AMRITSAR TRANSPORT CO. (PVT.) LTD VS COMMISSIONER OF INCOME-TAX
1998 P T D 3261
[223 I T R 693]
[Punjab and Haryana High Court (India)]
Before Ashok Bhan and N.K. Agarwal, JJ
SONEPAT COOPERATIVE MARKETING SOCIETY LTD.
Versus
INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH
Income-tax Case No.44 of 1991, decided on 09/10/1996.
Income-tax---
----Reference---Cooperative society---Special deduction---Question whether special deduction is to be computed on the gross income is a question of law---Indian Income Tax Act, 1961, Ss.80-P & 256.
Held, that the question whether, on the facts and circumstances of the case, 'the amount to be deducted under section 80-P(2)(a)(iv) of the Income Tax Act, 1961, is on the gross income of the cooperative society from the sale of fertilizers to its members or whether proportionate expenses were to be reduced from such income before allowing the said deduction, was a question of law to be referred to the High Court.
CIT v. Rajasthan Rajya Sahkari Upbhokta Sangh Ltd. (1995) 215 ITR 448 (Raj.); Distributors (Baroda) (P.) Ltd. v. Union of India (1985) 155 ITR 120 (SC); Kota Cooperative Marketing Society Ltd. v. CIT (1994) 207 ITR 608 (Raj.) and Punjab State Cooperative Supply and Marketing Federation Ltd. v. CIT (1981) 128 ITR 189 (P & irI) ref.
S.K. Mittal for Petitioner.
R.P. Sawhney, Senior Advocate (Mahavir Ahlawat, Advocate with him) for Respondent.
JUDGMENT
ASHOK BRAN, J.---The assessee-petitioner (hereinafter referred to as "the assessee") has filed this petition under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for a direction to the Income-tax Appellate Tribunal, Dehli Bench, New Delhi (hereinafter referred to as "the Tribunal"), to refer the following question of law to this Court stated to be arising from the order of the Tribunal, dated May 25, 1990 (Annexure "P-4"):
"Whether, on the facts and circumstances of the case, the amount to be deducted under section 80-P(2)(a)(iv) of the Act, is the gross income from sale of fertilizers to its members or whether proportionate expenses are to be reduced from such income before allowing the said deduction?"
The assessee is a cooperative marketing society engaged in the sale of agricultural produce to its members and is providing agricultural inputs to its members and also to others. It also procures food grains on behalf of the Governmental agencies. For the assessment year 1982-83, the assessee filed its return of income of Rs.31,200 after claiming exemption under section 80-P(2)(a)(iv) on the gross income of Rs.2,00,900 on account of sale of fertilizers to its members. As the assessee was not maintaining separate account of expenses incurred for sale of fertilizers to its members, the Income-tax Officer asked the assessee to work out proportionate expenses for such sales. Proportionate expenses came to Rs.77,400 and the Income-tax Officer after reducing the gross income of Rs.2,00,900 by the propor tionate expenses of Rs.77,400 allowed a deduction of Rs.1,30.500 under section 80-P(2)(a)(iv).
Before the Income-tax Officer, the assessee had claimed exemption in respect of full income for sale of fertilizers to its members. The Income tax Officer was, however, of the view the although under the provisions of section 80-P(2)(a)(iv) the income on account of sale and purchase of articles intended for agricultural use of the members is exempted but the word "income" meant the income earned by the assessee after deducting the expenses incurred for earning the said income. Thus, according to the Income-tax Officer, the gross income was not exempted under section 80-P(2)(a)(iv).
The Commissioner of Income-tax (Appeals) confirmed the order of the Income-tax Officer on this point against which the assessee filed an appeal before the Tribunal. The contention raised before the Tribunal by the assessee was that while computing deduction under section 80-P(2)(a)(iv) no proportionate deduction from the gross profit earned from the sale of fertilizers to the members of the assessee-society should have been made and that exemption under section 80-P(2)(a)(iv) was allowable on gross profit earned from sale of fertilizers to its members. In support of this contention, reliance was placed on a decision of this Court in Punjab State Cooperative Supply and Marketing Federation Ltd. v. CIT (1981) 128 ITR 189.
On behalf of the Department it was submitted before the Tribunal that while computing the deduction under section 80-P(2)(a)(iv) its net profits from sale of fertilizers to the members has to be taken into consideration and not the gross profit. In support of this contention, attention was invited to the provisions of section 80-AB which came into force with effect from April 1, 1981, and was applicable to the assessment order under consideration. Reliance was also placed on the decision of the Supreme Court in Distributors (Baroda) (P.) Ltd. v. Union of India (1985) 155 ITR 120.
The Tribunal held that section 80-AB lays down that where any deduction is required to be made under any section in Chapter VI-A under the heading "C-Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, that amount of income of the nature as computed in accordance with the provisions of the Act (before making any deduction under Chapter VI-A) shall alone be deemed to be the income of that nature which is derived or received by the assessee and which is included in its gross total income. It was held that provisions of section 80-AB made it abundantly clear that exemption or deduction under section 80-P(2)(a)(iv) is to be made in respect of the net income falling under that section and not of gross income as was the assessee's case. For this reliance was placed upon a decision of the Supreme Court in Distributors (Baroda 11P.) Ltd.'s case (1985) 155 ITR 120. The Tribunal further held that the decision of the Punjab and Haryana High Court in Punjab State Cooperative's case (1981) 128 ITR 189 does not support the assessee's case that the deduction under section 80-P(2)(a)(iv) is allowable on gross profit and not on net profit. The Tribunal, therefore, held that in the instant case the expenditure attributable to the earning of profit from fertilizers to the members amounted to Rs.70,400. Proportionate expenditure was deducted from gross profit for the purpose of allowing deduction under section 80-P(2)(a)(iv).
The Tribunal declined to refer the question claimed by the assessee to this Court for its opinion on the premise that the controversy in question stands concluded in favour of the Revenue by the decision of the Supreme Court in Distributors (Baroda) (P.) Ltd.'s case (1985) 155 ITR 120 and, therefore, no referable question of law arose from the order of the Tribunal.
Counsel for the parties have been heard.
The point in issue is squarely covered in favour of the assessee by the judgment of this Court in Punjab State Cooperative's case (1981) 128 ITR 189 which fully covers the controversy in question. Against the decision, the Department had filed S.L.P. (Civil) Nos. 10321 and 10322 of 1980 (see (1983) 143 ITR (St.) 64), which were dismissed by the Supreme Court on August 8, 1983. It was held that where the assessee incurred expenses in the course of business and some of its income was not liable to income-tax but the business was indivisible, the whole of the expenses had to be allowed. In Distributors (Baroda) (P.) Ltd.'s case (1985) 155 ITR 120 (SC) the interpretation of section 80-M(1) of the Act which deals with deductions in respect of certain inter-corporate dividends which is not under consideration in the present case (sic). The two subsequent judgments of the Rajasthan High Court in Kota Cooperative Marketing Society Ltd. v. CIT (1994) 207 ITR 608 and CIT v. Rajasthan Rajya Sahkari Upbhokta Sangh Ltd. (1995) 215 ITR 448, do support the contention raised by counsel for the Revenue. The Rajasthan High Court has placed reliance upon the judgment of the Supreme Court in Distributors (Baroda) (P.) Ltd.'s case (1985) 155 ITR 120. There is no subsequent judgment of this Court after the decision of the Supreme Court in Distributors (Baroda) (P.) Ltd.'s case (1985) 155 ITR 120. Final opinion is not to be given at this stage and the only point to be considered is as to whether a question of law arises from the order of the Tribunal or not. In view of the decision of this Court in Punjab State Cooperative's case (1981) 128 ITR 189, in our opinion, a question of law does arise from the order of the Tribunal.
Accordingly, we direct the Tribunal to refer the following question of law along with the statement of the case for the opinion of this Court:
"Whether, on the facts and circumstances of the case, the amount to be deducted under section 80-P(2)(a)(iv) of the Act, is the gross income from the sale of fertilizers to its members or whether proportionate expenses are to be reduced from such income before allowing the said deduction?"
M.B.A./1637/FCOrder accordingly.