1992 (9) TMI 18 - HC - Income Tax

Summary

Issues:
1. Interpretation of deduction under section 80P(2)(a)(iv) for sales to non-members.
2. Granting deduction of entire gross profit under section 80P(2)(a)(iv).

Analysis:
The High Court of BOMBAY addressed the interpretation of deduction under section 80P(2)(a)(iv) for sales to non-members and the granting of the entire gross profit under the same section. The case involved a co-operative society engaged in various agricultural activities, including supplying commodities to both members and non-members. The Income-tax Officer contended that the original intention at the time of purchase of commodities determined the eligibility for deduction under section 80P(2)(a)(iv). The Tribunal, however, held that the intention at the time of purchase was irrelevant, and exemption applied to sales to members, irrespective of the original intention. The Court agreed with the Tribunal, emphasizing that the law grants exemption based on the actual sales of specified commodities to members, not the original intention at the time of purchase.

Regarding the deduction of the entire gross profit, the Court analyzed the definition of "profits and gains of business" under the Income-tax Act. It highlighted that the expression must be understood in the context of section 29, which governs the computation of income. The Court also referenced section 80AB, clarifying that it explains the pre-existing legal position and applies to the assessment year in question. The Court dismissed the applicability of previous decisions cited by the assessee, emphasizing the distinct provisions and factual backgrounds. Additionally, the Court discussed a Supreme Court decision on the interpretation of "attributable to" versus "derived from," noting that the distinction did not impact the current case.

In conclusion, the High Court ruled in favor of the Revenue for both questions raised. It held that the Tribunal's approach was erroneous, emphasizing that exemption under section 80P(2)(a)(iv) applied to actual sales to members and that the entire gross profit could not be claimed as a deduction. No costs were awarded in the judgment.