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TMI Blog2015 (12) TMI 1763X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, 1961 (in short, "the Act") against the order dated 10.4.2015 passed by the Income Tax Appellate Tribunal, Chandigarh (in short, "the Tribunal") in Income Tax Appeal No.97/Chandi/2015 for the assessment year 2011-12, claiming following substantial questions of law:- "i) Whether in the facts and circumstances of the case, the orders (Annexure A.1), (Annexure A.2) and (Annexure A.3) are legally sustainable? ii)Whether on the facts and in the circumstances of the case, the ITAT was correct in law in holding that disallowance under Section 14A can be made against the income which is not specifically exempt under the Act? iii)Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed return was filed on 8.3.2012. The assessment under section 143 (1) of the Act was completed and the net income as returned was accepted. The assessee claimed deduction under Section 80P(2)(d) of the Act amounting to Rs. 7,16,47,331/-. The assessee had business income to the extent of Rs. 52,98,061/- as computed in the chart reproduced in the order of assessment and interest income from other member cooperative societies amounting to Rs. 7,16,47,331/-. Income from sale of seed was Rs. 2,11,27,895/- and from long term capital gain at Rs. 56,16,373/-. The total income came to Rs. 1,08,64,434/- besides agriculture income at Rs. 64,28,394/-. Assessment was completed vide order dated 26.3.2014, Annexure A.1 and net taxable income had been asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the order, the appellant filed appeal before the Tribunal. Vide order dated 10.4.2015, Annexure A.3, the Tribunal partly allowed the appeal upholding the order of the Assessing officer with regard to deduction under Section 80P(2)(d) of the Act reducing the deduction by applying the provisions of section 14A of the Act disallowing expenses claimed by the assessee. The Tribunal has however directed respondent No.2 to recompute the disallowance of the expenses in view of Rule 8D of the Income Tax Rules, 1962. Thus, the Tribunal has upheld the application of section 14A of the Act for the purpose of computing the allowable deduction under section 80P(2)(d) of the Act. Hence the instant appeals by the appellant-assessee. 4. We have heard l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act from tax only in relation to net profit and not gross profits. It was held as under:- "7. The said provision, as seen therefrom, undoubtedly exempts an assessee - co-operative society, which carries on the business envisaged therein, from payment of income-tax on profits and gains of such business. But the controversy which relates to the said provision is, whether the incometax not payable thereunder, calls to be calculated either with reference to the full amount of profits and gains of the cooperative society's business as contended on behalf of the assessee or with reference to the net amount of profits and gains of the co-operative society's business,as otherwise computable under the provisions of the I.T. Act for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad laid down as under:- "The insertion of Section 14A with retrospective effect is the serious attempt on the part of the Parliament not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act against the taxable income (see Circular No. 14 of 2001 dated 22.11.2001). In other words,Section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income. In many cases the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of Section 14A, the expenditure incurred in respect of exempt income was bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, then the related expenditure is outside the ambit of the applicability of Section 14A. Further, Section 14specifies five heads of income which are chargeable to tax. In order to be chargeable, an income has to be brought under one of the five heads. Sections 15 to 59 lay down the rules for computing income for the purpose of chargeability to tax under those heads. Sections 15 to 59 quantify the total income chargeable to tax. The permissible deductions enumerated in Sections 15 to 59 are now to be allowed only with reference to income which is brought under one of the above heads and is chargeable to tax. If an income like dividend income is not a part of the total income, the expenditure/ deduction though of the nature specified in Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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