DCIT, Vellore V. The Vellore Co-op Sugar Mills Ltd., Vellore

ITA 193/CHNY/2002

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57840 (ITAT-CHENNAI)
• Duration Of Justice: 9 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-01-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 01-03-2002
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R B NAIK II
• Assessee Lawyers: S SRIDHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 443/MDS/1999 AND 193/MDS/2002 (ASSESSMENT YEARS : 1994-95 AND 1995-96 ) THE JOINT/DY. CIT SPECIAL RANGE V CHENNAI VS THE VELLORE CO-OPERATIVE SUGAR MILL LTD VELLORE SUGAR MILLS N.A. DISTRICT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.B.NAIK, CIT/DR-II RESPONDENT BY : SHRI S.SRIDHAR, ADVOCATE DATE OF HEARING : 17-01-2012 DATE OF PRONOUNCEMENT : 17-01-2012 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE ARE TWO APPEALS OF THE REVENUE FOR ASSESS MENT YEARS 1994-95 AND 1995-96, WHICH HAVE BEEN PLACED BEFORE US IN THE SECOND ROUND AS PER THE DIRECTIONS OF HON'BLE HIGH COURT/ SUPREME COURT. I.T.A.NO. 443/MDS/1999 2. THIS APPEAL HAS BEEN FIXED FOR HEARING IN VIEW OF T HE DIRECTION OF THE HON'BLE SUPREME COURT GIVEN IN CIV IL APPEAL ITA 443/99 & 193/02 :- 2 -: NO.31/2011[TC NO.127/07] ARISING OUT OF I.T.A.NO. 4 43/MDS/1999, ORDER DATED 3.1.2011, VIDE WHICH THE CASE HAS BEEN REMITTED BACK TO THE TRIBUNAL FOR FRESH CONSIDERATION IN LINE WITH I TS OBSERVATION. COPIES OF THE JUDGMENT DATED 3.1.2011, ALONGWITH JUDGMENT OF HON'BLE MADRAS HIGH COURT DATED 21.2.2007 ARE PLACED ON REC ORD. THESE MATTERS HAVE BEEN REMANDED BACK TO ASCERTAIN VARIOU S FACTS, WHICH ARE DISCUSSED IN PARA 6 OF THIS ORDER. IN VIEW OF THE DIRECTION, SO GIVEN, WE HAVE HEARD THESE APPEALS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C O- OPERATIVE SUGAR MILL IN THE GOVERNMENT SECTOR WHICH HAD MADE A CLAIM OF EXEMPTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED FROM THE MEMBERS AMOUNTING TO ` 9,87,209/-. THE ASSESSING OFFICER HAD DISALLOWED THIS CLAIM, WHICH THE ASSESSEE HAS TAKEN FURTHER ON THE REASONING THAT WHEN IT PROVIDES CREDIT FACILITIES T O ITS MEMBERS, THE INCOME DERIVED, THEREFROM, HAS TO BE EXEMPT U/S 80 P(2(A)(I) OF THE ACT. THE LD.CIT(A) HAS ALLOWED THIS CLAIM BY FOLL OWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR EARLIER YEAR. 4. THE OTHER ISSUE IS REGARDING DISALLOWANCE OF DEDUCT ION U/S 80P(2)(A)(III) AMOUNTING TO ` 1,47,582/-. THE ASSESSEE HAD DIVERTED SOME SUGAR CANE PRODUCED BY ITS MEMBERS TO THE OTHE R CO-OPERATIVE ITA 443/99 & 193/02 :- 3 -: SOCIETIES. SINCE IT WAS IN EXCESS OF THE CRUSHING CAPACITY AND ON SUCH DIVERSION, INCOME OF ` 1,47,582/- HAS BEEN EARNED. THE ASSESSEE HAS TREATED THIS INCOME TO BE BY WAY OF MARKETING OF TH E AGRICULTURAL PRODUCE OF ITS MEMBERS AND HAS CLAIMED DEDUCTION U /S 80P(2)(A)(III). THE ASSESSING OFFICER HAD DISALLOWED THE SAME ON TH E GROUND OF THE SAME VERY ISSUE FOR EARLIER YEAR. THE DEPARTMENT I S IN REFERENCE BEFORE THE HIGH COURT. HOWEVER, THE LD.CIT(A) HAS ALLOWED THIS CLAIM FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN C ASE. 5. THESE ISSUES ULTIMATELY REACHED BEFORE THE HON'BLE SUPREME COURT, WHICH HAS CONSIDERED THE FOLLOWING T WO QUESTIONS IN ORDER TO DECIDE THE IMPUGNED ISSUES: 1. WHETHER IN THE FACTS AND UNDER THE CIRCUMSTANCE S OF THE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDI NG THAT THE ASSESSEE COOPERATIVE SOCIETY, WHICH IS ENGAGED IN THE MANUFACTURE AND SALE OF SUGAR, IS ELIGIBLE FOR THE BENEFIT OF SECTION 80-P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 9FOR SHORT THE ACT) IN RESPECT OF THE INTERE ST RECEIVED FROM MEMBERS? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSE E IS ELIGIBLE FOR THE BENEFIT OF SECTION 80-P(2)(A)(III) OF THE ACT WHEN THE ASSESSEE HAS DERIVED INCOME BY WAY OF MARKETING OF THE AGRICULTURAL PRODUCE OF THE MEMBER S? 6. THE HON'BLE SUPREME COURT HAS DECIDED THESE ISSUES AS UNDER: ITA 443/99 & 193/02 :- 4 -: IN SO FAR AS THE SECOND QUESTION IS CONCERNED, IT IS FAIRLY CONCEDED BY LEARNED COUNSEL FOR THE REVENUE THAT SPECIAL LEAVE PETITION ON SIMILAR ISSUE HAS ALREADY BEEN DISMISSED BY THIS COURT. FOLLOWING THE SAID DECISI ON, THE APPEAL INSOFAR AS IT RELATES TO THE BENEFIT OF SECT ION 80- P(2)(A)(III) OF THE ACT WOULD STAND DISMISSED. AS REGARDS THE FIRST QUESTION, A SIMILAR QUESTION V IZ. WHETHER THE ASSESSEE WAS ENTITLED TO EXEMPTION UND ER SECTION 80-P(2)(A)(I) OF THE ACT IN RESPECT OF INTE REST RECEIVED FROM THE MEMBERS OF THE SOCIETY, CAME UP F OR CONSIDERATION OF THIS COUR IN COMMISSIONER OF INCOM E TAX, MADRAS VS PONNI SUGARS & CHEMICALS LIMITED (2008) 9 SCC 337. VIDE FINAL JUDGMENT DATED 16 TH SEPTEMBER, 2008, THIS COURT HAS BEEN PLEASED TO SET ASIDE THE JUDGMENTS OF THE HIGH COURT ON THE GROUND THAT NONE OF THE AUTHORITIES BELOW, INCLUDING THE HIGH C OURT, HAVE EXAMINED THE MEMORANDUM OF ASSOCIATION FILED B Y VARIOUS COOPERATIVE SOCIETIES CONCERNED. WHILE REM ITTING ALL THE MATTERS TO THE TRIBUNAL FOR DE NOVO CONSIDE RATION IN ACCORDANCE WITH LAW, THIS COURT HELD THUS: 20. IN ORDER TO EARN EXEMPTION UNDER SECTION 80-P (2) A COOPERATIVE SOCIETY MUST PROVE THAT IT HAD ENGAGED ITSELF IN CARRYING ON ANY OF THE SEVERAL BUSINESS REFERRED TO IN SUB-SECTION (2),. IN THAT CONNECTION, IT IS IMPORT ANT TO NOTE THAT UNDER SUB-SECTION(2), IN THE CONTEXT OF COOPER ATIVE SOCIETY, PARLIAMENT HAS STIPULATED THAT THE SOCIETY MUST BE ENGAGED IN CARRYING ON THE BUSINESS OF BANKING O R PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREF ORE, IN EACH CASE, THE TRIBUNAL WAS REQUIRED TO EXAMINE THE MEMORANDUM OF ASSOCIATION, THE ARTICLES OF ASSOCIAT ION, THE RETURNS OF INCOME FILED WITH THE DEPARTMENT, TH E STATUS OF BUSINESS INDICATED IN SUCH RETURNS ETC. THIS EXERCISE HAD NOT BEEN UNDERTAKEN AT ALL. 7. AS REGARDS THE FIRST ISSUE, IT IS CLEARLY EVIDENT F ROM THE HON'BLE SUPREME COURTS FINDING THAT IN THE CONTEXT OF CO-O PERATIVE SOCIETY, THE PARLIAMENT HAS STIPULATED THAT THE SOCIETY MUST BE ENGAGED IN ITA 443/99 & 193/02 :- 5 -: CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS, THEREFORE, IN EACH CASE THE TRIBUNAL WAS R EQUIRED TO EXAMINE THE MEMORANDUM OF ASSOCIATION, ARTICLES OF ASSOCIATION, RETURNS OF INCOME FILED WITH THE DEPARTMENT AND STA TUS OF THE BUSINESS INDICATED IN SUCH RETURNS, ETC. WE HAVE NOTICED AN D FOUND FROM THE ENTIRE RECORD THAT THESE VERY ASPECTS HAVE NOT AT A LL BEEN INVESTIGATED INTO BY THE ASSESSING OFFICER OR BY THE LD.CIT(A), FOR THAT MATTER. THEREFORE, IT BECOMES IMPERATIVE FOR US, IN ORDER T O COMPLY WITH THE ABOVE DIRECTIONS OF THE HON'BLE SUPREME COURT, THAT THE MATTER BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL FOLLOW THE ABOVE MENTIONED HON'BLE SUPREME COURT JUDGMENT IN ITS LETTERS AND SPIRIT AND MAKE ALL THE NECESSAR Y ENQUIRIES AS HAVE BEEN MENTIONED IN PARA 6 OF THIS ORDER AND BRING TH E FACTS ON RECORD SO THAT THIS ISSUE CAN BE CORRECTLY AND PROPERLY A DJUDICATED UPON. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE ABOVE DIRECTION. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHALL CALL UPON THE ASSESSE-COMPANY TO FU RNISH ALL THE REQUISITE INFORMATIONS AND ALSO GIVE OPPORTUNITY OF BEING HEA RD IN THE LIGHT OF THE ABOVE MENTIONED DECISION. ITA 443/99 & 193/02 :- 6 -: 8. AS REGARDS THE SECOND ISSUE, THE SAME STANDS DISMIS SED IN VIEW OF THE ABOVE HON'BLE SUPREME COURTS DECISION. 9. IN THE RESULT, THIS APPEAL STANDS PARTLY ALLOWED FO R STATISTICAL PURPOSES. I.T.A.NO. 193/MDS/2001 10. IN THIS APPEAL, FOR ASSESSMENT YEAR 1995-96, THE RE VENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF DEDUCTION U/S 80P(2)(A)(I) O F THE ACT. FOLLOWING OUR FINDING GIVEN IN THE FORMER PART OF THIS ORDER ON A SIMILAR ISSUE ON IDENTICAL FACTS, WE RESTORE THE APPEAL IN THE SAM E MANNER TO THE FILE OF THE ASSESSING OFFICER AND WITH SIMILAR DIRECTION S. 11. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 1994-95 STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THAT OF ASSESSMENT YEAR 1995-96 STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA 443/99 & 193/02 :- 7 -: ORDER PRONOUNCED IN THE OPEN COURT O N 17-01-2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 17 TH JANUARY, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR