Citation Codes

Equivalent Citations

citation codes

Case Number

Tax Appeal No. 93 of 2008, Tax Appeal No. 94 of 2008, Tax Appeal No. 95 of 2008, Tax Appeal No. 96 of 2008

Attorney(S)

Mr. Manish J. Shah, Advocate No. 1
Mr. Sudhir M. Mehta, Advocate for the Opponent(s) No. 1

Judges

Hon'ble Mr. Justice G.R.Udhwani
Hon'ble Mr. Justice K. S. Jhaveri

Acts

Section 80P(2)(d) of the Income-tax Act 1961.
section 12(2) of the Indian Income-Tax Act
SECTION 148 INCOME TAX ACT 1961

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Smart Summary

Structured Summary of the Opinion — K.S. Jhaveri, J.

Factual and Procedural Background

The assessee aggrieved by an order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', preferred four Tax Appeals before this Court (Tax Appeals Nos. 93 to 96 of 2008). Each appeal related to a different assessment year (1991-92 to 1994-95) and raised a common issue concerning the grant of deduction under section 80P(2)(d) of the Income-tax Act in respect of interest and dividend received by the assessee from co-operative societies (a co-operative bank in this case).

The Assessing Officer allowed the deduction under section 80P(2)(d) only to the extent of net interest (i.e., after adjustments) instead of the gross interest claimed by the assessee, disallowing the excess claimed deduction for each year under consideration. The opinion records that these matters were admitted by the Court to consider substantial questions of law framed in each appeal (each asking whether the assessee was entitled under section 80P(2)(d) to the entire interest amounts shown in the respective questions of law).

Procedural note: The appeals were admitted for consideration of the substantial questions whether the assessee cooperative society was entitled under sec. 80P(2)(d) to the entire interest amounts received from the cooperative bank for each assessment year.

The opinion also records tabulated figures showing interest, dividend, deduction claimed, amounts disallowed by the Assessing Officer and deduction granted by the Assessing Officer for each assessment year.

Legal Issues Presented

Whether the assessee co-operative society was entitled under section 80P(2)(d) to the entire interest of Rs. 10,17,976 received from the co‑operative bank (Tax Appeal No. 93 of 2008).
Whether the assessee co-operative society was entitled under section 80P(2)(d) to the entire interest of Rs. 9,97,298 received from the co‑operative bank (Tax Appeal No. 94 of 2008).
Whether the assessee co-operative society was entitled under section 80P(2)(d) to the entire interest of Rs. 12,19,538 received from the co‑operative bank (Tax Appeal No. 95 of 2008).
Whether the assessee co-operative society was entitled under section 80P(2)(d) to the entire interest of Rs. 9,01,062 received from the co‑operative bank (Tax Appeal No. 96 of 2008).

Arguments of the Parties

Appellant's Arguments (Assessee — Mr. Manish Shah)

Reliance on statutory provisions: Sections 28, 36(1), 56, 57 and 80P of the Income-tax Act were relied upon in support of the assessee's entitlement.
Consistency with earlier years: The same deductions had been allowed in previous years; in view of the Apex Court decision in Excel Industries (358 ITR 295) it was submitted that the revenue could not take a stand different than that adopted in previous years.
Reliance on case law: The assessee relied on several judicial decisions (listed in the opinion) including Bai Bhuriben Lallubhai, Doaba Co-operative Sugar Mills Ltd., Kaira District Co-operative Milk Producers Union Ltd. and the Tribunal decision in Income Tax Officer v. Petlad Taluka Purchase & Sales Union Ltd. (1992) 42 ITD 442, which held that the assessee was entitled to deduction under section 80P(2)(d) in respect of the whole amount of interest from investments.
Point on revenue conduct: It was argued that the revenue had accepted the Petlad decision earlier and had not challenged it; accordingly, it was inconsistent for the revenue to take a contrary stand in the present cases. Reference was made to Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC) to submit that revenue cannot accept an earlier judgment in one case and challenge its correctness in another without just cause.

Respondent's Arguments (Revenue — Mr. Sudhir Mehta)

The observations of the Tribunal were fair and did not require interference.
Substance over form: The revenue emphasized that the funds had been borrowed for business purposes and, therefore, the assessee could not obtain the benefit of both sets of provisions (i.e., deducting interest paid and also claiming full deduction under section 80P(2)(d)).
Statutory computation point: Income exempted under section 80P(2) must be arrived at after relevant deductions; one cannot allow the total income received without deducting expenditures incurred in earning that income.
Reliance on case law: The revenue relied on several decisions (listed in the opinion) including Sabarkantha Zilla Kharid V. Sangh Ltd., Surat District Co-operative Milk Producers' Union Ltd., Rajasthan Rajya Sahkari Upbhokta Sangh Ltd., and a decision from Allahabad (Commissioner of Income-tax-I, Lucknow v. U.P. Co‑operative Sugar Factories) to support its position that adjustments/deductions should be made.
Concurrent findings: The revenue argued the authorities below had come to concurrent findings adverse to the assessee and that this Court should not interfere.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court (as stated in the opinion)
Excel Industries, 358 ITR 295	Relied on by the assessee to contend that the revenue could not take a different stand than in previous years.	The opinion records that the assessee invoked this decision to support consistency; the court's reasoning does not expressly state that it relied upon Excel Industries when disposing of these appeals.
Bai Bhuriben Lallubhai v. Commissioner of Income Tax, [1956] 29 ITR 543	Principle that the purpose for which money was borrowed must be connected to the income earned to attract certain deductions; if loan is for business purpose unrelated to fixed deposits, deduction under certain sections may not apply.	The court cited this decision for the proposition that where the loan was taken for business purposes (purchase of yarn) and not for fixed deposits, the argument to adjust interest received by reference to interest paid was weaker; the decision supported the assessee's factual position that loans were taken for business, not fixed deposits.
Commissioner Of Income-Tax v. Doaba Co-Operative Sugar Mills Ltd., [1998] 230 ITR 774 (Pb & H)	Interpreted section 80P(2)(d): allowance of deduction of whole interest received from co-operative society without adjusting interest paid to the bank.	The court reproduced and relied on the Punjab & Haryana High Court's reasoning that section 80P(2)(d) permits the whole deduction of interest or dividends derived from investments with another co‑operative society, and that no statutory adjustment was mandated by the provision.
Kaira District Co-operative Milk Producers Union Ltd. v. Assistant Commissioner of Income Tax, [1996] 220 ITR 194 (Guj)	Held that action under Section 148 does not permit a change of opinion as to interpretation previously adopted by the assessing authority.	The court relied on this Apex/High Court holding to support the assessee's contention that a previously granted benefit should not be withdrawn by a change of opinion; the court accepted this principle to require consistent treatment.
Income Tax Officer v. Petlad Taluka Purchase & Sales Union Ltd., (1992) 42 ITD 442	Tribunal decision that assessee is entitled to deduction under section 80P(2)(d) in respect of the whole amount of interest from investments.	The court noted that the Tribunal had accepted this earlier Tribunal decision and that the revenue had not successfully challenged it; the court relied on the existence and acceptance of this decision in favour of the assessee as a supporting ground.
Union of India v. Kaumudini Narayan Dalal, [2001] 249 ITR 219 (SC)	Principle that it is not open to the revenue to accept an earlier judgment in the case of one assessee and challenge its correctness without just cause in the case of other assessees.	The court applied this principle to criticize inconsistent conduct by the revenue and used it to support the assessee's claim for consistent treatment.
Sabarkantha Zilla Kharid V. Sangh Ltd. v. Commissioner of Income Tax, 203 ITR 1027	Relied on by the revenue to support its position (specific rule/principle as cited in the opinion: used to argue for adjustments/deductions).	The opinion records that the revenue relied on this decision; the court considered decisions cited by both sides and ultimately found the decisions cited by the assessee applicable on the facts.
Commissioner of Income Tax v. Surat District Co-operative Milk Producers' Union Ltd., [1995] 211 ITR 726 (Guj)	Relied on by the revenue (specific factual/principled use: to support the revenue's stance on adjustments).	The opinion notes the revenue's reliance on this decision; the court's reasoning concluded that the decisions cited by the assessee were applicable and supported the assessee's claim.
Commissioner of Income Tax v. Rajasthan Rajya Sahkari Upbhokta Sangh Ltd., [1995] 215 ITR 448 (Raj)	Relied on by the revenue in support of its position that adjustments/deductions should be made.	The court recorded the revenue's reliance but found, on balance and by comparing authorities, that the assessee's cited authorities were applicable and warranted relief to the assessee.
Commissioner of Income-tax-I, Lucknow v. U.P. Co-operative Sugar Factories, [2013] 37 taxmann.com 58 (Allahabad)	Relied on by the revenue (as cited in the opinion) to advance the position that adjustments should be made.	The opinion records the revenue's reliance. The court's reasoning does not indicate that this authority altered the ultimate conclusion reached in favour of the assessee.
K. Nandakumar (Kerala High Court) — (citation not reproduced in the opinion)	Interpreted a provision analogous to section 80P/80AB context: net amount contemplated should be arrived at after meeting expenses deductible from that item under the Act; held in that factual context that the provision had no application.	The court quoted and relied on the Kerala High Court's reasoning in K. Nandakumar to explain why interest paid on loans taken for business cannot be adjusted against interest received on fixed deposits for the purpose of computing the benefit under a section analogous to 80P; the Court found this reasoning supportive of the assessee.
Cape Brandy Syndicate v. IRC, [1921] 1 KB 64	Classic principle of interpretation of taxing statutes: the language used in a taxing Act must be looked at; there is no room for intendment or implication in favour of taxation and one can only look fairly at the language used.	The court invoked this principle (as quoted in the Doaba decision reproduced in the opinion) to reinforce the rule that section 80P(2)(d) should be read as it is written and that no implicit adjustment is required by the provision.
Hansraj Gordhandas v. H.H. Dave, AIR 1970 SC 755	Authority cited for the proposition that the Cape Brandy principle has been approved and applied by the Supreme Court in taxing statute interpretation.	The court referenced this authority to support the interpretive approach applied to section 80P(2)(d) — i.e., that the provision's plain language governs and no implied adjustments should be read into it.

Court's Reasoning and Analysis

The court's analysis proceeded in the following steps (expressed only in the manner and with the content used in the opinion):

Consistency principle: The court accepted the assessee's contention that benefits allowed in earlier years should be respected. It relied upon the principle in Kaira District Co-operative Milk Producers Union Ltd. that Section 148 cannot be used to change an interpretation previously adopted by the assessing authority; accordingly, a change of opinion is not a permissible basis to withdraw a benefit earlier granted.
Reliance on Tribunal precedent: The court noted that the Tribunal had not challenged the Tribunal decision in Petlad Taluka Purchase & Sales Union Ltd. (which had held that whole interest from investments with a co-operative society is deductible under section 80P(2)(d)), and that revenue had effectively accepted that decision by not pursuing it further. The court treated that as a factor favouring the assessee.
Inconsistency by revenue: The court invoked Union of India v. Kaumudini Narayan Dalal to support the proposition that the revenue cannot accept an earlier judgment for one assessee and later challenge the same point for another without just cause. This weighed in favour of the assessee's claim for consistent treatment.
Textual interpretation of section 80P(2)(d): The court examined the wording and applicable interpretive principles (including the Cape Brandy principle as approved in subsequent authorities) and accepted the construction adopted in decisions relied upon by the assessee (notably K. Nandakumar and Doaba Co-operative Sugar Mills Ltd.). The court highlighted that section 80P(2)(d) allows the whole of income by way of interest or dividends derived by a co-operative society from investments with another co‑operative society, and that the provision does not itself prescribe an adjustment for interest paid to the bank.
Treatment of interest paid on loans: The court accepted the reasoning (as cited from K. Nandakumar and Doaba) that interest paid on loan transactions incurred for business purposes is deductible under a different head (e.g., section 37) and is not an item to be set off against interest income received from fixed deposit investments for the purpose of section 80P(2)(d). Thus, the court rejected the revenue's submission that such interest paid must be adjusted against interest received for section 80P(2)(d) computation.
Factual application (Bai Bhuriben): The court also relied on the principle in Bai Bhuriben that where a loan is taken for business (e.g., purchase of yarn) and not for the purpose of fixed deposits, the asserted connection between the borrowing and the fixed-deposit income is weak; this supported allowing the deduction under section 80P(2)(d) without adjustment.
Conclusion of analysis: On the basis of the above principles and authorities (and noting the Tribunal's acceptance of the Petlad decision and the revenue's lack of further challenge), the court concluded that the authorities cited by the assessee applied and warranted answering the questions in favour of the assessee.

Holding and Implications

Holding: The questions raised in the present appeals are answered in favour of the assessee and against the revenue; the order passed by the Tribunal is quashed and set aside.

Implications

Direct effect on the parties: The appellate court reversed the Tribunal's order and ruled in favour of the assessee on the specific questions whether the assessee was entitled to claim the entire interest amounts under section 80P(2)(d) for the assessment years in question.
Interpretive consequence applied: The court applied and reaffirmed the textual interpretation of section 80P(2)(d) (as expressed in authorities cited in the opinion) that the provision permits deduction of the whole interest/dividend derived from investments with another co-operative society and does not mandate adjustment for interest paid, absent clearer statutory language to that effect.
On broader precedent: The opinion does not purport to lay down a novel general precedent beyond applying and following the authorities it cites; the decision is framed as an application of existing authorities to the facts, and the opinion specifically relied on prior Tribunal and High Court/Supreme Court authorities to reach its conclusion.

This summary is confined strictly to the information and statements contained in the provided opinion and does not add or infer facts or holdings beyond those expressly stated therein.

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The Surat Vankar Sahakari Sangh Ltd. (S) v. Asst. Commissioner Of Income Tax, Circle-5 Opponent(S)

K.S Jhaveri, J.:— Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘A’ (hereinafter referred to as ‘the Tribunal’), the assessee has preferred the present Tax Appeals assailing the following orders:

Tax Appeal No.Date of Tribunal's orderITA/CO No.Assessment Year93 of 200801/05/073848.Ahd/20021991-9294 of 200801/05/073849.Ahd/20021992-9395 of 200801/05/073850.Ahd/20021993-9496 of 200801/05/073851.Ahd/20021994-95

2. These matters were admitted by this Court for consideration of the following substantial question of law:

TAX APPEAL No. 93 OF 2008

Whether the assessee co-operative society was entitled under sec. 80P(2)(d) of the entire interest of Rs. 10,17,976/- received by it from the cooperative Bank?

TAX APPEAL No. 94 OF 2008

Whether the assessee co-operative society was entitled under sec. 80P(2)(d) of the entire interest of Rs. 9,97,298/- received by it from the cooperative Bank?

TAX APPEAL No. 95 OF 2008

Whether the assessee co-operative society was entitled under sec. 80P(2)(d) of the entire interest of Rs. 12,19,538/- received by it from the cooperative Bank?

TAX APPEAL No. 96 OF 2008

Whether the assessee co-operative society was entitled under sec. 80P(2)(d) of the entire interest of Rs. 9,01,062/- received by it from the cooperative Bank?

3. In all the four appeals, the common issue is grant of net deduction u/s 80P(2)(d) of the Act, in respect of interest and dividend received by the assessee from co-operative societies i.e bank in this case. The Assessing Officer allowed deduction u/s 80P(2)(d) to the extent of net interest instead of gross interest as claimed by the assessee and disallowed the excess claim of deduction in this regard for all the years under consideration. The amount disallowed by the Assessing Officer and deduction granted by the Assessing Officer is tabularized and recorded as under:

ParticularAssessment Years1991-921992-931993-941994-95Dividend-From co-op societies974348000349142674Interest (As shown in the return of income)102269912142591220756902765Deduction u/s 80P(2)(d) of the Act as per return102771910452981223026943736Disallowed by Assessing Officer47786364021964127376116Deduction granted u/s 80P(2)(d) of the Act by Assessing Officer549856405079581753867618

4. Mr. Manish Shah, learned advocate appearing for the assessee has drawn the attention of this Court to Sections 28, 36(1), 56, 57 and 80P of the Act and contended that same deductions were allowed in the previous years. He submitted that in view of the decision of the Apex Court in the case of Excel Industries reported in 358 ITR 295, the respondent could not have taken a stand different than previous year. He has also relied upon the following decisions:

(I) Bai Bhuriben Lallubhai v. Commissioner of Income Tax, Bombay North Cutch and Saurashtra reported in [1956] 29 ITR 543 (Commissioner Of Income-Tax v. Doaba Co-Operative Sugar Mills Ltd. reported in [1998] 230 ITR 774 (p & h)

(III) Kaira District Co-operative Milk Producers Union Ltd. v. Assistant Commissioner of Income Tax reported in [1996] 220 ITR 194 (Guj).

5. Mr. Shah further submitted that the Tribunal in the case of Income Tax Officer v. Petlad Taluka Purchase & Sales Union Ltd. reported in (1992) 42 ITD 442 has held that the assessee was entitled to deduction under section 80P(2)(d) in respect of the whole amount of interest from investments received by it. He submitted that the revenue has already accepted the said decision and has not challenged the same and therefore the stand taken by the revenue in the present case is contradictory in itself. He has drawn the attention of this Court to the decision of the Apex Court in the case of Union of India v. Kaumudini Narayan Dalal reported in [2001] 249 ITR 219 (SC) wherein the Apex Court has held that it was not open to the revenue to accept the earlier judgment in the case of one assesee and challenge its correctness without just cause in the case of the other assessees.

6. Mr. Sudhir Mehta, learned advocate appearing for the revenue has drawn the attention of this Court to the observations made by the Tribunal and contended that the same being just and proper does not call for any interference by this Court. He has drawn the attention of this court to the deductions granted by the Assessing Officer and submitted that the funds were borrowed for business purpose and therefore the assessee cannot get benefit of both the sections. He has relied upon the decisions in the following cases:

(I) Sabarkantha Zilla Kharid V. Sangh Ltd. v. Commissioner of Income tax reported in 203 ITR 1027:

(II) Commissioner of Income Tax v. Surat District Co-operative Milk Producers' Union Ltd. reported in [1995] 211 ITR 726 (Guj)

(III) Commissioner of Income tax v. Rajasthan Rajya Sahkari Upbhokta Sangh Ltd. reported in [1995] 215 ITR 448 (Raj)

(IV) Commissioner of Income-tax-I, Lucknow v. U.P Co-operative Sugar Factories reported in [2013] 37 taxmann.com 58 (Allahabad)

6.1 Mr. Mehta submitted that the income exempted under Section 80P(2) has to be arrived at separately in order to determine the income under Section 80P(2) and it can never be envisaged that the total income which has been so received could be allowed without deducting the expenditure incurred in earning the income. He submitted that the authorities below have come to a concurrent finding and therefore this Court may not entertain the present appeal.

7. Heard learned advocates for both the sides. So far as the contention regarding the benefit given to the assessee for earlier years is concerned, we are of the opinion that the same is required to be accepted. The Apex Court in the case of Kaira District Co-operative Milk Producers Union Ltd. (supra) has held that however wide the socpe for taking action under Section 148 of the Income tax Act 1961, it does not confer jurisdiction on a change of opinion as to the interpretation of a particular provision earlier adopted by the assessing authority. We are therefore of the opinion that the assessee when had been once granted the benefit of deduction for the earlier years, he should have been granted for the relevant assessment years also.

7.1 It is required to be noted that the Tribunal has not challenged the decision of the Tribunal rendered in the case of Petlad Taluka Purchase and Sales Union (supra) and thereby has accepted the same. The Apex Court in the case of Kaumudini Narayan Dalal (supra) has already held that it was not open to the revenue to accept the earlier judgement in the case of one assessee and challenge its correctness without just cause in the case of other assessees. Similarly, the Tribunal failed to appreciate that the point was otherwise covered in favour of the assessee by the decision of the Ahmedabad Bench of the Tribunal in the case of Petlad Taluka Purchase and Sales Union (Supra) and even the revenue's Reference Application against the said decision was rejected. The Revenue has not challenged the said order further thereby accepting the same. Even on the said ground, the contention of the assessee is required to be accepted.

8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar (supra), the Kerala High Court has held as under:

“4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income “in accordance with the provisions” of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.”

8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd. (supra), the Punjab & Haryana High Court has held as under:

“5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2)(d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said cooperative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under:

“80P. (2)(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.”

6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71:

“… In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used,”

7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H.H Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759.

8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co-operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income-tax Act 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.”

8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits.

9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside.

The Surat Vankar Sahakari Sangh Ltd. (S) v. Asst. Commissioner Of Income Tax, Circle-5 Opponent(S)

Structured Summary of the Opinion — K.S. Jhaveri, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (Assessee — Mr. Manish Shah)

Respondent's Arguments (Revenue — Mr. Sudhir Mehta)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Implications

The Surat Vankar Sahakari Sangh Ltd. (S) v. Asst. Commissioner Of Income Tax, Circle-5 Opponent(S)

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