2012 (5) TMI 697 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment u/s 147(a) and disallowance of deduction u/s 80P(2)(a)(iii).
2. Interpretation of "marketing of agricultural produce" u/s 80P(2)(a)(iii).
3. Applicability of Rule 8 of the Income-tax Rules.

Summary:

1. Reopening of assessment u/s 147(a) and disallowance of deduction u/s 80P(2)(a)(iii):
The Revenue issued notice u/s 148 to reopen the assessment for the Assessment Years 2003-04 to 2008-09 to withdraw the deduction granted u/s 80P(2)(a)(iii). The Assessing Officer disallowed the claim, arguing that the society's activities constituted trading and manufacturing rather than mere marketing of agricultural produce.

2. Interpretation of "marketing of agricultural produce" u/s 80P(2)(a)(iii):
The Assessing Officer observed that the assessee society purchased green leaves from its members, manufactured tea, and sold it. He contended that this did not qualify as "marketing of agricultural produce" as per section 80P(2)(a)(iii). The ld. CIT(A) disagreed, holding that the manufacturing of tea falls within the processing of agricultural produce to make it suitable for marketing, thus qualifying for the deduction. The CIT(A) relied on several judicial precedents, including the Hon'ble Supreme Court's decision in Broach District Cooperative Cotton Sales, Ginning, and Pressing Society Ltd. v. CIT, which supported a broader interpretation of "marketing."

3. Applicability of Rule 8 of the Income-tax Rules:
The Assessing Officer's argument that Rule 8 applied to the case was rejected by the CIT(A), who clarified that Rule 8 pertains to the computation of income from tea grown and manufactured by the seller, which was not applicable here as the society was involved in marketing agricultural produce grown by its members.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, emphasizing that the activities of the society, including the processing of green leaves into black tea, constituted "marketing of agricultural produce" as per section 80P(2)(a)(iii). The Tribunal dismissed the Revenue's appeals, affirming the assessee's eligibility for the deduction.

Order:
The appeals of the Revenue were dismissed, and the order was pronounced on 25th May 2012 at Chennai.