ACIT, Circle-2,, Solapur v. Yoginath Serva Seva Sangh,, Solapur

ITA 426/PUN/2013 | 2009-2010
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 42624514 RSA 2013
Assessee PAN AAATY0119N
Bench Pune
Appeal Number ITA 426/PUN/2013
Duration Of Justice 8 month(s) 17 day(s)
Appellant ACIT, Circle-2,, Solapur
Respondent Yoginath Serva Seva Sangh,, Solapur
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-10-2013
Assessment Year 2009-2010
Appeal Filed On 12-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 426/PN/2013 (ASSTT.YEAR : 2009-10) ACIT CIRCLE-2 SOLAPUR. .. APPELLANT VS. YOGINATH SERVA SEVA SANGH SIDDHA NAGAR TIKEKARWADI KUMATHE SOLAPUR. .. RESPONDENT PAN NO.AAATY0119N APPELLANT BY : SHRI S.P.WALIMBE RESPONDENT BY : NONE DATE OF HEARING : 29-10-2013 DATE OF PRONOUNCEMENT : 31-10-2013 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 05-12-2012 OF THE CIT(A)-III PUNE RELATING T O ASSESSMENT YEAR 2009-10. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. THEREFORE THE APPEAL IS BEING DISPOSED OF ON THE M ATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRE SENTATIVE. 3. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A)-III PUNE OUGHT TO HAVE UPHELD THE ORDER OF THE AO THE INTER EST PAID IN RESPECT OF CAPITAL BORROWED AS IT HAS NOT BORROWED ANY CAPITAL FUNDS FROM BANK AND THE THIRD PARTY LIABILITY IS NOT ALLOWABLE. 3.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS A REGISTERED TRUST UNDER THE COOPERATIVE SOCIETIES ACT 1960. THE TRU ST IS REGISTERED ON 12- 05-1982. IT FILED ITS RETURN OF INCOME ON 25-09-20 09 DECLARING NIL 2 INCOME. FROM THE COPY OF THE BYE-LAWS OF TRUST FUR NISHED BY THE ASSESSEE THE ASSESSING OFFICER NOTED THAT THE PREDOMINANT OB JECT OF THE TRUST IS FOR THE WELFARE OF THE AGRICULTURE LABOURS BY WAY OF HE LPING THEM IN SECURING DAY-TO-DAY WORK PARTICULARLY IN HARVESTING AND TRA NSPORTATION SEASON OF SUGARCANE. THE ASSESSEE DOES NOT ENJOY REGISTRATIO N U/S.12AA FOR WHICH THE TRUST IS NOT ENTITLED TO EXEMPTION U/S.11. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE RECEIPTS CREDITED IN THE INCOME AND EXPENDITURE ACCOUNT WAS AT RS.2 31 12 176/-. AFTER DEBITING VARIOUS EXPENSES THE NET INCOME WAS SHOWN AT RS.NIL. THE EXPENSES INCLUDE INTEREST TO BANK AT RS.1 79 01 506/-. THE ASSESSING OFFICER NOTED THAT THE BALANCE SHEET OF T HE ASSESSEE DOES NOT SHOW ANY BANK LOAN WHEREAS THE ASSESSEE HAS DEBITED INTEREST TO BANK. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN THE NA TURE OF SUCH INTEREST DEBITED AT RS.1 79 01 506/-. IT WAS SUBMITTED THAT THE TRUST RAISES THE BILL TO THE SUGAR FACTORY FOR HARVESTING WAGES AND TRANS PORTATION CHARGES FOR TRANSPORT OF SUGAR CANE AND ON RECEIPT OF THE SAID BILLS FROM SUGAR FACTORY THE SAME WOULD BE IN TURN PAID TO HARVESTING LABOUR ERS AND TRANSPORT OPERATORS. IN MOST OF THE CASES ADVANCES ARE PAID TO THE LABOURERS AND TRANSPORT CONTRACTORS BEFORE COMMENCING THE WORK BY RAISING LOAN FROM STATE BANK OF INDIA WHICH WOULD BE REQUIRED OUT OF THE BILLS PAYABLE TO SUCH CONTRACTORS. 3.2 IN ORDER TO VERIFY THE ASSESSEES BANK ACCOUNT DETAILS THE ASSESSING OFFICER ISSUED LETTER TO THE MANAGER STATE BANK OF INDIA SOLAPUR CALLING FOR INFORMATION U/S.133(6). IN REPLY TO THE SAME IT WAS STATED BY THE SAID MANAGER THAT THEY HAVE NOT SANCTIONED/GRANTED ANY L OAN DURING THE PERIOD 01-04-2008 TO 31-03-2009 TO THE ASSESSEE. I N VIEW OF THE ABOVE 3 THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CA USE AS TO WHY THE ABOVE LIABILITY OF INTEREST SHOULD NOT BE DISALLOWE D. IN RESPONSE TO THE SAME THE ASSESSEE FILED WRITTEN SUBMISSION VIDE LE TTER DATED 05-12-2011 WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER AND WHICH READS AS UNDER : 'THERE IS AN WRITTEN AGREEMENT BETWEEN YOGINATH SERV A SANGH TRUST AND SHRI SIDDHESHWAR SUGAR FACTORY KUMATHE S OLAPUR THAT ALL WORK RELATING TO HARVESTING AND TRANSPORTATION WILL B E ENTIRELY DONE BY THE TRUST AND PAYMENTS WILL BE DONE BY TRUST FOR THIS W ORK. 1. PAYMENT: THE TRUST IS REGISTERED IN 1982 AND IT IS THE BENEFIT OF HARVESTING AND TRANSPORTATION OF THE LABOURS WORKING I N SHRI SIDDHESHWAR SUGAR FACTORY KUMATHE SOLAPUR. THE PAYMENT IS MADE BY THE TRUST AFTER RECEIVING FUND S FROM SUGAR FACTORY THERE IS NO INDEPENDENT SOURCE OF INCOME TO THE TRUST. THE PAYMENTS ARE RECEIVED BY CHEQUE FROM SUGAR FACTORY T O TRUST YOGINATH SERVA SEVA SANGH AND THEN BY CHEQUE THE AMOUNTS ARE PAID TO THE RESPECTIVE PERSONS. THE ACCOUNTS ARE RECORDED ACCORDING LY IN THE BOOKS OF ACCOUNT. THE TRANSFER ENTRIES ARE MADE IN FEW CASES WHERE IN THE PAYMENT IS MADE BY CHEQUE TO THE PERSONS AND THEN THE ACCOUNTS IS TRANSF ERRED TO THE TRUST ACCOUNT BY JOURNAL ENTRY. THE TRUST FUNCTIONS FOR OTHER CHARITABLE WORK RUNNING SAKHAR SHALA SCHOOL AND RECENTLY THE BUILDING IS CONSTRUCTED FOR T HIS PROJECT AND THE SUGAR FACTORY AREA. THE LOAN STATE BANK OF INDIA IS SANCTIONED TO SUGAR F ACTORY FOR FINANCING TO HARVESTING AND TRANSPORTING CONTRACTOR LABOURS. THE LOAN AMOUNT IS PAID TO RESPECTIVE CONTRACTOR IN THEIR S/B A/C. IN T HE BANK. THERE IS NO CASH PAYMENT. THE RECOVERY IS MADE AFTER EVERY FORTNI GHT WHEN BILLS ARE PREPARED BY THE TRUST AS PER THE RECORD FOR HARVESTING AND TRANSPORT WORK. 2. RECEIPTS: THERE ARE NO RECEIPTS AND ONLY TRANSF ER ENTRY FOR REIMBURSEMENT OF EXPENSES IS MADE EVERY YEAR. 3. SURPLUS/DEFICIT : THERE IS NO SURPLUS OR DEFICIT IN THE INCOME & EXPENDITURE A/C. 4. IN RESPECT OF INCOME OF THE TRUST IT IS SUBMITTED THAT THE TRUST RAISES BILL TO THE SUGAR FACTORY FOR HARVESTING WAGES A ND TRANSPORTATION CHARGES FOR TRANSPORT OF SUGAR CANE AND ON RECEIPT OF THE SAID BILLS FROM SUGAR FACTORY THE SAME WOULD BE IN TURN PAID TO HARV ESTING LABOURS AND TRANSPORT OPERATORS IN MOST OF THE CASES ADVANCES ARE P AID TO THE LABOUR AND TRANSPORT CONTRACTORS BEFORE COMMENCING THE WORK BY RAISING LOAN FROM STATE BANK OF INDIA WHICH WOULD BE RECOVERED O UT OF BILLS PAYABLE ON SUCH CONTRACTORS IT IS ACCORDINGLY SUBMITTED THAT T HERE IS NO SEPARATE SOURCE OF INCOME OF INCOME OF THE TRUST. THE TRUST IS M ERELY ESTABLISHED FOR THE CHARITABLE PURPOSE.' 4 4. HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND DISALLOWED TH E EXPENDITURE ON ACCOUNT OF INTEREST TO BANK AT RS.1 79 01 506/- FOR THE FOLLOWING REASONS : I. THE EXPENSES CLAIMED ARE NOT BEING THE EXPENDITU RE OF THE NATURE DESCRIBED EITHER IN SECTION 36 OR SEC.37 OF THE I.T. ACT 1961 ALSO. II. AGREEMENT MADE DO NOT PROVIDE ANY SUCH CONDITION . III. TRANSFER ENTRIES ARE MADE IN FEW CASES WHERE PAYME NT IS MADE BY CHEQUE TO PERSONS & THEN ACCOUNT IS TRANSFERRED TO THE TRUST ACCOUNT BY JOURNAL ENTRY. IV. ANY THIRD PARTY EXPENDITURE CANNOT BE ALLOWED A S A DEDUCTION. V. BALANCE SHEET OF THE ASSESSEE DO NOT SHOW ANY LIABILIT Y IN THE NAME OF BANK. 5. IN APPEAL THE LD.CIT(A) FOLLOWING HIS ORDER FOR A.Y. 2007-08 ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIV E AND ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW WE FIND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF HIS ORDER FOR A.Y. 2007-08 IN CASE OF THE ASSESSEE. WE FIND THE REVEN UE CHALLENGED THE ORDER OF THE CIT(A) FOR A.Y. 2007-08 BEFORE THE TRI BUNAL AND THE TRIBUNAL VIDE ITA NO.822/PN/2012 ORDER DATED 15-07- 2013 DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER : 6. AFTER GOING THROUGH THE MATERIAL ON RECORD WE FIND THAT THE MAIN OBJECT OF THE ASSESSEE IS STATED TO BE WELFARE OF THE A GRICULTURAL LABOUR BY ASSISTING THEM IN SECURING DAY-TO-DAY WORK PARTICULARL Y IN HARVESTING AND TRANSPORTATION OF SUGARCANE. THE ASSESSEE HAS BEEN C ARRYING ON THESE ACTIVITIES ON NO PROFIT NO LOSS BASIS. FOR THIS P URPOSE THE ASSESSEE ENTERED INTO FORMAL AGREEMENT WITH THE KARKHANA. T HE ASSESSEE RAISED THE BILL TO KARKHANA ON ACCOUNT OF WAGES FOR HARVESTI NG SUGARCANE AND TRANSPORTATION CHARGES FOR TRANSPORT OF SUGARCANE AND O N RECEIPT OF THE AMOUNT FROM SUGAR FACTORY THE SAME WAS PAID TO HARVEST ING LABOURS AND 5 TRANSPORT OPERATORS. IN MOST OF THE CASES ADVANCES ARE PAID TO THE LABOURERS AND TRANSPORT CONTRACTORS BEFORE COMMENCEMEN T OF THE WORK. THE KARKHANA RAISED LOAN FROM STATE BANK OF INDIA FO R THE PURPOSE OF MAKING THESE ADVANCES. THE AMOUNT RAISED BY WAY OF L OAN WAS TRANSFERRED TO THE ASSESSEES ACCOUNT FOR MAKING ADVANCES TO THE RESPECTIVE LABOURERS/TRANSPORT OPERATORS. WHATEVER EX PENDITURE RELATING TO SUPPLY OF LABOUR AND TRANSPORT INCURRED B Y THE ASSESSEE THE SAME WAS REIMBURSABLE FROM KARKHANA. IN LINE WITH ACC OUNTING SYSTEM BEING FOLLOWED BY THE ASSESSEE THE INTEREST OF RS. 1 36 68 156/- ON BANK LOAN RELATING TO THE PERIOD UNDER CONSIDERATION THO UGH RAISED BY KARKHANA WAS ALSO SHOWN AS REIMBURSED BY THE KARKHANA B Y INCLUDING THE SAME IN THE GROSS RECEIPTS OF RS. 1 91 13 231.47 AS SHOWN UNDER THE HEAD BULLOCK CART ACCOUNT. AT THE SAME TIME THE INTEREST EXPENDITURE OF RS. 1.36 CRORES WHICH WAS SHOWN AS REIMBURSED AND INC LUDED IN THE GROSS RECEIPTS OF RS. 1.91 CRORES WAS DEBITED TO THE INCO ME AND EXPENDITURE A/C BY WAY OF CONTRA ENTRY WHICH WAS EVI DENT FROM THE CONFIRMATION LETTER GIVEN BY THE KARKHANA WAS REPROD UCED IN THE ORDER OF THE CIT(A) ON PAGE 5 OF HIS ORDER. IT WAS ALSO NOTICE D FROM THE SCHEDULE F OF THE BALANCE SHEET THAT THE LOAN OF RS. 16 CRO RES WAS REDUCED FROM THE GROSS AMOUNT RECEIVABLE FROM KARKHANA AND THE NE T AMOUNT OF RS. 6.9 CRORES WAS SHOWN UNDER THE HEAD ADVANCES. THE RELEVA NT PORTION OF SCHEDULE F OF THE BALANCE SHEET WAS AS UNDER:- YESHWANT HARVESTING AND TRANSPORT NAGEWADI (NAGEWADI) 225711.60 SIDDESHWAR SSK 2290-3761.04 ADD: SIDDESHWAR SAH. BANK (TODNI SABHASAD SHARES) 130414.30 229034175.34 LESS: SIDDESHWAR SUGAR FACTORY SBI LOAN 160000000.00 69034175.34 TOTAL 98427990.79 IT COULD BE OBSERVED FROM THE ABOVE EXTRACT THAT IT IS ONLY ALLOCATION OF INTEREST EXPENDITURE TO THE ASSESSEES ACCOUNT BY WAY OF ACCOUNTING ENTRY AND THEN REIMBURSEMENT TO THE SOCIETY BY ANOTHER ENTR Y AND IN A WAY THESE ARE ONLY CONTRA ENTRIES. THE ENTRIES IN THE AC COUNT EXTRACT FURNISHED BY THE KARKHANA AND THE BALANCE SHEET OF TH E ASSESSEE CLEARLY REVEALS THAT THE INTEREST DEBIT WAS ONLY A CONTRA ENTR Y IN THE INCOME & EXPENDITURE A/C. THEREFORE MERELY BECAUSE THE LOAN WAS RAISED IN THE NAME OF KARKHANA TO WHOM THE ASSESSEE PROVIDED LABOUR AND TRANSPORT THE INTEREST EXPENDITURE WHICH WAS SHOWN AS REIMBURSEMEN T FOR ACCOUNTING PURPOSES COULD NOT BE DISALLOWED WHEN THE SAME INTEREST EXPENDITURE WAS INCLUDED IN THE GROSS RECEIPTS BY WAY O F CONTRA ENTRY. THE ASSESSING OFFICER OBSERVED THAT THE BORROWER WAS KARK HANA FOR MAKING THE PAYMENT TO THE HARVESTING LABOURS AND TRA NSPORT CONTRACTORS AND DIRECTLY CREDITED TO THOSE CONTRACTORS. IF THE I NTEREST EXPENDITURE WAS DISALLOWED ON THE GROUND THAT IT DID NOT PERTAIN TO THE ASSESSEE THE CORRESPONDING RECEIPT OF THE SAME AMOUNT INCLUDED IN THE GROSS RECEIPTS BY WAY OF A CONTRA ENTRY SHOULD ALSO BE EXCLUDED. TH EREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING ONLY T HE INTEREST EXPENDITURE WITHOUT EXCLUDING THE AMOUNT FROM THE G ROSS RECEIPTS. THUS THE ADDITION OF RS. 1 36 68 154/- MADE ON THIS ACCOUN T WAS RIGHTLY DIRECTED TO BE DELETED BY THE CIT(A). WHILE DOING SO THE ASSESSING OFFICER WAS ALSO DIRECTED TO ENSURE THAT THE SAME INTER EST EXPENDITURE WAS NOT CLAIMED BY THE KARKHANA UNDER THE HEAD INTE REST EXPENDITURE AND AGAIN UNDER THE HEAD HARVESTING AND TRANSPORTATI ON EXPENSES OR UNDER ANY OTHER HEAD. THIS REASONED FINDING OF THE C IT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6 6.1 SINCE THE LD.CIT(A) WHILE DELETING THE ADDITION HAS FOLLOWED HIS ORDER FOR A.Y. 2007-08 WHICH HAS BEEN UPHELD BY THE TRIBUNAL THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE REVENUE AGAIN ST THE ORDER OF THE TRIBUNAL WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31-10-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED : 31 ST OCTOBER 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-III PUNE 4. THE CIT-III PUNE 5. D.R. B BENCH PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE