2006 (9) TMI 95 - HC - Income Tax

Deduction u/s 80P - Revenue contended that as per 80P the assessee-cooperative society which is engaged in the business of marketing of the agricultural product eligible for exemption of such but not including income from wheat, gram, maize, bazra and potatoes - Held the matter in favour of revenue

Summary

Issues:
Interpretation of section 80P(2)(a)(iii) of the Income-tax Act, 1961 for exemption of society's income.

Analysis:
The High Court of Punjab and Haryana was presented with a question of law referred by the Income-tax Appellate Tribunal regarding the exemption of a society's income under section 80P(2)(a)(iii) of the Income-tax Act, 1961 for the assessment year 1976-77. The Tribunal had considered the society as a co-operative society deriving income from various sources, including commission on sales, agricultural produce, house property, interest, and dividends. The Income-tax Officer had identified a credit of Rs. 40,000 as a subsidy from the National Co-operative Development Corporation, which was considered taxable income. However, the Appellate Assistant Commissioner had exempted income from specific agricultural activities, leading to a dispute over the taxability of this subsidy amount.

The Revenue argued that the relevant section had been amended over time, notably by the Finance (No.2) Act, 1967, and the Income-tax (Second Amendment) Act, 1998, which impacted the applicability of exemptions under section 80P. The amendment substituted section 80P(2)(a)(iii) and was made retrospective from April 1, 1968. The High Court highlighted the case law where the amended provision had been upheld, emphasizing that income derived from activities specified in the provision would not be exempt from tax. In this case, the income earned by the society from dealing in various agricultural products was not eligible for exemption under the amended provision.

Considering the amendments and the judicial precedents, the High Court ruled in favor of the Revenue, concluding that the society's income, including the disputed subsidy amount, was not exempt from taxation under section 80P(2)(a)(iii). The judgment aligned with the interpretation of the amended provision and the established legal principles, ultimately disposing of the reference in favor of the Revenue.