DCIT, Villupuram v. Kallakurichi Co.Op. Sugar Mills Ltd., Unit-1, Villupuram

ITA 1807/CHNY/2016 | 2012-2013
Pronouncement Date: 28-09-2016

Appeal Details

RSA Number 180721714 RSA 2016
Assessee PAN AAAAT3677M
Bench Chennai
Appeal Number ITA 1807/CHNY/2016
Duration Of Justice 3 month(s) 13 day(s)
Appellant DCIT, Villupuram
Respondent Kallakurichi Co.Op. Sugar Mills Ltd., Unit-1, Villupuram
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Department
Bench Allotted C
Assessment Year 2012-2013
Appeal Filed On 15-06-2016
Judgment Text
IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH CHENNAI . . BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY JUDICIAL MEMBER ./ I T.A. NO. 1633 /MDS/201 6 / ASSESSMENT YEAR :20 0 9 - 10 M/S. THE KALLAKURICHI CO - OPERATIVE SUGAR MILLS LIMITED MOONGILTHURAIPATTU VILLUPURAM 605 702. [PAN:A A A AT 3 677M ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE II CUDDALLORE . ( / APPELLANT ) ( / RESPONDENT ) I T.A. NO. 1804 1805 1806 & 1807 /MDS/2016 ASSESSMENT YEAR :200 8 - 0 9 2009 - 10 2010 - 11 & 2012 - 13 THE DEPUTY COMMISSIONER OF INCOME TAX VILLUPURAM CIRCLE VILLUPUR AM 605 602. VS. M/S. THE KALLAKURICHI CO - OPERATIVE SUGAR MILLS LIMITED UNIT I MOONGILTHURAIPATTU VILLUPURAM 605 702. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI B. GOWTHAMAN C.A. / RESPONDENT BY : SHRI PATHLAVATH PEERYA CIT / DATE OF HEARING : 07 . 0 9 .201 6 / DATE OF P RONOUNCEMENT : 28 .09 .201 6 / O R D E R PER DUVVURU RL REDDY JUDICIAL MEMBER : ALL T H E APPEAL S FILED BY THE REVE NUE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - PUDUCHERRY CHENNAI ALL DATED 28 . 0 3 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR S 2008 - 09 I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 2 20 0 9 - 1 0 2010 - 11 AND 2012 - 13 . THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) PUDUCHERRY CHENNAI DATED 28.03.2016 FOR THE ASSESSMENT YEAR 2009 - 10. SINCE ALL THE APPEALS PERTAIN TO SAME ASSESSEE AND HEARD TOGETHER ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF BREVITY. I.T.A. NO. 1633/MDS/ 2016 [A.Y. 2009 - 10] 2. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING A SUM OF .13 45 546/ - BEING THE BONUS PAID TO EMPLOYEES TREATED AS PRIOR PERIOD EXPENSES. 2.1 THE ASSESSEE IS A COOPER ATIVE SOCIETY RUNNING A SUGAR MILL AND FILED ITS RETURN OF INCOME ADMITTING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES FROM THE EARLIER YEARS. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT 1961 [ ACT IN SHORT]. THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER SECTION 143(2) OF THE ACT WAS ISSUED. SUBSEQUENTLY NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED. IN RESPONSE TO THE ABOVE NOTICES THE AR OF THE ASSESSEE APPEARED BEFO RE THE ASSESSING OFFICER AND PRODUCED BOOKS OF ACCOUNTS AND OTHER DETAILS AS CALLED FOR. AFTER VERIFYING THE DETAILS FILED BY THE ASSESSEE THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 3 ASSESSING TOTAL INCOME OF THE ASSESSEE AT .17 55 26 212/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE LD. CIT(A) AND RAISED TWO GROUNDS WITH REGARD TO INTEREST ON BORROWINGS AND PRIOR PERIOD EXPENSES (BONUS PAID). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE AND FACTS OF THE CASE THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND RAISED A SOLITARY GROUND WITH REGARD TO CONFIRMATION OF DISALLOWANCE OF A SUM OF .13 45 546/ - BEING THE BONUS PAID TO EMPLOYEES TREATING IT AS PRIOR PERIOD EXPENSES. THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY CONTENDED THAT AS PER THE ORDERS OF THE GOVERNMENT OF TAMIL NADU THE ASSESSEE HAS PAID BONUS TO ITS EMPLOYEES DURING THE RE LEVANT ACCOUNTING YEAR AND THEREFORE THE LIABILITY WAS ACCRUED IN THE CURRENT YEAR. THEREFORE THE AUTHORITIES BELOW HAVE WRONGLY TREATED THE SAME AS PRIOR PERIOD EXPENSES. IT WAS ALSO SUBMITTED THAT ACTUALLY THE ASSESSEE HAS PAID THE WHOLE AMOUNT DURING THE FINANCIAL YEAR 2008 - 09 ITSELF AND NO AMOUNT WAS OUTSTANDING AS ON 31.03.2009 AND PLEADED THAT THE DISALLOWANCE MAY BE DELETED. I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 4 ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH SIDES PERUSED THE MATERIA LS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED COPY OF THE ORDER OF THE GOVERNMENT OF TAMIL NADU DATED 22.10.2008 ADDRESSED TO THE COMMISSIONER OF SUGARS CHENNAI WITH REGARD TO SANCTION OF BONUS AND EX - GRATIA TO THE EM PLOYEES/WORKERS OF CO - OPERATIVE AND PUBLIC SECTOR SUGAR MILLS FOR THE YEAR 2007 - 08 PAYABLE DURING 2008 - 09 . AS PER THE ABOVE ORDERS OF THE GOVERNMENT OF TAMIL NADU THE ASSESSEE HAS PAID BONUS TO ITS EMPLOYEES DURING THE FINANCIAL YEAR 2008 - 09 ITSELF AND NO AMOUNT WAS OUTSTANDING AS ON 31.03.2009. DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE WOULD BE ENTITLED TO THE ACTUAL AMOUNT OF BONUS PAID DURING THE YEAR AND MOREOVER HE HAS OBSERVED THAT ONLY A SUM OF .23 7 4 217/ - WAS ONLY CLAIMED AS BONUS PAID DURING THE YEAR. THEREFORE THE LD. CIT(A) RESTRICTED THE ALLOWANCE TO .23 74 217/ - AND THE DISALLOWANCE TO THE EXTENT OF THE BALANCE SUM OF .13 45 546/ - WAS SUSTAINED. T HE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS NOTHING BUT BONUS AMOUNT PAID TO EMPLOYEES AND THE SAME CANNOT BE TREATED AS PRIOR I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 5 PERIOD EXPENSES. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE LEDGER ACC OUNT . HOWEVER THE LD. DR HAS STRONGLY CONTENDED THAT OUT OF TOTAL BONUS CLAIM OF .37 19 763/ - THE LD. CIT(A) HAS ALLOWED AN AMOUNT OF .23 74 217/ - WHICH WAS ACTUALLY PAID DURING THE PREVIOUS YEAR AND RIGHTLY DISALLOWED THE BALANCE AMOUNT OF .13 45 546/ - WHICH WAS UNPAID DURING THE PREVIOUS YEAR. IN VIEW OF THE ABOVE WE DIRECT THE ASSESSING OFFICER TO VERIFY AS TO WHETHER THE SUM OF .13 45 546/ - CLAIMED TO BE BONUS AMOUNT ACTUALLY PAID OR NOT AND IF IT WAS NOT PAID THEN IT SHOULD BE ALLOWED. IN PURSUANCE TO THE ORDERS OF THE GOVERNMENT OF TAMIL NADU IF THE AMOUNT IS ACTUALLY BON US AMOUNT PAYABLE DURING THE FINANCIAL YEAR 2008 - 09 THEN THE AMOUNT IN TOTO HAS TO BE ALLOWED IN TERMS OF PROVISIONS OF SECTION 43B OF THE ACT. THUS THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESS EE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2008 - 09 2009 - 10 2010 - 11 AND 2012 - 13 IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BEING I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 6 INTEREST PA YABLE ON THE LOANS OBTAINED FROM NATIONAL CO - OPERATIVE DEVELOPMENT CORPORATION BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT. 8. THE LD. DR HAS SUBMITTED THAT THE NATIONAL CO - OPERATIVE DEVELOPMENT CORPORATION IS A FINANCIAL INSTITUTION AS PER SEC TION 4A OF THE COMPANIES ACT 1956 AND MADE LOAN ADVANCE TO THE ASSESSEE FOR SPECIFIC PURPOSE. THE ADVANCE WAS RECEIVED BY THE ASSESSEE AND LIABILITY FOR INTEREST HAS BEEN ACCOUNTED FOR IN THE NAME OF NCDC ONLY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND A CCORDINGLY INTEREST IS RECEIVABLE ONLY BY THE PUBLIC FINANCIAL INSTITUTION I.E. THE NCDC. HE FURTHER ARGUED THAT JUST BECAUSE THE ADVANCE WAS ROUTED THROUGH THE GOVERNMENT OF TAMIL NADU IT CANNOT BE HELD THAT LOAN ADVANCE WAS NOT GRANTED BY THE NCDC WHEN THE ASSESSEE WAS LIABLE TO PAY THE INTEREST TO THE NCDC. THEREFORE THE PROVISIONS OF SECTION 43B OF THE ACT CLEARLY ATTRACT AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE SHOULD BE REVERSED FOR ALL THE ASSESSMENT YEARS . 9. PER CONTRA TH E LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY CONTENDED BY REFERRING TO THE GOVERNMENT ORDERS IN G.O.MS.NO.45 INDUSTRIES (MIC.1) DEPARTMENT DATED 27.7.2001 THAT ACTUALLY THE ASSESSEE I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 7 HAS TAKEN A LOAN FROM GOVERNMENT OF TAMIL N ADU AND NOT DIRECTLY FROM NC DC. CENTRAL GOVERNMENT HAD ALLOWED THE GOVERNMENT OF TAMIL N ADU TO GO FOR OPEN MARKET LENDING FOR RAISING FUNDS TO HELP THE SUGAR MILLS IN TAMIL N ADU. THE GOVERNMENT OF TAMIL N ADU HAS IN FACT AVAILED THE LOAN IN THE LIGHT OF APPROVAL GRANTED BY THE GOV ERNMENT OF INDIA. AFTER AVAILING SUCH OPEN MARKET LOAN FROM NCDC GOVERNMENT OF TAMIL N ADU DISTRIBUTED THE AMOUNT AMONG VARIOUS SUGAR MILLS IN TAMIL N ADU. AS PER THE DIRECTIONS ISSUED BY THE GOVERNMENT OF TAMIL N ADU THE LOANS HAVE TO BE UTILIZED FOR CER TAIN SPECIFIC PURPOSES. IF THE ASSESSEE NEEDS ANY LOAN FROM NCDC IT WOULD HAVE APPROACHED AND OBTAINED LOAN FROM NCDC. THEREFORE THE SUBMISSIONS OF THE LD. DR THAT THE ASSESSEE WAS GRANTED LOAN BY THE NCDC IS NOT AT ALL CORRECT AND PRAYED FOR SUSTAINING THE ORDER PASSED BY THE LD. CIT(A) WHO HAS FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN I.T.A. NO. 1079/MDS/2012 DATED 14.12.2012. 10. WE HAVE HEARD BOTH SIDES PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE FOR OUR CONSIDERATION IS WHETHER THE INTEREST PAYABLE BY THE ASSESSEE ON THE LOANS TAKEN FROM NCDC ARE LOANS TAKEN FROM GOVERNMENT AND WHETHER THE INTEREST PAYABLE ON SUCH LOANS IS TO BE DISALLOWED UNDER SECTION 43B OF THE ACT. IN SIMILAR FACTS AND CIRCUMSTANCES ON AN IDENTICAL ISSUE THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE KALLAKURICHI COOPERATIVE SUGAR MILLS LTD. UNIT II FOR THE I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 8 ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 1079/MDS/2012 DATED 14.12.2012 THE TRIBUNAL HAS OBSERV ED AND HELD AS UNDER: 5. WE HEARD BOTH SIDES IN DETAIL AND ALSO PERUSED THE PROCEEDINGS OF THE DIRECTOR OF SUGARS DATED 31.7.2004 IN WHICH HE HAS REFERRED TO CERTAIN GOVERNMENT ORDERS PARTICULARLY G.O.MS.NO.45 INDUSTRIES (MIC.1) DEPARTMENT DATED 27.7 .2001. ON GOING THROUGH THE PROCEEDINGS WE UNDERSTAND THAT THE ASSESSEE HAS TAKEN A LOAN FROM GOVERNMENT OF TAMILNADU AND NOT DIRECTLY FROM NCDC. OF COURSE NCDC IS A FINANCIAL INSTITUTION AS PROCLAIMED BY THE GOVERNMENT OF INDIA IN TERMS OF SEC.4A OF TH E COMPANIES ACT 1956. IF THE ASSESSEE HAS TAKEN THE LOAN DIRECTLY FROM NCDC THE CASE WOULD HAVE BEEN COVERED BY SEC.43B. NOW IN THE PRESENT CASE CENTRAL GOVERNMENT HAD ALLOWED THE GOVERNMENT OF TAMILNADU TO GO FOR OPEN MARKET LENDING FOR RAISING FUNDS TO HELP THE SUGAR MILLS IN TAMILNADU. THE GOVERNMENT OF TAMILNADU HAS IN FACT AVAILED THE LOAN IN THE LIGHT OF APPROVAL GRANTED BY THE GOVERNMENT OF INDIA. AFTER AVAILING SUCH OPEN MARKET LOAN FROM NCDC GOVERNMENT OF TAMILNADU DISTRIBUTED THE AMOUNT AMONG VARIOUS SUGAR MILLS IN TAMILNADU. AS PER THE DIRECTIONS ISSUED BY THE GOVERNMENT OF TAMILNADU THE LOANS HAVE TO BE UTILIZED FOR CERTAIN SPECIFIC PURPOSES. THE GOVERNMENT OF TAMILNADU ALSO ALLOWED THE ASSESSEE TO ENJOY A MORATORIUM ON REPAYMENT FOR A PERIOD OF 5 YEARS. THE MILLS ARE SUPPOSED TO MAKE REPAYMENT AS AND WHE N DIRECTED BY THE STATE GOVERNMENT. AT THE SAME TIME THE ASSESSEE PROVIDED FOR SUCH INTEREST AS IT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE PRIVITY OF CONTRACT IS BETWEEN THE ASSESSEE AND THE GOVERNMENT OF TAMILNADU. IN FACT THE AUDITORS MI GHT HAVE SHOWN THE LOAN AS AVAILED FROM NCDC LOOKING INTO THE SOURCE OF SOURCE OF THE LOAN. EVEN IF IT IS AN OVERSTATEMENT SUCH OBSERVATION ALONE SHOULD NOT DECIDE THE EXACT NATURE OF THE ISSUE. AS FAR AS THE PRESENT CASE IS CONCERNED GOVERNMENT OF TAM ILNADU IS THE LENDER AND THE ASSESSEE IS THE BORROWER. ANY AMOUNT PAYABLE TO A GOVERNMENT BUT NOT ACTUALLY PAID IS NOT HIT BY SEC.43B. THEREFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) IS JUSTIFIED IN CANCELLING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SEC.43B . 8. T HE REVENUE COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL BY FILING ANY ORDER OF THE HIGHER COURT HAVING MODIFIED OR REVERTED THE ABOVE DECISION OF THE TRIBUNAL. JUST BECAUSE THE DEPARTMENT HAS PREFERRED AN I.T.A. NO S . 1 633 & 1804 TO 1807 /M/ 16 9 APPEAL BE FORE THE HON BLE JURISDICTIONAL HIGH COURT WE CANNOT TAKE DIFFERENT VIEW. THE TRIBUNAL HAS ALSO FOLLOWED THE ABOVE DECISION WHILE DECIDING THE APPEALS IN THE CASE OF ACIT V. THE KALLAKURICHI COOPERATIVE SUGAR MILLS LTD. UNIT II FOR THE ASSESSMENT YEARS 20 0 5 - 0 6 2008 - 09 2009 - 10 AND 2010 - 11 IN I.T.A. NOS. 1952 1953 1954 AND 1955/MDS/2013 DATED 07.01.2014. THUS RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL WE DISMISS THE GROUND RAISED BY THE REVENUE FOR ALL THE ASSESSM ENT YEARS . 9 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IN I.T.A. NO. 1633/MDS/2016 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS FILED BY THE REVENUE IN I.T.A. NOS. 1804 TO 1807/MDS/2016 ARE DISMISSED. ORDER PRONOUNCED ON THE 28 TH SEPTEMB ER 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI DATED THE 28 . 0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR & 6. / GF.