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Gadat Vibhag Vividh Karyakari Sahkari Mandali Ltd. Versus The ITO, Ward-2, Navsari

2016 (7) TMI 823 - ITAT AHMEDABAD

Deduction under section 80P denied - Held that:- CIT(A) in the Asstt.Year 2007-08 was of the view that deduction under section 80P would not be admissible on the profit arisen to the assessee on trading of nonagriculture items, either sold to its members or non-members. This deduction was not allowable, and not claimed. On this premise, the ld.CIT(A) has decided the issue. This aspect was brought to the notice of the ld.CIT(A) in the present assessment year also, but no cognizance was taken. Fac .....

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d for the Asstt.Year 2009-10. 2. Grounds of appeal are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. In brief the grievance of the assessee is that the ld.CIT(A) has erred in confirming the action of the AO for denying the deduction under section 80P of the Income Tax Act, 1961 of a sum of ₹ 16,22,570/-. 3. Brief facts of the case are that the assessee, a cooperative society, has filed its return of .....

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rom FDRs. with nationalized banks. He further made some hypothetical calculations on the basis of his understanding and worked out the income of the assessee pertaining to non-agriculture trading activities, and thereafter made a fresh computation of total income. In this way, he worked out a sum of ₹ 16,22,570/- which according to his understanding does not call for grant of deduction under section 80P(2) of the Income Tax Act. 4. Dissatisfied with the assessment order, the assessee carri .....

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edecessor in the Asstt.Year 2007-08. The finding recorded in this assessment year by the ld.CIT(A) reads as under: 5.3 DECISION :- I have considered the observation of the AO in the assessment order as well as the contention raised by the AR of the appellant in the written submission. During the assessment the AO noticed that the appellant is having multiple business activities i.e. both agricultural and non-agricultural. The appellant had claimed ₹ 34,39,8io/- as deduction u/s. 8oP of the .....

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the computation of income, it claims entire interest income as deduction u/s. 8oP(2) of the Act. Thus, the deduction u/s. 8oP was claimed twice. But since, the deposit received are used for all activities including non-agricultural and other than credit facilities and towards administrative expenses, the interest paid to members and claimed by the society as expenses should be treated as used for non-agricultural activities and to that extent interest u/s. 8oP is not eligible. In support of his .....

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income of ₹ 77,22,132/- and after netting of the same it has claimed deduction u/s 8oP(2)(a)(iv) to the tune of ₹ 56,45,467/-. The AO, therefore, disallowed interest expenditure to the extent of nonagricultural/ non-credit facility ratio which has been determined at 3:17 out 6€ interest expenditure claimed at ₹ 77,22,1327- and added to the total income of the assessee. In short, the AO worked out income from agricultural and non-agricultural activities in the ratio of 3:17 .....

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he Tribunal has upheld the order of the ld.CIT(A). He placed on record copy of the Tribunal s order passed in ITA No.3171/Ahd/2011. The ld.counsel for the assessee further contended that the assessee has not made any claim under section 80P(2) of the Income Tax Act with regard to profit arising to it from trading of agriculture products not grown by members. The ld.DR, on the other hand, contended that this aspect does not discernible in the order of the AO. According to the AO, the accounts are .....

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carrying out agricultural as well as non-agricultural activities and the sales were made to members as well as non-members. He also noticed that Assessee had agricultural income, interest from Co. Op. Society, interest from members and had also earned income from various non-agricultural activities like income from sale of building material, petrol pump, departmental store etc. He also noticed that the Assessee carried out mixed activities and of the various activities carried on by Assessee, th .....

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of the Act on the income only on the income which is exempt u/s. 80P. The submission of the Assessee was not found acceptable to the A.O in view of the fact that Assessee was keeping mix accounting records for all the activities and thus it was difficult to decide the net profit earned from agricultural activities and non-agricultural activities. He thereafter on the basis of ratio of agricultural and non-agricultural income, applied Rule of 3 basis, for working out the eligible deduction u/s. 8 .....

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le u/s. 80P and not deductible. The short issue here is that the appellant determined the taxable income at Nil by claiming the deduction u/s. 80P of the Act whereas the AO determined the income of the appellant at ₹ 23,17,376/-. The activities, income there from and the eligibility of deduction u/s. 80P can be summarized in the tabular structure as under: 1. The AO held that as the appellant is keeping mixed accounting records of all activities, it is difficult to decide the net profit fr .....

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. The Id. AR relied upon several judicial decisions in support of his arguments. The invocation of Rule 3 by the AO was arbitrary and unjustified, What is the objectives of the Co- Operative Society is important here. The Society was primarily for the benefits of its Members. With regards the interest income from SBI and IDBI Banks, the appellant has clearly stated that such income accumulation was out of multiple activities done with the Banks. I have also perused the computation of income subm .....

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ot correct. In this circumstances, the AO is directed to delete the addition made of Rs. ₹ 23,17,376/- by invoking Rule 3. Accordingly, the appellant s appeal on this ground is allowed. 2. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us. 3. Before us, ld. D.R. supported the order of A.O. On the other hand ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted hat A.O adopted some unknown Rule of 3 and disallowed administr .....

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