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TMI Blog2010 (1) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (in short 'the Act'). Since the facts and the issue involved are common, we refer to the appeal of the Revenue in ITA No. 420/Chd/2007 which is directed against the order of the CIT(A) dt. 6th Feb., 2007 pertaining to the asst. yr. 2002-03. This order of the CIT(A) is arising from an order passed by the AO to give effect to the order of the Tribunal dt. 27th April, 2006 in ITA No. 1068/Chd/2005 in assessee's own case for the impugned assessment year. 2. The issue before the Tribunal was whether deduction under s. 80P(2)(d) of the Act was permissible to the assessee in respect of the gross interest received from the member co-operative societies or net interest computed in accordance with the provisions of the Act. The Tribunal in its order dt. 27th April, 2006 (supra) held that the assessee is entitled to deduction under s. 80P(2)(d) in respect of net income after deduction of expenses attributable to the earning of such income. The relevant portion of the order of the Tribunal is as under:- "We are therefore, of the considered view that deductions permissible to the assessee under s. 80P(2)(d) are in respect of the net income after excluding the expenses attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that perusal of the record would reveal that the total amount of working capital loan was not used for the purpose of advancing the loan and accordingly the interest paid on working capital loan after deducting the interest received on margin money needs to be proportionately allocated against the income received from by way of interest from members. It was argued that since the proportion between the loan advanced i.e. Rs. 1,08,64,81,652 to the members and that of the working capital loan raised i.e. (Rs. 56,83,69,066 - Rs. 3,93,13,566) is Rs. 52,90,55,500. Thus the proportion of the loan comes to 52 : 48 i.e. 52 per cent as funds provided by the assessee and 48 per cent out of the loans raised by the assessee. Accordingly, the proportionate expenses on account of interest would also be worked out in the same proportion. According to the Authorised Representative, it is incorrect to say that the total amount of interest paid on working capital loan is attributable to the earning of income, thus out of the interest paid on the working capital loan at Rs. 4,39,14,541 - Rs. 53,28,465 i.e. Rs. 3,85,86,076 comes to Rs. 1,85,21,316 being 48 per cent of the interest paid whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocieties was Rs. 1,08,64,81,652 and the total working capital loan raised was Rs. 56,83,69,066 and it could be seen that the entire amount of loan can be said to have been utilized for advancing loans to the member co-operative societies. The total expenditure incurred on the loan raised is thus to be allocated and there was no rationale that interest only to the extent of 48 per cent be allocated, It was pointed out that 48 per cent has been worked out by computing the proportion between the loan advanced to the members and the working capital loan raised. The learned CIT-Departmental Representative further pointed out that even with regard to the allocation of head office expenses, the AO had worked out the same at 13.82 per cent which was based on the percentage of interest receipts to the total receipts of the assessee. The CIT(A) has interfered with the estimation made by the AO without any substantial reasons. 6. On the other hand, the learned Departmental Representative has defended the orders of the CIT(A) by placing reliance on the same. The primary stand of the respondent-assessee is that the computation of expenses attributable to the earning of interest from member co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the banks. Moreover, there is no material led by the assessee and even nothing is brought on record by the Revenue to establish as to what level of working capital loans raised from the banks have been utilized in advancing of loans to the member co-operative societies. Therefore, under such a situation, an element of estimation is called for. It would also be not in the fitness of things to approve of the stand of the AO that the entire working capital loan raised is used for advancing of loans to the member co-operative societies. It is evident from the PandL a/c of the assessee that it is earning income from varied streams like sale of milk and milk products etc., service charges from milk unions, sale of agricultural produce, agricultural income, etc. Therefore, if at all a presumption is to be entertained, it is that the working capital loan has been utilized for varied activities which have generated receipts of income in the hands of the assessee. Moreover, the learned counsel for the assessee has explained and which has been accepted by the learned Departmental Representative, that interests of Rs. 51,53,314 and Rs. 9,60,000 are on account of specific term loans raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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