LINGNOOR DOODH UTPADAK AND PURAVATHA SAH SANSTHA MARYADIT,SANGLI vs. ITO, WARD 1, SANGLI, SANGLI

ORDER

PER DR. DIPAK P. RIPOTE, AM:

1. The Ld.Commissioner of Income Tax(Appeal) has erred in holding that the assessee is not eligible for deduction u/s 80P of the Income Tax Act in respect of the income of Rs.29,66,901.00 (deduction claimed; Rs.30,66,901.00 (-) deduction allowed by the Commissioner of Income Tax (Appeals) u/s 80P(2)(c) of the Income Tax Act; Rs.50,000.00)”

Submission of Ld.AR : 2. Ld.Authorised Representative(ld.AR) for the Assessee filed a paper Book. Ld.AR submitted that assessee had purchased milk from Farmers and this fact was brought to the notice of the AO.The Ld.AR invited our attention to the list of Members which was at page 33-54 of the Paper book .Ld AR submitted that individual farmers are members of the assessee. Assessee collects Milk from these individuals. Ld.AR also invited our attention to the By-Laws of the assessee society which were at page 6-32 of the paper book. Ld.AR submitted that as per the By-Laws only milk producing individuals can become members. Ld.AR submitted that Assessee has sold Milk to Kolhapur Zillah Sahakari Doodh Utpadak Sangh Maryadi Kolhapur which is a federal cooperative society. The ld.AR invited our attention to the certificate issued by the Secretary of the assessee and copies of the Sale bills which are at page 55-90 of the Paper book, to demonstrate that entire sale is made to Federal Milk Society. The Ld.AR submitted that all the conditions 2 of the section 80P(2)(b) have been fulfilled by the assessee hence assessee is eligible for deduction. Ld.AR submitted that ld.CIT(A) has erred in stating that Assessee has not sold milk to Federal Co- Operative Milk Society, where as entire sale is to Kolhapur Zillah Sahakari Dudh Utpadak Sangh. Ld.AR submitted that Assessee has also sold Cattle Feed and Animal Medicines to member farmers and it is essential activity. Assessee has to guide farmers regarding animal feed, medicines so that milk production improves. Thus, the activity is intrinsically related to sale of Milk.Ld.AR pleaded that for earlier years the Department has allowed 80P in assessee’s case on identical facts. Ld.AR invited our attention to Assessment Orders for AY 2016-17, 2017-18 which were at page 91-96 of the paper book to demonstrate that department has allowed 80P for earlier years to assessee on identical facts. Hence Ld.AR submitted that assessee is eligible for deduction u/s 80P of the Act.

Submission of Ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).

3 Findings and Analysis : 4. We have heard both the parties and perused the records. In this case the Assessee had filed return of Income for AY 2018-19 on 29/10/2018 declaring Nil income and claiming deduction of Rs.30,16,901/-. During the assessment proceedings the Assessee could not comply to notice u/s 142(1) issued by the Assessing Officer as it was peak Covid Period. The AO passed Ex Party assessment Order on 13/04/2021 and denied deduction claimed by the assessee. The assessee filed appeal before the Ld.CIT(A). Assessee also filed all the details called by the AO. The Ld.CIT(A) admitted the evidence filed by the assessee and called for a remand report from the AO. The Assessing Officer verified the details and submitted Report on 29/02/2024 which is at page 3-5 of the paper book.

4.1 The Ld.CIT(A) in para 8.2.2 observed as under : “8.2.2 It is noted, firstly, that the AO has stated in his remand report that the appellant’s receipts are mostly from milk sale raised by its members and that the case may be decided on merits. Secondly, the report of the AO is not binding on the appellate authority who has to decide the issues as per law, facts and circumstances of the case. Hence, the claim of the appellant needs to be tested as per facts of its 4 case and as per law. For the same, the books of accounts of the appellant & other evidences filed by it need to be perused.”

4.2 Then Ld.CIT(A) held that Assessee has not sold milk to federal cooperative society, assessee has also sold medicines and animal feeds hence the assessee is not eligible to deduction u/s 80P(2)(b) of the Act, however the ld.CIT(A) allowed deduction of Rs.50,000/- u/s 80P(2)(c) of the Act. Aggrieved by the order of the CIT(A) the assessee has filed appeal before ITAT.

4.3 On perusal of the copies of the Sale bills filed by the Ld.AR at page 56-90 of the paper book which were admittedly filed by the Assessee before the CIT(A)/AO , it is observed that assessee has sold milk to Kolhapur Zillah Sahakari Dudh Utpadak Sangh Maryadit . Assessee has also filed a certificate duly signed by the secretary of the assessee stating that entire Sale has been done to Kolhapur Zillah Sahakari Dudh Utpadak Sangh Maryadit. The Ld.DR for the Revenue has not disputed this fact. Section 80P(2)(b) of the Act is reproduced here as under : Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2), in computing the total income of the assessee.

5 (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) …………. (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to— (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; 4.4 Thus, as per section 80P(2)(b) assessee should be a Primary society supplying milk to Federal Co-Operative society engaged in the business of supplying milk, or Government Authority to become eligible for deduction.

4.5 In this case assessee has been collecting milk directly from individual farmers. A primary co-operative society is a co- operative society established by Individuals. Assessee has sold milk to Kolhapur Zillah Sahakari Dudh Utpadak Sangh Maryadit. The Kolhapur Zillah Sahkari Dudh Utpadak Sangh Maryadit is a registered Co-Operative Society under Maharashtra State Co- operative Societies Act, 1960. The Milk and Milk Products Order, 6 1992 lays down the conditions for registration for milk procuring/producing entities. The State Government has granted certain specified area to Kolhapur Zillah Sahkari Dudh Utpadak Sangh Maryadit as operational area for milk collection. The Kolhapur Zilla Sahakari Dudh Utpadak Sangh Maryadit is a Federal Milk Society as observed by Hon’ble Bombay High Court in the case of CIT vs Kolhapur Zilla Sahakari Dudh Utpadak Sangh Maryadit [2009] 315 ITR 304 (Bom). It means the assessee has sold milk to Federal Milk Society which is one of the requirements of the section 80P(2)(b) of the Act.

4.6 On perusal of the Assessment Order for A.Y.2016-17 and A.Y.2017-18, it is observed that assessee was allowed deduction u/s 80P(2)(b) of the Act. The paragraph 2 of the Assessment order for AY 2017-18 is reproduced here as under : “2. All the submissions made by the assessee are carefully verified. On perusal of the ITBA submissions and details furnished by the assessee vis-à-vis the reasons for verification, it is noticed that the assessee has claimed chapter VI-A deduction of Rs.21,80,683/-. The assessee society is registered under the Maharashtra State Co- operative Act, 1960 with District Deputy