DHOLASAN DUDH UTPADAK SAHAKARI MANDALI LTD,MEHSANA vs. ITO, WARD-1, MEHSANA

आदेश/O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals), Gandhinagar, dated 11/12/2018 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-16.

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3.1 The assessee in the present case is a co-operative society and engaged in the business of purchasing the milk from the members for sale to the federal society. Likewise it is purchasing Sagar dan, Sagar ghee from federal society for sale to the members since more than 47 years. The AO during the assessment proceedings found that the assessee has shown income from the activity of sale of Ghee for an amount of ₹ 17,028/- which is not eligible for deduction under section 80P of the Act. The assessee against the sale of Ghee has claimed only purchase expenses and has shown gross profit of Rs. 48,830/- only. The assessee against such gross profit has appropriated certain expenses and offered the net profit to tax for ₹ 17,028/- only. However, the assessee during the assessment proceedings cannot point out the specific indirect expenses incurred for the activity of sale of Ghee. Therefore the AO has treated the entire amount of Rs. 48,830/- representing the gross profit as income of the assessee.

4.1 The assessee before the learned CIT (A) submitted that the gross profit cannot be treated as taxable income of the assessee. As such, it has given the

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working of the net profit to the AO during the assessment proceedings but the same has not been taken into consideration. The assessee before the learned CIT (A) requested to take the net profit as taxable profit of the assessee instead of gross profit.

4.2 However the learned CIT (A) disregarded the contention of the assessee by observing that the assessee has claimed proportionate expenses against the sale of Ghee. As such these expenses were already claimed in the profit and loss account. Thus the learned CIT (A) rejected the contention of the assessee.

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administrative expenses. The assessee is engaged in multiple activity and some of the activity are eligible for deduction under section 80P of the Act. At the same time some of the activity of the assessee are taxable. But the assessee is maintaining common books of accounts, common infrastructure, common facilities, manpower etc. Thus in such a situation, the only option available to the assessee is to apportion the expenses to different activities for determining the net profit of each activity. Accordingly, we are not convinced with the finding of the authorities below by treating the gross profit as taxable income of the assessee. It was the duty of the revenue to pinpoint the infirmity in the expenses apportion by the assessee towards the activity under consideration. To our understanding, all the expenses apportion by the assessee cannot be ignored without bringing any cogent reason on record. Hence, we set aside the finding of the learned CIT (A) and direct the AO to take the net profit declared by the assessee as taxable income and delete the amount over and above such taxable income of the assessee. Hence the ground of appeal of the assessee is allowed.

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11.1 The assessee before the learned CIT (A) submitted that it is engaged in various activities of purchase and sale of milk, Sagar dan, Sagar Ghee under co- operative sector. These activities entitle the assessee to claimed the deduction under section under section 80P(2)(c)(ii) of the Act for ₹ 50,000/-.

11.2 However, the learned CIT (A) observed that the activity of the assessee falls under clause (b), therefore the assessee cannot claim the deduction under section 80P(2)(c)(ii) of the Act. Thus the ground of appeal of the assessee was dismissed.

15.1 Further, the coordinate bench of Hyderabad Tribunal in case of Film Nagar Co-operative Society Ltd reported 91 ITD 27 by following the judgment of Hon’ble

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Bombay Court in case of CIT vs. Ratanabad Co-operative Housing Society Ltd. 81 Taxman 257 held that “The expression 'profits and gains' in clause (c) of sub-section (2) of section 80P is not confined to 'Profits and gains of business' under clause (a)”. Thus, in case of co-operative credit society, income to which benefit of section 80P(2)(a)(i) is not allowed, e.g., rental income, interest income from surplus funds kept in FDs' of banks, etc., basic exemption of Rs. 50,000/- as provided for in section 80P(2)(c)(ii) must be granted.

15.2 It appears that, though the word 'activity' is not defined, yet the investment activity, activity of renting of immovable property, trading of Ghee etc., and the consequent income attributable to such activities would be covered under section 80P(2)(c). Hence, we set aside the finding of the learned CIT (A) and direct the AO to allow the deduction to the assessee for ₹ 50,000/- under the provisions of section under section 80P(2)(c)(ii) of the Act. Hence the ground of appeal of the assessee is allowed.

Order pronounced in the Court on 28/10/2021 at Ahmedabad.

Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 28/10/2021 Manish