TaxTMI 
TaxTMI 
2017 (10) TMI 317
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.... claimed by assessee (a) u/s. 80P(2)(e)for amount of Rs.22,79,433/- from Godown Rent (b) u/s.80P(2)(d) for amount of Rs.14,72,486/- from Dividend & 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 Cooperative Society and on perusal of the annual report it was noticed that the assessee had indulged in various trading 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 Officer. 2. The relevant facts as culled out from the materials on record are as under:- The relevant extracts from the assessment order are reproduced under:- "4. On going through the Annual report, it is seen that the co-op. society is engaged many activities, brief of each activity is given as under: (i) Electric Section : In this section, ceiling fan, table fan of Crompton Greaves, Bajaj tube-light, lamp, all the items related to lightning, motors for irrigation and flour factory, mixture, iron, Electric and gas geezers, all light fittings ....
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....are obtained from outside and sold in the entire district 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 trading activities and therefore the assessee is a profit-making organization. The activities carried out by the assessee does not fall within the ambit of cooperative 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 total income. The relevant portion of the show-cause notice is reproduced as under: "Please refer to the above. 2. On verification of annual report it is noticed that 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....
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.... The impression that the assesses society does not offered income for taxation from its activities is erroneous. Therefore the question of disallowance as proposed does not arise. It is again reiterated that such deduction is granted to the assessee society right from its inception i.e. since 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 but is not acceptable. It is seen from the annual report that the assessee is neither a Primary Agricultural Credit Society (PACS) nor Primary cooperative Agricultural and Rural Development Bank (PCARDB) - It is noted from records that range of assessee's activities is not confined to one taluka but is extended to entire Sabarkantha district and, thus, in view of Explanation to section 80P(4), assessee is not PCARDB - Further primary object as well as activities of assessee 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, primary object as well as activities of assessee is not confined ....
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....ived from the activities which is not eligible for 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 made 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 Bank [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. The assessee submitted the reply to show-cause notice by letter dated 06/01/2014 reproduced in the assessment order on Page No.5 explaining the nature of business and the nature of deductions claimed. 3. The assessee is a sales and purchases union. It makes the products both agriculture and non-agriculture and also to the members and non-members. The income is taxable. The income as per 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 under Sections 80P(2)(c) ....
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....r marketing cement for agriculture 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 godowns are let out for purpose of storing and marketing the commodities. The assessee has not incurred any expenses for earning the rent income since 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 earned the commission of Rs.7,55,590/- from Gujarat State Co.op. Marketing Federation. The Xerox copy of credit note dated 18/01/2011 is enclosed herewith. The assessee has disallowed expenses....
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....5 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 godown are let for marketing the commodities used for agricultural purposes and therefore the assessee is entitled to deduction under 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 assessee purchases and supplies or supplies and earns commission. It is one and the same and therefore the agricultural commission received from Gujarat Marketing Federation is eligible for deduction under Section 80P(2)(iv) as reduced by the estimated expenses. The kind attention is drawn to the SC decision in the case of assessee himself Sabarkantha Zilla Kharid Vechan Sangh Ltd. V/s. CIT 203 ITR 1027. The catch-notes are reproduced for ready reference: "Co. op. society - society engaged in purchase of agricultural implements, seeds, livestock etc. intended for supply to members - deduction from....
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....0P(2)(d) of the Act. The details filed by the appellant show that it has made investment in shares and debentures of various cooperative societies details of which are given in schedule for 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 be entitled for deduction. Since, the dividend has been received from other Co-operative Societies the deduction is allowable. 7.2 In our considered opinion, this Ground of department is dismissed. 8. The appellant has claimed the deduction of Rs. 4,80,591/- on account of agricultural commission income. The gross income earned by the appellant on account of commission was Rs. 7,55,591/- and after reducing, the estimated expenses of Rs. 2.75 Lacs the assessee has claimed this deduction. It has been explained by the appellant that it was acting as commission agent for Gujarat Estate Co-operative Marketing Federation for marketing inorganic fertilizer. It has earned commission for this activity. The assessee has itself disallowed certain expenses on estimated basis for earning such i....