ACIT, Jaipur V. JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD., Jaipur

ITA 1003/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5227 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BATEJA CIT DHK
• Keywords: Business expenditure
• Section: 43B; 37(1); 80G; 12A; 12AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF ;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.1003/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ACIT, CIRCLE-6, JAIPUR CUKE VS. M/S JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD. NEAR GANDHI NAGAR RAILWAY STATION, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAAJ 0767 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI O.P. BATEJA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.06.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 15/06/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR , JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 19.10.2015 WHEREIN THE REVENUE HAS TAK EN FOLLOWING GROUNDS OF APPEAL: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISA LLOWANCE OF CONTRIBUTION MADE TO SPARSH TRUST OF RS. 1,23,63,09 1/- MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO PROVE DIRECT BUSINESS NEXUS AND IT IS NOT AN ALLOWANCE EX PENDITURE U/S 37(1). (II) (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS. 16,726/- & RS. 39,94,886/- MADE FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TO ESI & CPF RESPECTIVELY BEYOND THE T IME LIMIT PROVIDED IN THE RESPECTIVE ACTS. ITA NO. 1003/JP/2015 ACIT, CIRCLE-6, JAIPUR VS. JAIPUR ZILA DUNGDH UTPAD AK SAHAKARI SANGH LTD., JAIPUR 2 (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT E MPLOYEES CONTRIBUTION TO ESI & CPF ARE GOVERNMENT BY THE PRO VISION OF SECTION 43B AND NOT BY SECTION 36(1) R.W.S. 2(24) OF I.T. ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROCUREMENT OF MILK, PRO CESSING THE SAME TO PREPARE ITS PRODUCT AND SALE THEREOF. THE MILK IS P ROCURED AT VILLAGE LEVEL THROUGH PRIMARY SOCIETIES. TO OBTAIN BETTER QUALITY OF MILK AS WELL AS MILK IN GOOD QUANTITY, ASSESSEE SOCIETY IS PROVIDING VARIOU S FACILITIES TO THE MILK ANIMAL OWNERS LIKE VACCINATION OF ANIMALS, MEDICAL TREATME NT OF ANIMALS, EMERGENCY SERVICES ETC. EARLIER ALL THESE SERVICES WERE PROVI DED BY THE ASSESSEE HIMSELF BUT FEELING DIFFICULTIES IN MANAGING AND CONTROLLIN G THE SAME, IT WAS DECIDED TO CREATE A TRUST FOR THIS PURPOSE. ACCORDINGLY, A TRU ST IN THE NAME OF PASUDHAN KALYAN AND UPBHOKTA SAMVARDHAN TRUST ALIAS SPARSH FOR PRODUCTIVITY OF ANIMALS AND RURAL SELF HELP WAS CONSTITUTED VIDE TR UST DEED DT. 12.03.2004. THE TRUST IS REGISTERED U/S 12A AND ALSO GRANTED CERTIF ICATE U/S 80G . ASSESSEE DECIDED TO CONTRIBUTE 5 PAISA PER LITER OF THE MILK PROCURED BY IT AND ACCORDINGLY, ASSESSEE CONTRIBUTED RS. 1,23,63,091/- TO THIS TRUST DURING THE YEAR UNDER CONSIDERATION. 2.1 THE AO DISALLOWED THE AMOUNT OF CONTRIBUTION OF RS. 1,23,63,091/- BY STATING THAT THE TRUST IS REGISTERED U/S 12AA AND H AS BEEN GRANTED CERTIFICATE U/S 80G, THEREFORE, ANY PAYMENT MADE BY ASSESSEE TO THIS TRUST FALLS WITHIN THE DEFINITION OF DONATION & CANNOT BE TREATED AS AN EX PENDITURE U/S 37(1). THE AO STATED THAT ON ONE SIDE, ASSESSEE CLAIMS THAT IT SI MPLY MAKES CONTRIBUTION FOR REIMBURSING THE EXPENSES INCURRED BY THE TRUST ON B EHALF OF THE ASSESSEE WHILE ON OTHER HAND, IT STATES THAT IT IS NOT CONTRACT GI VEN TO THE TRUST. BOTH SUCH CLAIMS ARE CONTRADICTORY TO EACH OTHER. ASSESSEE SI MPLY CONTRIBUTES IN THE TRUST AT THE STIPULATED RATES AND THEREFORE CLAIM OF ASSE SSEE REGARDING REIMBURSEMENT OF ITS EXPENDITURE IS NOT ACCEPTABLE. ASSESSEE FAILED TO FURNISH ANY DOCUMENT/EVIDENCE TO SUBSTANTIATE ITS CLAIM EVE N OTHERWISE. CONTRIBUTION TO SPARSH IS MADE AS A CATTLE DEVELOPMENT FUND AN D ASSESSEE DEALS IN DAIRY PRODUCTS. THUS, HOW A CONTRIBUTION FOR DEVELOPMENT OF CATTLE HAS NEXUS WITH THE BUSINESS OF THE ASSESSEE. THEREFORE, THE CONTRI BUTION CANNOT BE HELD TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. ITA NO. 1003/JP/2015 ACIT, CIRCLE-6, JAIPUR VS. JAIPUR ZILA DUNGDH UTPAD AK SAHAKARI SANGH LTD., JAIPUR 3 2.2 AT THE OUTSET, THE LD AR SUBMITTED THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDERS OF HONBLE ITAT IN ASSESSEE S OWN CASE FOR AY 2008-09, 2009-10 AND 2010-11 RESPECTIVELY. 2.3 THE LD AR FURTHER SUBMITTED THAT THE VARIOUS OB SERVATIONS MADE BY AO FOR DISALLOWING THE CONTRIBUTION MADE BY ASSESSEE T O TRUST IS INCORRECT AS THE BASIC REQUIREMENTS FOR INVOKING SECTIONS 37(1) AND 80G ARE QUITE DIFFERENT, BUT NONETHELESS THE TWO SECTIONS ARE NOT MUTUALLY EXCLU SIVE. EVEN, IF CONTRIBUTION MADE BY AN ASSESSEE IS IN THE FORM OF DONATIONS OF THE CATEGORY SPECIFIED U/S 80G, IT COULD STILL BE TERMED AS AN EXPENDITURE OF THE CATEGORY FALLING U/S 37(1), IF SUCH CONTRIBUTION IS LAID OUT OR EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS HAS BEEN SO HELD BY HON BLE KARNATAKA HIGH COURT IN CASE OF MYSORE KIRLOSKAR LTD. VS. CIT 166 ITR 836 & HONBLE MUMBAI TRIBUNAL IN CASE OF HINDUSTAN PETROLEUM CORPORATION LTD. VS. DC IT 96 ITD 186. THEREFORE, THE DISALLOWANCE OF CONTRIBUTION BY THE AO SIMPLY O N THE GROUND THAT THE TRUST IS REGISTERED U/S 12A & GRANTED CERTIFICATE U/S 80G & THUS ANY PAYMENT MADE BY ASSESSEE TO THE TRUST FALLS WITHIN THE DEFINITIO N OF DONATION & CANNOT BE TREATED AS AN EXPENDITURE U/S 37(1) IS MISCONCEIVED . IT IS A SETTLED LAW THAT DONATION ARE ALLOWABLE AS BUSINESS EXPENDITURE IF T HEY SATISFY THE EXPENDITURE TEST. 2.4 THE COORDINATE BENCH VIDE ITS ORDER DT. 15.03.2 012 IN ITA NO. 820/JP/11 FOR A.Y. 08-09 HAS GIVEN ITS FINDINGS AS UNDER: AFTER CONSIDERING THE SUBMISSIONS, ORDERS OF THE A UTHORITIES BELOW, WE FIND THAT ASSESSEE DESERVE TO SUCCEED IN ITS GROUND RAISED. IT IS NOTICED THAT BEFORE CREATING SPARSH, THE ASSESSEE WAS DOING ALL THESE EXPENDITURE ITSELF. JUST FOR BETTERMENT OF ADMINISTRATION SERVI CES, THE ASSESSEE CREATED THE TRUST THROUGH WHOM THESE EXPENSES ARE INCURRED. THE PROFIT & LOSS ACCOUNT OF THE TRUST IS MAINTAINED, COPY OF WHICH I S PLACED IN THE COMPILATION AND IT IS SEEN THAT WHATEVER AMOUNT HAS BEEN GIVEN BY ASSESSEE OR REIMBURSED BY ASSESSEE, THAT HAS BEEN S PENT BY THE TRUST ON THE ANIMALS TO GET BETTER QUALITY AND QUANTITY OF M ILK. THE ASSESSEE HAS CONTRIBUTED @ RS.0.05 PER LITRE OF MILK PROCURED TO ITS TRUST FOR THE PURPOSE OF INCURRING EXPENDITURE FOR BETTER QUALITY OF MILK . AN AGENDA NOTE WAS ITA NO. 1003/JP/2015 ACIT, CIRCLE-6, JAIPUR VS. JAIPUR ZILA DUNGDH UTPAD AK SAHAKARI SANGH LTD., JAIPUR 4 PREPARED WHICH CLEARLY STATES THAT THE PURPOSE OF C ONTRIBUTION IS FOR MEDICAL AND HEALTH FACILITY OF THE ANIMALS OF THE M ILK PRODUCERS AT THE DISTRICT LEVEL. THE CONTRIBUTION MADE BY ASSESSEE T O TRUST IS THUS DIRECTLY LINKED WITH THE PROCUREMENT OF BETTER QUALITY, HYGI ENIC AND MORE QUANTITY OF THE MILK. IT IS IN THE INTEREST OF THE ASSESSEE THAT THE MILK ANIMALS AT THE VILLAGE LEVEL FROM WHERE IT PROCURES THE MILK ARE H EALTHY AND FOR THIS PURPOSE, SPARSH TRUST INCURRED EXPENDITURE IN PROVI DING VATERNITY CARE, REGULAR TREATMENT, EMERGENCY CARE, PREVENTIVE CARE, BREED IMPROVEMENT THROUGH A.I. UNINTERRUPTED SUPPLY OF NUTRITIONAL SU PPLEMENT ETC. THEREFORE, IN OUR CONSIDERED VIEW, CONTRIBUTION MADE BY ASSESS EE TO THIS TRUST IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH IS ALLOWABLE U/S 37(1). FROM THE INCOME AND E XPENDITURE ACCOUNT OF THE TRUST, IT CAN BE NOTED THAT IT HAS INCURRED AN EXPENDITURE IN PURSUANCE OF ITS OBJECTIVES AND AFTER CONSIDERING THE RECEIPT S, THERE IS DEFICIT TO THE TRUST IN THE YEAR UNDER CONSIDERATION. SUCH DEFICIT IS MET OUT OF THE CONTRIBUTION MADE BY ASSESSEE TO THE TRUST. IT IS F URTHER SEEN THAT BEFORE CREATING THIS TRUST, THE ASSESSEE WAS INCURRING ALL THESE EXPENSES ITSELF AND ALL THESE EXPENSES WERE ALLOWED BY THE DEPARTMENT W HILE COMPLETING ASSESSMENT U/S 143(3).THEREFORE, THIS IS NOT A CASE THAT ASSESSEE HAS MADE DONATION TO ANY TRUST AND, THEREFORE, THE SAME CANN OT BE ALLOWED AS BUSINESS EXPENDITURE. THE ID. CIT (A) HAS DISALLOWE D THE CLAIM OF ASSESSEE BY OBSERVING THAT SINCE ASSESSEE HAS MADE DONATION U/S 80G AND, THEREFORE, DEDUCTION U/S 80G IS ALLOWABLE WHEREAS T HE FACTS ARE OTHERWISE. THE ASSESSEE HAS NOT MADE ANY DONATION BUT HAS CONT RIBUTED TO THE TRUST FOR A SPECIFIC PURPOSE I.E. TO INCUR THE EXPENDITUR E TO GET BETTER MILK FROM MILK ANIMAL. VARIOUS CASE LAWS RELIED UPON BY THE A SSESSEE ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. WE ARE NOT GETTING INT O DETAILS IN RESPECT OF THOSE CASES AS THEY HAVE ALREADY BEEN MENTIONED IN THE WRITTEN SUBMISSIONS WHICH ARE REPRODUCED HEREIN ABOVE. IN V IEW OF THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT THE EXPENDITURE/CONTRIB UTION MADE BY ASSESSEE IS ALLOWABLE AS BUSINESS EXPENDITURE. ACCO RDINGLY, THE ADDITION MADE AND CONFIRMED BY LOWER AUTHORITIES IS DELETED. 2.5 SIMILAR ORDERS WERE PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009- 10 AND 2010-11. THERE IS NO CHANGE OF CIRCUMSTANCES BROUGHT TO OUR NOTICE ITA NO. 1003/JP/2015 ACIT, CIRCLE-6, JAIPUR VS. JAIPUR ZILA DUNGDH UTPAD AK SAHAKARI SANGH LTD., JAIPUR 5 AFTER PASSING OF THE ORDERS REFERRED HEREINABOVE OR NO CHANGE IN LAW HAS BEEN BROUGHT TO OUR NOTICE BY EITHER OF PARTIES. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY TH E EARLIER DECISIONS OF THE COORDINATE BENCHES IN ASSESSEES OWN CASE. RESPE CTFULLY FOLLOWING THE EARLIER DECISIONS OF THE COORDINATE BENCHES, THE CONTRIBUTI ON OF RS. 1,23,63,091/- MADE BY THE ASSESSEE TO SPARSH TRUST IS ACCORDINGLY ALLOWED AS AN ELIGIBLE BUSINESS EXPENDITURE UNDER SECTION 37(1) OF THE ACT . THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 2.6 IN GROUND NO.2 THE DISALLOWANCE UNDER DISPUTE RELATES TO ADDITION OF RS. 16,726/- AND RS. 39,94,886/- MADE BY THE AO ON ACC OUNT OF DISALLOWANCE OF EXPENDITURE U/S 36(1)(VA) R.W.S. 2(24) OF THE INC OME TAX ACT, FOR DEPOSITING THE EMPLOYEES CONTRIBUTION TO PF AND ESI. ADMITTE DLY THE CONTRIBUTION WAS DEPOSITED BY THE ASSESSEE WITH THE PROVIDENT FUND O N THE NEXT DAY IMMEDIATELY IT WAS DUE. THE PROVIDENT FUND ACT BY W HICH THE DEPOSIT OF THE CONTRIBUTION BY THE ASSESSEE WITHIN THE GRACE PERIO D OF 5 DAYS FROM THE DATE WHEN IT BECOMES DUE. THE LD. CIT(A) HAS GIVEN THE FINDING THAT THE PAYMENTS OF ESI & PF WERE MADE BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN. IN LIGHT OF DECISION OF HONBLE RAJASTHAN HIGH COURT I N THE CASE OF CIT VS. STATE BANK OF BIKANER AND JAIPUR 99 DTR 131 AND IN THE C ASE OF JAIPUR VIDHYUT VITRAN NIGAM LTD. 265 CTR 62 WE FIND NO INFIRMITY IN THE D ECISION OF LD CIT(A) WHICH IS HEREBY DELETED. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06 /2016. SD/- SD/- (BHAGCHAND) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 15/ 06/2016 PILLAI ITA NO. 1003/JP/2015 ACIT, CIRCLE-6, JAIPUR VS. JAIPUR ZILA DUNGDH UTPAD AK SAHAKARI SANGH LTD., JAIPUR 6 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD. JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1003 /JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR