High Court Karnataka High Court

M/S The Totgars Co-Operative Sale … vs The Income Tax Officer on 30 September, 2008

Karnataka High Court
M/S The Totgars Co-Operative Sale … vs The Income Tax Officer on 30 September, 2008
Author: V.G Sabhahit S.N.Satyanarayana
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 'u,_PASsED IN
V 'ASSESSMENT YEAR 1992-93 PRAYING THAT THIS HON'BLE:
'---SouRT

IN Tfifl HIGH COURT OF KARNATAKA<TWI*v
CIRCUIT BENCH AT DHARWAD,m »S*fj 

DATED THIS THE Emfih DAY OF SEPTEMSSg«é05Sff"

pRESENT"*«fiL
THE HON'BLE MR.JUSfICE;§.G.§A§HRH1T{7, 

'.§nD V1 .__
 . 9N." , . g
THE Hon'BLESMR.JUSTtcE"S.SATYANARATANA

Triage.TV1Ss%§/%.2;g§§.L

M/S THE TOTQARS €O4OPERATIVE"SALE SQ€IETY LTD
NEW MARKET_IARD}.SIRSIx581 éfi2,
REPRESENTED.B¥*ITs{G£SSRAL,MANGAER
PRAKAsa.£SGDE;'ArfiS AEDUT 33 YRS, S/o SHRIDHAR
H£GDE,-- '*,«f%.'»_*__.§ ... APPELLANT
(33 s;iyutnSaRASfiugAMAN & CHYTHANYA --advs.)

AND :

VgTHE IScoMS*TAxMSFFTcER
AA ~wARn~«T,
' SIRS: e_5S1 402

. RESPONDENT

” _{By 5:: E V SESHACHALA – ADV.)

260.19: OF THE INCDME
9.11.2004
FOR THE

£ TSis I.T.A. FILED U/S.

TAX ACT, 1961 ARISING GUT OF ORDER DT.
ITA NO. 1461/sue/2903

MAY BE PLEASED TO A} FORMULATE THE
SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN
BHXLLOW THE APPEAL AND SET ASIDE THE ORDER OF THE
INCOME TAX AP?ELLATE’. TRIBUNAL BEARING ITA N0.
11260/BANG/2003 DT. 9.11.2GO4 FOR THE ASSESSMENT
YEAR 1992-93 ETC.

THIS ITFL COMING ON FOR HEARING THIS EAY,
SABEEBIT J. , DELIVERED THE FOLLOWING:

JUDGM£NT

This appeal is filed by ‘tne{faeeee$ee,

being aggrieved by the order paeeai E? thetx

Income Tax Appellate Tricnnaii Bangalore Bench
‘A’ in ITA NO.1461/Behg/2603 date§:§Iii.200%
wherein the A§peiiateWTrinnnal ey”a1iowing the
appeal of the afiefieneealhaeogeegd that income

received.*byfi the Eaeseeeeeu front investment in

security anfi page defioeits would not qualify

for exea§tion_iunder~ Section 8OP(2)(a)(i) of

the Income Tar Act; 1961 (hereinafter referred

_§¢ ‘as ‘Chev Act’) and accordingly, has set

A’=,aei&e.the order passed by the First Appellate

‘7Au£n5;1§yé Commissioner of Income Tax

“(Ap§éais), Hubli dated 26.9.2003 and restored

i*:,the order passed by the Assessing Qfficer.

2. The essential facts of this case
leading up to the filing of this appeal are as

follows :–

\}3

The assessee is a Co-operat«i-V§£»..__’Scciety

registered under the Co-operative’:.A_iSo99’i~–9i2–. :to
return of the incomeflfor year
1992–93 was f’i’3.ed riiiscivosing the
income of the head of
‘incomef. exemption
for the {a} (1) of the
Act tttt return was ‘nil’ .

The was processed under

S_e_ctio’n ‘l.4_3=.{i”)_ of the Act on 9.9.1992

._’:}_a’ict..ing return, statement of income,

.,4’repsc}rt under section 4423.13 cf the Act,

titrading P 5: L a/<2: and balance sheet

we~re";. fiieci slang with the return of income.

_ The business carried on by the assesee was

marketing of agricultural produce of the
members of the society. The business activity
other than marketing of the agricuitural

produce resulted in net loss. The assessment

V51

deposits other than cowopertivew befits Wand

interest from bonds and securities, 'the,

Additional Commissioner Wof',InoomehrTe$i_heldz_t

that interest on bank deposits other tsshéoa
operative banks and inf3rest*oh=secfirities and
bonds, income ,is essesahle es "income from
other sources "rorR_%hiche oeduction under
Section 8OE(llTiii@ no$ooio': he admissible.
Further finéié wee he deauepiefi for explanation

that the entire income would be assessable as
income}

'»LAfteri_he3ring the representative of the

*=,_ assessée and considering the contention, the

'*$seesshenti; Officer by its order dated

held that the following directions

given in Section 144A of the Act that income

ftifrom deposit (other than Co–operative banks)

'and income from bonds and securities is

assessable as income front other sources and

the said income is assessable without

deductions for interest expenditurelfgnol no

deduction under section "8OE(fi)(a}ii) 'of »the l

Act is allowable and further there shalihfig no l

deduction of interest expenditure,RVm

Being aggrieeedgofl toe saga order of the
Asessment_t.Qffioer;;vLtfieLi7assesse preferred
appeal~oetore"t§e first Aroellate Pmthorityw
the ____ Hcomgiesioneri be Wlncome Tax {RpDeals)
Huolig ano the rirst appellate authority by

orderV_"vvl'arL"o:* in appeal

2:1 4/2i5~/i2,;,1§/,217/213M 26/218/HBL/CIT EA} /new

l".¢ITiRlf§2fO3 & O3/O4 allowed the appeal

'V."ae¢e§t1ng the contentions of the aseessee that

the*A income received from deposits and

'"Isecerities is attributable to profit gains of

Relassessee and therefore, entitled to exemption

l under Section 80P{2)(a){i) of the Act and set

aside the order passed by the Assessing
Authority. Being aggrieved by the order

oassed by the first appellate authority,

\,J~

Revenue preferred appeal u_dinofi*:TA

NO.1461/Bang/2003. The essessee hes aisoifilede

cross objections being "aggrievedoVby' the '

finding given by the First Aoneliste-Auenority
regarding validity of the notice issued under
Section 148 Qf_ the" e¢§;_ Tee "Income Tax
Appellate Tribufiai' 9.11.2004
allowed_tne ap§esi fiiei cg the Revenue and
dismissed fine crcssVo§jections by holding that
thev """ °Assessing"Ldefticer; was justified in
reopenind tee assessment under Section 147 of

the Ace and groper notice was issued under

_Section iéerwof the Act and consequently,

';iasessment~_under Section 143(3) read with

" Section £44 A of the Act is valid and fruther

held that income from securities and deposits

2"~i;inA business does not qualify for exemption

diunder Section 8OP(2)(a){i) of the Act as the

said income is not attributable to gains and
profits of the assesse as asseseee is not

doing any banking business and further held

\y%

that the first appellate Tribunai',w§st'fi§tV

justified in relying upcn. the.féeci3iefis'

wherein the assessee was a ed-operative bank

and since the assessee; waei not' floihgs any'

banking business¢_ the"eifi¢6me teceiVed from
deposits in bante wherein ifipfeepect of the
surplus iuh§$_ éfieiteafiefggti'ettributable to
profits éfi@_§eifig gfvbgeieess end accordingly,
helqw"tfiét' the teéfie "die not qualify for
exe$pti§n'iefifié§=i$e§ti¢n 80P{2){a){i) of the
Act' afid,aeeeteinely, set aside the order

peesefi thy' the .First Appellate Tribunal and

'.testoteda the order passed by the Assessing

.' f_ it

Being aggrieved by the order of the

elncome Tax .Appe1late Tribunal, the assessee

has preferred this appeal.

3. The appeal was admitted on 15.6.2005.

Kyfi.

10

4. We have heard the learned counmel for

the appellant and the learne¢.Hfioouoeelo

appearing for the respondentrrevenfie;ji°

5. Having regand itoictneiycontefitions

urged, the substantial Questione of law that

arise for determination in this appeal are :«

1) Whether the~ finding “5: =tne income tax

gflapoeiiatefifriopnaiwtnat interest received

the” the iaeeeeeee from securities and

-, de§C$itS in Beak is not attributable to

.tifthe anofint of profits and gains of the

i>;fe§$sigess and wherefore, does not qualify

tforVexemption under Section 8OP(2)(a)(i)

“.eof the Act and as assessed under Section

56 of the Act is contrary’ to law and
calls for interference in this appeal?

ii) Whether the finding of the income

tax appellate tribunal that the

“VJ

11

Q. e e
_esssssen proceedings LMreopening.3’Qf

assessing order under Section i4?fof toe r

Act was proper and notioe.issned under

Section 148 of _theviAct_ wasfl_fiali&}°<is,

contrary to EQQH and «f¢ai;s" for

interference in this $P$ea1 ?H

6. The.aboyesseio_snostantial questions
of law ¥§§%??%me Q? consieetation before this
Court in iéfi i558 of ésoé arising out of the
same coefion,jodgment_passed by the the Income
Tax App§1;gte”5T:isnh$1, Bangalore Bench ‘A’

defied; 9.l1téfiO4: which is impugned in the

i’ptesent appeal and this appeal pertains to the

year 1992-1993 and wherefore,

follokinfii the reasons assigned in ITA

.yid’nL568/2605, we answer the substantial questions

‘Iof”1aw against the appellant and in favour of

H’v*the Revenue.

12

Accordingly, we pass the followffifi 5r§ex

rs f