The assessee, a cooperative society, engaged in the business of providing credit facilities to its members and marketing their agricultural produce, invested the surplus funds in short-term deposits with the Banks and in Government securities, and earned interest thereon. The assessee showed the said interest income under the head “Income from business” but the Assessing Officer assessed it as “income from other sources” u/s 56 and held that the assessee would not be entitled to deduction u/s 80 P(2)(a) of the Income Tax Act. In the instant appeal filed by the assessee, the question for consideration before the Court was: Whether the interest income earned by the assessee-society on surplus funds invested in short-term deposits would qualify for deduction as business income u/s 80P(2)(a) of the Income Tax Act, 1961? Dismissing the appeals, the Court held: An income which is attributable to any of the activities specified in s.80 P(2) of the Income Tax Act, 1961 would be eligible for deduction. In the instant case, the interest held not eligible for deduction u/s 80P(2)(a) is not the interest received from the business of the society, namely, providing credit facilities to its members or marketing their agricultural produce. What is sought to be taxed u/s 56 of the Act is the interest income arising in the surplus, which surplus was not required for business purposes, and was invested in specified securities as ‘investment’. Assessee markets the produce of its members whose sale proceeds at times were retained by it. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. Such interest income would come in the category of “Income from other sources” and, therefore, would be taxable u/s 56 of the Act, as rightly held by the Assessing Officer. The word “income” has been defined u/s 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically “business profits” into the definition of the word income. Therefore, the Court is required to give a precise meaning to the words “profits and gains of Business” mentioned in s.80P(2) of the Act. In the instant case, assessee-society regularly invests funds not required for business purposes. Interest on such investments, cannot fall within the meaning of the expression “profits and gains of business”. On this backdrop, when the evidence of PW11, the Medical Officer is seen that at 9 am itself, the doctor examined PW2 on the requisition of S.H.O. (Rural), who was accompanied by police constable who was PW14. There is no question of PW1 registering the F.I.R. PW14 also admitted that even by the time they reached the Hospital, M.L.A. was stated to have come to the Hospital and the legal advisors were also found in the Hospital. A compromise relating to shares in the suit property was entered into between the plaintiff-appellants and the predecessors-in-interest of the defendant-respondents. The plaintiffs filed a suit for declaration that they were in possession as owner of share and in joint possession of half of the share of the land along with the respondents and the entries in the revenue record of rights should be corrected. The trial court dismissed the suit accepting the defendants’ plea that the suit having been filed after 18 years of the compromise, was barred by limitation in view of the Article 58 of the Schedule to the Limitation Act, 1963 where-under the suit have been filed within three years of the compromise. The plaintiffs having remained unsuccessful in the first appeal as also in the second appeal, filed the appeal. In the instant, case, the right to sue accrued when a clear and unequivocal threat to infringe that right by the defendants was given, as they refused to admit the claim of the appellants, only seven days before filling of the suit. Therefore, as noted in paragraph 16 of the plaint, the suit was filed within three years from the date of infringement and, as such, the suit cannot be held to be barred by limitation. The courts below including the High Court had proceeded entirely on a wrong footing that the cause of action arose on the date of entering into the compromise and, therefore, the suit was barred by limitation. Whether or not the compromise decree was acted upon and whether delivery of possession had taken place has to be decided by the trial court before it could come to a proper conclusion that the suit was barred by limitation. The question of filling the suit before the right accrued to the plaintiffs by compromise could not arise. (800)
