Co-op Society wins appeal for tax deduction on agricultural income

The Tribunal allowed the appeal, holding that the Co-operative Society was entitled to the deduction under section 80P(2)(e) of the Income Tax Act for the hamali and commission income earned from procuring and selling agricultural products, following a precedent set by the Bombay High Court. The Tribunal found that the activities were in line with the society's business operations, qualifying for the deduction. The order was pronounced on February 19, 2019.

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Issues:
Claim of deduction under section 80P of the Income Tax Act.

Analysis:
The appeal was filed against the order of CIT(A)-2, Aurangabad, concerning the assessment year 2014-15 under section 143(3) of the Income-tax Act, 1961. The sole issue raised in the appeal was regarding the claim of deduction under section 80P of the Act. The assessee, a Co-operative Society, declared Nil income after claiming the deduction under section 80P of the Act, as it was formed for the purchase and sale of fertilizers, seeds, and pesticides. However, the Assessing Officer disallowed a sum of Rs. 10,44,088/-, stating that hamali and commission income were not connected to the society's objectives and hence not eligible for deduction under section 80P of the Act.

Before the CIT(A), the assessee explained that it was appointed to purchase pulses and soya bean on behalf of the Central Government through NAFED, entitling it to commission and hamali charges. The CIT(A) held that the activities of procuring pulses and soya bean did not qualify as letting out of godowns or warehouses, as required by section 80P(2)(e) of the Act. The CIT(A) upheld the Assessing Officer's decision.

The assessee contended that the profits earned on the purchase and sale of agricultural products were eligible for deduction under section 80P(2)(e) of the Act. The Central Government had directed the assessee to purchase pulses and store them for sale, entitling it to hamali and commission charges. The Tribunal noted that the activities undertaken by the assessee were in line with its business operations and hence eligible for deduction under section 80P(2)(e) of the Act.

Referring to the decision of the Hon’ble Bombay High Court in a similar case, it was held that commission on the sale of fertilizers was exempt as part of warehousing activity. Applying this precedent, the Tribunal allowed the appeal, stating that the assessee was entitled to the deduction under section 80P(2)(e) of the Act on the hamali and commission income earned. The appeal was thus allowed, and the order was pronounced on February 19, 2019.

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