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The Income Tax Officer Sabarkantha Ward – 3, Himatnagar Versus The Sabarkantha Dist. Purchase & Sales Union Ltd.

2017 (10) TMI 317 - ITAT AHMEDABAD

Deduction u/s.80P(2)(e) - income from godown rent - Held that:- The provision of Sec.80P(2)(e) provides that any income derived by the co-operative Society from the letting of godowns or warehouse for storage, processing or facilitating the marketing of commodities shall be fully entitled for deduction. Since, the appellant satisfies the conditions that claim for deduction is justified. In our considered opinion, assessee claim u/s.80P(2)(e) is allowed. - Income by way of interest or divide .....

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any other Co-operative Society the whole income would be entitled for deduction. Since, the dividend has been received from other Co-operative Societies the deduction is allowable. - Deduction on account of agricultural commission income - Held that:- 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 smal .....

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the deduction claimed by the assessee were rightly allowed by the learned CIT(A). The reliance is also placed on the Supreme Court’s decision in the case of appellant himself Sabarkantha Zilla Kharid Vechan Sangh Ltd. V/s. CIT [1993 (8) TMI 2 - SUPREME Court]. It is also noted that the AO has disallowed the estimated expenditure disallowed by the appellant from the activity of commission as it has completely disallowed the claim. The claim made by the assessee was justified as the net profit wa .....

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abad, dated 29/12/2014 for the Assessment Year (AY) 2011-12, on the following Grounds: i. The Ld.CIT(A) has erred in law and on facts in partly allowing the appeal of the assessee by allowing the deduction claimed u/s.80P(2) of the I.T. Act, in violation of provisions of Rule 46A(3)(1) of the I.T. Rule by not allowing a reasonable opportunity to AO to examine or rebuttal of the documents submitted by assessee to the CIT(A). ii. The Ld.CIT(A) has erred in law and on facts in partly allowing the a .....

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ng 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 fa .....

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et shawl, blankets, sweaters, muffler-cap socks, umbrella, rain-coat etc is sold in cloth department. (iii) Provision section : All types of provision items such as grains, pulses, oil, sugar jiggery, dry fruit, garam masala, tea, toothpaste, brush, soap, chocolate, talcum power, biscuits, hair oil, Eveready torch and power and many other items related to house-hold are sold in this section. (iv) Pesticides Section: In this department all types of seeds i.e.cotton, castor, wheat, maize, groundnu .....

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. Also cement of well-known companies is sold in this section. (vii) Iron section: All tools and equipments related to farming are sold in this section. (viii) Amul Parlor : In this parlor all the products of Amul such as milk, ghee, buttermilk, ice cream, curd, cheese, paneer, chocolate etc is sold. (ix) Kerosene section : The assessee is holding agency for kerosene. Besides, Petrol, diesel and oil of IOC company is sold in Mahavirnagar, Ganbhoi, Dhansura, Bhiloda, Malpur, Hansalpur. (x) Books .....

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obtained from outside and sold in the entire district of Sabarkantha. It has also shown income from Godown Rent, Tanker Rent, Pulse Mill Rent, Vehicle hire income, over riding 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 le .....

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.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 fall within the ambit of co-op society and therefore why the deduction of Rs.36,15,975/-claimed under section 80P be not disallowed. In this con .....

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and non agricultural items for members and others. 2. It may please be noted that the annual report you are referring is 63rd annual report and the assessee is getting deduction under section 80P right from its inception i.e. since 62 years. 3. It appears that the notes given below to the statement of income furnished during assessment proceedings are not looked at. As per the computation of income it is clearly stated that the assessee is eligible for deduction under section 80P to the extent .....

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s.4,80,591/- From the above, it may please be seen that the assessee has claimed deduction under section 80P(2)(C), 80P(2)(e), 80P(2)(d) And 80P(2)(iv) which is allowable as per statute and therefore the question of disallowance does not arise. It may please further be noted that the income or loss from all activities other than refer to in eligible deduction are offered for taxation. However, as a result of deduction there is a loss and there is no taxable income. The impression that the assess .....

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rimary 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 as .....

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oduce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. After insertion of sub-section (4) of section 80-P, by Finance Act, 2006, with effect from 1-4-2007, this deduction is available only to- 1. Primary Agricultural Credit Society (PACS) 2. Primary Co-operative Agricultural and Rural Development Bank (PCARDB) Section 80P has been amended by Finance Act, 2006, and sub-section (4) has been inserted. The assessee is neither PACS nor PCARDB a .....

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not confined to agricultural purposes but other purposes also. Hence, assessee is neither PACS nor PCARDB hence, no exemption is available to the assessee under section 80P. 6. Since the activities carried out by the assessee does not fall within the ambit of co-operative society and on perusal of annual report it is noticed that the assessee is indulged in trading activities and is a profit-making organization, the total claim of deduction u/s.80P of Rs.39,15,9757- is hereby rejected and added .....

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deduction under Section 80P. 2. In this connection, it may please be noted that the AO has failed to appreciate the nature of business and the claim made by the assessee in the computation of income. The learned AO has treated the assessee as Primary Agricultural Credit Society [PACS] and Primary Co.op. 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 appreci .....

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nder 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 h .....

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allow the appeal. The appellant has given further submission in addition to its earlier submission in support of its appeal. With reference to above and in continuation of our written submission dated 12-09-2014, we further beg to state as under: 1. The assessee is a sales and purchases union. It markets the products both agriculture and non-agriculture and also to the members and nonmembers. The income is taxable. The income as per written of income is Rs.39,15,976. Thereafter the assessee has .....

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has let out the godown for the purpose of marketing the commodities. Some of the main tenants are given below with the purpose specified against his name. Sr. No. Name of party to whom the godown is let out Purpose 01. KRIBHCO For marketing the fertilizers and seeds 02. Gujarat Sate Seeds Corporation Ltd. For marketing seeds 03. Krushi Care For marketing organic fertilizers 04. Benani Cement For marketing cement for agriculture purpose 05. IFFCO For marketing the fertilizers 06. Asian Tradelink .....

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enance 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 incur .....

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sment order for A.Y. 2012-2013 is also enclosed to show that such claim is allowed. The claim for A.Y. 2011-2012 is disallowed not on merits but under the wrong impression that the assessee is a Credit Co.op Society. In other words, the learned AO misappreciated the facts during A.Y. 2011-2012. 7. We enclose herewith Balance Sheet and Profit & Loss Account for A.Y. 2011-2012 in English as desired. The appellant has given further submission in addition to its earlier submission in support of .....

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ement For marketing cement for agriculture purpose 3,36,000 5 IFFCO For marketing the fertilizers 18,480 6 Asian Tradelink For marketing cattle feed 1,80,000 7 Mahakali Corporation For marketing cattle feed 2,94,000 8 Vinayak Corporation For marketing cattle feed 2,94,000 9 Ambica Trading Co. For marketing cattle feed 1,47,000 10 Dena Gramin Training Centre For providing training to the farmers 2,76,000 11 Hari Traders For marketing cattle feed 48,000 12 Subhashbhai Gangaram Inva For marketing s .....

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ies. Section 80P(2)(iv) is applicable to the purchase of other commodities intended for agriculture for the purpose of supplying them to the members. Now whether the assessee purchases and supplies or supplies and earns commission. It is one and the same and therefore the agricultural commission received from Gujarat Marketing Federation 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 .....

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s 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 ₹ 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 .....

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unting to ₹ 23,54,433/- and has claimed deduction u/s.80P(2)(e). The appellant has explained that the godowns have been let out for the purpose of marketing the commodities. The appellant has also furnished list of the parties to whom the godowns are let out. It has been contended by the appellant that the letting out of godowns is for the purpose of storing and marketing the commodities. The appellant had not incurred any expenses for earning the rent income as all the maintenance expense .....

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ismissed. 7. The appellant has earned dividend and interest income from other Co-operative Societies and it has accordingly claimed deduction u/s.80P(2)(d) of the Act. The details filed by the appellant show that it has made investment in shares and debentures of various cooperative societies details of which are given in schedule for of the balance sheet. As per the provisions of this section any income by way of interest or dividends derived by any Co-operative society from its investment any .....

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