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

ITA 822/PUN/2012 | 2007-2008
Pronouncement Date: 15-07-2013 | Result: Dismissed

Appeal Details

RSA Number 82224514 RSA 2012
Assessee PAN HJULY2013S
Bench Pune
Appeal Number ITA 822/PUN/2012
Duration Of Justice 1 year(s) 2 month(s) 20 day(s)
Appellant ACIT Cir -2 Solapur., Solapur
Respondent Yoginath Serva Seva Sangh,, Solapur
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2013
Assessment Year 2007-2008
Appeal Filed On 25-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO. 822/PN/2012 (ASSESSMENT YEAR: 2007-08) THE ASSTT. CIT CIR. 2 SOLAPUR APPELLANT VS. YOGINATH SERVA SEVA SANGH SIDDHA NAGAR TIKEKARWADI KUMATHE SOLAPUR PAN AAATY -0119 N .. RESPONDENT APPELLANT BY: SHRI RAJIB JAIN RESPONDENT BY: NONE DATE OF HEARING : 09-07-2013 DATE OF ORDER : 15.07.2013 ORDER PER SHAILENDRA KUMAR YADAV JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III PUNE DATED 28-2-2011 FOR A.Y. 2007-08 RA ISING THE FOLLOWING GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) PUNE OUGHT TO HAVE UPHELD THE ORDER OF THE AO THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED AS IT HAS NOT BORROWED ANY CAPITAL FUNDS FROM BANK AND THE THIRD PARTY LIABILI TY IS NOT ALLOWABLE. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY DULY REGI STERED UNDER THE CO-OPERATIVE SOCIETIES ACT 1860 SINCE 12-5-198 2. THE TRUST SOCIETY IS STATED TO HAVE BEEN FORMED FOR THE WELFA RE OF AGRICULTURAL LABOURERS BY WAY OF HELPING THEM IN SECURING DAY-TO -DAY WORK PARTICULARLY IN HARVESTING AND TRANSPORTATION OF SU GARCANE. 3. FOR THE YEAR UNDER CONSIDERATION THE TOTAL RECE IPTS WERE SHOWN AT RS. 1 91 13 231/- AND AFTER DEBITING VARIO US EXPENSES NET SURPLUS WAS SHOWN AT RS. 824/-. ON VERIFICATIO N THE ASSESSING OFFICER OBSERVED THAT OUT OF THE EXPENSES CLAIMED MAJOR COMPONENT OF EXPENDITURE AMOUNTING TO RS. 1 36 68 156/- PERTA INED TO INTEREST PAID TO BANK EVEN THOUGH NO OUTSTANDING BANK LOANS WERE REFLECTED IN THE BALANCE SHEET. IN THIS REGARD THE ASSESSEE STATED THAT THE ASSESSEE SOCIETY MADE ADVANCE PAYMENTS TOWARDS LABO UR CHARGES TRANSPORTATION ETC. WHICH WERE MET THROUGH LOANS RA ISED FROM STATE BANK OF INDIA AND THESE PAYMENTS WERE RECOVERED FRO M THE BILLS PAYABLE TO SUCH CONTRACTORS. THE ASSESSEE WAS CALL ED UPON TO FURNISH THE BANK ACCOUNT EXTRACT. ON PERUSAL OF THE SAME THE ASSESSING OFFICER OBSERVED THAT THE LOAN IS IN FACT SANCTIONED AND PAID TO SIDDESHWAR SAHAKARI SAKHAR KARKHANA LTD. (H EREINAFTER REFERRED TO AS KARKHANA) AND NOT TO THE ASSESSEE DIRECTLY. THIS WAS ALSO CONFIRMED BY THE STATE BANK OF INDIA BALI VES BRANCH SOLAPUR VIDE ITS LETTER DATED 21-12-2009 FURNISHED IN RESPONSE TO QUERY RAISED BY THE ASSESSING OFFICER U/S 133(6) OF THE ACT. THEREFORE DRAWING THE INFERENCE THAT THERE WAS NO LIABILITY ON ACCOUNT OF BANK INTEREST ON THE ASSESSEE. THE ASSES SEE WAS ASKED TO EXPLAIN AS TO WHY SUCH INTEREST CLAIMED SHOULD N OT BE DISALLOWED. 4. THE STAND OF THE ASSESSEE HAS BEEN THAT THE REQU IREMENT OF LABOURS AND TRANSPORT OPERATORS DURING A PARTICULAR SEASON WAS FINALIZED AFTER DISCUSSION WITH THE SUGAR FACTORY I .E. KARKHANA. AFTER ENGAGING THE LABOURS AND TRANSPORT OPERATORS FINANCIAL ASSISTANCE WAS MADE TO THEM IN THE FORM OF ADVANCE PAYMENTS WHICH WOULD BE ADJUSTED AGAINST THEIR ACTUAL BILLS. IT WAS STATED THAT THE RELEVANT BILLS WERE RAISED BY THE ASSESSEE ON THE SUGAR FACTORY WHO IN TURN MEET THEM BY OBTAINING LOANS FR OM STATE BANK OF INDIA IN THE NAME OF THE INDIVIDUAL OPERATORS AN D LABOURS WHICH ARE THEN TRANSFERRED TO THE CREDIT OF THE SOCIETY F OR ACTUAL DISBURSEMENT. IT WAS THUS ASSERTED THAT THE OBTAIN ING LOAN FROM THE BANK AND FINANCING THE LABOURS AND TRANSPORT OP ERATORS WAS THE RESPONSIBILITY OF THE SUGAR FACTORY AND THE ASSESS EE GOT THE GROSS RECEIPTS OF RS.1 91 13 147/- AS REIMBURSEMENT OF EX PENDITURE IT HAD INCURRED AND THEREFORE THERE WAS NO ELEMENT OF PROFIT. 5. HOWEVER THE ASSESSING OFFICER OBSERVED THAT THE BANK LOAN IN RESPECT OF WHICH INTEREST WAS DEBITED WAS NOT AVAIL ED BY THE ASSESSEE AND THUS THERE WAS NO OBLIGATION ON THE PA RT OF THE ASSESSEE TO DEFRAY THE INTEREST EXPENDITURE. THE B ANK LOAN WAS OBTAINED BY THE SUGAR FACTORY IN ITS OWN NAME AND D IRECTLY CREDITED TO THE BANK ACCOUNTS OF THE TRANSPORT OPERATORS AND LABOURS AND THE ASSESSEE WAS IN NO WAY CONCERNED ABOUT SUCH PAY MENTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTEREST PAID ON THE BANK LOAN WHICH WAS OBTAINED BY THE SUGAR FACTORY AND NO T THE ASSESSEE ITSELF COULD NOT BE SAID TO BE FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE WITHIN THE MEANING OF SEC 36(1)(III) OF SE C. 37 OF THE ACT. ACCORDINGLY THE EXPENDITURE CLAIMED AT RS. 1 36 68 154/ WAS DISALLOWED BY THE ASSESSING OFFICER. THE MATTER WA S CARRIED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED AND AFTER CONSIDERING THE S AME THE CIT(A) GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE ON BEHALF OF THE REVENUE. THE LEARNED DR SUBMITTED THAT THE CIT(A) SHOULD HAVE UPHELD THE ORDER OF THE ASSESSING OFFIC ER THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED AS IT HAS NOT B ORROWED ANY CAPITAL FUNDS FROM BANK AND THE THIRD PARTY LIABILI TY IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE. NONE APP EARED ON BEHALF OF THE ASSESSEE. SO THE APPEAL IS BEING DECIDED AF TER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE AND GOING THROUGH THE MATERIAL ON RECORD AS WELL AS ORD ERS OF THE LOWER AUTHORITIES. 6. AFTER GOING THROUGH THE MATERIAL ON RECORD WE F IND THAT THE MAIN OBJECT OF THE ASSESSEE IS STATED TO BE WELFARE OF THE AGRICULTURAL LABOUR BY ASSISTING THEM IN SECURING DAY-TO-DAY WOR K PARTICULARLY IN HARVESTING AND TRANSPORTATION OF SUGARCANE. THE ASSESSEE HAS BEEN CARRYING ON THESE ACTIVITIES ON NO PROFIT NO LOSS BASIS. FOR THIS PURPOSE THE ASSESSEE ENTERED INTO FORMAL AGRE EMENT WITH THE KARKHANA. THE ASSESSEE RAISED THE BILL TO KARKHANA ON ACCOUNT OF WAGES FOR HARVESTING SUGARCANE AND TRANSPORTATION C HARGES FOR TRANSPORT OF SUGARCANE AND ON RECEIPT OF THE AMOUNT FROM SUGAR FACTORY THE SAME WAS PAID TO HARVESTING LABOURS AN D TRANSPORT OPERATORS. IN MOST OF THE CASES ADVANCES ARE PAID TO THE LABOURERS AND TRANSPORT CONTRACTORS BEFORE COMMENCEMENT OF TH E WORK. THE KARKHANA RAISED LOAN FROM STATE BANK OF INDIA FOR T HE PURPOSE OF MAKING THESE ADVANCES. THE AMOUNT RAISED BY WAY OF LOAN WAS TRANSFERRED TO THE ASSESSEES ACCOUNT FOR MAKING AD VANCES TO THE RESPECTIVE LABOURERS/TRANSPORT OPERATORS. WHATEVE R EXPENDITURE RELATING TO SUPPLY OF LABOUR AND TRANSPORT INCURRED BY THE ASSESSEE THE SAME WAS REIMBURSABLE FROM KARKHANA. IN LINE W ITH ACCOUNTING SYSTEM BEING FOLLOWED BY THE ASSESSEE THE INTEREST OF RS. 1 36 68 156/- ON BANK LOAN RELATING TO THE PERIOD U NDER CONSIDERATION THOUGH RAISED BY KARKHANA WAS ALSO SHOWN AS REIMBURSED BY THE KARKHANA BY INCLUDING THE SAME IN THE GROSS RECEIPTS OF RS. 1 91 13 231.47 AS SHOWN UNDER THE H EAD BULLOCK CART ACCOUNT. AT THE SAME TIME THE INTEREST EXPE NDITURE OF RS. 1.36 CRORES WHICH WAS SHOWN AS REIMBURSED AND INCL UDED IN THE GROSS RECEIPTS OF RS. 1.91 CRORES WAS DEBITED TO TH E INCOME AND EXPENDITURE A/C BY WAY OF CONTRA ENTRY WHICH WAS EV IDENT FROM THE CONFIRMATION LETTER GIVEN BY THE KARKHANA WAS REPRO DUCED IN THE ORDER OF THE CIT(A) ON PAGE 5 OF HIS ORDER. IT WAS ALSO NOTICED FROM THE SCHEDULE F OF THE BALANCE SHEET THAT THE LOA N OF RS. 16 CRORES WAS REDUCED FROM THE GROSS AMOUNT RECEIVABLE FROM K ARKHANA AND THE NET AMOUNT OF RS. 6.9 CRORES WAS SHOWN UNDER TH E HEAD ADVANCES. THE RELEVANT PORTION OF SCHEDULE F O F 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 B Y WAY OF ACCOUNTING ENTRY AND THEN REIMBURSEMENT TO THE SOCI ETY BY ANOTHER ENTRY AND IN A WAY THESE ARE ONLY CONTRA ENTRIES. THE ENTRIES IN THE ACCOUNT EXTRACT FURNISHED BY THE KARKHANA AND THE B ALANCE SHEET OF THE ASSESSEE CLEARLY REVEALS THAT THE INTEREST D EBIT WAS ONLY A CONTRA ENTRY IN THE INCOME & EXPENDITURE A/C. THER EFORE MERELY BECAUSE THE LOAN WAS RAISED IN THE NAME OF KARKHANA TO WHOM THE ASSESSEE PROVIDED LABOUR AND TRANSPORT THE INTERES T EXPENDITURE WHICH WAS SHOWN AS REIMBURSEMENT FOR ACCOUNTING PUR POSES COULD NOT BE DISALLOWED WHEN THE SAME INTEREST EXPENDITUR E WAS INCLUDED IN THE GROSS RECEIPTS BY WAY OF CONTRA ENTRY. THE ASSESSING OFFICER OBSERVED THAT THE BORROWER WAS KARKHANA FOR MAKING THE PAYMENT TO THE HARVESTING LABOURS AND TRANSPORT CONTRACTORS AND DIRECTLY CREDITED TO THOSE CONTRACTORS. IF THE INTEREST EXP ENDITURE WAS DISALLOWED ON THE GROUND THAT IT DID NOT PERTAIN TO THE ASSESSEE THE CORRESPONDING RECEIPT OF THE SAME AMOUNT INCLUDED I N THE GROSS RECEIPTS BY WAY OF A CONTRA ENTRY SHOULD ALSO BE EX CLUDED. THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING ONLY THE INTEREST EXPENDITURE WITHOUT EXCLUDING THE AMOU NT FROM THE GROSS RECEIPTS. THUS THE ADDITION OF RS. 1 36 68 154/- MADE ON THIS ACCOUNT WAS RIGHTLY DIRECTED TO BE DELETED BY THE CIT(A). WHILE DOING SO THE ASSESSING OFFICER WAS ALSO DIRECTED T O ENSURE THAT THE SAME INTEREST EXPENDITURE WAS NOT CLAIMED BY THE KA RKHANA UNDER THE HEAD INTEREST EXPENDITURE AND AGAIN UNDER THE HEAD HARVESTING AND TRANSPORTATION EXPENSES OR UNDER A NY OTHER HEAD. THIS REASONED FINDING OF THE CIT(A) NEEDS NO INTERF ERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH JULY 2013 SD/- SD/- (G.K. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 15 TH JULY 2013 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A) III PUNE 4) THE CIT- IB PUNE 5) THE DR B BENCH I.T.A.T. PUNE. 6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T. PUNE