2006 (9) TMI 124 - HC - Income Tax

Revenue contend that interest is always treated as income whether earned from fixed deposits or from savings bank account. In the present case the assessee is a co-operative house building society established with the specific objective of purchasing agricultural land for development as plots which then are allotted only to its own members. - CIT (Appeals) as well as ITAT concluded that the utilization of moneys received from members and kept in savings bank account is directly linked with the activity of purchasing agricultural land developing the same and converting it into residential plots after obtaining approval of the Government of Haryana and thereafter distributing it to the members. Thus the moneys kept in the savings bank account have an inextricable link with the acquisition of land a fact which the Income-tax Appellate Tribunal records was not denied by the Revenue. no question of law - revenue appeal dismissed

Summary

Issues:
1. Treatment of interest as income earned from fixed deposits or savings bank account.
2. Utilization of moneys received from members by a co-operative house building society for purchasing agricultural land and developing it into residential plots.

Issue 1: Treatment of interest as income earned from fixed deposits or savings bank account

The judgment refers to the observations made by the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172, stating that interest is always considered as income, whether earned from fixed deposits or savings bank accounts. In this case, the assessee is a co-operative house building society with a specific objective of purchasing agricultural land for development into plots allotted only to its members. The agreement between the society and the Government of Haryana mandated keeping a portion of the amount realized from plot holders in a deposit for internal development work. The Income-tax Appellate Tribunal and the Commissioner of Income-tax (Appeals) concluded that the moneys kept in the savings bank account were directly linked to the acquisition of land and its development into residential plots, as acknowledged by the Revenue.

Issue 2: Utilization of moneys received from members by a co-operative house building society

The judgment discusses various legal precedents, including Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC), CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC), and CIT v. Kamal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC). It also refers to the decision in Krishan Kumar Aggarwal v. Assessing Officer [2004] 266 ITR 380, highlighting that once a question has been settled by the apex court, its application in a specific factual scenario does not constitute a substantial question of law. Consequently, the judgment was dismissed.

This judgment emphasizes the treatment of interest as income and the utilization of funds by a co-operative house building society for land acquisition and development, providing a detailed analysis of the legal aspects and precedents considered in arriving at the decision.