Sec 80P Deduction Allowed to Co-operative Societies if Activity has Direct Nexus to Agricultural Activities

Yashavantrao Chavan vs. ITO

(Order pronounced on this 31st day of May 2022)

The assessee runs a society whose main objective is to accept the Milk produced by members of the society and to sell the same to District level Federal Co-operative Society called Zilla Dudh Sangh. that assessee society has claimed deduction u/s 80P(2)(a)(iv) of the Act, of Rs. 38,69,712 on selling to its member of ‘Shenkhat’ and ‘Palapachola’ of Rs. 47,07,450. These are used by the farmer as organic fertilizer to grow good quality agricultural products.

Appeal before CIT(A): The Ld CIT(A) held that the motive of supplying the ‘Shenkhat’ and ‘Palapachola’ was to earn more profit which was outside the preview of objectives mentioned in the Bye-laws of the society and hence, deduction of Rs. 38,69,712 u/s 80P(2)(a)(iv) of the Act, is not allowed.

Appeal before ITAT: The assessee challenges the correctness of the action of lower authorities’ that denied the deduction of Rs. 38,69,712 in the course of assessment dated 13.11.2019 as upheld by the CIT(A)’s Assessment Order.

The tribunal held that this is not the case of bogus purchase of the twin foregoing twin fodder products and sold to the members. The tribunal reiterated that the assessee’s sole substantive grievance claim is u/s 80P deduction wherein it has sold organic manure to its milk producers so as to ensure better production of fodder meant for the consumption of the milch animals thereby increasing dairy outputting. the lower authorities failed to consider that there was a crucial direct nexus between the assessee, the organic manure sold at its behest for better fodder production & milk producers’ milch animals. The Court relied on the recent decision in Mavilayi Service Co-operative Bank Ltd. vs. CIT (2021) 123 taxmann.com 161 (SC) which is settled law that a liberal construction is to be adopted in an instance involving section 80P deduction. In the light of the foregoing factual and legal backdrop, the assessee was allowed section 80P deduction of Rs. 38,69,712. Therefore, the appeal was allowed accordingly.

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