THE COMMISSIONER OF INCOME TAX vs. THE DECCAN CO.OP.SPG. MILLS LTD

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ITXA/20/1999HC Bombay05 July 2005Bench: HON'BLE SHRI JUSTICE DR. S. RADHAKRISHNAN, HON'BLE SHRI JUSTICE J.H. BHATIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in allowing interest on non-refundable deposits as a deduction. The Court distinguished the ruling in Bazpur Co-operative Sugar Factory Ltd. by noting that the Supreme Court had distinguished the rules applicable to Co-operative Sugar Factories in Uttar Pradesh from the provisions applicable in Maharashtra. The Court relied on the Supreme Court's decision in Commissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (2004) 270 ITR 1. In this precedent, the Supreme Court held that in Maharashtra, non-refundable deposits are not trading receipts but belong to the members, and interest on such deposits is deductible. The High Court had previously disposed of similar appeals based on this Supreme Court ruling. Therefore, the question of law was answered in the affirmative, in favor of the assessee.

What were the facts?

The Commissioner of Income Tax (Appellant) filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 1994-95. The appeal challenges the ITAT's decision allowing interest on non-refundable deposits as a deductible expense for the assessee, The Deccan Co-operative Spinning Mills Ltd. (Respondent). The ITAT's order was based on its interpretation of relevant provisions and prior judicial pronouncements. The procedural history involves the Commissioner filing this appeal under Section 260A of the Income Tax Act after the ITAT ruled in favor of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that interest on non-refundable deposits is allowable deduction under section 36(1)(iii) contrary to the decision of the Honourable Supreme Court in the case of Bazpur Co-operative Sugar Factory Ltd. (177 ITR 469)? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the outcome indicates the assessee argued for the allowability of the deduction. Revenue's Contention: The Revenue contended that interest on non-refundable deposits is not an allowable deduction, citing the Supreme Court's decision in Bazpur Co-operative Sugar Factory Ltd. (177 ITR 469) which held such interest as not deductible.

Which sections of the Income-tax Act were involved?

Section 260A,Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.20 OF 1999 INCOME TAX APPEAL NO.20 OF 1999 INCOME TAX APPEAL NO.20 OF 1999 The Commissioner of Income Tax, ’Aayakar Bhavan’, 31-C/2, ’E’ Ward, Tarabai Park, Kolhapur 416 003. ...Appellant. V/s. The Deccan Co-operative Spinning Mills Ltd.,Ichalkaranji, Dist.Kolhapur. ...Respondents. Shri A.S.Rao for the Appellant. None for the Respondent. CORAM: S.RADHAKRISHNAN & CORAM: S.RADHAKRISHNAN & CORAM: S.RADHAKRISHNAN & J.H.BHATIA, JJ. J.H.BHATIA, JJ. J.H.BHATIA, JJ. DATE : 5th July, 2005. DATE : 5th July, 2005. DATE : 5th July, 2005.

ORAL JUDGMENT: ORAL JUDGMENT: ORAL JUDGMENT: (Per J.H.Bhatia, J.) 1. This Appeal is filed under section 260A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal in Income Tax Appeal No.1017/PN/1997 for the assessment year 1994-95. 2. The following substantial question of law has arisen in the said Appeal. "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that interest on non refundable deposits is allowable deduction CNR No : HCBM020013631999 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:38

: 2 : under section 36(1) (iii) contrary to the decision of the Honourable Supreme Court in the case of Bazpur Co-operative Sugar Factory Ltd. (177 ITR 469) wherein it is held that interest paid on such deposits is not allowable deduction ?" 3. Heard the learned counsels for both the parties. Admittedly, the Supreme Court has distinguished the rules pertaining to the Co-operative Sugar Factories in Uttar Pradesh applicable in Bazpur Co-operative Sugar Factory and the provisions of law obtained in Maharashtra in in in Commissioner of Income Tax v. Shri ommissioner of Income Tax v. Shri ommissioner of Income Tax v. Shri Chhatrapati Sahakari Sakhar Karkhana Ltd.(2004) 270 ITR Chhatrapati Sahakari Sakhar Karkhana Ltd.(2004) 270 ITR Chhatrapati Sahakari Sakhar Karkhana Ltd.(2004) 270 ITR 1. 1. 1. In view of the rules in Maharashtra, the Supreme Court has clearly held that Non-refundable deposits are not the trading receipts in the hands of the Co-operative Societies and they are only deposits belonging to the member of the Society. Interest on Non-refundable Deposits is also liable to be deducted from the income. Relying upon the Supreme Court authority in Shri Chhatrapati Sahakari Sakhar Karkhana Ltd., this Court has disposed of Income Tax Appeal No.9 of 1999 alongwith a group of Appeals. As such, question of law raised in the present Appeal is fully covered by the judgment of the Supreme Court in Shri Chhatrapati Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:38

: 3 : Sahakari Sakhar Karkhana Ltd as also by the judgment of this Court. 4. In view of the aforesaid reasons, we answer the question in affirmative, that is, in favour of the assessee and against the Revenue. The Appeal stands dismissed accordingly. (S.RADHAKRISHNAN,J.) (S.RADHAKRISHNAN,J.) (S.RADHAKRISHNAN,J.) (J.H.BHATIA, J.) (J.H.BHATIA, J.) (J.H.BHATIA, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:20:38 Powered by TCPDF (www.tcpdf.org)

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