Shirala Taluka Sahakari Dudh Utpadak & Puravatha Sanstha Ltd, Sangli V. Income-tax Officer, Ward - 2(1), Sangli

ITA 2326/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0969 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Assessee Lawyers: C V DESHPANDE
• Keywords: Business income
• Section: 143(3); 80P

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2326/PUN/2017 / ASSESSMENT YEAR : 2009-10 FATTESINGHRAO NAIK (APPA) SAHAKARI DUDH UTPADAK SANGH LIMITED, AT POST SHIRALA TALUKA SHIRALA DISTRICT, SANGLI. PAN : AAAAS1962J. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 2(1), SANGLI. . / RESPONDENT ASSESSEE BY : SHRI C.V. DESHPANDE & SHRI PRAMOD SHINGTE. REVENUE BY : SHRI RAJESH GAWLI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL) 1, KOLHAPUR DATED 2 5.07.2017 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN PURCHASE AND SALE OF MILK AND MILK PRODUCTS. ASSESSEE ELECTRONICALLY FILED ITS RETU RN OF INCOME FOR A.Y. 2009-10 ON 03.09.2009 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING DEDUCTION OF RS.35,12,878/- U/S 80P(2) OF THE ACT. THE CASE WAS / DATE OF HEARING : 19.07.2019 / DATE OF PRONOUNCEMENT: 05.09.2019 2 SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S 143(3) OF THE ACT VIDE ORDER DT.31.10.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS. 23,33,840/-. THE AO PARTIALLY DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80P(2)(B) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, A SSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.25.07.2017 (IN APP EAL NO.SLI/241/11-12) DISMISSED THE APPEAL OF ASSESSEE. AGGR IEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LOWER AUTHORITIES HAVE ERRED IN INCORRECTLY INVOKING PROV ISIONS OF SECTION 80P(2)(B) OF THE INCOME TAX ACT, 1961 AND THEREBY INCORRECTLY DENYING THE DEDUCTION CLAIMED BY THE ASSESSEE AMOUNTING RS.23,33,840/- FO R THE REASON THAT SOCIETY HAS SUPPLIED THE MILK COLLECTED FROM ITS ME MBERS TO FEDERAL SOCIETY AS WELL AS TO PRIVATE PARTIES. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, ALTERNATIVELY IT IS SUBMITTED THAT THE APPELLANT SHALL BE GRANTED DEDUC TION UNDER SECTION 80P(2) (A)(III) AS THE APPELLANT HAS COMPLIED WITH PROVISI ONS OF THE SAID SECTION. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ON P ERUSING THE DETAILS FURNISHED BY THE ASSESSEE NOTICED THAT ASSESSEE HAD SOLD MILK WORTH RS.19,24,82,650/- WHICH INCLUDED SALES OF RS.10,86,33,592/ - MADE TO PERSONS OTHER THAN FEDERAL SOCIETY, THE GOVERNMENT OR LOCAL AUTHORITY OR A GOVERNMENT COMPANY AS SPECIFIED U/S 80P(2)(B) OF THE ACT. THE DETAILS OF SUCH SALES ARE LISTED AND TABULATED BY THE AO ON PAGE 3 AND 4 OF THE ASSESSMENT ORDER. HE ALSO NOTICED THAT ASSESSEE HAD A LSO SOLD PACKING MILK AMOUNTING TO RS.1,56,48,867/- TO VARIOUS PERSONS OTH ER THAN FEDERAL SOCIETY OR THE GOVERNMENT OR LOCAL AUTHORITY. APART FROM THE AFORESAID SALES, HE ALSO NOTICED THAT ASSESSEE HAD MADE SALES TO THE TUNE OF RS.93,68,709/- WHICH INCLUDES SALE OF ALLIED DUDH PRODUCTS O F RS.8,93,599/-, STORE MATERIAL OF RS.35,50,791/-, ANIMAL BREADING OF RS.47,03,000/- TO PERSONS OTHER THAN FEDERAL SOCIETY, G OVERNMENT OR LOCAL AUTHORITY. AO WAS OF THE VIEW THAT PROFITS EARNED BY THE ASSESSEE FROM 3 THE SALE OF MILK AGGREGATING TO RS.13,36,51,168/- MADE T O PERSONS NOT COVERED UNDER SEC.80P(2)(B) OF THE ACT, ARE NOT ELIGIBLE FOR D EDUCTION. HE ACCORDINGLY RE-WORKED THE DEDUCTION U/S 80P(2)(B) AT RS.11 ,29,038/- AND DISALLOWED THE BALANCE AMOUNT CLAIMED AS DEDUCTION. AGGRIE VED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE LD .CIT(A), WHO UPHELD THE ORDER OF AO BY OBSERVING AS UNDER :. 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT WITH REFERENCE TO THE FACTS OF THE CASE . FROM THE ABOVE SUBMISSION IT CAN BE SEEN THAT THE APPELLANT HAS NOW CLAIMED DEDUCTIO N UNDER SECTION 80P(2)(A)(II I ) . FROM A PLAIN READING OF SECTION 80P IT CAN BE SEEN THAT THE SECTION CLASSIFIES CO-OPERATIVE SOCIETIES INTO DIFFERENT TYPES . WHERE, ON THE ONE HAND, CLAUSE (A) OF SECTION 80P(2 ) IS APPLICABLE TO CO-OPERATIVE SOCIETIES PROVIDING VARIOUS FACILITIES TO ITS MEMBERS, ON THE OTHER, CLAUSE (B) APPLIES TO CO-OPERATIVE SOCIE TIES, BEING A PRIMARY SOCIETY ENGAGED IN SUPPLY OF MILK ETC. THUS, THERE IS A CLEAR DISTINCTION . WHAT HAS TO BE TAKEN NOTE OF IS THAT THE EXPRESSION 'MEMBERS' UNDER SECTION 80P(2)(A) CANNOT BE EXTENDE D TO INCLUDE THE MEMBERS OF A PRIMARY CO-OPERATIVE SOCIETY WHICH IS A MEMBER OF THE FEDERATED COOPERATIVE SOCIETY . THEREFORE, THE ISSUE INVOLVED IS NOT REGARDING THE AGRICULTURAL PRODUCE BUT OF THE CLASS OF COOPERATIVE SOCIETY TO WHICH THE APPELLANT BELONGS, WHICH ALSO DEFINES ITS MEMBERS. FROM RECORDS, IT IS CLEAR THAT THE APPELLA NT IN THE INSTANT CASE IS A PRIMARY CO-OPERATIVE SOCIETY ENGAGED IN S UPPLY OF MILK RECEIVED FROM ITS MEMBERS. THE APPELLANT'S CORRESPO NDENCE DURING ASSESSMENT ALSO TESTIFIES THE ABOVE FACT. IN THE CI RCUMSTANCES, I FIND THAT THE CLAIM WAS RIGHTLY MADE UNDER SECTION 80P(2 )(B) AND THE ASSESSING OFFICER HAS ALSO RIGHTLY APPLIED PROVISION S OF SECTION 8OP(2)(B). THE ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAD SOLD ONLY 32.14% OF THE TOTAL SALES TO FEDERAL SOCI ETIES AND A MAJOR PORTION I.E . 67.86% OF THE SALES WERE MADE TO PRIVATE PARTIES WHEREAS IT HAS CLAIMED 100% DEDUCTION UNDER SECTION 80P(2)(B). THE APPELLANT HAS NOT DENIED THIS FINDING OF THE ASSESS ING OFFICER. THE ASSESSING OFFICER IS BOUND BY THE INCOME-TAX ACT AN D UNDER THE ABOVE CIRCUMSTANCES HE COULD NOT HAVE ALLOWED 100% OF THE CLAIM OF DEDUCTION. I FIND THAT THE APPELLANT HAS NOT COMPLI ED WITH ANY OF THE SUB-CLAUSES (I), (II) AND (III) OF SECTION 80P(2)(B ) IN ORDER TO MAKE ITSELF ELIGIBLE FOR THE CLAIM D EDUCTION. IN THE CIRCUMSTANCES, I HOLD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN RESTRICTING THE CLAIM OF DEDUCTION TO ONLY THAT PORTION OF PROFITS DERIVED FROM SALE OF MIL K MADE TO FEDERAL SOCIETIES. ACCORDINGLY , THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A). THE LD.A.R. FURTHER SUBMITTED THAT THOUGH THE A SSESSEE WANTED TO SUPPLY THE ENTIRE MILK COLLECTED BY IT TO MAHANAND DAIR Y, MUMBAI WHICH IS A FEDERAL SOCIETY BUT MAHANAND DAIRY EXPRESSED ITS INA BILITY TO ACCEPT 4 100% OF THE MILK COLLECTED BY THE ASSESSEE SOCIETY FROM TH E FARMERS DUE TO PAUCITY OF PROCESSING CAPACITY AND DEMAND OF MAHANAND DAIRY PRODUCTS AND THEREFORE ADVISED THE ASSESSEE NOT TO SEND THE EN TIRE MILK TO IT. HE SUBMITTED THAT IN VIEW OF THE AFORESAID FACT, ASSESSEE WA S FORCED TO SELL THE MILK TO OUTSIDE PURCHASERS AS THE MILK COLLECTED BY THE AS SESSEE HAS A VERY SHORT SHELF LIFE AND IF THE MILK IS NOT PROCESSED IMMEDIATEL Y, THE ENTIRE MILK WOULD GET SPOILED. HE THEREFORE SUBMITTED THAT IN SUC H A SITUATION FOR THE REASONS BEYOND THE CONTROL OF ASSESSEE, THE ASSES SEE WAS FORCED TO SELL THE MILK TO THE OUTSIDERS. HE SUBMITTED THAT IN SUCH SIT UATION, THE ASSESSEE COULD NOT BE DENIED THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT. IN SUPPORT OF HIS CONTENTION ABOUT THE INABILITY OF MAHANA ND DAIRY TO ACCEPT MILK FROM THE ASSESSEE, HE PLACED ON RECORD COPY OF THE LETTER BEARING NO.MND/02/DAIRY/SHIRALA TAL-MILK SUPPLY/18-19/D7 3 DATED 15.12.2018, ISSUED BY THE DAIRY MANAGER, MAHANAND DAIRY. H E FURTHER SUBMITTED THAT THE SALE MADE BY THE ASSESSEE TO OUTSID E PARTIES IS NOT AT A RATE HIGHER THAN THE PRICE AT WHICH THE MILK WAS SOLD TO THE FEDERAL SOCIETY AND THEREFORE, IT CANNOT BE SAID THAT ASSESSEE, WITH THE INTENTION TO CLAIM HIGHER PRICE SOLD THE MILK TO OUTSIDE PURCHASERS INSTEAD O F SELLING THE MILK TO THE FEDERAL SOCIETY. IN SUPPORT OF HIS AFORESAID CONT ENTION, THE LD.A.R. PLACED ON RECORD A TABULATED STATEMENT INDICATING RATE AND QUANTITY OF MILK SOLD TO OUTSIDE PARTIES AND THE FEDERAL SOCIETY. THE LD.A.R. FURTHER RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE O F BAJAJ TEMPO LIMITED VS. CIT REPORTED IN (1992) 196 ITR 188 FOR THE PRO POSITION THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES FOR PROMO TING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY. 5. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT SEC.80P(2)( B) OF THE ACT CONTEMPLATES THAT DEDUCTION CAN ONLY BE ALLOWED TO THE EXTENT OF SALE 5 OF MILK MADE TO THE FEDERAL CO-OPERATIVE SOCIETY OR GOV ERNMENT OR LOCAL AUTHORITY OR GOVERNMENT COMPANY AND NOT TO OUTSIDERS. HE THEREFORE SUBMITTED THAT IN VIEW OF THE CLEAR PROVISION OF THE ACT, A O AND LD.CIT(A) HAVE RIGHTLY DENIED THE CLAIM OF DEDUCTION. HE THUS SU PPORTED THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO CLAIM OF DEDUCTION U/S 80P(2)(B) OF THE ACT. IT IS AN UNDISPUTED FACT T HAT ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF COLLECTIN G MILK FROM FARMERS / PRIMARY SOCIETIES AND SUPPLYING THE SAME TO F EDERAL SOCIETIES AS WELL AS NON-FEDERAL PARTIES. IT IS AN UNDISPUTED FACT T HAT FOR THE YEAR UNDER CONSIDERATION ASSESSEE SOCIETY HAS MADE SALE OF M ILK AND OTHER MILK PRODUCTS TO THE TUNE OF RS.13,56,51,168/- TO THE PARTIE S WHICH ARE NOT COVERED UNDER THE PROVISIONS OF SEC.80P(2)(B) OF THE ACT. P ROVISIONS OF SEC.80P(2)(B) CONTEMPLATES THAT DEDUCTION CAN BE CLAIMED O N THE AMOUNT OF GAINS OF BUSINESS OF A CO-OPERATIVE SOCIETY ON SALE TO FEDERAL SOCIETY, THE GOVERNMENT OR LOCAL AUTHORITY OR GOVERNMENT COMPANY . IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE SALE TO THE TUNE O F RS.13.56 CRORES IS NOT TO THE PARTIES COVERED U/S 80P(2)(B) OF THE ACT. 7. BEFORE US, ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS FORCED TO SELL MILK TO OUTSIDE PARTIES AS MAHANAND DAIRY WHICH IS A FEDERAL CO- OPERATIVE SOCIETY TO WHOM ASSESSEE SOCIETY USE TO SUPP LY THE MILK, HAD EXPRESSED ITS INABILITY TO ACCEPT AND PROCESS THE MILK C OLLECTED FROM THE ASSESSEE SOCIETY. MAHANAND DAIRY HAD ADVISED THE ASSE SSEE NOT TO SEND THE MILK TO THEM AS THEY WOULD NOT BE IN A POSITION TO ACCEPT THE MILK DUE TO PAUCITY OF PROCESSING CAPACITY AT ITS END. THE AFORES AID CONTENTION OF THE 6 ASSESSEE HAS NOT BEEN CONTROVERTED BY REVENUE. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT MILK BEING A HIGHLY PERISHABLE ITEM, ITS SHELF LIFE BEING VERY SHORT, THE ASSESSEE WAS LEFT WITH NO OTHER ALTERNA TIVE BUT TO SELL THE MILK TO OUTSIDE PARTIES. THE ASSESSEE HAS PLACED BEFORE US A CHART SHOWING THE PRICE AT WHICH IT HAD SOLD MILK IN VARIOUS MONTHS TO OUTSIDE PARTIES AND THE CO-OPERATIVE SOCIETY DURING THE PERIOD RELEVANT TO A .Y. UNDER APPEAL. A PERUSAL OF THE SAME REVEALS THAT THE PRICE CHARGED BY THE ASSESSEE FROM OUTSIDE PARTIES IS LOWER THAN THE PRICE AT WHICH MILK WAS S OLD TO FEDERAL SOCIETY IN ALL THE MONTHS, EXCEPT IN THE MONTH OF AUGUST, 2 009. AS PER THE AFORESAID TABLE, IT IS SEEN THAT IN THE MONTH OF AUGUST, 200 9 THERE IS NO SALE OF MILK TO FEDERAL SOCIETY, WHEREAS THE SALE OF MILK TO OUTSI DE PARTIES IS TO THE TUNE OF RS.1,25,54,116/-. WE FIND FORCE IN THE ARGUMEN T OF THE LD.A.R. THAT IT IS NOT A CASE WHERE ASSESSEE HAS SOLD THE MILK A T A HIGHER RATE TO OUTSIDE PARTIES, IN FACT ASSESSEE WAS GETTING HIGHER PRICE ON SALE OF MILK TO FEDERAL SOCIETY IN ADDITION TO UNDISPUTED BENEFIT OF DEDUCTIO N U/S 80P(2)(B). IT IS NOT A CASE WHERE ASSESSEE HAS SUO-MOTO VOLUNTEERED TO SELL MILK IN THE OPEN MARKET. IT WAS AFTER THE DENIAL OF FEDERAL SOCIETY TO ACC EPT THE MILK THAT THE ASSESSEE WAS CONSTRAINED TO SELL THE MILK IN OPEN MARKET AT A PRICE LOWER THAN THE PRICE OFFERED BY FEDERAL SOCIETY. 8. THE HONBLE APEX COURT IN THE CASE OF BAJAJ TEMPO L IMITED VS. CIT (SUPRA) HAS HELD THAT A PROVISION IN A TAXING STATUTE WHIC H GRANTS INCENTIVES TO PROMOTE GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY SO AS TO ADVANCE THE OBJECTIVE OF THE SECTION AND NOT TO FRUSTRATE IT. IT IS AN UNDISPUTED POSITION THAT PROVISIONS OF DEDUCTION U/S 80P IS A PROVISION TO PROMOTE DEVELOPMENT OF CO-OPERATIVE SECTOR. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELYING ON THE AFORESAID DECISION OF HONBLE APEX COURT CITED HEREIN WE ARE OF THE VIEW THAT ASSESSEE IS ELIGIBLE 7 FOR DEDUCTION U/S 80P2(B) OF THE ACT ON THE MILK SOLD TO OU TSIDE PARTIES. HOWEVER, THE ASSESSEE WOULD BE ELIGIBLE FOR THE BENEFIT OF DE DUCTION U/S 80P(2)(B) ON SALE OF MILK AT A PRICE AT WHICH IT HAS ACTUALLY S OLD IN THE OPEN MARKET OR PRICE AT WHICH MILK IS SOLD TO FEDERAL SOCIETY, W HICHEVER IS LESS. FOR THE MONTH OF AUGUST, 2008, THERE IS NO SALE OF MILK BY THE ASSESSEE TO THE FEDERAL SOCIETY AND THE SALE OF RS.1,24,34,116/- IS ONL Y TO OUTSIDERS, HENCE, WE ARE OF THE VIEW THAT BENEFIT OF DEDUCTION SHOU LD NOT BE EXTENDED ON SALE OF MILK FOR THE MONTH OF AUGUST, 2008. WE THEREFO RE DIRECT THE AO TO RE-COMPUTE THE DEDUCTION U/S 80P(2)(B) OF THE ACT BY EXCLUDING THE SALE MADE TO OUTSIDERS IN THE MONTH OF AUGUST, 2009. THUS, T HE GROUND NO.1 OF THE ASSESSEE IS PARTLY ALLOWED. 9. SINCE THE GROUND NO.1 HAS BEEN DECIDED IN ASSESSEES FAVOUR, ALTERNATE GROUND RAISED BY THE ASSESSEE HAS BECOME A CADEMIC AND HENCE, THE SAME IS DISMISSED AS SUCH. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 5 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 5 TH SEPTEMBER, 2019. YAMINI 8 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, KOLHAPUR. PR. CIT- 1, KOLHAPUR. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.