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TMI Blog2013 (10) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... . Deduction in respect of interest income - Held that:- the deduction claimed in respect of sale of liquor does not fall under the categories stipulated in section 80P(2) of the Act and, therefore, the Tribunal has rightly rejected the claim of the assessee with regard to the sale of liquor. - Decided against the assessee. Deduction in respect of income from consumer goods sales and the income from liquor sales – Held that:- The Tribunal without assigning any reason has just upheld the order of the authorities. When it is not in dispute that the agricultural produce are grown by its members and fall within the category (iii) of section 80P(2) and, moreover, the goods are meant for public distribution we have been left with no other option than to set aside the order of the authorities as well as the Tribunal on this score. – Decided against the Assessee. - - - - - Dated:- 1-7-2013 - ELIPE DHARMA RAO, VENUGOPAL M., JJ. JUDGEMENT Elipe Dharma Rao J.- As the issue involved in all these three tax cases appeals are one and the same and they are inter-connected, they were heard together and disposed of by this common judgment. The appellant-society has preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax (Appeals), the assessee preferred I. T. A. Nos. 67, 68 and 69/Mds. 2005 by contending that the orders of the authorities below in reopening the assessment under section 147 and denying the exemption under section 80P of the Act in respect of the interest, received from a co-operative bank and also in refusing to allow the corresponding expenditure regarding sale of liquor and articles by public distribution system are against the provisions of law and contrary to the facts and circumstances of the case. The assessee also contended that reopening of the assessment beyond four years is not valid in law. The Tribunal, after hearing both sides, by a common order dated October 5, 2007, following the decisions of the hon'ble apex court in Asst. CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC) and Sun Engineering Works' case [1992] 198 ITR 297 (SC) rejected the appeals confirming the decision of the authorities giving rise to filing of the present tax case appeals. The following substantial questions of law are framed for consideration at the time of admission of these appeals : "1. Whether the Tribunal was right in holding that the claims made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular assessment made on the assessee and, therefore, the claim made in response to the notice under section 148 cannot be rejected at the threshold itself. In support of such contention, the learned counsel has relied on the decision of the Supreme Court reported in ITO v. K. L. Srihari, HUF [2001] 250 ITR 193 (SC). It is also contended by that the claim relating to interest received from co-operative banks and the allowance of corresponding expenditure regarding sale of liquor and articles by public distribution system against the income therefrom are legally valid in law and the rejection of the said claim on the ground that they were not part of the original return of income is unjustified. It is not in dispute that the assessee, while submitting its original return for the years 1997, 1998 and 1999, has not claimed any deduction under section 80P(2) on the interest income on investment from the Erode District Central Co-operative Bank and it is a fresh claim made after issuance of notice under section 148. When there is no dispute that the claim made by the assessee with regard to the interest income on investment was not made in the original return and only a fresh claim was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at reassessment wipes out the original assessment and the reassessment is not only confined to 'escaped assessment' or 'underassessment' but to the entire assessment for the year and starts the assessment proceedings de novo giving the right to an assessee to reagitate the matters which he had lost during the original assessment proceedings, which had acquired finality, is not only erroneous but also against the phraseology of section 147 of the Act and the object of reassessment proceedings." Ultimately, the hon'ble Supreme Court, while rejecting the fresh claims, has observed as follows (page 321) : "Keeping in view the object and purpose of the proceedings under section 147 of the Act which are for the benefit of the Revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to 'escaped income', and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment proceedings relating on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the apex level. This was also the view taken by the Kerala High Court as expressed in CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624 (Ker). The view was reversed by a Bench of the hon'ble Supreme Court in Assam Co-operative Apex Marketing Society Ltd. v. Addl. CIT [1993] 201 ITR 338 (SC) ; [1994] Supp (2) SCC 96 wherein it was held that the object of section 81 was to encourage basic level societies and that, therefore, the phrase "produce of its members" must refer to agricultural produce actually "produced by its members". It was also held that unless this interpretation were given, co-operative societies of traders would also become entitled to exemption which could not have been the intention of Parliament. As a result, of the decisions in Assam Co-operative case, who had enjoyed the deduction under section 80P till then, was reassessed to tax on its profits and the assessments in respect of the assessment years from 1986-87 to 1994-95 were reopened. Following the decision of this court in Assam Co-operative case, the Kerala High Court reversed its earlier view while deciding the issue raised by the Kerala Co-operative Marketing Federation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P of the Income-tax Act. Under the existing provision, profits derived by a co-operative society engaged in the marketing of agricultural produce of its members are fully deductible in computing the taxable income under section 80P(2)(a)(iii) of the Income-tax Act. The deduction was intended for primary co-operative societies marketing the agricultural produce of their farmer members. In the case of Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231 ITR 814 (SC) the hon'ble Supreme Court held that the use of words 'of its members' in the relevant clause would mean the agricultural produce belonging to the members and not necessary grown by them. The interpretation given to the use of the words in the provision is not in accordance with the legislative intent of the existing provision. In respect of income arising from transactions with non-members, the co-operatives are not different from other assessee, and such co-operatives are required to be taxed in the same manner as companies or other assessees engaged in marketing of agricultural produce. If an amendment in section 80P(2)(a)(iii) is not wade, it is likely to have serious impact on revenues. The propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot entitled for deduction towards the income from consumer goods has not given any reason. Simply, while calculating the deductions under the column less a sum of Rs. 20,000 was shown as deduction, which is admissible under section 80P(2)(c) wherein the cooperative society engaged in activities other than those specified in clause (a) or clause (b) are eligible for such deduction. The Commissioner of Income-tax in its order dated October 8, 2004, by observing that the claim is not in accordance with the provisions of section 80P(2) and the Assessing Officer has rightly withdrawn the allowance made under section 80P on income from sale of consumer goods has rejected the claim of the assessee. The Tribunal without assigning any reason has just upheld the order of the authorities. When it is not in dispute that the agricultural produce are grown by its members and fall within the category (iii) of section 80P(2) and, moreover, the goods are meant for public distribution we have been left with no other option than to set aside the order of the authorities as well as the Tribunal on this score. In view of the above, the second substantial question of law is partly answered in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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