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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD
By way of this appeal, the assessee appellant has challenged correctness of the order dated 29th August 2016, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2013-14.
In the first ground of appeal, the assessee appellant has raised the following grievance :-
“The learned CIT(A) has erred in disallowing following amount as representing the expenditure incurred in earning the income as in much as the assessee has never incurred such expenditure and that the AO has also not disallowed such expenditure as per the assessment order :
Out of godown rent under Section 80P(2)(e) Rs.1,50,000/- Out of dividend income under Section 80P(2)(d) Rs.1,00,000/-”
ITA No.2487/Ahd/2016 Assessment Year: 2013-14 Page 2 of 4
Learned Representatives fairly agree that the above disallowances are purely on estimate basis and by way of adhoc disallowances, to cover any expenditure as may have been incurred to earn the respective income.
In the absence of any specific details, such adhoc disallowances cannot be sustained as there is no basis whatsoever for the same. Accordingly I direct the Assessing Officer to delete the above mentioned impugned disallowance.
Ground no.1 is thus allowed.
In ground no.2, the assessee has raised the following grievance:-
The learned CIT(A) has erred that the net commission income of Rs.4,14,962/- is not eligible for deduction under section 80P(2)(iv) on the ground that the assessee has not carried on activity of purchase and sale in as much as the earning of commission represents the booking of the orders from the members as per credit note and that such commission is only on account of purchases and sale with the members.
So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer declined the claim of deduction under section 80P(2)(a)(iv) in respect of agricultural commission to the extent of Rs.4,14,962/-. When the matter travelled in appeal before the learned CIT(A), learned CIT(A) also confirmed the disallowance on the basis of following reasoning :-
“3.6 It has been noticed that the appellant has claimed the deduction under the sub-clause although no details of the income derived from the activities specified under the sub-clause has neither been provided to the A.O. nor in the appellate proceedings. The appellant in its written submission has simply relied upon the order of the ld. CIT(A)-2, Ahmedabad for A.Y. 2011-12. On going through the said appellate order it has been noticed that the appellant was acting as commission agent for Gujarat State Co-operative Marketing Federation for marketing inorganic fertilizer. From these activities, the appellant has earned the commission from the Federation. It has also been noticed that the appellant company has acting as nodal agency for all the smaller agencies at Taluka level.
3.7 As has been noticed that for claiming the deduction under the section under this sub-section the following conditions are to be fulfilled.
The appellant should have purchased the agriculture items used for the purpose of agricultural activities only.
These items ought to have been sold only to its members not to the non-members.
The appellant should have purchased these agricultural items and sold them. In other words the trading of these items has to be made.
ITA No.2487/Ahd/2016 Assessment Year: 2013-14 Page 3 of 4
However, it has been noticed that the appellant has derived the commission income as an agent which does not mean that it has purchased these items from the federation and sold only to the members and not to the outsiders. This is more important in view of the fact that the appellant had its business activities not only with his members but to the non-members also. Moreover the appellant has derived the commission as an agent and no business income as a trader. There is no details on record that it has purchased the items from the federation and sold those to its members. The appellant neither in the appellate proceedings nor in the assessment proceedings have provided any details showing that the appellant had fulfilled the aforesaid conditions of the sub-section to claim the deduction. It has been noticed that neither the appellant has purchased the goods from Gujarat State Co-operative marketing Federation nor sold to its members only and not to outsiders.
In fact, Gujarat State Co-operative Marketing Federation has sold the goods to the customers directly without any involvement of the appellant. Even the payments by the customers have directly been made to Gujarat State Co-operative Marketing Federation. Therefore, neither the purchase and sales nor any payments/receipts have been routed through the appellant. It has simply received the credit note for the commission income as a commission agent. Therefore, the assessee cannot be said to be indulged in trading of the goods. Even there are no details to show that the items sold by Gujarat State Co operative Marketing Federation were only to the members of the appellant and not to outsiders. Therefore the conditions of the sub-clause for grant of deduction does not get fulfilled. Thus, no deduction to the appellant on this account under clause 80P(2)(iv) is granted to the appellant. Thus, this sub-ground is dismissed.
The assessee is not satisfied and is in further appeal before me.
I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
10 I find that the credit note dated 01.11.2012 issued by the Gujarat State Co- operative Marketing Federation Limited, a copy of which was placed before me, categorically sets out the names of member societies to which goods were sold. It cannot thus be said that the goods were sold to the non-members and outsiders as well. I have also noted that the supplies are made directly to co-operative societies but then that is mode of execution of the order, and it cannot alter the nature of activity of the assessee. As long as assessee has booked the orders and executed the same, it does not really matter whether the delivery is made by the assessee or by the ultimate vendor directly. In view of these discussions, as also bearing in mind entirety of the case, I uphold the plea of the assessee on this count as well. In any case, a Division Bench order, in assessee’s own case for A.Y. 2011-12, has upheld this plea and this decision is a binding judicial precedent for me.
Ground no.2 is thus allowed.
ITA No.2487/Ahd/2016 Assessment Year: 2013-14 Page 4 of 4
Ground nos.3 & 4 were not argued before me and, in the light of my decisions on ground nos.1 & 2, are academic.
Ground nos.3 & 4 are thus dismissed as infructuous.
In the result, the appeal is partly allowed in the terms indicated above. Pronounced in the open court today on the 15th day of October, 2018.
Sd/- Pramod Kumar (Accountant Member) Dated: Ahmedabad, the 15th day of October, 2018.
PBN/*
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File
By order
Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad