The ITO, Ward-5(4), Surat V. Shree Sayan Vibhag Sahakari Khand Udhyog Mandli Ltd., Surat

ITA 1060/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6095 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: M K PATEL
• Keywords: Charitable institution; Diversion of income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM] ITA NO.1060/AHD/2010 (ASSESSMENT YEAR:-2006-07) INCOME-TAX OFFICER, WARD- 5(4), SURAT V/S SHREE SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD., SAYAN, TALUKA: OLPAD, SURAT [PAN: AAAAS 4058 F] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI M C PANDIT, SR. DR ASSESSEE BY:- SHRI M K PATEL, AR O R D E R A N PAHUJA: THIS IS AN APPEAL BY THE REVENUE AGAINST AN ORDER DATED 16-12-2009 OF THE LD.CIT(APPEALS)-IV, SURAT, RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF VARIOUS FUNDS COLLECTED BY THE KHAND UDYOG MANDLI LTD., DURING TH E YEAR AMOUNTING TO RS.39,36,191/- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A)-IV, SURAT MAY BE SET-ASIDE AND THAT OF THE AO RESTORED. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL TOTAL INCOME FILED ON 29.12.2006 BY THE ASSESS EE SOCIETY, MANUFACTURING SUGAR AND MOLASSES BESIDES GIVING LOA NS TO MEMBERS, AFTER BEING PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 24.12.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER[AO IN SHORT] NOTICED THE SOCIETY DID NOT PA Y FULL AMOUNT TO ITS ITA NO.1060/AHD/2010 FOR AY 2006-07 SHRI SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. 2 MEMBERS ON PURCHASE OF SUGARCANE FROM THEM AND DEDU CTED VARIOUS AMOUNTS TOWARDS DIFFERENT WELFARE FUNDS. THESE AMO UNTS WERE NEVER PAID TO SELLER MEMBERS. THE SOCIETY DEBITED THE PURCHASE ACCOUNT BY FULL AMOUNT, WITHOUT DEDUCTING THEREFROM DEDUCTION MADE FOR THESE FUNDS WHILE COLLECTION OF THESE FUNDS WAS NOT SHOWN AS INCOME. SINCE THESE WERE TRADING RECEIPTS, THE AO W AS OF THE OPINION THAT THESE WERE LIABLE TO BE TAXED ON VERIF ICATION, THE DETAILS OF FUNDS COLLECTED AND UTILIZED DURING THE YEAR UN DER CONSIDERATION REVEALED AS UNDER: SR. NO. NAME OF THE FUND OPENING BALANCE ON 1.4.05 AMOUNT COLLECTED AMOUNT SPENT BALANCE AS ON 31.3.2006 1 KALYAN FUND 16,75,2267- 15,19,8297- 8,38,675/- 23,56,3807 - 2 ROAD DEV. FUND 53,72,4037- 9,66,545/- 7,77,624/- 55,61,324/- 3 LAND DEVP. FUND 58,58,9587- 4,83,2737- 21,18,2457- 42,23,986/- 4 CHARITABLE TRUST FUND 6,60,759/- 9,66,545/- 6,65,080/- 9,62,224/- 2.1 TO A QUERY BY THE AO AS TO WHY THE AMOUNT CR EDITED TO VARIOUS FUNDS AMOUNTING TO RS.39,36,191/- DURING THE YEAR B E NOT ADDED TO THE TOTAL INCOME, THE ASSESSEE EXPLAINED VIDE LETT ER DATED 28.11.08 THAT AMOUNT COLLECTED TOWARDS VARIOUS FUNDS FROM T HE SUGARCANE GROWERS WAS BEING SPENT ACCORDING TO THE RULES AND REGULAT IONS FRAMED FOR A PARTICULAR FUND AND THE UNUTILIZED AMOUNT HAD TO BE REFUNDED T O THE FARMERS. RELYING UPON THE DECISIONS IN THE CASE OF CIT V/S BIJLI COTTON M ILLS PVT. LTD. (1979) 116 ITR 60 ITA NO.1060/AHD/2010 FOR AY 2006-07 SHRI SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. 3 (SC) AND SIDHESHWAR SAHKARI KARKHANA LTD. V/S CIT 2 70 ITR (SC) AS ALSO ON THE APPELLATE ORDER IN THE CASE OF UKAI PRADESH SAHKARI KHAND MANDLI LTD., THE ASSESSEE PLEADED THAT THE SAID AMOUNTS WERE NOT TAX ABLE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND WHI LE REFERRING TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF SIDHESHWAR SA HKARI KARKHANA LTD. (SUPRA) CONCLUDED THAT THE SOCIETY DID NOT ACT AS AN AGENT AND HAD TOTAL CONTROL OVER THESE FUNDS WHILE THERE WAS NOTHING TO SUGGEST THAT THE AMOUNTS COLLECTED DURING THE YEAR ,WERE ACTUALLY SPENT. SINCE THE SOCIETY DI D NOT FRAME ANY RULES IN RESPECT OF HOSPITAL FUND AND THE OBJECTS OF VARIOUS FUNDS WERE FOUND TO BE LIKE AREA DEVELOPMENT FUND IN THE CASE OF SIDHESHWAR SAHKARI KARKHANA LTD .(SUPRA), THE AO BROUGHT THE ENTIRE AMOUNT COLLECTED DURING THE Y EAR TO TAX . 3. ON APPEAL, THE LD. CIT(A) ,FOLLOWING THE ORDE R OF HIS PREDECESSOR FOR THE AYS 2001-02 AND 2002-03, DELET ED THE ADDITION IN THE FOLLOWING TERMS: THE ONLY GROUND OF APPEAL IS REGARDING ADDITION OF VARIOUS FUNDS COLLECTED BY THE KHAND UDYOG MANDLI LTD. DURING THE YEAR. THI S ISSUE AROSE IN APPELLANTS CASE FOR AY 2001-02 AND AY 2002-03 WHER EIN MY PREDECESSOR, VIDE HIS ORDER NO. CAS-IV/52/05-06, DATED 10-08-200 5, HAD DECIDED IN FAVOUR OF THE APPELLANT. THEREFORE, THE ADDITION MA DE IN THIS CASE IS ALSO DIRECTED TO BE DELETED . 4 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). BOTH THE PARTIES AGREED THAT THE IMPUGNED ORDER IS NOT A SPEAKING ORDER WHILE THE ITAT VIDE T HEIR ORDER DATED 24- 02-2006 IN THE ASSESSEES OWN CASE IN THE AY 2002-0 3 HAD RESTORED THE MATTER TO THE FILE OF THE AO IN ITA NO.2283/AHD /2005 FOR READJUDICATION IN THE LIGHT OF AFORESAID DECISION I N THE CASE OF SIDHESHWAR SAHKARI KARKHANA LTD.(SUPRA). ACCORDINGL Y, IT WAS PLEADED THAT MATTER FOR THE YEAR UNDER CONSIDERATION MAY BE REST ORED TO THE FILE OF THE AO. ITA NO.1060/AHD/2010 FOR AY 2006-07 SHRI SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. 4 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. WE FIND THAT A CO- ORDINATE BENCH VIDE THEIR ORDER DATED 24-02-2006 IN THE ASSESSEES OWN CASE FOR THE AY 2002-03 IN ITA NO.2283/AHD/20 05, RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJ UDICATION IN THE FOLLOWING TERMS: 3. THE ONLY ISSUE IN APPEAL RELATES TO THE TAXABIL ITY OF VARIOUS SUMS WITHHELD BY THE ASSESSEE, A CO-OPERATIVE SOCIETY EN GAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR, FROM THE PURCHASE CONSIDERATION OF SUGARCANE PROCURED FROM ITS FARMER MEMBERS, I.E., T HE SUGARCANE GROWERS. THE IMPUGNED AMOUNTS FOR THE YEAR UNDER CONSIDERATI ON WORKS TO RS.67,12,212/-, ALLOCATED BY THE ASSESSEE AMONGST T HE FOLLOWING FUNDS: (I) KALYAN FUND RS.16,78,053 (II) ROAD DEVELOPMENT FUND RS.L 1,18,702 (III) LAND DEVELOPMENT FUND RS. 5,59,351 (IV) CHARITABLE TRUST FUND RS.33,53,1 06 ---------------- RS.67,12,212 (* THE. TOTAL, IN FACT, WORKS TO RS.67,09,212) 4. THE SAME STANDS DELETED BY THE LEARNED CIT(A) FO LLOWING HIS OWN ORDER IN THE ASSESSEE'S CASE FOR THE PRECEDING YEAR , I.E., A.Y. 2001-2002, AND WHICH STOOD PASSED FOLLOWING THE DECISION OF TH E IT AT (AHMEDABAD BENCH) IN THE MATTER. 5. AT THE OUTSET, IT WAS CONTENDED BY THE LEARNED D .R. THAT THE ASSESSEE'S APPEAL BEFORE THE TRIBUNAL FOR THE A.Y. 1991-92 STANDS SET ASIDE BACK TO THE FILE OF THE A.O. FOR A RECONSIDER ATION OF THE MATTER IN LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SIDESHWAR SAHKARI SAKHAR KHARKANA LIMITED VS. CIT (270 ITR 1) . THE LEARNED A.R. ALSO COULD NOT CONTROVERT THIS FACT, OR AS TO THE V ALIDITY THEREOF IN ADJUDICATION OF THIS ISSUE. 6. WE HAVE HEARD THE PARTIES BEFORE US AND PERUSED THE MATERIAL PLACED ON RECORD. VIDE PARA 5 OF THE ORDER OF THE I TAT IN THE ASSESSEE'S ITA NO.1060/AHD/2010 FOR AY 2006-07 SHRI SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. 5 CASE FOR A,Y. 1991-92, WE FIND THE SAME AS HAVING B EEN RESTORED BACK TO THE FILE OF THE A.O. FOR CONSIDERATION OF THE MATTE R IN THE LIGHT OF THE AFORESAID JUDGEMENT OF THE HON'BLE APEX COURT. WE S EE NO REASON IN NOT FOLLOWING THE SAME, IT RATHER BEING, IN THE FACTS O F THE CASE, THE SPECIFIC GRIEVANCE AS RAISED BY THE REVENUE PER THE GROUNDS OF APPEAL. WE, THEREFORE, SET ASIDE THE ASSESSMENT BACK TO THE FIL E OF THE A.O. FOR FRESH ADJUDICATION IN THE AFORESAID TERMS. WE DIRECT ACCO RDINGLY. 5.1 IN THE LIGHT OF VIEW TAKEN BY THE ITAT IN T HE AYS. 1991-92 & 2002-03, WE CONSIDER IT FAIR AND APPROPRIATE TO SE T ASIDE THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO TH E FILE OF THE AO WITH THE DIRECTIONS TO READJUDICATE THE CLAIM OF THE ASSESSE E IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE, KE EPING IN MIND THE AFORESAID DECISION OF THE HONBLE APEX COURT IN THE CASE OF S IDHESHWAR SAHKARI KARKHANA LTD.(SUPRA),. NEEDLESS TO SAY THAT WHILE REDECIDING THE ISSUE, THE AO SHALL PASS A SPEAKING ORDER AFTER EXAMINING THE RE LEVANT BYELAWS, RULES AND REGULATIONS FOR EACH OF THE AFORESAID FUNDS AND THE CHARACTER OF DEDUCTIONS MADE FROM THE PAYMENTS TO SUGAR CANE GROWERS, BRINGING O UT CLEARLY THE TRUE NATURE, CHARACTER AND PURPOSE OF THE REALIZATIONS AND AS TO WHETHER OR NOT THE RECEIPTS TOWARDS THE AFORESAID FUNDS REMAINED WITH THE ASSES SEE FOR DISCHARGING ITS LIABILITIES OR THERE HAS BEEN DIVERSION OF INCOME TO A THIRD PARTY BEFORE IT REACHED THE ASSESSEE. WHILE EXAMINING THE TRUE NATURE AND QUALITY OF THE RECEIPTS , IT MAY ALSO BE EXAMINED AS TO WHETHER THESE RECEIPTS BEAR THE CHARACTER OF INCOME AT THE TIME THEY REACH THE HANDS OF THE ASSESSEE AN D DOES THE TITLE TO THE MONEY GET VESTED WITH THE ASSESSEE-SOCIETY ONCE AND FOR A LL, THE ASSESSEE EXERCISING COMPLETE DOMINION OVER THE FUNDS IN QUESTION? OR, I S IT TO BE REGARDED AS THE MONEY OF DEPOSITORS/ MEMBERS NOTWITHSTANDING THE CU STODY OF THE SOCIETY AND THE AUTHORITY GIVEN TO THE MANAGEMENT OF THE SOCIETY TO UTILISE THE MONEY FOR THE OVERALL ADVANTAGE OF THE SOCIETY?. WITH THESE OBSER VATIONS, GROUND NO.1 RAISED IN THE APPEAL IS DISPOSED OF. 6. GROUND NOS. 2 & 3 IN THE APPEAL ,BEING GENER AL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE ,THER EFORE, DISMISSED. ITA NO.1060/AHD/2010 FOR AY 2006-07 SHRI SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. 6 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE COURT ON 4 -06-2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 4 -06-2010 COPY OF THE ORDER FORWARDED TO : 1. SHREE SAYAN VIBHAG SAHAKARI KHAND UDYOG MANDLI L TD., SAYAN, TALUKA: OLPAD, SURAT 2. THE ITO, WARD-5(4), SURAT 3. CIT CONCERNED 4. CIT(A)-IV, SURAT 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD