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

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

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

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.

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.”

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.

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.

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.

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 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 :