TaxTMI 
TaxTMI 
2019 (9) TMI 978
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....lowed the deduction u/s 80P(2)(b), however the primarily objects and activities of the appellant society are duly eligible for the deduction u/s 80P(2)(b) of the act. 1.1 That, the learned CIT(A) has grossly erred in law and on facts by wrongly confirming the disallowance of Rs. 1,24,61,498/- u/s 80P(2)(b) of I.T. Act, 1961 by stating that the nature of activity of the appellant is of an intermediary society and not of a primary co-operative society, hence not eligible for deduction u/s. 80P(2)(b) of LT. Act, 1961. 2. That, the learned CIT(A) has wrongly confirmed the disallowance of contribution to Employees' Provident Fund and Employees' State Insurance of Rs. 4,05,105/- u/s 43B of I.T. Act, 1961 by stating that the same is not deposited within the due date prescribed under section 36(1 )(va) of the I. T. Act, 1961. 3. That, the learned CIT(A) has wrongly confirmed the disallowance of expenses amounting to Rs. 6,13,744/- u/s. 40A(3) of the I.T. Act, 1961. 4. That, Learned CIT(A) has wrongly confirmed the disallowance amounting to Rs. 40,000/- u/s.40(a)(ia) of the I.T. Act, 1961 for non-deduction of TDS u/s.194J for payment made for laboratory testing charges. 5.....
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....ve Bank has been wrongly taken as Rs. 63,04,010/-. Hence, the appellant while filing an appeal before the Hon'ble IT AT, Rajkot has taken the same amount of interest. However, the actual amount of interest received from the investments with co-operative banks is Rs. 1,08,62,154/-. 3. It is therefore most respectfully requested to allow to amend this ground of appeal with a further prayer that the same may kindly be adjudicated upon. The 1st issue raised by the assessee in ground No. 1 is that the learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 1,11,42,436.00 under the provisions of section 80P(2)(b) of the Act. 3. The facts in brief as culled out from the order of the authorities below are that the assessee in the present case is a district level cooperative society which is above the primary co-operative society. The assessee has 646 members which are primary co-operative societies. These primary co-operative societies have the members such as farmers, their family members and other rural family unit. These primary cooperative societies are procuring milk from the members and in turn supplying to the assessee being a single so....
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....being a district level society which in turn will supply the milk to the Mother Dairy. Moreover, the primary credit society cannot become the member of GMMF. Accordingly the assessee claimed that it is facilitating the object of the statute and therefore it is eligible for deduction under section 80P(2)(b) of the Act. 3.5 The assessee also submitted that both the primary and the district level society are eligible for deduction under section 80P(2)(b) of the Act as all the conditions as specified therein have been complied with. 3.6 The assessee also claimed that it has been claiming deduction under section 80P(2)(b) of the Act for the last more than 25 years and the same was allowed even in the scrutiny assessment framed under section 143(3) of the Act. 3.7 However the learned CIT (A) rejected the contention of the assessee and confirmed the order of the AO by observing as under: 4.2.2 A perusal of the above provision shows that the said deduction is available to a "primary society" engaged in supplying milk to a federal cooperative society, Govt or a local authority or a Govt company. In this case, the appellant by its very nomenclature is a district level cooperative milk p....
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....producing societies. This fact was also brought to the notice of the appellant's AR. To this the appellant has submitted that there is no bar on both the levels claiming the said deduction. This argument of the appellant is also not acceptable. If it was the intention of the legislature to allow the said exemption to all cooperative societies engaged in the production and supply of milk, the same would have been clearly mentioned in the Act itself. As it stands now, the relevant Section clearly states that the deduction is available only to a primary society. Thus, the appellant is clearly not eligible to claim deduction u/s. 80P(2)(b) which has been rightly disallowed by the AO. 4.2.4 The appellant has also argued that the said deduction has been claimed by it and also allowed in the earlier assessment years and therefore should be allowed during the year under consideration as well. However, it is a settled principle of law that the principle of res judicata does not apply to assessment proceedings. Hence, the appellant's contention in this regard is rejected by relying upon the following decisions:- (a) Res Judicata not applicable as each assessment year is a separat....
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....ality checks. b. The supplies milk raised by their members and do not themselves produce milk. c. The main role of the society is to directly interact with the lower level farmers and to carry out transactions with them. Therefore, the society is duly considered as the primary co-operative society. d. All the benefits/sale proceeds to the society have been passed on to the society members. The society retained only minimum portion. e. Deduction u/s.80P(2)(b) is available only if the society is engaged in the supplying milk etc. raised or grown by the members of the society to the Federation. f. The word "primary" is not defined in the law so it has to be understood in larger respect. g. The section 80P(2)(b)(i) clearly states that the deduction is available to all other societies other than the Federal Co-operative Society. h. A small agricultural Co-operative society does not have any facilities to supply milk to federation; it can become a member of apex society which may supply milk to federation. The society can supply milk only to the Federation to which it is federated and not to any other agency. i. The detailed eligibility criteria to supply milk to federati....
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....n of that provision." 6.2 Besides the above, we also note that the assessee has been claiming the deduction under section 80P(2)(b) of the Act consistently for the last several assessment years and there was no disallowance even in the assessment framed under section 143(3) of the Act pertaining to the assessment years 2004-05, 2005-06, 2007-08 and 2009-10 and 2010- 11. The assessment orders for the assessment years mentioned above are placed on pages 54 to 62 of the paper book. Therefore we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. In this regard we find support and guidance from the judgment of Hon'ble Supreme Court in the case of CIT versus Excel Industries Ltd reported in 358 ITR 295 wherein it was held as under: 28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reason....
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....come Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act." In view of t....
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..... 13. We have heard the rival contentions of both the parties and perused the materials available on record. The facts regarding the impugned dispute are arising from the order of the authorities below. Therefore, the consideration of these documents as discussed above is necessary for adjudication the issue on hand. Therefore we admit the same and restore the issue to the file of the AO for fresh adjudication as per the provisions of law. It is needless to mention that the assessee should co-operate in the proceedings before the AO. Hence the ground of appeal of the assessee is allowed for the statistical purposes. The 4th issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowance of Rs. 40,000 on account of non-deduction of TDS. 14. At the outset the learned AR for the assessee submitted that he has been instructed not to press the impugned issue. Therefore we dismiss the same as not pressed. The 5th issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by treating the profit on sale of land as business income and without allowing the indexation benefit under section 48 of the Act. 15. At the outs....
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....oss account and worked out the net profit at Rs. 1,11,42,336.00. The relevant extract of the computation of income stands as under: Particulars Amount Amount Net Profit as per Profit and Loss account 1,11,42,336 Add: Depreciation as per book 1,38,98,042 Less:Depreciation as per rule (1,38,98,042) Total 1,11,42,336 Less: Income from other sources (1,86,33,268) Income from Profits and Gains of Business and Profession (74,90,933) Interest Taxed under Income from other Sources 1,86,33,269 Total Taxable Income 1,11,42,336 19.2 Thus the assessee claimed the deduction under section 80P(2)(b) of the Act was worked out after considering the interest income and the expenses as discussed above amounting to Rs. 1,11,42,336.00 19.3 However, the AO was of the view that the assessee is not eligible for deduction under section 80P(2)(b)/ 80P(2)(d) of the Act on account of such interest income. It is because such interest income was not arising from the eligible activity as specified under section 80P(2)(b) of the Act. Accordingly, the AO treated such interest income of Rs.1,86,33,269.00 as income from ot....
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.... of the assessee-society providing credit facilities to its members. The interest income derived from investing surplus funds with the bank must be closely linked with the business of providing credit facilities for is to be held attributable to the business of the assessee. Therefore, the profits and gains could be said to be directly attributable to the business of providing credit facilities to its members if there was a direct and proximate connection between the profits and gains and the business of the assessee. There was no obligation on the assessee to invest its surplus funds with the bank. Investing surplus funds in a bank was no part of the business of the assessee providing credit facilities to its members and hence it could not be said that the interest derived from depositing its surplus funds with the bank was profits and gains of business attributable to the activities of the assessee. It was only the interest income derived from the credit provided to its members which was deductible under section 80P(2)(a)(i) and the interest income derived by depositing the surplus funds with the bank not being attributable to the business carried on by the assessee could not b....
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....ct which reads as under: 4[Deduction in respect of income of co-operative societies. 580P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX [(b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company 13 as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a 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 t....
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....s open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d)." 24.3 Taking up the matter further regarding the interest income from the deposits made with the co-operative banks, we note that a cooperative bank is basically a cooperative Society only. It becomes a cooperative bank upon getting a license from the Reserve Bank of India. Therefore, in our considered view such amount of interest income from the deposits made with the co-operative bank is eligible for deduction under section 80P(2)(d) of the Act. In this regard we find support and guidance from the judgment of Hon'ble High Court of Gujarat in the case of Surat Vankar Sahakari Sangh Ltd. Vs. a CIT reported in tax appeal numbers 93 to 96 of 2008 wherein the head note reads as under: Section 80P of the Income-tax Act 1961- Deductions- Income of cooperative societies (Computation of deduction) - Assessment Years 1991-92 to 1994 - Whether assessee-co-operative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adjusting interest paid to said bank - Held, yes [In favour of assessee] We are also....
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....t co-operative Society and wrongly disallowed the deduction u/s 80P(2)(b), however the primarily objects and activities of the appellant society are duly eligible for the deduction u/s 80P(2)(b) of the act. 1.1 That, the learned CIT(A) has grossly erred in law and on facts by wrongly confirming the disallowance of Rs. 1,24,61,4981- u/s 80P(2)(b) of LT. Act, 1961 by stating that the nature of activity of the appellant is of an intermediary society and not of a primary co-operative society, hence not eligible for deduction u/s. 80P(2)(b) of LT. Act, 1961. 2. That, the learned CIT(A) has wrongly confirmed the disallowance of contribution to Employees' Provident Fund and Employees' State Insurance of Rs. 1,72,3941- u/s 438 of IT. Act, 1961 by stating that the same is not deposited within the due date prescribed under section 36(1 )(va) of the I. T. Act, 1961. 3. That, the learned CIT(A) has wrongly confirmed the disallowance of expenses amounting to Rs. 2,30,754/- u/s. 40A(3) of the LT. Act, 1961. 4. That, Learned AD has wrongly assessed interest income of Rs. 1,43,91,7751- as part of net profit from "Business & Profession" and also assessed the same income as income un....