VEERAKERALAM PACB,COIMBATORE vs. THE INCOME TAX OFFICER, NON CORP WARD 4(1), CBE, COIMBATORE
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आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C BENCH: CHENNAI
श्री यस यस विश्वनेत्र रवि, न्यावयक सदस्य एवं श्री अविताभ शुक्ला, लेखा सदस्य के समक्ष
BEFORE SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1951/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2018-19
आयकर अपील सं./ITA No.1952/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2020-21
Veerakeralam PACB,
No.17, Periya Thottam Colony,
Veerakeralam, Coimbatore,
Tamil Nadu-641007
[PAN: AAAAV3131G]
The Income Tax Officer ,
Non-Corp Ward-4(1), CBE,
Coimbatore
(अपीलार्थी/Appellant)
(प्रत्यर्थी/Respondent)
अपीलार्थी की ओर से/ Assessee by :
Shri S.Ramachandran, C.A.
प्रत्यर्थी की ओर से /Revenue by Ms.R.Anita, Addl.CIT
सुिवाई की तारीख/Date of Hearing
:
20.11.2024
घोर्णा की तारीख /Date of Pronouncement
:
10.01.2025
आदेश / O R D E R
PER AMITABH SHUKLA, A.M :
This appeal is filed against the order bearing DIN & Order No.ITBA
/
NFAC
/
S
/
250
/
2024-25
/
1065077565(1) and No.ITBA/NFAC/S/250/2024-25/1065078595(1) dated 22.05.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), National
Faceless Appeal Center[NFAC], Delhi, for the assessment years 2018-19
& 2020 - 21. Through the aforesaid appeal the assesse has challenged order u/s 250 dated 22.05.2024 passed by NFAC, Delhi.
ITA No.1951 & 1952/Chny/2024
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0 We have noted that both the appeals of the assessee are on identical issue of denial deduction u/s 80P by the Ld.AO on the premise of assessee earning income from an activity not covered by its regular areas of engagement. The Ld. First Appellate Authority confirmed the order of the Ld.AO. Consequently both the appeals are taken together. For the purposes of this adjudication, we take AY – 2018-19 as the lead year and consider the figures thereof. The decision would apply mutatis mutandis to AY-2020-21 which is resting on identical facts.
1 All the grounds of appeal are centering around the principal controversy of denial of deduction u/s 80P to the assessee. Accordingly all the grounds are adjudicated together. The Ld. Counsel for the assessee informed that the assessee is a primary agricultural cooperative society and engaged chiefly in the activity of providing credit facilities to its members. The assessee has, pursuant to directions of Government of Tamil Nadu, reportedly undertaken Public Distribution Scheme (PDS) and earned income therefrom. As per the facts recorded by the Ld. AO in para 4 of page 2 of his order dated 29.09.2021, assessee had shown gross profit of Rs.16, 99, 166/- from the PDS activity, which was arrived at after claiming of expenses of Rs.20,58,32/-. In response to the Ld.AO’s query to justify the above income as part of regular activity of the ITA No.1951 & 1952/Chny/2024
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primary agricultural cooperative society, the assessee replied that, even though its by-laws approved such activity, it was a work thrusted upon it by the Tamil Nadu Government and that it has in realty incurred loss.
The Ld. AO could not get convinced by assessee’s argument and hence after giving assessee due credits of expenses it proceeded to make an addition of Rs.8,22,269/- as amount, earned from PDs activity, not eligible for deduction u/s 80P(2)(a)(i). The Ld. First Appellate Authority confirmed the order of the Ld.AO by placing reliance upon the decision of Hon’ble Madras High Court in the case of Udaipatti PACCS sustained the addition made by the Ld.AO.
0 We have heard the rival submissions in the light of material available on records. The Ld. Counsel for the assessee vehemently argued against the order of the Ld. AO and of the Ld.CIT(A). It was submitted that the assessee is governed by rules of the Government of Tamil Nadu and that the activity of PDS was thrust upon it. It was stated that to survive, it has to comply with the directions of the state government. In support of its argument, the assessee placed reliance upon the orders of Hon’ble Madras High Court in the case of S-1234 Udaipatti PACCS dated 22.07.2019 and The Kodumudi Growers Cooperative dated 01.11.2018 as well as of Hon’ble Bombay High Court
ITA No.1951 & 1952/Chny/2024
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in the case of Ahmed Nagar District Central Cooperative Bank. The Ld.
DR argued that the case laws cited by the assessee are distinguished on facts and do not comes to its rescue.
1 As regards the case of Ahmed Nagar District Central Cooperative Bank(ADCB), the decision of Hon’ble Bombay High Court does not comes to assessee’s rescue as the impugned case pertain to the ADCB earning commission income by acquiring the role of acting as commission agent for Maharashtra Electricity Board. It was contended by ADCB that collection of electricity bills was directly related to its business of banking. The Hon’ble Bombay High Court, placing reliance upon the Apex Court decision held that collecting electricity bills was part of banking activity. The Hon’ble Court also placed reliance upon the facts that u/s 6(1)(b) of the banking regulation act a banking company may engage itself as an agent for government or local authorities.
2 In the case of The Kodumudi Growers Cooperative (KGC), Hon’ble Juri ictional high court took cognizance of two crucial facts. Firstly that the activity of PDS undertaken by KGC was supported by its by-laws and secondly that the same, as per facts available on records, was restricted to its members only. Consequently the Hon’ble Madras
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High Court held that the assessee would be entitled for deduction u/s 80P(2)(a)(i). The decision of KGC supra was followed by the Hon’ble
Juri ictional High Court in its decision dated 22.07.2019 in the case of S-1234 Udaipatti PACCS. Here again the assessee had established that it had sold fertilizers to its members only. The decision in the case of The Kodumudi Growers Cooperative (KGC) is reproduced hereunder:-
“….7.Thus, we are called upon to decide as to whether the assessee is entitled for deduction under Section 80P(2) of the IT Act in respect of the income earned from the sale under the PDS.
8.It is not in dispute that the fair price http://www.judis.nic.in shops were set up pursuant to the direction issued by the Government of Tamil Nadu and communicated through the District Collector. The assessee, while filing the appeal before the CIT (A), specifically contended that theAssessing Officer erred in fixing the income from the sale of fertilizers (PDS) without considering the material fact that the profit in respect of the same is from the supply and purchase of fertilizers to its members. Further, the assessee referred to the communications received from the Government dated 19.2.1995, 06.11.1995 and 15.11.1995 and the copy of the circular of the