2004 (10) TMI 65 - HC - Income Tax

Whether Tribunal was legally correct in holding that deduction under section 80P(2)(d) is allowable on the gross amount of interest ignoring the provisions of section 80B(5) which defines the term gross total income in such a way that it could only mean net income before making any deduction under Chapter VI-A or section 280-O and without applying the provisions of section 64? Whether Tribunal was legally correct in holding that deduction under section 80P(2)(d) was allowable on the gross amount of income from interest in the assessment year 1979-80? - We answer both the questions of law referred to us in the negative, i.e., in favour of the Revenue and against the assessee

Summary

Issues:
1. Interpretation of deduction under section 80P(2)(d) of the Income-tax Act, 1961 for co-operative societies.
2. Application of section 80AB and section 80B(5) in determining the deduction on income from interest for co-operative societies.

Analysis:
Issue 1:
The judgment pertains to two Income-tax Reference cases concerning the assessment years 1971-72 and 1979-80, where the Income-tax Appellate Tribunal referred questions regarding the deduction under section 80P(2)(d) of the Income-tax Act, 1961 for co-operative societies. The core issue was whether the deduction should be allowed on the gross amount or the net amount of interest income received by the co-operative society from its investments. The respondents, co-operative societies, claimed deductions on the gross amounts of interest received. The Revenue contended that only the net amount of income should be allowed as a deduction under section 80P(2)(d) of the Act.

Issue 2:
The debate revolved around the applicability of section 80AB and section 80B(5) in determining the deduction on income from interest for co-operative societies. The Revenue argued that section 80B(5) mandates only the net income to be allowed as a deduction, while the respondents relied on section 80P(2)(d) which allows the whole income received as a deduction. The court analyzed the provisions of section 80AB, inserted in the Act in 1980, which specifies the computation of deductions under Chapter VI-A. The court also referred to relevant case laws such as Hansraj Gordhandas v. H.H. Dave and Doaba Co-operative Sugar Mills Ltd. to interpret the legislative intent behind section 80P(2)(d).

The judgment emphasized that the provisions of section 80AB were declaratory and retrospective in operation, aiming to clarify the law regarding deductions for specified incomes. The court highlighted the significance of adhering to the plain terms of the statute without implying any intention beyond the exemption provided. Additionally, the court deprecated the practice of citing overruled decisions and stressed the duty of legal practitioners to assist the court accurately.

Ultimately, the court ruled in favor of the Revenue, holding that the deduction under section 80P(2)(d) should be allowed on the net amount of income received by the co-operative society, considering the provisions of section 80AB and the legislative intent behind the deduction. The judgment provided a comprehensive analysis of the legal framework and relevant precedents to arrive at its decision, ensuring clarity on the interpretation of tax deductions for co-operative societies.