TMI Blog2017 (2) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... on its own were not referable to section 80P(2)(c)(ii) which was taken by the assessing authority. There was no reason to pick various sub-sections of section 80P by the assessing authority in his own way. In fact, section 80P is applicable in respect of a different kind of person, i.e., co-operative societies. If it permits the entire income deductible, how and in what manner profits and gains are further utilized or divided by the assessee, would not be relevant. It is for this reason, in our view, sections 40A(7)(b) and 43B(f) would not be attracted. The assessee did not claim any deduction under the head of sum payable in lieu of any leave of credit of employees or in respect of any provision made for payment of gratuity to its employees on their retirement. The assessee claimed the entire business income and profit under the special provision, i. e., under section 80P, with reference to receipts to various heads referable to section 80P. Thus there was no justification or occasion to look into any other provision under Chapter VI-A, Part "D". - Decided in favour of assessee. - Income Tax Appeal No. 130 of 2015 - - - Dated:- 3-2-2017 - Sudhir Agarwal And Ravindra Nath Mishra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits to the employees, by the assessee, rejecting argument of the Revenue that there was no approval under section 36(1)(v) or section 40A(7)(b) of the Act, 1961 ? (IV) Whether the Tribunal was right in allowing deduction in respect of actual payment of certain amount towards gratuity to the employees, by the assessee, rejecting the argument of the Revenue that there was no approval under section 36(1)(v) or section 40A(7)(b) of the Act, 1961 since it was attracted ? 7. Before answering the aforesaid questions it would be appropriate to have a bird eye view of relevant facts, giving rise to the present dispute. 8. The assessee is a co-operative society, engaged in various sections of activities, namely, general section, fertilizer section, marketing section, trading section, coal section, price support section, agriculture inputs section, levy sugar section, seed section, godown section, krishaksewa kendra, Mumbai showroom, projects, cold storages, etc. It filed return disclosing nil income on October 1, 2010 after claiming deduction of ₹ 9,21,47,967 under section 80P of the Act, 1961. The case was processed under section 143(1) and selected for scrutiny. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total income qualifying for deduction of ₹ 50,000 under section 80P(2)(c)(ii) (i) Net loss as per accounts enclosed with the return (-) 6,59,84,563 (ii) Addition on account of contribution towards gratuity and LEB funds as discussed in para 6d above. 31,48,00,000 Gross total income qualifying for deduction of ₹ 50,000 under section 80P(2)(c)(ii) 24,88,15,437 (C) Addition on account of disallowance of bad and doubtful debts as discussed above in para 5 1,00,00,000 (D) Gross total income (A + B + C) 40,36,63,404 Less : deduction under section 80P (14,48,47,967+50,000) 14,48,97,967 (E) Assessed total income 25,87,65,437 11. Aggrieved by the aforesaid assessment order dated March 26, 2013, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Lucknow (hereinafter referred to as the CIT(A) ). This appeal was decided vide order dated September 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also confirmed by the Commissioner of Income-tax (Appeals). The approach of the assessing authority and the Commissioner of Income-tax (Appeals), in our view, is patently erroneous. 17. Section 80P reads as under : 80P. Deduction in respect of income of co-operative societies.-(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the pro visions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (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) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative society, the whole of such income ; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income ; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. Explanation.-For the purposes of this section, an 'urban consumers' co-operative society' means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA or section 80J or section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing authority in his own way. In fact, section 80P is applicable in respect of a different kind of person, i.e., co-operative societies. If it permits the entire income deductible, how and in what manner profits and gains are further utilized or divided by the assessee, would not be relevant. It is for this reason, in our view, sections 40A(7)(b) and 43B(f) would not be attracted. The assessee did not claim any deduction under the head of sum payable in lieu of any leave of credit of employees or in respect of any provision made for payment of gratuity to its employees on their retirement. The assessee claimed the entire business income and profit under the special provision, i. e., under section 80P, with reference to receipts to various heads referable to section 80P. Thus there was no justification or occasion to look into any other provision under Chapter VI-A, Part D . 21. In Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) the court had an occasion to consider section 80E of the Act, 1961. This provision is also applicable in respect of specified industries where total income includes profits and gains attributable to the business of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption, it would be free from taxes notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. The relevant observations are noticed as under (page 819) : We may notice that the provision is introduced with a view to encouraging and promoting the growth of the co-operative sector in the economic life of the country and in pursuance of the declared policy of the Government, the correct way of reading the different heads of exemption enumerated in the section would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of an income of a co- operative society is exempt from tax what has to be seen is whether the income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax not withstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption. 25. In Gorakhpur Kshetriya Gramin Bank v. CIT [2007] 292 ITR 205 (All) a certain amount was received by a co-operative bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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