ITO Vs Maliyana Cooperative Cane Development Union (ITAT Delhi)
Commission from Sugar Factory Eligible for Deduction – ITAT Upholds 80P(2)(a)(iii) Relief to Cooperative Society
Revenue appealed against CIT(A)’s order allowing deduction u/s 80P(2)(a)(iii) on commission income earned by the Assessee-society from marketing sugarcane grown by its members.
AO had denied the deduction treating ₹3.62 crore commission as “income from other sources”, relying on Totgars Co-operative Sale Society Ltd. v. ITO (2010) 188 Taxman 282 (SC). CIT(A) held that Totgars dealt with interest on surplus deposits, not with commission from marketing of members’ agricultural produce. Since the Assessee’s commission represented its operational business income from marketing activity, it clearly fell within the scope of Section 80P(2)(a)(iii).
ITAT agreed, noting that the commission was directly attributable to the society’s core activity of marketing members’ sugarcane, and that Revenue failed to show any contrary evidence. Accordingly, Tribunal upheld CIT(A)’s order, confirming full deduction u/s 80P(2)(a)(iii) & dismissed the Revenue’s appeal.
Held: Commission from sugar factory for marketing members’ produce is business income eligible for deduction u/s 80P(2)(a)(iii); Totgars ruling inapplicable.
FULL TEXT OF THE ORDER OF ITAT DELHI
The instant appeal filed by the Revenue is directed against the order passed by the Ld. CIT(A)/NFAC, Delhi dated 27.09.2023 [DIN & Order No. ITBA/NFAC/S/2023-24/1056591398(1) arising out of the order dated 26.03.2021 passed by the Assessing Officer, National e-Assessment Centre, Delhi under Section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2018-19. Grounds of appeal taken by the Revenue read as under:
“1. That the CIT(A), NFAC has erred in law and in facts by not appreciating the disallowance of deduction u/s 80P(2)(a)(iii) of the IT Act, 1961 claimed on commission income from sugar factory and was unjustified and unsustainable in the eyes of law.
2. That the CIT(A), NFAC has erred in law and in facts by not appreciating the facts that the assessee itself claimed commission income under the head ‘Income from Other Sources’ in place of ‘Profits and gains of Business or Profession’.
3. That the CIT(A), NFAC has erred in law and in facts that the deduction u/s 80P(2)(a)(iii) of the IT Act, 1961 is not applicable on the income shown under the Head ‘Income from Other Sources’ as has been held in Totgars Cooperative Sale Society Ltd. Vs. ITO/2010) 188 Taxman 282 (SC) that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society.”
2. According to statement of facts filed by the assessee before the CIT(A), the assessee is a Cooperative Society, engaged in the activity falling under Section 80P(2)(a)(iii) of the Act. It filed its Return of Income showing taxable income at Rs.47,810/- after claiming deduction of Rs.2,48,97,047/- u/s 80P(2)(a)(iii) out of GTI of Rs.2,49,44,857/-, which includes net H.P. income of Rs.47,810/- and net income of Rs.2,48,97,047/- (arrived at by deducting expenses of Rs. 1,95,00,000/-under Section 57 from total gross receipts of Rs.4,43,97,047/-) from activity falling u/s 80P(2)(a)(iii). According to assessee, the Assessing Officer without providing sufficient opportunity of being heard, disallowed total deduction claimed u/s 80P(2)(a)(iii) at Rs.2,48,97,049/- and thus assessed T.I. at Rs.2,49,44,857/-.
