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TMI Blog2017 (10) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... come would be entitled for deduction. Since, the dividend has been received from other Co-operative Societies the deduction is allowable. Deduction on account of agricultural commission income - Held that:- A perusal of the details filed by the assessee show that the appellant has earned this income from Gujarat State Co-operative Marketing Federation Ltd. for acting as an agent. The assessee company is acting as the nodal agency for all the smaller agencies at Taluka level. The provisions of the section clearly shows that the deduction is allowable for purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. The assessee has acted as a marketing agent for supplying the fertilizers to its subsidiary cooperative societies meaning thereby that the product is being marketed to the members. Since, the income has been earned from a specified activities, the deduction claimed by the assessee were rightly allowed by the learned CIT(A). The reliance is also placed on the Supreme Court’s decision in the case of appellant himself Sabarkantha Zilla Kharid Vechan Sangh Ltd. V/s. CIT [1993 (8) TMI 2 - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co - op . society is engaged many activities, brief of each activity is given as under : ( i ) Electric Section : In this section, ceiling fan, table fan of Crompton Greaves, Bajaj tube - light, lamp, all the items related to lightning, motors for irrigation and flour factory, mixture, iron, Electric and gas geezers, all light fittings related to Anchor and Welcon Co . furniture, fuse, changeover switch etc is sold here . ( ii ) Cloth Section : The assessee is engaged in the sale of suiting and shirting of Siyaram . Also suiting, shirting, ready - made pants, Shirt, T - Shift of different mills is sold . Pillow covers, sheets, sofa tapestry, curtains, carpet shawl, blankets, sweaters, muffler - cap socks, umbrella, rain - coat etc is sold in cloth department . ( iii ) Provision section : All types of provision items such as grains, pulses, oil, sugar jiggery, dry fruit, garam masala, tea, toothpaste, brush, soap, chocolate, talcum power, biscuits, hair oil, Eveready torch and power and many other items related to house - hold are sold in this section . ( iv ) Pesticides Section : In this department all typ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 should not be disallowed and added the total income . The relevant portion of the show - cause notice is reproduced as under : Please refer to the above . 2 . On verification of annual report it is noticed that the activities carried out by you not fall within the ambit of co - operative society, you are therefore requested to show - cause as to why the deduction claimed u / s . 80P of Rs . 39,15,975 /- should not be disallowed and added to your total income . In response, the assessee furnished a letter dated 06 / 01 / 2014 which is inter - alia reproduced as under : With reference to above we beg to state as under : 1 . We have received the show cause notice [ SCN ] dated 06 / 01 / 2014 stating that the activities carried out by Co . op . society does not fall within the ambit of co - op society and therefore why the deduction of Rs . 36,15,975 /- claimed under section 80P be not disallowed . In this connection, it may please noted that the assessee is district apex co . op society and is carrying on the activities for the benefit of its members . The attention is drawn to reply to Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore the question of disallowance as proposed does not arise . It is again reiterated that such deduction is granted to the assessee society right from its inception i . e . since more than 62 years . You are therefore requested to allow the claim and drop the show cause notice . 4 . 3 The reply of the assessee is duly considered but is not acceptable . It is seen from the annual report that the assessee is neither a Primary Agricultural Credit Society ( PACS ) nor Primary cooperative Agricultural and Rural Development Bank ( PCARDB ) - It is noted from records that range of assessee's activities is not confined to one taluka but is extended to entire Sabarkantha district and, thus, in view of Explanation to section 80P ( 4 ) , assessee is not PCARDB - Further primary object as well as activities of assessee is not confined to agricultural purposes but other purposes also . In view of explanation to section 80P assessee is not Primary Co - operative Agricultural and Rural Development bank . Further, primary object as well as activities of assessee is not confined to agricultural purpose b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AO has determined the income of Rs . 39,15,976 /- as against returned income of Rs . Nil on the ground that the income is derived from the activities which is not eligible for deduction under Section 80P . 2 . In this connection, it may please be noted that the AO has failed to appreciate the nature of business and the claim made by the assessee in the computation of income . The learned AO has treated the assessee as Primary Agricultural Credit Society [ PACS ] and Primary Co . op . Agricultural and Rural Development Bank [ PCARDB ]. Similarly, the assessee has discussed in the assessment order that the assessee is a Co . op . Credit Society . The learned AO has failed to appreciate the nature of business . The assessee submitted the reply to show - cause notice by letter dated 06 / 01 / 2014 reproduced in the assessment order on Page No . 5 explaining the nature of business and the nature of deductions claimed . 3 . The assessee is a sales and purchases union . It makes the products both agriculture and non - agriculture and also to the members and non - members . The income is taxable . The income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee has let out the godown for the purpose of marketing the commodities . Some of the main tenants are given below with the purpose specified against his name . Sr. No. Name of party to whom the godown is let out Purpose 01. KRIBHCO For marketing the fertilizers and seeds 02. Gujarat Sate Seeds Corporation Ltd. For marketing seeds 03. Krushi Care For marketing organic fertilizers 04. Benani Cement For marketing cement for agriculture purpose 05. IFFCO For marketing the fertilizers 06. Asian Tradelink For marketing cattle feed 07. Mahakali Corporation For marketing cattle feed 08. Vinayak Corporation For marketing cattle feed 09. Ambica Tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We submit herewith the breakup of godown rent as desired by your honour as under : Sr No. Name of party to whom the godown is let out Purpose Amount Rs. 1 KRIBHCO For marketing the fertilizers and seeds 4,91,700 2 Gujarat Sate Seeds Corporation Ltd. For marketing seeds 2,35,000 3 Krushi Care For marketing organic fertilizers 1,31,200 4 Benani Cement For marketing cement for agriculture purpose 3,36,000 5 IFFCO For marketing the fertilizers 18,480 6 Asian Tradelink For marketing cattle feed 1,80,000 7 Mahakali Corporation For marketing cattle feed 2,94,000 8 Vinayak Corporation For ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate on amount on which no tax is payable . Accordingly the assesses has deducted the expenses on estimated basis which is accepted by the AQ in the past . It is hoped that the explanation offered will be satisfactory . 2.2 Finally assessee claimed u/s.80P(2) of the I.T. Act was disallowed and income of ₹ 39,15,976/- was assessed. 3. Against the said order, assessee preferred first statutory appeal before the learned CIT(A), who partly allowed the appeal of the assessee. 4. We have gone through the relevant record and impugned order. Learned AR stated that claim of the assessee has been allowed from the date of inspection since sixty two years. 5. So far Ground No.1 is concerned. In this regard, assessee submitted that learned CIT(A) has coterminous power and he can decide the matter on his own, after appreciating the facts and circumstances of the case. 5.2 In our opinion, Ground No.1 is not sustainable and dismissed this Ground of department. 6. So far Ground No.2 is concerned. In this regard, the appellant has earned income from godown rent amounting to ₹ 23,54,433/- and has claimed deduction u/s.80P(2)(e). The appellant has explained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keting Federation Ltd. for acting as an agent. The assessee company is acting as the nodal agency for all the smaller agencies at Taluka level. The provisions of the section clearly shows that the deduction is allowable for purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. The assessee has acted as a marketing agent for supplying the fertilizers to its subsidiary cooperative societies meaning thereby that the product is being marketed to the members. Since, the income has been earned from a specified activities, the deduction claimed by the assessee were rightly allowed by the learned CIT(A). The reliance is also placed on the Supreme Court s decision in the case of appellant himself Sabarkantha Zilla Kharid Vechan Sangh Ltd. V/s. CIT 203 ITR 1027. It is also noted that the AO has disallowed the estimated expenditure disallowed by the appellant from the activity of commission as it has completely disallowed the claim. The claim made by the assessee was justified as the net profit was rightly allowed as deduction and not the gross income. 8.2 In our considered opinion, learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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