Puna Kumbharia Co.Op.Fruit & Vegetable ... vs Department Of Income Tax

This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-IV, Surat ('CIT(A)' in short) dated 30/12/2010 pertaining to Assessment Year (AY) 2007-08. The Revenue has raised the following grounds of appeal:-

ITA No.1082 /Ahd/2011 ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

Asst.Year - 2007-08 -2-

[1] On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Surat has erred in re-computing the total income after deduction u/s.80P of Rs.10,81,712/- as against Rs.50,04,034/- determined by the A.O. after making disallowing on account of :

i. Disallowance of fertilizer income Rs. 28224/-

ii. Disallowance of income earned on account f petrol/CNG Rs. 2337510/- iii.Disallowance of rent income Rs. 1824305/- iv.Disallowance of veg.commission income Rs. 447430/- v. Disallowance of interest of FD Rs. 376565/- ------------------ Total Rs. 5004034/- -----------------

[2] On the facts and in the circumstances of the case, and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer.

[3] It is, therefore, prayed that the order of the Ld.CIT(A)-IV, Surat may be set aside and that of the Assessing Officer restored.

2. Briefly stated facts are that the case of the assessee was reopened for assessment and the assessment u/s.143(3) r.w.s.147 of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 31/12/2009. While framing the assessment, the Assessing Officer (AO in short) made disallowance of deduction on various items claimed u/s.80P(2)(a)(iii) of the Act. The AO made disallowance of Rs.50,04,034/-. The assessee feeling aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee held that the total deduction u/s.80-P of the ITA No.1082 /Ahd/2011 ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

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Act is admissible to the appellant to the extent of Rs.4,73,695/-. Aggrieved by the order of the ld.CIT(A), now the Revenue is in appeal before us.

3. The only effective ground in this appeal is against the disallowances of deduction claimed u/s.80P(2) of the Act. The ld.Sr.DR Shri B.L.Yadav vehemently argued that the ld.CIT(A) was not justified in deleting the disallowances. He reiterated the submissions as were made in the statement of facts. He submitted that the ld.CIT(A) has not appreciated that the assessee has failed to explain the justification for claiming deduction u/s.80P of the Act.

3.1. On the contrary, the ld.counsel for the assessee supported the order of the ld.CIT(A).

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find the ld.CIT(A) has given findings on fact in paras-3.1 to 5.1 of his order are as under:-

"3.1.The correct method for determining the income of the appellant which is a co-operative society would be to first determine its gross total income from all activities carried out by it and then allowing deduction u/s.80P(2) of the act, to the extent it pertains to eligible activities. The determination of taxable income by the A.O. wherein he has simply considered profits from different ineligible activities as taxable income is incorrect. With a view to determine the correct income of the appellant, the accounts were perused which show that the appellant had claimed several capital expenses and made provisions ITA No.1082 /Ahd/2011 ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

Asst.Year - 2007-08 -4- and reserves in its accounts which were inadmissible and should have been disallowed for determining the gross total income of the appellant. It was further observed that income from CNG out let and petrol/diesel distribution out let were situated on the highway and opened to every customer irrespective of the fact whether he was a member or not. These outlets seem to be situated on the highway as the photographs on the printed accounts show them selling fuel to Auto-riks has and motor-cycles. This activity was clearly ineligible for deduction u/s. 80P(2) of the act as it did not fall within provisions of section 80P(2)(a)(iii) of the act. (marketing of produce grown by members) or section 80P(2)(a)(iv) of the act (procurement of agriculture implements for supplying them to its members). Similarly, income from premises given on rent to Bank of Baroda, M/s. Dhiraj Sons (Mega Stores) and Baroda Swarojgar Vikas Sansthan is also not eligible for deduction u/s. 80P of the act as it does not fulfill the criteria prescribed u/s. 80P(2)(e) and

(f) of the act.

3.2. Based on the above the fresh computation of income of the appellant was done adding back the inadmissible expenses in the nature of building fund provisions, property expenses, different reserves, stamp duty expenses, donation, provision for new land compound, compound provision, property tax, TDS, building funds, Sabar Gram Project provision, etc and computing income from property rent under house property income and interest and dividend as income from other sources. It was observed that assessee was eligible for deduction u/s. 80P(2)(d) of the act of Rs.3,92,471/- (interest and dividend earned from other co-operatives including bank) and 80P(2)(c) of Rs.50,000/- and. 80P(2)(iv) of the act, Rs.28,224/- (purchase and sales of fertilizers for members). No deduction u/s. 80P(2)(a)(iii) of the act - sale of produce of members was available since this activity had resulted in loss to the appellant. The assessee was given a show cause in terms of provisions of section 251(2) of the Act as to why his income should not be determined in this way. The appellant was also required to show as to whether payment of provident fund and other similar dues and taxes were actually made or not with a view to determine their admissibility.

4. In its reply to the show cause, it was submitted by the appellant that taxes had been duly paid and PF, ESI deposited. Xerox of these were submitted. The appellant submitted its computation of total income determining its gross total income from the activity at Rs. 13,44,132/- and after claiming deduction of Rs.1013074/- arrived at its taxable income of Rs.331058/-. The deduction claimed under Chapter-VIA in this revised computation by the assessee amounting to Rs.10,13,074/- comprises :-

ITA No.1082 /Ahd/2011 ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

Asst.Year - 2007-08 -5-

i) Agricultural implements for supply to members Rs. 28,224/- u/s 80P(2)(a)(iv).

ii) Interest and dividend from other co-operative society Rs. 95,471/- u/s 80P(2)(d).

iii) Marketing of Agricultural produce of members Rs. 5,39,379/- u/s 80P(2)(a)(iii).

iv) Basic deduction Rs. 50,000/- u/s 80P(2)(c).

Total... Rs. 10,13,074/-

5. It is seen from the computation of income submitted by the appellant's A.R. during the course of appeal in response to the show cause that it had not disallowed the following inadmissible :-

Compound provision Rs.50,000/- Land Development Rs. 7,650/- Construction contribution Rs.40,825/- Municipal Taxes pertaining to house property Rs.55,400/-

Total.. Rs.l,54,875/-

5.1. In addition to this the appellant had wrongly reduced the items of' Municipal Taxes pertaining to house properties as against adding it back. This would increase the income from business activity further by Rs.56,400/-. Therefore the income determined from its business and profession would be Rs.77,598/- (Loss) as against loss of Rs.2,88,873/- shown by the appellant [ - Rs.2,88,873/- + Rs.l,54,875/- + Rs.56,400/-]. The gross total income of the appellant would be higher by an amount of Rs.211275/- than what has been shown by the appellant in its computation of income submitted in response to the show cause. The gross total income of the appellant is therefore taken at Rs.1555407/- as against Rs.1344132/- determined by him. Coming to the deductions claimed by the appellant in its revised computation before me, the deductions of Rs.28,224/- u/s. 80P(2)(a)(iv) of the act, Rs.50,000/- u/s. 80P(2)(c) of the act and Rs.395471/- u/s. 80P(2)(d) of the act are held as admissible to the appellant. Its claim of deduction of Rs.539379/- u/s. 80P(2)(iii) of the act in respect of vegetable commission is inadmissible as there was no profit from this activity. This activity has resulted in a loss which has wiped out the profits generated by the CNG and Petrol business. The appellant is therefore not eligible for any deduction u/s. 80P(2)(a)(iii) of the act. Its claim that no expenditure relating to commission income received from members is debited in the P. & L. account is untenable. All expenses pertaining to all other activities have been accounted for separately, i.e. in the accounts maintained individually for each activity. The expenses in the P. & L. account pertained only to the vegetable commission activity. The total deduction u/s. 80P of the act is admissible to the appellant is only Rs.473695/- [ Rs.28,224/- + Rs.3,95,471/- + Rs.50,000/-]. The total taxable income ITA No.1082 /Ahd/2011 ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

Asst.Year - 2007-08 -6- of the appellant which is gross total income less deduction u/s. 80P(2) of the act works out to Rs.10,81,712/- [ Rs.15,55,407/- - Rs.4,73,695/-). The total taxable income is determined at Rs.1081710/-. The A.O. is directed to consider this as taxable income of the appellant."

5. The aforesaid findings of the ld.CIT(A) is not controverted by the Revenue by placing any material contrary to the finding on record, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby confirmed. Thus, ground Nos.1(i) to (v) of Revenue's appeal are rejected.

6. Ground Nos.2 & 3 are general in nature which require no independent adjudication.

7. In the result, Revenue's appeal stands dismissed.

Order pronounced in the Court on Thursday, the 25th day of June, 2015 at Ahmedabad.

Sd/- Sd/- (अ नल चतव ु द ) (कुल भारत) लेखा सद य या यक सद य ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 25/ 06 /2015

ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS ITA No.1082 /Ahd/2011

ITO vs. The Puna Kumbharia Co-op.Fruit & Vegetable Soc.Ltd.

Asst.Year - 2007-08 -7-

आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :

1. अपीलाथ% / The Appellant

2. &'यथ% / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आयु6त(अपील) / The CIT(A)-IV, Surat

5. 7वभागीय & त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स'या7पत & त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 18.6.15 (dictation-pad 4 + pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ... 19.6.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......25.6.15

7. Date on which the file goes to the Bench Clerk.....................25.6.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................