2019 (10) TMI 316 - AT - Income Tax

Claim of deduction u/s 80P(2)(b) - assessee has sold the milk at a higher rate to outside parties - HELD THAT - We find force in the argument of the Ld.A.R. that it is not a case where assessee has sold the milk at a higher rate to outside parties, in fact assessee was getting higher price on sale of milk to Federal Society in addition to undisputed benefit of deduction u/s 80P(2)(b). It is not a case where assessee has suo-moto volunteered to sell milk in the open market. It was after the denial of Federal Society to accept the milk that the assessee was constrained to sell the milk in open market at a price lower than the price offered by Federal Society. The Hon ble Apex Court in the case of Bajaj Tempo Limited Vs. CIT 1992 (4) TMI 4 - SUPREME COURT has held that a provision in a taxing statute which grants incentives to promote growth and development should be construed liberally so as to advance the objective of the section and not to frustrate it. It is an undisputed position that provisions of deduction u/s 80P is a provision to promote development of Co-operative Sector. Considering the totality of the aforesaid facts and relying on the aforesaid decision of Hon ble Apex Court cited herein we are of the view that assessee is eligible for deduction u/s 80P2(b) on the milk sold to outside parties. The assessee would be eligible for the benefit of deduction u/s 80P(2)(b) on sale of milk at a price at which it has actually sold in the open market or price at which milk is sold to Federal Society, whichever is less. For the month of August, 2008, there is no sale of milk by the assessee to the Federal Society and the sale of ₹ 1,24,34,116/- is only to outsiders, hence, we are of the view that benefit of deduction should not be extended on sale of milk for the month of August, 2008. We therefore direct the AO to re-compute the deduction u/s 80P(2)(b) of the Act by excluding the sale made to outsiders in the month of August, 2009

Summary

Issues:
Claim of deduction under section 80P(2)(b) of the Income Tax Act, 1961 for a Co-operative Society engaged in the sale of milk products.

Analysis:
1. The appeal filed by the assessee challenges the order of the Commissioner of Income Tax (Appeal) for the assessment year 2009-10. The assessee, a Co-operative Society, electronically filed its return of income claiming deduction under section 80P(2) of the Act. The Assessing Officer (AO) partially disallowed the deduction claimed under section 80P(2)(b) as the society sold milk to parties not covered under the provision. The Commissioner upheld the AO's decision.

2. The main contention was whether the assessee, a primary Co-operative Society supplying milk, was eligible for the deduction under section 80P(2)(b). The Commissioner noted that the society sold a significant portion of milk to private parties, not covered under the provision. The Commissioner held that the society did not comply with the requirements of section 80P(2)(b) to claim the full deduction, as it sold a major portion of milk to private parties.

3. During the appeal before the ITAT, the assessee argued that it was forced to sell milk to outside parties as the Federal Society could not accept the entire quantity due to processing capacity constraints. The ITAT observed that the price charged to outside parties was lower than that charged to the Federal Society, except in one month. Relying on the decision in Bajaj Tempo Limited Vs. CIT, the ITAT held that the deduction under section 80P should be construed liberally to promote growth in the Co-operative Sector.

4. The ITAT allowed the appeal partly, directing the AO to re-compute the deduction by excluding sales made to outsiders in a specific month. The alternate ground raised by the assessee became academic and was dismissed. The ITAT's decision favored the assessee, granting partial relief and emphasizing the liberal interpretation of tax provisions to encourage development in the Co-operative Sector.

5. In conclusion, the ITAT's judgment in the matter of claiming deduction under section 80P(2)(b) for a Co-operative Society selling milk products highlighted the importance of interpreting tax provisions liberally to promote growth and development in the relevant sector, ultimately providing partial relief to the assessee.