National Co-Operative Development Corporation v. Commissioner Of Income Tax,
CIVIL APPEAL NOS. 5105-5107 OF 2009 decided on September 11, 2020.
BENCH– Sanjay Kishan Kaul, Indu Malhotra, JJ.
The Corporation, National Co-operative Development Corporation, which was established under the National Cooperative Development Corporation Act, 1962 (hereinafter referred to as the ‘NCDC Act’)is required to maintain a fund called the National Cooperative Development Fund (for short ‘the Fund’) which is, inter alia, credited with all monies received by it by way of grants and loans from the Central Government, as well as sums of money as may from time to time be realised out of repayment of loans made from the Fund or from interest on loans or dividends or other realisations on investments made from the Fund. Section 13 of NCDC Act mandates maintenance of a Fund.
Whether interest on loans or dividends would fall under the head of ‘Income from other sources’ under Section 56 of the Income Tax Act or would it amount to income from ‘Profits and gains of business or profession’ under head ‘D’ of Section 14 of the Income Tax Act?
The Court said that the income generated from interest of fund was again applied to the disbursement of grants and loans and therefore income generated from interest is necessarily interlinked to the business of the Corporation and would, thus, fall under the head of ‘profits and gains of business or profession’.
Recommendation of Court
The Court recommend the Central Government to consider the efficacy of the advance tax ruling system and make it more comprehensive as a tool for settlement of disputes rather than battling it through different tiers, whether private or public sectors are involved.