Income Tax Appellate Tribunal - Jaipur
M/S Alwar Kray Vikray Sahakari Samiti ... vs Income Tax Officer, Ward-2-3, Alwar on 30 August, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 787 & 985/JP/2017
fu/kZkj.k o"kZ@Assessment Years : 2012-13 & 13-14.
M/s. Alwar Kray Vikray Sahakari cuke The Income Tax officer,
Samiti Ltd., Vs. Ward 2(3)/ The ACIT, Circle-2,
D-10, New Mandi Yard, Alwar.
Alwar.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAABA 0196 R
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
jktLo dh vksj ls@ Revenue by: Shri J.C. Kulhari (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 28.08.2018.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/08/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, JM :
These two appeals by the assessee are directed against two separate orders of the ld. CIT (A) for the assessment years 2012-13 and 13-14 dated 19.09.2017 and 16.10.2017 respectively. For the assessment year 2012-13 the assessee has raised the following grounds :-
" 1. The ld. CIT (A) has erred on facts and in law in upholding the order of AO in reducing the claim of deduction u/s 80P(2)(a)(iv) at Rs. Nil as against Rs. 6,07,375/- claimed by the assessee.
2. The assessee craves right to add, alter or amend any of the grounds of the appeal.
3. The appropriate cost be awarded to the assessee.2
ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
2. The only issue arises in this appeal of the assessee is regarding reduction of claim of deduction under section 80P(2)(a)(iv) at Nil as against the claim of Rs. 6,07,375/-.
3. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The assessee is a cooperative society constituted under Rajasthan Co-operative Act. The assessee is in the business of wholesale trading of fertilizers, seeds, pesticides, agricultural equipments etc. as well as trading of consumable goods under PDS (Ration) as per the policy of Government of India. The income from the wholesale trading of fertilizers, seeds, pesticides, agricultural equipments is eligible for deduction under section 80P of the IT Act whereas the income from trading of consumable goods under PDS is not eligible for deduction under section 80P(2) of the IT Act. In the return of income, the assessee declared income of Rs. 2,64,640/- after claiming the deduction under section 80P of Rs. 9,72,673/- as under :-
80P(2)(a)(iv)(purchase of agricultural implements, seeds etc) Rs. 6,07,375/-
(G.P Rs.11,46,660 - Expenses Rs. 5,39,205)
80P(2)(c)(ii) (General) Rs. 50,000/-
80P(2)(d)(Interest Rs.41,358/- & Dividend Rs.2,73,940) Rs. 3,15,298/-
Rs.9,72,673/-
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The AO in the scrutiny assessment has observed that out of total turnover of Rs.
25.21 crores, the turnover of fertilizers, seeds and pesticides is Rs. 8.59 crores and gross profit is Rs. 11,46,661/-. The assessee has claimed expenses of Rs.
5,39,205/- against the income from fertilizers, seeds and pesticides out of total expenditure of Rs. 62,51,180/-. Hence the AO was of the view that the claim of expenditure of Rs. 5,39,205/- against the income eligible for deduction under section 3 ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
80P is not acceptable as it is without any basis. Accordingly, the AO apportioned the total expenditure on turnover basis and worked out the expenses incurred on fertilizers, seeds and pesticides business at Rs. 21,31,877/- resulting net loss of Rs. 9,85,216/- in the segment of fertilizers, seeds and pesticides. Thus due to the allocation of expenses on turnover basis, the net outcome of the eligible business activity under section 80P of the Act is loss and the deduction of Rs. 6,07,375/- was reduced to Nil. The ld. A/R of the assessee has submitted that the assessee is serving 429 PDS shops whereas the fertilizers, seeds and pesticides are supplied only to 70 village service cooperative societies. Thus when the number of PDS shops and the village service cooperative societies are not equal, then the apportionment of the expenditure on turnover basis is not justified. Hence, the ld. A/R has submitted that the expenditure should have been allocated at the best on the basis of number of PDS shops and number of village service cooperative societies to whom the assessee catered the needs.
3.1. On the other hand, the ld. D/R submitted that the assessee is not maintaining separate books of account to show the expenditure incurred for each of the segments of business activities, therefore, the AO had no option but to apportion the expenditure on turnover basis. The ld. D/R relied upon the orders of the authorities below.
4. Having considered the relevant facts as well as the rival submissions of the parties, we note that in an ordinary case turnover is a proper basis for allocation of common expenditure if the activities in various segments are similar in nature. Therefore, until and unless there is an exception, the turnover is an acceptable basis of allocation of common expenditure. We further note that the major expenditure 4 ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
which is common and direct expenditure of Head Office of the assessee is on account of salary and wages. Therefore, when the assessee is catering 70 village service co-operative societies in the segments of fertilizers, seeds, pesticides, agricultural equipments as against 429 service points of PDS shops, then allocating the expenditure on turnover basis may give a distorted result and not the correct out-come of the activities. Therefore, to the extent of the expenditure which is incurred in serving the various service points, the same can be allocated on the basis of number of service points and the remaining expenditure which are invariable in relation to the number of service points like audit fee etc. and Head Office expenses, the same can be allocated on the basis of the turnover of the different segments of the business activities of the assessee. Thus when the assessee is having the income from different segments comprising the income eligible for deduction under section 80P as well as the income which is not eligible for deduction under section 80P, then the allocation of the common expenditure should be made after considering the peculiar facts of the case of the assessee. Accordingly, we set aside the issue to the record of the AO for re-adjudication of the same by segregating the common expenditure which can be related to the activities of serving the PDS shops as well as the service cooperative societies. The same has to be allocated on the ratio of respective number and the rest of the expenditure has to be allocated on turnover basis.
5. For the assessment year 2013-14, the assessee has raised the following grounds :-
5
ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
" 1. The ld. CIT (A) has erred on facts and in law in confirming the action of AO in not allowing the claim of deduction u/s 80P(2)(a)(iv) at Rs. 3,83,103/-.
2. The ld. CIT (A) has erred on factgs and in law in confirming the disallowance of Rs. 29,609/- u/s 14A of the IT Act, 1961 read with Rule 8D.
3. The assessee craves right to add, alter or amend any of the grounds of the appeal.
4. The appropriate cost be awarded to the assessee.
6. Ground No. 1 is common to the ground raised in assessment year 2012-13. Accordingly, in view of our finding on this issue for the assessment year 2012-13, this ground stands set aside to the record of the AO on same terms.
7. Ground No. 2 is regarding disallowance made under section 14A read with Rule 8D of the IT Act.
8. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. At the outset, we note that the AO invoked section 14A in respect of the dividend received by the assessee from the investments made in the various co-operative societies. Thus it is clear from the record that the said income is otherwise eligible for deduction under section 80P and not falling in the category of exempt income under section 10(34) of the Act. Hence this issue is connected with the issue of allocation of common expenditure between the eligible income under section 80P(2) as well as non-eligible income. Since the dividend is in the category of eligible income under section 80P(2), therefore, the provisions of section 14A are not applicable but this has to be considered for the purpose of allocating the common expenditure. Hence we set aside this issue to the record of the AO for 6 ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
considering this amount along with the other income of the assessee eligible for deduction under section 80P(2) of the Act.
5. In the result, both the appeals of the assessee are allowed for statistical purposes.
Order is pronounced in the open court on 30/08/2018.
Sd/- Sd/-
(foØe flag ;kno) (fot; iky jkWo ½
(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)
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Jaipur
Dated:- 30/08/2018.
Das/
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- M/s. Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.
2. The Respondent - The ACIT, Circle-2/The ITO Ward 2(3), Alwar.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 787 & 985/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 7 ITA Nos. 787 & 985/JP/2017 Alwar Kray Vikray Sahakari Samiti Ltd., Alwar.