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TMI Blog2018 (2) TMI 2117X X X X Extracts X X X X X X X X Extracts X X X X ..... parcel of the sale price. In the present case, such transfer fee accumulated for the assessment year 2002-03 is at Rs. 9,60,470/-. This is not exempted at all, looking to the nature of activity of this appellant. This transfer fee has been received by this appellant from a new member on their joining to the Society. Thus, firstly the flat is purchased, thereafter the purchaser becomes member of the Society. The main object of this Society is to construct the residential flats and to sell them to the public at large. Thus, the transfer fee is a part parcel of the sale price. This aspect of the matter has been properly appreciated by the Income Tax Appellate Tribunal under the Income-tax Act. As further appears from the facts that sizable interest receipt has been claimed by this assessee as exempted under Section 80P (2) (a) (i) of the Income-tax Act on the ground that this appellant is giving credit facility to its members. This contention is not accepted by this Court mainly for the reasons that the basic purpose of this assessee is not to provide credit facility to the members. Basically, the members are not fixed or definite persons. The basic goal of this assessee is to constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling it to the public at large and is getting the sale price along with the transfer fees. In fact, the main business of this assessee is not to give the loans or the credit to its members. In fact, not a single member of the appellant-Society is fixed one or identified one. Those who are coming to purchase the dwelling units or the flats or the residential units, they have to become members of this appellant. Thus, the provision of Section 80P (2) (a) (i) of the Income-tax Act is not applicable to this appellant looking to the facts of the present case. 6) It is further submitted by the counsel for the respondents that no error has been committed by the Assessing Officer in rejecting the claim of deduction of transfer fee amounting to Rs. 9,60,470/-. The appellant-assessee is not a club, nor it is a Cooperative Society having fixed or definite members, who have been contributing towards this assessee-society. In fact, the purchasers of the flats have to become members. Thus, the transfer fee is a part parcel of the sale price of the flats. Similarly, interest receipt is also to be added in the income of this assessee, because, it is not covered by Section 80P (2) (a) (i) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that this appellant is giving credit facility to its members. This contention is not accepted by this Court mainly for the reasons that the basic purpose of this assessee is not to provide credit facility to the members. Basically, the members are not fixed or definite persons. The basic goal of this assessee is to construct residential flats and to sell it to the public at large. After purchase of the flats, the purchasers have to become members of the Society. Thus, provision of Section 80P (2) (a) (i) of the Income-tax Act is not applicable to the facts of the present case. For the ready reference, Section 80P of the Income Tax Act reads as under:- 80P. Deduction in respect of income of co-operative societies (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely : (a) In the case of co-operative society engaged in (i) Carrying on the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees; and (ii) in any other case, fifty thousand rupees. Explanation .-In this clause, consumers co-operative society means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of powers, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. Explanation .- For the purpose of this section, an urban consumers co-operative society means a society for the benefit of consumers within the limits of a municipal corporation, municipality, municipal committee, noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose. The assessee(s) markets the produce of its members and wholesale 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. 16. In this connection, we may analyse 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its subject-matter. For example, Section 80-HHC of the Act, at the relevant time, dealt with deduction in respect of profits retained for export business. The scope of Section 80-HHC 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 business . 21. An important point needs to be mentioned. The words the whole of the amount of profits and gains of business emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. In this particular case, the evidence shows that the assessee Society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a cooperative society is exempt from tax what has to be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. 21. In CIT v. Punjab State Coop. Bank Ltd., while dealing with an identical issue, the High Court of Punjab and Haryana held as follows: (SCC OnLine P H paras 8 13) 8. The provisions of Section 80P were introduced with a view to encouraging and promoting the growth of the cooperative sector in the economic life of the country and in pursuance of the declared policy of the Government. The different heads of exemption enumerated in the section are separate and distinct heads of exemption and are to be treated as such. Whenever a question arises as to whether any particular category of an income of a cooperative society is exempt from tax, then i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge, dam or other structure or of any canal or road; (b) the execution of any works contract. (Emphasis supplied) (vii) Unnecessarily the Assessing Officer has shown leniency in calculation of the profit at the rate of 5%. It should have been at the rate of 8%. In fact, the respondents-authorities cannot be more charitable than the law. (viii) The aforesaid aspects have been properly appreciated by the Assessing Officer while passing the order for the assessment year 2002-03 dated 30.12.2009. Similarly, no error has been committed by the Commissioner of Income Tax (Appeals), Jamshedpur while deciding the appeal against the aforesaid order and no error has been committed by the Income Tax Appellate Tribunal, Circuit Bench at Ranchi while dismissing the appeal preferred by this appellant. 8) Hence, there is no substance in this Tax Appeal, as no substantial question of law is involved. This Tax Appeal is dismissed with a cost of Rs. 5000/- (Rs. Five Thousand only) which will be deposited by the appellant before the Secretary, Department of Women and Child Development Social Welfare, Government of Jharkhand, towards the Juvenile Justice Fund. This amount will be deposited in Bank A/c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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