PUNJAB STATE COOPERATIVE FEDERATION OF HOUSE BUILDING SOCIETIES LTD vs. COMMISSIONER OF INCOME TAX-II CHANDIGARH AND ORS,

This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.4.2015 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA Nos. 847/Chd/2013 and 810/Chd/2013 for the assessment year 2010-11, claiming the following substantial questions of law:- i) Whether in the facts and circumstances of the case, the orders (Annexure A-1), (Annexure A- GURBACHAN SINGH 2016.05.25 14:00 authenticity of this document High Court Chandigarh -2- 3) and partly (Annexure A-2) are legally sustainable? ii) Whether on the facts and circumstances of the case, the Learned Income Tax Appellate Tribunal is right in law in holding that the income earned from banks other than cooperative banks as interest on its bank accounts as income from other sources being attributable to its business income and thereby not allowing deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961? iii) Whether in the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal is correct in law in upholding the expenses of 1% of income attributable to the earning of interest income under the provision of Section 57(iii) of the Income Tax Act, 1961? iv) Whether in the facts and circumstances of the case, the Learned Income Tax Appellate Tribunal has grossly erred in upholding the order of the Assessing Officer and reversing Commissioner of Income Tax (Appeals) Chandigarh with regard to the interest income of ` 27,19,241/- received by the appellant as interest on the loans advanced to the employees for housing and conveyance as a condition precedent more so when it has been GURBACHAN SINGH 2016.05.25 14:00 authenticity of this document High Court Chandigarh -3- treated as business income in the earlier years? v) Whether in the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal grossly erred in upholding the order of the Assessing Officer and reversing the order of the Commissioner of Income Tax (Appeals) and also not following its own earlier decision is perverse more so when the earlier order of the Tribunal was a reasoned order and has not been even distinguished? vi) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal was right in law in holding that the income by way of interest on loans advanced to its employees and the deposits held with schedule banks was chargeable to tax u/s 56 under the head income from other sources without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses u/s 57?

Put shortly, the facts necessary for adjudication of the present appeal as narrated therein are that the assessee filed its return of income for the assessment year 2010-11 on 14.10.2010 declaring the income at 'nil' after claiming deduction of ` 22,16,98,658/- under Section 80P of the Act. Along with the return, the assessee filed a computation chart (Annexure A-4) of its income. The Assessing Officer vide order dated 28.2.2013 (Annexure A-1) framed the assessment at ` 37,73,963/- GURBACHAN SINGH 2016.05.25 14:00 authenticity of this document High Court Chandigarh -4- (rounded off ` 37,73,960/-) as net taxable income by levying income tax on the said income and disallowed various claims under Section 80P(2) (a)(i) of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated 22.5.2013 (Annexure A-2) partly allowed the appeal upholding the certain disallowance made by the Assessing Officer and the addition made on account of interest received from commercial banks amounting to ` 10,54,722/- after deducting the expenses at the rate of 1% out of the gross income at ` 10,65,376/-. The assessee as well as the revenue assailed the order, Annexure A-2, in appeal before the Tribunal. The Tribunal vide a consolidated order dated 28.4.2015 (Annexure A-3) dismissed the appeal of the assessee upholding the order of the Assessing Officer. The Tribunal allowed the appeal of the revenue by reversing the order of the CIT(A) with regard to the disallowance of ` 27,19,241/- under Section 80P(2)(a)(i) of the Act being amount of interest received by the assessee on various loans advanced to its employees as a condition of service of its employees holding the income as 'income from other sources' and not 'income from business'. Hence, the present appeal by the assessee.