SHRI PATAN TALUKA SAHAKARI VECHAN SANGH LTD.,PATAN vs. ITO, WARD-2,, PATAN

The fact of the case is that assessee filed return of income declaring total income at Rs. Nil after claiming deduction u/s. 80P of Rs. 15,15,343/- on 28th August, 2015. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 28th August, 2014. During the course of assessment on verification of the detail filed, the assessing officer noticed that assessee has claimed interest income on fixed deposit with Axis Bank to the amount of Rs. 19,788/- on which deduction u/s. 80P was claimed. The assessing officer has disallowed the claim of deduction u/s. 80P of the act on the aforesaid interest income earned from nationalized bank on the ground that interest income was not derived from business activity of the asssessee. The assessing officer further noticed that assessee has received interest from Gujcomasol amounting to Rs. 7,38,183/- on which also claimed deduction u/s. 80P of the act. The assessee explained that it had purchased fertilizer from Gujcomasol and the same was sold further to the member of assessee society. The assessee has further submitted as per business practice an amount in advance has to be given to the Gujcomasol for purchase of fertilizer and the Gucomasol use to provide interest on such advance amount given for purchase of fertilizers. In the similar way, the asssessee also provide interest to its members for the advance amount received for selling the fertilizers purchased from the Gujcomasol. During the year, the assessee had paid interest on balance amount to the society member to the amount of Rs. 6,28,292/- and after reducing the same from the interest received from Gujcomasol the difference of amount was only Rs. 1,09,191/-. In view of these facts, the assessee has contended that interest received by the society from Gujcomasol was not liable to tax. The assessing officer has not agreed with the submission of the assessee and

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has sustained the addition made by the assessing officer. During the course of appellate proceedings before us, the ld. counsel has furnished paper book containing detail of submission made before the assessing officer and ld. CIT(A) during the course of assessment and appellate proceedings. As per page no. 1 to 8 of the paper book, the assessee has given detail of ledger account of Gujcomasol and other materials which demonstrate that advances were given for purchase of fertilizer towards business activities of the asssessee for the year under consideration. The assessee has also filed copies of trading and P & L a/c demonstrating that nature of business activity of the assessee was purchase of fertilizer and various kinds of seeds for distribution to the members of the society.

With the assistance of ld. representatives, we have gone through the aforesaid submission contained in the paper book filed by the assessee and it is observed that assessee has received the interest amount of Rs. 7,38,183/- on the advance payments made to Gujcomasol for purchase of fertilizers. It is also noticed that similarly assessee has also paid interest on balance amount of society members on the amount which was received from the society member for sale of goods of the society. After perusal of the above undisputed material facts, we observed that assessee society is a member of Gujcomasol from which it purchase fertilizer and earn interest income on the

Regarding interest income earned form Axis Bank to the amount of Rs. 19,788/-, we consider that this interest income earned from nationalized bank on surplus fund has not been derived from the business activity of the assessee, therefore, we uphold the decision of ld. CIT(A) in disallowing the claim of 80P deduction in respect of interest income earned from Axis Bank. Accordingly, the appeal of the assessee is partly allowed for statistical purposes.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 19-03-2019