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2019 (9) TMI 978 - AT - Income TaxEligibility for deduction u/s 80P(2)(b) - primarily objects and activities of the appellant society - HELD THAT - Admittedly, it appears that the assessee is not the primary co-operative society but its activities are depending upon the primary co-operative societies. As such the primary co-operative societies can also not operate without the assessee being a district level society. As such the activities of the assessee are interlinked with the activities of the primary co-operative societies. The primary co-operative societies will be eligible only when they supply milk to a federal co-operative society. To our mind, the assessee is not federal co-operative society to whom these primary cooperative societies are supplying the milk. Thus, even the primary cooperative societies in the given facts and circumstances will not be eligible to enjoy the benefit of the deduction provided under section 80P(2)(b) of the Act. Thus in such a situation we are of the view that the provisions of section 80P(2)(b) of the Act should be read liberally. 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. Therefore we are of the view that claim of the assessee should be allowed on the basis of principles of consistency. We are of the view that the assessee is eligible for deduction under section 80P(2)(b) of the Act. Accordingly we reverse the order of the authorities below. AO is directed to allow the claim of the assessee as per the provisions of law. Hence the ground of appeal of the assessee is allowed. Disallowance on account of delay in deposit in the contribution of employees Provident fund and employees state insurance - HELD THAT - Issue is covered against the assessee by the Hon ble Gujarat High Court in the case of CIT vs. GSTRC 2014 (1) TMI 502 - GUJARAT HIGH COURT 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 - Decided against assessee Addition u/s 40A(3) - Disallowance on account of cash payment exceeding ₹20,000 - HELD THAT - As 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. Treating the profit on sale of land as business income and without allowing the indexation benefit under section 48 - HELD THAT - The facts regarding the impugned dispute are arising from the order of the AO. But there was no discussion in the order of the learned CIT (A). We also note that the AO has not observed the provisions of section 50C and 48 of the Act. Therefore we restore the issue to the file of the AO for fresh/de-novo 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. Non providing deduction of interest u/s 80P(2)(d) - whether the assessee is entitled for the deduction on account of interest income on the deposits made with the nationalized banks/private banks/co-operative banks? - HELD THAT - There is no mention about any interest income from whatever source. Therefore, we are not in agreement with the argument of the learned counsel for the assessee that the assessee is eligible for the deduction of interest income under section 80P(2)(b). Assessee can claim the deduction of interest /dividend income if it is derived from the investments with any other co-operative society. Thus the possibility of claiming the deduction under section 80P(2)(d) of the Act on account of interest income from the deposits made with the nationalized/private banks is ruled out. 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. See THE SURAT VANKAR SAHAKARI SANGH LTD. VERSUS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5. 2016 (7) TMI 1217 - GUJARAT HIGH COURT We are also conscious to the fact that the assessee has shown interest income as part of the business income, therefore if the same is treated as income from other sources, then the same should be reduced from the business income. But the AO has not done so. Thus in the given facts circumstances, the amount of interest income has been added twice resulting the double addition to the total income of the assessee. Therefore, we direct the AO to be careful in effect giving order. We also make it clear that in case there arises some loss from the activity carried on by the assessee i.e. procuring and supplying the milk on account of the adjustment as discussed above, then such loss can be set off against the income from any other head as per the provisions of law. In view of the above, we hold that the assessee cannot claim the benefit of section 80P(2)(d) of the Act in respect of the interest earned by it from the deposits made with the nationalized/private banks. But the assessee is eligible for deduction under section 80P(2)(d) of the Act in respect of the interest income on the deposits made with the co-operative bank. We direct the AO, while working out the amount of disallowance with respect to the interest income earned on the deposits made with the nationalized/private banks, to allow the direct corresponding expenses incurred by the assessee with respect to such income. Accordingly, for this limited purpose, we are setting aside the impugned issue to the file of the AO for fresh verification/examination the amount of disallowance under section 80P(2)(d) of the Act as per the provisions of law after providing a reasonable opportunity of being heard to the assessee. Hence the ground of appeal of the assessee is partly allowed for the statistical purposes.
Issues Involved:
1. Disallowance of deduction under section 80P(2)(b) of the Income Tax Act, 1961. 2. Disallowance of contribution to Employees' Provident Fund and Employees' State Insurance under section 43B. 3. Disallowance of expenses under section 40A(3) for cash payments exceeding ?20,000. 4. Disallowance for non-deduction of TDS under section 194J. 5. Treatment of profit on sale of land as business income without allowing indexation benefit under section 48. 6. Incorrect assessment of interest income under "Business & Profession" and "Income from other sources," leading to double taxation. 7. Disallowance of deduction of interest income under section 80P(2)(d). 8. Disallowance of deduction of dividend income under section 80P(2)(d). Issue-wise Detailed Analysis: 1. Disallowance of Deduction Under Section 80P(2)(b): The assessee, a district-level cooperative society, claimed a deduction under section 80P(2)(b) for supplying milk procured from primary cooperative societies to Mother Dairy. The AO disallowed the claim, stating the deduction is available only to primary cooperative societies. The CIT(A) upheld this view, noting the assessee is a district-level society, not a primary society. However, the Tribunal, considering the interlinked activities of the primary and district-level societies and the consistent allowance of the deduction in previous years, allowed the deduction under section 80P(2)(b). 2. Disallowance of Contribution to Employees' Provident Fund and Employees' State Insurance: The assessee's contributions to Provident Fund and State Insurance were disallowed under section 43B for not being deposited within the due date prescribed under section 36(1)(va). The Tribunal upheld the disallowance, referencing the Gujarat High Court's decision in CIT vs. GSTRC, which mandates adherence to the due dates. 3. Disallowance of Expenses Under Section 40A(3): The AO disallowed ?6,13,744 for cash payments exceeding ?20,000, violating section 40A(3). The CIT(A) confirmed the disallowance. The Tribunal, however, restored the issue to the AO for fresh adjudication, as the assessee provided vouchers showing payments below ?20,000, which were not previously considered. 4. Disallowance for Non-deduction of TDS Under Section 194J: The assessee did not press this issue, and the Tribunal dismissed it as not pressed. 5. Treatment of Profit on Sale of Land as Business Income: The AO treated the profit from the sale of land as business income without allowing indexation under section 48. The Tribunal restored the issue to the AO for fresh adjudication, noting the lack of discussion in the CIT(A)'s order and the need to consider sections 50C and 48. 6. Incorrect Assessment of Interest Income: The AO assessed interest income both as part of net profit from "Business & Profession" and under "Income from other sources," leading to double taxation. The Tribunal noted the need for careful adjustment to avoid double addition and directed the AO to ensure proper computation. 7. Disallowance of Deduction of Interest Income Under Section 80P(2)(d): The AO disallowed the deduction of interest income from deposits with nationalized/private banks under section 80P(2)(d). The Tribunal upheld this disallowance but allowed the deduction for interest income from cooperative banks, referencing the Gujarat High Court's decision in State Bank of India vs. CIT. The Tribunal also directed the AO to allow direct corresponding expenses incurred to earn the interest income. 8. Disallowance of Deduction of Dividend Income Under Section 80P(2)(d): The Tribunal did not specifically address this issue in the detailed analysis but implied that similar principles applied as in the interest income disallowance. Combined Results: Both appeals of the assessee were partly allowed for statistical purposes, with specific issues remanded to the AO for fresh adjudication.
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