Facts of the Case

The assessee claimed to be a cooperative society engaged in marketing agricultural produce (sugarcane) grown by its members and providing agricultural inputs such as fertilizers, seeds, and equipment. It claimed deduction under Section 80P.

During scrutiny assessments for A.Y. 2014-15 and 2015-16 under Section 143(3), the Assessing Officer observed that the assessee was not registered with the competent authority under the Societies Registration framework but only with the Registrar of Cane Cooperative Societies, U.P. The AO therefore treated the assessee as an Association of Persons (AOP) and denied deduction under Section 80P, which is available only to cooperative societies.

The AO also questioned the genuineness of books and evidence relating to commission receipts and added interest income earned from FDRs and other investments to taxable income.

Issues Involved

  1. Whether the assessee qualifies as a cooperative society within the meaning of Section 2(19).
  2. Whether commission received from sugar mills constitutes income from marketing agricultural produce eligible for deduction under Section 80P(2)(a)(iii).
  3. Whether interest income from FDRs and investments is taxable.
  4. Whether deduction under Section 80P can be allowed in absence of proper registration. 

Petitioner’s Arguments (Revenue)

  • The assessee lacked valid registration as a cooperative society under the competent authority.
  • It functioned merely as a facilitator or agent between farmers and sugar mills.
  • Commission income was not derived from marketing activities of agricultural produce.
  • Deduction under Section 80P was wrongly allowed without factual verification.

Respondent’s Arguments (Assessee)

  • The assessee contended that it was a cooperative society engaged in marketing sugarcane grown by its members.
  • It facilitated supply of produce to mills, negotiated prices, and provided agricultural support services.
  • Commission income arose from such marketing activities and was therefore eligible for deduction under Section 80P.

Court Order / Findings

  • Registration status of the assessee
  • Nature of activities carried out
  • Whether income was truly attributable to marketing of members’ agricultural produce

Important Clarification

The Tribunal did not decide the issue on merits and kept all contentions open, directing a fresh speaking order based on evidence and proper verification.

Link to download the order - https://itat.gov.in/public/files/upload/1646982475-ganna%2092&93.pdf

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