| Case ID |
14810c97-168b-4383-8153-e9287f9ed4c2 |
| 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, which was used by the cooperative society for its business, did not constitute capital borrowed under section 36(1)(iii) of the Income Tax Act, 1961. Consequently, the interest on this credit balance could not be deducted when computing the total income of the society. This decision clarified the interpretation of capital borrowed in the context of cooperative societies and their financial operations, reinforcing the legal framework surrounding income tax deductions. |
| Summary |
This case involves the interpretation of the Income Tax Act, 1961, particularly section 36(1)(iii) concerning capital borrowed and interest deductions. The Allahabad High Court examined whether the credit balance in the Loss Equalisation and Capital Redemption Reserve Fund, utilized by a cooperative society for its business, constituted borrowed capital. The court concluded that since the funds were not borrowed but rather retained for business use, the interest on these funds could not be claimed as a deduction. This case is significant for cooperative societies and their financial practices, impacting how they manage reserves and calculate taxable income. The ruling emphasizes the importance of understanding the definitions and implications of borrowed capital within the framework of tax law, particularly for entities operating under cooperative structures. Legal practitioners and tax advisors should take note of this precedent as it outlines the limits of allowable deductions concerning interest on non-borrowed funds, which remains a pivotal issue in income tax assessments. |
| Court |
Allahabad High Court
|
| Entities Involved |
BAZPUR COOPERATIVE SUGAR FACTORY LTD,
COMMISSIONER OF Income Tax
|
| 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 305,
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(1)(iii)
|