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Facts
The assessee, a state-level cooperative society, declared a profit and claimed exemption for a project under Section 10(20A) and deduction under Section 80P. The AO denied these claims, and the issue escalated to the High Court, which remanded the matter for considering capital gains.
Held
The Tribunal held that interest income is taxable as income from other sources and not eligible for deduction under Section 80P. It also concluded that gains from projects were assessable as business income, not capital gains, as the assessee was in the business of construction.
Key Issues
Whether interest income is taxable as income from other sources and eligible for deduction under Section 80P. Whether gains from projects should be treated as capital gains or business income.
Sections Cited
143(3), 10(20A), 80P, 80P(2)(a)(i), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2002-03) M/s Punjab State Cooperative DCIT, Circle 4(1), Federation of Housing Building Chandigarh. बनाम/ Societies Ltd. Vs. SCO 150-152, Sector 34-A, Chandigarh. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAAAT-0759-L (अपीलाथ�/Appellant) (��थ� / Respondent) : अपीलाथ�कीओरसे/ Appellant by : Sh. Atul Goyal (CA ) - Ld. AR ��थ�कीओरसे/Respondent by : Dr. Ranjit Kaur (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 25-03-2025 घोषणाकीतारीख /Date of Pronouncement : 23-04-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2002-03 arises out of an order of learned Commissioner of Income Tax (Appeals), Chandigarh [CIT(A)] dated 26-02-2009 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 14-02-2005. The assessee is a state level co-operative society of which other small cooperative societies are members. The main object of the society is to raise funds from various sources to finance the activities of its member-societies. The loans are to be granted for construction of houses and purchase of land for this purpose. The assessee also has ancillary objects like construction of house, acquiring immovable properties etc.
Facts leading to present litigation are that the assessee declared profit of Rs.16.66 Crores and it claimed exempt income for Bathinda Project u/s 10(20A) for Rs.2.34 Crores. Against remaining amount of Rs.14.31 Crores, the assessee claimed deduction u/s 80P for Rs.14.20 Crores. The Ld. AO denied exemption u/s 10(20A) since the cooperative society could not be termed as “authority” for the purpose of said section. Accordingly, the deduction as claimed by the assessee u/s 10(20A) was denied to the assessee in assessment order dated 14- 02-2005. The Tribunal upheld the stand of the revenue in order dated 31-07-2006. The dispute reached up- to the level of Hon’ble High Court in of 2007 dated 03-11- 2008 wherein the assessee raised an issue that the Tribunal erred in not deciding the grounds of appeal
with regard to the claim of the assessee for treating the income as long term capital gains. No other ground was challenged / admitted by Hon’ble Court. Allowing the same, this sole issue was remanded back by Hon’ble Court to the file of Ld. CIT(A) to consider the claim of the assessee under the head ‘capital gains’.
3. Pursuant to the aforesaid directions of Hon’ble Court, Ld. CIT(A) passed another order on 26-02-2009 and arrived at a conclusion that the activities of the assessee fell within the realm of the adventure in the nature of trade and the resultant income was to be taxed under the head ‘business income’ only. The assessee also raised another issue that interest income would qualify for deduction u/s 80P(2)(a)(i) or u/s 80P(2)(d). The Ld. CIT(A) held this issue also against the assessee since the assessee had not made any investment with its member societies. Upon further appeal against his order, Tribunal dismissed the appeal of the assessee vide order dated 30-08- 2017 for non-appearance of the assessee. However, the order was recalled vide assessee’s MA No/2/Chd/2018 order dated 24-08-2023. Accordingly, the appeal has come up for fresh hearing before this bench.
During hearing, it is admitted position by Ld. AR that both the issues stand covered against the assessee. The Tribunal, in for AY 2009-10 order dated 23-08-2013, considering the decision of Hon’ble High Court in assessee’s own case ITA No.643 of 2010, held that the interest income would be chargeable to tax as income from other sources and no deduction from the same would be allowed to the assessee. The relevant finding of the Tribunal is contained in para-7 of the order. The issue of head of income under which the gains from projects would be assessable has also been held against the assessee in para-16 of the same order. The bench observed that it was not the case of one or two odd investments but the assessee was in the business of construction. The assessee, in its additional grounds of appeal
, seeks apportionment of expenditure. However, no such prayer could be accepted since the said project income was computed by the assessee himself and deduction thereof was claimed u/s 10(20A). In view of the above, we see no reason to interfere in the order of Ld. CIT(A).
5. The appeal stand dismissed. Order pronounced on 23-04-2025.