Gujarat Co.Op.Milk Marketing Federation Ltd.,, Anand v. The ACIT.,Anand Circle,, Anand

ITA 1119/AHD/2012 | 2005-2006
Pronouncement Date: 30-09-2016 | Result: Allowed

Appeal Details

RSA Number 111920514 RSA 2012
Assessee PAN AAAAG5588Q
Bench Ahmedabad
Appeal Number ITA 1119/AHD/2012
Duration Of Justice 4 year(s) 4 month(s) 8 day(s)
Appellant Gujarat Co.Op.Milk Marketing Federation Ltd.,, Anand
Respondent The ACIT.,Anand Circle,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-09-2016
Date Of Final Hearing 05-09-2016
Next Hearing Date 05-09-2016
Assessment Year 2005-2006
Appeal Filed On 22-05-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHRI N.K. BILLAIYA ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD JUDICIAL MEMBER GURAJRAT CO-OPERATIVE MARKETING FEDERATION LTD. AMUL DAIRY ROAD ANAND PAN: AAAAG5588Q (APPELLANT) VS THE ACIT ANAND CIRCLE (RESPONDENT) GURAJRAT CO-OPERATIVE MARKETING FEDERATION LTD. AMUL DAIRY ROAD ANAND PAN: AAAAG5588Q (APPELLANT) VS THE ACIT ANAND CIRCLE (RESPONDENT) I T A NO S . 1119 & 1900 / A HD/2 0 12 ASSESSMENT YEARS 2005-06 & 2008-09 ITA NO S . 3037 /AHD/20 10 & 597/AHD/2013 ASSESSMENT YEARS 2007-08 & 2009-10 ITA NO S . 1226 & 1977/AHD/2012 ASSESSMENT YEARS 2005-06 & 2008-09 I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 2 THE ACIT/DCIT ANAND CIRCLE (APPELLANT) VS GURAJRAT CO- OPERATIVE MARKETING FEDERATION LTD. AMUL DAIRY ROAD ANAND PAN: AAAAG5588Q (RESPONDENT) THE ACIT/DCIT ANAND CIRCLE (APPELLANT) VS GURAJRAT CO- OPERATIVE MARKETING FEDERATION LTD. AMUL DAIRY ROAD ANAND PAN: AAAAG5588Q (RESPONDENT) REVENUE BY: SHRI KAMLESH MAKWANA SR. D.R. ASSESSEE BY: SHRI SUNIL H. TALATI A. R. DATE OF HEARING : 05-09-2016 DATE OF PRONOUNCEMENT : 30-09-201 6 /ORDER PER : MAHAVIR PRASAD JUDICIAL MEMBER:- ITA NO S . 2968 /AHD/20 10 & 924/AHD/2013 ASSESSMENT YEARS 2007-08 & 2009-10 I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 3 THESE ARE EIGHT APPEALS NO. ITA 1119/AHD/2012 ITA NO. 1900/AHD/2012 THEN ITA NO. 3037/AHD/2012 FOR ASSES SMENT YEAR 2007-08 AND ITA NO. 597/AHD/2013 FOR ASSESSMENT YEA R 2009-10 HAVE BEEN PREFERRED BY THE ASSESSSEE/APPELLANT WHER EAS FOLLOWING FOUR NUMBERS HAVE BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A). THES E APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.1119/AHD/2012 ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN HOLDING THAT ISSUANCE OF NOTICE U/S. 147 OF THE I.T. ACT WAS VAL ID AND NOT ACCEPTING THE CONTENTION THAT THERE BEING NO ESCAPE MENT OF INCOME THE REOPENING IS BAD IN LAW. IT IS SUBMITTED THAT P ROCEEDINGS INITIATED U/S. 147 AND 148 OF THE I.T. ACT ARE BAD IN LAW AND THE SAME BE HELD SO NOW. 2. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 1 50 00 000/- BE ING ASSISTANCE GIVEN TO JKMPC LTD. ON THE GROUND THAT THE SAID EXP ENDITURE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS AND THE AP PELLANT DID NOT GAIN ANY BENEFIT THEREON. IT IS SUBMITTED THAT THE CONCLUSION ARRIVED AT AND THE BASIS OF DISALLOWANCE IS TOTALLY INCORRE CT ON FACTS AND ON LAW. THE EXPENDITURE INCURRED IN PROVIDING ASSISTAN CE TO JAMMU & KASHMIR MILK PRODUCERS CO-OPERATIVE LIMITED WAS IN THE NATURE OF CO-OPERATIVE DEVELOPMENT EXPENDITURE INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. IT IS ACCORDINGLY SUBMITTED THAT THE DISALLOWANCE CONFIRM ED BY THE LEARNED C.I.T. (APPEALS) BE DELETED. 3. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AM UL PARLOURS. ON THE FACTS OF THE CASE AND IN VIEW OF THE LEGAL P OSITION THE LEARNED I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 4 C.I.T. (APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DE PRECIATION AT 100% AS CLAIMED. IT BE SO HELD NOW AND THE DEPRECIA TION BE ALLOWED AT 100%. 4. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER TO DISALLOW THE EXPENSE INCURRED IN CONNECTION WITH DIRECTORS' VISI T TO VARIOUS DAIRY PLANTS OF RS. 2 17 000/- ON THE GROUND THAT SUCH EX PENDITURE WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS. IT IS SUB MITTED THAT THE DIRECTORS WHO VISITED VARIOUS DAIRY PLANTS WERE IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE AND DIRECTLY CONNECTED WITH THE APPELLANT'S BUSINESS ACTIVITIES OF PROCURING PRODU CING MILK MILK PRODUCTS AND POUCHES. IT IS SUBMITTED THAT THE EXPE NDITURE ON DIRECTORS' VISIT OF RS. 2 17 000/- BEING WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS THE SAME BE A LLOWED. 5. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 51 800/- U/S. 14 AOFJHE I.T. ACT 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE WER E NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND THE DISALLOWA NCE OF RS. 51 800/- OUGHT TO HAVE BEEN DELETED. IT IS SUBMITTE D THAT THE ASSESSING OFFICER HAS NOT BEEN ABLE TO PROVE ANY NE XUS BETWEEN MONEY BORROWED ON INTEREST AND IN TURN USED FOR EXE MPT INCOME. IT IS SUBMITTED THAT INVESTMENT BEING OLD IN NATURE MADE OUT OF ITS OWN FUND AND THE ASSESSEE IS IN A POSITION TO PROVE TH E NEXUS THE DISALLOWANCE IS TOTALLY UNCALLED FOR. IT IS THEREFO RE SUBMITTED THAT THE ADDITION BE DELETED. 6. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIR MING THE INTEREST CHARGED U/S. 234 OF THE INCOME TAX ACT. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S. 234B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIRMED BY THE LEARNED C.I.T. (APPEALS) BE DELETE D. 3. FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSME NT WAS FINALIZED U/S. 143(3) ON 31/12/2007 ASSESSING THE TOTAL INCOM E AT RS.133596650/-. THEREFORE THE ASSESSMENT WAS RE-OP ENED U/S. 147 OF THE ACT AND NOTICE U/S. 148 OF THE ACT WAS ISSUE D ON 21/01/2010 AFTER RECORDING THE REASONS THEREFORE WHICH WAS SUP PLIED TO THE I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 5 ASSESSEE ON 06/09/2010. IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT A REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME. 4. THE ASSESSEE IS A CO-OPERATIVE SOCIETY. IT DERIV ES INCOME FROM BUSINESS OF MARKETING AND MANUFACTURING OF MILK AND MILK PRODUCTS PACKAGING ROLLS FOR MILKS CONSIGNEE AGENT OF MEMBE R UNIONS FOR MILK PRODUCTS. 5. ON GOING THROUGH THE P&L A/C. FILED WITH THE RET URN OF INCOME AND ANNUAL REPORT FOR THE YEAR 2004-2005 IT WAS FO UND THAT THE ASSESSEE HAS DEBITED RS.334.48 LACS TOWARDS COOPERA TIVE DEVELOPMENT EXPENSES WHICH INCLUDE THE ASSISTANCE OF RS.150 LACS GIVEN TO JKMPC LTD. (JAMMU & KASHMIR MILK PRODUCERS ' CO- OPERATIVE LTD.). IT WAS FOUND THAT THE EXPENDITURE OF RS.334.48 LACS TOWARDS CO-OPERATIVE DEVELOPMENT EXPENSES IS OF CAP ITAL EXPENDITURE IN NATURE AND THEREFORE NOT ALLOWABLE AS REVENUE EXPENDITURE AS PER THE PROVISIONS OF THE ACT. FURTH ER THE CO- OPERATIVE DEVELOPMENT EXPENSES INCLUDES ASSISTANCE OF RS.150 LACS TO JKMPC LTD. WHICH IS ALSO NOT ALLOWABLE EITHER U/ S.36 OR U/S.37 OF THE ACT FOR THE SINGLE REASON THAT ANY EXPENSES IN THE NATURE OF 'ASSISTANCE' WAS TO BE QUALIFIED AS CAPITAL EXPENDITURE ONLY. IN VIEW OF THE ABOVE THE ASSESSEE WAS REQUIRED VIDE PARA-6 OF QUESTIONNAIRE LETTER DATED 20/08/2010 TO EXPLAIN WITH COGENT & SU FFICIENT EVIDENCES AS TO WHY CO-OPERATIVE DEVELOPMENT EXP.(INCLUDING A SSISTANCE OF RS.150 LACS TO JKMPC LTD) OF RS.334.48 LACS SHOULD NOT BE TREATED I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 6 AS CAPITAL EXPENDITURE. IN RESPONSE TO THIS A WRIT TEN SUBMISSION DATED 24/11/2010 WAS FURNISHED AND THE RELEVANT PARAGRAPH S OF THE SUBMISSION ARE REPRODUCED HERE BELOW. I. 'APART FROM MARKETING AND DISTRIBUTION ARE OF KEY ROLE OF FEDERATION IS TO DEVELOP PROMOTE AND SUPPORT CO-OPERATIVE MOV EMENT. II. WE HAVE TO FURTHER STATE THAT WITH THE INTRODUC TION OF THE PRIVATE PARTIES IN THE MILK AND MILK PRODUCTS BUSINESS IN O RGANIZED MANNER IT WAS FEARED THAT THE MILK PRODUCERS AT VILLAGE LEVEL ARE LIKELY TO BE MISDIRECTED BY THE PRIVATE ENTREPRENEURS AND THEREB Y THE MILK PRODUCERS WOULD BE TEMPTED TO DIVERT SUPPLY OF MILK TO THESE PRIVATE PARTIES AND IT WOULD RESULT INTO REDUCTION IN QUANT UM OF THE PROCUREMENT OF MILK AND AFFECT THE BUSINESS OF THE FEDERATION ADVERSELY. III. FEDERATION STARTED THE COOPERATIVE DEVELOPMEN T PROGRAMME IN THE EARLIER YEARS ALSO AND DEVELOPED IN RESPECT OF MILD COOPERATIVE IT IS FINANCIAL INVOLVEMENT OF MEMBERS DEVELOPMENT AC TIVITIES IN RESPECT OF FODDER MILK PRODUCTION ENHANCEMENT SCIENTIFIC ANIMAL HUSBANDRY PRACTICES AND OVERALL STRUCTURAL DEVELOPMENT OF ANA ND PATTERN DIARY COOPERATIVE BY DIRECT PARTICIPATION OF THE MEMBER B ASED ON INTERNATIONAL RECOGNIZED PRINCIPLES OF CO-OPERATION . 6. DURING THE YEAR ASSESSEE/APPELLANT HAVE EVOLVED FOLLOWING ACTIVITIES IN RESPECT OF COOPERATIVE MOVEMENT. THE Y HAVE I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 7 IMPLEMENTED INTERNAL CONSULTANT DEVELOPMENT (ICD) I NTERVENTION FOR DEVELOPING SELF LEADERSHIP AMONG MEMBER PRODUCERS A ND THEREBY ENABLING THEM TO MANAGE THEIR DAIRY BUSINESS EFFICI ENTLY LEADING TO THEIR OVERALL DEVELOPMENT . UNDER ICD THEY HAVE IM PLEMENTED MODULE ON VISION MISSION STRATEGY (VMS) FOR PRIMARY MILK P RODUCER MEMBERS & VILLAGE DAIRY COOPERATIVES. FACILITATED B Y SPECIALLY TRAINED CONSULTANTS VILLAGE DAIRY COOPERATIVE SOCIETIES (VDCS) HAVE CONDUCTED MISSION STRATEGY WORKSHOPS PREPA RED THEIR MISSION STATEMENTS BUSINESS PLANS FOR NEXT FIVE YE ARS. A COPY OF THE BUSINESS PLAN DEVELOPED BY OF THE VILLAGE DAIRY COOPERATIVE SOCIETY IS ALSO ENCLOSED. THEY ALSO CARRY OUT CLE ANLINESS AUDIT AT VDCS. IN ADDITION ON 2 ND OCTOBER (GANDHI JAYANTI DAY) VDCS ALSO CARRY OUT RED TAG DAY WHERE CLEANING OF VDCS SURRO UNDINGS AND ITS RECORDS / REGISTER IS CONDUCTED. 7. DURING THE YEAR ASSESSEE/APPELLANT HAVE INCURRED RS. 334.48 LACS ON CO-OPERATIVE DEVELOPMENT EXPENSES AS PER FO LLOWING DETAILS:- BREAKUP OF CO-OPERATIVE DEVELOPMENT EXPENDITURE FOR THE YEAR 2004-05 RS. IN LACS I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 8 1 REIMBURSEMENT TO MEMBER UNIONS AGAINST CO-OPERATIVE DEVELOPMENT EXP. 124.60 2 ASSISTANCE TO J K M P C L 150.00 3 HACCP AUDIT REIMBURSEMENT TO MEMBER UNIONS (HAZARD ANALYSIS AND CRITICAL CONTROL POINT AUDIT - FOOD SAFTY PROGRAM) 2.29 4 TECHNICAL TRAINING OF STAFF TO DENMARK & SWEDEN 14.86 5 DIRECTORS VISIT TO VARIOUS DAIRY PLANTS 2.17 6 AMUL YATRA EXPENSE (CO-OPERATIVE DEVELOPMENT YATRA) AND OTHER MISC. EXP. . 40.56 TOTAL 334.48 8. IT IS SUBMITTED THAT THOUGH IT IS DIFFICULT TO M EASURE ECONOMIC BENEFIT IN MONEY TERMS BUT IT WAS SEEN THAT THE MI LK PRODUCTION / PROCUREMENT IN THESE UNION HAVE BEEN INCREASED BY 1 5 PER CENT WHEN COMPARED TO EARLIER YEAR. 9. ASSISTANCE TO THE JAMMU & KASHMIR MILK PRODUCERS' CO- OPERATIVE LIMITED - WITH REFERENCE TO THE ABOVE THE FEDERATION SUBMITS THAT ON SEPTEMBER 12 2003 THE CHIEF MINIST ER OF JAMMU & I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 9 KASHMIR VISITED ANAND ALONG WITH SENIOR MINISTER R EQUESTED THAT ANAND TYPE DAIRY CO-OPERATIVE INFRASTRUCTURE BE EST ABLISHED IN KASHMIR WITH COMPLETE FINANCIAL AND TECHNICAL ASSIS TANCE PROVIDED BY THE GCMMF. THE OBJECTIVE WAS TO ASSOCIATE THE GCMMF IN THE 'HEALING TOUCH' ACTIVITIES INITIATED BY MILK PRODUC ERS BY SETTING UP A FINANCIALLY VIABLE CO-OPERATIVE DAIRY INDUSTRY ON T HE AMUL PATTERN. 10. AS REQUESTED BY THE CHIEF MINISTER JAMMU & KA SHMIR THE FEDERATION HAD SENT A TEAM OF OFFICER TO STUDY THE SITUATION IN THE STATE AND IDENTITY THE POSSIBILITY OF SETTING UP OF OFFICERS TO STUDY THE SITUATION IN THE STATE AND IDENTITY THE POSSIBILITY OF SETTING UP VILLAGE CO-OPERATIVE SOCIETY AND MILK PROCESSING PLANT IN T HE VICINITY OF SRINAGAR. A TEAM VISITED THE MILK SHED AREAS OF JAM MU & KASHMIR BETWEEN SEPTEMBER 21 AND 26 2003 HELD MEETING WIT H HEAD OF THE DEPARTMENT AND OFFICERS OF THE DEPARTMENT OF AGRICU LTURE & CO- OPERATION. REGISTRAR OF CO-OPERATIVE SOCIETIES J&K DIRECTORATE OF ANIMAL HUSBANDRY KASHMIR AND JAMMU REGIONS MILK FEDERATIONS OF KASHMIR AND JAMMU REGIONS. DURING THE VISIT OF T HE TEAM THE GOVERNMENT OFFICERS REQUESTED THAT THEIR STUDY SHOU LD INCLUDE JAMMU REGION. IT WAS INDICATED THAT ANY FUNDS REQUIRED F OR THE JAMMU REGION WOULD BE PROVIDED BY THE STATE GOVERNMENT. THE FED ERATION HAS FURTHER SUBMITTED A PROJECT IDENTIFICATION REPORT. AS PER AGREEMENT IT WAS ESTIMATED THAT INVESTMENT REQUIRED TO SET UP TH E FACILITIES WOULD BE RAISED RS. 5 CRORES FOR EACH JAMMU AND KASHMIR P ROJECTS. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 10 11. WITH REFERENCE TO THE ASSISTANCE PROVIDED BY T HE FEDERATION TO THE JAMMU & KASHMIR MILK PRODUCERS' CO-OPERATIVE LI MITED WE ENCLOSE HEREWITH THE BOARD RESOLUTIONS FOR PROVIDIN G SUCH ASSISTANCE AND COPY OF MOU ARE ENCLOSED. IT IS ONE OF THE OB JECTIVE OF FEDERATION TO PROMOTE CO-OPERATIVE MOVEMENT AND FOR THAT PURPOSE IT WERE DEVELOPMENT AND EDUCATION PROGRAMME AND EVERY YEAR INCUR EXPENDITURE FOR CO-OPERATIVE DEVELOPMENT AND THUS I T IS A ROUTINE NATURE OF EXPENDITURE. WITH REFERENCE TO AMUL YATR A IT IS SUBMITTED THAT TO GET EXPOSURE TO OUR NETWORK OF CO-OPERATIVE INSTITUTION WE ORGANIZE AMUL YATRA FOR OUR CHANNEL PARTNER DISTRI BUTION AND MAJOR RETAILERS FROM ACROSS THE COUNTRY COME TO ANAND IN AMUL YATRA PROGRAMME. SO FAR MORE THEN 7700 DISTRIBUTORS AND O THER CHANNEL PARTNER HAVE VISITED ANAND IN AMUL YATRA. TO SUBS TANTIATE INCURRENCE OF SIMILAR BUSINESS EXPENSE AS REGULAR B USINESS EXPENSES THE FEDERATION PROVIDE DETAILS OF SIMILAR EXPENSE IN IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS AS UNDER : A.Y. 2003-04 RS. 186.36 LACS A.Y. 2004-05 RS.213. 66LACS FURTHER DURING THE YEAR UNDER CONSIDERATION TOTAL EXPENDIT URE IS RS.334.48 LACS INCLUDES ASSISTANCE OF RS.150 LACS TO JAMMU & KASHMIR MILK PRODUCERS' COOPERATIVE LTD. FURTHER THE SAME BEING EXPENDED FOR CO-OPERATIVE DEVELOPMENT AND THEREFORE INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND DOES NO T GIVE ANY ENDURING BENEFIT AND BEING PARI MATERIAL SIMILAR TO THE EXPENSES INCURRED AND ALLOWED IN ALL EARLIER ASSESSMENTS YEA R AND ALSO DURING ASSESSMENT COMPLETED U/S. 143(3) OF THE ACT. FURTHE R WE HAVE TO SUBMIT THAT JKMPCL HAVE SUPPLIED POUCH MILK (MILK P RODUCT) OF RS. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 11 186.14 LACS DURING THE A Y 2005-06 AND RS. 951.21 D URING THE A Y 2006-07 TO GCMMF LTD. JAMMU BRANCH. THUS IT HELPED TO INTRODUCED AMUL POUCH MILK IN JAMMU AND SRINAGAR AREA. 12. IN CONSIDERATION OF EARLIER SUBMISSIONS THAT TH E EXPENDITURE FOR ASSISTANCE TO GMCL IS INCREASED FOR THE PURPOSE OF BUSINESS AND LIABLE AS BUSINESS EXPENSES THE ASSESSING OFFICER HELD THE ENTIRE BUSINESS OF THE ASSESSEE OF MARKETING AND MANUFACTU RING OF MILK AND MILK PRODUCTS THE PACKAGING ROLLS FOR MILK CONSIGNM ENT AGENT OF TRADE UNION FOR MILK PRODUCTS AND THE ASSISTANCE OF RS. 1 50 LACS WAS GIVEN TO JKMPCL IS ALSO NOT WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS OF THE ASSESSEE AND FOUND THAT IT WAS INCU RRED FOR MAINTAINING THE BUSINESS OF THE ASSESSEE AND IN THE PAST THE YEARS OF THE ASSESSEE WAS NOT ADVERSELY AFFECTED FOR WANT OF SUCH ASSISTANCE WAS FURNISHED BY THE ASSESSEE. THUS IT IS NOT AN EXPENDITURE OF REVENUE NATURE AND RELIANCE WAS PLACED IN THIS REGA RD ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DALMIA JAIN & CO. LTD VS. COMMISSIONER OF INCOME TAX (1971) 81 ITR 754 (SC). THE ASSESSING OFFICER ALSO CITED THAT ANY EXPENDITURE I N THE NATURE OF ASSISTANCE IS QUALIFIED AS CAPITAL EXPENDITURE EVEN IF THIS EXPENDITURE IS FOR TIME BEING CONSIDERED AS REVENUE EXPENDITURE EVEN THIS EXPENDITURE IS NOT LIABLE SINCE IT IS NON-BUSINESS PURPOSE EXPENDITURE AND THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE/APPELLANT WITH REGARD TO THE EXPENDITURE A ND DISALLOWED THE AMOUNT OF RS. 334.48 LACS DEBITED TO P & L ACCOUNT TOWARDS COOPERATIVE DEVELOPMENT EXPENSES INCLUDING THE ASSI STANCE OF RS. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 12 150 LACS GIVEN TO JKMCL AND THE SAME WAS ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. 13. ASSESSING OFFICER AFTER VERIFICATION OF THE OD ACCOUNT BANK STATEMENT FOR THE DATE OF 15/12/2004 IT WAS FOUND THAT BEFORE DEBIT OF ADVANCE TAX PAYMENT OF RS. 1.05 CRORE 15-12-2004 THERE WAS DEBIT OF RS. 4659597/- WHICH WAS INCREASED TO RS. 1515959 7/- ON PAYMENT OF ABOVE ADVANCE TAX INSTALLMENT AMOUNT. ON FURTHE R VERIFICATION OF THE OD ACCOUNT DATED 14-03-2005 IT WAS FOUND THAT BEFORE DEBIT OF ADVANCE TAX THE PAYMENT OF 1.50 CRORES IN THE STAT EMENT THERE WAS DEBIT BALANCE OF RS. 6289564/- WHICH WAS INCREASED TO 21189564/- ON PAYMENT OF ABOVE ADVANCE TAX INSTALLMENT AMOUNT. THUS THE AMOUNT OF ADVANCE TAX PAYMENT AS ABOVE ARE EFFECTIV ELY AND CLEARLY UTILIZED FROM OD ACCOUNT I.E. THE BORROWED FUND AN D THEREFORE DISALLOW THE INTEREST ON OD OF RS. 732856/- U/S. 37 OF THE ACT AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 14. DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE CLAIMED DEPRECIATION OF RS. 2976689/- AS PER ANNEXURE 4(II) OF THE ACT AUDIT REPORT ON AMUL PARLOUR AT THE 100% TREATING THE SAM E AS TEMPORARY STRUCTURES. ON BEING ASKED VIDE ORDER SHEET DATED 27/10/2010 AS TO WHY THE DEPRECIATION CLAIMED @ 100% ON AMUL PARLAOU R SHOULD NOT BE RESTRICTED TO 10%. SINCE THE AMUL PARLOUR WERE NOT PURELY OF TEMPORARY STRUCTURE. IN THIS REGARD IT WAS SUBMITT ED THAT THE AMUL PARLOUR WERE FABRICATED OR MADE FROM WOOD OR STRUCT URAL STEEL AND WHEREVER REQUIRED THEY GENERALLY CONSTRUCT IN THE P REMISES OF I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 13 MUNICIPAL CORPORATION RAILWAY STATION BUS STATION HOSPITALS AND OTHER PLACES. IT WAS FURTHER SUBMITTED THAT THEY HAVE TO REMOVE THE PARLOURS ONCE THE ARRANGEMENT WITH THE CONCERNED AU THORITY IS OVER. IT WAS OBSERVED THAT THESE PARLOURS WERE CONSTRUCTED U P TO PLINTH LEVEL IN CONCRETE/CEMENT AND EVEN THE WALL AND ROOF OF TH E SAME ARE OF WEATHER PROOF PVC LAMINATES. IT IS ALSO OBSERVED TH AT THESE STRUCTURES HAVE PROVISION FOR CERAMIC TILING OF THE SALE COUNTERS WALLS AND FLOORING AND HENCE THEY DO NOT PARTAKE THE CHAR ACTER OF PURELY TEMPORARY STRUCTURES AKIN TO A WOODEN STRUCTURE WHI CH ONLY ARE ELIGIBLE FOR 100% DEPRECIATION. IT IS THEREFORE HE LD THAT DEPRECIATION AT THE RATE OF 10% IS ALLOWABLE ON THE STRUCTURES CALL ED AMUL PARLOUR SINCE THEY ARE NOT FOUND TO BE OF TEMPORARY STRUCT URES. I THEREFORE DISALLOW THE EXCESS CLAIM OF DEPRECIATION OF RS.267 9020 ON AMUL PARLOUR AND THE SAME IS ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 15. IT WAS FURTHER FOUND THAT THE ASSESSEE IN ITS COMPUTATION HAS CLAIMED DIVIDEND OF RS.563940/- AS EXEMPT. THE ASSE SSEE WAS ASKED TO EXPLAIN THE EXPENSES INCURRED FOR EARNING THE AFORESAID DIVIDEND INCOME. ON PERUSAL OF BALANCE SHEET IT IS FOUND THAT THE ASSESSEE HAS MADE INVESTMENT OF RS.72.91 LACS. IT H AS INCURRED INTEREST EXPENDITURE OF RS. 19 LACS ON THE BORROWED FUNDS OF RS.7.89 CRORES. HOWEVER ITS OWN SHARE CAPITAL IS TO THE EX TENT OF RS 40 X CRORES. THE ASSESSEE HAS CLAIMED THAT IT HAS NOT IN CURRED ANY EXPENSES TO EARN EXEMPT INCOME AND ALL THE INVESTME NTS WERE MADE OUT OF THE OWN FUNDS. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 14 16. THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTABL E TO THE EXTENT THAT NO EXPENSES AT ALL HAS BEEN INCURRED IN RELATI ON TO EARNING OF TAX FREE INCOME AND THE ENTIRE INVESTMENT HAS BEEN MADE OUT OF OWN FUNDS. THE ASSESSEE HAS NOT PROVED THE NEXUS THAT T HE SAID INVESTMENTS WERE OUT OF OWN FUNDS AND NO PART OF BO RROWED FUNDS HAVE BEEN DIVERTED. HENCE IT IS HELD THAT RULE 8D IS APPLICABLE IN THIS CASE. THE WORKING OF DISALLOWANCE UNDER RULE 8D IS AS UNDER: 8D(2)(I I) A TOTAL INTEREST EXPENSES DEBITED IN BOOKS 20168000 B AVERAGE VALUE OF THE INVESTMENT AS SHOWN IN THE BALANCE SHEET ON 31/03/2004 AND 3 1/03/2005 5291000 C AVERAGE OF THE TOTAL ASSETS APPEARING IN THE BALANCE SHEET AS ON 31/03/2004 AND 31/03/2005 4210297500 A*B/C 25345 8D(2)(I I) 0.5% OF B ABOVE 26455 TOTAL DISALLOWANCE 51800 I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 15 17. IN VIEW OF THE MATTER DISCUSSED ABOVE THE AMOU NT OF RS.51800/- ADDED IN THE TOTAL INCOME OF THE ASSESSE E U/S 14A R.W.R. 8D OF THE ACT. 18. SUBJECT TO ABOVE REMARKS AND AFTER DISCUSSION THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER:- TOTAL INCOME AS PER ORDER DATED 13/02/2009 GIVING EFFECT TO CIT(A)'S ORDER DATED 27/0 1/2009 RS.133396650 ADD: ON ACCOUNT OF CO- OPERATIVE DEVELOPMENT EXPENSES DISALLOWED AS DISCUSSED ABOVE RS.33448000 ADD: ON ACCOUNT OF INTEREST ON OD ACCOUNT AS DISCUSSED ABOVE RS.732856 ADD: ON ACCOUNT OF THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION ON AMUL PARLOUR AS DISCUSSED ABOVE RS.2679020 ADD: ON ACCOUNT OF THE DISALLOWANCE U/S.14A R.W.R. 8D AS DISCUSSED ABOVE RS.51800 TOTAL INCOME RS.170308326 ROUNDED OFF TO RS.170308330 I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 16 19. AGAINST THE SAID ORDER ASSESSEE/APPELLANT PREF ERRED THE FIRST STATUTORY APPEAL BEFORE THE COMMISSIONER OF INCOME TAX(A) AND FOLLOWING GROUNDS TAKEN:- 1. THE LEARNED ASSESSING OFFICER HAS ERRED I N REOPENING THE CASE U/S. 147 OF THE INCOME TAX ACT BY WRONGLY ISSU ING NOTICE U/S: 148 OF THE IT. ACT. IT IS SUBMITTED THAT ON THE FAC TS AND CIRCUMSTANCES OF THE CASE REOPENING IS BAD IN. IT IS SUBMITTED T HAT THE ASSESSEE HAVING DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT THE REOPENING CANNOT BE MADE. IT IS SUB MITTED THAT THE PROVISIONS OF SEC. 147 R.W.S. 148 ARE NOT AT ALL AP PLICABLE AND THEREFORE THE REOPENING IS BAD IN LAW AND THE SAME BE HELD ACCORDINGLY. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKIN G AN ADDITION BY WAY OF DISALLOWING RS.3 34 48 000/- BEING CO-OPE RATIVE DEVELOPMENT EXPENSES WHICH INCLUDE THE BREED IMPRO VEMENT EXPENSES AS UNDER: (RS. IN LACS) 1. REIMBURSEMENT OF MEMBER UNIONS AGAINST CO-OP. DEVELOPMENT EXPENSES RS. 124.60/- 2. ASSISTANCE TO JKMPCL RS. 150.00/- 3. HACCP AUDIT REIMBRSEMENT TO MEMBER UNIONS (HAZARD ANALYSIS AND CRITICAL CONTROL POINT AUDIT - FOOD SAFTY PROGRAM) RS. 2 .29/- 4. TECHNICAL TRAINING OF STAFF TO DENMARK & SWEDEN RS. 14.86/- 5. DIRECTORS VISIT TO VARIOUS DAIRY PLANTS RS . 2.17/- 6. AMUL YATRA EXPENSE (CO-OP.DEV. YATRA) AND OTHER MISC. EXP. RS. 40.56/- THE LEARNED ASSESSING OFFICER HAS REPRODUCED THE SU BMISSION AND EXPLANATION GIVEN BY THE APPELLANT IN THE ASSESSMEN T ORDER FROM PAGE 2 TO 6 BUT HAS SUMMARILY REJECTED THE CLAIM O N THE GROUND THAT I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 17 THEY ARE NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE. IT IS SUBMITTED THAT THE FINDING GIVEN IS TOTALLY ERRONEOUS INCORRECT AND ABSOLUTELY CONTRARY TO THE CONSISTENT FACT BEING ACCEPTED FOR ALL THESE YEARS. IN VIEW OF THESE FACT S THE ADDITION MADE OF RS. 334.48 LACS BE DELETED. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED ASSESSIN G OFFICER HAS GROSSLY ERRED IN CONTRADICTING HIMSELF BY HOLDING A SECOND ALTERNATIVE VIEW THAT DEVELOPMENT EXPENSES ARE OF ENDURING NATU RE AND THEY ARE CAPITAL IN NATURE WITHOUT GRANTING ANY DEPRECI ATION. THUS THE ASSESSING OFFICER IS NOT AT ALL CONFIDENT AND SURE ABOUT THE TREATMENT OF THE DEVELOPMENT EXPENSES INCURRED BY THE APPELLA NT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT IS SUBM ITTED THAT THE ADDITION MADE OF RS. 334.48 LACS IS CONTRARY TO THE FACTS CONTRARY TO THE CONSISTENT PRINCIPLE AND AGAINST THE SET LEGAL PROPOSITION. IN VIEW OF THIS THE ADDITION OF RS. 334.48 LACS BE DELETED . 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOWING AND MAKING AN ADDITION OF RS.7 32 856/- ON THE GROUND T HAT THE ASSESSEE HAS MADE THE PAYMENT OF ADVANCE TAX FROM THE OVER D RAFT BANKING ACCOUNT ON WHICH INTEREST IS PAID. BY MAKING VARIOU S ASSUMPTIONS HE HAS ERRONEOUSLY COME TO A CONCLUSION THAT THE ASSES SEE HAS MADE THE ADVANCE PAYMENT OF INCOME TAX BY USING THE OVER DRAFT ACCOUNT AND HAS CONSEQUENTLY DISALLOWED INTEREST AT 9.75% O N THE PAYMENT OF ADVANCE TAX MADE. IT IS SUBMITTED THAT THE OBSER VATION AND FINDING OF THE ASSESSING OFFICER IS ERRONEOUS AND CONTRARY TO THE FACTS. THE APPELLANT WAS HAVING SUFFICIENT AND SUBSTANTIAL INT EREST-FREE DEPOSITS AND AMOUNT AVAILABLE WITH IT FROM WHICH ADVANCE TAX HAVE BEEN PAID. WHEN THE ACCOUNTS ARE ONE AND ALL THE FUNDS A RE MUTUALLY INCLUDED NO SUCH CARVING OUT OF PRESUMED INTEREST I S PERMISSIBLE UNDER THE LAW. THE LEARNED ASSESSING OFFICER HAVING FAILED TO PROVE THE NEXUS OF INTEREST ON ADVANCE TAX NOTIONAL INTE REST OF RS.7 32 856/- ADDED IN THE TOTAL INCOME BE DELETED. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN D ISALLOWING DEPRECIATION OF RS.26 79 020/- BEING 100% DEPRECIAT ION CLAIMED ON AMUL PARLOUR. IT IS SUBMITTED THAT SUCH AMUL PARLOU RS ARE PURELY TEMPORARY CONSTRUCTIONS AND ARE ENTITLED TO 100% DE PRECIATION. THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN ALLO WING DEPRECIATION AT 10% BEING APPLICABLE RATE OF DEPRECIATION ON BUI LDING. IT IS SUBMITTED THAT SUCH PARLOURS BEING PURELY TEMPORARY CONSTRUCTIONS I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 18 THE APPELLANT IS ENTITLED TO 100% DEPRECIATION AND THE SAME BE ALLOWED. WITHOUT PREJUDICE TO THE ABOVE THE APPELLANT SUBMIT S THAT SUCH AMUL PARLOURS ARE CONSTRUCTED ON THE LAND WHICH IS NOT OWNED BY THE APPELLANT THE APPELLANT DOES NOT HAVE ANY RIGHT T ITLE OR INTEREST ON SUCH TEMPORARY CONSTRUCTED PARLOURS WHICH CAN BE D EMOLISHED OR REMOVED AT ANY TIME BY THE OWNERS OF THE LAND. IN V IEW OF THIS THE APPELLANT IS ENTITLED TO 100% DEPRECIATION AND THE SAME BE ALLOWED. 5 THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKI NG ADDITION OF RS.51 800/- BY DISALLOWANCE U/S. 14A BY APPLYING AN D WORKING THE SAME UNDER RULE 8D OF THE I.T. RULES IT IS SUBMITT ED THAT AS PER THE LATEST DECISION AND READ WITH PROVISIONS OF THE ACT THE LEARNED ASSESSING OFFICER HAS NOT BEEN ABLE TO GIVE A FINDI NG AND PROVE THE NEXUS OF INTEREST EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. IN ABSENCE OF ANY EVIDENCE AND MATERIAL AND IN ABSENCE OF NEXUS RULE 8D CANNOT BE INVOKED AND DISALLOWANCE U/S. 14A CANNOT BE MADE. THE NOTIONAL DISALLOWANCE OF RS.51 8007- IS R EQUIRED TO BE DELETED. 6 THE LEARNED ASSESSING OFFICER HAS ERRED IN CHAR GING INTEREST U/S. 234A 234B & 234C OF THE I.T. ACT. IT IS SUBMITTED THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE NO INTEREST IS CHARGEABLE AND THE INTEREST CHARGED BE DELETED. 7 THE LEARNED ASSESSING OFFICER HAS ERRED IN INIT IATING PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE IT. ACT. IT IS SUBMITTED THAT THE ASSESSEE HAS NOT CONCEALED AND PARTICULARS OF INCOM E OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS THEREFORE S UBMITTED THAT THE PENALTY PROCEEDINGS INITIATED BE CANCELLED. 20. AFTER CONSIDERING THE ORDER OF THE ASSESSING OF FICER AND SUBMISSIONS MADE BY THE ASSESSEE/APPELLANT LD. COM MISSIONER OF INCOME TAX(A) HELD THAT REASONS FOR MAKING ADDITION OF RS. 14.86 LACS AS MADE BY THE ASSESSING OFFICER IN THE ASSESS MENT ORDER WAS CONSIDERED AND ON PERUSAL OF RELEVANT PART OF THE ASSESSMENT ORDER OF THE ASSESSING OFFICER IT IS SEEN THAT ASSESSING OFFICER HAS MADE I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 19 ADDITION OF RS. 334.48 LACS WHICH INCLUDES REIMBURS EMENT TO MEMBER UNIONS AGAINST COOPERATIVE DEVELOPMENT EXPENSES OF RS. 124.60 LACS ASSISTANCE TO JKMPLCL OF RS. 150 LACS HACCP AUDIT REIMBURSEMENT OF RS. 2.29 TO MEMBERS UNIONS TECHNIC AL TRAINING OF STAFF TO DENMARK AND SWEDEN OF R. 14.86 LACS ETC. IN THE OPINION OF COMMISSIONER OF INCOME TAX(A) THE ASSESSING OFFICE R WAS REQUIRED TO MAKE A SUBMISSION SO FAR THIS ADDITION IS CONCER NED THEREFORE HELD THAT ASSESSING OFFICER WAS NOT CORRECT IN MAKI NG AT RS. 14.86 LACS WHICH WAS INCURRED BY THE APPELLANT ON THE TEC HNICAL TRAIRING OF THE STAFF AND THERE THE SAME IS DELETED. 21. NEXT ISSUE WAS RELATED TO DISALLOWANCE OF EXPEN SES OF RS. 2.17 LACS AS INCURRED ON ACCOUNT OF VISIT OF DIRECTORS T O VARIOUS DAIRY PLANTS. THE APPELLANT VIDE IS LATTER DATED 08-08-2011 SUBMI TTED THAT THESE ARE EXPENDITURES INCURRED BY THE APPELLANT FOR THE VISI T MADE BY THE DIRECTORS OF THE FEDERATION TO VARIOUS DAIRY PLANTS AND SUCH EXPENDITURE ARE INCURRED EVERY YEAR. THE COMMISSIO NER OF INCOME TAX(A) REJECTED THE CLAIM BY SAYING THAT HOW THE VI SIT OF DIRECTORS TO PLANT IN JAMMU AND KASHMIR WAS BENEFICIAL TO IT AND HOW IT IS CONCERNED WITH THE STANDARD OF THE PLANT OF FEDERAT ION WHICH IS SITUATED IN DIFFERENT STATES. HENCE ADDITION OF RS . 2.17 LACS WERE CONFIRMED. ANOTHER ISSUE IN THE CASE OF THE APPELL ANT WAS RELATED TO ADDITION OF RS. 2.29 LACS WHICH IS HACCP AUDIT REI MBURSEMENT TO TRADA UNIONS. THE ASSESSING OFFICER HAS NOT ASSIGN ED ANY REASON IN THE ASSESSMENT ORDER SEPARATELY FOR MAKING ADDITION OF THIS AMOUNT. HENCE THE ADDITION OF RS. 2.29 LACS WERE DELETED BY THE I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 20 COMMISSIONER OF INCOME TAX(A). SO FAR MAKING ADDIT ION OF RS.7 32 856/- ON THE GROUND THAT APPELLANT HAD MADE PAYMENT OF ADVANCE TAX FROM OVERDRAFT BANKING ACCOUNT ON WHICH INTEREST WAS PAID. AS PER THIS GROUND THE APPELLANT WAS HAVING SUFFICIENT AND SUBSTANTIAL INTEREST TO THE DEPOSITS AND AMOUNT AVA ILABLE FROM WHICH ADVANCE TAX WAS FOUND PAID. AS PER THE APPELLANT W HEN THE ACCOUNTS ARE ONE AND ALL FUNDS ARE MUTUALLY INCLUDED NO SU CH CARKING OUT OF PRESUMED INTEREST IS PERMISSIBLE UNDER THE LAW. IN THE CASE OF APPELLANT ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDING IN ITS APPELLANT HAD MADE PAYMENT OF ADV ANCE TAX BY BORROWING MONEY WHICH WERE UTILIZED FROM THE OVERD RAFT ACCOUNT AND BASED ON THE TOTAL ADVANCE TAX PAYMENT MADE OF RS. 1.05 CRORES IN DECEMBER 2004 AND RS. 1.75 CRORES IN MARCH 2005. ACCORDINGLY THE ASSESSING OFFICER HELD THAT WHILE MAKING THE P AYMENT OF ADVANCE TAX THERE WERE SIMILAR OVERDRAFT IN THE BANK WHICH RESULTED INTO INTEREST PAYMENT BY THE APPELLANT. THE ASSESSING OFFICER ACCORDINGLY WORKED THE INTEREST ON ADVANCE TAX PAYM ENT AT RS. 732 856/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE APPELLANT AND COMMISSIONER OF INCOME TAX(A) ALSO HELD THE R EASONS FOR MAKING DISALLOWANCE OF RS. 7 32 756/- AS MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AS WELL A S ABOVE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED AND APPELLANT HAS REFERRED ASSESSMENT ORDER IN THE CASE OF APPELL ANT FOR ASSESSMENT YEAR 2008-09 WHEREIN THE APPELLANT HAD SUBMITTED IDENTICAL EXACT DETAILS OF OVERDRAFT ENJOYED FOR THE PURPOSE OF PAYMENT OF ADVANCE AND ASSESSING OFFICER DISALLOWED THE EXACT I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 21 AMOUNT OF RS. 24 712 ONLY RELYING ON SUCH WORKING G IVEN BY THE APPELLANT. FOR THIS YEAR ALSO THE APPELLANT HAS WO RKED OUT THE DISALLOWANCE DIRECTLY 4565/- ONLY THEREFORE DIRECTE D THE ASSESSING OFFICER TO VERIFY ARITHMETICAL CORRECTNESS OF OVERD RAFT WORKING OUT AND BALANCE SHOWN AND RESTRICT THE DISALLOWANCE ACCORDI NGLY AND THIS GROUND WAS PARTLY ALLOWED. GROUND NO. 4 IS RELATE D TO DISALLOWANCE OF DEPRECIATION OF RS. 26 79 020/- BEING 100% D EPRECIATION CLAIMED ON AMUL PARLOUR BUT DISALLOWED THE APPELL ANT CONTENTION AND HELD THAT THE APPELLANT IS ENTITLED TO 100% ONL Y ON THE AMUL PARLOUR. THUS GROUND NO. 4 OF THE APPELLANT WAS DI SMISSED. GROUND NO. 5 OF THE APPELLANT WAS THAT THE ASSESSING OFFIC ER HAS ERRED IN MAKING THE ADDITION OF RS. 51 800/- BY MAKING DISAL LOWANCE U/S. 14A BY APPLYING AND WORKING THE SAME UNDER RULE 8D OF T HE INCOME TAX RULE. IN THIS REGARD IT WAS MENTIONED THAT SIMIL AR ISSUE IN THE CASE OF APPELLANT WAS INVOLVED FOR ASSESSMENT YEAR 2006-07 AND ALSO THE LD. COMMISSIONER OF INCOME TAX(A) DECIDED THIS ISSUE IN FAVOUR OF DEPARTMENT AND AGAINST THE ASSESSEE. THUS GROUND NO. 5 OF THE APPELLANT WAS DISMISSED. 22. GROUND OF APPEAL NO. 6 OF THE APPELLANT IS THA T THE LD. A.O HAS ERRED IN CHARGING INTEREST U/S 234A 234B & 234C OF THE INCOME TAX ACT. IT IS SUBMITTED BY THE APPELLANT THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE NO INTEREST IS CHARGEABL E. IN THIS REGARD IT IS HELD THAT THE CHARGING OF INTEREST U/S 234B IS M ANDATORY. THE CHARGING OF INTEREST U/S 234B IS THEREFORE UPHELD . SO FAR AS CHARGING OF INTEREST U/S 234A & 234C OF THE ACT ARE CONCERNE D THE APPELLANT I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 22 HAS NOT MADE ANY SUBMISSION AS TO WHY THE SAME ARE CONSIDERED TO BE WRONG. THE APPELLANT HAS MERELY SUBMITTED THAT L OOKING TO THE FACT AND CIRCUMSTANCES OF THE CASE NO INTEREST IS CHARGE ABLE. SINCE THE APPELLANT HAS NOT GIVEN ANY REASON IN SUPPORT OF TH IS GROUND OF APPEAL AND THEREFORE THE SAME IS DISMISSED AND TH E CHARGING OF INTEREST AS MADE BY THE A.O U/S 234A & 234C ARE UPH ELD. THUS THE GROUND OF APPEAL NO.6 OF THE APPELLANT IS DISMISSED AND IN THE RESULT THE APPEAL OF THE ASSESSEE/APPELLANT WAS PARTLY ALL OWED BY THE COMMISSIONER OF INCOME TAX (A). 23. IN ITA NO.1226/AHD/2012 FOR ASSESSMENT YEAR 200 5-06 THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS . 124.60 LACS ON ACCOUNT OF REIMBURSEMENT OF MEMBER UNIONS AGAINST C O-OP. DEVELOPMENT EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE IS NOT CONNECTED WITH THE ORDINARY COUR SE OF BUSINESS OF THE ASSESSEE AND THAT THE CO-OPERATIVE DEVELOPMENT EXPENSES ARE OF ENDURING NATURE AND THEREFORE THEY ARE CAPITAL I N NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF R S. 40.56 LACS ON ACCOUNT OF DISALLOWANCE OF AMUL YATRA EXPENSES (CO- OPERATIVE DEVELOPMENT YATRA) WITHOUT APPRECIATING THE FACT TH AT SUCH EXPENDITURE IS OF ENDURING NATURE AND THEREFORE CA PITAL IN NATURE. 23.1. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 23 23.2. SO FAR AS DELETION OF ADDITION OF RS.124.60 LACS ON ACCOUNT OF REIMBURSEMENT OF MEMBER UNIONS AGAINST CO-OP. DEVEL OPMENT EXPENSES WHICH WERE NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS AND THE CO-OP.DEVELOPMENT EXPENSES ARE CON CERNED SAME WERE ALLOWED BY THE LD.CIT(A) ORDER AT PAGE NO A.24 TO 25 IN PARA NO.5.3 AND FURTHER DEPARTMENT WAS IN APPEAL AS PER GROUND NO.1 OF DEPARTMENT APPEAL IN ITA NO.1226/AHD/2012 BUT APPELLANT RELIES ON DETAILED WRITTEN SUBMISSION FILED BEFORE THE LD.CIT(A) AS PER PAPER-BOOK AT PAGE NOS.2 TO 11 AND FULL DETAILS HAV E BEEN GIVEN. THE APPELLANT HAS FILED A COPY OF THE DECISION OF I TAT AHMEDABAD BENCH IN THE CASE OF VALSAD DISTRICT CO-OP.SOCIETY WHEREIN ASSESSEES CLAIM WAS ALLOWED. SINCE THE PRESENT IS SUE IS IDENTICAL TO THE CASE OF VALSAD DISTRICT CO-OP.BANK LTD THIS GR OUND OF ASSESSEES APPEAL IS ALLOWED. 23.2. SO FAR AS DELETION OF ADDITION OF RS.40.56 LA CS ON ACCOUNT OF DISALLOWANCE OF AMUL YATRA EXPESNES (CO-OPERATIVE D EVELOPMENT YATRA) THE SAME WERE ALLOWED BY THE LD.CIT(A) AT P AGE NO.39 IN PARA5.23 AND THIS GROUND IS ALSO COVERED BY THE DEC ISION OF ITAT AHMEDABAD IN THE CASE OF VALSAD DISTRICT CO-OP.SOCI ETY IN ITA NO.3356/AHD/2008 FOR AY 2005-06. IN THIS CASE AMU L GUJARAT DIARY HAS TO PROCURE MILK FROM SMALL FARMERS AND DOING WO RK FOR THE BETTERMENT OF FARMERS AND THE SOCIETY WAS RUNNING U NDER THE GUIDANCE OF FEDERATION AND IS WITH NO PROFIT MOTIVE WITH OBJECTIVE OF UPLIFTMENT OF SMALL FARMERS OF RURAL AREAS. THE CL AIM WAS DISALLOWED BY THE AO BY MAKING OBSERVATIONS TO THE FACT THAT T HE ASSESSEE COULD I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 24 OT LINK UP THE BUSINESS CONNECTION IN RESPECT OF TH E ABOVE EXPENSES REIMBURSED TO VASUDHARA TRUST AND OTHER TWO MEMBERS OF THE TRUST HAVE NOT BORNE SUCH EXPENDITURE. THE ASSESSEE FURN ISHED DETAILS OF THE EXPENSES WHICH ARE MAINLY PERTAINING TO ANIMAL HUSBANDRY & VETERINARY AND ADMINISTRATIVE EXPENSES PERTAINING T O THESE ACTIVITIES. IT WAS SUBMITTED THAT THESE EXPENSES WERE COMPLETEL Y VOUCHED AND SUBJECT TO AUDIT AND WERE INCURRED FOR BUSINESS ACT IVITIES OF THE ASSESSEE BECAUSE THE SAME WERE ADVANTAGEOUS TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT SIMILAR DISALLOWANCE OF CO- OPERATIVE DEVELOPMENT EXPENSES BEING IN THE NATURE OF RESEARC H.& DEVELOPMENT EXPENSES WERE DISALLOWED WHICH HAVE BE EN DELETED BY THE LD.CIT(A)AND SUBSEQUENTLY ACTION OF THE LD.CIT( A) WAS CONFIRMED BY THE ITAT AS MENTIONED THEREIN. RESPECTFULLY FOL LOWING THE SAID DECISION OF THE COORDINATE BENCH WE ALLOW THE APPE AL OF THE ASSESSEE AND DISMISS THE APPEAL OF THE REVENUE. 23. IN THE RESULT ASSESSEES APPEAL IS ALLOWED WH EREAS DEPARTMENTAL APPEAL IS DISMISSED. 24. IN ITA NO.3037/AHD/2010 FOR ASSESSMENT YEAR 2007-08 THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.3 64 32 000/- BEI NG AMOUNT TRANSFERRED TO RESERVE FUND U/S. 67 OF GUJARAT CO. OP. SOCIETIES ACT. ON THE FACTS OF THE CASE AND IN LAW THE DEDUCTION OF THE AFORESAID AMOUNT OUGHT TO HAVE BEEN GIVEN. IT BE SO HELD NOW AND THE SAID AMOUNT BE ALLOWED AS CLAIMED. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 25 2. THE LEARNED C.I.T. (APPEALS) FURTHER ERRE D BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AM UL PARLOURS. ON THE FACTS OF THE CASE AND IN VIEW OF THE LEGAL P OSITION THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DE PRECIATION AT 100% AS CLAIMED. IT BE SO HELD NOW AND THE DEPRECIA TION BE ALLOWED AT 100%. 3. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 72 855/- U/S. 14 A OF THE IT. ACT 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE WER E NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND THE DISALLOWA NCE OF RS. 72 855/- OUGHT TO HAVE BEEN DELETED. IT BE SO HELD NOW. 4. THE LEARNED C.I.T. (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.87 00 000/- BEING DISALLOWANCE OF EXPENSES ON REPAIRS TO THE PLANT CONSIDERING THE SAME AS CAPITAL IN NATURE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON THE BASIS OF THE D ETAILS FILED THE EXPENDITURE IS IN THE NATURE OF CURRENT REPAIRS AND NOT AT ALL IN THE NATURE OF CAPITAL EXPENDITURE. IT IS SUBMITTED THAT THE DISALLOWANCE OF RS. 87 00 000/- EFFECTIVELY RS. 73 95 000/- AFTER G RANTING DEPRECIATION BE DELETED AND THE CLAIM OF THE APPELL ANT THAT THE EXPENDITURE ARE OF REVENUE IN NATURE BE ALLOWED. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN NOT APPRE CIATING THE FACT AND CIRCUMSTANCES OF THE CASE WITH REGARD TO THE SA ID CLAIM THAT THE APPELLANT HAD RECEIVED THE INSURANCE CLAIM OF RS.72 83 686/- AND THE SAME CREDITED AND SHOWED AS INCOME IN THE SUBSE QUENT YEAR. FURTHER THE LEARNED C.I.T. (APPEALS) HAS ALSO ERRE D TO INTERPRET THE BHIMANI & CO SURVEYORS LETTER THAT THE INSURANCE C LAIM RS. 49 00 000 IS RECEIVED AGAINST THE LOSS OF STOCK OR PLANT. HOWEVER IT IS CLEARLY MENTIONED IN THE LETTER THAT THE ASSESSE E FILED THE CLAIM AGAINST THE DAMAGE IN PLANT ONLY AND NOT AGAINST TH E LOSS OF STOCK. IT IS THEREFORE PRAYED THAT RS. 87 00 000/- ARE TO BE ALLOWED AS REVENUE EXPENDITURE. 5. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIR MING THE AMOUNT RECEIVED OF RS.237 LAKHS BEING SECURITY DEPO SITS WRITTEN BACK AS INCOME AND NOT AS CAPITAL RECEIPT. IT IS SU BMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE SECURITY DEPOSI TS RECEIVED FROM VARIOUS VENDORS WERE NEVER ALLOWED AS A DEDUCTION I N THE PREVIOUS I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 26 YEAR PROVISIONS OF SEC. 41(1) ARE NOT APPLICABLE A ND THEREFORE WRITING OFF AND CREDITING SECURITY DEPOSITS AS NO M ORE PAYABLE CANNOT BE TREATED AS INCOME. IT IS SUBMITTED THAT T HE DEPOSITS SO WRITTEN OFF OF RS. 237 LAKHS AS NOT PAYABLE IS CAPI TAL RECEIPT AND NOT INCOME AND THE SAME BE ALLOWED ACCORDINGLY. SECURITY DEPOSITS WRITTEN OFF IN THE SUBSEQUENT YEA R. IT IS SUBMITTED THAT THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM O F ACCOUNTING DULY AUDITED AND WRITING OFF OF OTHER SECURITY DEPOSITS OF RS.239.07 LAKHS WAS NOT AT ALL AN ISSUE FOR THE YEAR UNDER APPEAL BUT IS TO BE CONSIDERED AND DECIDED IN SUBSEQUENT ASST. YEAR 200 8-09. IN ANY EVENT THE CREDIT OF AMOUNT OF DEPOSITS OF RS.239.07 LAKHS IN PROFIT & LOSS ACCOUNT AND ITS TREATMENT AS INCOME OR OTHERWI SE IS NOT AT ALL AN ITEM OF INCOME IN THIS YEAR AND IT CANNOT BE ADD ED IN THE HANDS OF THE INCOME OF THE APPELLANT IN THE ASST. YEAR 2007- 08. THE ACTION OF LEARNED C.I.T. (APPEALS) DIRECTING THE ASSESSING OF FICER TO ENHANCE THE INCOME FURTHER BY RS.239.07 LAKHS IS BAD IN LAW AND ALSO NOT CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE. IT IS SUBMITTED THAT THE SAME BE HELD ACCORDINGLY. 6. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIR MING THE INTEREST CHARGED U/S. 234 OF THE INCOME TAX ACT. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S. 234B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIRMED BY THE LEARNED C.I.T. (APPEALS) BE DELETE D. 25. IN ITA NO.2968/AHD/2010 FOR ASSESSMENT YEAR 2007-08 THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE OF ADDITIONAL DEPRECIATION OF RS. 54 00 000/- OVERLOO KING THE PROVISIONS OF SEC. 32(1)(IIA) OF THE ACT. AND ALSO THE FACT T HAT NO NEW IDENTIFIABLE PRODUCT OR THING HAD COME INTO EXISTEN CE. 25.1. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 27 25.2. IN THIS CASE MATTER WAS DECIDED AGAINST THE ASSESSEE BY THE HONBLE ITAT AHMEDABAD IN ASSESSEES OWN CASE IN AY 2006-07 IN ITA NO.3270/AHD/2009. SO FAR AS THE DEPRECIATION IS CONCERNED AO ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% ON AM UL PARLOURS. IN THIS CASE MATTER WAS DECIDED IN FAVOUR OF ASSESSEE BY THE HONBLE ITAT IN ASSESSEES OWN CASE FOR AY 2002-03 IN ITA NO.475/AHD/2006 AND NOW THE SAME HAS ALSO BEEN CONF IRMED BY THE HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE I N TAX APPEAL NO.759 OF 2013 DATED 23/01/2014. IN THIS CASE HO NBLE HIGH COURT HAS HELD THAT MILK DAIRY PROCURE LAND ON LEASE BASI S AND CONSTRUCTED TEMPORARY SHEDS FOR SALE OF MILK PRODUCTS AND HONB LE HIGH COURT HAS ALSO CITED SIMILAR DECISION IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD. REPORTED IN (2007) 293 ITR 432 (MAD) AND HELD THAT CONSTRUCTION OF BUILDING ON A LEASEHOLD LAND RESULTED INTO ASSES SEE ONLY A BUSINESS ADVANTAGE AND THE ASSESSEE CANNOT BE STATE D TO HAVE ACQUIRED ANY CAPITAL ASSET. THEREFORE IN VIEW OF T HE ABOVE JUDGEMENTS APPEAL OF THE ASSESSEE IS ALLOWED AND DEPARTMENTAL APPEAL IS DISMISSED. 26. IN ITA NO.1900/AHD/2012 FOR ASSESSMENT YEAR 2 008-09 THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 3 86 21 189/- BE ING AMOUNT TRANSFERRED TO RESERVE FUND U/S. 67 OF GUJARAT CO. OP. SOCIETIES ACT. ON THE FACTS OF THE CASE AND IN LAW THE DEDUCTION OF THE AFORESAID AMOUNT OUGHT TO HAVE BEEN GIVEN. IT BE SO HELD NOW AND THE SAID AMOUNT BE ALLOWED AS CLAIMED. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 28 2. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AM UL PARLOURS. ON THE FACTS OF THE CASE AND IN VIEW OF THE LEGAL P OSITION THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DE PRECIATION AT 100% AS CLAIMED. IT BE SO HELD NOW AND THE DEPRECIA TION BE ALLOWED AT 100%. 3. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 63 929/- U/S. 14 A OF THE IT. ACT 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE WER E NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND THE DISALLOWA NCE OF RS.63 929/- OUGHT TO HAVE BEEN DELETED. IT BE SO HE LD NOW. 4. THE LEARNED C.I.T. (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.24 812/- SEPARATELY ON THE GROUND THAT INTEREST PERTAINS TO THE BORROWING TO MAKE PAYMENT OF ADVANCE TAX. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE FINDING AND WORKING OUT OF THE INTEREST IS INCORREC T BOTH ON FACTS AND ON LAW AND THE SAME BE DELETED. 5. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CON FIRMING THE INTEREST CHARGED U/S. 234 OF THE INCOME TAX ACT. IT IS SUBMI TTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S. 2 34B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIRMED BY THE LEARNED C.I.T. (APPEALS) BE DELETED. 27. IN ITA NO.1977/AHD/2012 FOR ASSESSMENT YEA R 2008-09 THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F RS. 616.36 LACS ON ACCOUNT OF CO-OP. DEVELOPMENT EXPENSES WHICH INC LUDES BREED IMPROVEMENT EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE IS NOT CONNECTED WITH THE ORDINARY COUR SE OF BUSINESS OF I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 29 THE ASSESSEE AND THAT THE CO-OPERATIVE DEVELOPMENT EXPENSES ARE OF ENDURING NATURE AND THEREFORE THEY ARE CAPITAL I N NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF ADDITIONAL DEPRECIATION OF RS. 10.99 LACS OVERLOOKING THE PRO VISIONS OF SECTION 32(1)(IIA) OF THE ACT AND ALSO THE FACT THAT NO NEW IDENTIFIABLE PRODUCT OR THING HAD COME INTO EXISTENCE. 27.1. WE HAVE HEARD THE RIVAL SUBMISSIONS PER USED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 27.2. SO FAR AS GROUND NO.1 IN CONFIRMING THE DISAL LOWANCE OF RS.3 86 21 189/- BEING AMOUNT TRANSFERRED TO RESER VE FUND U/S.67 OF GUJARAT CO-OP. SOCIETIES ACT IS CONCERNED THE APP ELLANT-ASSESSEE HAS STATED THAT ASSESSEE IS ENTITLED TO DEDUCTION F OR THE AMOUNT TRANSFERRED TO RESERVE FUND FROM NET PROFIT AS PER THE PROVISIONS OF SECTION 67 OF GUJARAT CO-OP. SOCIETIES ACT AND THE REFORE THE AMOUNT IS ALLOWABLE AS TAKEN AS THE SAME HAS BEEN PROVIDED UNDER THE PROVISIONS OF SECTION 67 OF THE GUJARAT CO-OP. SOCI ETIES ACT. THE APPELLANT ALSO SUBMITTED THAT IMMEDIATELY PRECEDING AY 2006-07 THE LD.CIT(A) BARODA VIDE HIS ORDER DATED 20/10/2009 HA S CONFIRMED THE SAID ADDITION IN VIEW OF THE DECISION OF ITAT IN AS SESSEES OWN CASE FOR AY 2001-02 AND IN THE SUBSEQUENT YEAR THE ASS ESSEE IS IN APPEAL BEFORE THE HONBLE GUJARAT HIGH COURT. IN VIEW OF THESE FACTS WE DECLINE TO INTERFERE WITH THE ORDER OF TH E LD.CIT(A) SAME IS HEREBY UPHELD. THUS THIS GROUND OF ASSESSEES APP EAL IS DISMISSED. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 30 27.3. SO FAR AS DISALLOWANCE MADE IN RESPECT OF DEP RECIATION ON CLAIM OF MILK POWER PLANT IS CONCERNED IN OUR VIEW THE CLAIM IS ELIGLE BECAUSE THE SAID MACHINE ARE MEANT FOR PASTEURIZATI ON OF MILK AND MAKING OF SKIMMED MILK POWER. THERE IS ALSO MERIT IN THE APPELLANTS CONTENTION THAT U/S.32(1)(IIA) OF THE ACT THE CONDI TION TO BE SATISFIED THAT THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE APPELLA NT IS CURRENTLY ENGAGED IN THE BUSINESS OF MANUFACTURING OF MILK PR ODUCTION OF MILK PRODUCTS AND CONSIDERING ALL ASPECTS IT IS HELD TH AT THE APPELLANT IS ELIGIBLE FOR CLAIM OF DEPRECIATION U/S.32(1)(IIA) O F THE ACT. 27.4. IN THE RESULT ASSESSEES APPEAL IS PARTLY AL LOWED WHEREAS DEPARTMENTAL APPEAL IS ALSO PARTLY ALLOWED. 28. IN ITA NO.597/AHD/2013 FOR ASSESSMENT YEAR 2009-10 THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 5 40 09 134/- BE ING AMOUNT TRANSFERRED TO RESERVE FUND U/S. 67 OF GUJARAT CO. OP. SOCIETIES ACT. ON THE FACTS OF THE CASE AND IN LAW THE DEDUCTION OF THE AFORESAID AMOUNT OUGHT TO HAVE BEEN GIVEN. IT BE SO HELD NOW AND THE SAID AMOUNT BE ALLOWED AS CLAIMED. 2. THE [EARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION .AS AGAINST 100% DEPRECIATION ON A MUL PARLOURS AND MAKING A DISALLOWANCE OF RS.89 38 131/-. ON THE FACTS OF THE CASE AND IN VIEW OF THE LEGAL POSITION THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DEPRECIATION AT 100 % AS CLAIMED. IT BE SO HELD NOW AND THE DEPRECIATION BE ALLOWED AT 1 00%. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 31 3. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 52 449/- U/S. 14 A OF THE I.T. ACT 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE W ERE NO EXPENSES INCURRED TO EARN ANY EXEMPT ICOME THE DISALLOWANCE OF RS.52.449/- OUGHT TO HAVE BEEN DELETED. IT BE SO HELD NOW. 29. IN ITA NO.924/AHD/2013 FOR ASSESSMENT YEAR 2009-10 THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F RS. 453.04 LACS ON ACCOUNT OF REIMBURSEMENT OF FERTILITY IMPROVEMEN T PROGRAMME EXPENSES (FIP) AND RS. 176.02 LACS ON ACCOUNT OF RE IMBURSEMENT OF MEMBER UNIONS AGAINST CO-OP. DEVELOPMENT EXPENSE S WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE IS NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE AND THA T THE CO- OPERATIVE DEVELOPMENT EXPENSES ARE OF ENDURING NATU RE AND THEREFORE THEY ARE CAPITAL IN NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F RS. 47.81 LACS ON ACCOUNT OF TRAVELLING & CONVEYANCE AND RS. 8.42 LAC S ON ACCOUNT OF LODGING AND BOARDING EXPENSES AGAINST CO-OP. DEVELO PMENT EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EX PENDITURE IS NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS OF T HE ASSESSEE AND THAT THE CO-OPERATIVE DEVELOPMENT EXPENSES ARE OF E NDURING NATURE AND THEREFORE THEY ARE CAPITAL IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F RS. 34.72 LACS ON ACCOUNT OF DISALLOWANCE OF AMUL YATRA EXPENSES (CO- OPERATIVE DEVELOPMENT YATRA) WITHOUT APPRECIATING THE FACT TH AT SUCH EXPENDITURE IS OF ENDURING NATURE AND THEREFORE CA PITAL IN NATURE. 29.1. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSE D THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDERS OF THE AUTHORITIES BELOW. IN THIS CASE THE LD.CIT(A) CO NFIRMED THE I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 32 DISALLOWANCE OF RS.5 40 09 134/- BEING AMOUNT TRANS FERRED TO RESERVE FUND U/S.67 OF GUJARAT CO-OP. SOCIETIES ACT. 29.2. SINCE WE HAVE GIVEN OUR FINDINGS IN THE AY 2008-09(SUPRA) WHEREIN WE HAVE DECIDED THE ISSUE AGAINST THE ASSES SEE AND IN FAVOUR OF REVENUE AND THEREFORE ON THE SAME REASO NING FOR THIS YEAR ALSO ASSESSEES APPEAL IS DISMISSED ON THIS I SSUE. 29.2. SO FAR AS 10% DEPRECIATION AS AGAINST 100% O N AMUL PARLOURS IS CONCERNED WE HAVE DEALT WITH THE SIMILAR ISSUE (IN ASSESSEES CASE-SUPRA) IN FAVOUR OF ASSESSEE IN AY 2007-08. T HEREFORE FOR THE SAME REASONING FOR THIS AY 2009-10 ALSO ASSESSEES APPEAL IS ALLOWED ON THIS ISSUE. 29.3. GROUND NO.3 OF ASSESSEES APPEAL IS AGAINST C ONFIRMING THE DISALLOWANCE OF RS.52 449/- U/S.14A OF THE ACT. TH IS GROUND IS NOT PRESSED BY ASSESSEES REPRESENTATIVE IN ACCOUNT OF SMALLNESS OF THE AMOUNT. THEREFORE THIS GROUND IS DISMISSED AS NOT PRESSED. AS A RESULT ASSESSEES APPEAL IS PARTLY ALLOWED WHEREA S REVENUES APPEAL IS ALSO PARTLY ALLOWED. 30. WE SUMMARIZE THE RESULT AS UNDER: 1. ASSESSEES APPEAL IN ITA NO.1119/AHD/2012 FOR AY2005 06 IS ALLOWED. 2. REVENUES APPEAL IN ITA NO.1226/AHD/2012 FOR A Y 2005- 06 IS DISMISSED. 3. ASSESSEES APPEAL IN ITA NO.3037/AHD/2010 FOR A Y 2007-08 IS ALLOWED. 4. REVENUES APPEAL IN ITA NO.2968/AHD/2010 FOR A Y 2007- 08 IS DISMISSED. I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 33 5. ASSESSEES APPEAL IN ITA NO.1900/AHD/2012 FOR AY 2008-09 IS PARTLY ALLOWED. 6. REVENUES APPEAL IN ITA NO.1977/AHD/2012 FOR A Y 2008- 09 IS PARTLY ALLOWED. 7. ASSESSEES APPEAL IN ITA NO.597/AHD/2013 FOR A Y 2009- 10 IS PARTLY ALLOWED. 8. REVENUES APPEAL IN ITA NO.924/AHD/2013 FOR AY 2009- 10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-09-201 6 SD/- SD/- (N.K. BILLAIYA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30/09/2016 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER/ / I.T.A NOS.1119 2968 3037/AHD/2010 1226 1900 197 7/AHD/2012 & 597 924/AHD/2013 GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD VS. ACIT/DCIT 34 STRENGTHENED PREPARATION & DELIVERY OF O RDERS IN THE ITAT 1) DATE OF DICTATION 14 PAGES 07/ 30 /09 /201 6 2) DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER & OTHER MEMBER 09 /09 /2016 /30/09/16 3) DATE O N WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. /09 / 20 1 6 4) DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5) DATE O N WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 30/9/2016 6) DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/9/2016 7) DATE ON WHICH THE FILE GOES THE HEAD CLERK 8) DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9) DATE OF DISPATCH OF THE ORDER