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TMI Blog2017 (10) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... s.22,79,433/- from Godown Rent (b) u/s.80P(2)(d) for amount of Rs.14,72,486/- from Dividend & Interest (c) u/s.80P(2)(a)(iv) for amount of Rs.4,80,591/- from Agriculture Commission income though the assessee does not fall within the ambit of Cooperative Society and on perusal of the annual report it was noticed that the assessee had indulged in various trading activities and was a profit making organization. iii. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 2. The relevant facts as culled out from the materials on record are as under:- The relevant extracts from the assessment order are reproduced under:- "4. On going through the Annual report, it is seen that the co-op. society is engaged many activities, brief of each activity is given as under: (i) Electric Section : In this section, ceiling fan, table fan of Crompton Greaves, Bajaj tube-light, lamp, all the items related to lightning, motors for irrigation and flour factory, mixture, iron, Electric and gas geezers, all light fittings related to Anchor and Welcon Co. furniture, fuse, changeover switch etc is sold here. (ii) Cloth Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding petrol pump and has sold petrol, diesel and oil of IOC Ltd during the year. In the instant case, the assessee had indulged in trading activities and therefore the assessee is a profit-making organization. The activities carried out by the assessee does not fall within the ambit of cooperative society. 4.1 Accordingly a letter was issued to the assessee on 06/01/2014 to show-cause as to why the claim of deduction u/s.80P of the I.T. Act 1961 should not be disallowed and added the total income. The relevant portion of the show-cause notice is reproduced as under: "Please refer to the above. 2. On verification of annual report it is noticed that the activities carried out by you not fall within the ambit of co-operative society, you are therefore requested to show- cause as to why the deduction claimed u/s.80P of Rs.39,15,975/- should not be disallowed and added to your total income. In response, the assessee furnished a letter dated 06/01/2014 which is inter-alia reproduced as under: With reference to above we beg to state as under: 1. We have received the show cause notice [SCN] dated 06/01/2014 stating that the activities carried out by Co. op. society does not fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om its inception i.e. since more than 62 years. You are therefore requested to allow the claim and drop the show cause notice." 4.3 The reply of the assessee is duly considered but is not acceptable. It is seen from the annual report that the assessee is neither a Primary Agricultural Credit Society (PACS) nor Primary cooperative Agricultural and Rural Development Bank (PCARDB) - It is noted from records that range of assessee's activities is not confined to one taluka but is extended to entire Sabarkantha district and, thus, in view of Explanation to section 80P(4), assessee is not PCARDB - Further primary object as well as activities of assessee is not confined to agricultural purposes but other purposes also. In view of explanation to section 80P assessee is not Primary Co-operative Agricultural and Rural Development bank. Further, primary object as well as activities of assessee is not confined to agricultural purpose but other purposes also, and hence, assessee cannot be regarded as PACS. Section 80P, inter alia, provides for a deduction from the total income of the co-operative societies engaged in the business of banking or providing credit facilities to its members, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agricultural and Rural Development Bank [PCARDB]. Similarly, the assessee has discussed in the assessment order that the assessee is a Co.op. Credit Society. The learned AO has failed to appreciate the nature of business. The assessee submitted the reply to show-cause notice by letter dated 06/01/2014 reproduced in the assessment order on Page No.5 explaining the nature of business and the nature of deductions claimed. 3. The assessee is a sales and purchases union. It makes the products both agriculture and non-agriculture and also to the members and non-members. The income is taxable. The income as per written of income is Rs.39,15,976. Thereafter the assessee has claimed deduction under Section 80P as stated in the notes to the statement of income. The assessee has claimed the deduction under Sections 80P(2)(c) i.e. basic deduction 80P(2)(e) i.e. godown rent, 80P(2)(d) i.e. dividend and interest & 80P(2)(iv) i.e. agriculture commission income. After deduction eventually the income is Rs. Nil. 4. The learned AO has completely misappreciated the facts and the learned AO ignored the deduction claimed as if the assessee is a co.op. credit society. This is erroneous. Your honou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... downs are let out for purpose of storing and marketing the commodities. The assessee has not incurred any expenses for earning the rent income since all maintenance expenses are borne by the tenants. The rent is eligible for deduction under Section 80P(2)(e). 4. As regards agricultural commission, the assessee is acting as commission agent for Gujarat State Co.op, Marketing Federation for marketing Inorganic fertilizer. The assessee has earned the commission of Rs.7,55,590/- from Gujarat State Co.op. Marketing Federation. The Xerox copy of credit note dated 18/01/2011 is enclosed herewith. The assessee has disallowed expenses on estimated basis incurred for earning such commission. The agricultural commission is eligible for deduction under Section 80P(2)(iv) since it is in connection with supplying fertilizers to the members. 5. The deduction under Section 80P(2)(d) being the interest and dividend from other Co.op. Society is eligible for deduction and the statutory deduction of Rs.50,000 is also eligible for deduction under Section 80P(2)(c). 6. It may please be noted that the claim has been allowed consistently for since years. The assessment order for A.Y. 2012-2013 is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is eligible for deduction under Section 80P(2)(iv) as reduced by the estimated expenses. The kind attention is drawn to the SC decision in the case of assessee himself Sabarkantha Zilla Kharid Vechan Sangh Ltd. V/s. CIT 203 ITR 1027. The catch-notes are reproduced for ready reference: "Co. op. society - society engaged in purchase of agricultural implements, seeds, livestock etc. intended for supply to members - deduction from income tax- society carrying on taxable activities also - deduction from tax available only in relation to net profits and not gross profits -deduction at average rate on amount on which no tax is payable". Accordingly the assesses has deducted the expenses on estimated basis which is accepted by the AQ in the past. It is hoped that the explanation offered will be satisfactory." 2.2 Finally assessee claimed u/s.80P(2) of the I.T. Act was disallowed and income of Rs. 39,15,976/- was assessed. 3. Against the said order, assessee preferred first statutory appeal before the learned CIT(A), who partly allowed the appeal of the assessee. 4. We have gone through the relevant record and impugned order. Learned AR stated that claim of the assessee has been allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/- and after reducing, the estimated expenses of Rs. 2.75 Lacs the assessee has claimed this deduction. It has been explained by the appellant that it was acting as commission agent for Gujarat Estate Co-operative Marketing Federation for marketing inorganic fertilizer. It has earned commission for this activity. The assessee has itself disallowed certain expenses on estimated basis for earning such income. A perusal of the details filed by the assessee show that the appellant has earned this income from Gujarat State Co-operative Marketing Federation Ltd. for acting as an agent. The assessee company is acting as the nodal agency for all the smaller agencies at Taluka level. The provisions of the section clearly shows that the deduction is allowable for purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. The assessee has acted as a marketing agent for supplying the fertilizers to its subsidiary cooperative societies meaning thereby that the product is being marketed to the members. Since, the income has been earned from a specified activities, the deduction claimed by the assessee were r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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