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I-T - 'Tapping of toddy' being traditional agri enterprise, is at variance from foreign liquor trade, and hence very much eligible for exemption benefit u/s 80P(2): HC


By TIOL News Service

ERNAKULAM, JULY 12, 2018: THE ISSUE IS - Whether though 'toddy' comes under the definition of 'liquor' as defined under the Abkari Act, the same can be said to be agricultural produce, since it is a product which is extracted from a tree just as any other agricultural produce is extracted. YES IS THE VERDICT.

Facts of the case:

The assessees are cooperative societies engaged in tapping of toddy and vending it through licensed shops. During the year under consideration, the assessees had claimed deduction u/s 80P(2)(iii), but failed to file their income tax return. Accordingly, on the said basis, the Revenue Authorities denied such claim of deduction. The assessee's counsel pointed out that exemption as applicable to co-operative societies u/s 80P was a deduction of the total income and, hence, the same could be applied even without a return filed. The decision in the case of CIT v. Yokogawa India Ltd was relied on to contend that the deduction being available to the total income, de hors the technical defect of return having not been filed, the AO ought to have allowed the deduction at the point of computing of gross total income as provided under Chapter IV.

High Court held that,

++ the appeals filed by the Revenue are on the premise that toddy cannot be termed to be an 'agricultural produce'. The Tribunal has agreed that toddy is an agricultural produce. The Revenue's counsel would argue that toddy being an intoxicating liquor, the extraction and sale are regulated by the State under the provisions of the Abkari Act. The income generated from such vending under license, cannot be covered u/s 80P(2)(iii). It is also argued that initially the claim of the assessee was u/s 80P(2)(vi), which later, before the FAA the assessee changed to one u/s 80P. As per the Revenue, what is intended by the exemption provision is to grant an incentive to the agricultural activity, which cannot be extended to 'toddy' coming under the definition of 'liquor' as defined under the Abkari Act. This Court is unable to agree with such contentions of the counsel. As has been found by the FAA and the Tribunal, toddy is a product which is extracted from a tree just as any other agricultural produce is extracted. The mere fact of a particular agricultural activity having not been carried out would not be the sole ground for denying the exemption as available to the marketing of an agricultural produce when carried out by the co-operative Society. Regulatory regime under the Abkari Act would also be not relevant in deciding whether the Society would be entitled to the exemption as available u/s 80P. The mere fact that the Society carries on vending of toddy; a trade in liquor, which the Supreme Court has held to be res extra commercium, would not have any effect on the essential nature of the activity of growing trees for the purpose of tapping toddy. The fact of the tree tax being paid by the Society is only on account of the license of tapping and vending having been obtained by the Society. It is also noticed that tapping of toddy is a traditional agricultural enterprise within the State and the State also encourages it; as distinguished from the foreign liquor trade. Therefore, there is no reason to interfere with the orders of Tribunal.

(See 2018-TIOL-1312-HC-KERALA-IT)


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