9911796707
TMI Blog1991 (7) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The CIT(A) decided the quantum appeals for these two years vide consolidated order dt. 9th Dec.,1987.The Revenue has preferred appeals against the order of the CIT(A) relating to quantum appeal for both these years, which are marked as ITA No.393 and 394. The assessee has submitted cross objections which are marked as C.O. Nos. 182 and 183. The ITO also imposed penalty under s. 271(1)(a) for asst. yr. 1982-83 amounting to Rs. 1,63,920 which was subsequently rectified and reduced to Rs. 94.378. This order of the ITO was confirmed by the CIT(A). He, however, directed the ITO to recompute the amount of penalty after giving effect to the appellate order passed by him in the quantum appeal. The Revenue has preferred an appeal against this order relating to penalty under s. 271(1)(a) which is marked as ITA No. 392. The assessee has submitted cross objection against the said penalty matter which is marked as C.O. No. 181. 2. We will first deal with the Revenue's appeal relating to quantum for asst. yr. 1982-83. 2.1. Ground No.1 reads as under: "The learned CIT(A) has erred in directing to work out gross profit after including sales of fertilizers, seeds, insecticides, etc., and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit derived in fertilizer account for computing the amount of exemption allowable under the aforesaid provision. 2.3 The learned counsel for the assessee contended that exemption on income derived by the society from supply of seeds, fertilizer, insecticides, light diesel, mobil oil which are solely used for direct use for agricultural purposes for running the engines installed in the farm have always been allowed to the assessee in the past as well as in the subsequent assessments. The assessee is not claiming exemption on all the petroleum products but such exemption was claimed only in respect of two items, viz., light diesel (crude) and Mobil oil directly sold to the members of the society for agriculture purposes. The income derived on sale of other petroleum products used for plying of vehicles, etc., has not been claimed. Our attention was invited towards order passed by the CIT under s. 263 for asst. yr. 1980-81 in which the CIT has himself held that the assessee is entitled to deduction in respect of income derived from sale of Fertilizer, Rajdan, Hybrid seeds, pesticides and Mobil oil aggregating to Rs. 65,716. It was contended that similar exemption has been grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of fertilizers from Total Sales 9,44,39,870 19,32,250 7,83,94,931 . Total 10,32,84,878 20,83,400 8,46,96,982 Average G.P. will be = 2.017% (Thus the G.P. on sales to members will be : 2.017 x 84,69,69,982/100=17,08,338). . . Thus the G.P. on Sales to members will be 2.017 2. The management expenses will be as under: (a) Head Office expenses net as per details filed and as per page No. 11 to 15 of paper book 20,39,651 (b) From direct purchases a/c. as per page 25 of the report & as per details filed 78,411 (c) Cotton Department as per details filed and page No. 27 of the report 20,317 (d) Expenses from vehicle expenses as per details filed and page No.25 of the report. 1,21,658 (e) Net interest considered by ITO at 8,92,926 (considered as rebate) which is actually interest as per page 23. Item No. 106 as Bank guarantee interest and for which separate rebate has been claimed. 8,92,926 (f) Total management expenses 31,52,962 3. (a) Total sales of the society as taken by ITO as total turnover of page 2 of the order: 32,29,38,335 . (b) Thus the PC.% of management expenses will be:31,52,962 x 100/32,29,38,335= 0.976 . (c) The ITO has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. No such material has been produced by the assessee, in the absence of which the CIT(A) should be have granted this deduction. 3.1 The leaned counsel for the assessee submitted that the rent was received from Gujarat Sate Co-operative Marketing Federation of which the assessee is also a member. The rent was recovered for storing groundnut, groundnut seeds and wheat. Details were also filed at page 18 and 19 of the paper book. 3.2 After considering the submissions made by the learned representatives and after going through the relevant details and orders of the learned departmental authorities we are of the view that the CIT(A) has rightly granted deduction in respect of the aforesaid amount of godown rent under s. 80P(2)(e). A perusal of the relevant details indicates that rent of Rs. 19,200 was received from Gujarat State Sahakari Marketing Federation Ltd. For storing their empty gunny bags of groundnut and groundnut seeds (HPS). Rs. 7,200 was received from "Gujarat State Sahakari Marketing Federation Ltd. for storing 416 bags of raida (raydo) from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO. The CIT(A) has clearly erred in allowing the said deduction without giving specific opportunity to the ITO. 5.3 The learned counsel for the assessee contended that the claim for this deduction is included in the printed annual account submitted before the ITO. It is incorrect to say that no such deduction was claimed before the ITO. He supported the order of the CIT(A) on this point. 5.4 We have considered the submissions made by the learned representatives. At page 40 of the printed balance sheet, it appears that a sum of Rs. 1 lakhs has been provided for by way of provision for rebate on sales. At page 4 of the paper book it has been mentioned that details of Rs. 98,862 were submitted before the CIT(A) from pages 52 to 55. The paper book submitted for this year consists of page No. 1 to 41 and page No. 42. is marked on the printed balance sheet. There are no pages marked as page No. 52 to 55. In the absence of details it was not possible for us to verify the correctness or otherwise of the view taken by the CIT(A) relating to this ground. The matter is, therefore, restored back to the ITO with a direction that if the amount of Rs. 98,862 represent remission in sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of interest income received by the assessee from Gujarat Sate Sahakari Marketing Federation Ltd. for loan given for the purchase of goods on their behalf would clearly come within the scope of, exemption provided under s. 80P(2)(d). The funds provided by the society for purchase of goods on behalf of the said Federation would be treated as investments with the other co-operative society and interest income derived therefrom will be eligible for grant of exemption under this section. This view is fully fortified by the decision of Hon'ble Supreme Court in the case of CIT v. U.P. Co-operative Federation Ltd. [1989] 176 ITR 435. It will be worthwhile to reproduce the findings given by the Hon'ble Supreme Court on page 441: "There can be no dispute on the conclusion reached by the High Court that the money provided by the assessee was by way of investment. In fact, if this money had not been made available, the business as stipulated under the scheme could not have been carried out and perhaps there would have been no business. 'Investment' has been defined in the Act. P. Ramanatha Aiyar's Law Lexicon states: "The term 'invest, is used in a sense broad enough to cover the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring under the chapter of deductions like section 80P appearing in Chapter VI-A in the IT Act, 1961. Chapter VI-A of the IT Act, 1961 provides for deductions to be made in computing total income. Prior to introduction of section 80AA and section 80AB various High Courts had held that in the absence of express statutory indication to the contrary, the deductions allowable under various sections under the chapter should be calculated with reference to the gross dividend, gross royalty etc. and not with reference to the net amount after deducting the allowable expenditure. This view was confirmed by the Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243. To supersede this view, the Finance (No. 2) Act, 1980 introduced section 80AA with retrospective effect from 1-4-1968 as regards inter corporate dividend and section 80AB with effect from 1-4-1981 as regards other receipts. The Hon'ble Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120 overruled the judgment in the case of Cloth Traders (P.) Ltd.'s case and held that the deduction under section 80M has to be calculated only with reference to the net amount after dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m interest on such investments under section 80P(2)(d). This view is fully fortified by the decision of Hon'ble Andhra Pradesh High Court in the case of CIT v. Anakapalli Co-operative Marketing Society [1989] 175 ITR 584. The relief granted by the CIT(A) amounting to Rs. 13,93,250 is accordingly reduced to only Rs. 2,37,210. 7. Now we will consider Revenue's appeal for asst. yr. 1983-84. 7.1 Ground No. 1 is same as ground No. 1 of Appeal for asst. yr 1982-83. The order of the CIT(A) granting relief under s. 80P(2)(iv) on sale of fertilisers, rajdan, etc., to its members is held to be valid. The ITO is directed to compute the amount of deduction allowable under this provision as per findings given in ground NO. 1 of Revenue's appeal for asst. yr. 1982-83. 8. Ground No. 2 deals with findings given by the CIT(A) directing the ITO to grant deduction of Rs. 2,73,055 in respect of interest received from Gujarat State Co-operative Marketing Federation Ltd. under s. 80P(2)(d). A perusal of the relevant details submitted at page 17 of the proper book reveals that total interest credited in the said interest account was Rs. 13,82,307 and the corresponding debit in this interest account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ITO is directed to allow deduction in respect of the same. 12. The second ground of cross objection in both these years relate to assessee's claim for grant of deduction under s. 80P(2)(a)(i) in respect of interest received from member co-operative societies for providing credit facilities to the members. The deduction claimed in asst. yr. 1982-83 was Rs. 12,59,515 and Rs. 14,90,037 in asst. yr. 1983-84. A perusal of page 23 of the printed balance sheet for asst. yr. 1982-83 reveals that debit in this interest account was Rs. 21,52,441. The credit in this interest account was Rs. 12,59,515. Thus there was a net debit in the said interest account amounting to Rs. 8,92,936 in asst. yr. 1982-83. Similarly in asst. yr. 1983-84 relief of Rs. 14,90,037 has been claimed under s. 80P(2)(a)(i) in respect of interest on bank guarantee. A perusal of page 25 of the printed balance sheet reveals that total debits in bank guarantee interest is Rs. 23,97,245 while the corresponding credits are only Rs. 14,90,307. Thus there is a net deficit in bank guarantee interest account. In view of the fact that there is a deficit in the said interest account, the assessee is not entitled to grant of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984. The ITO levied penalty for default of 33 completed months at the rate of 2 per cent per month which worked out to Rs. 1,63,920. The ITO vide hid order under s. 154 dt. 8th July, 1987 reduced the penalty to Rs. 94,378 for a default of 19 completed months after taking into consideration the fact that the assessee was allowed to file the return of income upto 31st Aug., 1982. The CIT(A) held that the penalty levied by the ITO appears to be correct and he, therefore, confirmed the same. He however, directed the ITO to recompute the amount of penalty after giving effect to the appellate order passed by him in the quantum appeal for the year under consideration. The Revenue has challenged the findings given by the CIT(A) directing the ITO to recompute the penalty levied under s. 271(1)(a), the assessee in its cross objections has contended that the CIT(A) ought to have cancelled the entire amount of penalty. 15.2 Before us the learned Sr. Deptl. Representative contended that the quantum appeal decided by the CIT(A) was subject matter of pending appeal before the Tribunal. The learned CIT(A) ought to have, therefore, confirmed the entire amount of penalty instead of directing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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