2017 (2) TMI 1270

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....all situations, which is not in consonance with the findings given by the High Court in the assessment year 2009-10, wherein the High Court confirmed the findings of the Commissioner of Income-tax (Appeals) on disallowance to the extent of Rs. 4,08,64,000 and also observed that additions were made to the incomes, specified incomes only would be tax neutral in accordance with law and not the entire income ? II. Whether on the facts and circumstances of the case the Tribunal has erred in holding that the assessee is eligible for deduction under section 80P(2) of the Act, 1961 while relying on the High Court's earlier order passed in the assessment year 2009-10 ?" 4. However, after some argument of learned counsel for the Revenue we find that the actual issues raised by him relate to additions made by the assessing authority (hereinafter referred to as the "A. A.") in respect of "payment of leave encashment" and "gratuity" to the employees on retirement and this addition has not been accepted by the Tribunal. 5. Learned counsel for the Revenue submits, since there was no approval under section 36 of the Act, 1961 with respect to "leave encashment" and "gratuity fund....

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.... of amount of contribution made towards gratuity fund and leave encashment fund, section wise. In reply dated March 21, 2013, the assessee said that the total contribution towards gratuity fund was Rs. 20 crores and the actual gratuity payment was Rs. 1,75,27,877. It results into net disallowable contribution of Rs. 18,24,72,122. Similarly towards leave encashment benefit, the contribution was Rs. 20,75,00,000 and the actual payment was Rs. 2,24,88,687 resulting in net disallowable contribution towards leave encashment benefit to Rs. 18,50,11,313. The total net contribution under both heads thus came to Rs. 36,74,83,435. The assessing authority disallowed the aforesaid amount and computed the income as under :   (Rs.) (A) Total income qualifying for 100% deduction under section 80P :   (i) New profit from seed section, godown letting section and income from dividend as shown by the assessee in the return 9,21,47,697 (ii) Addition on account of disallowance of contribution towards gratuity and LEB funds as discussed in para "6b" above 5,27,00,000  Gross total income eligible for 100% deduction 14,48,47,967 (B) Total income qualifying f....

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....sessee. 15. We have heard learned counsel for the parties at length and perused the record as well as the relevant provisions applicable for adjudication of the questions raised in this appeal. 16. The assessee claimed net income in respect of various activities which are referable to section 80P(2)(a)(iv), 80P(2)(d) and 80P(2)(e). The assessing authority held that sectionwise details having not been supplied, therefore, proportionate expenditure under the head "Salary" and "Wages" in two blocks, is being done. First block qualifies 100 per cent. deduction. The assessing authority applied this block to seed section and letting of godowns, i.e., section 80P(2)(a)(iv) and 80P(2)(d). Second block of remaining twelve activities, he (assessing authority) kept under section 80P(2)(c)(ii). Accordingly, he has also worked out the payments under "salary" and "wages" and worked out the proportionate disallowance. This was also confirmed by the Commissioner of Income-tax (Appeals). The approach of the assessing authority and the Commissioner of Income-tax (Appeals), in our view, is patently erroneous. 17. Section 80P reads as under : "80P. Deduction in respect of income of c....

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.... corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business ; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,- (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees ; and (ii) in any other case, fifty thousand rupees. Explanation.-In this clause, 'consumers' co-operative society' means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income ; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, pro....

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....ctions in respect of certain incomes. Under sub-section (1) if gross total income includes income referred to in sub-section (2), the sums specified in sub-section (2) are deductible in accordance with the said section, i. e., section 80P. 19. Sections dealing with seeds and letting out godowns admittedly come under sub-sections (2)(a)(iv) and (2)(e). On this aspect the learned counsel for the Revenue has no dispute. Under sub-section (2)(a) the whole of the amount of profits and gains of business attributable to one or more of activities under sub-section (2) are deductible. Similarly, under section 80P(2)(e) the whole of the income is deductible. Under section 80P(2)(c)(ii) deduction is permissible to the extent of Rs. 50,000 only. Letting of godowns in fact comes in sub-section (2)(e) and here also the whole of income is deductible. 20. The assessee's activities on its own were not referable to section 80P(2)(c)(ii) which was taken by the assessing authority. There was no reason to pick various sub-sections of section 80P by the assessing authority in his own way. In fact, section 80P is applicable in respect of a different kind of person, i.e., co-operative societies.....

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.... manner laid down in this Act." 23. Section 5 contemplates total income of any previous year of a person who is resident, to include all income from whatever source derived, which is received or deemed to be received by or on behalf of such person or accrues or arise or is deemed to accrue or arise, in India or outside. Therefore, for section 80P, it is the gross total income of co-operative society which has to be seen to attract section 80P and if gross total income includes income referred to in sub-section (2) of section 80P, deductions can be made. In order to apply deduction under section 80P, therefore, there is no need to look into any other provision. 24. In Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231 ITR 814 (SC) the court said, whenever a question arises as to whether any particular category of income of a co-operative society is exempt from tax, what has to be considered is, whether the income falls within one of the several heads of the exemption and if it falls within any one of the heads of the exemption, it would be free from taxes notwithstanding that the conditions of another head of exemption are not satisfied and such income is no....