2012 (9) TMI 554 - HC - Income Tax

Deduction u/s 80P (2)(d) - whether provision of section 14A are applicable to the deductions u/s 80P(2)(d) - Held that - As decided in The Punjab State Cooperative Milk Producers Federation Ltd. v. Commissioner of Income-Tax and another 2011 (3) TMI 615 - PUNJAB AND HARYANA HIGH COURT that under Section 14A, any expenditure incurred by the assessee for earning income which does not form part of total income under the Act shall not be an allowable expenditure. The assessee is entitled to deduction under Section 80P(2)(d) after deducting the expenditure attributable to the earning of such income - against the assessee

Summary

Issues:
- Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2003-04.
- Legality of orders regarding deduction under section 80P(2)(d) of the Income Tax Act.
- Allowance of deduction for interest income derived by a cooperative society from member cooperative societies.
- Determination and deduction of expenses while computing interest income derived from other cooperative societies for the purpose of deduction under section 80P(2)(d).
- Legality of the ITAT order directing deduction of expenses for determining deduction under section 80P(2)(d).
- Applicability of section 14A to deductions under section 80P(2)(d) for the assessment year 2003-04.

Analysis:
1. The appellant filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2003-04, questioning the legality of the orders regarding deduction under section 80P(2)(d) of the Income Tax Act. The appellant claimed deduction under section 80P(2)(d) for interest income derived by a cooperative society from member cooperative societies. The key issue was whether the expenses attributable to earning such income could be determined and deducted, especially when these expenses were not identifiable and were part of common accounts.

2. The facts of the case revealed that the appellant had filed its return of income declaring nil income after claiming a deduction under Section 80P(2)(d) of the Act. However, the Assessing Officer disallowed the claim, leading to an appeal by the assessee before the Commissioner of Income Tax (Appeals), who allowed the appeal. Subsequently, the revenue filed an appeal before the Tribunal, which allowed the revenue's appeal. The appellant then filed the present appeal challenging the Tribunal's decision.

3. During the hearing, the appellant's counsel acknowledged that the issue raised in the present case was settled by a previous decision of the Court. The Court referred to a previous judgment where it was held that under Section 14A of the Act, any expenditure incurred by the assessee for earning income not forming part of the total income shall not be an allowable expenditure. The appellant could claim deduction under Section 80P(2)(d) after deducting the expenditure attributable to earning such income.

4. Consequently, the Court held that the substantial questions of law were answered against the assessee and in favor of the revenue. The appeal was dismissed based on the precedent set by the previous judgment regarding the deduction under Section 80P(2)(d) and the applicability of Section 14A to such deductions for the assessment year 2003-04.