TMI Blog2016 (12) TMI 1649X X X X Extracts X X X X X X X X Extracts X X X X ..... roup of cases is as to whether penalty under section 271 (1)(c) of the Act is sustainable in the facts of the present case. 3. That it is pertinent to note that on the merit of the issue namely as to whether the assessee is entitled to claim deduction under Section 80P of the Income Tax Act, this Court has held in favour of the assessee in D.B. Income Tax Appeal No.139/2002 in Commissioner of Income Tax, Bikaner vs. M/s Rajasthan Rajya Sahakari, decided on 01.09.2016, which reads as under:- 2.1 The case of the department is that the assessee claimed benefit under Section 80P(2)(a)(iv) 80P(2)(d)of the Income Tax Act, 1961 which reads as under:- 80P(1) ... . (2) (a)... (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agricultural for the purpose of supplying them to its members, or 3 . It manifests from the material on record that the assessing officer while considering the law prevailing at the relevant point of time for the assessment years in question has rejected the claim of the assessee in view of the judgment in Assam Co-operative Apex Marketing Society Ltd. Vs. Additional CIT: (1993) 113 CTR (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submits that the interest income has been earned from short-term deposits with Co-operative Banks and Co-operative Societies and is fully exempted u/s 80P(2) (d). The CTT(A), in the subsequent assessment year, i.e., assessment year 1993-94, has allowed the same. The reliance was also placed upon the judgement of Hon'ble Punjab Haryana High Court in the case of CTT vs. Haryana State Co-operative Housing Society (1998) 234 ITR 714. 4. Counsel for the Department, Mr. Sanjay Jhanwar, has drawn our attention to the provisions contained in Section 80P(2)(a)(iv) of the Income Tax Act, 1961 which reads as under: 80P(1) ... . (2) (a)... (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agricultural for the purpose of supplying them to its members, or 5. Counsel for the respondent in support of submission has relied on the decision of the Supreme Court in case of UP Cooperative Cane Union Federation Ltd. Vs. Commissioner of Income Tax: (1997) 11 SCC 287 and more particularly paragraph no 7, 8 and 9 which reads as under:- 7. The relevant part of Section 80P(2)(a)(i) of the Act is reproduced as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was to extend the exemption to co-operative societies directly extending credit facilities to its members. There is nothing in the said provisions to show that the intention was to grant exemption to co-operative societies which were extending credit facilities to persons, though not the members of the said society, were members of another cooperative society which is a member of the cooperative society seeking exemption. The meaning of the expression members cannot, therefore, be extended to include the members of a primary cooperative society which is a member of the federated co-operative society seeking exemption. The principle of lifting the corporate veil which was invoked by Shri Tripurari Rai in support of his submission cannot have any application in the context of the provisions contained in Section 80P(2) (a)(i) of the Act. 6. The learned counsel further contended that the present substantial questions of law framed by this Court in examining the claim of the assessee are squarely covered by the judgments of the Supreme Court (supra) and in the light thereof the assessee is not entitled for the benefit under Section 80P(2)(a)(iv), since the Parliament in its w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80P(2)(a) of the Act which reads as follows : (2) The sums referred to in Sub-section (1) shall be the following, namely : (a) in the case of a co-operative society engaged in-- (i) to (iii) xxxxxxx (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. Thus, the interpretation placed by the apex Court in the case of Kerala State Cooperative Marketing Federation Ltd. (supra) would still be applicable for interpreting the provision of Clause (iv). 7. Applying the principles laid down by the apex Court to the facts of the present case, it is not in dispute that the apex society supplied/sold gypsum, seeds and fertilizers to its members. These goods were intended for agricultural purposes and, therefore, benefit of Section 80P(2)(a) (iv) of the Act was available. 9. In Commissioner of Income Tax, Tamilnadu-I vs. Tamilnadu Cooperative Marketing Federation Ltd. (1999) 151 CTR 0232 in para no.5, it has been held as under:- 5. The other sub-sections not being material for the discussion, they are not referred to. As already stated, the marg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 3,10,253 and exemption was allowed for ₹ 1,50,132 only. In computing the expenses of ₹ 3,10,253 the total income shown on the credit side of the profit and loss account was taken into consideration and the total expenses on the debit side of the profit and loss account were taken into consideration and the proportionate expenses come to 67 per cent. Applying this 67 per cent to the figure of ₹ 4,60,385, the figure of ₹ 3,10,253 was arrived at which was considered as expenses not liable to deduction under s. 80P(2) of the IT Act. It was not disputed that the income from the trucks and tractors was not exempt and other activity which was the main source of income, i.e., supply of fertilizers and agricultural implements to its members and marketing of agricultural produce was exempted. The staff which was employed by the assessee was looking after both the businesses, namely, the business of supply of fertilizers, agricultural implements, etc., to its members and carrying on the activity of running of the rice mill and deriving income from trucks and tractors. The income which was derived by the assessee from the rice mill or from operating the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. Sec.80P(2)(d) of the Act allows wholededuction of an income by way of interest or dividends derived by the cooperative society from its investment with any other cooperative society. This provisions does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the cooperative society from any investment with a cooperative society. It is immaterial whether any interest paid to the cooperative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the cooperative society from its investment in any other cooperative society. Therefore, we do not agree with the argument advanced by the learned counsel for the Revenue. In our opinion, the learned Tribunal was right in allowing deduction under Sec.80P(2)(d) of the Income Tax Act, 1961. In respect of interest of ₹ 4,00,919/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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