TMI Blog2022 (3) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety while assessing its income or the assessee is to be assessed as an AOP as there is no discussion whatsoever in the appellate order passed by ld. CIT(A) on this issue which is infact is an issue which goes to the root of the matter as the assessee will only be entitled for deduction u/s 80P if the assessee is held to be Co-operative Society as is defined u/s 2(19) rather on the contrary the ld. CIT(A) proceeded to grant relief to the assessee by allowing deduction u/s 80P of the Act without adjudicating on this issue . CIT(A) also did not addressed the grievance of the AO while granting relief to the assessee as to non furnishing of the explanation by assessee before the AO about nature of sources of gross receipt or commission income as were claimed by assessee to be earned from the marketing of agricultural produce grown by its members , before allowing relief to the assessee u/s 80P of the 1961 Act . The ld. CIT(A) even did not look into the grievance of the AO that accounts of the assessee were not audited and even tax-audit report has not been filed by the assessee despite the assessee being covered by the provisions of Section 44AB of the 1961 Act, rather ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (Appeals)-1, Lucknow, U.P. (hereinafter called the CIT(A) ),for assessment year s(ay s):2014-15 and 2015-16 respectively, the appellate proceedings had arisen before learned CIT(A) from two separate assessment order(s), firstly assessment order dated 30.12.2016 passed u/s 143(3) of the Income-tax Act, 1961(hereinafter called the Act ) by learned Assessing Officer (hereinafter called the AO ) for ay: 2014-15 and secondly assessment order dated 29.12.2017 passed u/s 143(3) of the 1961 Act by AO for ay: 2015-16. Since both these appeals filed by Revenue involves common issues, both these appeals were heard together and are now adjudicated by this common order. Both these appeals were heard by Division Bench of the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad , U.P, in Open Court through physical hearing of the appeals. 2. The Revenue has raised following grounds of appeal in memo of appeal filed with Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, U.P. (hereinafter called the tribunal ), in ITA no. 92/Alld./2020 for ay; 2014-15 (similar grounds of appeals are raised by Revenue in memo of appeal filed with tribunal in ITA no. 93/Alld/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who in the opinion of the AO was not a Competent Authority as prescribed u/s 2(19) of the 1961 Act read with Section 80P of the 1961 Act and the Societies Registration Act. Thus, the AO did not accept the status of the assessee as Co-operative Society rather, the AO held that the assessee is an Association of Person (AOP) and hence in the opinion of the AO , the assessee is not entitled for deduction u/s 80P of the 1961 Act because deduction u/s 80P is only allowable to Co-operative Societies. The assessee on its part contended that it is registered as a Co-operative Society being registered under the provisions of Section 8 of U.P. Sahkari Samiti Adhiniyam ,1912. The assessee submitted before the AO that the assessee being a society is engaged in providing services to the farmers of territorial jurisdiction of the District Ambedkar Nagar who claimed to be the members of the society for marketing of their crops, and in providing them with the needs of fertilizers , seeds, pesticides and agricultural equipment s at subsidized rates , which are obtained directly by purchasing from companies on no profit or loss basis, and thus it was claimed that the assessee society is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) challenging the denial of deduction u/s 80P by the AO. The ld. CIT(A) granted relief to the assessee by allowing deduction u/s 80P of the 1961 Act, by holding as under:- 6. However, nature of commission Income is different from the Interest Income and this income has been clearly derived by the assessee Society from the above activity i.e. marketing of agricultural produces of members. It is pertinent to mention that the appellant society has received commission in lieu of sale of sugar made by the cane growers to the sugar mills but for carrying out the developmental activities as specified under U.P. Sugar Cane (Regulation of Supply and Purchases) Act 1953 r/w the U.P. Sugar Cane (Regulation of Supply and Purchases) Rules, 1954. 7.In view of the above facts and above binding judgments of the Hon ble Apex Court, it is held that the Interest Income are liable to be taxed u/s 56 as income from Other sources and the appellant is not entitled to get deduction u/s 80P(2) on the above incomes. It is further held that the assessee Society is entitled to claim deduction u/s 80P(2) on the Commission Income which it derived from the marketing of agricultural produces o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions and perused the material on record. We are presently concerned with ay(s): 2014-15 and 2015-16, and the solitary issue involved in these two appeals filed by Revenue is with respect to denial by AO of deduction claimed by the assessee u/s 80P of the 1961 Act while framing assessment order, which deduction u/s 80P stood allowed later by ld. CIT(A) to the assessee while adjudicating first appeal filed by the assessee . The assessee has claimed itself to be Co-operative society engaged in marketing of crops and providing fertilizers, seeds and agricultural equipment s to farmers who are claimed to be its members. The assessee has claimed deduction u/s 80P of the 1961 Act (the relevant applicable clauses being Section 80P(2)(a)(iii) and(iv) of the 1961 Act), on the grounds that it is Co-operative Society and is engaged in marketing of agricultural produce of the members and purchase of fertilizers, seeds etc. intended for agriculture for the purposes of supplying to its members . Before proceeding further, it will be useful to refer to the provisions of Section 2(19) and 80P of the 1961 Act as it stood at the relevant point of time, which reads as under: Definitions. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business;] (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as [does not exceed,- (i) where such co-operative society is a consumers co-operative society, [one hundred] thousand rupees; and (ii) in any other case, [fifty] thousand rupees. Explanation.-In this clause, consumers co-operative society means a society for the benefit of the consumers;] (d) in respect of any income by way of interest or dividends derived by the co-operative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities.] As could be seen from statutory provisions that for the purposes of eligibility for deduction u/s 80P, the assessee must be a co-operative society . A co-operative society is defined in Section 2(19) of the 1961 Act, as being a co-operative society registered either under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of cooperative societies. This, therefore, refers only to the factum of a co-operative society being registered under the 1912 Act or under the State law. Then, there are several other conditions which are stipulated in Section 80P of the 1961 Act which are to be met by the tax-payer, before any deduction from the income of the Co-operative Societies can be allowed u/s 80P of the 1961 Act . The assessee has claimed that it was registered under the Co-operative Societies Registration Act as is enacted under the State Law in the State of Uttar Pradesh being U.P. Sahkari Samiti Adhiniyam ,1912, which the AO is disputing as we would see in this order. The relevant statute is The U.P. co-operative Societies Act, 1965 (U.P. Act No. 11 of 1966) read with The Uttar Pradesh Co-operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd by general or special order confer on any such person all or any of the powers of the Registrar. (3) Where any order has been made under sub-section (2) conferring on any person all or any of the powers of the Registrar under any provision of this Act, such order shall be deemed to confer on him all the powers under that provision as may be amended from time to time. 4. Societies which may be registered. - Subject to the provisions of this Act, a society which has as its object the promotion of the economic interests of its members in accordance with co-operative principles or a society established with the object of facilitating the operations of such a society, may be registered under this Act. Explanation. - Co-operative principles shall include - (a) advancement of economic interest of the members in accordance with public morals, decency and the relevant directive principles of State policy enunciated in the Constitution of India; (b) regulation and restriction of profit motive; (c) promotion of thrift, mutual aid and self-help; (d) voluntary membership; and (e) democratic constitution of the society The provisions of Section 6 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the Registrar for the type or class of co-operative societies to which the proposed society belongs, the Registrar shall pass final orders thereon either registering the society or refusing its registration within three months from the date of the receipt of the application by him and if he fails to do so, the applicants may make a representation to the authority competent to hear under Section 98 appeals against Registrar's order of refusal to register a society and if such authority, after calling for a report from the Registrar, passes an order for registration of society, the society shall be deemed to have been duly registered from the date of communication of such order to the Registrar. (2) Where the Registrar refuses to register a society he shall communicate the order of refusal together with the reasons therefore to such applicant as has been named in the application for this purpose and in default of such naming to any one of the applicants. 8. Registration certificate. - (1) Where a society is registered under this Act or deemed to be registered under the proviso to sub-section (1) of Section 7, the Registrar shall issue a certificate of registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar, Cane Co-operative , U.P. who is merely a departmental authority under the Cane Department, U.P. and is not a Competent Authority to issue Registration Certificate to Cooperative Societies under the authority of law. The AO treated assessee as an AOP and not Co-operative Society and since deduction u/s 80P of the 1961 Act is only available to Co-operative Societies, the assessee, was accordingly denied the deduction u/s 80P by the AO while framing assessment u/s 143(3) of the 1961 Act. The AO while framing assessment for ay: 2015-16 observed that the assessee has not explained the sources of gross receipts or income claimed as marketing commission as are found credited in its books of accounts nor any explanation was furnished as to payments made or investments made, and also that the assessee did not get its accounts audited as are required u/s 44AB of the 1961 Act and no tax-audit report was furnished by the assessee. The AO held the assessee s accounts to be not reliable as no evidence to substantiate the nature of gross receipts or income claimed as marketing commission income nor any details as to payments or investments made by the assessee, were furnished by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiate the same , and rather the books of accounts of the assessee for ay: 2015-16 were rejected by AO by invoking provisions of Section 145(3) of the 1961 Act, but the ld. CIT(A) proceeded to grant relief to the assessee u/s 80P of the 1961 Act without addressing on these issues. The provisions of Section 80P are benevolent provisions which must be construed with the object of furthering the co-operative movement generally , but the onus is primarily on the assessee to produce all necessary facts before the authorities to satisfy the authorities that it is entitled for claim of deduction u/s 80P of the 1961 Act. Then it is for the authorities to conduct fact finding enquiry to arrive at conclusion as to the eligibility of the assessee to deduction u/s 80P of the 1961 Act. There is a real distinction between the eligibility of the taxpayer for claim of deduction u/s 80P and the attributability of profits and gains to activities of marketing of produce grown by its members to ascertain the quantum of deduction allowable u/s 80P, as there could be some dealings of the tax-payer with non members or with respect to produce not grown by member which will have bearing on quantification o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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