TaxTMI 
TaxTMI 
1991 (7) TMI 125
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....85 and 20th March, 1986 respectively. The CIT(A) decided the quantum appeals for these two years vide consolidated order dt. 9th Dec.,1987.The Revenue has preferred appeals against the order of the CIT(A) relating to quantum appeal for both these years, which are marked as ITA No.393 and 394. The assessee has submitted cross objections which are marked as C.O. Nos. 182 and 183. The ITO also imposed penalty under s. 271(1)(a) for asst. yr. 1982-83 amounting to Rs. 1,63,920 which was subsequently rectified and reduced to Rs. 94.378. This order of the ITO was confirmed by the CIT(A). He, however, directed the ITO to recompute the amount of penalty after giving effect to the appellate order passed by him in the quantum appeal. The Revenue has preferred an appeal against this order relating to penalty under s. 271(1)(a) which is marked as ITA No. 392. The assessee has submitted cross objection against the said penalty matter which is marked as C.O. No. 181. 2. We will first deal with the Revenue's appeal relating to quantum for asst. yr. 1982-83. 2.1. Ground No.1 reads as under: "The learned CIT(A) has erred in directing to work out gross profit after including sales of fertili....
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.... be considered for working out the gross profit derived in fertilizer account for computing the amount of exemption allowable under the aforesaid provision. 2.3 The learned counsel for the assessee contended that exemption on income derived by the society from supply of seeds, fertilizer, insecticides, light diesel, mobil oil which are solely used for direct use for agricultural purposes for running the engines installed in the farm have always been allowed to the assessee in the past as well as in the subsequent assessments. The assessee is not claiming exemption on all the petroleum products but such exemption was claimed only in respect of two items, viz., light diesel (crude) and Mobil oil directly sold to the members of the society for agriculture purposes. The income derived on sale of other petroleum products used for plying of vehicles, etc., has not been claimed. Our attention was invited towards order passed by the CIT under s. 263 for asst. yr. 1980-81 in which the CIT has himself held that the assessee is entitled to deduction in respect of income derived from sale of Fertilizer, Rajdan, Hybrid seeds, pesticides and Mobil oil aggregating to Rs. 65,716. It was contend....
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....ciety (a) Sales of Rajdan, etc. 15,00,727 26,650 2,40,685 (b) Sales of petrol division [only light diesel (crude)] 56,28,468 24,814 53,39,939 (c) Sales of insecticides 17,15,813 99,686 7,16,426 . Add: Sales of fertilizers from Total Sales 9,44,39,870 19,32,250 7,83,94,931 . Total 10,32,84,878 20,83,400 8,46,96,982 Average G.P. will be = 2.017% (Thus the G.P. on sales to members will be : 2.017 x 84,69,69,982/100=17,08,338). . . Thus the G.P. on Sales to members will be 2.017 2. The management expenses will be as under: (a) Head Office expenses net as per details filed and as per page No. 11 to 15 of paper book 20,39,651 (b) From direct purchases a/c. as per page 25 of the report & as per details filed 78,411 (c) Cotton Department as per details filed and page No. 27 of the report 20,317 (d) Expenses from vehicle expenses as per details filed and page No.25 of the report. 1,21,658 (e) Net interest considered by ITO at 8,92,926 (considered as rebate) which is actually interest as per page 23. Item No. 106 as Bank guarantee interest and for which se....
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....received by the assessee from Gujarat State Co-operative Marketing Federation by way of godown rent is exempt under s. 80P(2)(c). He also relied upon the judgment of Hon'ble Madras High Court reported in CIT v. South Arcot District Co-operative Marketing Society Ltd. [1973] 92 ITR 371. The ld. Sr. Deptl. Representative contended that the burden lies upon the assessee to prove that such income was derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. No such material has been produced by the assessee, in the absence of which the CIT(A) should be have granted this deduction. 3.1 The leaned counsel for the assessee submitted that the rent was received from Gujarat Sate Co-operative Marketing Federation of which the assessee is also a member. The rent was recovered for storing groundnut, groundnut seeds and wheat. Details were also filed at page 18 and 19 of the paper book. 3.2 After considering the submissions made by the learned representatives and after going through the relevant details and orders of the learned departmental authorities we are of the view that the CIT(A) has rightly granted deduction in respect....
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....d CIT(A) in para 10 of his order. He has observed that the amount of Rs. 98,862 claimed as deduction represent the amount of rebate given to various customers and the same obviously results in reduction of the sale price received by the society. He, therefore, allowed the said deduction. 5.2 The ld. Sr. Deptl. Representative contended that no such deduction was specifically claimed before the ITO. The CIT(A) has clearly erred in allowing the said deduction without giving specific opportunity to the ITO. 5.3 The learned counsel for the assessee contended that the claim for this deduction is included in the printed annual account submitted before the ITO. It is incorrect to say that no such deduction was claimed before the ITO. He supported the order of the CIT(A) on this point. 5.4 We have considered the submissions made by the learned representatives. At page 40 of the printed balance sheet, it appears that a sum of Rs. 1 lakhs has been provided for by way of provision for rebate on sales. At page 4 of the paper book it has been mentioned that details of Rs. 98,862 were submitted before the CIT(A) from pages 52 to 55. The paper book submitted for this year consists of page....
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.... of the paper book reveals that the assessee received by way of interest an amount of Rs. 13,93,250 from, Gujarat State Sahakari Marketing Federation Ltd. For Loan given by the society for purchase of groundnut, groundnut seeds, (HPS) and Til, etc. The CIT(A) granted deduction under s. 80P(2)(d) on the aforesaid amount of interest of Rs. 13,93,250 received from said Marketing Federation. In our view the nature of interest income received by the assessee from Gujarat Sate Sahakari Marketing Federation Ltd. for loan given for the purchase of goods on their behalf would clearly come within the scope of, exemption provided under s. 80P(2)(d). The funds provided by the society for purchase of goods on behalf of the said Federation would be treated as investments with the other co-operative society and interest income derived therefrom will be eligible for grant of exemption under this section. This view is fully fortified by the decision of Hon'ble Supreme Court in the case of CIT v. U.P. Co-operative Federation Ltd. [1989] 176 ITR 435. It will be worthwhile to reproduce the findings given by the Hon'ble Supreme Court on page 441: "There can be no dispute on the conclusion reached by....
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....net amount of income in this interest account amounting to Rs. 2,37,210 should be held to be eligible for grant of deduction under this section. The provisions of section 14(3)(iii) of IT Act, 1922 provided exemption in respect of interest and dividends derived from its investments with any other co-operative society. Section 14 of IT Act, 1922 dealt with exemptions of general nature and was not a section appearing under the chapter of deductions like section 80P appearing in Chapter VI-A in the IT Act, 1961. Chapter VI-A of the IT Act, 1961 provides for deductions to be made in computing total income. Prior to introduction of section 80AA and section 80AB various High Courts had held that in the absence of express statutory indication to the contrary, the deductions allowable under various sections under the chapter should be calculated with reference to the gross dividend, gross royalty etc. and not with reference to the net amount after deducting the allowable expenditure. This view was confirmed by the Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243. To supersede this view, the Finance (No. 2) Act, 1980 introduced section 80AA with retrospective effect ....
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....s. 16,40,882 which includes the interest received from Gujarat State Sahakari Marketing Federation Ltd. amounting to Rs. 13,93,250. The debits in this interest account as per page 25 of the printed balance sheet was Rs. 14,03,572. There is a net credit of only Rs. 2,37,210 in this account. We are therefore of the view that deduction under section 80P(2)(d) should be allowed only in respect of the net income from interest on such investments under section 80P(2)(d). This view is fully fortified by the decision of Hon'ble Andhra Pradesh High Court in the case of CIT v. Anakapalli Co-operative Marketing Society [1989] 175 ITR 584. The relief granted by the CIT(A) amounting to Rs. 13,93,250 is accordingly reduced to only Rs. 2,37,210. 7. Now we will consider Revenue's appeal for asst. yr. 1983-84. 7.1 Ground No. 1 is same as ground No. 1 of Appeal for asst. yr 1982-83. The order of the CIT(A) granting relief under s. 80P(2)(iv) on sale of fertilisers, rajdan, etc., to its members is held to be valid. The ITO is directed to compute the amount of deduction allowable under this provision as per findings given in ground NO. 1 of Revenue's appeal for asst. yr. 1982-83. 8. Ground No....
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....learned representatives and after going through the relevant details and resolution passed by the society, we are of the view that the amount of bonus paid to the staff amounting to Rs. 13,000 and Rs. 20,585 in these two year respectively are allowable as business expenditure, in view of second proviso to s. 36(1)(ii) r/w judgment of Hon'ble Supreme Court in the case of Shahzada Nand & Sons v. CIT [1977] 108 ITR 358. The ITO is directed to allow deduction in respect of the same. 12. The second ground of cross objection in both these years relate to assessee's claim for grant of deduction under s. 80P(2)(a)(i) in respect of interest received from member co-operative societies for providing credit facilities to the members. The deduction claimed in asst. yr. 1982-83 was Rs. 12,59,515 and Rs. 14,90,037 in asst. yr. 1983-84. A perusal of page 23 of the printed balance sheet for asst. yr. 1982-83 reveals that debit in this interest account was Rs. 21,52,441. The credit in this interest account was Rs. 12,59,515. Thus there was a net debit in the said interest account amounting to Rs. 8,92,936 in asst. yr. 1982-83. Similarly in asst. yr. 1983-84 relief of Rs. 14,90,037 has been claime....
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....oss objections submitted by the assessee for both these years are partly allowed. 15. Now we will deal with Revenue's appeal No. 392 relating to penalty under sw. 271(1)(a) and the cross objection No. 181 submitted by the assessee in relation to the aforesaid penalty matter for asst. yr. 1982-83. 15.1 The return of income for aforesaid year was due on 30th June, 1982 but the same was actually submitted on 12th April, 1984. The ITO levied penalty for default of 33 completed months at the rate of 2 per cent per month which worked out to Rs. 1,63,920. The ITO vide hid order under s. 154 dt. 8th July, 1987 reduced the penalty to Rs. 94,378 for a default of 19 completed months after taking into consideration the fact that the assessee was allowed to file the return of income upto 31st Aug., 1982. The CIT(A) held that the penalty levied by the ITO appears to be correct and he, therefore, confirmed the same. He however, directed the ITO to recompute the amount of penalty after giving effect to the appellate order passed by him in the quantum appeal for the year under consideration. The Revenue has challenged the findings given by the CIT(A) directing the ITO to recompute the penalty....