The Jalore Central Co-operative Bank Ltd., JODHPUR V. ACIT, BARMER

ITA 240/JODH/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78123 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Diversion of income
• Section: 37

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.240/JODH/2011 (A.Y. 2007-08) THE JALORE CENTRAL CO-OPERATIVE VS. A CIT, CIRCLE, BANK LTD., C/O U.C. JAIN, ADVOCATE, BARMER. SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN NO. AAABT 2537 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 22/04/2014. DATE OF PRONOUNCEMENT : 24/04/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 01/03/2011 OF LD. CIT(A), JODHPUR. 2 THE REGISTRY HAS POINTED OUT THAT THERE IS A DELAY IN FILING THIS APPEAL AND THIS DEFECT WAS INFORMED TO THE ASSESSEE . IN RESPONSE, THE 2 ASSESSEE SUBMITTED AN APPLICATION FOR CONDONATION O F DELAY STATING THEREIN AS UNDER:- WITH REFERENCE TO ABOVE CITED SUBJECT MATTER, THIS IS TO SUBMIT THAT: 1] THAT THE ORDER OF THE CIT(A) WAS SERVED ON 29/0 3/2011. 2] THAT APPEAL WAS DUE TO BE FILED ON OR BEFORE 28 /05/2011. 3] THAT APPEAL WAS FILED ON 01/06/2011. 4] THAT 28/05/2011 WAS SATURDAY AND 29/05/2011 WAS SUNDAY AND AS SUCH THE APPEAL WAS TO BE FILED ON OR BEFORE 30/05/ 2011 BUT WAS FILED ON 01/06/2011 AND AS SUCH THERE IS A DELAY OF 2 DAY S IN FILING THE APPEAL WHICH MAY BE CONDONED FOR THE FOLLOWING REASONS: A. THAT THE DELAY WAS DUE TO UNAVOIDABLE CIRCUMSTA NCES AS THE PERMISSION TO FILE THE APPEAL WAS RECEIVED LATE DUE TO COMMUNICATION GAP. B. THAT LOOKING TO THE SHORT DELAY OF TWO DAYS, THE SAME MAY KINDLY BE CONDONED. IN LIGHT OF ABOVE YOUR HONORS KINDLY REQUESTED TO C ONDONE THE DELAY AND THE APPEAL BE DIRECTED TO BE HEARD ON MERITS. IN SUPPORT OF THE ABOVE, AN AFFIDAVIT DATED 09/03/ 2013 IS ALSO FILED WHICH IS PLACED ON RECORD. 3. DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTS OF THE AFORESAID APPLICATIO N AND REQUESTED TO CONDONE THE DELAY. LEARNED D.R. OPPOSED THE SAID A PPLICATION. 4. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PART IES, WE ARE OF THE VIEW THAT THERE WAS NO INTENTIONAL DELAY BY THE ASS ESSEE. WE FIND MERIT 3 IN THE AFORESAID APPLICATION AND CONDONE THE DELAY. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ADMITTED. 5. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APP EAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) ERRED IN NOT ALLOWING RS. 10,92,792/- BEING THE PRE MIUM PAID TO THE LIC FOR GRATUITY FUND AND CONFIRMING THE ADDITION M ADE BY THE LD. AO FOR RS. 7,00,000/- BEING AMOUNT DEBITED TO THE PROF IT & LOSS ACCOUNT OUT OF RS. 10,92,792/- PREMIUM PAID FOR GRATUITY FU ND. THE DECISION OF THE LD. CIT(A) IS CONTRARY TO THE DECISION OF HO N'BLE HIGH COURT OF PUBJAB & HARYANA IN THE CASE OF CIT VS. BITONI LAMP S LTD. REPORTED IN 277 ITR 396. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) ERRED IN CONFORMING THE ADDITION MADE BY THE AO FOR RS. 49,50,000/- BEING FUND SET APART FOR THE SECURITY OF THE SALARY OF THE MANAGERS OF THE PRIMARY AGRICULTURAL SOCIETIES WITHOUT APPRECIA TING THE FACT THAT THE FUND WAS SET APART IN COMPLIANCE TO THE DIRECTI ON OF REGISTRAR OF COOPERATIVE SOCIETY, RAJASTHAN. 3. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL OR ALTERNATIVE GROUND AT OR BEFORE THE TIME OF HEARING . 4. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 6 . GROUND NOS. 3 & 4 ARE GENERAL IN NATURE, SO DO NO T REQUIRE ANY COMMENTS ON OUR PART. THE FIRST ISSUE VIDE GROUND NO. 1 RELATES TO THE CONFIRMATION OF ADDITION MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF PREMIUM PAID TO THE LIC FOR GRATUITY FUND. 7 . DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE 4 VIDE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE C ASE OF CIT VS. TEXTOOL CO. LTD. REPORTED AT (2013) 216 TAXMAN 327. 8 . LEARNED D.R. IN HIS RIVAL SUBMISSIONS, ALTHOUGH, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW, BUT COULD NOT CONT ROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE VIDE AFORESAID REFERRED TO JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER:- FROM A BARE READING OF SECTION 36(L)(V) OF THE ACT, IT IS MANIFEST THAT THE REAL INTENTION BEHIND THE PROVISION IS THAT THE EMPLOYER SHOULD NOT HAVE ANY CONTROL OVER THE FUNDS OF THE IRREVOCABLE TRUST CREATED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEES. IN TH E INSTANT CASE, IT IS EVIDENT FROM THE FINDINGS RECORDED BY THE COMMISSIO NER AND AFFIRMED BY THE TRIBUNAL THAT THE ASSESSEE HAD ABSOLUTELY NO CONTROL OVER THE FUND CREATED BY THE LIC FOR THE BENEFIT OF THE EMPL OYEES OF THE ASSESSEE AND FURTHER ALL THE CONTRIBUTION MADE BY T HE ASSESSEE IN THE SAID FUND ULTIMATELY CAME BACK TO THE TEXTOOL EMPLO YEES GRATUITY FUND, APPROVED BY THE COMMISSIONER WITH EFFECT FROM THE FOLLOWING PREVIOUS YEAR. THUS, THE CONDITIONS STIPULATED IN SECTION 36(L)(V) OF THE ACT WERE SATISFIED. HAVING REGARD TO THE FACTS FOUN D BY THE COMMISSIONER AND AFFIRMED BY THE TRIBUNAL, NO FAULT CAN BE FOUND 5 WITH THE OPINION EXPRESSED BY THE HIGH COURT, WARRA NTING INTERFERENCE OF THIS COURT. 10 . WE, THEREFORE, KEEPING IN VIEW THE RATIO LAID DOW N BY THE HON'BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE OF CIT VS. TEXTOOL CO. LTD. (SUPRA), DELETE THE ADDITION MADE BY THE ASSES SING OFFICER AND SUSTAINED BY THE LD. CIT(A). 11 . VIDE GROUND NO. 2, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION MADE BY THE ASSESSING OFFI CER FOR RS. 49.50 LAC BEING FUND SET APART FOR THE SECURITY OF THE SALARY OF THE MANAGERS OF THE PRIMARY AGRICULTURAL SOCIETIES. 12. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD DEBITED RS. 49.50 LAC PROVISION FOR MANAGER SAL ARY FUND. ACCORDING TO HIM, THE SAID AMOUNT WAS NOT ALLOWABLE BECAUSE I T WAS NOT CREATED AS PER DIRECTION OF RBI OR BYLAWS OF THE STATE GOVERNM ENT. ACCORDINGLY, THE SAID AMOUNT WAS DISALLOWED. 13. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT REGISTRAR OF CO-OPERATIVE SOCIET Y, RAJASTHAN ISSUED ORDER DATED 02/07/2004 IN COMPLIANCE TO THE ORDER NO. 29/2003 OF STATE 6 CABINET COMMITTEE AND THE ORDER WAS AN OBLIGATION O N THE ASSESSEE TO SET APART A FUND AS DIRECTED IN ORDER AND THE FUND SO S ET APART WAS NAMED AS SALARY SECURITY FUND. IT WAS FURTHER STATED THAT T HE FUND WAS SET APART FOR THE SECURITY OF THE SALARY OF THE MANAGERS OF T HE PRIMARY AGRICULTURAL SOCIETIES AND NOT FOR THE MANAGERS OF THE ASSESSEE- BANK. IT WAS FURTHER STATED THAT THE ASSESSEE HAD NO CONTROL OVER THE FU ND WHICH COULD BE USED IN ACCORDANCE WITH THE DIRECTIONS OF THE REGIS TRAR AND AS SUCH THE SAME WAS CHARGED ON THE INCOME OF THE ASSESSEE AND WAS ALLOWABLE EXPENSES. RELIANCE WAS PLACED ON THE JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BOMBAY STATE ROAD TRANSPORT CORPORATION REPORTED IN 106 ITR 303 AND IN THE CASE OF AMALGAMATED ELECTRICITY CO. LTD. VS. CIT REPORTED IN 97 ITR 334. 14. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, SUSTAINED THE ADDITION MADE BY THE ASSESS ING OFFICER BY OBSERVING IN PARA 6.3 OF THE IMPUGNED ORDER AS UNDE R:- 6.3. I HAVE GONE THROUGH THE FACTS OF THE CASE AND IT IS OBSERVED THAT AS PER TERMS AND CONDITION FOR APPOINTMENT OF MANAGERS OF PRIMARY AGRICULTURAL LENDING CO-OPERATIVE SOCIETY, IT IS A RESPONSIBILITY OF REGISTRAR OF CO-OPERATIVE SOCIETIES, RAJASTHAN TO CREATE A PRIMA RY SALARY FUND AT THE LEVEL OF THE PRIMARY SOCIETY. IT FURTHER PROVIDES T HAT THE SOCIETY SHALL CONTRIBUTE 75% OF MARGIN TAKEN ON AVERAGE OF MONTHL Y OUTSTANDING LOAN DISTRIBUTED IN THE YEAR UNDER CONSIDERATION. THE TO TAL CONTRIBUTION SHALL BE KEPT IN AN ACCOUNT MAINTAINED WITH CENTRAL CO-OPERA TIVE BANK. IN CASE, THE PRIMARY SALARY FUND IS NOT SUFFICIENT TO MEET OUT R EQUIREMENT OF SALARY AND 7 OTHER EMOLUMENTS TO MANAGERS OF THE PRIMARY SOCIETY THEN AFTER ENTERING INTO AN AGREEMENT WITH TERMS AND CONDITIONS, THE PR IMARY SOCIETIES CAN TAKE LOAN FOR THE MAXIMUM PERIOD OF 3 YEARS AT THE RATE OF 4% INTEREST FROM THE 'SALARY SECURITY FUND'. THE 'SALARY SECURITY FUND' WILL BE MAINTAINED BY THE BANK ITSELF AND THE BANK SHALL CONTRIBUTE 0.50% OF AVERAGE OF OUTSTANDING LOAN GIVEN BY THE BANK TO THE SOCIETY IN THE CURREN T YEAR AND 0.15% OF AVERAGE OF OUTSTANDING OF LOAN GIVEN BY THE RAJASTH AN STATE CO-OPERATIVE BANK LTD. TO THE CENTRAL BANK I.E. THE APPELLANT. A S PER PARA 4 OF THE ORDER DATED. 26-7-2004, FOR TAKING LOAN PRIMARY SOCIETIES HAVE TO FULFILL CERTAIN CONDITIONS SUCH AS FIRST, WHETHER THE SOCIETY HAS C ONTRIBUTED ITS CONTRIBUTION TO PRIMARY SALARY FUND, SECOND, WHETHER, THE SOCIET Y HAS NOT UTILIZED THE PRIMARY SALARY FUND OTHER THAN STATED OBJECTS, THIR D, WHETHER THE SOCIETY HAD GOT ACCOUNTS AUDITED OF PRIMARY SALARY FUND AND FOURTH, THE MANAGER HAS NOT MADE FRAUD IN ANY MANNER. IN ADDITION, IT H AS FURTHER TO BE SATISFIED THAT FIRST, WHETHER THE PRIMARY SOCIETY HAS SUBMITT ED ITS ANNUAL PROJECTIONS OF GROWTH OF PROFIT TO SHOW 30% INCREASE COMPARED T O LAST YEAR, SECOND, WHETHER THE SOCIETY HAD SUBMITTED TO BANK COMPLETE SCHEME OF RECOVERY OF OUTSTANDING BALANCES OF LOAN, THIRDLY, WHETHER, GOV ERNING BODY FOR SALARY SECURITY FUND HAS PASSED RESOLUTION ALLOWING THE SO CIETY TO TAKE LOAN ACCOUNTS. FROM THESE CONDITIONS, IT WOULD BE CLEAR THAT THE CONTRIBUTION BY THE APPELLANT TO THE SALARY SECURITY FUND WAS REQUI RED TO BE MADE ON FULFILLMENT OF CERTAIN CONDITIONS AND NON AVAILABIL ITY OF AMOUNT IN THE PRIMARY SALARY FUND. THE APPELLANT HAD NOT PRODUCED ANY EVIDENCE TO SUGGEST THAT NO AMOUNT WAS AVAILABLE FOR PAYMENT OF SALARY TO MANAGER OF PRIMARY SOCIETIES OUT OF PRIMARY SALARY FUND MAINTA INED AT BANK LEVEL ON BEHALF OF THE SOCIETIES. SECONDLY, THIS FUND WAS RE QUIRED TO MAKE ANNUAL CONTRIBUTION TO THE EXTENT OF 0.50% OF AVERAGE OF O UTSTANDING LOAN ADVANCED TO THE PRIMARY SOCIETY IN THE CURRENT YEAR . NO EVIDENCE HAS BEEN PLACED ON RECORD TO SUGGEST THAT THE CONTRIBUTION O F RS. 49,50,000/- IN THE YEAR UNDER CONSIDERATION IS IN ACCORDANCE WITH TERM S AND CONDITIONS LAID DOWN IN THE CIRCULAR DATED 26-7-2004 IN F. NO. 97(2 6)/BANK-3/2002. THIRDLY, IT IS RELEVANT TO NOTE HERE THAT SALARY SECURITY FU ND A FUND AVAILABLE TO PRIMARY SOCIETIES FOR LOAN ON PAYMENT OF INTEREST A ND THE BALANCE FUND IS AVAILABLE TO THE CENTRAL BANK FOR UTILIZATION IN IT S BUSINESS. THUS, IT CAN BE SAID THAT CONTRIBUTION TO SALARY SECURITY FUND WAS AN APPLICATION OF INCOME AND NOT A CHARGE TO THE BUSINESS OF THE APPELLANT. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, I THEREFOR E, HOLD THAT THE APPELLANT IS NOT ABLE TO PROVE WITH THE DOCUMENTARY EVIDENCE THAT NO 8 AMOUNT WAS AVAILABLE IN PRIMARY SALARY FUND MAINTAI NED AT LEVEL OF PRIMARY SOCIETIES; THAT THE APPELLANT HAS CONTRIBUTED IN AC CORDANCE TO TERMS AND CONDITIONS AND PERCENTAGE PROVIDED IN THE ORDER DAT ED 2-7-2004 R.W. 26-7- 2004 AND THAT CONTRIBUTION TO SALARY SECURITY FUND IS AN APPLICATION OF INCOME AND NOT CHARGE TO BUSINESS OF THE YEAR UNDER CONSIDERATION AS FUND WAS MEANT TO PROVIDE LOAN TO THE PRIMARY SOCIETY FO R PAYMENT OF SALARY TO MANAGERS IN CASE THEIR FUND IS NOT SUFFICIENT. THE CONTRIBUTION CLAIMED TO MAKE BY THE APPELLANT IS IN FACT, IN NATURE OF CONT INGENCE AND LIABILITY HAS NOT BEEN PROVED TO HAVE ACCRUED IN THE YEAR UNDER C ONSIDERATION. IF THE LIABILITY HAS ACCRUED, IT HAS NOT BEEN SUBMITTED HO W MUCH HAS ACCRUED IN VIEW OF TERMS AND CONDITIONS. SINCE, THE CONTRIBUTI ON DEPENDS UPON FULFILLMENT OF CERTAIN TERMS AND CONDITIONS, THEREF ORE, IT CAN BE SAID THAT THE LIABILITY IS NOT IN PRESENT AND IT IS IN NATURE OF CONTINGENCY. THE LD. CIT(A) ALSO OBSERVED THAT THE CASES RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. BEING AGGRI EVED, THE ASSESSEE IS IN APPEAL. 15. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT TH IS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 15/07/2013 IN THE CASE OF THE BARMER CENTRAL COOPERATIVE BANK LTD., BARMER VS . ACIT, BARMER IN I.T.A.NO. 212/JODH/2010 FOR THE A.Y. 2007-08, CO PY OF WHICH IS PLACED AT PAGES 140-152 OF THE ASSESSEES PAPER BOO K. 16. IN HIS RIVAL SUBMISSIONS, LEARNED D.R. STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 9 17. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND THE MATERIAL ON RECORD, IT IS NOTICED THAT THE PRESENT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE AFORESAID RE FERRED TO ORDER DATED 15/07/2013 IN I.T.A.NO. 212/JODH/2013 FOR THE A.Y. 2007-08 IN THE CASE OF BARMER CENTRAL COOPERATIVE BANK LTD., BARMER VS. ACIT, BARMER (SUPRA) WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIV EN IN PARA 9 & 10 WHICH READ AS UNDER:- 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT A SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE I N THE AFORESAID REFERRED TO ORDER DATED 19/02/2013. IN THE SAID ORDER, BY FOLLO WING THE ORDER DATED 22/07/2011 OF ITAT JAIPUR BENCH IN THE CASE OF ACIT V. RAJASTHAN STATE COOPERATIVE BANK LTD. IN I.T.A. NO.1277/JAIPUR/2010 FOR THE ASSESSMENT YEAR 2007-2008, THE ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 2.6 T O 2.8 OF THE SAID ORDER, WHICH READ AS UNDER: '2.6 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIALS AVAILABLE ON RECORD, IT IS NOTICED THAT S IMILAR ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH IN THE AFORESAID RE FERRED TO CASE OF ACIT VS RAJASTHAN STATE COOPERATIVE BANK LTD., JAIP UR. IN THE SAID CASE ON SIMILAR ISSUE, THE ADDITION WAS DELETED BY THE L D. CIT(A) BY OBSERVING AS UNDER:- 'ALLOWABILITY OF CONTRIBUTION BY THE APEX BANK FOR PAC MANGERS SALARY IS A STATUTORY LIABILITY WHICH IS CRYSTALLIZ ED AT THE END OF EVERY YEAN THE CONTRIBUTION HOWEVER, ONCE MADE BECOME AT THE DISPOSAL OF REGISTRAR OF COOPERATIVE SOCIETY WHICH IS PAYABL E AS AND WHEN DEMANDED BY THE REGISTRAR COOPERATIVE SOCIETY ALONG WITH INTEREST ON IT THUS, IT IS NOT CONTINGENT LIABILITY BUT A ST ATUTORY LIABILITY WHICH IS CRYSTALLIZED AT THE END OF EVERY YEAR AND HENCE THE LIABILITY IS ALLOWABLE.' 10 2.7 AGAINST THE SAID ORDER, THE DEPARTMENT PREFERRED AN APPEAL IN JTA NO.1277/JP/2010 WHEREIN VIDE ORDER DATED 22/07/2011 , THE ORDER OF THE LD. CIT(A) WAS UPHELD BY OBSERVING IN PARA 3.6 OF THE SAID ORDER AS UNDER: '3.6 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE AP EX COURT IN THE CASE OF SRI VENKATA SATYANARAYANA RICE MILL CONTRAC TORS CO. VS CIT 223 ITR 101 HAS STATED THAT IT IS TO BE SEEN AS TO WHETHER THE PAYMENT IS COMPULSORY FOR THE ASSESSEE TO MAKE OR N OT BUT WHETHER IT WAS EXPENDED OUT OF CONSIDERATION OF COM MERCIAL EXPEDIENCY. ANY CONTRIBUTION MADE BY THE ASSESSEE T O A FUND WHICH DIRECTLY CONNECTED OR RELATED TO CARRYING ON ASSESS EES BUSINESS OR WHICH RESULTS IN BENEFIT TO THE ASSESSEES BUSINESS HAS TO BE REGARDED AS DEDUCTION ALLOWABLE U/S 37 OF THE ACT. THE DECISION OF HON'BLE APEX COURT IN THE CASE OF ASSOCIATED POWER CO. LTD. VS CIT (SUPRA) IS NOT APPLICABLE. THE HON'BLE APEX COURT H ELD THAT APPLICATION OF THE DOCTRINE OF DIVERSION OF INCOME BY REASON OF OVERRIDING TITLE IS NOT APPLICABLE IN THAT CASE AS THE RESERVE IS OUT OF THE REVENUES OF THE UNDERTAKING AND REACH THE ELECT RICITY COMPANY AND IS NOT DIVERTED AWAY FROM IT. HOWEVER, IN THE I NSTANT CASE, THE AMOUNT IS TO BE CONTRIBUTED TO A FUND AND THE FUND IS NOT BEING MANAGED BY THE ASSESSEE. THE ASSESSEE MAY BE TRUSTE E OF THAT FUND BUT IT CANNOT APPLY THE FUND AS PER HIS OWN WILL. T HE INTEREST, IF ANY, EARNED ON THIS FUND IS ALSO TO BE CREDITED TO THAT FUND, IT IS THEREFORE, CLEAR THAT FUNDS STAND DIVERTED AT THE S OURCE AND THEREFORE, THIS CANNOT BE CONSIDERED AS AN APPROPRI ATION OF INCOME BUT IT IS AN EXPENDITURE. THUS THE ID. CIT(A) WAS J USTIFIED IN DELETING THE ADDITION.' 2.8 SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE, SO RESPECTFULLY FOLLOWING THE ORDER DATED 22-07-2011 OF THE ITAT JAIPUR BENCH IN ITA NO .1277/JP/2010 FOR THE ASSESSMENT YEAR 2007-08 IN THE CASE OF ACIT VS RAJASTHAN STATE COOPERATIVE BANK LTD. JAIPUR, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE ID CJT(A) IS DELETED.' 10. IN VIEW OF THE ABOVE DISCUSSION AND BY RESP ECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 19 TH FEBRUARY, 2013 IN THE CASE OF THE SIROHI CENTRAL COOP. BANK LTD. JODHPUR VS. ACIT, CI RCLE-2, JODHPUR IN I.T.A. NO.351/JU/2012, THE ISSUE IS DECIDED IN FAVOUR OF T HE ASSESSEE. 11 18. SINCE THE FACTS OF THE PRESENT ISSUE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF BARMER CENTRAL COOPERATIVE BANK LTD., BARMER VS. AC IT, BARMER (SUPRA) , SO, BY RESPECTFULLY FOLLOWING THE ORDER DATED 15/07/2013, WE DELETE THE ADDITION MADE BY THE ASSE SSING OFFICER AND SUSTAINED BY THE LD. CIT(A). 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 24 TH APRIL, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH APRIL, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.