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Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
Per INTURI RAMA RAO, AM : These are appeals filed by the revenue against different orders of the Commissioner of Income-tax (Appeals),[CIT(A)], Hubli, both dated 10/6/2015 for the assessment years 2010-11 and 2012-13. Since common issue is involved in both the appeals, we dispose of the same by this common order for the sake of convenience.
& 1184/Bang/2015 Page 2 of 5 2. The revenue raised the following common grounds of appeal:
1) “The order of the CIT(A) is opposed to law and facts of the case. 2) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in restricting the disallowance made u/s. 80P(2)(a)(iv) without appreciating that the assessee has not maintained separate books of accounts for the eligible and ineligible business. 3) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in restricting the disallowance made u/s. 80P(2)(a)(iv) without appreciating that the Tally software maintained by the assessee and relied upon by ld. CIT(A) to give the relief does not give a true and accurate picture of the profits of the eligible business. 4) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in denying an opportunity to the AO to examine the claim made by the assessee regarding maintenance of separate books of accounts though the assessee had, during the assessment proceedings, submitted that he did not maintain any separate books of accounts. 5) The appellant craves leave to add, alter, amend and delete any of the grounds of appeal. ”
3. Briefly facts of the case are that the respondent-assessee is a co-operative society registered under the Karnataka Co- operative Societies Act. It is engaged in the business of distribution of oil seeds among the members of the society and trading in edible oils. In the return of income filed, assessee-co- & 1184/Bang/2015 Page 3 of 5 operative society claimed deduction u/s 80P(2)(a)(iv) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] in respect of income earned from sale of seeds to its members. While arriving at the income attributable to activity of sale of seeds, assessee-co-operative society had allocated common expenditure in proportion of the turnover whereas the AO arrived at the income by apportioning the net income in the proportion of turnover. As a result of this, it resulted in short- allowance of deduction under the provisions of section 80P(2)(a) of the Act.
4. On appeal, before the contention, contention of the assessee-co-operative society was accepted by holding that from the books of account maintained under tally system, gross profit from each activity can be arrived at and the method of apportionment of common expenditure between two activities was accepted by the CIT(A).
Being aggrieved by this order of the CIT(A), revenue is in appeal before us.
5.1 The learned Departmental Representative vehemently contested that when there are no separate books of account maintained, correct profit cannot be arrived at in respect of eligible activity for deduction u/s 80P(2)(a)(iv) of the Act. Law does not authorize apportionment of common expenditure. Therefore, he submitted that the matter may be sent back to the & 1184/Bang/2015 Page 4 of 5 file of the AO to examine the issue from the angle whether profit is derived on account of sale of seeds to members or not?
5.2 On the other hand, learned AR for the assessee submitted that the method of apportionment of common expenditure is adopted by the assessee-co-operative society is acceptable and reasonable and there was no difficulty in arriving at the GP from each activity, then the question that arises about apportionment of common expenditure which has been done in the proportion of turnover. This is in consonance with law laid down by the Hon’ble Supreme Court in the case of Consolidated Coffee Ltd. vs. State of Karnataka (248 ITR 432). Hence, he submitted that no interference is called for.
5.3 We heard the rival submissions and perused the material on record. There is no dispute about eligibility of the assessee co-operative society for deduction u/s 80P(2)(a)(iv) of the Act. The dispute is only with regard to method of arriving at profit from the activity which is eligible for deduction u/s 80P. The bone of contention between the assessee co-operative society and the Revenue is only with regard to the method to be adopted for arriving at profit eligible for deduction u/s 80P(2). The ld.CIT(A) recorded a finding that GP in respect of each activity can be arrived at from the books of account maintained by the assessee under tally system. This finding remains uncontroverted by the revenue. Once GP is arrived at, question of apportionment of & 1184/Bang/2015 Page 5 of 5 common overheads among the eligible activity and non-eligible activity. In our considered opinion, method of apportionment of common expenditure among the two activities adopted by the assessee co-operative society is acceptable and reasonable having regard to the ratio laid down by the Hon’ble Apex Court in the case of Consolidated Coffee Ltd.(supra) wherein it was held that adoption of method of apportioning common expenditure on the basis of gross receipts could not be said to be perverse method and it is a reasonable method. Therefore, the view taken by the ld.CIT(A) cannot be found fault with. Hence, we do not find any reason to interfere with the order of the ld.CIT(A).
In the result, the appeals of the revenue are dismissed.