Prathamik Krishi Pattin Sahakari Bank Niyamit., Belgaum V. Income Tax Officer Ward-1(3), Belgaum

ITA 60/PAN/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1006 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH LD
• Keywords: Business income
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN , HONBLE JUDICIAL MEMBER ITA N O . 60 /PNJ/201 4 : (A.Y S 2009 - 10 ) PRATHAMIK KRISHI PATTIN SAHAKARI BANK NIYAMIT, AT POST : SHEDBAI, TAL. ATHANI, DIST. BELGAUM PAN : AAAAP1364R ( APPELLANT) VS. INCOME TAX OFFICER, WARD 1(3), BELGAUM (RESPONDENT) ITA NO. 162/PNJ/2015 : (A.Y 2010 - 11 ) PRATHAMIK KRISHI SAHAKARI BANK NIYAMIT, AT POST : HARUGERI, TAL. RAIBAG, DIST. BELAGAVI PAN : AAAAP1343C ( APPELLANT) VS. INCOME TAX OFFICER, WARD 2(2), BELAGAVI (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI K.M. MAHESH , LD. DR DATE OF HEARING : 0 1 / 0 6 /201 5 DATE OF ORDER : 02 / 0 6 /201 5 O R D E R 1. ITA NO. 60/PNJ/2014 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM IN ITA N O. 198/BGM/2011 - 12 DT. 10.12.2013 FOR A.Y 2009 - 10. NONE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI K.M. MAHESH, DR REPRESENTED ON BEHALF OF THE REVENUE. 2. IT WAS SUBMITTED BY THE LD. DR THAT THE ONLY ISSUE IN THE ASSESSEES APPEAL WAS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF 2 ITA NOS. 60/PNJ/2014 & 162/PNJ/2015 (A. YS : 2009 - 10 & 2010 - 11) RS.3,43,094/ - U/S 40A(3) OF THE ACT. IT WAS THE SUB MI SSION THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND ALSO DOING BUSINESS OF RUNNING A PDS AND PURCHASE AND SALE OF FERTILIZERS. IT WAS THE SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT IT WAS NOTICE D THAT THE ASSESSEE HAD MADE PURCHASE OF KEROSENE FROM VARIOUS PERSONS FOR ITS PDS ACTIVITY. IT WAS THE SUBMISSION THAT AS PURCHASE OF KEROSENE EXCEEDED RS. 20,000/ - , DISALLOWANCE WAS MADE BY THE AO BY INVOKING THE PROVISIONS OF SEC. 40A(3) OF THE ACT . T HE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND CIT(A). IT WAS THE SUBMISSION THAT BEFORE THE LD. CIT(A) ALSO THE ASSESSEE WAS UNABLE TO SUBSTANTIATE ITS CLAIM FOR THE REASON WHY THE ASSESSEE HAD TO PAY CASH IN EXCESS OF RS. 20,000/ - PER DAY FOR TH E PURCHASE OF KEROSENE. 3. HEARD THE LD. DR. I HAVE PERUSED THE ORDER OF THE AO AND THE ORDER OF THE LD. CIT(A). ON PERUSAL OF THE ORDER OF THE LD. CIT(A), MORE SPECIFICALLY PAGE 2, PARA 3, IT IS NOTICED THAT THE GROUNDS HAVE BEEN EXTRACTED BY THE LD. CIT(A). IN THE SAID GROUNDS THE ASSESSEE HAS SPECIFICALLY RAISED THE ISSUE THAT THREE OF THE PAYMENTS HAVE BEEN MADE ON A SUNDAY, ON A HOLIDAY (LAXMI POOJA) AND ON A SATURDAY (HALF DAY WORKING). ADMITTEDLY, THESE PAYMENTS WOULD FALL WITHIN THE CRITERION OF RULE 6DD(K). CONSEQUENTLY, DISALLOWANCE IN RESPECT OF 25.5.2008, 28.10.2008 AND 20.12.2008 WOULD STAND DELETED AS THE SAME FALLS WITHIN THE EXEMPTION PROVIDED UNDER RULE 6DD(K). ON THIS GROUND, THE ASSESSEE GETS RELIEF OF RS.95,944/ - . IN RESPECT OF THE BALANCE, ADMITTEDLY KEROSENE IS A CONTROLLED COMMODITY. SUPPLY OF KEROSENE IS UNDER AUTHORITY OF THE GOVERNMENT. PAYMENTS AND SUPPLY OF KEROSENE IS COMPLETELY REGULATED BY THE GOVERNMENT. THOUGH THE SAME IS SUPPLIED THROUGH PRIVATE DEALERS, THE SAME CAN BE DONE ONLY ON THE SPECIFIC PERMISSION GRANTED BY THE GOVERNMENT. AGAIN, KEROSENE CANNOT BE SUPPLIED ON CREDIT. CONSEQUENTLY, PURCHASE OF KEROSENE WOULD HAVE TO BE DONE BY CASH. THE QUANTITY OF KEROSENE REQUIRED CANNOT BE 3 ITA NOS. 60/PNJ/2014 & 162/PNJ/2015 (A. YS : 2009 - 10 & 2010 - 11) KNOWN IN ADVANCE. THIS I S BECAUSE WHEN RUNNING A PDS SHOP, NOT EVERY RATION CARD HOLDER WOULD PURCHASE THE KEROSENE. THEREFORE, IT IS ONLY AS PER THE REQUIREMENT THAT THE PDS SHOP AGENT WOULD BE ABLE TO PURCHASE KEROSENE. IN THESE CIRCUMSTANCES, THE PRESUMPTION THAT THE PDS SHO P AGENT WOULD KNOW THE QUANTITY OF KEROSENE REQUIRED FOR WHICH DDS COULD BE DRAWN WOULD BE EXTENDING THE PRESUMPTIONS OF BUSINESS TO AN IMPROBABLE EXTENT. IN THESE CIRCUMSTANCES, I FIND FORCE IN THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) TH AT THE SUPPLIERS INSISTED ON CASH PAYMENT AND THE LETTERS AND CERTIFICATES ISSUED BY THE KEROSENE SUPPLIERS PROVED THE REASON FOR THE PAYMENT FOR THE SAME BEING MADE IN CASH. ON THIS GROUND, THE ADDITION MADE BY THE AO AND AS CONFIRMED BY THE LD. CIT(A) BY INVOKING THE PROVISIONS OF SEC. 40A(3) OF THE ACT IN RESPECT OF PURCHASE OF KEROSENE ON CASH EXCEEDING RS. 20,000/ - PER DAY STANDS DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. ITA NO. 162/PNJ/2015 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) IN ITA NO. 200/BGM/2012 - 13 DT. 04.03.2015 FOR A.Y 2010 - 11. IT WAS SUBMITTED BY THE LD. DR THAT THE ONLY ISSUE IN THE ASSESSEES APPEAL WAS AGAINST ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS. 94,866/ - BY DENYING THE EXEMPTION CLAIMED U/S 80P(4). IT WAS THE SUBMISSION THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS DOING BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT WAS THE SUBMISSION THAT THE ASSESSEE IS ALSO DOI NG THE BUSINESS OF PURCHASING AND PROVIDING FERTILIZERS. FOR THIS PURPOSE, THE ASSESSEE PURCHASE S THE SAME FROM VARIOUS COMPANIES. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD CLAIMED THAT INTEREST RECEIVED BY THE ASSESSEE OF RS. 42,000/ - FROM M/S. ZUARI INDUSTRIES LTD., GOA AND RS. 52,866/ - FROM M/S. MADRAS FERTILIZERS, CHENNAI WAS IN EFFECT THE INTEREST ON THE EARNEST MONEY DEPOSIT MADE BY THE ASSESSEE WITH THE SAID TWO COMPANIES. IT WAS THE SUBMISSION THAT AS THE INTEREST HAS NOT BEEN RECEIVED 4 ITA NOS. 60/PNJ/2014 & 162/PNJ/2015 (A. YS : 2009 - 10 & 2010 - 11) IN THE C OURSE OF THE BUSINESS OF THE ASSESSEE AND THE INTEREST HAVING NOT BEEN RECEIVED FROM ANOTHER CO - OPERATIVE SOCIETY AND THE SAME HAVING NOT BEEN RECEIVED FROM A MEMBER OF THE ASSESSEE CO - OPERATIVE SOCIETY, THE AO WAS RIGHT IN DISALLOWING THE INTEREST RECEIVE D FROM THE SAID TWO COMPANIES. THE INTEREST EARNED FROM THE DEPOSITS WITH THE SAID TWO COMPANIES EVEN THOUGH CLAIMED TO BE EARNEST MONEY DEPOSIT HAS NOT BEEN SUBSTANTIATED NOR HAS IT BEEN SHOWN TO BE THE INTEREST E ARNED FROM THE BANKING BUSINESS. IT WAS SUBMITTED THAT THE LD. CIT(A) HAD RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE PROVISIONS OF SEC. 80P(2)(IV) SHOWS THAT THE WORD USED ARE THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS , LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS . ADMITTEDLY, THE ASSESSEE IS CLEARLY PURCHASING FERTILIZERS FOR THE SUPPLY TO THE FARMERS AND AGRICULTURISTS, MORE SO, FOR THE PURPOSE OF AGRICULTURE AND THIS IS NOT DISPUTED BY THE REVENUE. IN THE COURSE OF ITS PURCHASE, IT HAS TO KEEP DEPOSIT WITH THE SUPPLIER REPRESENTING EARNEST MONEY DEPOSIT. OBVIOUSLY, THIS INTEREST EARNED ON THE EARNEST MONEY IN EFFECT GOES TO REDUCE THE COST OF PURCHASES. ON THIS GROUND, THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE EARNEST MONEY WOULD NORMALLY HAVE TO BE TREATED AS PART OF THE PURCHASE PRICE PAID BY THE ASSESSEE AND CONSEQUENTLY WOULD CONSTITUTE PART OF THE BUSINESS INCOME OF THE ASSESSEE. EVEN OTHERWISE , UNDER SEC. 80P(2)(C) ADMITTEDLY THE ASSESSEE IS A CO - OPERATIVE SOCIETY AND IF THE INTEREST EARNED ON THE EARNEST MONEY DEPOSIT IS TREATED AS AN ACTIVITY OTHER THAN THOSE SPECIFIED UNDER CLAUSE (A) & (B) OF SUB - SECTION 2 OF SEC. 80P, THEN, UNDER SUB - CLAUS E ( I ) OF CLAUSE (C) OF SUB - SECTION 2 OF SEC. 80P THE ASSESSEE CO - OPERATIVE SOCIETY WOULD BE ENTITLED TO A BENEFIT OF RS. 1,00,000/ - FROM THE PROFIT AND GAINS ATTRIBUTABLE TO SUCH ACTIVITY AND AS THE INTEREST INCOME EARNED IS ONLY RS.94,866/ - , EVEN ON THIS GROUND, THE ADDITION MADE BY THE AO AND CONFIRMED 5 ITA NOS. 60/PNJ/2014 & 162/PNJ/2015 (A. YS : 2009 - 10 & 2010 - 11) BY THE LD. CIT(A) WOULD BE UNSUSTAINABLE. IN THE RESULT, THE SAID ADDITION STANDS DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS STAND ALLOWED. 7. ORDE R PRONOUNCED IN THE OPEN COURT ON 0 2 /06/2015. S D / - ( GEORGE MATHAN ) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 0 2 /06/ 201 5 *SSL* COPY TO : (1) APPELLANT S - (I) PRATHAMIK KRISHI PATTIN SAHAKARI BANK NIYAMIT & (II) PRATHAMIK KRISHI SAHAKARI BANK NIYAMIT (2) RESPONDENT S (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ,