The ITO, Sabarkantha Ward-3, Sabarkantha V. The Sabarkantha Dist. Purchase & Sales Union Ltd., Sabarkantha

ITA 603/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8369 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEM BER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.603/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) THE INCOME TAX OFFICER SABARKANTHA WARD 3, HIMATNAGAR, DIST SABARKANTHA - 383001 # VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. SOCIETY ROAD, OLD VEGETABLE MARKET NR. RAILWAY CROSSING, HIMATNAGAR DIST SABARKANTHA 383001 $ # % & # PAN/GIR NO. : AAAAT 0524 H ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI JAMES KURIAN, SR. D.R. ($'*) / RESPONDENT BY : SHRI A. C. SHAH, A.R. + ,*-. / DATE OF HEARING 31/08/2017 /012*-. / DATE OF PRONOUNCEMENT 04/10/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2,AHMEDABAD, DA TED 29/12/2014 FOR THE ASSESSMENT YEAR (AY) 2011-12, ON THE FOLLOW ING GROUNDS: ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 2 - I. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN PART LY ALLOWING THE APPEAL OF THE ASSESSEE BY ALLOWING THE DEDUCTIO N CLAIMED U/S.80P(2) OF THE I.T. ACT, IN VIOLATION OF PROVISI ONS OF RULE 46A(3)(1) OF THE I.T. RULE BY NOT ALLOWING A REASON ABLE OPPORTUNITY TO AO TO EXAMINE OR REBUTTAL OF THE DOC UMENTS SUBMITTED BY ASSESSEE TO THE CIT(A). II. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN PART LY ALLOWING THE APPEAL OF THE ASSESSEE BY ALLOWING THE DEDUCTIO N CLAIMED BY ASSESSEE (A) U/S. 80P(2)(E)FOR AMOUNT OF RS.22,79,433/- FROM GOD OWN RENT (B) U/S.80P(2)(D) FOR AMOUNT OF RS.14,72,486/- FROM DI VIDEND & INTEREST (C) U/S.80P(2)(A)(IV) FOR AMOUNT OF RS.4,80,591/- FROM AGRICULTURE COMMISSION INCOME THOUGH THE ASSESSEE DOES NOT FALL WITHIN THE AMBIT OF CO- OPERATIVE SOCIETY AND ON PERUSAL OF THE ANNUAL REPO RT IT WAS NOTICED THAT THE ASSESSEE HAD INDULGED IN VARIOUS T RADING ACTIVITIES AND WAS A PROFIT MAKING ORGANIZATION. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE RELEVANT EXTRACTS FROM THE ASSESSMENT ORDER AR E REPRODUCED UNDER:- 4. ON GOING THROUGH THE ANNUAL REPORT, IT IS SEEN THAT THE CO-OP. SOCIETY IS ENGAGED MANY ACTIVITIES, BRIEF OF EACH A CTIVITY IS GIVEN AS UNDER: (I) ELECTRIC SECTION : IN THIS SECTION, CEILING FAN, TA BLE FAN OF CROMPTON GREAVES, BAJAJ TUBE-LIGHT, LAMP, ALL THE I TEMS RELATED TO LIGHTNING, MOTORS FOR IRRIGATION AND FLOUR FACTO RY, MIXTURE, IRON, ELECTRIC AND GAS GEEZERS, ALL LIGHT FITTINGS RELATED TO ANCHOR ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 3 - AND WELCON CO. FURNITURE, FUSE, CHANGEOVER SWITCH E TC IS SOLD HERE. (II) CLOTH SECTION : THE ASSESSEE IS ENGAGED IN THE SALE OF SUITING AND SHIRTING OF SIYARAM. ALSO SUITING, SHIRTING, READY- MADE PANTS, SHIRT, T-SHIFT OF DIFFERENT MILLS IS SOLD. PILLOW C OVERS, SHEETS, SOFA TAPESTRY, CURTAINS, CARPET SHAWL, BLANKETS, SWEATER S, MUFFLER-CAP SOCKS, UMBRELLA, RAIN-COAT ETC IS SOLD IN CLOTH DEP ARTMENT. (III) PROVISION SECTION : ALL TYPES OF PROVISION ITEMS SU CH AS GRAINS, PULSES, OIL, SUGAR JIGGERY, DRY FRUIT, GARAM MASALA , TEA, TOOTHPASTE, BRUSH, SOAP, CHOCOLATE, TALCUM POWER, B ISCUITS, HAIR OIL, EVEREADY TORCH AND POWER AND MANY OTHER ITEMS RELATED TO HOUSE-HOLD ARE SOLD IN THIS SECTION. (IV) PESTICIDES SECTION: IN THIS DEPARTMENT ALL TYPES OF SEEDS I.E.COTTON, CASTOR, WHEAT, MAIZE, GROUNDNUT, BAJRI, RICE, TUVAR, MUG, UDAD DAL ETC PURCHASE FROM GUJARAT RAJYA BIJ N IGAM, GUJCOMASOL, KRUBHKO CO ARE SOLD IN THIS SECTION. (V) RETAIL FERTILIZER: ALL TYPES OF ORGANIC FERTILIZER AND HYBRID SEEDS ARE SOLD. ALL TYPES OF BASMATI RICE, DAL, PULSES, G ROUNDNUT OIL, SOYABIN OIL SUGAR IS SOLD HERE. (VI) MACHINERY SECTION: IN THIS SECTION, GALVANIZED SHEE TS OF JINDAL, PVC PIPES, GARDEN PIPE, DRUMS TO STORE GRAINS, SPRA Y PUMPS OF ASPI CO. PVC TANKS OF SINTEX AND KANT COMPANY, FURN ITURE, TABLE, CHAIR. ALSO CEMENT OF WELL-KNOWN COMPANIES I S SOLD IN THIS SECTION. (VII) IRON SECTION: ALL TOOLS AND EQUIPMENTS RELATED TO F ARMING ARE SOLD IN THIS SECTION. (VIII) AMUL PARLOR : IN THIS PARLOR ALL THE PRODUCTS OF AM UL SUCH AS MILK, GHEE, BUTTERMILK, ICE CREAM, CURD, CHEESE, PA NEER, CHOCOLATE ETC IS SOLD. (IX) KEROSENE SECTION : THE ASSESSEE IS HOLDING AGENCY F OR KEROSENE. BESIDES, PETROL, DIESEL AND OIL OF IOC COMPANY IS S OLD IN MAHAVIRNAGAR, GANBHOI, DHANSURA, BHILODA, MALPUR, HANSALPUR. (X) BOOKS SECTION :. THE ASSESS IS WHOLE-SALE SUPPLIERS OF BOOKS OF GUJARAT STATE IN S.K.DISTRICT. BOOKS OF STD 1 TO 12 , BOOKS RELATED TO P.T.C ARE SOLD HERE. THE ASSESSEE SOCIETY HAS CLAIMED DEDUCTION UNDER SE CTION 80P IN RESPECT OF INCOME DERIVED BY IT FROM THE ABOVE ACTI VITIES CARRIED OUT BY IT. THE ASSESSEE IS A CO-OPERATIVE SOCIETY DERIVING INCOME ON SALE OF VARIOUS ITEMS AS MENTIONED ABOVE. THE PRODUCTS MARK ETED BY THE SOCIETY ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 4 - IS NOT GROWN OR MANUFACTURED BY THE MEMBERS, THE IT EMS MARKETED ARE OBTAINED FROM OUTSIDE AND SOLD IN THE ENTIRE DISTRI CT OF SABARKANTHA. IT HAS ALSO SHOWN INCOME FROM GODOWN RENT, TANKER RENT , PULSE MILL RENT, VEHICLE HIRE INCOME, OVER RIDING PETROL PUMP AND HAS SOLD PETROL, DIESEL AND OIL OF IOC LTD DURING THE YEAR. IN THE INSTANT CASE, THE ASSESSEE HAD INDULGED IN T RADING ACTIVITIES AND THEREFORE THE ASSESSEE IS A PROFIT-MAKING ORGANIZAT ION. THE ACTIVITIES CARRIED OUT BY THE ASSESSEE DOES NOT FALL WITHIN TH E AMBIT OF CO- OPERATIVE SOCIETY. 4.1 ACCORDINGLY A LETTER WAS ISSUED TO THE ASSESSEE ON 06/01/2014 TO SHOW-CAUSE AS TO WHY THE CLAIM OF DEDUCTION U/S.80P OF THE I.T. ACT 1961 SHOULD NOT BE DISALLOWED AND ADDED THE TOT AL INCOME. THE RELEVANT PORTION OF THE SHOW-CAUSE NOTICE IS RE PRODUCED AS UNDER: PLEASE REFER TO THE ABOVE. 2. ON VERIFICATION OF ANNUAL REPORT IT IS NOTICED T HAT THE ACTIVITIES CARRIED OUT BY YOU NOT FALL WITHIN THE AMBIT OF CO- OPERATIVE SOCIETY, YOU ARE THEREFORE REQUESTED TO SHOW- CAUSE AS TO WHY THE DEDUCTION CLAIMED U/S.80P OF RS.39,15,975/- SHOULD NOT BE DISALLOWED AND ADDED TO YOUR TOTAL INCOME. IN RESPONSE, THE ASSESSEE FURNISHED A LETTER DATED 06/01/2014 WHICH IS INTER-ALIA REPRODUCED AS UNDER: WITH REFERENCE TO ABOVE WE BEG TO STATE AS UNDER: 1. WE HAVE RECEIVED THE SHOW CAUSE NOTICE [SCN] DATED 06/01/2014 STATING THAT THE ACTIVITIES CARRIED OUT BY CO. OP. SOCIETY DOES NOT FALL WITHIN THE AMBIT OF CO-OP SOCIETY AND THEREFORE WHY THE DEDUCTION OF RS.36,15,975/-CLAIMED UNDER SECTION 80P BE NOT DISA LLOWED. IN THIS CONNECTION, IT MAY PLEASE NOTED THAT THE ASSESSEE I S DISTRICT APEX CO.OP SOCIETY AND IS CARRYING ON THE ACTIVITIES FOR THE BENEFIT OF ITS MEMBERS. THE ATTENTION IS DRAWN TO REPLY TO Q. NO.8 (A) OF THE TAX AUDIT REPORT IN FORM NO.3CD-PART-B WHICH HAS STATED THE ACTIVITIES CARRIED ON BY THE SOCIETY. FOR THE PURPOSE OF EASY REFERENCE THE SAME IS REPRODUCED AS UNDER: ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 5 - 'PURPOSE AND SALE OF AGRICULTURAL IMPLEMENTS, SEEDS , FERTILIZERS AND PESTICIDES FOR MEMBERS ETC. AND TRADING AND PROCEED ING IN AGRICULTURAL AND NON AGRICULTURAL ITEMS FOR MEMBERS AND OTHERS.' 2. IT MAY PLEASE BE NOTED THAT THE ANNUAL REPORT YOU A RE REFERRING IS 63 RD ANNUAL REPORT AND THE ASSESSEE IS GETTING DEDUCTION UNDER SECTION 80P RIGHT FROM ITS INCEPTION I.E. SINCE 62 YEARS. 3. IT APPEARS THAT THE NOTES GIVEN BELOW TO THE STATEM ENT OF INCOME FURNISHED DURING ASSESSMENT PROCEEDINGS ARE NOT LOO KED AT. AS PER THE COMPUTATION OF INCOME IT IS CLEARLY STATED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P TO THE EXT ENT OF RS. 44,62,957/- AND THAT THE CLAIM IS MADE TO THE EXTEN T OF INCOME AVAILABLE I.E. RS.39,15,9757-. 4. THE BREAK-UP OF THE ELIGIBLE DEDUCTION UNDER SECTIO N 80P IS GIVEN IN THE NOTES. THE SAME IS REPRODUCED BELOW FOR READY R EFERENCE: BASIC DEDUCTION UNDER SECTION 80P(2)(C) RS. 50,000/- GODOWN RENT UNDER SECTION 80P(2)(E) RS .24,59,880/- DIVIDEND&INTEREST UNDER SECTION 80P(2)(D) RS.14,72,486/- AGRICULTURE COMMISSION INCOME U/S 80P(2)(IV) R S. 7,55,591/- LESS: ESTIMATED EXPENSES RS. 2,75,000 /- RS.4,80,591/- FROM THE ABOVE, IT MAY PLEASE BE SEEN THAT THE ASSE SSEE HAS CLAIMED DEDUCTION UNDER SECTION 80P(2)(C), 80P(2)(E), 80P(2 )(D) AND 80P(2)(IV) WHICH IS ALLOWABLE AS PER STATUTE AND TH EREFORE THE QUESTION OF DISALLOWANCE DOES NOT ARISE. IT MAY PLEASE FURTH ER BE NOTED THAT THE INCOME OR LOSS FROM ALL ACTIVITIES OTHER THAN REFER TO IN ELIGIBLE DEDUCTION ARE OFFERED FOR TAXATION. HOWEVER, AS A RESULT OF DEDUC TION THERE IS A LOSS AND THERE IS NO TAXABLE INCOME. THE IMPRESSION THAT THE ASSESSES SOCIETY DOES NOT OFFERED INCOME FOR TAXATION FROM I TS ACTIVITIES IS ERRONEOUS. THEREFORE THE QUESTION OF DISALLOWANC E AS PROPOSED DOES NOT ARISE. IT IS AGAIN REITERATED THAT SUCH DEDUCTI ON IS GRANTED TO THE ASSESSEE SOCIETY RIGHT FROM ITS INCEPTION I.E. SINC E MORE THAN 62 YEARS. YOU ARE THEREFORE REQUESTED TO ALLOW THE CLAIM AND DROP THE SHOW CAUSE NOTICE.' 4.3 THE REPLY OF THE ASSESSEE IS DULY CONSIDERED BU T IS NOT ACCEPTABLE. IT IS SEEN FROM THE ANNUAL REPORT THAT THE ASSESSEE IS NEITHER A PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS) NOR PR IMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK ( PCARDB) - IT IS ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 6 - NOTED FROM RECORDS THAT RANGE OF ASSESSEE'S ACTIVIT IES IS NOT CONFINED TO ONE TALUKA BUT IS EXTENDED TO ENTIRE SABARKANTHA DI STRICT AND, THUS, IN VIEW OF EXPLANATION TO SECTION 80P(4), ASSESSEE IS NOT PCARDB - FURTHER PRIMARY OBJECT AS WELL AS ACTIVITIES OF ASS ESSEE IS NOT CONFINED TO AGRICULTURAL PURPOSES BUT OTHER PURPOSES ALSO . IN VIEW OF EXPLANATION TO SECTION 80P ASSESSEE IS NOT PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. FURTHER, P RIMARY OBJECT AS WELL AS ACTIVITIES OF ASSESSEE IS NOT CONFINED TO A GRICULTURAL PURPOSE BUT OTHER PURPOSES ALSO, AND HENCE, ASSESSEE CANNOT BE REGARDED AS PACS. SECTION 80P, INTER ALIA, PROVIDES FOR A DEDUCTION F ROM THE TOTAL INCOME OF THE CO-OPERATIVE SOCIETIES ENGAGED IN THE BUSINE SS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR BUSI NESS OF A COTTAGE INDUSTRY, OR OF MARKETING OF AGRICULTURAL PRODUCE O F ITS MEMBERS, OR PROCESSING, WITHOUT THE AID OF POWER, OF THE AGRICU LTURAL PRODUCE OF ITS MEMBERS, ETC. AFTER INSERTION OF SUB-SECTION (4) OF SECTION 80-P, BY FINANCE ACT, 2006, WITH EFFECT FROM 1-4-2007, THIS DEDUCTION IS AVAILABLE ONLY TO- 1. PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS) 2. PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVE LOPMENT BANK (PCARDB) SECTION 80P HAS BEEN AMENDED BY FINANCE ACT, 2006, AND SUB-SECTION (4) HAS BEEN INSERTED. THE ASSESSEE IS NEITHER PACS NOR PCARDB AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P. A SOCIETY FULFILLING TWO CONDITIONS IS A PCARDB AS PER EXPLANATION TO SECTION 80P(4) (A) AREA OF OPERATION CONFIRMED TO A TALUKA (B) THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDED FO R LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. PRIMARY OBJECT OF PRINCIPAL BUSINESS OF P.ACS IS TO FINANCE FOR AGRICULTURAL PURPOSES OR PURPOSES CONNECTED WITH AG RICULTURAL ACTIVITIES. THE PRIMARY OBJECT AS WELL AS ACTIVITIE S OF ASSESSEE ARE NOT CONFINED TO AGRICULTURAL PURPOSES BUT OTHER PURPOSE S ALSO. HENCE, ASSESSEE IS NEITHER PACS NOR PCARDB HENCE, NO EXEMP TION IS AVAILABLE TO THE ASSESSEE UNDER SECTION 80P. 6. SINCE THE ACTIVITIES CARRIED OUT BY THE ASSESSEE DO ES NOT FALL WITHIN THE AMBIT OF CO-OPERATIVE SOCIETY AND ON PER USAL OF ANNUAL REPORT IT IS NOTICED THAT THE ASSESSEE IS INDULGED IN TRAD ING ACTIVITIES AND IS A ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 7 - PROFIT-MAKING ORGANIZATION, THE TOTAL CLAIM OF DEDU CTION U/S.80P OF RS.39,15,9757 - IS HEREBY REJECTED AND ADDED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) ARE SEPARATELY IN ITIATED FOR CLAIMING WRONG DEDUCTION U/S.80P OF THE I.T. ACT 1961 AND TH EREBY FURNISHING INACCURATE PARTICULARS OF INCOME. 3.2 APPELLANT'S SUBMISSION:- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE AP PELLANT ARE REPRODUCED HERE UNDER:- 1. 'THE LEARNED AO HAS DETERMINED THE INCOME OF RS.39, 15,976/- AS AGAINST RETURNED INCOME OF RS.NIL ON THE GROUND THA T THE INCOME IS DERIVED FROM THE ACTIVITIES WHICH IS NOT ELIGIBLE F OR DEDUCTION UNDER SECTION 80P. 2. IN THIS CONNECTION, IT MAY PLEASE BE NOTED THAT THE AO HAS FAILED TO APPRECIATE THE NATURE OF BUSINESS AND THE CLAIM MAD E BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE LEARNED AO HAS TREATED THE ASSESSEE AS PRIMARY AGRICULTURAL CREDIT SOCIETY [PACS] AND PRIMARY CO.OP. AGRICULTURAL AND RURAL DEVELOPMENT B ANK [PCARDB]. SIMILARLY, THE ASSESSEE HAS DISCUSSED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS A CO.OP. CREDIT SOCIETY. THE LEARNED AO HAS FAILED TO APPRECIATE THE NATURE OF BUSINESS. TH E ASSESSEE SUBMITTED THE REPLY TO SHOW-CAUSE NOTICE BY LETTER DATED 06/01/2014 REPRODUCED IN THE ASSESSMENT ORDER ON PAGE NO.5 EXP LAINING THE NATURE OF BUSINESS AND THE NATURE OF DEDUCTIONS CLA IMED. 3. THE ASSESSEE IS A SALES AND PURCHASES UNION. IT MAK ES THE PRODUCTS BOTH AGRICULTURE AND NON-AGRICULTURE AND ALSO TO TH E MEMBERS AND NON-MEMBERS. THE INCOME IS TAXABLE. THE INCOME AS P ER WRITTEN OF INCOME IS RS.39,15,976. THEREAFTER THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80P AS STATED IN THE NOTES TO THE STATEMENT OF INCOME. THE ASSESSEE HAS CLAIMED THE DEDUCTION U NDER SECTIONS 80P(2)(C) I.E. BASIC DEDUCTION 80P(2)(E) I.E. GODOW N RENT, 80P(2)(D) I.E. DIVIDEND AND INTEREST & 80P(2)(IV) I.E. AGRICU LTURE COMMISSION INCOME. AFTER DEDUCTION EVENTUALLY THE INCOME IS RS . NIL. 4. THE LEARNED AO HAS COMPLETELY MISAPPRECIATED THE FA CTS AND THE LEARNED AO IGNORED THE DEDUCTION CLAIMED AS IF THE ASSESSEE IS A ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 8 - CO.OP. CREDIT SOCIETY. THIS IS ERRONEOUS. YOUR HONO UR IS THEREFORE PRAYED TO ALLOW THE DEDUCTION UNDER SECTION 80P AS CLAIMED. 5. IT MAY PLEASE FURTHER BE NOTED THAT THE AO HAS ALLO WED THE DEDUCTION AS CLAIMED BY THE ASSESSEE IN THE PAST SINCE MANY Y EARS. THE COPY OF ASSESSMENT ORDER AND STATEMENT OF INCOME FOR A.Y. 2 009-2010 AND AY. 2010-2011 ARE ENCLOSED TO SHOW THAT THE DEDUCTION A S CLAIMED IS ALLOWED. THEREFORE, THE AO SHOULD FOLLOW THE POL ICY CONSISTENTLY AND THAT THE DEDUCTION SHOULD HAVE BEEN ALLOWED. YOUR HONOUR IS THEREFORE PRAYED TO ALLOW THE APPEAL . THE APPELLANT HAS GIVEN FURTHER SUBMISSION IN ADDIT ION TO ITS EARLIER SUBMISSION IN SUPPORT OF ITS APPEAL. 'WITH REFERENCE TO ABOVE AND IN CONTINUATION OF OUR WRITTEN SUBMISSION DATED 12-09-2014, WE FURTHER BEG TO STATE AS UNDER: 1. THE ASSESSEE IS A SALES AND PURCHASES UNION. IT MAR KETS THE PRODUCTS BOTH AGRICULTURE AND NON-AGRICULTURE AND ALSO TO TH E MEMBERS AND NON- MEMBERS. THE INCOME IS TAXABLE. THE INCOME AS PER W RITTEN OF INCOME IS RS.39,15,976. THEREAFTER THE ASSESSEE HAS CLAIMED D EDUCTION UNDER SECTION 80P AS STATED IN THE NOTES TO THE STATEMENT OF INCOME. THE ASSESSEE HAS CLAIMED THE DEDUCTION UNDER SECTIONS 8 0P(2)(C) I.E. BASIC DEDUCTION, 80P(2)(E) I.E. GODOWN RENT, 80P(2)(D) I. E. DIVIDEND AND INTEREST & 80P(2)(IV) I.E. AGRICULTURE COMMISSION I NCOME. AFTER DEDUCTION EVENTUALLY THE INCOME IS RS. NIL. 2. IN THE COURSE OF HEARING, YOUR HONOUR ASKED TO FURN ISH THE NOTE ON THE RENT OF RS.24,59,880/-. IN THIS CONNECTION, IT MAY PLEASE BE NOTED THAT THE ASSESSEE HAS LET OUT THE GODOWN FOR THE PURPOSE OF MARKETING THE COMMODITIES. SOME OF THE MAIN TENANTS ARE GIVEN BEL OW WITH THE PURPOSE SPECIFIED AGAINST HIS NAME. SR. NO. NAME OF PARTY TO WHOM THE GODOWN IS LET OUT PURPOSE 01. KRIBHCO FOR MARKETING THE FERTILIZERS AND SEEDS 02. GUJARAT SATE SEEDS CORPORATION LTD. FOR MARKETING SEEDS 03. KRUSHI CARE FOR MARKETING ORGANIC FERTILIZERS ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 9 - 04. BENANI CEMENT FOR MARKETING CEMENT FOR AGRICULT URE PURPOSE 05. IFFCO FOR MARKETING THE FERTILIZERS 06. ASIAN TRADELINK FOR MARKETING CATTLE FEED 07. MAHAKALI CORPORATION FOR MARKETING CATTLE FEED 08. VINAYAK CORPORATION FOR MARKETING CATTLE FEED 09. AMBICA TRADING CO. FOR MARKETING CATTLE FEED 10. DENA GRAMIN TRAINING CENTRE FOR PROVIDING TRAINING TO THE FARMERS 11. HARI TRADERS FOR MARKETING CATTLE FEED 3. FROM THE ABOVE, IT MAY PLEASE BE SEEN THAT THE GODO WNS ARE LET OUT FOR PURPOSE OF STORING AND MARKETING THE COMMODITIES. T HE ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING THE RENT INCOME S INCE ALL MAINTENANCE EXPENSES ARE BORNE BY THE TENANTS. THE RENT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(E). 4. AS REGARDS AGRICULTURAL COMMISSION, THE ASSESSEE IS ACTING AS COMMISSION AGENT FOR GUJARAT STATE CO.OP, MARKETING FEDERATION FOR MARKETING INORGANIC FERTILIZER. THE ASSESSEE HAS EA RNED THE COMMISSION OF RS.7,55,590/- FROM GUJARAT STATE CO.OP. MARKETIN G FEDERATION. THE XEROX COPY OF CREDIT NOTE DATED 18/01/2011 IS ENCLO SED HEREWITH. THE ASSESSEE HAS DISALLOWED EXPENSES ON ESTIMATED BASIS INCURRED FOR EARNING SUCH COMMISSION. THE AGRICULTURAL COMMISSIO N IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(IV) SINCE IT IS IN C ONNECTION WITH SUPPLYING FERTILIZERS TO THE MEMBERS. 5. THE DEDUCTION UNDER SECTION 80P(2)(D) BEING THE INT EREST AND DIVIDEND FROM OTHER CO.OP. SOCIETY IS ELIGIBLE FOR DEDUCTION AND THE STATUTORY DEDUCTION OF RS.50,000 IS ALSO ELIGIBLE FOR DEDUCTI ON UNDER SECTION 80P(2)(C). 6. IT MAY PLEASE BE NOTED THAT THE CLAIM HAS BEEN ALLO WED CONSISTENTLY FOR SINCE YEARS. THE ASSESSMENT ORDER FOR A.Y. 2012-201 3 IS ALSO ENCLOSED TO SHOW THAT SUCH CLAIM IS ALLOWED. THE CLAIM FOR A .Y. 2011-2012 IS DISALLOWED NOT ON MERITS BUT UNDER THE WRONG IMPRES SION THAT THE ASSESSEE IS A CREDIT CO.OP SOCIETY. IN OTHER WORDS, THE LEARNED AO MIS- APPRECIATED THE FACTS DURING A.Y. 2011-2012. ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 10 - 7. WE ENCLOSE HEREWITH BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR A.Y. 2011-2012 IN ENGLISH AS DESIRED.' THE APPELLANT HAS GIVEN FURTHER SUBMISSION IN ADDIT ION TO ITS EARLIER SUBMISSION IN SUPPORT OF ITS APPEAL. WITH REFERENCE TO ABOVE AND IN CIRCUMSTANCES OF OU R WRITTEN SUBMISSION DATED 12/09/2014 & 11/12/2014, WE FURTHE R BEG TO STATE AS UNDER: 1. WE SUBMIT HEREWITH THE BREAKUP OF GODOWN RENT AS DE SIRED BY YOUR HONOUR AS UNDER: SR NO. NAME OF PARTY TO WHOM THE GODOWN IS LET OUT PURPOSE AMOUNT RS. 1 KRIBHCO FOR MARKETING THE FERTILIZERS AND SEEDS 4,91,700 2 GUJARAT SATE SEEDS CORPORATION LTD. FOR MARKETING SEEDS 2,35,000 3 KRUSHI CARE FOR MARKETING ORGANIC FERTILIZERS 1,31,200 4 BENANI CEMENT FOR MARKETING CEMENT FOR AGRICULTURE PURPOSE 3,36,000 5 IFFCO FOR MARKETING THE FERTILIZERS 18,480 6 ASIAN TRADELINK FOR MARKETING CATTLE FEED 1,80,00 0 7 MAHAKALI CORPORATION FOR MARKETING CATTLE FEED 2,94,000 8 VINAYAK CORPORATION FOR MARKETING CATTLE FEED 2,94,000 9 AMBICA TRADING CO. FOR MARKETING CATTLE FEED 1,47,000 10 DENA GRAMIN TRAINING CENTRE FOR PROVIDING TRAINING TO THE FARMERS 2,76,000 11 HARI TRADERS FOR MARKETING CATTLE FEED 48,000 12 SUBHASHBHAI GANGARAM INVA FOR MARKETING SEEDS 1,200 ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 11 - 13 GAJESHWARI GARAGE FOR REPAIRING TRACTOR USED FOR AGRICULTURAL PURPOSES 4,800 14 JAY SHAKTI FOR MARKETING SEEDS 1,100 15 RAJUBHAI HARIBHAI SHARMA FOR MARKETING CATTLE FEED 1,400 TOTAL: 24,59,880 1.2 FROM THE ABOVE, IT MAY PLEASE BE SEEN THAT THE GODO WN ARE LET FOR MARKETING THE COMMODITIES USED FOR AGRICULTURAL PUR POSES AND THEREFORE THE ASSESSEE IS ENTITLED TO DEDUCTION UND ER SECTION 80P(2)(E). 2. AS REGARDS COMMISSION, IT IS CONNECTION WITH SALES OF FERTILIZER TO THE MEMBER SOCIETIES. SECTION 80P(2)(IV) IS APPLICABLE TO THE PURCHASE OF OTHER COMMODITIES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO THE MEMBERS. NOW WHETHER THE ASSE SSEE PURCHASES AND SUPPLIES OR SUPPLIES AND EARNS COMMIS SION. IT IS ONE AND THE SAME AND THEREFORE THE AGRICULTURAL COMMISS ION RECEIVED FROM GUJARAT MARKETING FEDERATION IS ELIGIBLE FOR D EDUCTION UNDER SECTION 80P(2)(IV) AS REDUCED BY THE ESTIMATED EXPE NSES. THE KIND ATTENTION IS DRAWN TO THE SC DECISION IN THE CASE O F ASSESSEE HIMSELF SABARKANTHA ZILLA KHARID VECHAN SANGH LTD. V/S. CIT 203 ITR 1027. THE CATCH-NOTES ARE REPRODUCED FOR READY REFE RENCE: 'CO. OP. SOCIETY - SOCIETY ENGAGED IN PURCHASE OF A GRICULTURAL IMPLEMENTS, SEEDS, LIVESTOCK ETC. INTENDED FOR SUPP LY TO MEMBERS - DEDUCTION FROM INCOME TAX- SOCIETY CARRYING ON TAXA BLE ACTIVITIES ALSO - DEDUCTION FROM TAX AVAILABLE ONLY IN RELATION TO NE T PROFITS AND NOT GROSS PROFITS -DEDUCTION AT AVERAGE RATE ON AMOUNT ON WHI CH NO TAX IS PAYABLE'. ACCORDINGLY THE ASSESSES HAS DEDUCTED THE EXPENSES ON ESTIMATED BASIS WHICH IS ACCEPTED BY THE AQ IN THE PAST. IT IS HOPED THAT THE EXPLANATION OFFERED WILL BE SATISFACTORY .' 2.2 FINALLY ASSESSEE CLAIMED U/S.80P(2) OF THE I.T. ACT WAS DISALLOWED AND INCOME OF RS.39,15,976/- WAS ASSESSED. ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 12 - 3. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A), WHO PARTLY ALLOWED THE A PPEAL OF THE ASSESSEE. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LEARNED AR STATED THAT CLAIM OF THE ASSESSEE HAS BE EN ALLOWED FROM THE DATE OF INSPECTION SINCE SIXTY TWO YEARS. 5. SO FAR GROUND NO.1 IS CONCERNED. IN THIS REGARD, ASSESSEE SUBMITTED THAT LEARNED CIT(A) HAS COTERMINOUS POWER AND HE CAN DECIDE THE MATTER ON HIS OWN, AFTER APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.2 IN OUR OPINION, GROUND NO.1 IS NOT SUSTAINABLE AND DISMISSED THIS GROUND OF DEPARTMENT. 6. SO FAR GROUND NO.2 IS CONCERNED. IN THIS REGARD, THE APPELLANT HAS EARNED INCOME FROM GODOWN RENT AMOUNTING TO RS.23,5 4,433/- AND HAS CLAIMED DEDUCTION U/S.80P(2)(E). THE APPELLANT HAS EXPLAINED THAT THE GODOWNS HAVE BEEN LET OUT FOR THE PURPOSE OF MARKET ING THE COMMODITIES. THE APPELLANT HAS ALSO FURNISHED LIST OF THE PARTIE S TO WHOM THE GODOWNS ARE LET OUT. IT HAS BEEN CONTENDED BY THE APPELLANT THAT THE LETTING OUT OF GODOWNS IS FOR THE PURPOSE OF STORING AND MARKETING THE COMMODITIES. THE APPELLANT HAD NOT INCURRED ANY EXPENSES FOR EAR NING THE RENT INCOME AS ALL THE MAINTENANCE EXPENSES WERE BORNE BY THE T ENANTS. THE PROVISION OF SEC.80P(2)(E) PROVIDES THAT ANY INCOME DERIVED B Y THE CO-OPERATIVE ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 13 - SOCIETY FROM THE LETTING OF GODOWNS OR WAREHOUSE FO R STORAGE, PROCESSING OR FACILITATING THE MARKETING OF COMMODITIES SHALL BE FULLY ENTITLED FOR DEDUCTION. SINCE, THE APPELLANT SATISFIES THE CONDI TIONS THAT CLAIM FOR DEDUCTION IS JUSTIFIED. 6.2 IN OUR CONSIDERED OPINION, ASSESSEE CLAIM FOR R S.23,54,433/- U/S.80P(2)(E) IS ALLOWED. IN THE RESULT, THIS GROUN D OF THE DEPARTMENT IS DISMISSED. 7. THE APPELLANT HAS EARNED DIVIDEND AND INTEREST I NCOME FROM OTHER CO-OPERATIVE SOCIETIES AND IT HAS ACCORDINGLY CLAIM ED DEDUCTION U/S.80P(2)(D) OF THE ACT. THE DETAILS FILED BY THE APPELLANT SHOW THAT IT HAS MADE INVESTMENT IN SHARES AND DEBENTURES OF VAR IOUS COOPERATIVE SOCIETIES DETAILS OF WHICH ARE GIVEN IN SCHEDULE FO R OF THE BALANCE SHEET. AS PER THE PROVISIONS OF THIS SECTION ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY ANY CO-OPERATIVE SOCIETY FROM ITS INVESTMENT ANY OTHER CO-OPERATIVE SOCIETY THE WHOLE INCOME WOULD B E ENTITLED FOR DEDUCTION. SINCE, THE DIVIDEND HAS BEEN RECEIVED FR OM OTHER CO-OPERATIVE SOCIETIES THE DEDUCTION IS ALLOWABLE. 7.2 IN OUR CONSIDERED OPINION, THIS GROUND OF DEPAR TMENT IS DISMISSED. 8. THE APPELLANT HAS CLAIMED THE DEDUCTION OF RS.4, 80,591/- ON ACCOUNT OF AGRICULTURAL COMMISSION INCOME. THE GROS S INCOME EARNED BY THE APPELLANT ON ACCOUNT OF COMMISSION WAS RS.7,55, 591/- AND AFTER ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 14 - REDUCING, THE ESTIMATED EXPENSES OF RS.2.75 LACS TH E ASSESSEE HAS CLAIMED THIS DEDUCTION. IT HAS BEEN EXPLAINED BY TH E APPELLANT THAT IT WAS ACTING AS COMMISSION AGENT FOR GUJARAT ESTATE CO-OP ERATIVE MARKETING FEDERATION FOR MARKETING INORGANIC FERTILIZER. IT H AS EARNED COMMISSION FOR THIS ACTIVITY. THE ASSESSEE HAS ITSELF DISALLOW ED CERTAIN EXPENSES ON ESTIMATED BASIS FOR EARNING SUCH INCOME. A PERUSAL OF THE DETAILS FILED BY THE ASSESSEE SHOW THAT THE APPELLANT HAS EARNED THI S INCOME FROM GUJARAT STATE CO-OPERATIVE MARKETING FEDERATION LTD. FOR AC TING AS AN AGENT. THE ASSESSEE COMPANY IS ACTING AS THE NODAL AGENCY FOR ALL THE SMALLER AGENCIES AT TALUKA LEVEL. THE PROVISIONS OF THE SEC TION CLEARLY SHOWS THAT THE DEDUCTION IS ALLOWABLE FOR PURCHASE OF AGRICULT URAL IMPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTUR E FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS. THE ASSESSEE HAS ACT ED AS A MARKETING AGENT FOR SUPPLYING THE FERTILIZERS TO ITS SUBSIDIA RY COOPERATIVE SOCIETIES MEANING THEREBY THAT THE PRODUCT IS BEING MARKETED TO THE MEMBERS. SINCE, THE INCOME HAS BEEN EARNED FROM A SPECIFIED ACTIVITIES, THE DEDUCTION CLAIMED BY THE ASSESSEE WERE RIGHTLY ALLO WED BY THE LEARNED CIT(A). THE RELIANCE IS ALSO PLACED ON THE SUPREME COURTS DECISION IN THE CASE OF APPELLANT HIMSELF SABARKANTHA ZILLA KHA RID VECHAN SANGH LTD. V/S. CIT 203 ITR 1027. IT IS ALSO NOTED THAT T HE AO HAS DISALLOWED THE ESTIMATED EXPENDITURE DISALLOWED BY THE APPELLA NT FROM THE ACTIVITY OF COMMISSION AS IT HAS COMPLETELY DISALLOWED THE CLAI M. THE CLAIM MADE BY THE ASSESSEE WAS JUSTIFIED AS THE NET PROFIT WAS RIGHTLY ALLOWED AS DEDUCTION AND NOT THE GROSS INCOME. ITA NO. 603/AHD/2015 THE ITO VS. THE SABARKANTHA DIST. PURCHASE & SALES UNION LTD. ASST.YEAR 2011-12. - 15 - 8.2 IN OUR CONSIDERED OPINION, LEARNED CIT(A) HAS R IGHTLY ALLOWED THE AGRICULTURAL COMMISSION TO THE ASSESSEE. 9. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 04 / 10 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 04/10/2017 PRITI YADAV, SR.PS !'# $#! # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-2, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. % & / BY ORDER, (9-- //TRUE COPY // '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 25/09/2017 (DICTATION-PAD 6 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/10/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER