Special Story – The Maharashtra Co-op. Housing Society 9.2 In Asstt. CIT vs. Kribhco (2011) 38 (II) ITCL 402 (Del ‘D’- Trib.) : (2010) 6 ITR (Trib.) 686 (Del.) it was held that where assessee received dividend and deposits from co-operative societies and claimed deduction, the terms “exempt income� and “deduction from income� are two different propositions and a deduction from income will not amount to an exemption from income. Since both the above receipts of the assessee were not exempt and includible in income merely because deduction under section 80P is provided, it cannot be assumed to be hit by section 14A. 9.3 Assessee was entitled to deduction under section 80P(2)(d) after excluding the expenditure attributable to the earnings of such income in view of section 14A which would be applied to allow deduction under section 80P(2)(d). – Vide Punjab State Co-operative Milk Producer Federation Ltd. vs. CIT & Anr. (No.1) (2011) 42 (I) ITCI. 216 (P&H-HC) : (2011) 336 ITR 495 (P&H) : (2011) 245 CTR (P&H) 432. 10. The Madras High Court in CIT vs. Katpadi Co-operative Timber Works Ltd. (1982) 135 ITR 287 (Mad.) held that deduction under section 80P should be allowed before set-off of unabsorbed loss and unabsorbed depreciation of the earlier years. This decision of the Madras High Court has been overruled by the Supreme Court. As the Supreme Court in CIT vs. Kotagiri Industrial Co-operative Tea Factory Ltd. (1997) 224 ITR 604 (SC) held that if section 80P (1) is read with * contained in section 80B(5), it has to be held that for the purpose of making deduction under section 80P, it is necessary to first determine the gross total income in accordance with the other provisions of the Act. This means that for the purposes of the present case, the gross total income must be determined by setting off against the income the business losses of the earlier years as required under section 72. Since the losses were in excess of the income, the Income-tax Officer was held to be right in holding that no deduction was permissible under section 80P.
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11. Deduction under section 80P cannot be denied merely for the reason that books were not ! } = † vide ITO vs. Sherawali Majur Kamghar Sahakari Sanstha Ltd. (2007) 16 (II) ITCL 33 (Mum-Trib) : (2006) 10 SOT 348 (Mum-Trib) 12. When a co-operative society is entitled to deduction under various provisions of the Act, sub-section (3) of section 80P, prescribes the manner of allowability of deduction in such case. According to sub-section (3) of section 80P, in a case where the assessee is entitled also to the deduction under section 80HH, or section 80HHA, or section 80HHB, or section 80HHC, or section 80HHD, or section 80-I or section 80-IA or section 80J, the deduction under subsection (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80HH. Section 80HHA, section 80HHB section 80HHC, section 80HHD, section 80-I and section 80-IA. Thus deduction under clauses (a), (b) and (c) of section 80P(2) will be allowed after considering deduction under sections 80HH, 80HHA, 80HHB, 80HHC, 80-I and 80-IA. 13. If a co-operative society carries on certain activities, out of which some of the activities qualify for exemption and some of the activities do not qualify for exemption, then the profits and gains attributable to the exempted activities shall enjoy the exemption and the profits and gains attributable to non-exempt activities are liable to be taxed. While computing income from taxable activities, the proportionate expenditure out of the total expenditure should have to be deducted so as to arrive at the correct income from taxable activities. 13.1 In the case of Kota Co-operative Marketing Society Ltd. vs. CIT (1994) 207 ITR 608 (Raj.) the Tribunal found that if a co-operative society is
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