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2015 (12) TMI 570 - BOMBAY HIGH COURT

2015 (12) TMI 570 - BOMBAY HIGH COURT - TMI - Reopening of assessment - Entitlement to the deduction u/s 80P(e) denied - Held that:- The jurisdictional condition under Section 147 of the said Act is the formation of belief by the Assessment Officer that income chargeable to tax has escaped assessment. In the present matter, the Assessment Officer expressly did not accept the audit objection and later on acted under the dictate of superior authorities. In IL & FS Investment Managers Ltd vs Income .....

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GMENT ( Per B. P. Dharmadhikari, J.) The department has attempted to raise the following questions as the substantial questions of law in this appeal : 1] Whether on the facts and circumstances of the case and in law, the Hon ble ITAT has erred in holding that the assessee was entitled to the deduction u/s 80P(e) of the Income Tax Act, 1961 in respect of the alleged rental income computed @ 50% in respect of ginning and pressing charges received/earned by the assessee during the year ? 2] Whethe .....

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to reopen the proceedings in a grossly perverse manner? 2. The facts show that for the assessment year 2003-2004 the respondent Cooperative Society filed return on 31-10-2003 declaring the total income at Rs. Nil after claiming the exemption under Section 80P(2) of the Income Tax Act, 1961 [for short, the said Act ]. This return was processed under Section 143(1) of the said Act on 27-02-2004 and during the scrutiny a notice was issued to the assessee on 2010-2004. The gross total income during .....

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ibunal, Nagpur. 3. A notice under Section 148 of the said Act was issued on 19-03-2008. The assessee on 29-03-2008 adopted its return filed on 31-10-2003. The assessee opposed the reopening and also pointed out that there was no error. The Income Tax Officer passed the assessment order on 29-12-2008 and after recording the finding that the assessee did not receive any commission income from the Cotton Federation in respect of the ginning and pressing services under any agreement for the assessme .....

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of the assessee. The above mentioned ruling was, therefore, found applicable to the case of the assessee. The ITAT rejected the appeal filed by the Revenue. 4. Learned Advocate Shri Parchure for the appellant has submitted that as the assessee was not receiving any commission separately from the Cotton Growers Federation, the deduction under Section 80P(2)(e) of the said Act on 50% of ginning and pressing charges is not permissible. He points out that there is no specific provision allowing the .....

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tion under Section 80P(2)(e). The deduction is not illegal. Similarly, when the settled law has been followed, the assessment could not have been reopened under Section 148 of the said Act. 6. The Division Bench of this Court in judgment reported at [1995] 78 Taxman 341 (Bombay) noted that there was fertilizer agreement and the paddy agreement with the assessee namely Bhandara Zilla Sahakari Kharedi Vikri Sangh Ltd. As per the fertilizer agreement which related to wholesale distribution, the ass .....

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same. Applying that ratio, the Division Bench found that the whole of income derived under the fertilizer agreement was entitled to deduction under Section 80P(2)(e) of the said Act. As far as paddy agreement is concerned, the Division Bench notices that the activities were split into two groups viz; (i) pertaining to milling and (ii) pertaining to use of godowns. As sufficient material was not available on record to enable the adjudication of exact quantum of deduction, applying law in Supreme .....

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e it was specifically provided for in the agreement. In [2009] 182 Taxman 287 (SC) the Hon ble Apex Court after considering the material on record finds that the assessee was storing commodities in its godown as its own trading stock. It is, therefore, held not entitled to deduction under Section 80P(2)(e) of the said Act. Thus, the view reached is on account of a specific finding about the ownership of stocks. In case of Surat Vankar Sahakari Sangh Ltd vs Commissioner of Incometax reported at [ .....

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as outsiders. It earned income during the assessment year from processing gray cloth on labour basis and also from processing its own gray cloth. The assessee claimed exemption from tax in respect of income from processing and facilitating the marketing of commodities. As the income from letting out godowns or warehouses for storage, processing or facilitating the marketing of commodities was exempted and claim for exemption was for income not falling in that category, the claim was declined. Th .....

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harges as already mentioned supra. This 50% ginning and pressing charges has been accepted towards the letting of godown as per the order of CIT (A) dated 14021994 since the assessment year 19901991 in case of the assessee itself. The effort made to distinguish the judgment of this Court in case of CIT vs Bhandara Zilla Sahakari Kharedi Vikri Sangh Ltd (supra), overlooks the fact that the amount received by the assessee from the Cotton Growers Federation was inclusive of the charges towards lett .....

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houses, is not in dispute. We find that the substantial question of law as sought to be urged vide question no.1 does not arise for consideration. The judgments relied upon by learned Advocate Shri Parchure for the appellant, mentioned supra, take a contrary view because of the facts available on record. The Revenue has not come up with a fact that the commodity i.e. cotton in relation to which the petitioner is receiving ginning and pressing charges is not stored in its godown. In absence of su .....

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a decision to issue notice under Section 148 of the said Act was taken because of the subsequent direction from the higher authorities. The appellate authority has relied upon several judgments including the judgment of Hon ble Apex Court and held that the reopening was not permissible as notice under Section 148 of the said Act was based only on the audit objection. The appellate authority has specifically found that in later order the Assessment Officer proceeded under wrong impression that t .....

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