1994 (2) TMI 44 - HC - Income Tax

Summary

Issues:
- Interpretation of section 80P(2) of the Income-tax Act, 1961
- Classification of shares and units as stock-in-trade
- Exemption of income from business under section 80P(2)

Analysis:
The judgment involves five applications under section 256(2) of the Income-tax Act, 1961, pertaining to assessment years 1981-82 to 1985-86. The key questions raised in these applications revolve around the classification of shares of the Agricultural Refinance Corporation and the Unit Trust of India as stock-in-trade and the exemption of income earned from these shares under section 80P(2) of the Act. The respondent-assessee, a cooperative society providing long-term finance, claimed that the income from dividends and interest on these shares should be exempt under section 80P(2). The Income-tax Officer initially rejected this claim but it was accepted by the appellate authorities, including the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. The Commissioner held that the shareholdings were incidental to the business and exempt under section 80P(2).

Regarding the first question, the court found that the Income-tax Appellate Tribunal's decision that the shares and units were not held as stock-in-trade by the assessee was based on factual evidence and did not raise any legal question. The court emphasized that these findings were purely factual and not open to challenge as questions of law. Moving on to the second question, the court noted precedents where similar issues were considered by the court previously. Referring to previous decisions, the court highlighted that interest earned on government securities held as stock-in-trade by cooperative societies qualified for exemption under section 80P(2). Citing specific cases, the court concluded that the second question did not present any new legal issue based on established precedents.

In conclusion, the court rejected all applications as lacking merit. The judgment underscored that the findings regarding the classification of shares and the exemption of income under section 80P(2) were based on factual evidence and previous legal interpretations. The court's decision was guided by established precedents and the absence of any new legal questions arising from the issues raised in the applications.