The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench has upheld a revision order reaffirming the right of the assessee, a Ginning Pressing Cotton Sale Co-operative Society Ltd. to make an alternate claim for deductions under Section 80P(2)(e) of the Income Tax Act.
The case stemmed from an appeal against the order of the Principal Commissioner of Income Tax (PCIT), which was invoked under Section 263 of the Income Tax Act, asserting that the original assessment was both erroneous and prejudicial to the interests of revenue.
The PCIT order had initially disallowed the society’s claim for deductions under Section 80P(2)(a)(v) of the Income Tax Act on the grounds that the processing of agricultural produce involved the use of automatic machinery and included work for private parties.
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During the proceedings, the society argued that their ginning and pressing activities were integral to their operations and that the income from these activities should qualify for deductions under Section 80P of the Income Tax Act.
Furthermore, the assessee contended that even if the deductions under Section 80P(2)(a)(v) of the Income Tax Act were disallowed, they should still be eligible for deductions under Section 80P(2)(e) of the Income Tax Act related to income from the letting of godowns for storage and processing of agricultural commodities.
The income tax appellate tribunal found merit in the society’s alternate claim and emphasised the importance of a liberal interpretation of Section 80P of the Income Tax Act, which aims to foster the growth of cooperative societies.
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The tribunal bench of Accountant Member Annapurna Gupta and Judicial Member Siddhartha Nautiyal noted that deductions for income derived from activities that are incidental to the core functions of the society should not be disregarded, as they are essential for the operational framework of such organisations.
The ruling reiterates that the mere technicalities in the operation or equipment used should not overshadow the underlying purpose of cooperative societies, which is to support the agricultural community.
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