2002 (7) TMI 233 - AT - Income Tax

Summary

Issues involved:
- Deduction under section 80P(2)(c)(ii) of the Income-tax Act for a co-operative housing society.
- Interpretation of the term 'profits and gains' in section 80P(2)(c)(ii).
- Applicability of section 80P(2)(f) in relation to the deduction claimed under section 80P(2)(c)(ii).

Detailed Analysis:
1. The appeals were filed by the assessee against the CIT(A)'s order upholding the disallowance of a deduction of Rs. 20,000 under section 80P(2)(c)(ii) for the assessment years 1995-96 and 1996-97. The Assessing Officer disallowed the claim stating that the assessee, a housing society, did not have profits and gains of business, which led to the disallowance. The CIT(A) agreed with this view, citing section 80P(2)(f) which excludes housing societies from certain exemptions related to property incomes.

2. The assessee argued that the term 'profits and gains' in section 80P(2)(c)(ii) should not be limited to business profits but should include incomes under other heads. They relied on a Bombay High Court decision supporting their claim. The Departmental Representative contended that the deduction under section 80P(2)(c)(ii) pertains only to business activities. The Tribunal noted the debatable nature of the issue.

3. The Tribunal analyzed the provisions of section 80P(2), emphasizing that section 80P(2)(c) refers to "profits and gains attributable to such activities" of a co-operative society, not specifically to business profits. It highlighted that the absence of the term 'business' in section 80P(2)(c) indicates a broader interpretation of 'profits and gains.' Reference was made to legal commentary supporting a wider interpretation of 'profits and gains.'

4. Referring to a Supreme Court decision, the Tribunal noted that in certain contexts, 'profits and gains' may extend beyond business proceeds. It concluded that the issue was debatable. The Tribunal also clarified that invoking section 80P(2)(f) was irrelevant since the claim was under section 80P(2)(c). It held that the Assessing Officer's disallowance was beyond permissible adjustments, and the CIT(A) erred in confirming it. Consequently, the Tribunal allowed the appeals, directing the deletion of the disallowed deduction of Rs. 20,000 for both assessment years.