| Case ID |
0ffb02b0-61ba-4f08-8c12-290cb69fc984 |
| Body |
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| Case Number |
Income-tax Reference No.258 of 1981 |
| Decision Date |
Apr 04, 1996 |
| Hearing Date |
|
| Decision |
The court held that the credit balance in the Loss Equalisation and Capital Redemption Reserve Fund, used by the cooperative society for business purposes, did not constitute capital borrowed under the Income Tax Act, 1961. The interest on this credit balance was not allowable as a deduction when computing the total income of the society. The court's decision was influenced by the precedent set in CIT v. Bazpur Cooperative Sugar Factory Ltd., reinforcing the interpretation of capital and deductions under the Income Tax Act. |
| Summary |
In this landmark case decided by the Allahabad High Court, the central issue revolved around the interpretation of capital borrowed under the Income Tax Act, 1961, specifically Section 36. The case involved the Bazpur Cooperative Sugar Factory Ltd., which had credit balances in a fund designed for Loss Equalisation and Capital Redemption. The court examined whether these balances could be classified as capital borrowed, thereby allowing the deduction of interest expenses. The ruling concluded that since the cooperative used the fund for business purposes, it did not meet the criteria for capital borrowed as outlined in the Act. Consequently, the interest on these balances was deemed non-deductible for tax purposes. This decision underscores the critical distinction between operational funds and borrowed capital in tax law, providing clarity for similar future disputes. Key terms include 'Income Tax Act', 'capital borrowed', and 'deduction of interest', essential for understanding tax implications for cooperatives and businesses alike. |
| Court |
Allahabad High Court
|
| Entities Involved |
BAZPUR COOPERATIVE SUGAR FACTORY LTD
|
| Judges |
M. Katju,
Dr. B. S. Chauhan
|
| Lawyers |
Rajesh Kumar Agarwal,
U.S Awasthi
|
| Petitioners |
COMMISSIONER OF Income Tax
|
| Respondents |
BAZPUR COOPERATIVE SUGAR FACTORY LTD
|
| Citations |
1998 SLD 530,
1998 PTD 2435,
(1996) 222 ITR 90
|
| Other Citations |
CIT v. Bazpur Cooperative Sugar Factory Ltd. (1989) 1-77 ITR 469 (SC),
CIT v. Bazpur Cooperative Sugar Factory Ltd. (1989) 177 ITR 469 (SC)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
36
|