TMI Blog2005 (2) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(ii) and (iv) in respect of income/profit derived from sale of testing equipment, acid, alcohol, stationery, etc. treating them as falling under above clause." 3. The assessee is a federal co-operative society consisting of various primary milk co-operative societies as its members. The assessee is engaged in marketing of milk and milk products like butter, ghee, cattle feeds, seeds. The assessee has claimed deduction under s. 80P(2)(a)(ii) and (iv) amounting to Rs. 97.391 and Rs. 1,12,787 for the asst. yrs. 1993-94 and 1994-95, respectively. The AO however, rejected the claim of the assessee for both the years. The matter was carried to CIT(A). The CIT(A) observed that it is difficult to appreciate how the AO has come to the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society Ltd. (1990) 90 CTR (Mad) 617 : (1991) 188 ITR 671 (Mad) wherein the High Court has held that if the assessee is a co-operative society engaged in any of the activities falling under s. 80P(1) and (2)(a), that would suffice to enable the society to claim the benefit of deduction under s. 80P. The learned Departmental Representative has no objection if the matter is decided accordingly. 5. Having heard both the parties, we are of the view that the issue in controversy is covered by the decision of Madras High Court in the case of CIT vs. Pondichery Co-operative Society Ltd. wherein the Hon'ble High Court held as under: "A liberal construction should be given to s. 80P. In this case, if it is established that the co-operative socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the union is intentionally kept low to keep the costs of operation low, and yet ensure that the primary societies cash flow is kept active. In this way, while on the one hand the constituent members get a minimum price, the incentive of subsequently getting a higher price ensures a steady flow of the goods to the union, and there is a clear understanding that in the eventuality of the profit, the amount will be placed in reserve. The AO has not appreciated that this amount represents the difference between the interim price of milk fixed and the final price of milk fixed. This is a co-operative society which exists for the benefit of its members who in turn are mostly from other co-operative societies. The entire corpus in any case belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenditure, because business expenditure is to be allowed for ascertaining the net profit and not to be paid out of the net profits. But the fact was that the net profit was ascertained only after allowing the rebate which went to reduce the price at which members purchased the goods from the society. The rebate allowed was not a part of profit at all. The Tribunal had pointed out that the scheme of rebate was that the price at which the goods were sold to the members was taken as a provisional price. When the rebate is given at the end of the year, the provisional price is reduced and the amount received by the society is itself taken at a reduced figure. The deduction goes to the trading account where the figure of sales will be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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