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TMI Blog2011 (12) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... led return of income for A.Y. 2004-2005 amounting of Rs. 81,23,534/- and claiming exemption u/s 80P of the I.T. Act, 1961 and declared NIL Income on 29.10.2004. The assessment has been completed u/s 143 (3) on 6.07.2005 at the returned income NIL. The hon'ble Supreme Court of India has announced decision in favour of department in the case S.L.P. (C. No.7527 of 2009) in the case of M/s Totgar's Coop. Society Ltd -reg - The decision is quoted in the 322 ITR at page No.283 (S.C.). There is similar issue involved in the M/s Pustikar Laghu Vyaparik Pratisthan Evan Shakh Sahakari Samiti Ltd., Jodhpur. The A.O. has allowed 80P on the interest received of Rs. 11,99,228/- on various FDRs. As per the decision of Hon'ble Supreme Court it will be taxed as income from other sources and it is taxable. I have reason to believe that income to tune of Rs. 11,99,228/- chargeable to tax has escaped assessment of the for the A.Y.2004-05. Dated: 05-03-2011" 3. The present writ petition was filed by the assessee in this Court on 12.9.2011 and while issuing notice to the respondents, this Court vide order dtd.22.9.2011 directed that assessing authority - respondent No.2 will not pass any final order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282, a copy of which has also been placed on record as Annex.7 has issued the impugned notice. He, therefore, submitted that the impugned notice and reassessment proceedings deserve to be quashed by this Court in the present writ petition. 6. Per contra, Mr. K.K. Bissa, learned counsel appearing for the Revenue submitted that limitation of four years would not apply in the present case, as contended by the learned counsel for the petitioner, for the reason that assessing authority has obtained the approval of the Commissioner of Income Tax for issuance of said notice in accordance with Section 151 first proviso of the Act according to which, the bar of limitation of four years is lifted in case such approval or sanction is granted by the Chief Commissioner or the Commissioner for issuance of said notice under Section 148 of the Act. He also submitted that Section 149 of the Act providing for time limit for issuing notice under Section 148 of the Act also provides 6 years' limitation under Section 149(1)(b) of the Act, if the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. 148. Issue of notice where income has es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members was entitled to deduction under section 80P(2)(a)(i) of the Act or not, held against the assessee, affirming the decision of High Court and the Income Tax Appellate Tribunal that such interest income of investment would not be business profit and therefore, would not be deductible from income under Section 80P(2) of the Act. The following extract from the judgment makes the position in this regard clear: "At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under Section 80P (2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them. What is sought to be taxed under Section 56 of the Act is the interest income arising on the surplus invested in short- term deposits and securities which surplus was not required for business purposes. Assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question, befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties as "investment". Further, as stated above, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this "retained amount" which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-Society, was a liability and it was shown in the balance-sheet on the liability-side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2) (a)(i) of the Act or in Section 80P(2)(a)(iii) of the Act. Therefore, looking to the facts and circumstances of this case, we are of the view that the Assessing Officer was right in taxing the interest income, indicated above, under Section 56 of the Act. An alternative submission was advanced by the assessee(s) stating that, if interest income in question is held to be covered by Section 56 of the Act, even then, the assessee-Society is entitled to the benefit of Section 80P(2)(a)(i) of the Act in respect of such interest income. We find no merit in this submission. Section 80P(2)(a)(i) of the Act cannot be placed at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly mixed questions of facts and law. The factual foundation for claiming 100% deduction in respect of interest income of Rs. 11,99,228/- by the petitioner - society under Section 80P(2)(a) (i) of the Act are yet to be laid by the assessee before the Assessing Authority. Merely because the petitioner - society is engaged prima facie in banking activities does not disentitle the assessing authority from issuing the impugned notice under Section 147/148 of the Act and calling in question, the taxability/deductibility of the aforesaid interest income of Rs. 11,99,228/- as 'income from other sources' unless such interest income is shown to be 'profits and gains from business' of banking society. Deduction under Section 80P(2) of the Act would not be available to the assessee if such interest income is taxable under section 56 as 'income from other sources' as held by the Hon'ble Apex Court. The petitioner has not even placed any evidence on record showing its governance by RBI under Banking Regulations Act to show that it is exclusively a banking business society. Therefore, it is a question still open and yet to be adjudicated upon by the assessing authority in present proceedings u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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