Income-tax Officer, V. Nashik District Labour Society Co-op. Federation, Nashik

ITA 1815/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0950 (ITAT-PUNE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJI
• Keywords: Commercial expediency; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.1815/PN/2016 / ASSESSMENT YEAR : 2012-13 ITO, WARD - 1(2), NASHIK . / APPELLANT V/S NASHIK DISTRICT LABOUR SOCIETY CO-OPERATIVE FEDERATION, SHRAM-SAHAKAR, CHUMBLE MARG, TIDKE COLONY, NASHIK 422 002 PAN :AAABN0028M . / RESPONDENT / APPELLANT BY : SMT. SUMITRA BANERJI / RESPONDENT BY : NONE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 03-06-2016 OF THE CIT(A)-I, NASHIK RELATING TO ASSE SSMENT YEAR 2012-13. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING WHEN THE NAME OF THE ASSESSEE WAS CALLED. HOWEVE R, A FAX WAS RECEIVED FROM THE ASSESSEE STATING THAT THE ISSUE H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE T RIBUNAL IN ASSESSEES OWN CASE. ACCORDINGLY, THE APPEAL IS BEING DECIDED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTRA S TATE COOPERATIVE SOCIETIES ACT ENGAGED IN PROVIDING CREDIT FACILITIE S TO ITS MEMBERS. IT FILED ITS RETURN OF INCOME ON 29-09-2012 DEC LARING / DATE OF HEARING :21.09.2016 / DATE OF PRONOUNCEMENT:23.09.2016 2 ITA NO.1815/PN/2016 TOTAL INCOME OF NIL. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE AO OBSERVED THAT ASSESSEE HAS DECLARED NET PROFIT OF RS.95,00,446/- FROM GROSS RECEIPT OF RS.1,93,55,105 WHICH IS ADJUSTED TO RS.96,25,009/- WHICH IS TAXABLE IN ASSESSEES HANDS. HE FURTHER NOTED THAT IN EARLIER YEARS THE ASSESSEE WAS HELD TO BE NOT ENTITLED TO DEDUCTION U/S.80P(2)(A)(VI) OF THE I.T. ACT ON T HE BASIS OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF UP COOPERATIVE CANE UNION FEDERATION LTD. REPORTED IN 237 I TR 574. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN HOW IT IS ENT ITLED TO DEDUCTION U/S.80P(2)(A)(VI) OF THE I.T. ACT. 4. IT WAS EXPLAINED BY THE ASSESSEE THAT THE CLAIM OF T HE ASSESSEE HAS BEEN ACCEPTED BY THE CIT(A) AS WELL AS TH E TRIBUNAL FOR PAST SEVERAL YEARS. HOWEVER, THE AO HELD THAT THE D ECISION OF THE TRIBUNAL HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE HONBLE HIGH COURT. THERE FORE, REJECTING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE THE AO MADE ADDITION OF RS.96,25,009/- TO THE TOTAL INCOME OF THE ASSESSEE BY DISALLOWING THE CLAIM OF DEDUCTION U/S.80P(2)(A)(VI) OF THE I.T. ACT. HE ALSO DISALLOWED AN AMOUNT OF RS.1,75,303/- ON ACCOUNT OF ADVERTISEMENT EXPENSES. 5. IN APPEAL THE LD.CIT(A) DECIDED BOTH THE ISSUES IN FAV OUR OF THE ASSESSEE BY OBSERVING AS UNDER : 5. I HAVE CONSIDERED THE FACTS OF THE CASE, THE ASSESSME NT ORDER AND RIVAL CONTENTIONS. THE ORDER OF MY PREDECESSOR A ND THE ORDER OF HONBLE ITAT (PUNE) ON SAME ISSUE FOR A.Y. 2006-07, 20 08-09 & 2009- 10. THE HONBLE ITAT PUNE IN ITA NO.62,63 & 64/PN/ 2013 DATED 24- 02=2014 HAS HELD INTER-ALIA AS UNDER : 3. THE ASSESSEE IS A COOPERATIVE BANK PROVIDING VARIOUS SERVICES TO ITS MEMBERS. THE MAIN OBJECTS OF THE ASSESSEE IS TO WORK AS FEDERATION OF SKILLED AND UNSKILLED LABOURERS AND TO WORK AS LIAISON BETWEEN VARIOUS GOVERNMENT DEPARTMENTS ON 3 ITA NO.1815/PN/2016 BEHALF OF THE MEMBERS OF SOCIETY. THE ASSESSEE HAS FILED A RETURN OF INCOME DECLARING TOTAL INCOME AT NIL ON 3 1.10.2006 FOR A.Y. 2006-07 AFTER CLAIMING DEDUCTION U/S.80P(2) (A)(VI) WHICH WAS ACCEPTED U/S.143(1). THEREAFTER, THE ASSESSIN G OFFICER INITIATED THE PROCEEDINGS U/S.147 ISSUING NOTIC E U/S.148 ON 08.10.2010. 3.1 THE ASSESSING OFFICER THEREFORE, EXAMINED THE RETUR N OF ASSESSEE WHO HAD CLAIMED DEDUCTION OF RS. 36,76,912/- U/S.80P(2)(A)(VI) AND DISALLOWED THE ADVERTISEMENT EXP ENSES OF RS.1,68,600/-. THE MATTER WAS CARRIED BEFORE THE F IRST APPELLATE AUTHORITY, WHEREIN THE RELIEF HAS BEEN GRA NTED TO THE ASSESSEE ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA SUBMITTED THAT TH E CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S.80P(2)(A)( VI) WHEN THE ASSESSEE ITSELF IS NOT A COOPERATIVE SOCIETY BUT A DI STRICT FEDERATION OF LABOURERS COOPERATIVE SOCIETY AND INCOM E EARNED BY FEDERATION CANNOT BE SAID TO BE ATTRIBUTABLE TO T HE COLLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS AS CONTEMPLATED IN SECT ION 80P(2)(A)(VI) OF I.T. ACT. ON THE OTHER HAND, THE A UTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) AND SUBMITTED THAT THIS ISSUE IS COVERED IN ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO.195/PN/2011, WHEREIN, THIS ISSU E WAS DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 3. AFTER HEARING THE LEARNED DR AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION DESPITE THE FACT THAT I N ASSESSEES OWN CASE IN ITA NO. 1064/PN/1984 DATED 5- 5-2006 FOR A.Y. 1980-81 THE TRIBUNAL ALLOWED THE CL AIM OF DEDUCTION U/S 80P(2) OF THE ACT. 4. WE FURTHER FIND SIMILAR DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEARS BUT THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 495/PN/20 06 FOR A.Y. 2003- 04 DATED 30-6-2008 AND IN ITA NO.1336/PN/2008 FOR A.Y.2005-06 DATED 28-11-2008 HAS CONFIRMED THE ORDERS OF THE CIT(A) IN ALLOWING TH E CLAIM OF ASSESSEE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. WE ARE THEREFORE, O F THE OPINION THAT THE CIT(A) WAS JUSTIFIED IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. THI S VIEW IS FORTIFIED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF KERALA STATE CO-OPERATIVE MARKE TING FEDERATION LTD & OTHERS VS. CIT (231 ITR 841 (SC). WE ACCORDINGLY, UPHOLD THE ORDER OF THE CIT(A) IN ALLO WING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(VI) OF THE ACT. 3.2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. SO, WE ARE NOT INCLINED TO INTERFERE WI TH THE FINDINGS OF CIT(A) WHO HAS ALLOWED THE DEDUCTION U/S.80P(2)(A)(VI). WE UPHOLD THE SAME. SIMILAR ISSUE AR OSE IN A.Y. 2008-09 AND 2009-10. FACTS BEING SIMILAR, SO FOL LOWING THE SAME REASONING, WE UPHOLD THE ORDER OF CIT(A) ON THE ISSUE FOR THE REASONS STATED ABOVE. 4 ITA NO.1815/PN/2016 4. NEXT ISSUE IN A.Y. 2006-07 IS WITH REGARD TO ALLOWA BILITY OF ADVERTISEMENT EXPENSES OF RS.1,68,600/-. THE ASSESSING OFFI CER DISALLOWED THE EXPENDITURE IN THE ASSESSMENT ORDER, IN A PPEAL, THE SAME WAS ALLOWED. THE SAME HAS BEEN OPPOSED BEFORE U S ON BEHALF OF REVENUE. WE FIND THAT A SIMILAR ISSUE ARO SE IN A.Y. 2009-10 WHICH IS A SPEAKING ORDER ON THE ISSUE, WHERE IN, THE ASSESSING OFFICER DISALLOWED THE ENTIRE ADVERTISEMENT EXPENDITURE OF RS.3,32,320/- BY RESORTING ONLY TO AUD ITORS REMARK IN THE STATUTORY AUDIT. IN APPEAL, THE CIT(A) ALLOWED THE SAME. IT IS A SETTLED LEGAL POSITION THAT BY WAY OF EXP ENDITURE BUSINESSMANS BUSINESS MAY BE BENEFITTED IN A NUMBER OF WAYS. THE ASSESSEE WHO CAN SEE THE REASONABILITY OF THE EXPENDITURE INCURRED IN QUESTION IN THE INTEREST OF B USINESS, SO THE PAYMENT HAS TO BE VIEWED IN THE LARGER INTEREST OR EXPEDIENCY OF ASSESSEES BUSINESS. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.3,32,320/- ON ACCOUNT OF ADVERTISEM ENT IN SAID YEAR AND THE SAME WAS CLAIMED IN THE NATURE OF BU SINESS. IT WAS SUBMITTED THAT CERTAIN DIGNITARIES VISITED THE ORGANIZATION AND ASSESSEE WAS REQUIRED TO INCUR EXPENSES OUT OF COMMERCIAL EXPEDIENCY BY GIVING WIDE PUBLICITY O F SUCH VISITS IN THE LOCAL PRINT MEDIA IN ORDER TO DERIVE CE RTAIN COMMERCIAL BENEFITS. THE ASSESSEE CLAIMED THAT BY VIRTUE OF INTERACTION WITH VARIOUS DIGNITARIES, THE ASSESSEE WAS AB LE TO GET MONETARY LIMIT OF CONTRACT TO LABOUR CONTRACT SO CIETIES ENHANCED. THE EXPENDITURE WAS, THEREFORE, INCURRED A ND CLAIMED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE HAS N OT PROVIDED PROOF THAT IT WAS FOR THE PURPOSE OF BUSINESS P URPOSE. IT IS NOT A CASE OF THE ASSESSING OFFICER THAT THE EXPE NDITURE HAS NOT BEEN INCURRED. SINCE THE ASSESSEE HAS ESTABLISHED THE EXPENDITURE INCURRED ON ACCOUNT OF COMMERCIAL EXPED IENCY, SO THE COMMERCIAL EXPEDIENCY IS TO BE VIEWED FROM THE V IEW POINT OF BUSINESSMAN / ASSESSEE. THE FACTS ON RECORD INDICATE THE IMPUGNED EXPENDITURE IS ON ACCOUNT OF PUBLIC VISITS OF STATE MINISTERS, LOCAL ELECTED REPRESENTATIVES AND OTHER DIGN ITARIES TO THE CITY OF NASHIK AND THE PREMISES OF SOCIETY, WHO HAV E HELPED THE ASSESSEE IN GETTING MORE CONTRACTS FOR LABOUR, THERE FORE, COMMERCIAL EXPEDIENCY ESTABLISHED. IN THE FACTS AND CIRCUMSTANCES, THE EXPENDITURE WAS RIGHTLY MADE BY THE ASSESSEE FOR BUSINESS PURPOSE AND THE SAME WAS RIGHTLY DIRECTED BY THE CIT(A) TO DELETED THE EXPENDITURE I NCURRED WHOLLY AND EXCLUSIVELY FOR THE GROWTH OF ASSESSEES BUSI NESS. ACCORDINGLY, THE SAME IS UPHELD. A SIMILAR ISSUE AROSE IN OTHER YEARS. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONI NG, THE ORDER OF CIT(A) IS UPHELD WHO HAS ALLOWED THE EXPENDI TURE WHICH WAS DISALLOWED BY THE ASSESSEE ON ACCOUNT OF NON BUSINESS PURPOSE. 5. IN THE RESULT, ALL THREE APPEALS FILED BY THE REVE NUE ARE DISMISSED AS INDICATED ABOVE. 5.1 SINCE THE FACTS ARE IDENTICAL AND NOTHING CONTRA RY TO THAT OF EARLIER YEARS HAS BEEN BROUGHT ON RECORD BY THE AO I N THE ASSESSMENT ORDER, RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE ITAT IN APPELLANTS OWN CASE FOR A.YRS. 2006-07, 2008-09 & 200 9-10, THE ADDITIONS OF RS.96,25,009/- AND RS.1,75,300/- ARE DELE TED. GROUND NOS. 1 TO 8 ARE ALLOWED. 5 ITA NO.1815/PN/2016 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCE OF T HE CASE THE LD . CIT(A)-I, NASHIK WAS JUSTIFIED IN ALLOWING EXEMPTION F ROM INCOME-TAX TO THE ASSESSEE SOCIETY U/S 80P(2)(A)(VI) OF THE INCOME TAX ACT, 1961 EVEN THOUGH THE ASSESSEE SOCIETY IS A FEDERATION OF PRIM ARY SOCIETIES WHICH ONLY SUPERVISES AND CO-ORDINATES THE AFFAIRS OF IT S MEMBERS AND CANNOT BE SAID TO BE ENGAGED IN THE COLLECTIVE DISPOSA L OF THE LABOUR OF ITS MEMBERS WITHIN THE MEANING OF SECTION 80P(2)(A)(VI ) OF THE I.T. ACT, 1961. 2. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENGAGED IN THE COLLECTIVE DISPOSAL OF THE LABOUR OF I TS MEMBERS WHEN THERE IS NO INDIVIDUAL WHO IS MEMBER OF THE ASSESSEE SOCI ETY. 3. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT(A)-I , NASHIK WAS JUSTIFIED IN HOLDING THAT ADVERTISEMENT EXPENSES OF RS , I , 75 , 303/- ARE INCURRED MAIN L Y FOR WELCOME/FELICITATION OF MINISTERS , OFFICIALS AT SECRETARIAT AND LOCAL LEADERS ETC. ALL THESE PEOPLE ARE HELPFUL AND INSTRUME NTAL IN GENERAL PROGRESS AND ADVANCEMENTS OF THE PURPOSES OF FEDERATION. 4. THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THA T OF THE A.O. BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD/ ALTER / AMEND GROUNDS OF APPEAL . 7. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND ON PERUSAL OF THE ORDERS OF THE AO AND THE CIT(A) I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE CONSISTENT VIEW OF THE CIT(A) AS W ELL AS THE TRIBUNAL IN ASSESSEES OWN CASE. MERELY BECAUSE TH E DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE TRIBUNAL AND AN APPEAL HAS BEEN FILED BEFORE THE HONBLE HIGH COURT, THE SA ME IN MY OPINION CANNOT BE A GROUND TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY THE TRIBUNAL. SINCE THE LD.CIT(A) WHILE DECIDING BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEEDING YEARS AND NOTHING WAS BROUGHT TO MY NOTICE THAT THE DECISION OF TH E TRIBUNAL 6 ITA NO.1815/PN/2016 HAS BEEN REVERSED BY THE HONBLE HIGH COURT, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL I DO NOT FIND ANY INFIRMITY IN THE O RDER OF THE CIT(A). ACCORDINGLY, THE SAME IS UPHELD AND THE GROUN DS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-09-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 23 RD SEPTEMBER, 2016. '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , /// // $ % / TRUE COPY // // TRUE COPY // &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - I, NASHIK 4. THE CIT- I, NASHIK 5. $ %%* , * , SMC BENCH / DR, ITAT, SMC BENCH PUNE; 6. 2 / GUARD FILE.