Baramati Taluka Sah. Dudh Utpadak Sangh Ltd.,, Pune v. ACIT Cir.1(1),, Pune

ITA 1278/PUN/2008 | 2005-2006
Pronouncement Date: 23-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 127824514 RSA 2008
Assessee PAN AAAAB1280E
Bench Pune
Appeal Number ITA 1278/PUN/2008
Duration Of Justice 2 year(s) 5 month(s) 20 day(s)
Appellant Baramati Taluka Sah. Dudh Utpadak Sangh Ltd.,, Pune
Respondent ACIT Cir.1(1),, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 23-03-2011
Assessment Year 2005-2006
Appeal Filed On 03-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A : PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI D. KARUNAKARA RAO. AM I.T.A. NO. 1278/PN/2008 : A.Y. 2005-06 BARAMATI TALUKA SAHAKARI DUDH UTPADAK SANGH LTD. BARMAATI 413 102 PAN AAAAB 1280 E APPLICANT VS. ASSTT. CIT CIR. 1(1) PUNE RESPONDENT APPLICANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY: SHRI ABHAY DAMLE ORDER PER SHAILENDRA KUMAR YADAV THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)I PUNE DATED 11-6-2008 FOR A.Y. 2005-06 ON THE FOLLOW ING GROUNDS: 1. LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION OF RS. 5 00 000/- CLAIMED AS PROVISION FOR PAYMENT OF RENT TO STATE GOVERNMENT FOR ITS LAND. 2. LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4 50 000/- OUT OF THE STUDY TOUR EXPENSES OF RS . 6 44 000/- UNDERTAKEN BY THE ASSESSEE FOR ITS DIRECTORS AND SENIOR EXECUTIVES. 3. WITHOUT PREJUDICE TO GROUND NO. 2 ABOVE THE LD. CIT(A) ERRED IN CONFIRMING THE ENTIRE DISALLOWANCE OF STUDY TOUR MENTIONED IN GR. NO. 2 WHICH DISALLOWANCE AS MADE BY THE A.O WAS EXCESSIVE AND UNREASONABLE. ITA NO. 1278/PN/08 BARAMATI TAL. SAH. UTPADAK SANGH A.Y. 2005-06 - 2 - 4. LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE AT 50% OF THE ADHOC DISALLOWANCE OF 5% U/S 14A AS MADE BY THE A.O FOR ESTIMATED EXPENSES FOR EARNING ALLEGED EXEMPT INCOME FROM CO-OPERATIVE INTEREST LAND CO- OPERATIVE DIVIDENDS TOTALING TO RS. 16 78 581/- WHEN PROVISION U/S 14A ARE NOT APPLICABLE TO SUCH INCOME AND WHEN IN AN EARLIER YEAR SUCH DISALLOWANCE WAS RESTRICTED BY THE PREDECESSOR CIT(A) TO RS. 10 000/- ONLY. 2. AT THE OUTSET OF HEARING THE LEARNED COUNSEL FO R THE ASSESSEE DID NOT PRESS GROUND NO. 1. SO THE SAME IS DISMISSED AS NOT PRESSED. 3. GROUNDS NO. 2 AND 3 RELATE TO CONFIRMATION OF DISALLOWANCE OF RS. 4 50 000/- OUT OF STUDY TOUR EX PENSES OF RS. 6 44 000/-. THE ASSESSING OFFICER FOUND THAT T HE ASSESSEE HAD CLAIMED RS. 6 44 000/- AS EXPENDITURE FOR STUDY TOUR. AFTER TAKING INTO CONSIDERATION THE DETAILED SUBMIS SIONS FILED BY THE ASSESSEE THE ASSESSING OFFICER DISALLOWED 7 0% OF THE EXPENDITURE ON STUDY TOUR AS HAVING BEEN INCURRED F OR NON- BUSINESS PURPOSES WHICH WAS CONFIRMED BY THE CIT(A ). THE SAME HAS BEEN OPPOSED BY THE ASSESSEE BEFORE US. 4. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE CIT( A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE CLAIM OF THE ASSESSEE AND MAKING DI SALLOWANCE ITA NO. 1278/PN/08 BARAMATI TAL. SAH. UTPADAK SANGH A.Y. 2005-06 - 3 - OF 70% OF THE TOTAL EXPENDITURE INCURRED ON STUDY T OUR. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE GENUINE NESS OF THE CLAIM TO PROVE THAT THE TOUR CONDUCTED BY THE DIREC TORS WAS FOR THE PURPOSES OF BUSINESS. MOST OF THE PLACES V ISITED INCLUDED TOURIST PLACES AND THEREFORE IT WAS CLEAR THAT THE PREDOMINANT PURPOSE OF THE VISIT WAS SIGHT SEEING A ND NOTHING ELSE THEREFORE MOST OF THE TOUR WAS PERSONAL IN N ATURE NOT CONNECTED WITH THE BUSINESS ACTIVITIES. IN THE CIR CUMSTANCES THEREFORE THE CIT(A) WAS JUSTIFIED IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN DISALLOWING 70% OF THE TOT AL EXPENDITURE ON ACCOUNT OF STUDY TOUR BEING FOR NON- BUSINESS EXPENDITURE AND NO INTERFERENCE IS CALLED FOR WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. THE GROUNDS NO. 2 AND 3 ARE THEREFORE DISMISSED. 6. GROUND NO. 4 RELATES TO SUSTENANCE OF DISALLOWAN CE AT 50% OF THE ADHOC DISALLOWANCE OF 5% U/S 14A AS MADE BY THE ASSESSING OFFICER FOR ESTIMATED EXPENSES FOR EARNIN G ALLEGED EXEMPT INCOME FROM CO-OPERATIVE INTEREST AND CO-OPE RATIVE DIVIDENDS TOTALING TO RS. 16 78 581/-. AS PER THE S UBMISSION OF THE ASSESSEE THE ASSESSEE HAS EARNED CO-OP. INT EREST OF RS. 12 73 903/- CO-OPERATIVE DIVIDENDS OF RS. 4 04 678 /- WHICH WAS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT . THE ITA NO. 1278/PN/08 BARAMATI TAL. SAH. UTPADAK SANGH A.Y. 2005-06 - 4 - ASSESSING OFFICER HAS DISALLOWED 5% OF THIS AMOUNT AS DISALLOWABLE U/S 14A OF THE ACT. THE CONTENTION OF THE ASSESSEE WAS THAT THE PROVISIONS OF SEC. 14A ARE AP PLICABLE TO EXEMPT INCOME AS COVERED BY THE CHAPTER III OF THE ACT AND NOT TO DEDUCTIONS GIVEN U/S 80P AS CONTAINED IN CHAPTER IV OF THE ACT. HOWEVER THE CIT(A) DID NOT FIND FAVOUR WITH THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE A SSESSEE HAS FAILED TO MAINTAIN DETAILS IN RESPECT OF EXPEND ITURE INCURRED FOR EARNING INCOME ATTRIBUTABLE TO INCOME WHICH DID NOT FORM PART OF TOTAL INCOME. HAVING REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF FAILURE OF THE ASSESSEE TO MAINTAIN DETAILS OF ADMINISTRATI VE EXPENSES INCURRED IN CONNECTION WITH EARNING OF EXEMPT INCOM E THE CIT(A) REDUCED THE DISALLOWANCE BY 50% AND GAVE CONSEQUENTIAL RELIEF. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . KINGS EXPORTS (2009) 318 ITR 100 (P & H) WHEREIN IT HAS B EEN HELD THAT SECTION 14A HAS NO APPLICATION IN A CASE WHERE A ITA NO. 1278/PN/08 BARAMATI TAL. SAH. UTPADAK SANGH A.Y. 2005-06 - 5 - DEDUCTION HAS BEEN CLAIMED UNDER CHAPTER VIA AS THE SAME IS NOT EXPENDITURE INCURRED FOR EARNING INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME. SIMILARLY THE CHENNAI B BENCH OF THE TRIBUNAL IN THE CASE OF ASSTT. CIT VS. TAMIL NA DU STATE PRODUCERS FEDERATION LTD. (2006) 103 TTJ (CHENNAI) 716 HAS OBSERVED THAT THE PROVISION OF SECTION 14A DO NOT S PEAK ABOUT THE DEDUCTION TO BE MADE IN COMPUTING THE TOTAL INC OME AS PER THE PROVISIONS OF CHAPTER VIA EVEN THOUGH AS A RESU LT OF SUCH DEDUCTIONS THE TAXABLE INCOME IS REDUCED WHOLLY OR PARTIALLY. IN THIS VIEW OF THE MATTER THE TRIBUNAL CONCLUDED THAT SECTION 14A PROHIBITS DEDUCTION OF EXPENDITURE INCURRED ONL Y IN RELATION TO EXEMPT INCOME AND IT CANNOT BE APPLIED TO THE PROVISIONS OF CHAPTER IVA WHERE DEDUCTIONS ARE TO B E ALLOWED IN COMPUTING THE TOTAL INCOME ASSESSEE HAVING CLAI MED DEDUCTION U/S 80P(2)(E) ON THE GROSS RECEIPTS WITHO UT DEDUCTING THE EXPENDITURE. SO FOLLOWING THE RATIO OF JUDGMENT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CAS E OF KINGS EXPORTS (SUPRA) AND THE DECISION OF CHENNAI B ENCH OF THE TRIBUNAL IN THE CASE OF TAMIL NADU STATE PRODUC ERS FEDERATION LTD. (SUPRA) THE ISSUE IS DECIDED IN FA VOUR OF THE ASSESSEE. ITA NO. 1278/PN/08 BARAMATI TAL. SAH. UTPADAK SANGH A.Y. 2005-06 - 6 - 6. THE ASSESSEE HAS PRAYED FOR ADMISSION OF THE ADD ITIONAL GROUND WHICH READS AS UNDER: THE LD. CIT(A) ERRED IN REFUSING TO ADMIT ADDITION AL EVIDENCE SOUGHT TO BE PRODUCED BEFORE HIM UNDER RUL E 46A(1) F THE I.T. RULES 1962 HOWEVER AT THE TIME OF HEARING OF THIS APPEAL NOT HING WAS ADDRESSED FOR ADMISSION OF THE ABOVE MENTIONED ADDI TIONAL GROUND. SO THE SAME IS DISMISSED AS NOT PRESSED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH 2011. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 23 RD MARCH 2011 ANKAM COPY OF ORDER FORWARDED TO : 1. ASSESSEES 2. DEPARTMENT 3. CIT - I PUNE 4. CIT(A) I PUNE 5. ITAT D.R. A BENCH PUNE. TRUE COPY BY ORDER ASSTT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE.