1997 (5) TMI 21 - HC - Income Tax

Summary

Issues involved:
The issue involves the deduction under s. 80P(2)(a)(iii) against the net income after setting off proportionate expenses for earning the exempt income where such expenses are mixed up with the remaining expenses.

Summary of Judgment:

Issue 1: Deduction under s. 80P(2)(a)(iii)
The assessee, a co-operative society, claimed that income earned from commission business was entirely exempt. The Income Tax Officer (ITO) calculated proportionate expenses against total receipts under various activities, resulting in a net income from the commission business. The Tribunal, ITO, and Appellate Authority upheld this calculation. The Court found that the various activities of the assessee were not interdependent, leading to the conclusion that the deduction under s. 80P(2)(a)(iii) should be allowed against the net income after setting off proportionate expenses. Citing relevant case law and principles, the Court affirmed the Tribunal's decision, stating that the expenses for earning exempt income must be considered separately.

Separate Judgment by Judge A. L. VAIDYA:
Judge A. L. VAIDYA concurred with the decision of Judge M. SRINIVASAN, emphasizing the importance of considering all relevant facts and circumstances to determine the applicability of deductions under tax statutes. The judgment highlighted the need for a comprehensive assessment of business activities to ascertain the eligibility for exemptions and deductions under the law.