in respect of income of co-operative societies. Section 80P(2) of the Act refers to the sums to be considered for the purpose of deduction. Section 80P(2)(c) of the Act which is relevant to the case on hand reads as under,
80P(2) The sums referred to in Sub-section (1) shall be the following, namely -
(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 any other case, [fifty] thousand rupees, Explanation. - In this clause, consumers'' co-operative society'' means a society for the benefit of the consumers;].
8. Thus, in contra distinction to the provisions of deductions, restricting the claim of deduction to the income ''derived'' from the activity specified therein, having direct nexus to the activity or the business therein, Section 80P of the Income Tax Act provides for the deductions in respect of profits and gains ''attributable to'' the activities of the co-operative society.
9. In the decision reported in
10. In the decision reported in
11. In the circumstances, we have no hesitation in rejecting the plea of the Revenue, thereby confirming the view of the Tribunal. The Tax Case Appeals are dismissed. No costs.
