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Principal Commissioner of Income Tax, Ajmer Versus Kekri Sahakari Bhumi Vikas Bank Ltd.

2016 (12) TMI 1649 - RAJASTHAN HIGH COURT

Penalty under section 271 (1)(c) - entitled to claim deduction under Section 80P - Held that:- 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 [2016 (9) TMI 1385 - RAJASTHAN HIGH COURT]. - Since, the issue on merit has been decided in favour of the assessee no penalty can be levied and as such the Tribunal has committed no error .....

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ue involved in the present group 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, .....

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w 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) 58, which came to be further confirmed by the CIT (Appeals) while dismissing the appeal preferred by the assessee against the order of the Assessing Officer. However, the tribunal has also thoroughly examined the matter in detail in the light of the decision of the S .....

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of the decision of Hon'ble Supreme Court in the case of Assam Co-operative Apex Marketing Federation Ltd. 201 ITR 338 (supra). We also find that this judgement has been impliedly overruled by the Apex Court in the case of Kerala State Cooperative Marketing Federation Ltd. & Others 231 ITR 814 (supra), wherein at Page No. 825 it was held as under:- We hold that the society engaged in the marketing of agricultural produce of its members would mean not only such societies which deal with t .....

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duction acording to law. 7. The Id. A.R. Submits that the assessee has received interest from other Co-operative Societies/Banks and after deduction the interest paid to State Government on loan, the net amount of interest amounting to ₹ 58,84,711.46 was shown as interest income and claimed as deduction u/s 80P(2)(d). This deduction was disallowed by the AO on the ground that the4 interest income has not been earned out of any investment but the same is a result of running current account .....

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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 respo .....

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operative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or... 8. The expression "members" is not defined in the Act. Since a co-operative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the co .....

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ons of this Act, the rules and the bye-laws for the time being in force but a reference to "members" anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty. 9.It is not disputed that as per the said provision the members of the Federati .....

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g in the country, namely, the federated co-operative societies and primary societies. In Section 80P(2) (a)(i), when Parliament has used the expression "members", it has used it in the normal sense of a member of a co-operative society. The intention 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 exten .....

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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 wisdom was conscious of the distinction .....

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t in Kerala State Cooperative Marketing Federation Ltd. And Ors. (supra) & more particularly para no.14 which reads as under:- 14. The attention of this Court does not seem to have been drawn to the aforesaid decision while deciding Assam Cooperative Society's case. With respect, we, therefore, hold that the view taken therein requires reconsideration as stated earlier by us. In the result, the order of the Kerala High Court following the decision of this Court in Assam Cooperative Socie .....

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nue. There shall be no order as to costs. 8. In Commissioner of Income Tax vs. U.P. Co-operative Federation Ltd.: (2006) 203 CTR (ALL) 186 in para no. 6 & 7, it has been held thus: 6. It may be mentioned here that after the apex Court had delivered the judgment in the case of Kerala State Co-operative Marketing Federation Ltd. (supra), the Parliament had amended the provisions of Section 80P(2)(a)(iii) of the Act by substituting the words "the marketing of agricultural produce grown by .....

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n 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 pr .....

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eady stated, the marginal heading of S. 80P is Deduction in respect of Income of Cooperative Societies. 10. In Commissioner of Income Tax vs. Haryana Cooperative Sugar Mills Ltd: (1989) 180 ITR 631 (P & H) in para no.8 which reads as under:- 8. For the reasons recorded above, we answer both the questions in favour of the assessee, in the affirmative and hold that the Tribunal was right in coming to the conclusion that short-term call deposits were investments within the meaning of Sec. 80P(2 .....

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was partly taxable and partly nontaxable. Subsequently, the said return was revised and the assessee claimed deduction from the gross amount of income, of the amount of income derived from its members without deducting therefrom proportionate administrative and managerial expenses. The assessee derives its income mainly from supply of fertilizers to its members, marketing of agricultural produce, agricultural implements, etc. The assessee is also running a rice mill. In the year in question, th .....

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ble activity has to be computed by setting off against the gross profit proportionate amount of expenditure. The claim of the assessee for allowing the entire expenditure on account of managerial and administrative expenses was not accepted. On the basis of the said decision of the Gujarat High Court, the proportionate expenses from the gross income of ₹ 4,60,385 were reduced to the extent of ₹ 3,10,253 and exemption was allowed for ₹ 1,50,132 only. In computing the expenses of .....

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come 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 tr .....

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ar Sahakari Sangh Ltd. Vs. Assistant Commissioner of Income Tax: (2016) 72 taxmann.com 169 (Gujarat) in para no.8.1 & 8.2 which reads as under:- 8.1 Similarly, in the case of Doaba Cooperative Sugar Mills Ltd. (supra), the Punjab and Haryana High Court has held as under: '5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Sec. 80P(2)(d) of the Act because it is not established that the assessee had derived .....

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e, it is reproduced as under: 80P.(2)(d) in respect of any income by way of interest or dividends derived by the cooperative society from its investment with any other cooperative society, the whole of such income. 6. So far as the principle of interpretationapplicable to a taxing statute is concerned, we can do no better than to quote the bynow classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC (1921) 1 KB 64, 71: ...In a taxing Act, one has to look merely at what is clearly said. The .....

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eduction 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 inves .....

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ion, 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/- on account of interest received from Nawanshaln Central Cooperative Bank without adjusting the interest paid to the bank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.' 8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for wh .....

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