THE LADWA CO-OP MARKETING CUM PROCESSING SOCIETY LTD ,HARYANA vs. INCOME TAX OFFICER, WARD-1, KURUKSHETRA

The assessee’s case was reopened since the assessee did not file return of income and Form 26AS reflected receipt of commission / brokerage and interest by the assessee society. The assessee indulged in trading of paddy / wheat on behalf of its members and it credited commission income of Rs.36,26,905/- and interest on savings bank account for Rs.11,11,172/- to its Profit & Loss Account. The net profit was arrived at Rs.27,20,598/-, the whole of which was claimed as business income exempt u/s 80P(2)(a)(iii). However, Ld. AO held that the commission and interest income would fall under the head ‘income from other sources’ and accordingly, the impugned deduction was denied to the assessee. The Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us.

From case records, it emerges that the assessee is a cooperative society and engaged in procuring agricultural produce from its members and selling the same to canalizing agencies of state government like HAFED. The marketing of product may happen by buying the goods in its own name and selling it further or arranging for sale of agricultural produce directly to the canalizing agencies against which the assessee is suitable reimbursed the margin of profit by way of commission. In the present case, the assessee has earned commission while marketing the agricultural produce of its members. The primary object of assessee entity is to facilitate marketing of agricultural produce of its members. The surplus so earned would be nothing but profit arising out of marketing of agricultural produce grown by the members of the society which is duly covered u/s 80P(2)(a)(iii). The same could not be considered as income from other sources since the primary function of the assessee is to perform marketing functions for its members. This income is duly covered under the provisions of Sec. 80P(2)(a)(iii) and therefore, the assessee would be entitled to lay claim on the deduction to that extent. We order so.

So far as the interest from bank is concerned, the same has arisen out of normal business operations of the assessee. The assessee markets the products on behalf of its members and receives sale proceeds thereof in the bank account. The same are thereafter distributed to the members. During this transitional period, the assessee’s funds have earned interest income. On the facts of the case, it could be well said that there was direct nexus between the interest income and the marketing activities of the assessee. Both the activities could be held to be intrinsically connected. Therefore, the same has rightly been offered to tax as business income which would also qualify for deduction under Sec. 80P(2)(a)(iii). We order so. No other ground has been urged in the appeal.

The appeal stand allowed. Order pronounced on 10-07-2025.