2023 (1) TMI 1159 - AT - Income Tax

Disallowance of exemption claimed u/s. 80P - deduction claimed by the assessee society under section 80P(2)(a) (iii) and (iv) was wrongly claimed as the assessee society has failed to provide the complete details of its members and its activities between the members and outsiders separately and also failed to prove eligibility of specific deduction against the specific activity claim in the return of income u/s. 80P (2) - HELD THAT - CIT(A) has partly dismissed the appeal of assessee on the issue of interest income and there is no cross appeal or cross objection by the assessee in this regard. Gross profit - appellate purchase sugarcane seeds, agricultural equipments etc. and supplied them to its members as per objects of the society and profit from such activity was claimed to be exempt u/s. 80P(2)(a)(iv) - CIT(A) was right in observing that there is no evidence suggest that trading in agricultural equipment was done with persons other than the members. It is also not a case of the AO, therefore the Ld. CIT(A) rightly held that the profit earned from said activities deserve to be exempt u/s. 80P(2)(a)(iv) Grants received from State Government it was contended that the same was passed to members of the society and the Ld. CIT(A) directed to the AO ascertain if these grants have indeed been passed to the members of the society. To that extent these grants have been distributed to the members then they should be allowed to be deducted. CIT(A) has directed the AO to verify the claim of the assessee and we are unable to see any ambiguity in this regard. Commission income, entry fee, other income, patte (satte) se income , Upaj Badhotri and Vasooli Kharcha - On a careful perusal of the first appellate order we observe that the AO merely alleged that if the assessee takes sale/purchase of agricultural produce by its members then it must be shown in trading account, while no such transactions has been shown in the trading account maintained by the assessee. AO alleged that the account maintain by the assessee are defective and not audited u/s. 44AB - CIT(A) after considering the explanation and submissions of the assessee that wherein it was submitted that from the details mentioned it is clear that the activity of supply of sugarcane to the sugar mill constitute a marketing activity of sugarcane which is agricultural produce grown by the appellants members and as the appellant is cooperative society duly registered under Cooperative Society Act 1912 all the essential require for claiming deduction u/s. 80P(2)(iii) are fulfilled and thus the assessee is eligible for deduction. Assessee also drawn attention first appellate authority towards order of his predecessor for a immediately preceding year A.Y. 2013-14 which was deleted by the Ld. CIT(A), Aligarh after considering the total facts and circumstances of the case and orders of his predecessor for A.Y. 2013-14 the Ld. CIT(A) concluded that the AO has not given any cogent reason why the claim exemption should not be allowed to the appellant. In view of above we note that principle of res judicata does not apply of tax proceedings, however rule of consistency is always respected therefore the Ld. CIT(A) was right in allowing claim of assessee u/s. 80P(2)(a) (iii) - No ambiguity perversity for any valid reason to interfere with the same. Allowance of cheque book fee - CIT(A) right noted that the appellant is providing credit facilities to its members for that purpose cheque books are issued to the members therefore cheque book fee received by the assessee is incidental to the business of providing credit facilities to the members therefore this amount was also rightly allowed u/s. 80P(2) (a)(iii) . CIT(A) was right in directing the AO to verify the amounts of grants Anudhan Keetnashak and Anudan Krishi Yantra received from State Government to ascertain if these grants have been indeed to passed to the members of the society and the amount so passed was allowed to be deducted. We are also in the agreement with the conclusion drawn by the Ld. CIT(A) that the claim of assessee regarding commission income, entry fee, other income, patte (satte) se income, Upaj Badhotri and Vasooli Kharcha are incidental receipts relating to the business of marketing of agricultural produce of the members therefore the receipt from said heads is eligible for deduction u/s. 80P(2)(a)(iii) Assessee has claimed u/s. 80P(2) only on the net profit amount and not gross commission and other incomes therefore the AO was not right in denying the claim of assessee on the basis of quantum of sale of sugar cane and commission. Such kind of allegation could be made in the case of showing or declaring lesser commission in comparison to the quantum of sale but when the assessee is disclosing entire commission income and simultaneously disclosing sale of sugarcane then as per submissions of the assessee is not only undertaking purchase of sugarcane but also taking care of the entire process right from showing sugarcane seeds to procuring crops grown by its members and for entire activities supervise by Cane Commissioner of State Government who grants required approval and the supply of sugarcane is made to the sugar mills nominated by the Sugar Board. In this situation the showing of higher commission income cannot be basis of denying exemption u/s. 80P(2) of the Act. - Decided against revenue.

Summary

Issues:
Disallowance of exemption claimed u/s. 80P of the IT Act, 1961; Consideration of all grounds of disallowance of deduction made by the A.O.; Admissibility of deduction u/s. 80P(2)(a) (iii) and (iv) for the assessee society; Verification of grants received from the State Government and their distribution to members; Eligibility of specific deductions against specific activity claims; Allowance of deductions for various receipts related to the business of marketing agricultural produce; Verification of cheque book fee as incidental to providing credit facilities.

Analysis:
1. The appeal by the Revenue challenged the order of the Ld. CIT(A) regarding the disallowance of exemption claimed u/s. 80P of the IT Act, 1961. The Revenue contended that the Ld. CIT(A) erred in granting relief to the assessee without a reasonable basis. The Ld. Senior D.R. emphasized that the assessee failed to provide complete details of its activities and members, affecting the eligibility for specific deductions under section 80P(2) of the Income Tax Act, 1961.

2. The Ld. CIT(A) granted relief to the assessee on various grounds, including gross profit, grants received from the State Government, commission income, entry fee, and other incidental receipts related to marketing agricultural produce. The Ld. CIT(A) directed the AO to verify if grants were passed to society members and allowed deductions accordingly. The Ld. CIT(A) also upheld the claim of the assessee regarding commission income and other related receipts, considering them eligible for deduction under section 80P(2)(a)(iii) of the Act.

3. The Ld. CIT(A) found the cheque book fee to be incidental to providing credit facilities to members, allowing it for deduction under section 80P(2)(a)(iii). The Ld. CIT(A) directed the AO to verify the grants received from the State Government and their distribution to members, ensuring the correct allowance of deductions. The Ld. CIT(A) maintained consistency with past decisions and upheld the deductions for various receipts related to the business of marketing agricultural produce.

4. The Tribunal upheld the findings of the Ld. CIT(A), dismissing the Revenue's appeal. It concluded that the Ld. CIT(A) correctly directed the AO to verify the grants and allowed deductions for various receipts, maintaining the eligibility criteria under section 80P(2) of the Act. The Tribunal found no valid reason to interfere with the Ld. CIT(A)'s decision, upholding the allowance of deductions and dismissing the Revenue's appeal.