1995 (1) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of deduction under section 80P(2)(d) of the Income-tax Act, 1961 for a co-operative society.
2. Justification of granting exemption to the assessee under section 80P(2)(d).

Interpretation of Deduction under Section 80P(2)(d):
The case involved a co-operative society claiming deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest income. The Income-tax Officer apportioned expenses between taxable and non-taxable income, allowing 50% of interest income as deductible. The Commissioner of Income-tax (Appeals) upheld this decision, emphasizing that income from commission and interest was separate from other business activities. The Tribunal agreed that deductions under section 80P should be considered after computing the gross total income, and upheld the 50% deduction for commission income. The court held that the Income-tax Appellate Tribunal was not justified in allowing deduction for the entire interest income, ruling against the assessee.

Granting Exemption under Section 80P(2)(d):
The Tribunal granted an exemption of Rs. 2,49,948 to the assessee under section 80P(2)(d). However, the court disagreed with this decision, stating that the Tribunal was not justified in granting this exemption. It was emphasized that the expenses incurred in earning exempted income must be deducted to ascertain real profits, and the Tribunal's decision to allow the exemption was deemed incorrect based on legal precedents.

In conclusion, the court answered both questions against the assessee and in favor of the Revenue, highlighting the importance of correctly interpreting and applying the provisions of section 80P(2)(d) for co-operative societies.