Kashti Vivideh Karyakari Seva Sah. Society, Ahmednagar V. Income-tax Officer,

ITA 1596/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1683 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 18-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Business income
• Section: 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE MS. SUSHMA CHOWLA, JM / ITA NO.1596/PN/2014 ! ' ' / ASSESSMENT YEAR : 2009-10 KASHTI VIVIDH KARYAKARI SEVA SAH. SOCIETY, KASHTI, AHMEDNAGAR . / APPELLANT PAN: AAAAK0815A VS. THE INCOME TAX OFFICER, WARD-1, AHMEDNAGAR . RESPONDENT / APPELLANT BY : SHRI NARESH KUMAR / RESPONDENT BY : SHRI HITENDRA NINAWE DATE OF HEARING : 28.06.2016 / DATE OF PRONOUNCEMENT: 28.06.2016 # / ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-IT/TP, PUNE, DATED 18.06.2014 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.1596/PN/2014 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE APPELLANT OBJECT TO THE IMPUGNED ORDER OF THE C IT (APPEALS) ON FOLLOWING GROUNDS OF APPEAL WHICH ARE RAISED WITHOUT PREJUDIC E TO EACH OTHER: 1. THE LEARNED CIT (APPEALS), PUNE HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE AO AMOUNTING RS .3,28,650.00 ON ACCOUNT OF BUSINESS INCOME BY DISALLOWING THE DEDUCTIONS U/ S 80P OF INCOME TAX ACT,1961. A. THAT THE SOCIETY HAS TRANSACTED MOSTLY (80%) WIT H ITS MEMBERS AND HAS CLAIMED 80% OF ITS INCOME AS THE DEDUCTIONS U/S 80P AND THE REMAINING 20% IS OFFERED TO TAX. B. SINCE THE PROVISION OF SECTION 80P HAS BEEN ENAC TED WITH THE VIEW TO PROVIDE INCENTIVE TO CO-OPERATIVE MOVEMENT AND THESE MAY BE INTERPRETED LIBERALLY. RELIANCE IS PLACED ON THE DECISION OF THE APEX HIGH COURT IN THE CASE OF BAJAJ TEMPO L TD REPORTED IN 196 ITR 188 AND IN THE CALCUTTA HIGH COURT DECIS ION REPORTED IN 280 ITR 118. C. FOLLOWING THE DECISION OF THE HON BOMBAY HIGH CO URT IN CASE OF AHMEDNAGAR CENTRAL CO - OPERATIVE CONSUMER WHOLESAL E AND RETAIL STORE LTD. VS CIT AS REPORTED IN 227 ITR 458 WHERE IT WAS HELD THAT 'THE ASSESSEE WOULD BE ENTITLED TO EXEMPT ION U/S.80P IN RESPECT OF PROFITS ATTRIBUTABLE TO THE DEALINGS OF THE ASSESSEE SOCIETY WITH ITS MEMBERS.' THE FACTS AND LEGAL POSI TION OF THE APPELLANT ARE ALSO SIMILAR. 2. THE APPELLANT MAY KINDLY BE PERMITTED TO ADD TO OR ALTER ANY OF GROUNDS OF APPEAL, IF DEEMED NECESSARY. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAIN ST THE DENIAL OF DEDUCTION UNDER SECTION 80P OF THE ACT ON ACCOUNT OF BUSINESS INCOME OF RS.3,28,650/-. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE IS REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIES ACT AND IS ENGAG ED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE SOCIETY AL SO HAS VARIOUS DIVISIONS SUCH AS RASAINIK VIBHAG, MACHINERY VIBHAG, CLOTH VIBHAG, READY-MADE VIBHAG, SADI VIBHAG, MEDICAL VIBHAG, GRHAAK BHANDAR, GRUHUPYOGI VIBHAG, SEEDS AND PESTICIDES SECTION THUS, IT WAS ALSO CARRYING ON TR ADING BUSINESS IN ADDITION TO MAKING AVAILABLE CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF TH E ACT FOR THE ITEMS OF ITA NO.1596/PN/2014 3 INCOME TRADING IN SEVERAL COMMODITIES SUCH AS CONSU MER GOODS, CLOTH, READYMADE GARMENTS, SARIS, MEDICINES, ETC.. THUS, THE ASSESSING OFFICER ASSESSED INCOME OF THE ASSESSEE AT RS.3,28,650/- AS AGAINST THE RETURNED INCOME OF RS.4,900/-. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER , AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2008-09 IN ITA NO.264/PN/2014, ORDER DATED 14.08.2015. 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BEL OW. 8. ON PERUSAL OF RECORD, IT IS APPARENT THAT THE IS SUE ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN B Y PUNE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.264/PN/2014 (SUPRA). THE RELEVANT EXTRACTS OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AR E REPRODUCED AS UNDER FOR READY REFERENCE :- 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRE SENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIE S BELOW. WE ALSO CONSIDERED THE JUDGMENTS ON WHICH THE LD. AR HAS PL ACED RELIANCE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND IS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND SUBS TANTIAL PART OF ITS EARNINGS ARE FROM THE ACTIVITIES RELATED TO SALE OF AGRICULTURE IMPLEMENTS AND MACHINES, CHEMICALS, PESTICIDES, SEEDS ETC. IT HAS COME ON R ECORD THAT THE ASSESSEE IS HAVING NET INCOME OF RS.43,40,243/- OUT OF WHICH ME RELY RS.3,89,174/- RELATES TO INCOME FROM SALE OF CONSUMER GOODS, CLOTH/READYM ADE BUSINESS ETC. IT HAS NOT BEEN DISPUTED THAT 80% OF THE TRANSACTIONS BY T HE ASSESSEE ARE WITH ITS MEMBERS ALONE. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I). THE ITA NO.1596/PN/2014 4 RELEVANT EXTRACT OF THE SECTION UNDER WHICH THE ASS ESSEE HAS CLAIMED DEDUCTION IS AS UNDER: SECTION 80P(2): THE SUMS REFERRED TO IN SUB-SECTIO N (1) SHALL BE THE FOLLOWING NAMELY :- (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N - (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS. 6. AS STATED EARLIER, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE IS FOLLOWING THE PRINCIPLES OF MUTUALITY. THE CONSUMER DIVISION AND GARMENTS DIVI SION WAS SET UP FOR THE BENEFIT OF THE MEMBERS OF THE ASSESSEE SOCIETY. TH E REVENUE HAS DENIED DEDUCTION ON THE PROFITS EARNED BY ASSESSEE FROM CO NSUMER AND GARMENTS DIVISION ON THE GROUND THAT SUCH ACTIVITIES ARE AKI N TO THE ACTIVITIES OF CONSUMER SOCIETY. THE DEDUCTION ON EARNINGS FROM SUCH ACTIV ITIES CAN BE ALLOWED MAXIMUM TO THE EXTENT OF RS.1,00,000/- ONLY IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 80P(2)(C)(I). THE RELEVANT EXTRACT OF C LAUSE (C) OF SECTION 80P(2) READS AS UNDER: (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 SPECIF IED), 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-OPERATI VE SOCIETY MEANS A SOCIETY FOR THE BENEFIT OF THE CONSUMERS;] 7. IT IS AN ADMITTED POSITION THAT THESE ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE FOR SEVERAL YEARS AND NO OBJECTION WHATSOE VER WAS RAISED BY THE DEPARTMENT ON THIS COUNT. THE ASSESSEE HAS BEEN CO NSISTENTLY FOLLOWING THE SAME METHOD OF ACCOUNTING AND THE NATURE OF ACTIVIT IES CARRIED OUT IN THE PAST, AS WELL AS, IN SUBSEQUENT ASSESSMENT YEARS IS SAME. IT WAS ONLY DURING THE IMPUGNED ASSESSMENT YEAR AND THE FOLLOWING ASSESSME NT YEAR THAT THE REVENUE HAS RAISED DISPUTE WITH RESPECT TO PROFITS FROM CONSUMER GOODS AND GARMENTS DIVISION. THE LD. AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE ASSESSMENT ORDER PASSED IN THE ASSESSMENT YEAR 2010 -11 U/S. 143(3) WHEREIN NO SUCH DISPUTE WAS RAISED. WE ARE OF THE CONSIDER ED VIEW THAT SINCE THE TURNOVER FROM THE CONSUMER DIVISIONS AS COMPARED TO THE TOTAL TURNOVER OF THE ASSESSEE IS MINISCULE, IT WOULD NOT CHANGE THE NATU RE OF ACTIVITIES OF CO- OPERATIVE SOCIETY. THE ASSESSEE CO-OPERATIVE SOCIE TY IS PRIMARILY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IT I S FOR THE BENEFIT FOR MEMBERS THAT CONSUMER DIVISION AND CLOTH DIVISION HAVE BEEN INCLUDED IN THE ACTIVITIES OF THE SOCIETY. BY PROVIDING SUCH FACILITIES TO ITS M EMBERS IT CANNOT BE SAID THAT THE ASSESSEE IS ENGAGED IN TRADING OF CONSUMER GOOD S ON COMMERCIAL BASIS. THE PROFITS ARISING FROM AFORESAID DIVISIONS ARE NO T LIABLE TO BE TAXED UNDER THE PRINCIPLE OF MUTUALITY. THE HON'BLE PATNA HIGH COU RT IN THE CASE OF CIT VS. RANCHI CLUB LTD. REPORTED AS 100 CTR 295 WHILE DEAL ING WITH QUESTION WHETHER ITA NO.1596/PN/2014 5 INCOME DERIVED BY THE ASSESSEE-CLUB FROM SALE OF LI QUOR, ETC., TO ITS MEMBERS AND THEIR GUESTS IS NOT TAXABLE IN ITS HAND? HAS HE LD : .. THAT MERELY BECAUSE THE ASSESSEE-COMPANY HAD ENTERED INTO TRANSACTIONS WITH NON-MEMBERS AND EARNED PROFITS OU T OF TRANSACTIONS HELD WITH THEM, ITS RIGHT TO CLAIM EXEMPTION ON THE PRINCIPLE OF MUTUALITY IN RESPECT OF TRANSACTIONS HELD BY IT WITH ITS MEMB ERS WAS NOT LOST. THE ASSESSEE WAS A MUTUAL CONCERN. THE INCOME DERIVED BY IT FROM ITS HOUSE PROPERTY LET TO ITS MEMBERS AND THEIR GUESTS AND FROM THE SALE OF LIQUOR, ETC., TO ITS MEMBERS AND THEIR GUESTS WAS N OT TAXABLE IN ITS HAND. 8. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE O F CIT VS. BANKIPUR CLUB LTD. (SUPRA) HAS HELD AS UNDER: 14. NOW WE TURN TO THE MAIN QUESTION CANVASSED BY THE REVENUE IN THE APPEALS COMING UNDER GROUPS A TO D, NAMELY, WHETHER THE ASSESSEE MUTUAL CLUBSARE ENTITLED TO EXEMPTION FOR THE RECE IPTS OR SURPLUS ARISING FROM THE SALES OF DRINKS, REFRESHMENTS ETC. OR AMOUNTS RECEIVED BY WAY OF RENT FOR LETTING OUT THE BUILDINGS OR AMO UNTS RECEIVED BY WAY OF ADMISSION FEES, PERIODICAL SUBSCRIPTIONS AND REC EIPTS OF SIMILAR NATURE, FROM ITS MEMBERS? IN ALL THESE CASES, THE T RIBUNAL AS ALSO THE HIGH COURT HAVE FOUND THAT THE AMOUNTS RECEIVED BY THE CLUBS WERE FOR SUPPLY OF DRINKS, REFRESHMENTS OR OTHER GOODS AS AL SO THE LETTING OUT OF BUILDING FOR RENT OR THE AMOUNTS RECEIVED BY WAY OF ADMISSION FEES, PERIODICAL SUBSCRIPTION ETC. FROM THE MEMBERS OF TH E CLUBS WERE ONLY FOR/TOWARDS CHARGES FOR THE PRIVILEGES, CONVENIENCE S AND AMENITIES PROVIDED TO THE MEMBERS, WHICH THEY WERE ENTITLED T O AS PER THE RULES AND REGULATIONS OF THE RESPECTIVE CLUBS. IT HAS ALS O BEEN FOUND THAT DIFFERENT CLUBS REALISED VARIOUS SUMS ON THE ABOVE COUNTS ONLY TO AFFORD TO ITS MEMBERS THE USUAL PRIVILEGES, ADVANTAGES, CO NVENIENCES AND ACCOMMODATION. IN OTHER WORDS, THE SERVICES OFFERED ON THE ABOVE COUNTS WERE NOT DONE, WITH ANY PROFIT MOTIVE, AND W ERE NOT TAINTED WITH COMMERCIALITY. THE FACILITIES WERE OFFERED ONLY AS A MATTER OF CONVENIENCE FOR THE USE OF THE MEMBERS, (AND THEIR FRIENDS, IF ANY, AVAILING OF THE FACILITIES OCCASIONALLY). IN THE LIGHT OF THE ABOVE FINDINGS, IT NECESSARILY FOLLOWS THAT THE RECEIPTS FOR THE VARIOUS FACILITIES EXTENDED BY THE CLUBS TO ITS MEMBERS, AS STATED HEREINABOVE, AS PART OF THE USUAL PRIVILEGES, ADVAN TAGES AND CONVENIENCES, ATTACHED TO THE MEMBERSHIP OF THE CLU B, CANNOT BE SAID TO BE 'A TRADING ACTIVITY.' THE SURPLUSEXCESS OF R ECEIPTS OVER THE EXPENDITUREAS A RESULT OF MUTUAL ARRANGEMENT, CANN OT BE SAID TO BE 'INCOME' FOR THE PURPOSE OF THE ACT. THUS, WE CAN SAFELY CONCLUDE THAT ANY INCOME GENERA TED FROM FACILITIES, AMENITIES, PRIVILEGES PROVIDED TO THE MEMBERS IN AC CORDANCE WITH THE BYE-LAWS AND REGULATIONS OF THE SOCIETY IS EXEMPT ON THE PRI NCIPLE OF MUTUALITY. 9. IN THE LIGHT OF FACTS OF THE CASE AND THE JUDGME NTS DISCUSSED ABOVE, WE ACCEPT THE APPEAL OF THE ASSESSEE AND SET ASIDE THE IMPUGNED ORDER. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO.1596/PN/2014 6 9. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICA L TO THE FACTS IN THE EARLIER ASSESSMENT YEAR I.E. A.Y. 2008-09 AND FOLLOWING THE SAME PARITY OF REASONING, I HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIR ECTED TO ALLOW THE SAME. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JUNE, 2016. SD/- (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 30 TH JUNE, 2016 . ! #$%&'()(& / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ' ' # () THE CIT(A)-IT/TP, PUNE; ' ' # THE CIT-I, PUNE &'( ))*+, ' *+ , , - . // / DR SMC, ITAT, PUNE; (01 2 / GUARD FILE. #! / BY ORDER & ) // TRUE COPY // 345 )! *6 / SR. PRIVATE SECRETARY ' *+ , ITAT, PUNE