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Income Tax Appellate Tribunal, “SMC-C” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R Per Shri A.K. Garodia, Accountant Member These two appeals are filed by the assessee which are directed against two separate orders of ld. CIT (A) – HUBLI dated 03.10.2017 for A. Y. 2010 – 11 and dated 28.07.2017 for A. Y. 2012 – 13. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
The grounds raised
by the assessee in A. Y. 2010 – 11 in are as under:- “1. The order of the learned Commissioner of Income-tax(Appeals) passed under Section 250 of the Act in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
2. The appellant denies itself to be assessed to an income of Rs. 37,67,040/ - against the returned income of Rs.NIL on the facts and circumstances of the case.
3. The learned CIT(A) was not justified in confirming the disallowance of claim of Rs. 24,98,732/ -, holding that the appellant was not eligible to claim deduction under section 80P(2) of the Act, on the facts and circumstances of the case.
The learned CIT(A) was not justified in law in not appreciating that the appellant was eligible to make a claim under section 80P(2) of the Act, on the facts and circumstances of the case.
The learned CIT(A) was not justified in holding that the activities of the appellant was not restricted to its members on mere suspicion, to hold that the appellant was not eligible to claim deduction under section 80P(2) of the Act, on the facts and circumstances of the case.
The learned CIT(A) was not justified in confirming the disallowance of Rs.3,39,847/- being commission and interest from the activity of the society, under section 80P(2)(a) of the Act, on the premise that the traders purchasing the agricultural produce grown by its members, were not members of the society, on the facts and circumstances of the case.
The learned CIT(A) was not justified in appreciating that the provisions of section 80P permit "the whole of the amount of profits and gains of business attributable to any one or more of such activities" in making a claim of deduction, on the facts and circumstances of the case.
8. The learned CIT(A) was not justified in confirming the disallowance of Rs. 8,76,507/ - being the claim of deduction under section 80P(2)(d) of the Act, being interest earned from deposits from a co-operative bank, holding that the co-operative Bank was not a society, on the facts and circumstances of the case.
9. The learned CIT(A) was not justified in appreciating that the Co- operative Banks were essentially Co-operative societies, who have obtained licences for the business of banking, and the interest earned on deposits were allowable deductions under section 80P(2)(d) of the Act, on the facts and circumstances of the case.
The appellant denies the liability to pay interest under section 234 of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case.
11. The Appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal
urged above.
12. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.” 3. The grounds raised by the assessee in A. Y. 2012 – 13 in are as under:- “1. The order of the learned Commissioner of Income-tax(Appeals) passed under Section 250 of the Act in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
2. The appellant denies itself to be assessed to an income of Rs. 19,93,639/- against the returned income of Rs.NIL on the facts and circumstances of the case.
3. The learned CIT(A) was not justified in confirming the disallowance of Rs. 19,93,639/- being the claim of deduction under section 80P(2)(d) of the Act, being interest earned from deposits from a co-operative bank and co-operative societies, holding that the co- operative Bank was not a society, on the facts and circumstances of the case.
4. The learned CIT(A) was not justified in appreciating that the Co- operative Banks were essentially Co-operative societies, who have obtained licences for the business of banking, and the interest earned on deposits were allowable deductions under section 80P(2)(d) of the Act, on the facts and circumstances of the case.
5. The learned CIT(A) was not justified in appreciating that the provisions of section 80P "the whole of the amount of profits and gains of business attributable to any one or more of such activities" in making a claim of deduction, on the facts and circumstances of the case.
6. Without prejudice, the learned CIT(A) ought to have allowed the claim of deduction of interest and dividend under section 80P(2)(a)(i) of the Act, if the appellant was not eligible for claim under section 80P(2)(d) of the Act, being income attributable to the business of the appellant, on the facts and circumstances of the case.
7. Without prejudice, the AO ought to have allowed the interest to the extent earned from Co-operative societies, as stated by the AO in the order of assessment, on the facts and circumstances of the case.
8. The learned CIT(A) was not justified in not condoning the delay in filing the appeal on the facts and circumstances of the case.
9. The appellant denies the liability to pay interest under section 234 of the Act in view of the fact that there is no liability to additional tax as determined by the learned assessing officer. Without prejudice the rate, period and on what quantum the interest has been levied are not discernable from the order and hence deserves to be cancelled on the facts and circumstances of the case. 10. The Appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal urged above.
11. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”
4. Regarding A. Y. 2010 – 11, it is submitted by the learned AR of the assessee that although 12 grounds are raised by the assessee in this year but only three issues are involved in these grounds. He pointed out that all these three issues are different aspects of the assessee’s claim for deduction u/s 80P. He submitted that first aspect is about disallowance of claim of Rs. 24,98,732/- by holding that the assessee is not eligible to claim deduction u/s 80P (2) of I T Act. The second aspect is regarding disallowance of the assessee’s claim for deduction of Rs. 339,847/- as deduction u/s 80P (2) (a) in respect of commission and interest from the activity of the assessee society. The third aspect is regarding disallowance of the assessee’s claim for deduction of Rs. 876,507/- as deduction u/s 80P (2) (d) in respect of interest earned from deposits in Banks.
5. Learned AR of the assessee submitted that the claim of deduction of Rs. 24,98,732/- is allowable u/s 80P (2) (a). Regarding disallowance of Rs. 339,847/- also, he submitted that this income is received from non members but the same is received in course of marketing of the agricultural produce grown by members. He also submitted that the nomenclature given is commission and interest but it is in respect of sale proceeds of agricultural produce grown by members and marketed by the assessee society and therefore, it is also eligible for deduction u/s 80P (2) (a). About the claim of deduction u/s 80P (2) (d) of Rs. 876,507/-, he submitted that for this issue, the matter may be restored to AO for fresh decision after examining the facts of the present case in the light of two judgments of Hon’ble Karnataka High Court rendered in the case of Tumkur Merrchants Souharda Credit Co operative Ltd. vs. ITO as reported in 230 taxman 309 and in the case of PCIT vs. Totgars Co
operative sale society as reported in 395 ITR 611. The ld. DR of revenue supported the order of CIT (A).
6. I have considered the rival submissions. Regarding the first issue i.e. disallowance of assessee’s claim u/s 80P of Rs. 24,98,732/-, I find that in this regard, the AO says on page 2 of the assessment order that the assessee has not made any submission in respect of claim of deduction of Rs. 24,98,732/- u/s 80P (2) (a) (i). In Para 8 of the order of CIT (A), it is stated by him that the assessee has carried out multi function activity including sale of groceries, PVC pipes, areca nut etc. and the assessee also helped the farmer members in sale of agricultural produce. As per section 80P (2) (a) (iii), the marketing of agricultural produce grown by members is an eligible activity for deduction u/s 80P (1). Similarly, purchase of agricultural implements or other articles intended for agriculture for supplying to members is also an eligible activity for deduction u/s 80P (1). From the orders of lower authorities, nothing is coming out as to how the assessee is not eligible for deduction u/s 80P (1). This is noted by CIT (A) that the assessee also helped the farmer members in sale of agricultural produce. I have seen that this is eligible activity. Regarding sale of groceries, PVC pipes, areca nut etc., there is no specific finding of CIT (A) that this activity is not covered by 80P (2) (iv). Hence, I hold that the disallowance of assessee’s claim u/s 80P of Rs. 24,98,732/- is not justified in the facts of the present case. I delete the same.
7. Regarding the second issue i.e. disallowance of assessee’s claim u/s 80P of Rs. 339,847/-, I find that as per Para 9 of the order of CIT (A), this is the objection of the CIT (A) that the assessee has not established that the traders are members of the assessee society and he confirmed the disallowance on this basis that income arising from transactions with members only will qualify for deduction. He has totally disregarded the claim that such income has arisen in course of marketing of the agricultural produce grown by members. Marketing of the agricultural produce grown by members cannot be only with members and it can be with outsiders and hence, this income is also eligible for deduction u/s 80P. I order accordingly.
Regarding the third issue i.e. allowability of deduction u/s 80P (2) (d) of Rs. 876,507/-, I feel it proper to restore this matter back to the file of AO for a fresh decision after examining the facts of the present case in the light of two judgments of Hon’ble Karnataka High Court rendered in the case of Tumkur Merrchants Souharda Credit Co operative Ltd. vs. ITO (Supra) and in the case of PCIT vs. Totgars Co operative sale society (Supra) because the judgment in these two cases are not in conflict and the ultimate conclusion is different because facts are different. In the case of Tumkur Merrchants Souharda Credit Co operative Ltd. vs. ITO (Supra), the issue was decided in favour of the assessee because in that case, it was found that the money deposited in bank was out of own funds and not out of liability of the assessee. But in the case of PCIT vs. Totgars Co operative sale society (Supra), the issue was decided in favour of the revenue because in that case, it was found that the money deposited in bank was out of liability of the assessee and not out of own funds of the assessee. The AO is directed that if it is found that the facts in the present case are in line with the facts in the case of Tumkur Merrchants Souharda Credit Co operative Ltd. vs. ITO (Supra), the issue should be decided in favour of the assessee but if it is found that the facts in the present case are in line with the facts in the case of PCIT vs. Totgars Co operative sale society (Supra), the issue should be against the assessee.
In the result, the appeal of the assessee in A. Y. 2010 – 11 stands allowed for statistical purposes in the terms indicated above.
10. Regarding the appeal for A. Y. 2012 – 13, learned AR of the assessee submitted that in this year, only one issue is involved i.e. regarding allowability of deduction u/s 80P (2) (d). He submitted that the facts are similar in both years and hence, this issue may be decided in this year also on similar line. Learned DR of the revenue supported the order of CIT (A).
I have considered the rival submissions. In AY 2010 – 11 as per Para 8 above, the issue is restored back to AO for fresh decision. Since, no difference in facts
is pointed out by the learned DR of the revenue, I decide this issue in this year on similar line and the matter is restored to AO for fresh decision with same directions.
In the result, the appeal of the assessee in A. Y. 2012 – 13 stands allowed for statistical purposes in the terms indicated above.
In the combined result, both the appeals of the assessee in A. Y. 2010 – 11 & 2012 – 13 are allowed for statistical purposes in the terms indicated above.
Order pronounced in the open court on the date mentioned on the caption page.