Dy.CIT, Circle-1, Khammam V. The Khammam Dist. Co-op Marketing Society Limited, Khammam

ITA 864/HYD/2013

• Counselvise Citation: 86422514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.864/HYD/2009 ASSESSMENT YEAR 2008-2009 DCIT, CIRCLE-1 KHAMMAM. VS. THE KMM DIST. COOP. MARKETING SOCIETY LTD., KHAMMAM PAN AABAT-3816-H (APPELLANT) (RESPONDENT) FOR REVENUE : MR. R. MOHAN REDDY FOR ASSESSEE : MR. D.L. NARASIMHA RAO DATE OF HEARING : 08.07.2014 DATE OF PRONOUNCEMENT : 05.09.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE OR DER OF THE LD. CIT(A), VIJAYAWADA DATED 22.03.2013 ON T HE ISSUE OF DEDUCTION CLAIMED UNDER SECTION 80P(2)(A). 2. BRIEFLY STATED, ASSESSEE IS A COOPERATIVE SOCIE TY AND FILED ITS RETURN OF INCOME FOR A.Y. 2008-2009 ADMIT TING LOSS OF RS.41,38,622. THE CASE WAS SELECTED FOR SCRUTINY AN D ASSESSMENT WAS COMPLETED DETERMINING THE TOTAL INCOME AT RS.23 ,33,565 BY DISALLOWING AMOUNT OF RS.63,22,933 UNDER PROVISIONS OF 40(A)(IA) AND ALSO RESTRICTING DEDUCTION UNDER SECTION 80P TO AN AMOUNT OF RS.50,000. 2 ITA.NO.864/HYD/2013 THE KMM DIST. COOP MARKETING SOCIETY LTD., KHAMMAM. 3. ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND LD. CIT(A) WHILE ALLOWING RELIEF UNDER SECTION 40(A )(IA), GRANTED DEDUCTION UNDER SECTION 80P(2)(A)(III)/(IV) BY STAT ING AS UNDER : 5.6 IN RELATION TO THE REMAINING INCOME OUT OF TH E TOTAL RECEIPTS OF RS.35,36,013.60/- THE ASSESSING OFFICER ALLOWED THE MAXIMUM RELIEF OF RS.50,000/- U/S.80P(2)(C) (II) OF THE ACT. HOWEVER, IT IS SUBMITTED BY THE APPELLANT THAT THEI R CASE IS COVERED BY U/S.80P(2)(A) (III & IV) AS IT WAS REGIS TERED AS A CO- OPERATIVE SOCIETY UNDER HYDERABAD COOPERATIVE SOCIE TIES ACT XVI OF 1952. ITS OPERATION SHALL EXTEND TO THE ENTI RE REVENUE DISTRICT OF KHAMMAM. THE DISTRICT CO OPERATIVE MARK ETING SOCIETY LTD., VIZ., THE APPELLANT ENGAGED IN PROVID ING SERVICE ACTIVITY TO THE FARMER'S COMMUNITY. IT ALSO FILED T HE BY-LAWS OF THE APPELLANT'S SOCIETY AND AS SEEN THEREFROM IT EN GAGED ITSELF IN THE MARKETING OF THE GOODS DISTRIBUTION OF THE S EEDS FERTILIZERS, PESTICIDES EXCLUSIVELY FOR THE BENEFIT OF THE FARMERS WHO HAPPENED TO BE THE MEMBERS OF THE PRIMARY COOPE RATIVE SOCIETY. IT PURCHASES SEEDS FROM AP SEEDS CORPORATI ON, A GOVT. UNDER TAKING AND THE SAME ARE SUPPLIED TO THE AGRIC ULTURISTS. THE PULSES ARE PURCHASED FROM THE RYOTS AND THOSE A RE SOLD TO NAFEL I.E., NATIONAL AGRICULTURAL FEDERATION LIMITE D. THE FERTILIZERS AND PESTICIDES ARE PURCHASED FROM ANDHR A PRADESH MARKETING FEDERATION WHICH IS A GOVT. ORGANIZATION AND THOSE ARE MOSTLY SUPPLIED TO INTEGRATED TRIBAL DEVELOPMEN T AGENCY, BHADRACHALAM A GOVT. ORGANIZATION WHO IN TURN SUPPL IES THE SAME TO THE AGRICULTURISTS ON SUBSIDY BASIS. THE PE STICIDES ARE SUPPLIED TO THE AGRICULTURISTS WHO ARE MEMBERS OF P RIMARY AGRICULTURE COOPERATIVE SOCIETIES, NUMBERING ABOUT 104 WHICH ARE FUNCTIONING FOR THE BENEFIT OF MEMBERS ONLY AND MOST OF THEM ARE LOCATED IN RURAL AND REMOTE PLACES. GOING BY TH E NATURE OF ACTIVITIES UNDERTAKEN BY IT, IT RENDERS SERVICE TO THE FARMERS WITHOUT ANY PROFIT MOTIVE AND THERE IS NO COMMERCIA L ACTIVITY INVOLVED IN ITS ACTIVITIES. IT IS SUBJECTED TO AUDI T BY THE AUTHORITIES OF THE COOPERATIVE DEPARTMENT. IN THE A BOVE CIRCUMSTANCES, THE APPELLANT SOUGHT FOR EXEMPTION O F THE ENTIRE SURPLUS INCOME U/S.80(P)(2)(A) (III & (IV) OF THE A CT. AFTER GOING THROUGH THE VARIOUS SUBMISSIONS OF THE APPELLANT IT S BY-LAWS ITS NATURE OF ACTIVITIES I AM CONVINCED THAT ITS CASE F ALLS WITHIN THE SCOPE OF SEC.80(P)(2)(A) (III & IV) AND ACCORDINGLY, WHATEVER SURPLUS IS LEFTOVER IS LIABLE TO BE EXEMPTED AS PER THE ABOVE PROVISIONS OF LAW. THE ASSESSING OFFICER IS ACCORDI NGLY DIRECTED TO ALLOW RELIEF ACCORDINGLY. 3 ITA.NO.864/HYD/2013 THE KMM DIST. COOP MARKETING SOCIETY LTD., KHAMMAM. 4. THE REVENUE IS AGGRIEVED AND RAISED FOLLOWING G ROUNDS MAINLY ON THE ISSUE OF ALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)(A). THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESS EE SOCIETY IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(III) AND (I V) OF THE ACT, WHERE AS THE ASSESSEE SOCIETY IS ELIGIBLE FOR DEDUC TION U/S.80P(2)(C)(II) OF THE ACT. 3. THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE A.O. TO GRANT DEDUCTION TO THE ASSESSEE SOCIETY U/S.80P(2)(III) O F THE ACT WHERE THE MEMBERS OF THE ASSESSEE ARE ONLY SOCIETIE S BUT NOT FARMERS AND THE PURCHASES ARE MADE FROM NON- MEMBERS. 4. THE LD. CIT(A) IS NOT JUSTIFIED IN DIRECTING THE A.O. TO GRANT DEDUCTION TO THE ASSESSEE SOCIETY U/S.80P(2)(IV) OF THE ACT WHERE THE SOCIETY IS DISTRIBUTING PESTICIDES AND FE RTILIZERS BUT NOT AGRICULTURAL IMPLEMENTS, SEEDS, LIVESTOCK A S ENVISAGED THE SAID SECTION. 5. THE LD. CIT(A) OUGHT TO HAVE OBSERVED THAT THE A SSESSEE SOCIETY HAS TRADED IN THE GOODS WHICH INVOLVED PROF IT ELEMENT AND NOT SUPPLIED THE SAME AND HENCE THE PROVISION OF SECTION 80(P)(2)(A)(IV) ARE NOT APPLIC ABLE. 6. THE LD. CIT(A) FAILED TO CONSIDER THAT IN THE RE TURN OF INCOME ITSELF THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80(P)(2)(C) OF THE ACT. 7. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ASSESSEE WAS IN RECEIPT OF COMMISSION ON SALES OF RS.4,76,16 0, TRADE CHARGES RECEIVED OF RS.31,625, PROFIT ITEMS O F RS.4,15,777, INTEREST ON RESERVE FUND OF RS.28,213 AND INTEREST ON BDR OF RS.1,346 WHICH ARE NOT ELIGIBLE FOR DEDUCTION U/S.80P OF THE ACT. 8. THE LD. CIT(A) IS NOT CORRECT IN ACCEPTING/CONSI DERING THE ADDITIONAL EVIDENCE WITH REGARD TO CAR HIRE, RENT A ND ADVERTISEMENT CHARGES WITHOUT OBSERVING RULE 46A OF THE I.T. ACT. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMINED THE PAPER BOOK PLACED ON RECORD INCLUDING THE 4 ITA.NO.864/HYD/2013 THE KMM DIST. COOP MARKETING SOCIETY LTD., KHAMMAM. SUBMISSIONS MADE BY THE ASSESSEE COUNSEL PLACED IN PAPER BOOK FROM PAGES 1 TO 9. AS CAN BE SEEN FROM THE ORDER OF LD. CIT(A) HE HAS ALLOWED THE DEDUCTION UNDER SECTION 80P(2)(A)(I II) AND (IV) WITHOUT EXAMINING THE ASSESSEES ACTIVITIES IN DETA IL. AS FAR AS DEDUCTION UNDER SECTION 80P(2)(A)(III) IS CONCERNED , THE SAID PROVISION IS VERY CLEAR THAT THE MARKETING OF AGRI CULTURAL PRODUCE GROWN BY ITS MEMBERS CAN ONLY BE EXEMPTED. THIS IS SUE WAS CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF IN DIA AND ANOTHER VS. UNION OF INDIA AND OTHERS 260 ITR 549 W ITH REFERENCE TO THE INTERPRETATION OF AGRICULTURAL PRODUCE PROD UCED BY MEMBERS. THE LD. CIT(A) HAS NOT EXAMINED THIS ISSU E IN THE CONTEXT OF SPECIFIC PROVISION OF SECTION 80P(2)(A)( III). WITH REFERENCE TO DEDUCTION UNDER SECTION 80P(2)(A)(IV), THE PROVI SION PERTAINS TO PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIVE ST OCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE O F SUPPLYING THEM TO ITS MEMBERS. AS SEEN FROM THE BRIEF DETAILS FILE D, ASSESSEE PURCHASED FERTILIZERS AND PESTICIDES FROM A.P. MARK ETING FEDERATION AND SUPPLIED TO INTEGRATED TRIBAL DEVELO PMENT AGENCY. WE ARE NOT SURE WHETHER INTEGRATED TRIBAL DEVELOPME NT AGENCY IS MEMBER OF THE ASSESSEE, AS THE PROVISION ALLOWS DED UCTION ONLY FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS. LIKE WISE THERE ARE MANY SUCH TRANSACTION WHICH REQUIRE DETAILED EXAMINATION.THEREFORE, IT IS, NECESSARY TO EXAMINE WHETHER THE SUPPLIES MADE BY THE ASSESSEE ARE TO THE MEMBERS AL ONE OR NOT. IN THIS REGARD, THE FOLLOWING CASES ARE REQUIRED TO BE CONSIDERED ON THE FACTS OF THE CASE. (I) TAMILNADU BRICK & TILE MANUFACTURERS INDUSTRIAL SERVICE COOPERATIVE SOCIETY LTD., 265 ITR 332 (MAD. ) (II) CIT VS. KOTA COOPERATIVE MARKETING SOCIETY 262 ITR 452. 5 ITA.NO.864/HYD/2013 THE KMM DIST. COOP MARKETING SOCIETY LTD., KHAMMAM. (III) CIT VS. RAJASTHAN RAJYA BUNKAR SAHAKARI SAMITI LTD. , 323 ITR 365 (SC) WHEREIN THE HONBLE APEX COURT WIT H RESPECT TO DEDUCTION UNDER SECTION 80P(2)(II) AND ( IV) HAS HELD AS UNDER : THE AO OUGHT TO HAVE CALLED FOR THE BYE-LAWS. IT A PPEARS THAT BYE-LAWS WERE NOT PRODUCED BEFORE THE AO. IT APPEAR S THAT THE BYE-LAWS HAVE NOT BEEN EXAMINED BY THE AO. FURTHER, IT IS NOT CLEAR AS TO WHETHER A WEAVER COULD OR COULD HAVE BE COME A MEMBER OF THE APEX SOCIETY UNDER THE BYE-LAWS. EVEN TO ANSWER THE QUESTION WHETHER THE ASSESSEE-SOCIETY IS ENGAGE D IN THE COTTAGE INDUSTRY, THE DEPARTMENT OUGHT TO HAVE CALL ED FOR THE BYE-LAWS. THIS EXERCISE HAS NOT BEEN DONE. IN THE CIRCUMSTANCES, FOR THE RELEVANT ASSESSMENT YEARS, T HE FINDINGS GIVEN BY THE COURTS BELOW ARE NOT TO BE INTERFERED WITH. HOWEVER, THIS ORDER WILL NOT COME IN THE WAY OF DEP ARTMENT IN MAKING ASSESSMENT FOR THE FUTURE ASSESSMENT YEARS. IN SUCH AN EVENT, THE DEPARTMENT WILL DECIDE THE APPLICABILITY OF S. 80P [INCLUDING THE PROVISO TO S. 80P(2)] KEEPING IN MIN D THE PROVISIONS OF THE BYE-LAWS. THE SAID PROVISIONS OF THE BYE-LAW S WILL POINT TO THE NATURE OF THE BUSINESS OF THE ASSESSEE AS ALSO ENTITLEMENT OF THE WEAVERS TO BECOME MEMBERS OF THE APEX SOCIETY. THE DEPARTMENT WILL EXAMINE THE JANATA SCHEME OF THE CE NTRAL GOVERNMENT TO DECIDE WHETHER PAYMENTS MADE THEREUND ER WOULD BE ENTITLED TO DEDUCTION UNDER S. 80P(2)(A)(I I) AND S. 80P(2)(A)(VI).CIT VS. RAJASTHAN RAJYA BUNKER SAHAK ARI SANGH LTD. (2002) 176 CTR (RAJ) 488 AFFIRMED. 6. KEEPING IN VIEW THE PRINCIPLES LAID DOWN BY THE VARIOUS JUDICIAL DECISIONS, IT IS NECESSARY TO EXAM INE ASSESSEES ACTIVITIES IN DETAIL BEFORE ALLOWING DEDUCTION UNDE R SECTION 80P(2)(A). WE ARE OF THE OPINION THAT LD. CIT(A) DI D NOT EXAMINE ANY OF THE ISSUES AND REVENUE HAS RAISED GROUNDS VA LIDLY. IN ORDER TO EXAMINE THESE ISSUES, SPECIFICALLY KEEPING IN VI EW VARIOUS JUDICIAL PRECEDENTS ON THE ISSUE, WE RESTORE THE IS SUE TO THE FILE OF THE A.O. TO EXAMINE NATURE OF THE TRANSACTIONS OF T HE ASSESSEE SOCIETY AND DETERMINE THE DEDUCTIONS UNDER SECTION 80P(2)(A)(III)/(IV) AS APPLICABLE. WITH THESE OBSE RVATIONS, THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80P IS RESTORED TO THE FILE OF A.O. SINCE, REVENUE HAS NOT COME UP IN APPEAL ON TH E ISSUE OF 6 ITA.NO.864/HYD/2013 THE KMM DIST. COOP MARKETING SOCIETY LTD., KHAMMAM. 40(A)(IA) WHICH WAS GIVEN AS A RELIEF BY THE LD. CI T(A), A.O. IS DIRECTED NOT TO EXAMINE ANY OTHER ISSUE WHICH ARE C ONCLUDED, EXCEPT THE CLAIM OF DEDUCTION UNDER SECTION 80P ON VARIOUS INCOMES RECEIVED BY THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.09.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 05 TH SEPTEMBER, 2014 VBP/- COPY TO 1 DCIT, CIRCLE-1, 1 ST FLOOR, AAYAKAR BHAVAN, BEHIND KINNERASANI THEATRE, RAJIV GUNJ, KHAMMAM 2. THE KMM DISTRICT COOPERATIVE MARKETING SOCIETY L TD., VENKATAGIRI ROAD, KHAMMAM 3. CIT(A) , VIJAYAWADA 4. CIT, VIJAYAWADA 5. D.R. A BENCH, ITAT, HYDERABAD.