M/s Thotada Utpannagala Marata Sagakara Sangha Niyamitha, Shivamogga V. Income Tax Officer, Ward-3, Shivamogga

ITA 2857/BANG/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8001 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Revised return; Co-operative Credit Society; Set aside
• Section: 80P

Judgement Text

ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.2857/BANG/2017 ASSESSMENT YEAR: 2011-12 M/S. THOTADA UTPANNAGALA MARATA SAHAKARA SANGHA NIYAMITHA APMC YARD, CHANNAGIRI SHIVAMOGA 577 213 PAN NO :AAAAT3475D VS. ITO WARD-3 SHIVAMOGA APPELLANT RESPONDENT APPELLANT BY : SHRI RAVISHANKAR, A.R. RESPONDENT BY : SHRI KANNAN NARAYANAN, D.R. DATE OF HEARING : 06.08.2021 DATE OF PRONOUNCEMENT : 23.08.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 20.6.2017 PASSED BY LD. CIT(A), DAVANAGERE AN D IT RELATES TO THE ASSESSMENT YEAR 2011-12. 2. THE EFFECTIVE GROUNDS URGED BY THE ASSESSEE READ AS UNDER: 2. THE LEARNED CIT(A) IS NOT ALLOWING THE DEDUCTION U/S 80P(2)(A)(II) WITHOUT APPRECIATING THE EXPLANATION OF THE APPELLANT THAT APPELLANT IS A CO-OPERATIVE SOCIETY ENGAGED IN BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMB ERS AND PROFIT OBTAINED FROM MARKETING OF AGRICULTURAL MARKETING O F AGRICULTURE PRODUCE GROWN BY MEMBERS IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(III). ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 2 OF 7 3. THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT THE AGRICULTURIST WHO ARE GROWING ARCANUT ARE ADMITTED AS MEMBER AND AGRICULTURIST WHO ARE NOT GROWING ARCANUT ARE N OT AT ALL ADMITTED AS MEMBERS. HENCE THE PROFIT OBTAINED FRO M MARKETING OF AGRICULTURE PRODUCE GROWN BY MEMBERS ARE ONLY CLAIM ED U/S 80P(2)(A)(III) OF THE INCOME TAX ACT. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS O F MARKETING OF AGRICULTURAL PRODUCE. IN THE ORIGINAL RETURN OF IN COME, IT CLAIMED DEDUCTION U/S 80P OF THE ACT TO THE EXTENT OF RS.2, 58,96,344/-. IN THE REVISED RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION U/S 80P OF THE ACT TO THE EXTENT OF RS.3,07,28,992/- WH ICH INCLUDED DEDUCTION OF RS.50,000/- CLAIMED U/S 80P(2)(C) OF T HE ACT. THE REMAINING AMOUNT WAS CLAIMED AS DEDUCTION U/S 80P(2 )(A) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO FILE THE DETAILS RELATING TO DEDUCT ION U/S 80P OF THE ACT. THE ASSESSEE FURNISHED A REPLY STATING AS UND ER: OURS IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSI NESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY OUR MEMB ERS. APART FROM THIS, WE ARE ALSO ENGAGED IN THE BUSINESS OF P ROVIDING CREDIT FACILITIES TO OUR MEMBERS. ANOTHER BUSINESS CONDUC TED BY US IS PURCHASE OF SEEDS, FERTILISERS, AGRICULTURAL IMPLEM ENTS AND OTHER ARTICLES INTENDED FOR AGRICULTURAL PURPOSE OF SUPPL YING THEM TO OUR MEMBERS. ALL THESE ACTIVITIES ARE COVERED U/S 80P OF I.T. ACT IN SUB- SECTION NAMELY 80P(2)(A)(I), 80P(2)(A)(III) & 80P(2 )(A)(IV) OF THE ACT. SO THE EXEMPTION CLAIMED BY US IS PERFECTLY I N ORDER THE ASSESSEE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS:- A) ITO VS. JANA KALYAN NAGRI SAHAKARI PAT SANSTHA LTD. (2012) 24 TAXMANN.COM 127 B) ACIT VS. BULDANA URBAN CO-OPERATIVE CREDIT SOCIETY LTD. (2011) 32 TAXMANN.COM 69. ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 3 OF 7 4. THE A.O. NOTICED THAT THE ASSESSEE HAS ENROLLED CERTAIN TRADERS AS NOMINAL MEMBERS. HENCE, THE A.O. ASKED THE ASSESSEE TO CLARIFY AS TO HOW THE ASSESSEE IS ENTITLED FOR D EDUCTION U/S 80P(2)(A)(III) OF THE ACT SINCE THE SAID PROVISION REQUIRES THAT THE PRODUCE SOLD BY THE MEMBERS HAVE TO BE GROWN BY THE M AND NOT GROWN BY OTHERS. IN RESPONSE TO THE SAME, THE AS SESSEE PRODUCED LIST OF NOMINAL MEMBERS. IT ALSO SUBMITTED THAT IT IS ENGAGED IN THE BUSINESS OF MARKETING THE AGRICULTURAL PRODUCE GROW N BY ITS MEMBERS. IT FURTHER SUBMITTED THAT THE INTEREST IN COME IS DERIVED FROM TRADERS ON THE CREDIT FACILITY GIVEN TO THEM A ND THE SAID INTEREST INCOME ALSO FORMS PART OF THE PROCESS OF M ARKETING OF AGRICULTURAL PRODUCE AND HENCE EXEMPT U/S 80P(2)(A) (III) OF THE ACT. IN THIS REGARD, THE ASSESSEE PLACED HIS RELIANCE ON THE FOLLOWING CASE LAWS: A) CIT VS. RIOTS AGRICULTURAL PRODUCE CO-OPERATIVE MARKETING SOCIETY LTD. (2010) 323 ITR 666. B) BROCH DISTRICT CO-OPERATIVE COTTON SALES JINNING & PRESSING SOCIETY LTD. VS. CIT 177 ITR 418 5. THE A.O. NOTICED THAT THE ASSESSEE HAS FAILED TO PRODUCE THE DETAILS NECESSARY TO PROVE THAT IT IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(III) OF THE ACT. THE A.O. ALSO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT SINCE IT IS NEITHER A PRIMARY AGRICULTURAL SOCIETY NOR A PRIMARY CO-OPERA TIVE AGRICULTURAL RURAL DEVELOPMENT BANK, WHICH ARE ELIGIBLE FOR DEDU CTION U/S 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, HE DISALLOWE D THE DEDUCTION CLAIMED U/S 80P(2)(A)(I) & 80P(2)(A)(III) OF THE AC T TO THE EXTENT OF RS.2,76,37,690/-. THE A.O. ALLOWED DEDUCTION OF RS .50,000/- U/S 80P(2)(C) OF THE ACT. THE RECONCILIATION OF THE DE DUCTION ALLOWED BY THE A.O. IS GIVEN BELOW:- ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 4 OF 7 DEDUCTION CLAIMED BY ASSESSEE IN THE REVISED RETURN - RS.3,07,28,992/- LESS: INTEREST INCOME RS. 30,41,302/- BALANCE RS.2,76,87,690/- LESS DEDUCTION U/S 80P(2)(C) OF THE ACT RS. 50,000/- BALANCE RS.2,76,37,690/- 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CON FIRMED THE DISALLOWANCE MADE BY THE A.O. AND HENCE THE ASSESS EE HAS FILED THIS APPEAL BEFORE US. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE HAS FILED ITS TRADING AND PROFIT & LOSS ACCOUNT AT PAGES 225 TO 227 OF THE PAPER BOOK. A PERUSAL OF THE SAME WOULD SHOW T HAT THE ASSESSEE HAS SHOWN FOLLOWING GROSS RECEIPTS/GROSS P ROFIT: A) GROSS PROFIT FROM TRADING OF FERTILIZERS, SEEDS AND OTHERS RS. 17,27,701/- B) GROSS COMMISSION EARNED ON MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS RS. 1,37,01,081/- C) INTEREST INCOME RECEIVED FROM TRADERS RS.3,03,61,3 99/- D) INTEREST INCOME RECEIVED FROM MEMBERS RS.3,66,57,0 74/- IN ADDITION TO THE ABOVE, THE ASSESSEE HAS ALSO REC EIVED OTHER MISCELLANEOUS INCOME. 8. IT IS THE SUBMISSION OF LD. A.R. THAT (A) PROFIT FROM TRADING OF FERTILIZERS, SEEDS AND O THERS IS DEDUCTIBLE U/S 80P(2)(A)(IV) OF THE ACT. (B) COMMISSION EARNED ON MARKETING OF AGRICULTURA L PRODUCE AND INTEREST INCOME RECEIVED FROM TRADERS IS DEDUCT IBLE U/S 80P(2)(A)(III) OF THE ACT. (C) INTEREST INCOME EARNED FROM ITS MEMBERS IS EXEM PT U/S 80P(2)(A)(I) OF THE ACT. ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 5 OF 7 HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTIO N AS STATED ABOVE, BUT THE TAX AUTHORITIES HAVE NOT APPRECIATED THE SAME. ALTERNATIVELY, THE LD AR SUBMITTED THAT THE ASSESSE E IS A MARKETING CO-OPERATIVE SOCIETY AND IT DEALS ONLY WITH ITS MEM BERS. HENCE ENTIRE INCOME IS ATTRIBUTABLE TO THE MARKETING AC TIVITY OF THE ASSESSEE AND HENCE ENTIRE INCOME IS DEDUCTIBLE U/S 80P(2)(A)(III) OF THE ACT. 9. WE NOTICE THAT THE ASSESSEE HAS RAISED GROUND WI TH REGARD TO THE DISALLOWANCE OF CLAIM RELATING TO 80P(2)(A)(III ) OF THE ACT. THE A.O. HAS DISALLOWED THE CLAIM FOR DEDUCTION U/S 80P (2)(A)(III) OF THE ACT, ONLY FOR THE REASON THAT THE ASSESSEE HAS FAIL ED TO FURNISH THE DETAILS CALLED FOR. OTHERWISE, THERE APPEARS TO BE NO QUARREL THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A )(III) OF THE ACT IN RESPECT OF INCOME EARNED FROM MARKETING OF AGRICULT URAL PRODUCE GROWN BY ITS MEMBERS. THE LD. CIT(A) HAS ALSO CONF IRMED THE DISALLOWANCE ONLY FOR THE REASON THAT THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS BEFORE HIM ALSO. 10. IT IS THE CONTENTION OF THE LD. A.R. THAT THE A SSESSEE HAS BEEN GRANTED DEDUCTION U/S 80P(2)(A)(III) OF THE ACT IN THE EARLIER YEARS. ACCORDINGLY, BY PLACING RELIANCE ON THE DECISION RE NDERED BY HONBLE SUPREME COURT IN THE CASE OF RADHA SWAMI SATSANG 15 3 ITR 321, THE LD. A.R. SUBMITTED THAT THE DEDUCTION CLAIMED B Y THE ASSESSEE SHOULD HAVE BEEN ALLOWED UNDER THE PRINCIPLE OF CON SISTENCY. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE IS ADM ITTING PERSONS AS MEMBERS ONLY AFTER SATISFYING ITSELF THAT THE SA ID MEMBER OWNS AGRICULTURAL LANDS. ONLY THE TRADERS, WHO PURCHASES THE AGRICULTURAL PRODUCE ARE ADMITTED AS NOMINAL MEMBERS. HENCE THE RE IS NO REASON TO SUSPECT THAT THE AGRICULTURAL PRODUCE WAS NOT GROWN BY THE MEMBERS. ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 6 OF 7 11. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT TH E A.O. HAS REJECTED THE CLAIM FOR THE REASON THAT THE ASSESSEE HAS FAILED TO FURNISH THE DETAILS CALLED FOR BY HIM. HE SUBMITTE D THAT THE CONDITION FOR ALLOWING DEDUCTION U/S 80P(2)(A)(III) OF THE ACT IS THAT THE AGRICULTURAL PRODUCE SHOULD HAVE BEEN GROWN BY ITS MEMBERS. THE ASSESSEE HAS FAILED TO PROVE THAT THE AGRICULTU RAL PRODUCE MARKETED BY THE ASSESSEE WAS GROWN BY ITS MEMBERS. 12. WE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AN D PERUSED THE RECORD. ADMITTEDLY, THE ASSESSEE DID NOT FURNISH T HE DETAILS CALLED FOR BY THE A.O., MORE PARTICULARLY THAT THE PRODUCE MARKETED BY IT WAS GROWN BY ITS MEMBERS. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ADMITTING FARMERS AS MEMBERS, ONLY AFTER SATISFYING ITSELF THAT HE/SHE OWNS AGRICULTURAL LANDS. HOWEVE R, WE NOTICE THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS BEFO RE THE A.O. TO SUPPORT THE CLAIM FOR DEDUCTION U/S 80P(2)(A)(III) OF THE ACT, MORE PARTICULARLY, THE FACT THAT THE AGRICULTURAL PRODUC E WAS GROWN BY ITS MEMBERS. SINCE THE ASSESSEE HAD BEEN ALLOWED DEDU CTION U/S 80P(2)(III) IN THE EARLIER YEARS, WE ARE OF THE VIE W THAT, IN THE INTEREST OF NATURAL JUSTICE, THE ASSESSEE MAY BE PROVIDED WI TH AN OPPORTUNITY TO FURNISH THE RELEVANT DETAILS BEFORE THE A.O. TO SUPPORT THE CLAIM FOR DEDUCTION U/S 80P(2)(A)(III) OF THE ACT. 13. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR EXAMIN ING THE CLAIM OF THE ASSESSEE AFRESH IN ACCORDANCE WITH LAW. THE ASSESS EE IS ALSO DIRECTED TO FURNISH RELEVANT DETAILS BEFORE THE AO. ITA NO.2857/BANG/2017 M/S. THOTADAUTPANNAGALAMARATA SAHAKARA SANGHA NIYAMITHA, SHIVAMOGA PAGE 7 OF 7 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUG, 2021. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 23 RD AUG, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.