Appeal details
Counselvise Citation
[2015] 123 COUNSELVISE.COM (IT) 0530 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 7 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
22-05-2015
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
20-05-2015
Assessment Year
2009-2010
Appeal Filed On
10-10-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY : JUDICIAL MEMBER ITA NOS. 3557/DEL/2010 & 4455/DEL/2012 A.Y. 2007-08 & 2009-10 DCIT, CIRCLE 9(1), VS. M/S STATE FARMS CORPORATI ONS OF NEW DELHI. INDIA LTD., 14-15, FARM BHAWAN, NEHRU PLACE, NEW DELHI. PAN: AAHCS 0113 N AND C.O. NOS. 291/D/2010 & 403/DEL/2012 ( IN ITA NOS. 3557/DEL/2010 & 4455/DEL/2012 ) A.Y. 2007-08 & 2009-10 M/S STATE FARMS CORPORATIONS OF VS. DCIT, CIRCLE 9 (1), INDIA LTD., 14-15, FARM BHAWAN, NEW DELHI. NEHRU PLACE, NEW DELHI. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI RAMESH CHANDRA CIT(DR ) ASSESSEE BY : SHRI P.N. MEHTA FCA DATE OF HEARING : 20-05-2015 DATE OF ORDER : 22-05-2015. O R D E R PER S.V. MEHROTRA, A.M:- THE APPEALS, FILED BY THE REVENUE AND THE CROSS-OB JECTIONS PREFERRED BY THE ASSESSEE, ARE DIRECTED AGAINST SEPARATE ORDERS OF C IT(A) PERTAINING TO AY 2007-08 2 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA & 2009-10. ALL THESE MATTERS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . REVENUES APPEAL - AY 2007-08 (ITA NO. 3557/DEL/20 10): 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CENTRAL GOVERNMENT UNDERTAKING ENGAGED PRIMARILY IN AGRICULTURAL ACTIV ITIES AND THE MAIN SOURCE OF INCOME IN THE RELEVANT YEAR WAS FROM AGRICULTURE, WHICH HAD BEEN CLAIMED AS EXEMPT U/S 10 OF THE I.T. ACT AND, ACCORDINGLY, NOT INCLUDED IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE. THE ASSESSEE HAD FILE D RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 6,25,63,250/-, WHICH COMPRISED OF FOLLOWING: A) INCOME FROM HOUSE PROPERTY RS. 52,27,808/- B) BUSINESS INCOME RS.546,17,971/- C) INCOME FROM OTHER SOURCES RS. 27,17,467/- 2.1. THE AO NOTICED THAT DURING THE YEAR UNDER CONS IDERATION THE ASSESSEE HAD RECEIVED SUBSIDY TO THE TUNE OF RS. 10,55,14,866/- FROM THE CENTRAL GOVERNMENT. THE AO HAS OBSERVED THAT THIS ISSUE HAD BEEN DISCUS SED AT LENGTH IN THE ASSESSMENT ORDER FOR AY 2002-03 TO 2006-07. ACCORDINGLY, FOLL OWING THE SAME HE HELD THAT SUBSIDY WAS NOT ELIGIBLE FOR EXEMPTION U/S 10 OF TH E I.T. ACT, NOT BEING AGRICULTURE INCOME AS PER SECTION 2(1)A OF THE I.T. ACT. HE INC LUDED THE SUBSIDY OF RS. 5,04,04,286/- ON ACCOUNT OF DISTRIBUTION SUBSIDY, S EED BANK SUBSIDY & TRANSPORT SUBSIDY AND PRODUCTION SUBSIDY TO THE ASSESSEES IN COME. 2.2. LD. CIT(A) FOLLOWING THE ORDER OF HER PREDECES SOR FOR AY 2002-03, 2003-04 AND 2004-05, DIRECTED THE AO TO DETERMINE THE NET T AXABLE INCOME AFTER VERIFYING AND ALLOWING REVENUE EXPENDITURE TO BE SET OFF AGAI NST QUANTUM OF SUBSIDY RECEIPTS FROM THE GOVERNMENT DISCLOSED AT RS. 5,04,04,280/-. 3 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA 2.3. LD. CIT(A) FURTHER OBSERVED THAT DURING THE C OURSE OF PROCEEDINGS IT HAD BEEN SUBMITTED THAT THE SUBSIDY RECEIVED BY THE AS SESSEE WAS NOT COVERED U/S 14A OF THE I.T. ACT AS THE SAME WAS MERELY A REIMBURSEM ENT OF EXPENSES BY THE GOVERNMENT AND WAS NOT IN THE NATURE OF INCOME OF I NCOME OF THE ASSESSEE. KEEPING IN VIEW OF HER FINDING IN REGARD TO THE NAT URE OF RECEIPTS BEING OF NON AGRICULTURAL REVENUE NATURE, SHE ACCEPTED THE ASSES SEES PLEA THAT THE SUBSIDY WAS MERELY REIMBURSEMENT IN NATURE AND EXPENDITURE HAD BEEN BROUGHT ON RECORD. 2.4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING EFFECTIVE GROUND S OF APPEAL: 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DIRECTING THE AO TO DETERMINE THE NET TAXABLE INCOME AFTER VERIFY ING AND ALLOWING REVENUE EXPENDITURE TO BE SET OFF AGAINST QUANTUM OF SUBSIDY RECEIPTS FROM THE GOVERNMENT DISCLOSED AT R S. 5,04,04,286/- 2. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN HOLDING THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IS NOT COVERED U/S 14A OF THE I.T. ACT AS THE SAME IS MERELY A REIMBURSEMENT OF EXPENSES BY THE GOVERNMENT AND IS NOT IN THE NATURE OF INCOM E OF THE ASSESSEE. 3. AT THE OUTSET WE MAY POINT OUT THAT THE APPEAL O F THE DEPARTMENT WAS EARLIER DISMISSED BY THE ITAT FOR WANT OF COD APPROVAL, WHI CH ORDER WAS RECALLED BY THE ITAT VIDE ORDER DATED 20-1-2011 IN MA NO. 178/DEL/2 011. ACCORDINGLY, THE PRESENT APPEAL IS BEING LISTED FOR HEARING. ON A SP ECIFIC QUERY FROM THE BENCH, AS REGARDS THE POSITION FOR AY 2002-03 TO 2006-07, LD. COUNSEL POINTED OUT THAT COPY 4 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA OF CIT(A)S ORDER FOR AY 2002-03 IS AT PAGES 10 TO 15 OF THE PB. HOWEVER, NO DETAILS ARE THERE IN REGARD TO SUBSEQUENT PROCEEDIN GS APROPOS AY 2002-03 TO 2006- 07. WE, THEREFORE, PROCEED TO DECIDE THIS APPEAL. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES. THE SHORT DISPUTE IS WHETHER THE SUBSIDY RECEIVED BY THE ASSESSEE IS IN THE NATURE OF AGRICULTURE INCOME OR NOT. AS PER THE ANNUAL REPORT OF ASSESSEE FOR AY 2006-07, THE ASSESSEE CORPORATION WAS MANAGING SIX FARMS, NAMELY, CENTRAL STATE FARMS AT SURATGARH; SARDARGARH AND JETSAR IN RAJASTHAN; HISAR IN HARYAN A; BAHRAICH IN U.P. AND RAICHUR IN KARNATAKA. 4.1. THE OPERATIONAL ACTIVITIES OF ASSESSEE COMPRIS ED OF TEST STOCK SEED PRODUCTION; BREEDER SEED PRODUCTION; TOTAL SEED PRO DUCTION; GROWERS SEED PRODUCTION. THE ASSESSEE HAD RECEIVED FOLLOWING SUB SIDY DURING THE YEAR: S.NO. TYPE OF SUBSIDY AMOUNT REMARKS 1. TRANSPORT SUBSIDY 99007 VIDE SANCTION DT. 27-9-2 006 & 21-12-2006 BY MIN. OF AGRICULTURE, GOVT. OF INDIA. . SEED BANK 6010590 VIDE SANCTION DT. 7-2-2007 & 1 -11-2006 BY MIN. OF AGRICULTURE, GOVT. OF INDIA 3. JATROPHA PLANT SUBSIDY 5500000 4. PRODUCTION SUBSIDY 24032095 5. DISTRIBUTION SUBSIDY 7696513 6. BREEDER SEEDS 7764339 4.2. AS PER THE LETTER NO. 8-6/2001-SD.VI DATED 27- 9-2006, ISSUED BY THE MINISTRY OF AGRICULTURE, GOVT. INDIA, THE SUBSIDY W AS IN THE FORM OF REIMBURSEMENT TOWARDS EXPENDITURE INCURRED BY IT ON ACCOUNT OF 20 3 QTLS. OF JUTE SEEDS TRANSPORTED FROM OUTSIDE THE STATE TO GUWAHATI (ASSAM) DURING A Y 2006-07. 5 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA 4.3. FURTHER, AS PER THE LETTER NO. 8-6/2001-SD.VI DATED 21-12-2006, ISSUED BY THE MINISTRY OF AGRICULTURE, GOVT. INDIA, RS. 10,08 3/- WAS REIMBURSEMENT TOWARDS EXPENDITURE INCURRED BY IT ON ACCOUNT OF 150 QTLS. OF WHEAT SEEDS TRANSPORTED FROM CSF SURATGARH TO JAMMU & KASHMIR DURING AY 2006-07. 4.4. AS REGARDS THE SUBSIDY FOR ESTABLISHMENT & MAI NTENANCE OF SEED BANK, AS PER THE LETTER NO. 10-1/2006-SD.V DATED 7-2-2007, I SSUED BY THE MINISTRY OF AGRICULTURE, GOVT. INDIA, THE SUBSIDY WAS IN THE FO RM OF REIMBURSEMENT TOWARDS MAINTENANCE COST OF SEEDS KEPT IN THE SEED BANK UND ER ESTABLISHMENT & MAINTENANCE OF SEED BANK. 4.5. FURTHER, AS PER THE LETTER NO. 10-5/2006-SD.V/ PT. DATED 1-11-2006, ISSUED BY THE MINISTRY OF AGRICULTURE, GOVT. INDIA, IN RESPE CT OF FUNDS TO NSC, SFCI, GSSC AND RSSC THE SUBSIDY WAS IN THE FORM OF REIMBURSEME NT TOWARDS MAINTENANCE COST OF SEEDS KEPT IN THE SEED BANK UNDER ESTABLISHMENT & MAINTENANCE OF SEED BANK. 4.6. FROM A BARE PERUSAL OF THE ABOVE SANCTION LETT ERS, IT IS EVIDENT THAT THE AMOUNT HAS BEEN REIMBURSED TO ASSESSEE TOWARDS EXPE NDITURE INCURRED BY IT. THEREFORE, LD. CIT(A) HAS RIGHTLY HELD THIS AMOUNT TO BE IN THE NATURE OF NON- AGRICULTURAL REVENUES AND, THEREFORE, LIABLE TO BE TAXED. 4.7. WE ARE IN AGREEMENT WITH THE FINDING OF LD. CI T(A) THAT ONLY NET INCOME I.E. INCOME LEFT OVER AFTER DEDUCTING THE EXPENDITURE I NCURRED IN EARNING THE SAID INCOME FROM THE AMOUNT OF SUBSIDY RECEIVED IS TO BE TAXED. 6 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA 4.8. LD. CIT(A) HAS FURTHER NOTED THE OBSERVATIONS OF LD. CIT(A) FOR EARLIER YEARS THAT AO HAD EXPRESSED THE VIEW THAT IT WAS DIFFICUL T TO BIFURCATE THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING AGRICULTURE IN COME AND FOR EARNING NON- AGRICULTURE INCOME. SINCE THE ENTIRE INCOME OF THE ASSESSEE HAD BEEN HELD TO BE NON-AGRICULTURE INCOME, HENCE ALL THE EXPENSES INCU RRED ON PURCHASE OF SEEDS, TRANSPORTATION TO REMOTE AREAS LIKE JAMMU & KASHMI R, SRINAGAR ETC. WOULD CONSTITUTE REVENUE EXPENDITURE AND OUGHT TO BE DEDU CTED FROM THE REVENUE RECEIPTS. THEREFORE, LD. CIT(A) HAD DIRECTED THE AO TO DETERM INE THE NET TAXABLE INCOME AFTER VERIFYING THE REVENUE EXPENDITURE AND ALLOWIN G THE SAME TO BE SET OFF AGAINST THE REVENUE RECEIPTS OF RS. 5,04,04,286/- I.E. THE QUANTUM OF SUBSIDY RECEIVED. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F LD. CIT(A) ON THIS COUNT. THEREFORE GROUND NO. 1 OF THE DEPARTMENT IS DISMISS ED. 5. AS WE HAVE HELD THAT THERE IS NO EXEMPT INCOME, THEREFORE, THE QUESTION OF APPLICABILITY OF SECTION 14A, IN ANY CASE, DOES NOT ARISE. ACCORDINGLY, GROUND NO. 2 IS DISMISSED. 6. IN THE RESULT DEPARTMENTS APPEAL IS DISMISSED. ASSESSEES C.O. NO. 291/DEL/2010 (AY 2007-08): 7. IN ITS CROSS-OBJECTION THE ASSESSEE HAS RAISED F OLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN H OLDING THAT THE SUBSIDIES RECEIVED FROM THE GOVERNMENT OF INDIA ARE IN THE NATURE OF REVENUE RECEIPT LIABLE TO TAX. 2. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT TO HAVE HELD THAT THE SUBSIDIES RECEIVED WERE AGRICULTURAL IN NA TURE IN SO FAR AS THE SAME WERE FOR THE RECOUPMENT OF THE EXPENSES INCURR ED BY THE CORPORATION AND AS SUCH ARE PART OF THE AGRICULTURA L INCOME. 7 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA 3. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT TO HAVE HELD THAT IT IS THE NATURE OF SUBSIDY RECEIVED BY THE AS SESSEE AND THE PURPOSE FOR WHICH IT IS RECEIVED DETERMINES THE NAT URE OF INCOME WHETHER LIABLE TO TAX UNDER THE INCOME TAX ACT OR N OT. SINCE THE SUBSIDIES RECEIVED WERE FOR RECOUPMENT OF AGRICULTU RAL EXPENSE, THE SAME OUGHT TO HAVE BEEN TREATED AS INCOME FROM AGRI CULTURE. 8. WHILE ADJUDICATING REVENUES APPEAL, WE HAVE UPH ELD THE ORDER OF LD. CIT(A), DIRECTING THE AO TO DETERMINE THE NET TAXA BLE INCOME AFTER VERIFYING THE REVENUE EXPENDITURE AND ALLOWING THE SAME TO BE SE T OFF AGAINST THE REVENUE RECEIPTS. IN VIEW THEREOF, THE CROSS-OBJECTION FILE D BY THE REVENUE HAS NO FORCE AND IS DISMISSED ACCORDINGLY. A.Y. 2009-10 ( REVENUES APPEAL ITA 4455/DEL/2012 ): 9. SOLE EFFECTIVE GROUND RAISED IS AS UNDER: THE LD. CIT(A) HAS ERRED IN LAW IN RESTORING THE I SSUE TO THE FILE OF AO REGARDING DISALLOWANCE OF SUBSIDY RECEIVED FROM THE GOVERNMENT AMOUNTING TO RS. 6,52,82,074/-. 10. IN ITS CROSS OBJECTIONS FOR AY 2009-10, THE ASS ESSEE HAS RAISED IDENTICAL GROUNDS AS IN AY 2007-08, ABOVE. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THE FACTS OF THE PRESENT C ASE, ON THE ISSUE IN QUESTION, IS IDENTICAL TO AY 2007-08, ABOVE, WHEREIN WE HAVE UP HELD THE ORDER OF LD. CIT(A), DIRECTING THE AO TO DETERMINE THE NET TAXABLE INCOM E AFTER VERIFYING THE REVENUE EXPENDITURE AND ALLOWING THE SAME TO BE SET OFF AG AINST THE REVENUE RECEIPTS. IN VIEW OF OUR FINDINGS FOR AY 2007-08, WE SEE IN FORC E IN THE APPEAL OF THE REVENUE 8 ITA 3557/D/10 & 4455/D/12 CO 291/D/10 & 403/D/12 STATE FARMS CORPORATION OF INDIA AS WELL AS THE CROSS-OBJECTIONS FILED BY THE ASSES SEE. ACCORDINGLY, THE SAME STAND DISMISSED. 12. IN THE RESULT APPEALS FILED BY THE REVENUE AS WELL AS THE CROSS- OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22-05-2015. SD/- SD/- (A.T. VARKEY ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22-05-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR
Mehul