The ITO Ward-8(5), Ahmedabad v. M/S Uttar Gujarat Sahakari Ruvechan Sangh Ltd, Ahmedabad

ITA 865/AHD/2000 | 1995-1996
Pronouncement Date: 05-03-2010 | Result: Dismissed

Appeal Details

RSA Number 86520514 RSA 2000
Bench Ahmedabad
Appeal Number ITA 865/AHD/2000
Duration Of Justice 9 year(s) 11 month(s) 1 day(s)
Appellant The ITO Ward-8(5), Ahmedabad
Respondent M/S Uttar Gujarat Sahakari Ruvechan Sangh Ltd, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 05-03-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 05-03-2010
Date Of Final Hearing 03-01-2006
Next Hearing Date 03-01-2006
Assessment Year 1995-1996
Appeal Filed On 03-04-2000
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.865/AHD/2000 (ASSESSMENT YEAR:- 1995-96) INCOME TAX OFFICER WARD-8(5) AHMEDABAD. VS. UTTAR GUJARAT SAHKARI RU- VECHAN SANGH LTD. KISHAN GHAR NR. MITHAKALI UNDER BRIDGE AHMEDABAD. PAN/GIR NO. : (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR AR. ADV. WITH SHRI S.V.AGRAWAL RESPONDENT BY: SHRI GOVIND SINGHAL SR. D.R. O R D E R PER N.S. SAINI (ACCOUNTANT MEMBER) : THE APPEAL FILED BY THE REVENUE IN ITA NO.865/AHD/2000 FOR THE ASSESSMENT Y EAR 1995-96 WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 13 .01.2006. THE ASSESSEE FILED MISCELLANEOUS APPLICATION STATING TH AT THE ONLY GROUND ON WHICH THE TRIBUNAL HELD AGAINST THE ASSESSEE IS THAT THE INTEREST ON DELAYED SALE PROCEEDS WILL NOT BE PROFIT OF THE MARKETING OF AGRICULTURAL PRODUCE. VIDE ORDER OF EVEN DATE THE TRIBUNAL RECALLED ITS ORDER IN RESPECT OF THE ABOVE ISSUE FOR THE YEA R UNDER CONSIDERATION. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE IN ITA NOS.865/AHD/2000 READS AS UNDER:- THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS OF TH E CASE IN TAKING THE VIEW THAT THE INTEREST INCOME OF THE ASS ESSEE SOCIETY IS PART OF THE INCOME OF THE SOCIETY DERIVE D FROM THE MARKETING OF THE AGRICULTURE PRODUCE OF ITS MEMBERS . 2 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABL E ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS A CO-OPERATIVE SO CIETY AND IS INTER- ALIA ENGAGED IN THE BUSINESS OF MARKETING OF AGRICU LTURAL PRODUCE GROWN BY ITS MEMBERS ALSO. THE ASSESSEE SIMILARLY I S ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) IN RESPECT OF INCOME WHICH IS ATTRIBUTABLE TO ITS BUSINESS OF MARKETING OF AGRICU LTURAL PRODUCE GROWN BY ITS MEMBERS. THE AO DID NOT ALLOW DEDUCTIO N UNDER SECTION 80P(2) IN RESPECT OF ENTIRE INTEREST INCOME EARNED BY THE ASSESSEE ON THE GROUND THAT SUCH INTEREST INCOME CA NNOT BE CONSIDERED AS INCOME ATTRIBUTABLE TO THE BUSINESS O F MARKETING OF AGRICULTURAL PRODUCE GROWN BY THE MEMBERS OF THE AS SESSEE SOCIETY. ON APPEAL THE CIT(A) HELD AS UNDER:- POINT FOR CONSIDERATION IS WHETHER INTEREST RECEIV ED FROM CUSTOMERS ON DELAYED PAYMENTS MADE BY THEM OR RECEI VED FROM MEMBERS ON ADVANCE PAYMENTS TAKEN BY THEM WAS PART OF INCOME DERIVED FROM BUSINESS ACTIVITY OR NOT SO AS TO QUALIFY FOR DEDUCTION UNDER SECTION 80P. IN THE CAS E OF THE APPELLANT SOCIETY THE WHOLE OF THE AMOUNT OF PROFIT S AND GAINS OF THE BUSINESS ATTRIBUTABLE TO THE MARKETING OF AG RICULTURAL PRODUCTS OF ITS MEMBERS IS DEDUCTIBLE U/S.80P(1). T HE AFORESAID INTEREST INCOME RECEIVED FROM MEMBERS AND CUSTOMERS IS LINKED WITH THE TERMS AND CONDITIONS O F SALE OF AGRICULTURAL PRODUCE OF THE MEMBERS OF THE SOCIETY TO THE CUSTOMERS AND IS THEREFORE AN INTEGRAL PART OF T HE BUSINESS ACTIVITY OF THE APPELLANT SOCIETY. IT IS IN FACT RE IMBURSEMENT OF THE ADDITIONAL COST INCURRED FOR MARKETING THE COTT ON BALES TO MILLS/TRADERS WHEN THERE IS DELAY IN MAKING PAYMENT S TOWARDS THE PRICE OF THE BALES OR WHEN PAYMENTS ARE TAKEN A S ADVANCE BY THE MEMBERS. THIS INCOME IS PART OF THE PROFIT A ND GAINS OF THE BUSINESS OF THE SOCIETY ENGAGED IN MARKETING OF COTTON BALES. FURTHER IN CASE OF CIT VS. KARJAN CO. OPT. COTTO N SALE GINNING & PRESSING FACTORY 129 ITR 821 THE HON'BL E GUJARAT HIGH COURT HAS HELD THAT INTEREST CHARGES GODOWN C HARGES RECOVERED FROM PERSONS WHO PURCHASED COTTON FROM TH E ASSESSEE SOCIETY WERE PART OF ITS MARKETING ACTIVI TY OR IN THE COURSE OF ITS MARKETING ACTIVITY WHILE MARKETING TH E COTTON OF ITS MEMBERS. THE RECEIPTS BEING ATTRIBUTABLE TO THE ACTIVITY OF MARKETING OF THE AGRICULTURAL PRODUCE OF THE MEMBER S OF THE 3 ASSESSEE SOCIETY WERE HELD TO BE DEDUCTIBLE UNDER S ECTION 80P(2)(A). 8. IN THE LIGHT OF THE ABOVE DISCUSSION DEDUCTION U/S. 80P(2)(A)(III) CAN NOT BE DENIED TO THE APPELLANT I N RESPECT OF THE INTERESTS CHARGES RECEIVED FROM THE REASONS MEN TIONED BY THE ASSESSING OFFICER. HOWEVER DEDUCTION IS AVAILABLE ONLY IN RESPECT OF INCOME ATTRIBUTABLE TO MARKETING OF COTTON BALES OF THE MEMBERS OF THE SOCIETY. INCOME ATTRIBUTABLE TO MARK ETING DONE FRO NON-MEMBERS DOES NOT QUALIFY FOR DEDUCTION UNDER SECTION 80P(2)(A). THE ASSESSING OFFICER IS DIRECTE D TO VERIFY THIS POSITION WHILE ALLOWING DUE DEDUCTION IN RESPE CT OF INTEREST RECEIPTS U/S.80P(2)(A) IN PURSUANCE OF THI S ORDER. 4. WE FIND THAT THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF NIRMA INDUSTRIES LTD. VS. DCIT 283 ITR 402 (GUJ) H AS HELD THAT :- WHEN THE ASSESSEE ENTERS INTO A CONTRACT FOR SALE O F ITS PRODUCTS IT COULD EITHER STIPULATE (A) THAT INTERES T AT THE SPECIFIED RATE WOULD BE CHARGED ON THE UNPAID SALE PRICE AND ADDED TO THE OUTSTANDING TILL THE POINT OF TIME OF REALISATION OR (B) THAT IN CASE OF DELAY THE PAYMENT FOR SALE OF P RODUCTS WORTH RS. 100 TO CARRY THE SALE PRICE OF RS. 102 FO R FIRST MONTH S DELAY RS. 104 FOR SECOND MONTH S DELAY RS. 106 FOR THIRD MONTH S DELAY AND SO ON. IF THE CONTENTION OF REV ENUE IS ACCEPTED MERELY BECAUSE THE ASSESSEE HAS DESCRIBED THE ADDITIONAL SALE PROCEEDS AS INTEREST IN CASE OF CON TRACT AS PER ILLUSTRATION (A) ABOVE SUCH PAYMENT WOULD NOT BE P ROFITS DERIVED FROM INDUSTRIAL UNDERTAKING BUT IN CASE OF ILLUSTRATION (B) ABOVE IF THE PAYMENT IS DESCRIBED AS SALE PRIC E IT WOULD BE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THIS CAN NEVER BE BECAUSE IN SUM AND SUBSTANCE THESE ARE ON LY TWO MODES OF REALISING SALE CONSIDERATION THE OBJECT B EING TO REALISE SALE PROCEEDS AT THE EARLIEST AND WITHOUT D ELAY. PURCHASER PAYS HIGHER SALE PRICE IF IT DELAYS PAYME NT OF SALE PROCEEDS. IN OTHER WORDS THIS IS A CONVERSE SITUAT ION TO OFFERING OF CASH DISCOUNT. THUS IN PRINCIPLE IN R EALITY THE TRANSACTION REMAINS THE SAME AND THERE IS NO DISTIN CTION AS TO THE SOURCE. IT IS INCORRECT TO STATE THAT THE SOURC E FOR INTEREST IS THE OUTSTANDING SALE PROCEEDS. IT IS NOT THE ASS ESSEE S BUSINESS TO LEND FUNDS AND EARN INTEREST. THE DISTI NCTION DRAWN BY REVENUE IS ARTIFICIAL IN NATURE AND IS NEI THER IN CONSONANCE WITH LAW NOR COMMERCIAL PRACTICE. THE TR IBUNAL WAS THEREFORE NOT JUSTIFIED IN HOLDING THAT WHILE COMPUTING DEDUCTION UNDER S. 80-I INTEREST RECEIVED FROM TRAD E DEBTORS TOWARDS LATE PAYMENT OF SALES CONSIDERATION IS REQU IRED TO BE EXCLUDED FROM THE PROFITS OF THE INDUSTRIAL UNDERTA KING AS THE 4 SAME CANNOT BE STATED TO HAVE BEEN DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING.CIT VS. GOV INDA CHOUDHURY & SONS (1994) 116 CTR (SC) 61 : (1993) 20 3 ITR 881 (SC) APPLIED; NIRMA INDUSTRIES LTD. VS. ASSTT. CIT (2005) 95 TTJ (AHD) (SB) 867 OVERRULED. 5. AS THE LD. CIT(A) HAD DIRECTED THE AO TO ALLOW D EDUCTION IN RESPECT OF SUCH INTEREST INCOME WHICH CAN BE HELD A S ATTRIBUTABLE TO THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE G ROWN BY THE MEMBERS OF THE ASSESSEE SOCIETY ONLY. WE DO NOT F IND ANY ERROR IN THE ORDER OF THE CIT(A) IN VIEW OF THE DECISION GIV EN IN THE CASE OF NIRMA INDUSTRIES LTD.(SUPRA). THEREFORE THE ORDER OF THE CIT(A) IS CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON 05 -03-2010 SD/- SD/- (MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT M EMBER AHMEDABAD; DATED 05/03/2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS) 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD