The Sabarkantha Dist. Co. Op. Purchase and Sale Union Ltd., Sabarkantha V. The Income Tax Officer, S.K. Ward-3, Sabarkantha

ITA 2487/AHD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4605 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SEWAK
• Assessee Lawyers: A C SHAH
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO.2487/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO.2487/AHD/2016 ASSESSMENT YEAR: 2013-14 THE SABARKANTHA DIST CO-OP. PURCHASE & SALE ............ APPELLANT UNION LTD., NEAR OLD VEGETABLE MARKET, NEAR RAILWAY STATION, HIMATNAGAR, DIST. SABARKANTHA. [PAN: AAAAT 0524 H] VS. INCOME TAX OFFICER, SK WARD 3, SABARKANTHA. ....................... RESPONDENT APPEARANCES BY: A.C. SHAH FOR THE APPELLANT SHIVASEWAK FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 08.10.2018 DATE OF PRONOUNCING THE ORDER : 15.10.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 29 TH AUGUST 2016, PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2013-14. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE APPE LLANT HAS RAISED THE FOLLOWING GRIEVANCE :- THE LEARNED CIT(A) HAS ERRED IN DISALLOWING FOLLOW ING AMOUNT AS REPRESENTING THE EXPENDITURE INCURRED IN EARNING TH E INCOME AS IN MUCH AS THE ASSESSEE HAS NEVER INCURRED SUCH EXPENDITURE AN D THAT THE AO HAS ALSO NOT DISALLOWED SUCH EXPENDITURE AS PER THE ASS ESSMENT ORDER : OUT OF GODOWN RENT UNDER SECTION 80P(2)(E) RS.1,50 ,000/- OUT OF DIVIDEND INCOME UNDER SECTION 80P(2)(D) RS.1 ,00,000/- ITA NO.2487/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 2 OF 4 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AB OVE DISALLOWANCES ARE PURELY ON ESTIMATE BASIS AND BY WAY OF ADHOC DISALLOWANCES, T O COVER ANY EXPENDITURE AS MAY HAVE BEEN INCURRED TO EARN THE RESPECTIVE INCOME. 4. IN THE ABSENCE OF ANY SPECIFIC DETAILS, SUCH ADH OC DISALLOWANCES CANNOT BE SUSTAINED AS THERE IS NO BASIS WHATSOEVER FOR THE S AME. ACCORDINGLY I DIRECT THE ASSESSING OFFICER TO DELETE THE ABOVE MENTIONED IMP UGNED DISALLOWANCE. 5. GROUND NO.1 IS THUS ALLOWED. 6. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE:- THE LEARNED CIT(A) HAS ERRED THAT THE NET COMMISSIO N INCOME OF RS.4,14,962/- IS NOT ELIGIBLE FOR DEDUCTION UNDER S ECTION 80P(2)(IV) ON THE GROUND THAT THE ASSESSEE HAS NOT CARRIED ON ACTIVIT Y OF PURCHASE AND SALE IN AS MUCH AS THE EARNING OF COMMISSION REPRESENTS THE BOOKING OF THE ORDERS FROM THE MEMBERS AS PER CREDIT NOTE AND THAT SUCH COMMISSION IS ONLY ON ACCOUNT OF PURCHASES AND SALE WITH THE MEMB ERS. 7. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER DECLINED THE CLAIM OF DEDUCTION UNDER SECTION 80P(2 )(A)(IV) IN RESPECT OF AGRICULTURAL COMMISSION TO THE EXTENT OF RS.4,14,962/-. WHEN TH E MATTER TRAVELLED IN APPEAL BEFORE THE LEARNED CIT(A), LEARNED CIT(A) ALSO CONFIRMED T HE DISALLOWANCE ON THE BASIS OF FOLLOWING REASONING :- 3.6 IT HAS BEEN NOTICED THAT THE APPELLANT HAS CLA IMED THE DEDUCTION UNDER THE SUB-CLAUSE ALTHOUGH NO DETAILS OF THE INC OME DERIVED FROM THE ACTIVITIES SPECIFIED UNDER THE SUB-CLAUSE HAS NEITH ER BEEN PROVIDED TO THE A.O. NOR IN THE APPELLATE PROCEEDINGS. THE APPELLA NT IN ITS WRITTEN SUBMISSION HAS SIMPLY RELIED UPON THE ORDER OF THE LD. CIT(A)-2, AHMEDABAD FOR A.Y. 2011-12. ON GOING THROUGH THE S AID APPELLATE ORDER IT HAS BEEN NOTICED THAT THE APPELLANT WAS ACTING AS C OMMISSION AGENT FOR GUJARAT STATE CO-OPERATIVE MARKETING FEDERATION FOR MARKETING INORGANIC FERTILIZER. FROM THESE ACTIVITIES, THE APPELLANT H AS EARNED THE COMMISSION FROM THE FEDERATION. IT HAS ALSO BEEN NOTICED THAT THE APPELLANT COMPANY HAS ACTING AS NODAL AGENCY FOR ALL THE SMALLER AGEN CIES AT TALUKA LEVEL. 3.7 AS HAS BEEN NOTICED THAT FOR CLAIMING THE DEDUC TION UNDER THE SECTION UNDER THIS SUB-SECTION THE FOLLOWING CONDIT IONS ARE TO BE FULFILLED. 4. THE APPELLANT SHOULD HAVE PURCHASED THE AGRICULT URE ITEMS USED FOR THE PURPOSE OF AGRICULTURAL ACTIVITIES ONL Y. 5. THESE ITEMS OUGHT TO HAVE BEEN SOLD ONLY TO ITS MEMBERS NOT TO THE NON-MEMBERS. 6. THE APPELLANT SHOULD HAVE PURCHASED THESE AGRICU LTURAL ITEMS AND SOLD THEM. IN OTHER WORDS THE TRADING OF THESE ITEMS HAS TO BE MADE. ITA NO.2487/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 3 OF 4 38. HOWEVER, IT HAS BEEN NOTICED THAT THE APPELLANT HAS DERIVED THE COMMISSION INCOME AS AN AGENT WHICH DOES NOT MEAN T HAT IT HAS PURCHASED THESE ITEMS FROM THE FEDERATION AND SOLD ONLY TO THE MEMBERS AND NOT TO THE OUTSIDERS. THIS IS MORE IMPORTANT I N VIEW OF THE FACT THAT THE APPELLANT HAD ITS BUSINESS ACTIVITIES NOT ONLY WITH HIS MEMBERS BUT TO THE NON-MEMBERS ALSO. MOREOVER THE APPELLANT HAS DERIV ED THE COMMISSION AS AN AGENT AND NO BUSINESS INCOME AS A TRADER. THERE IS NO DETAILS ON RECORD THAT IT HAS PURCHASED THE ITEMS FROM THE FEDERATION AND SOLD THOSE TO ITS MEMBERS. THE APPELLANT NEITHER IN THE APPELLATE PR OCEEDINGS NOR IN THE ASSESSMENT PROCEEDINGS HAVE PROVIDED ANY DETAILS SH OWING THAT THE APPELLANT HAD FULFILLED THE AFORESAID CONDITIONS OF THE SUB-SECTION TO CLAIM THE DEDUCTION. IT HAS BEEN NOTICED THAT NEITHER TH E APPELLANT HAS PURCHASED THE GOODS FROM GUJARAT STATE CO-OPERATIVE MARKETING FEDERATION NOR SOLD TO ITS MEMBERS ONLY AND NOT TO OUTSIDERS. IN FACT, GUJARAT STATE CO-OPERATIVE MARKETING FEDER ATION HAS SOLD THE GOODS TO THE CUSTOMERS DIRECTLY WITHOUT ANY INVOLVE MENT OF THE APPELLANT. EVEN THE PAYMENTS BY THE CUSTOMERS HAVE DIRECTLY BE EN MADE TO GUJARAT STATE CO-OPERATIVE MARKETING FEDERATION. THEREFORE , NEITHER THE PURCHASE AND SALES NOR ANY PAYMENTS/RECEIPTS HAVE BEEN ROUTE D THROUGH THE APPELLANT. IT HAS SIMPLY RECEIVED THE CREDIT NOTE FOR THE COMMISSION INCOME AS A COMMISSION AGENT. THEREFORE, THE ASSES SEE CANNOT BE SAID TO BE INDULGED IN TRADING OF THE GOODS. EVEN THERE AR E NO DETAILS TO SHOW THAT THE ITEMS SOLD BY GUJARAT STATE CO OPERATIVE MARKET ING FEDERATION WERE ONLY TO THE MEMBERS OF THE APPELLANT AND NOT TO OUT SIDERS. THEREFORE THE CONDITIONS OF THE SUB-CLAUSE FOR GRANT OF DEDUCTION DOES NOT GET FULFILLED. THUS, NO DEDUCTION TO THE APPELLANT ON THIS ACCOUNT UNDER CLAUSE 80P(2)(IV) IS GRANTED TO THE APPELLANT. THUS, THIS SUB-GROUND IS DISMISSED. 8. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 9. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 10 I FIND THAT THE CREDIT NOTE DATED 01.11.2012 ISS UED BY THE GUJARAT STATE CO- OPERATIVE MARKETING FEDERATION LIMITED, A COPY OF W HICH WAS PLACED BEFORE ME, CATEGORICALLY SETS OUT THE NAMES OF MEMBER SOCIETIE S TO WHICH GOODS WERE SOLD. IT CANNOT THUS BE SAID THAT THE GOODS WERE SOLD TO THE NON-MEMBERS AND OUTSIDERS AS WELL. I HAVE ALSO NOTED THAT THE SUPPLIES ARE MADE DIRECT LY TO CO-OPERATIVE SOCIETIES BUT THEN THAT IS MODE OF EXECUTION OF THE ORDER, AND IT CANN OT ALTER THE NATURE OF ACTIVITY OF THE ASSESSEE. AS LONG AS ASSESSEE HAS BOOKED THE ORDER S AND EXECUTED THE SAME, IT DOES NOT REALLY MATTER WHETHER THE DELIVERY IS MADE BY T HE ASSESSEE OR BY THE ULTIMATE VENDOR DIRECTLY. IN VIEW OF THESE DISCUSSIONS, AS ALSO BE ARING IN MIND ENTIRETY OF THE CASE, I UPHOLD THE PLEA OF THE ASSESSEE ON THIS COUNT AS WE LL. IN ANY CASE, A DIVISION BENCH ORDER, IN ASSESSEES OWN CASE FOR A.Y. 2011-12, HAS UPHELD THIS PLEA AND THIS DECISION IS A BINDING JUDICIAL PRECEDENT FOR ME. 11. GROUND NO.2 IS THUS ALLOWED. ITA NO.2487/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 4 OF 4 12. GROUND NOS.3 & 4 WERE NOT ARGUED BEFORE ME AND, IN THE LIGHT OF MY DECISIONS ON GROUND NOS.1 & 2, ARE ACADEMIC. 13. GROUND NOS.3 & 4 ARE THUS DISMISSED AS INFRUCTU OUS. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 15 TH DAY OF OCTOBER, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 15 TH DAY OF OCTOBER, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD