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Issues involved:
The judgment involves the interpretation of deductions under section 80P(2)(a) of the Income-tax Act, 1961 for a co-operative society engaged in cottage industries and marketing of agricultural produce. Issue 1 - Deduction under section 80P(2)(a): The assessee claimed exemption under section 80P(2)(a)(ii) and (iii) for income from business in minor forest produce and grocery items. The Assessing Officer disallowed part of the deduction based on the view that profits from eligible activities should not be taxed, leading to a reduced deduction. The Appellate Assistant Commissioner and the Tribunal held that the entire deduction should be allowed, which was endorsed by the High Court. The legislative intent behind section 80P is to encourage and promote the growth of the co-operative sector by providing relief from profits of specified activities without deducting losses from other activities. The deduction should be given to the extent of the profit attributable to the cottage industry without offsetting losses from other activities. Issue 2 - Separate consideration for deduction: The Tribunal was questioned on whether profits and gains from each activity specified in section 80P(2) should be separately considered for deduction from gross total income. The High Court affirmed that the deduction under section 80P(2)(a) should not be calculated on the adjusted total income from all activities mentioned in the sub-section, but rather on the profit attributable to each eligible activity without offsetting losses from other activities. Issue 3 - Correct interpretation of section 80P(2)(a): The Tribunal was asked to determine if the assessee was entitled to deduction being the income from business in minor forest produce without adjusting for the loss incurred on the marketing of agricultural produce of its members. The High Court held that the deduction under section 80P(2)(a) should not be reduced by losses from other activities, as the legislative intent is to provide relief to the co-operative sector by deducting profits from eligible activities without considering losses from other activities. Issue 4 - Calculation of deduction: The Tribunal questioned whether the deduction under section 80P(2)(a) should be calculated on the adjusted total income from all activities mentioned in the sub-section. The High Court clarified that the deduction should be given to the extent of the profit attributable to the cottage industry without deducting losses from other activities, as indicated by the language of section 80P(2)(a). The High Court, comprising of Judges Arijit Pasayat and D. M. Patnaik, answered all four questions in favor of the assessee and against the Revenue, affirming that the entire deduction should be allowed without offsetting losses from other activities.
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