SHRIMANT BABASAHEB DESHMUKH MULTI STATE DAIRY CO-OP LTD,,SANGLI vs. INCOME-TAX OFFICER, WARD - 2(3),, SANGLI

During the course of assessment proceedings, the Assessing Officer noticed that the assessee had sold milk of Rs.34,13,70,406/- to the parties other than federal societies and had sold the milk of Rs.1,83,92,433/- to Mahananda Dairy which is a federal society. The assessee was therefore asked to show cause as to why the deduction u/s. 80P(2)(b) of the Act not be disallowed on the profits earned from sale of milk to other than federal society. The assessee made the submissions which were not found acceptable to Assessing Officer. The Assessing Officer noted that the assessee had sold only 5.11% of the total milk to federal society and 94.89% of the milk was sold to the other private parties. He was of the view that on the profits earned from sale of milk to other than federal society, assessee is not

Before me, the ld. AR reiterated the submissions made by before Assessing Officer and CIT(A) and further submitted that the Mahananda is a state level milk sanstha and its capacity is 1000000 liters per day. Excess over this capacity cannot be purchased by the Mahananda as there are more than 100 members of this federal society and every member is ready to supply the milk. As the collection capacity of the federal society is insufficient to purchase milk from every member of the society, Mahahanda has permitted members to sell the milk to other customers. He submitted that though the assessee was ready to supply the entire milk to Mahananda but due to the limitation of the capacity of Mahananda and due to the highly perishable nature of the goods, assessee could not sell the entire milk to Mahananda and was forced to sell it to outsider. In such a situation, he submitted that assessee be granted deduction on entire profits out of sale of milk. He further submitted that on identical facts in the case of Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Limited Vs. ITO in ITA No. 2326/PUN/2017 for assessment year 2009-10, order dated 05-09- 2019, the Co-ordinate Bench of Tribunal has allowed the assessee’s claim of deduction on the milk sold to the outsider. He submitted that the facts of the case in the year under appeal are identical to

The ld. DR on the other hand submitted that Sec.80P(2)(b) of the Act contemplates that deduction can only be allowed to the extent of profit from sale of milk made to the Federal Co-operative Society or Government or local authority or Government company and not to outsiders. He therefore submitted that in view of the clear provision of the Act, Assessing Officer and ld. CIT(A) have rightly denied the claim of deduction. He thus supported the orders of lower authorities. On the issue of similarity of facts in assessee’s case and in the case of Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Limited Vs. ITO (supra) the ld. DR did not controvert the submissions made by the ld. AR.

I have heard the rival submissions and perused the material on record. I find that the issue in the preset case is with respect to

Since, the facts in the present case are identical to that in the case of Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Limited Vs. ITO (supra) I therefore, for the reasons stated in the decision in the case of Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Limited Vs. ITO (supra) and for similar reasons restore the issue back to the file of Assessing Officer. The Assessing Officer is directed to decide the issue in line with the decision in the case of Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Limited Vs. ITO (supra), in accordance with law and after considering the submissions of assessee. As far as the disallowance u/s. 40(a)(ia) is concerned, I find force in the arguments of ld. AR. I find that Hon’ble Gujarat High Court in the case of ITO Vs. Keval Construction (2013) 33 taxmann.com 277 (Guj.) has held that disallowance for non-deduction of TDS liability would increase the profits of the assessee from business and ultimate profit would qualify for deduction. The Assessing Officer shall thus also examine the issue of disallowance u/s. 40(a)(ia) and its eligibility for deduction in the light of the aforesaid decision and thereafter decide the issue, in

In ground No. 4 of the appeal, the assessee has assailed charging of interest u/s. 234B of the Act. Charging of interest u/s. 234B is consequential and mandatory, hence, ground No. 4 raised in appeal by the assessee is dismissed being devoid of any merit.

In the result, the appeal of assessee is partly allowed for statistical purpose.

The assessee has raised following grounds : “1. On the facts and in the circumstances of the case and in law the Lower Authorities have erred in denying the deduction of Rs.27,58,920/- claimed u/s. 80P(2)(b), to the society for the reason that Society has supplied the Milk collected from its members to Federal Society as well as to Private parties. Alternatively, your appellant would like to raise the following ground : 2. On the facts and in the circumstances of the case and in law the lower authorities erred in denying the deduction of Rs.27,58,920/- u/s. 80P(2)(a)(iii), by disregarding the appellant’s contention in this regard as it has complied with all the provisions of the said section.”

The appeal is time barred by two days. The assessee has filed an application seeking condonation of delay in filing of the appeal. After perusal of the same, we are satisfied that the delay in filing of the appeal is not intentional or deliberate but has been caused due to bonafide reasons as stated in the application. The delay in filing of appeal is condoned and the appeal is admitted to be heard and disposed of on merits.

Since, the facts in the assessment year under appeal are identical to the assessment year 2014-15, the findings given by us while adjudicating the appeal in assessment year 2014-15 would mutatis mutandis apply in the assessment year under appeal. The appeal of assessee is thus allowed for statistical purpose.

The appeal of assessee is allowed for statistical purpose.

To sum up, the appeal of assessee in ITA No. 2215/PUN/2017 is partly allowed for statistical purpose and appeal of assessee in ITA No. 1583/PUN/2018 is allowed for statistical purpose.