ITO, Ooty V. The Bikatty Industrial Co-operative Tea Factory Ltd., The Nilgiris

ITA 709/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8880 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVASAS IRS
• Assessee Lawyers: N VIJAYKUMARC A
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.709/MDS/2016 / ASSESSMENT YEAR : 2012-2013. THE INCOME TAX OFFICER, WARD-1, OOTY VS. THE BIKATTY INDUSTRIAL CO- OPERATIVE TEA FACTORY LTD, YEDAKADU POST, NILGIRIS 643 209. [PAN AAAAT 3434A ] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. SHIVA SRINIVASAS, IRS, JCIT. $% ! ' # /RESPONDENT BY : SHRI. N. VIJAYKUMAR, C.A. & ' '( / DATE OF HEARING : 10-08-2016 )* ' '( / DATE OF PRONOUNCEMENT : 16-08-2016 ! / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3 , COIMBATORE IN ITA NO.553/14-15, DATED 17.12.2015 FOR THE ASSESSM ENT YEAR 2012- ITA NO.709/MDS/2016. :- 2 -: 2013 PASSED U/S.143(3) AND 250 OF THE INCOME TAX A CT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION U/S.80P(2)(A) (II) AMOUNTING TO C36,66,680/-. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONSIDERING THAT THE PROCESS OF CONVERSION OF GREEN TEA LEAVES INTO BLACK POWDER WOULD COME UNDER MARKETING REFERRED TO IN SECTION 80P(2)(A)(III) . 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE AMENDED PROV ISIONS OF SECTION 80P(2)(A)(III) WHICH STATES THAT THE MAR KETING OF AGRICULTURAL PRODUCE GROWN BY THE MEMBERS OF THE CO - OPERATIVE SOCIETY ONLY IS ELIGIBLE FOR EXEMPTION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CO- OPERATIVE SOCIETY ENGAGED IN MANUFACTURE AND SALE O F TEA AND FILED RETURN OF INCOME ELECTRONICALLY ON 06.09.2012 AND S UBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICE U/S.143 (2) OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOTICE, THE LD. AUTHORISE D REPRESENTATIVE OF ASSESSEE APPEARED FROM TIME TO TIME AND PRODUCED BO OKS OF ACCOUNT AND OTHER DETAILS CALLED FOR. THE LD. ASSESSING OF FICER FOUND THAT THE ASSESSEE SOCIETY ADMITTED GROSS TOTAL INCOME OF C36 ,66,584/- AND CLAIMED ENTIRE AMOUNT AS DEDUCTION U/S.80P OF THE A CT AND FURTHER EXPLAINED THAT THE ASSESSEE SOCIETY IS ENGAGED IN T HE MANUFACTURE OF ITA NO.709/MDS/2016. :- 3 -: TEA OUT OF RAW LEAVES SUPPLIED BY ITS MEMBERS AND T RADING AND ELIGIBLE FOR EXEMPTION U/S.80P OF THE ACT. THE LD. ASSESSIN G OFFICER ALLEGED THAT THE ASSESSEE SOCIETY NATURE OF ACTIVITIES SHA LL NOT FALL WITHIN PURVIEW FOR CLAIM OF EXEMPTION U/S. 80P(2) OF THE ACT. THE LD. AUTHORISED REPRESENTATIVE FILED DETAILED NOTE ON TH E OPERATIONAL ACTIVITIES OF THE SOCIETY AND REASONS FOR CLAIM OF DEDUCTION U/S.80P(2) OF THE ACT. THE LD. ASSESSING OFFICER CONSIDERED T HE AUTHORISED REPRESENTATIVES NOTE AND PERUSED THE AUDIT REPOR T IN FORM 3CB WERE THE ACTIVITIES OF THE SOCIETY SPECIFIED AS MANUFAC TURING OF BLACK TEA. THE ASSESSEE SOCIETY PROCURES GREEN TEA LEAVES AND MAKE IT CONSUMABLE AND MARKETABLE AND PROCESSING OF GREEN T EA LEAVES TO BLACK TEA IS THE NATURE OF MARKETING OF AGRICULTUR AL PRODUCTS TO ITS MEMBERS. THE LD. ASSESSING OFFICER PERUSED THE PRO VISIONS OF SEC.80P(2)(A) OF THE ACT AND CONSIDERED THE SUBMISS IONS OF THE LD. AUTHORISED REPRESENTATIVE IS OF THE OPINION THAT TH E PROFITS ARE MADE ONLY THROUGH SALE OF TEA AND ASSESSEE IS NOT ELIGIB LE FOR DEDUCTION U/S.80P(2)(A) OF THE ACT. BUT WHEREAS THE ASSESSEE PURCHASE GREEN TEA LEAVES FROM ITS MEMBERS AND PROCESS THE SAME I NTO BLACK TEA DUE TO WHICH ASSESSEE MADE PROFITS, AND LD. ASSESSING O FFICER RELIED ON THE DECISIONS CONSIDERING THE NATURE OF PRODUCT AND T HE SOCIETY IS ONLY SELLING MANUFACTURED TEA BY PURCHASING RAW LEAVES F ROM ITS MEMBERS. SINCE THE PRODUCT SOLD BEING MANUFACTURED TEA, THE ASSESSEE SOCIETY ITA NO.709/MDS/2016. :- 4 -: CLAIM THAT THEY ARE MARKETING AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS CANNOT BE ACCEPTED AND THEREFORE NO DEDUCTI ON U/S.80P(2) (A)(III) CAN BE CLAIMED BY THE ASSESSEE. THE PROCES S OF MANUFACTURING BLACK TEA FROM GREEN LEAVES INVOLVES USE OF HEAVY M ACHINERIES POWERED BY USE OF HEAVY LOAD OF ELECTRICITY AND DIS ALLOWED THE CLAIM U/S.80P(2)(A) OF THE ACT AND PASSED ASSESSMENT ORDE R U/S.143(3) OF THE ACT DATED 01.01.2015. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEAL S). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS, MADE SUBMISSIONS ON MANUFACTURING ACTIVITIES AND THE LD. ASSESSING OF FICER HAS ERRED IN DENYING DEDUCTION U/S.80P(2)(A) (III) OF THE ACT. THE ASSESSEE IS USING THE HEAVY LOAD OF ELECTRICITY AND THE PURPOSE OF MAKING GREEN TEA INTO BLACK TEA IN THE NATURE OF MANUFACTURING A CTIVITY TO MAKE IT MARKETABLE. FURTHER, THE MAIN PURPOSE OF SOCIETY A CTIVITIES FALLS WITHIN PARAMETERS OF ELIGIBILITY OF CLAIM OF DEDUCTION U/ S.80P(2) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE GROUNDS OF THE ASSESSEE AND THE FINDINGS OF THE LD. ASSESSING OFFICER AND RELIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF SALISBURY INDUSTRIAL CO-OP TEA FACTORY LTD. GUDALUR NILGIRIS IN ITA NOS. 243 TO 243/MDS/2012 AND OTHER JUDICIAL DECISIONS AND DELETED THE ADDI TION. ITA NO.709/MDS/2016. :- 5 -: AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEAL S) ORDER, THE REVENUE ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE ARG UED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80P OF THE ACT. THE ACTIVITY OF CONVERTING OF GREEN LEAVES INTO BLACK T EA POWDER COMES UNDER THE MARKETING AND THE LD.CIT(A) HAS ERRED IN CONSIDERING THE SUBMISSIONS AND DELETED THE ADDITION. THE DEPARTMEN T HAS NOT ACCEPTED THE DECISION RELIED BY COMMISSIONER OF INC OME TAX (APPEALS) AND CONTESTED BEFORE HIGHER FORUMS AND PRAYED FOR ALLOWING THE APPEAL. 6. CONTRA, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND VEH EMENTLY OPPOSED TO THE GROUNDS. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE CRUX OF T HE ISSUES BEING THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND ELIGIBLE FO R DEDUCTION U/S.80P (2) (A) OF THE ACT. THE LD. DEPARTMENTAL REPRESENT ATIVE CONTENTION THAT THE PURPOSE OF CONVERSION OF GREEN LEAVES TO B LACK TEA POWDER DOES NOT SATISFY THE REQUISITE CONDITIONS. ON THE OTHER HAND, THE LD ITA NO.709/MDS/2016. :- 6 -: AUTHORISED REPRESENTATIVE RELIED ON THE ORDER OF TH E TRIBUNALS AND JUDICIAL DECISION. WE FIND THE SIMILAR ISSUE W AS CONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SALISBURY INDUSTRIAL CO-OP TEA FACTORY LTD. GUDALUR NILGIRIS (SURPA) WERE IT WAS HELD THAT AS UNDER:- 7. WE HAVE HEARD THE LD. COUNSEL FOR THE DEPARTMENT , PERUSED THE RELEVANT MATERIAL ON RECORD AND GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CITED DECISIONS. THE ONLY ISSUE BEFORE US FOR OUR CONSIDE RATION IS AS TO WHETHER THE ASSESSEE SOCIETY IS COVERED BY SE CTION 80P(2)(A)(III) OF THE ACT OR NOT? THE ASSESSEE IS A N INDUSTRIALLY REGISTERED TEA FACTORY UNDER THE TAMIL NADU COOPERATIVE SOCIETIES ACT, 1985. THE SOCIETY WAS REGISTERED ON 4.2.1980 AND STARTED ITS PRODUCTION O N 16.9.1983. THE SOCIETY WAS STARTED WITH 55 MEMBERS WHO INCREASED TO 1570 MEMBERS. ALL THE MEMBERS HAVE SMA LL TEA GARDENS AND IN THE WELFARE OF THE SMALL TEA GRO WERS, THE ASSESSEE SOCIETY IS FORMED. THE ASSESSEE SOCIET Y BY PAYING SOME ADVANCE TO THE MEMBERS COLLECTING THE G REEN LEAVES AND THEREAFTER MANUFACTURING BLACK TEA POWER WHICH THEY ARE SELLING IN AUCTION. THE CASE OF THE ASSESS ING OFFICER IS THAT THE ASSESSEE WITHOUT CONVERTING THE LEAVES INTO BLACK TEA CAN DIRECTLY SELL TO OTHERS AND THE SAME MAY BE USED IN MEDICINES. THE SECOND MAIN REASON FOR REJECTION OF THE CLAIM BY THE ASSESSING OFFICER IS THAT THE ASSESSEE IS NOT COVERED BY SECTION 80P(2)(A)(III) O F THE ACT BECAUSE THE ASSESSEE CARRIED ON THE ACTIVITY OF MANUFACTURING BLACK TEA WITH THE AID OF POWER. A VE RY IMPORTANT ASPECT TO BE CONSIDERED IN THIS CASE IS S ECTION 80P(2)(A)(III) OF THE ACT I.E. THE MARKETING OF AG RICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE CLAUSE MARKETIN G OF AGRICULTURAL PRODUCE IS AN EXPRESSION OF WIDE IMPO RTANCE WHICH VARIOUS COURTS HAVE CONSIDERED. 8. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS. HARYANA STATE CO-OPERATIVE SUPPLY AND MARKE TING FEDERATION LTD. REPORTED IN 182 ITR 53 [P & H] HAS HELD AS UNDER: ITA NO.709/MDS/2016. :- 7 -: SECTION 80P OF THE INCOME-TAX ACT, 1961 MUST BE INTERPRETED LIBERALLY HAVING REGARD TO THE OBJECT O F THE PROVISIONS, THAT IS, TO ENCOURAGE COOPERATIVE SOCIETIES. THE WORDS USED IN SECTION 80P ARE NOT AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS AND THEREFORE, SO LONG AS THE COMMODITY BROUGHT TO THE ASSESSEE SOCIETY WAS AGRICULTURAL PRODUCE AND THE PRODUCE BELONGED TO ITS MEMBERS, IT WAS AGRICULTURAL PRODUCE. UNDER THE PROVISIONS OF SECTI ON 80P(2)(A)(III) OF THE ACT A COOPERATIVE SOCIETY WOU LD BE ENTITLED TO EXEMPTION IN RESPECT OF ITS ACTIVITI ES OF MARKETING AGRICULTURAL PRODUCE RECEIVED, PURCHASED OR ACQUIRED FROM ITS MEMBERS. THE TERM MARKETING CANNOT BE RESTRICTED TO THE BUYING AND SELLING ACTI VITY. IT INCLUDES ALL ACTIVITIES CONNECTED WITH THE PROCE SS OF TAKING OVER THE AGRICULTURAL PRODUCE OF ITS MEMBERS AND HANDING OVER THE MARKETABLE COMMODITIES TO THE PURCHASERS AND ALL THE INTERMEDIATE PROCESSES CONNECTED WITH THE MARKETING OF THE AGRICULTURAL PRODUCE OF THE MEMBERS AND HELD THAT THE PROFITS OF THE SOCIETY WERE EXEMPT U/S.809(2)(A)(III) OF THE A CT. 9. THE HON'BLE SUPREME COURT IN THE CASE OF BROACH DISTRICT COOPERATIVE COTTON SALES, GINNING AND PRESSING SOCI ETY LTD. REPORTED IN [1989] 177 ITR 418 HAS HELD AS UNDER : THE ASSESSEE A CO-OPERATIVE SOCIETY, POSSESSED A GINNING A PRESSING FACTORY TO CATER TO THE NEEDS OF ITS MEMBERS. IT GOT RAW COTTON FROM ITS MEMBERS AND GINNED AND PRESSED THE COTTON FOR MARKETING ON BEHALF OF ITS MEMBERS. FOR RENDERING THE SERVICES O F GINNING AND PRESSING BEFORE SELLING THE GOODS, THE APPELLANT CHARGED THE MEMBERS A CERTAIN AMOUNT BY WAY OF GINNING AND PRESSING CHARGES. IT ALSO CHARGE D COMMISSION FOR THE SALE OF THE FINISHED PRODUCTS. T HE TRIBUNAL HELD THAT HAVING REGARD TO THE CIRCUMSTANC E THAT THE RECEIPTS WERE FROM MEMBERS ONLY, THAT THER E WAS A GENERAL MARKET FOR GINNED AND PRESSED COTTON ONLY AND NO EVIDENCE APPEARED OF ANY DEALING IN RAW COTTON, THE GINNING AND PRESSING ACTIVITIES WERE TO BE REGARDED AS AN INTEGRAL PART OF THE MARKETING ACTIV ITY AND THAT THEREFORE THE RECEIPTS FROM THOSE ACTIVITI ES WERE NOT LIABLE TO TAX BY VIRTUE OF SECTION 81(I)(C ) OF THE ACT PRIOR TO ITS AMENDMENT IN 1968]. THE HIGH COURT ON A REFERENCE HELD THAT SINE THE APPELLANT CARRIED ON GINNING AND PRESSING OF COTTON WITH THE ITA NO.709/MDS/2016. :- 8 -: AID OF POWER, EVEN THOSE ACTIVITIES WERE REGARDED AS ANCILLARY OR INCIDENTAL TO ITS MARKETING ACTIVITY, THEY WOULD NOT COME WITHIN THE CATEGORY OF EXEMPTED ACTIVITIES IN VIEW OF PROVISO TO SECTION 80(I) AND THEREFORE, THEY WOULD HAVE TO BE TAXED. ON APPEAL, THE HON'BLE SUPREME COURT HELD AS UNDER: REVERSING THE DECISION OF THE HIGH COURT THAT THE OBJECT OF SECTION 81(I) WAS TO ENCOURAGE AND PROMOTE THE GROWTH OF COOPERATIVE SOCIETIES AND CONSEQUENTLY A LIBERAL CONSTRUCTION HAD TO BE GIVEN TO THE OPERATION OF THAT PROVISION. THE PROVISO TO SECTIO N 81(I) OPERATED TO EXCLUDE FROM THE EXEMPTION THOSE ACTIVITIES WHIC H COULD BE REGARDED AS SEPARATE AND DISTINCT FROM THE ACTIVIT IES ENUMERATED IN CLAUSES (A) TO (F) OF SECTION 81(I). IF THE AC TIVITY IN QUESTION WAS INCIDENTAL OR ANCILLARY TO ONE OF THE ACTIVITIE S MENTIONED IN THOSE CLAUSES, THE PROVISO DID NOT APPLY. THE GINNI NG AND PRESSING WAS PART OF THE INTEGRAL PROCESS OF MARKET ING. IT WAS AN ACTIVITY INCIDENTAL OR ANCILLARY TO THE MARKETING O F THE PRODUCE OF ITS MEMBERS. THE GINNING AND PRESSING OF RAW COTTON WAS NEVER REGARDED AS A DISTINCT PROCESS. WHEY THEY DELIVERED THE RAW COTTON TO THE APPELLANT FOR MARKETING, GINNING AND PRESSING WAS REGARDED AS PART OF THAT PROCESS. THE MEMBERS DID N OT TAKE BACK THE GINNING AND PRESSING. ALL THE RAW COTTON SO TRE ATED BY THE APPELLANT WAS RECEIVED FROM ITS MEMBERS AND IT WAS ONLY SUCH COTTON OF ITS MEMBERS WHICH WAS MARKETED BY THE APP ELLANT. THE SALE OF COTTON WAS EFFECTED BY THE APPELLANT TO THE OUTSIDE WORLD AND NOT TO ITS MEMBERS. THE APPELLANT WAS ENTITLED TO THE EXEMPTION OF THE PROFITS AND GAINS DERIVED FROM THE ACTIVITY OF THE ENTIRE BUSINESS OF GINNING AND PRESSING OF COTTON A ND MARKETING IT BY VIRTUE OF SECTION 81(I)(C). 10. THE HON'BLE KERALA HIGH COURT IN THE CASE OF ME ENACHIL RUBBER MARKETING AND PROCESSING CO-OPERATIVE SOCIETY LTD. VS. CIT REPORTED IN [1992] 193 ITR 108 HAS HELD AS UNDER : THE ASSESSEE A COOPERATIVE SOCIETY, PURCHASED RAW LATEX FROM ITS MEMBERS AND PROCESSED THE SAME BY CENTRIFUGAL METHOD AND SOLD THE COMMODITY. THE ASSESSEE CONTENDED THAT EH INCOME DERIVED BY SALE OF THE LATEX OF THE MEMBERS OF THE SOCIETY AFTER PROCESSING WAS EXEMPT U/S 80P(2)(A)(III) OF THE ACT. THE ITO REJECTED THE CLAIM FOR EXEMPTIO N ON THE GROUND THAT WHEN THE ASSESSEE PURCHASED LATEX FROM ITS MEMBERS AND EFFECTED THE SALE AFTER PROCESSING, WHAT WAS SOLD BY THE ASSESSEE WAS ITS OWN COMMODITY. THE LD. COMMISSIONER OF INCOME-TAX HELD THAT THE ASSESSEE WAS ENGAGED IN THE ITA NO.709/MDS/2016. :- 9 -: MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS AN D WAS ENTITLED TO EXEMPTION. THE TRIBUNAL B\AGREED WITH THE ORDER PASSED BY THE ITO AND HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE EXEMPTION. ON APPEAL, THE HON'BLE KERALA HIGH COURT HELD THAT THE TERM MARKETING INCLUDED BOTH BUYING AND SELLING AND H ENCE THE ASSESSEE WAS ENTITLED TO THE EXEMPTION. 11. THE HON'BLE MADHYA PRADESH HIGH COURT [INDORE B ENCH] IN THE CASE OF CIT VS. CO-OPERATIVE PROCESSING AND MARKETI NG SOCIETY REPORTED IN [1995] 216 ITR 633 HAS HELD AS UNDER: DISMISSING THE APPLICATION FOR REFERENCE THAT THE ORDER OF THE TRIBUNAL MADE IT CLEAR THAT DEDUCTION WAS GRANTED IN REGARD TO PROFITS FROM THE GINNING AND PRESSING OPERATION ONLY BECAUSE THE SOCIETY WAS ENGAGED IN MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. THE TRIBUNAL WAS JUSTIFIED INGRANTING SPECIAL DEDUCTION U/S 80P(2)(A)(III) OF THE ACT AND NO QUESTION OF LAW AROSE FROM ITS ORDER. 12. THE HON'BLE SUPREME COURT IN THE CASE OF KERALA STATE COOPERATIVE MARKETING FEDERATION LTD. AND OTHERS RE PORTED IN [1998] 231 ITR 814 HAS HELD AS UNDER : FOR THE PURPOSE OF SECTION 80P(2)(A)(III) OF THE A CT, SO LONG AS AGRICULTURAL PRODUCE HANDLED BY THE ASSESSEE BELONGED TO ITS MEMBERS, IT IS ENTITLED TO EXEMPTION. THE EXPRESSION MARKETING IS AN EXPRESSION OF WIDE IMPORT. IT INVOLVES EXCHANGE OF FUNCTIONS SUCH AS BUYING AND SELLING, PHYSICAL FUNCTION SUCH AS STORAGE, TRANSPORTATION, PROCESSIN G AND OTHER COMMERCIAL ACTIVITIES SUCH AS STANDARDIZATION, FINANCING, MARKETING INTELLIGENCE, ETC. SUCH ACTIVITIES CAN BE CARRIED ON BY AN APEX SOCIETY RATHER THAN A PRIMARY SOCIETY. SECTION 80P OF THE ACT IS INTRODUCED WITH A VIEW TO ENCOURAGING AN D PROMOTING THE GROWTH OF THE CO-OPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY AND IN PURSUANCE O F THE DECLARED POLICY OF THE OVERNMENT. THE CORRECT WAY OF READING THE DIFFERENT HEAD OF EXEMPTION ENUMERATED IN THE SECTION WOULD BE TO TREAT EACH AS A SEPARATE AND DISTINCT HAD OF EXEMPTION. WHENEVER A QUESTION ARISES AS TO WHETHER ANY PARTICULAR ITA NO.709/MDS/2016. :- 10 -: CATEGORY OF INCOME OF A COOPERATIVE SOCIETY IS EXEMPT FROM TAX WHAT HAS TO BE SEEN IS WHETHER THE INCOME FELL WITHIN ANY OF THE SEVERAL HEADS OF EXEMPTION. IF IT FELL WITHIN ANY ONE HEAD OF EXEMPT ION, IT WOULD BE FREE FROM TAX NOTWITHSTANDING THAT THE CONDITIONS OF ANOTHER HEAD OF EXEMPTION ARE NOT SATISFIED AND SUCH INCOME IS NOT FREE FROM TAX UNDE R THAT HEAD OF EXEMPTION. 13. IN THE PRESENT CASE, THE ASSESSEE SOCIETY IS A SMALL TEA GROWER. THEY ARE UNABLE TO MARKET THEIR PRODUCE THE MSELVES. ALL OF THEM JOINED TOGETHER TO FORM A SMALL SOCIETY WHICH COLLECTED LEAVES AND AFTER MANUFACTURING, CONVERTED INTO BLACK TEA. THE SAME WAS SOLD IN AUCTION. WHATEVER PROFIT WAS EARNED BY THE SOCIETY, IT WAS DISTRIBUTED TO ALL MEMBERS A FTER REDUCING THE EXPENDITURE. IN SO FAR AS THE OBJECTION RAISED BY THE ASSESSING OFFICER IS CONCERNED THAT THE SALE OF MA NUFACTURED TEA IS THROUGH AUCTION CENTRES AND THIS DOES NOT RE QUIRE MARKETING AND THIS AUCTION MECHANISM ENSURES A FAIR PRICE TO THE PRODUCER, IS NOT JUSTIFIED. IN SO FAR AS THE US ING OF POWER FOR THE PURPOSE OF CONVERTING GREEN LEAVES INTO BLACK T EA IS CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT TH IS ISSUE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF BROACH DISTRICT CO-OPERATIVE COTTON SALES, GINNING AND PRESSING SOCIETY LTD. [SUPRA] WHEREIN IT HAS BEEN C ATEGORICALLY HELD THAT IF THE ACTIVITY IN QUESTION WAS INCIDENTA L OR ANCILLARY TO ONE OF THE ACTIVITIES MENTIONED IN THOSE CLAUSES, T HE PROVISO DID NOT APPLY. THE GINNING AND PRESSING WAS PART OF TH E INTEGRAL PROCESS OF MARKETING. IT WAS AN ACTIVITY INCIDENTAL OR ANCILLARY TO THE MARKETING OF THE PRODUCE OF ITS MEMBERS. IN THE PRESENT CASE , THE MEMBERS OF THE SOCIETY HAD DECIDED TO CO NVERT GREEN LEAVES INTO BLACK TEA POWDER AND SELL IN THE MARKET IN AUCTION. IN OUR CONSIDERED OPINION, CLAUSE (V) OF SECTION 80P(2 )(A) OF THE ACT HAS NO APPLICATION TO THE ASSESSEES CASE. TAKI NG INTO CONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IN HAND AND IN VIEW OF THE ABOVE CITED DECISIO NS OF VARIOUS COURTS, WE ARE OF THE CONSIDERED OPINION THAT THE L D. COMMISSIONER OF INCOME-TAX HAS RIGHTLY DECIDED THE ISSUE AND WE FIND NO INFIRMITY IN THE FINDINGS OF THE LD. COM MISSIONER OF INCOME-TAX. HENCE THE GROUNDS RAISED BY THE REVENUE IN ALL THE APPEALS ARE DISMISSED. AND ALSO THE CONTENTION OF THE DEPARTMENT BEFORE T HE TRIBUNAL THAT THE REVENUE HAS NOT ACCEPTED THE ORDER OF THE TRIBU NAL AND AN APPEAL ITA NO.709/MDS/2016. :- 11 -: HAS ALREADY BEEN FILED IN HIGH COURT AND THE SAM E IS PENDING BEFORE ADJUDICATION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERE PENDENCY OF APPEAL BEFORE HIGH COURT CANNOT BE A R EASON TO TAKE A DIFFERENT VIEW. THE ORDER OF THE TRIBUNAL IS BINDI NG ON ALL THE AUTHORITIES IN THE STATE OF TAMIL NADU AND UNION TE RRITORY OF PONDICHERRY. SO, WE, RESPECTFULLY FOLLOWING THE CO -ORDINATE BENCH DECISION, UPHELD THE ORDER OF COMMISSIONER OF INCO ME TAX (APPEALS) AND DISMISS THE GROUNDS OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IN ITA NO.709/MDS/2016 IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 16TH DAY OF A UGUST, 2016, AT CHENNAI. SD/- SD/- ( . ) (ABRAHAM P. GEORGE) $ % & / ACCOUNTANT MEMBER ( . ) (G. PAVAN KUMAR) ' % & / JUDICIAL MEMBER +& / CHENNAI , / DATED:16TH AUGUST, 2016 KV - ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 3. 1' () / CIT(A) 5. /45 $'6 / DR 2. $% ! / RESPONDENT 4. 1' / CIT 6. 57 8& / GF