2016 (7) TMI 823 - AT - Income Tax

Deduction under section 80P denied - Held that - CIT(A) in the Asstt.Year 2007-08 was of the view that deduction under section 80P would not be admissible on the profit arisen to the assessee on trading of nonagriculture items either sold to its members or non-members. This deduction was not allowable and not claimed. On this premise the ld.CIT(A) has decided the issue. This aspect was brought to the notice of the ld.CIT(A) in the present assessment year also but no cognizance was taken. Faced with this situation I set aside both the orders and restore this issue to the file of the AO for re-adjudication. The ld.AO shall examine the facts in the light of the Tribunal s order passed in the Asstt.Year 2007-08.

Summary

Issues:
1. Denial of deduction under section 80P of the Income Tax Act.
2. Application of Rule 3 for working out deduction under section 80P.
3. Discrepancy in treatment of non-agricultural trading activities.
4. Failure to consider the Tribunal's order from a previous year.

Issue 1: The appellant contested the denial of deduction under section 80P of the Income Tax Act amounting to ?16,22,570 by the Assessing Officer (AO). The AO disallowed the deduction based on interest income from fixed deposits with nationalized banks, considering it as non-agricultural income. The appellant, a cooperative society, primarily engaged in marketing agricultural products, claimed the deduction. The ld.CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

Issue 2: The AO invoked Rule 3 to apportion the turnover between agricultural and non-agricultural activities, resulting in the disallowance of the claimed deduction. The ld.CIT(A) re-evaluated the contentions and granted the deduction under section 80P(2) of the Income Tax Act. However, the appellant pointed out that the ld.CIT(A) failed to consider the order of his predecessor in a previous assessment year, which had allowed the deduction under similar circumstances.

Issue 3: The Tribunal in the previous assessment year had held that the deduction under section 80P would not be applicable to profits from trading non-agricultural items, whether sold to members or non-members. This aspect was not considered by the ld.CIT(A) in the present assessment year, leading to a discrepancy in treatment. Consequently, the Tribunal set aside both orders and remanded the issue to the AO for re-evaluation in light of the previous year's Tribunal order.

Issue 4: The Tribunal's decision emphasized the importance of considering past orders and maintaining consistency in decisions across assessment years. The Tribunal directed the AO to re-examine the facts in alignment with the Tribunal's order from the previous assessment year. Ultimately, the appeal of the assessee was allowed for statistical purposes, highlighting the need for adherence to established precedents and legal interpretations in tax matters.