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TMI Blog2010 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... come from other sources" under Section 56 and not under Section 28 of the Income Tax Act, 1961 [`Act', for short], and, consequently, the assessee-Society would not be entitled to deduction under Section 80P(2)(a)(i) of the Act. 5. The bunch of civil appeals filed by the assessee-Society concerns Assessment Years 1991-1992 to 1999-2000 [excluding Assessment Year 1995-1996]; however, the lead matter is civil appeal arising out of S.L.P. (C) No.7572 of 2009 which relates to Assessment Year 1991-1992. 6. The assessee-Society was assessed to tax as a cooperative society. The assessee is the appellant in all eight civil appeals. For all the above Assessment Years 1991-1992 to 1999-2000 [except Assessment Year 1995-1996], assessee(s) filed its Returns disclosing income from business, i.e., marketing of agricultural produce of its members and providing credit facilities to them. Assessee(s) also filed its Profits and Loss Accounts and its balance-sheets along with its Returns. In respect of above-mentioned interest income, assessee(s) claimed deduction under Section 80P(2)(a)(i) of the Act. The assessment(s) for the afore-stated period stood re-opened by issue of notice(s) under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer held that the assessee-Society had invested the surplus funds as, and by way of, investment by an ordinary investor, hence, interest on such investment has got to be taxed under the Head "Income from other sources". Before the Assessing officer, it was argued by the assessee(s) that it had invested the funds on short-term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman; therefore, such interest income was liable to be taxed under Section 28 and not under Section 56 of the Act, and, consequently, the assessee(s) was entitled to deduction under Section 80P(2)(a)(i) of the Act. This argument was rejected by the Assessing Officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s). 8. It was the case of the assessee(s) before us that the assessee(s) is a cooperative credit society. It's business is to provide credit facilities to its members and to market the agricultural produce of its members. According to the assessee(s), it's activity constituted "eligible activity" under Section 80P(2)(a)(i) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act with Explanation (baa) to Section 80HHC, the language used in Section 80HHD(3) and the words used in Section 80HHE(5) of the Act. In this connection, it was urged that there is a wide contrast in the language between Section 80P(2)(a) on one hand and the language used in Section 80HHC read with Explanation (baa), Section 80HHD(3) and Section 80HHE(5) as also the language used in Sections 72 and 32AB of the Act. According to the assessee(s), if one keeps this contrast in mind, it is clear that the concept of head of income or source of income will not apply to the provisions of Section 80P(2) of the Act because wherever Parliament intended to emphasise the applicability of such concept, it has expressly so stated in the relevant section. According to the assessee(s), by way of illustration, under Explanation (baa) to Section 80HHC or under Section 80HHD(3) or under Section 80HHE(5), etc., the words used are, "`profits of the business' means the profits of the business as computed under the head "Profits and gains of business". Therefore, according to the assessee(s), when such words do not find place in Section 80P(2) of the Act, it is clear that the concept of source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, before us, is - whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under Section 28 of the Act? In our view, such interest income would come in the category of "Income from other sources", hence, such interest income would be taxable under Section 56 of the Act, as rightly held by the Assessing Officer. In this connection, we may analyze Section 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with "Deductions in respect of certain Incomes". The Headnote to Section 80P indicates that the said section deals with deductions in respect of income of cooperative Societies. Section 80P(1), inter alia, states that where the gross total income of a cooperative Society includes any income from one or more specified activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lternative 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 with Explanation (baa) to Section 80HHC, Section 80HHD(3) and Section 80HHE(5) of the Act. Each of the said sections has to be interpreted in the context of its subject-matter. For example, Section 80HHC of the Act, at the relevant time, dealt with deduction in respect of profits retained for export business. The scope of Section 80HHC is, therefore, different from the scope of Section 80P of the Act, which deals with deduction in respect of income of cooperative Societies. Even Explanation (baa) to Section 80HHC was added to restrict the deduction in respect of profits retained for export business. The words used in Explanation (baa) to Section 80HHC, therefore, cannot be compared with the words used in Section 80P of the Act which grants deduction in respect of "the whole of the amount of profits and gains of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Commissioner of Income Tax. In the circumstances, it was urged that the notice under Section 148 of the Act was invalid and consequential re-assessment under Section 147 read with Section 144A of the Act was bad in law. We find no merit in this argument. At the outset, we may state that the point aised on validity of the notice under Section 148 of the Act essentially concerns factual aspect. The Tribunal is the final fact finding Authority under the Income Tax Act. It has given a finding of fact that, though the written communication of the sanction, which has no prescribed format, was received by the Assessing Officer on 8th June, 2001, yet, it cannot be said that sanction was not accorded prior to 31st May, 2001. The Tribunal has recorded a finding of fact that there was a detailed correspondence between the concerned officers prior to 31st May, 2001, in the context of re-opening of assessment. It may also be mentioned that there is a vital difference between grant of sanction and communication of such sanction. As stated by the Tribunal, no particular form has been prescribed in the matter of grant of sanction. For the afore-stated reason, the Tribunal came to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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