ITO, Ward 1(1), Kolhapur V. Mahalaxmi Sahakari Dudh Utpadak Sangh Ltd., Kolhapur

ITA 2131/PUN/2012

• Counselvise Citation: 213124514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.2131 & 2132/PN/2012 (A.YS.2007-08 & 2008-09) ITO, WARD 1(1), KOLHAPUR APPELLANT VS. MAHALAXMI SAHAKARI DUDH UTPADAK SANGH LTD., 1649/E, RAJARAMPURI, 7 TH LANE, SAHAKAR BHAVAN, KOLHAPUR PAN: AAABM0365Q RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : NONE DATE OF HEARING : 09.12.2013 DATE OF ORDER : 27.12.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THESE APPEALS FILED BY REVENUE PERTAIN TO THE SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEARS. SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE REVENUE HAS TAKEN THE FO LLOWING COMMON GROUNDS IN BOTH THE APPEALS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN DELETIN G THE ADDITION MADE ON ACCOUNT OF DISTRIBUTION OF PROFITS IN THE GARB OF PAYMENT OF ADDITIONAL PRICE FOR PURCHASE OF MILK? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE ADDITIONAL PURCHASE PRICE FOR MILK WAS DETERMINED B Y THE 2 ASSESSEE AFTER DETERMINATION OF PROFIT AT THE END O F THE FINANCIAL YEAR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE ADDITIONAL PURCHASE PRICE WAS PAID ONLY TO THE MEMB ERS OF THE SOCIETY AFTER DETERMINATION OF PROFIT EARNED BY THE ASSESSEE SOCIETY AT THE END OF THE FINANCIAL YEAR, WHICH AMOUNTED TO DISTRIBUTION OF PROFIT IN TERMS OF BYE LAWS OF THE ASSESSEE SOCIETY? 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE BYE LAWS O F THE ASSESSEE SOCIETY WHICH PROVIDES FOR DISTRIBUTION OF PROFITS TO ITS MEMBERS IN THE RATIO OF MILK SUPPLIED DURING TH E FINANCIAL YEAR? 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN RELYING UPON THE DECISI ON OF THE BOMBAY HIGH COURT IN THE CASE OF KOLHAPUR ZILLA SAH . DUDH UTPADAK SANGH LTD., KOLHAPUR (315 ITR 304) AS THE S AID DECISION IS RENDERED ON THE BASIS OF GUJRAT HIGH CO URT'S DECISION IN THE CASE OF MEHASANA DISTRICT MILK PROD UCERS UNION LTD., VIDE 282 ITR 24 (GUJ), WHICH IS DISTING UISHABLE ON FACTS AND HAS NO APPLICATION IN THE CASE OF THE ASSESSEE SOCIETY? 2. THE ASSESSEE IS A FEDERAL CO-OPERATIVE SOCIETY E NGAGED IN COLLECTION AND SALE OF MILK. THIS CASE WAS SELECTE D FOR SCRUTINY AND CONSEQUENTLY, ASSESSMENT ORDERS WERE PASSED U/S.143 (3) WHEREIN, THE MILK RATE DIFFERENCE WAS ADDED BACK TO INCOME. AGGRIEVED BY THE SAME, MATTER WAS CARRIED BEFORE FIRST APPELLATE AUT HORITY, WHEREIN CIT(A) GRANTED RELIEF TO THE ASSESSEE. SAME HAS BE EN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA STATED THAT CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DISTRIB UTION OF PROFITS IN THE GARB OF PAYMENT OF ADDITIONAL PRICE FOR PURCHAS E OF MILK. ON THE OTHER HAND, NONE APPEARED ON BEHALF OF ASSESSEE. S O MATTER IS BEING DECIDED ON THE BASIS OF ARGUMENTS OF LEARNED DEPART MENTAL REPRESENTATIVE AND MATERIAL ON RECORD. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER DURING ASSES SMENT PROCEEDINGS 3 NOTICED THAT THE BALANCE SHEETS FOR ASSESSMENT YEAR S 2007-08 AND 2008-09 REFLECTED AMOUNTS OF RS.1,62,43,835/- AND R S.73,29,762/- RESPECTIVELY, AS RESERVES TOWARDS RATE DIFFERENCE O F MILK TO BE PAID TO MEMBER SUPPLIERS. THESE AMOUNTS WERE BROUGHT TO TAX BY THE ASSESSING OFFICER HOLDING IT TO BE DISTRIBUTION OF PROFITS. IN APPEAL, CIT(A) ALLOWED THE SAME BY FOLLOWING THE DECISION O F HIGH COURT IN THE CASE OF KOLHAPUR ZILLA SAHAKARI DUDH UTPADAK SA NGH LTD. (2009) 315 ITR 304 (BOM), WHEREIN IT WAS HELD AS UNDER: HELD, DISMISSING THE APPEALS, THAT THE AMOUNT TO B E PAID WAS NOT OUT OF THE PROFITS ASCERTAINED AT THE ANNUAL GE NERAL MEETING. IT WAS NOT PAID TO ALL SHAREHOLDERS. THE AMOUNT WHI CH WAS THE SUBJECT-MATTER WAS PAID TO MEMBERS WHO SUPPLIED MIL K AND IN SOME CASE ALSO TO NON-MEMBERS. THE PAYMENT WAS FOR THE QUANTITY OF MILK SUPPLIED IN TERMS OF THE QUALITY S UPPLIED. THE COMMERCIAL EXPEDIENCY FOR PAYMENT OF THIS PRICE WER E THE MARKET CONDITIONS AND THE NEED TO PROCURE MORE MILK FROM THE MEMBERS AND NON-MEMBERS TO THE ASSESSEE. THEREFORE, THE AMOUNT PAID COULD NOT BE SAID TO BE DIVIDEND TO THE MEMBERS OR SHAREHOLDERS OR PAYMENT IN THE FORM OF BONUS AS BONUS ALSO HAD TO BE PAID FROM THE ACCRUED PROFITS. IT WAS DED UCTIBLE. 2.2 FACTS BEING SIMILAR, SO FOLLOWING THE SAME REAS ONING, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF CIT(A), WHOSE VIEW IS FORTIFIED BY THE DECISION OF JUDICATURE OF BOMBAY H IGH COURT IN CASE OF KOLHAPUR ZILLA SAHAKARI DUDH UTPADAK SANGH LTD. (SUPRA), WHEREIN, IT HAS BEEN HELD THAT AMOUNT TO BE PAID WA S NOT OUT OF PROFITS ASCERTAINED AT THE ANNUAL GENERAL MEETING. IT WAS PAID TO ALL SHAREHOLDERS. THE AMOUNT WHICH WAS SUBJECT MATTER WAS PAID TO MEMBERS WHO SUPPLIED THE MILK AND IN SOME CASE ALSO TO NON- MEMBERS. THE PAYMENT WAS FOR THE QUANTITY OF MILK SUPPLIED IN TERMS OF THE QUALITY SUPPLIED. THE COMMERCIAL EXPED IENCY FOR PAYMENT OF THIS PRICE WERE ACCORDING TO THE MARKET CONDITIONS AND THE NEED TO PROCURE MORE MILK FROM THE MEMBERS AND NON-MEMBERS TO THE ASSESSEE. THEREFORE, IT WAS HELD THAT AMOUN T COULD NOT BE SAID TO BE DIVIDEND TO THE MEMBERS OR SHAREHOLDERS OR PAYMENT IN THE FORM OF BONUS. SO SAME WAS RIGHTLY HELD TO BE DEDUCTABLE. WE UPHOLD THE SAME. 4 SIMILAR ISSUE AROSE IN ITA NO.2132/PN/2012 FOR A.Y . 2008-09. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONIN G, WE ARE NOT INCLINED TO INTERFERE WITH SAME. 3. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 27 TH DECEMBER 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH DECEMBER, 2013 GCVSR COPY TO:- 1. DEPARTMENT 2. ASSESSEE 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE DR, A BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE