The ITO, Ward-2,, Navsari v. Gadat Vibhag Vividh Karyakari Sahakari Mandali Ltd.,, Navsari

ITA 3171/AHD/2011 | 2007-2008
Pronouncement Date: 24-04-2015 | Result: Dismissed

Appeal Details

RSA Number 317120514 RSA 2011
Assessee PAN AAAAG0537B
Bench Ahmedabad
Appeal Number ITA 3171/AHD/2011
Duration Of Justice 3 year(s) 4 month(s) 9 day(s)
Appellant The ITO, Ward-2,, Navsari
Respondent Gadat Vibhag Vividh Karyakari Sahakari Mandali Ltd.,, Navsari
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 24-04-2015
Date Of Final Hearing 13-04-2015
Next Hearing Date 13-04-2015
Assessment Year 2007-2008
Appeal Filed On 15-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV J.M. & SHRI ANIL CHATURVEDI A.M.) I.T. A. NO. 3171/AHD/2011 (ASSESS MENT YEAR: 2007-08) INCOME-TAX OFFICER WARD-2 NAVSARI V/S GADAT VIBHAG VIVIDH KARYAKARI SAHAKARI MANDALI LTD. AT & PO: GADAT TAL: GANDEVI DIST: NAVSARI (APPELLANT) (RESPONDENT) PAN: AAAAG0537B APPELLANT BY : SHRI ROOP CHAND SR. D.R. RESPONDENT BY : SHRI TUSHAR P. HEMANI A.R. ( )/ ORDER DATE OF HEARING : 13-04-2015 DATE OF PRONOUNCEMENT : 24 -04-2015 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A) VALSAD GUJARAT DATED 12.09.2011 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A MULTIPURPOSE CO. OP. SOCIETY CARRYING OUT DIFFERENT TYPE OF ACTIVITIES THAT ARE AGRICULTURAL AND NON-AGRICULTUR AL PROVIDING CREDIT FACILITIES RENTAL INCOME ETC. ASSESSEE FILED ITS R ETURN OF INCOME FOR A.Y. 2007-08 ON 22.10.2007 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING ITA NO 3171/ AHD/2011 . A.Y. 2007-08 2 DEDUCTION OF RS. 56 98 026/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 10.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT R S. 23 17 376/-. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 12.09.2011ALLOWED THE A PPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS;- 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) VALSAD WITHOUT APPRECIATING THE FACTS HAS ERRED IN DELETING THE A DDITION OF RS.23 17 376/- IN RESPECT OF ADMINISTRAT IVE & MANAGERIAL EXPENSES RELATED TO NON-AGRICULTURAL ACT IVITIES BY DIRECTING NOT TO APPLY THE RULE OF 3 TH OUGH PRESENT ASSESSEE BEING A CO. OP. SOCIETY ENGAGED IN BOTH THE AGRICULTURAL AND NON-AGRICULTURAL ACTIV ITIES RULE OF 3 IS APPLICABLE IN SEQUENCE TO PROVISION OF SECTION 14A AND THE RATIO OF JUDGMENT OF HON'BLE H IGH COURT RAJASTHAN IN THE CASE OF CIT VS RAJASTHAN RA JYA SAHAKARI UPBHOKTA SANGH LTD. (1996) 84 TAXMAN 33 (RAJ.) AND ALSO DECISION IN THE CASE OF K OTA CO-OPERATIVE MARKETING SOCIETY LTD. VS CIT(1994) 76 TAXMAN 245 (RAJ.) TO TAX THE PROFIT EA RNED FROM NON-AGRICULTURAL ACTIVITIES AND INTEREST FROM NATIONALIZED BANK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) VALSAD OUGHT TO H AVE UPHELD THE ORDER OF THE A.O. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT ASSESSEE WAS CARRYING OUT AGRICULTURAL AS WELL AS NON-AGRICULTUR AL ACTIVITIES AND THE SALES WERE MADE TO MEMBERS AS WELL AS NON-MEMBERS. HE AL SO NOTICED THAT ASSESSEE HAD AGRICULTURAL INCOME INTEREST FROM CO. OP. SOCIETY INTEREST FROM MEMBERS AND HAD ALSO EARNED INCOME FROM VARIOU S NON-AGRICULTURAL ACTIVITIES LIKE INCOME FROM SALE OF BUILDING MATERI AL PETROL PUMP DEPARTMENTAL STORE ETC. HE ALSO NOTICED THAT THE A SSESSEE CARRIED OUT MIXED ACTIVITIES AND OF THE VARIOUS ACTIVITIES CARRIED ON BY ASSESSEE THE PROFITS EARNED FROM SOME OF THE ACTIVITIES WERE EXEMPT AND SOME OF THEM WERE NOT EXEMPT U/S. 80P OF THE ACT BUT ACCORDING TO THE A.O . ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P ON THE ENTIRE PROFITS. HE WAS O F THE VIEW THAT THE INTEREST ITA NO 3171/ AHD/2011 . A.Y. 2007-08 3 EARNED BY THE ASSESSEE FROM NATIONALIZED BANK AND O THER ACTIVITIES WERE NOT EXEMPT U/S. 80P (2) AND THEREFORE THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE AND ASKED TO JUSTIFY ITS CLAIM TO WHICH ASSE SSEE INTERALIA SUBMITTED THAT IT HAS CLAIMED DEDUCTION UNDER 80P OF THE ACT ON THE INCOME ONLY ON THE INCOME WHICH IS EXEMPT U/S. 80P. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O IN VIEW OF THE FACT THA T ASSESSEE WAS KEEPING MIX ACCOUNTING RECORDS FOR ALL THE ACTIVITIES AND T HUS IT WAS DIFFICULT TO DECIDE THE NET PROFIT EARNED FROM AGRICULTURAL ACTI VITIES AND NON-AGRICULTURAL ACTIVITIES. HE THEREAFTER ON THE BASIS OF RATIO OF AGRICULTURAL AND NON- AGRICULTURAL INCOME APPLIED RULE OF 3 BASIS FOR W ORKING OUT THE ELIGIBLE DEDUCTION U/S. 80P AND RESTRICTED THE CLAIM OF ASSE SSEE. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- DECISION ; I HAVE CAREFULLY GONE THOUGH THE SUBMISSIONS MADE BEFORE ME BY THE LD. A.R OF THE APPELLANT AND THE FINDINGS OF THE A.O IN THE ASSESS MENT ORDER AND THE VARIOUS JUDICIAL DECISIONS AS RE LIED UPON BY BOTH THE PARTIES. THE APPELLANT HAS TWO T YPES OF INCOME I.E. INCOME DEDUCTIBLE U/S. 80P AND NOT DEDUCTIBLE. THE SHORT ISSUE HERE IS THAT THE APPELL ANT DETERMINED THE TAXABLE INCOME AT NIL BY CLAIMIN G THE DEDUCTION U/S. 80P OF THE ACT WHEREAS THE AO DETE RMINED THE INCOME OF THE APPELLANT AT RS. 23 17 376/-. THE ACTIVITIES INCOME THERE FROM AND THE ELIGIBILITY OF DEDUCTION U/S. 80P CAN BE SUMMAR IZED IN THE TABULAR STRUCTURE AS UNDER: INCOME | || AGRICULTURAL ITEMS NON-AGRI.ITEM S | | ________ ________ | | | SOLD TO SOLD TO SOLD TO MEMBERS MEMBERS MEMBERS & & NON- MEMBERS NON- MEMBERS | | | DEDUCTION DEDUCTION DEDUCTION U/S. 80P U/S. 80P NOT U/S. 80P N OT CLAIMED CLAIMED DUE TO LOSS AL LOWABLE AND NOT CLAIME D 5. THE AO HELD THAT AS THE APPELLANT IS KEEPING MIXED ACCOUNTING RECORDS OF ALL ACTIVITIES IT IS DIFFICU LT TO DECIDE THE NET PROFIT FROM AGRICULTURAL AND NON- AG RICULTURAL ACTIVITIES. HE OBSERVED THAT WHEN THERE IS ITA NO 3171/ AHD/2011 . A.Y. 2007-08 4 UNCERTAINTY OF MATCHING CONCEPT EXISTS OR CASCADING EFFECT CANNOT BE IDENTIFIED IN SUCH CASE RULE 3 I S APPLIED. THERE WAS NO DISPUTE ON ITEM-WAS NOT SUPPO RTED BY DEDUCTION U/S. 80P. IN MY VIEW THE ACTION OF THE AO WAS NOT SUPPORTED BY VALID REASONS AND CORRO BORATED BY EVIDENCES BROUGHT OUT IN RECORDS. THE APPELLANT HAS MAINTAINED SEPARATE SETS OF BOOKS OF A/C. FOR INCOME ELIGIBLE/NON-ELIGIBLE FOR DEDUCTION U/S.80P. THE ID. AR RELIED UPON SEVERAL J UDICIAL DECISIONS IN SUPPORT OF HIS ARGUMENTS. THE INVOCATION OF RULE 3 BY THE AO WAS ARBITRARY AND UN JUSTIFIED WHAT IS THE OBJECTIVES OF THE CO- OPERAT IVE SOCIETY IS IMPORTANT HERE. THE SOCIETY WAS PRIMARIL Y FOR THE BENEFITS OF ITS MEMBERS. WITH REGARDS THE INTEREST INCOME FROM SBI AND IDBI BANKS THE APPELL ANT HAS CLEARLY STATED THAT SUCH INCOME ACCUMULATIO N WAS OUT OF MULTIPLE ACTIVITIES DONE WITH THE BANKS. I HAVE ALSO PERUSED THE COMPUTATION OF INCOME SUBM ITTED BY THE APPELLANT AND FOUND NO ANOMALY THEREIN. THE AO HAS NOT BROUGHT ON RECORD WHAT HE MEANS BY RULE 3 AND HOW THAT IS APPLICABLE IN THIS CASE. IN THE I NTEREST OF REVENUE AND FAIRNESS TO THE APPELLANT WH AT IS TO BE WORKED OUT IS THE CORRECT APPLICATION OF LAW TO THE FACT AND CIRCUMSTANCES OF THE CASE. IN THIS CAS E IN MY VIEW THE DISPUTE WAS THE CHARGEABILITY OF INCOME. THE AO INSTEAD OF BRINGING ON RECORD WHICH SPECI FIC INCOME WAS NOT EXEMPTED APPLIED AN UNKNOWN FORMU LA RULE 3 WHICH NOT CORRECT. IN THIS CIRCUMSTANCES THE AO IS DIRECTED TO DELETE THE ADDITION MADE OF R S. RS.23 17 376/- BY INVOKING RULE 3. ACCORDINGLY THE APPELLANTS APPEAL ON THIS GROUND IS ALLOWED. 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED HAT A.O ADOPTED SOME UNKNOWN RULE OF 3 AN D DISALLOWED ADMINISTRATIVE AND MANAGERIAL EXPENSES AND WORKED O UT THE ASSESSEES INCOME AT RS. 23 17 376/-. HE FURTHER SUBMITTED THA T ASSESSEE HAS MAINTAINED SEPARATE SET OF BOOKS OF ACCOUNTS FOR I NCOME ELIGIBLE AND NON- ELIGIBLE FOR DEDUCTION U/S. 80P AND WHEN SUCH SEPAR ATE BOOKS WERE NOT MAINTAINED A.O SHOULD NOT HAVE RESORTED TO RULE OF 3 TO ARTIFICIALLY WORK OUT ASSESSEES INCOME. HE THUS SUPPORTED THE ORDER OF L D. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE ASSESSEE WAS UNDERTAKING VARIOUS A CTIVITIES AND OUT OF THE VARIOUS ACTIVITIES PROFIT FROM SOME ACTIVITIES WER E EXEMPT AND FROM SOME OTHER ACTIVITIES THE PROFIT WAS NOT EXEMPT U/S 80P AND ACCORDINGLY A.O HAS RE-WORKED OUT THE AMOUNT ELIGIBLE FOR DEDUCTION U/S . 80P. WE FIND THAT LD. ITA NO 3171/ AHD/2011 . A.Y. 2007-08 5 CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE AS SESSEE HAS GIVEN A FINDING THAT ASSESSEE HAS MAINTAINED SEPARATE SET O F BOOKS OF ACCOUNTS FOR INCOME ELIGIBLE AND NON-ELIGIBLE FOR DEDUCTION U/S. 80P AND THE INVOCATION OF RULE 3 BY A.O TO ALLOCATE THE EXEMPT PROFITS WAS AR BITRARY AND UNJUSTIFIED. HE HAS ALSO NOTED THAT A.O HAS NOT BROUGHT ON RECOR D WHAT HE MEANT BY RULE 3 AND HOW IT WAS APPLICABLE TO THE CASE. HE HAS FUR THER NOTED THAT A.O HAS APPLIED AN UNKNOWN FORMULA OF RULE 3 WHICH WAS NOT CORRECT. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUNDS OF REV ENUE ARE DISMISSED. 9. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24 - 04 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT A HMEDABAD