The ACIT, 5(1), Indore v. M/s Krishi Upaj Mandi Samiti, Mhow

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.60/IND/2011 A.Y. 2007-08 ACIT-5(1) INDORE ... APPELLANT VS KRISHI UPAJ MANDI SAMITI MHOW PAN AAFFK 5074 P ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN SR. DR RESPONDENT BY : SHRI PRAKASH JAIN CA DATE OF HEARING : 8.11.2011 DATE OF PRONOUNCEMENT : 8.11.2011 O R D E R PER JOGINDER SINGH THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE O RDER DATED 31.3.2011 OF THE LEARNED COMMISSIONER OF INCO ME TAX-II INDORE ON THE FOLLOWING GROUNDS: 2 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ARAKSHIT NIDHI PENSION AS ANY PROVISION OR RESERVE CREDITED IN THIS ACCOUNT IS NOT AN ADMISSIBLE DEDUCTION. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF KRISHI ANUSANDHAN NIDHI AS IT IS ADHOC DEDUCTION AND NOT ACTUAL DEDUCTION INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SADAK NIDHI AS THE DEDUCTION UNDER THIS HEAD IN P & L ACCOUNT IS ALSO CLAIMED TO BE BASED ON THE CIRCULAR ISSUED BY MANDI BOARD BHOPAL BUT THE SAID CIRCULAR DOES NOT IN ANY WAY ESTABLISH THE ADMISSIBILITY OF EXPENDITURE. 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHR I SHRI ARUN DEWAN LEARNED SR. DR AND SHRI PRAKSH JAIN LE ARNED COUNSEL FOR THE ASSESSEE. AT THE OUTSET THE LEARNE D COUNSEL FOR THE ASSESSEE CONTENDED THAT THE APPEAL OF THE REVEN UE IS COVERED BY THE ORDER OF THE TRIBUNAL THAT TOO IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEARS 2004-05 & 2005 -06 DATED 3 18.11.2009 (ITA NOS.293 & 294/IND/2008). THE LD. SR . DR AGREED WITH THE ASSERTION MADE BY THE LEARNED COUNS EL FOR THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. IN VIEW OF THE ABOV E AND WITHOUT GOING INTO MUCH DELIBERATION AND THE ASSERTION MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE WE ARE REPRODUCIN G HEREUNDER THE AFORESAID ORDER OF THE TRIBUNAL DATED 18.11.2009 (SUPRA): ALL THESE FOUR APPEALS HAVE BEEN FILED BY THE TWO DIFFERENT ASSESSEES AND INVOLVE COMMON ISSUES HENCE THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. THE ISSUE OF ALLOWANCE OF CONTRIBUTION BY THE ASSESSEE TO RESERVE FUNDS BY SENDING THE SAME TO THE CONTROLLING HEAD OFFICE IS INVOLVED IN GROUND NO. 1 IN I.T.A.NOS. 291 & 292/IND/2008 AND GROUND NOS. 5 & 4 IN I.T.A.NOS. 293 & 294/IND/2008 RESPECTIVELY EXCEPT THE QUANTUM BEING DIFFERENT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS TO BE RESTORED BACK T O THE FILE OF A.O. IN VIEW OF THE ORDER OF THE TRIBUN AL IN THE CASE OF KRISHI UPAJ MANDI SAMITI BURHANPUR VS. ITO AS REPORTED IN 12 ITJ 12 AND REFERRED TO PARA 2 AT PAGE 24 OF THE REPORT. THE LD. 4 DEPARTMENTAL REPRESENTATIVE ALSO AGREED. WE FIND THAT THE TRIBUNAL IN THE SAID ORDER HAS RESTORED TH E ISSUE FOR RECONSIDERATION AT THE LEVEL OF THE A.O. FOR THE REASON THAT RULE 7(1) OF M.P. KRISHI UPAJ MANDI (MANDI NIDHI & ACCOUNT) RULES 1980 HAD NOT BEEN TAKEN INTO CONSIDERATION. THE TRIBUNAL ALSO HELD THAT THE REVENUE AUTHORITIES HAD NOT GIVEN ANY FINDING ON THE ASPECT THAT THE ASSESSEE HAD CLAIMED ANY EXPENDITURE ACTUALLY INCURRED IN THE YEAR UNDER CONSIDERATION WHICH HAD BEEN CLAIMED ON PROVISION BASIS IN THAT YEAR. WE ACCORDINGLY RESTORE THIS ISSUE TO THE FILE OF A.O. ON THE SIMILAR LINES. IT IS NEEDLESS TO MENTION THAT THE A.O. SHALL GIVE AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THIS GROUND IN ALL THE ABOVE APPEALS STANDS ALLOWED FOR STATISTICAL PURPOSES FOR BOTH THE YEARS UNDER CONSIDERATION. 5. IN GROUND NO.4 OF I.T.A.NOS. 291 & 292/IND/2008 AND GROUND NO. 2 OF I.T.A.NOS. 293 & 294/IND/2008 THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE REVENUE AUTHORITIES IN DISALLOWING THE CONTRIBUTION MADE BY THE ASSESSEE AS A PART OF ITS STATUTORY OBLIGATIONS UNDER RULE 4 OF M.P. KRIS HI UPAJ MANDI (RAJYA VIPNAN VIKAS NIDHI) RULES 2000. THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE CITED HEREINBEFORE AND REFERRED TO PARA 15 AT PAGE 26 OF THE REPORT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO AGREED. 7. WE FIND THAT THE TRIBUNAL FOLLOWING THE DECISION OF I.T.A.T. JABALPUR BENCH IN THE CASE OF KRISHI UPAJ MANDI SAMITI AND OTHERS IN INO 280/JAB/2006 ORDER DATED 12.10.2007 HELD THAT THIS EXPENDITURE WAS ALLOWABLE U/S 37 AS REVENUE EXPENDITURE. FOLLOWING THE SAME WE ALLOW BOTH THESE GROUNDS OF THE ASSESSEE AND DIRECT THE A.O. T O GRANT DEDUCTION OF THE AMOUNT CONTRIBUTED BY THE ASSESSEE TOWARDS KRISHI ANUSANDHAN NIDHI. THUS GROUND NO. 4 AND GROUND NO. 2 IN I.T.A.NOS. 291 & 5 292/IND/2008 AND I.T.A.NOS. 293 & 294/IND/2008 RESPECTIVELY IN THE ASSESSMENT YEARS UNDER APPEALS STAND ALLOWED. 8. IN GROUND NO.3 OF THE APPEAL IN I.T.A.NOS. 291 292/IND02008 AND 292 & 293/IND/2008 THE ASSESSMENT YEARS UNDER APPEAL THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CONTRIBUTION MADE BY THE ASSESSEE TO ITS HEAD OFFICE FOR CONSTRUCTION OF RUR AL ROAD AND CREATION OF ANOTHER INFRASTRUCTURE AS PER RULE 7(2) OF M.P. KRISHI UPAJ MANDI (RAJYA VIPNAN VIKAS NIDHI) RULES 2000. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS ALSO COVERED IN FAVOUR OF THE ASSESSEE AND REFERRED TO PARA 16 AND 38 OF THE IMPUGNED ORDER OF THE TRIBUNAL AT PAGES 37 TO 39 OF THE REPORT. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO AGREED. 10. WE FIND IN PARA 16 AT PAGE 27 THE TRIBUNAL HAS HELD THAT THE IMPUGNED AMOUNT WHICH WAS DISALLOWED BY THE REVENUE AUTHORITIES BEING OF CAPITAL NATURE WAS ALLOWABLE AS REVENUE EXPENDITURE FOR THE REASON THAT SUCH CONTRIBUTION HAD BEEN MADE AS PER THE PROVISIONS OF RELEVANT REGULATIONS AND IT WAS NOT IN THE NATURE OF APPLICATION OF INCOME. WE ALSO FOLLOWING THE SAME ACCEPT THESE GROUNDS OF THE ASSESSEE IN ALL THE ASSESSMENT YEARS UNDER APPEALS. 11. IN GROUND NO. 4 OF I.T.A.NO. 293/IND/09 THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A ) IN DISALLOWING DEPRECIATION OF RS. 8 27 213/-. 12. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THIS ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE FINDINGS OF THE TRIBUNAL IN THE DECISION CITED HEREINBEFORE AND REFERRED TO PARA NO.20 AT PAGE 28 WHICH HAS BEEN CONCLUDED AT PAGE 36 THE TRIBUNAL FOLLOWING ITS DECISION IN THE CASE OF KRISHI UPAJ MANDI SAMITI AS REPORTED IN 12 ITJ 1 HAD HELD THAT THE DEPRECIATION WAS NOT 6 ALLOWABLE ON THE BASIS OF ACTUAL COST INCURRED BY T HE ASSESSEE WITHOUT DEDUCTING THE DEPRECIATION WHICH WAS NOT CLAIMED AND ALLOWED IN EARLIER YEARS. RESPECTFULLY FOLLOWING THE SAME WE ALSO HOLD SO. THUS GROUND NO.4 STANDS DISMISSED. 13. IN GROUND NO. 6 OF I.T.A.NO. 293/IND/08 AND GROUND NO.5 OF I.T.A.NO. 294/IND/08 THE ISSUE INVOLVED IS REGARDING ALLOWABILITY OF PENSION ACTUA LLY DISTRIBUTED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WHICH HAD NOT BEEN CLAIMED AS DEDUCTION EARLIER. 14. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE WAS TO BE RESTORED BACK T O THE FILE OF A.O. IN VIEW OF THE DECISION OF THE TRIBUNAL CITED HEREIN BEFORE AND REFERRED TO PARA 9 AT PAGE 24 WHEREIN THE TRIBUNAL HAD RESTORED THIS ISSUE FOR VERIFICATION OF FACTS BY THE ASSESSING OFFICER AND DECISION THEREON THEREAFTER AFTER GIVIN G AN ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. WE ALSO RESTORE THIS ISSUE TO THE FILE OF A.O. ON SIMILAR LINES. THUS THE RELEVANT GROUNDS OF BOT H THESE APPEALS STAND ALLOWED FOR STATISTICAL PURPOSE S. 16. IN GROUND NO. 7 OF I.T.A.NO. 293/IND/2008 AND GROUND NO. 6 OF I.T.A.NO. 294/IND/08 THE ISSUE INVOLVED IS REGARDING HEAD OF ASSESSABILITY OF RENT AL INCOME. 17. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THIS ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL CITED HEREINBEFORE AND REFERRED TO PARA 25 AT PAGE 38 OF THE REPORT WHEREIN THE TRIBUNAL HAD HELD THAT INCOME FROM PROPERTIES LET OUT BY THE ASSESSEE PURELY FOR THE PURPOSE OF EARNING RENT AND HAD NOT BEEN EXPLOITED FOR COMMERCIAL PURPOSE. HENCE SUCH INCOME WAS LIABLE TO BE ASSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. RESPECTFULLY FOLLOWING THIS RATIO WE ALSO HOLD SO. THUS GROUND NO. 7 OF I.T.A.NO. 293 AND GROUND NO.6 OF I.T.A.NO. 294/IND/2008 STAND DISMISSED. 7 18. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ON CONSIDERATION OF THE ABOVE WE FIND THAT GROUND NOS.2 & 3 ARE SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL B EING THE SAME ISSUES. HOWEVER IN RESPECT OF GROUND NO.1 TH E TRIBUNAL RESTORED THE MATTER TO THE ASSESSING OFFICER TO EXA MINE THE ALLOWABLITY OF CLAIM BY CONSIDERING RULE 7(1) OF KR ISHI UPAJ MANDI (MANDI NIDHI & ACCOUNT) RULES 1980 WHICH HAS BEEN CONSIDERED BY THE LD. CIT(A) THEREFORE ON THIS GR OUND ALSO WE FIND NO INFIRMITY IN THE STAND OF THE LD. CIT(A). FINALLY THE APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8.11.2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE !VYAS!