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2015 (8) TMI 1200 - ITAT PUNE

2015 (8) TMI 1200 - ITAT PUNE - TMI - Principle of mutuality - Co-operative Society - Disallowance of deduction u/s. 80P - Revenue has denied deduction on the profits earned by assessee from consumer and garments division on the ground that such activities are akin to the activities of consumer society - Held that:- It is an admitted position that these activities were carried out by the assessee for several years and no objection whatsoever was raised by the Department on this count. The assess .....

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miniscule, it would not change the nature of activities of Co-operative Society. The assessee Co-operative Society is primarily engaged in providing credit facilities to its members and it is for the benefit for members that consumer division and cloth division have been included in the activities of the society. By providing such facilities to its members it cannot be said that the assessee is engaged in trading of consumer goods on commercial basis. The profits arising from aforesaid division .....

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. Modi ORDER PER VIKAS AWASTHY, JM : The appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-IT/TP, Pune dated 20-11-2013 for the assessment year 2008-09. The only issue raised in appeal is disallowance of deduction u/s. 80P of the Income Tax Act, 1961 (hereinafter referred to as the Act ) claimed by the assessee. 2. The brief facts of the case are : the assessee is registered under Maharashtra Co-operative Societies Act and is engaged in providing cre .....

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the assessee was selected for scrutiny, accordingly, notice u/s. 143(2) was issued to the assessee on 21-08- 2009. The net income as per the profit and loss account filed by the assessee is ₹ 43,40,243/-. The assessee claimed the entire income as exempt u/s. 80P(2)(a)(i). During the course of scrutiny assessment, the Assessing Officer found that the assessee has earned income of ₹ 3,89,174/- from sale of consumer goods and readymade/cloth divisions. The details of same are as under: .....

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s. 80P(2)(c)(i) of the Act. The Assessing Officer made disallowance u/s. 80P(2)(a)(i) of ₹ 3,89,174/- and restricted the claim of assessee to ₹ 1,00,000/- u/s. 80P(2)(c)(i). Aggrieved by the assessment order dated 02-09-2010, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer and dismissed the appeal of the assessee. Now, the assessee is in second appeal before the Tribuna .....

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tio of sales to members and nonmembers is worked out. In the year under appeal, the sales to nonmembers is only 20%. The assessee is governed by the principles of mutuality. The activities like Grahak Bhandar, Cloth Division, Grahapyogi Division, Medical Division etc. are very much part of the objects of the society for the benefit of its members. The majority of transactions i. E. more than 80% are with members alone. The assessee has been carrying on these activities for long and no objection .....

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the assessee. It is only in the assessment years 2008-09 and 2009-10 that the Revenue has raised objection to the income earned by assessee from such activities. On the principles of consistency, the ld. AR placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gopal Purohit reported as 336 ITR 287 (Bom). On the issue whether the assessee can undertake the activities of sale of consumer goods and cloth division etc. for the benefit of its members, the assessee pl .....

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aced reliance. It is an undisputed fact that the assessee is a Co-operative Society and is engaged in providing credit facilities to its members and substantial part of its earnings are from the activities related to sale of agriculture implements and machines, chemicals, pesticides, seeds etc. It has come on record that the assessee is having net income of ₹ 43,40,243/- out of which merely ₹ 3,89,174/- relates to income from sale of consumer goods, cloth/readymade business etc. It h .....

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is an undisputed fact that the assessee is providing credit facilities to its members. The assessee is following the principles of mutuality. The consumer division and garments division was set up for the benefit of the members of the assessee society. The Revenue has denied deduction on the profits earned by assessee from consumer and garments division on the ground that such activities are akin to the activities of consumer society. The deduction on earnings from such activities can be allowed .....

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society is a consumers co-operative society, [one hundred] thousand rupees; and (ii) in any other case,[fifty] thousand rupees. Explanation.-In this clause, consumers co-operative society means a society for the benefit of the consumers;] 7. It is an admitted position that these activities were carried out by the assessee for several years and no objection whatsoever was raised by the Department on this count. The assessee has been consistently following the same method of accounting and the na .....

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the consumer divisions as compared to the total turnover of the assessee is miniscule, it would not change the nature of activities of Co-operative Society. The assessee Co-operative Society is primarily engaged in providing credit facilities to its members and it is for the benefit for members that consumer division and cloth division have been included in the activities of the society. By providing such facilities to its members it cannot be said that the assessee is engaged in trading of con .....

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non-members and earned profits out of transactions held with them, its right to claim exemption on the principle of mutuality in respect of transactions held by it with its members was not lost. The assessee was a mutual concern. The income derived by it from its house property let to its members and their guests and from the sale of liquor, etc., to its members and their guests was not taxable in its hand. 8. The Hon'ble Supreme Court of India in the case of CIT Vs. Bankipur Club Ltd. (sup .....

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