Railway Employees Co-operative Banking Society, JODHPUR V. ACIT, JODHPUR

ITA 243/JODH/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70348 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-11-2013
• 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; GAUTAM BAID
• Keywords: Rule of consistency; Cost of acquisition; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO.243/JODH/2011 ASSESSMENT YEAR: 2007-08 RAILWAY EMPLOYEES CO-OPERATIVE VS. ASSTT. COMMISSI ONER OF INCOME TAX, BANKING SOCIETY, CIRCLE-1, JODHPUR. C/O. SHRI U.C. JAIN, ADVOCATE, SHATRUNJAY, HARI SINGH NAGAR, PALI ROAD, JODHPUR. (PAN: AAAAR 1921 N). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI U.C. JAIN AND SHRI GAUTAM BAID RESPONDENT BY : SHRI N.A. JOSHI, D.R. DATE OF HEARING : 25.11.2013 DATE OF PRONOUNCEMENT : 29.11.2013 ORDER PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR DATED 01.0 3.2011. 2. THIS APPEAL IS BARRED BY LIMITATION FOR 4 DAYS A ND IN RESPECT THEREOF A CONDONATION PETITION SUPPORTED BY DULY SWORN IN AFF IDAVIT HAS BEEN FILED. THE VERSION OF THE APPLICATION IS AS UNDER :- 2 ITA NO.243/JODH/2011 A.Y. 2007-08 THE REGISTRY HAS POINTED OUT THAT APPEAL IS BARR ED BY LIMITATION. IN THIS RESPECT I HAVE THE HONOUR TO S UBMIT THE FOLLOWING FACTS FOR CONDO NATION OF DELAY IN FILING THE APPEAL :- 1. THAT THE ORDER OF THE CIT(A) WAS SERVED ON 29.03 .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 ON 28.05.2011 WAS SATURDAY AND 29.05.2011 W AS 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 DAYS IN FILING THE APPEAL WHICH MAY KINDLY BE CONDONED FOR THE FOLLOWI NG REASONS :- A. THAT THE DELAY WAS DUE TO UNAVOIDABLE CIRCUMSTAN CES AS THE ORIGINAL ORDER OF CIT(A) WAS MISPLACED IN THE OFFIC E OF THE SOCIETY AND AS SUCH THERE WAS DELAY OF TWO DAYS IN FILING THE APPE AL BEFORE THE HONBLE TRIBUNAL. B. THAT LOOKING TO THE SHORT DELAY OF TWO DAYS, THE SAME MAY KINDLY BE CONDONED. 3. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE HAS OBJECTED CONDONATION OF THIS DELAY. 4. AFTER CONSIDERING RIVAL SUBMISSIONS, WE FIND THA T DELAY OF 4 DAYS IN QUESTION STANDS DULY EXPLAINED WITH SUFFICIENT REASONS MENTI ONED IN APPLICATION. ACCORDINGLY, WE CONDONE THIS DELAY OF 4 DAYS AND TA KE THE APPEAL IN ORDER. 5. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A CO-OPERATIVE SOCIETY WHO DERIVES ITS INCOME MAINLY FROM BUSINESS OF BANKING. FOR A.Y. 2007- 08 THE ASSESSEE SOCIETY FILED ITS RETURN ON 31.10.2 007DECLARING TOTAL INCOME OF 3 ITA NO.243/JODH/2011 A.Y. 2007-08 RS.1,75,64,820/-. THE ASSESSMENT WAS COMPLETED UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) ON 17.12 .2009 AT A TOTAL INCOME OF RS.2,04,05,070/-. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL AND THE LD. CIT(A) HAS DISMISSED THE SAME. NOW THE ASSESSEE IS FURTHER AGGRIEVED AN D HAS FILED THIS APPEAL BY TAKING FOLLOWING TWO EFFECTIVE GROUNDS:- 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O. F OR RS.16,29,306/- BEING AMORTIZATION OF PREMIUM PAID ON PURCHASE OF G OVERNMENT SECURITIES. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR RS.8,39,403/- BEING CONTRIBUTION OF WELFARE FUND. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ENTIRE RECORDS. THE FACTS APROPOS GROUND NO.1 OF THIS APP EAL WHICH PERTAINS TO ADDITION OF RS.16,29,306/- ARE THAT THE A.O. HAS FOUND THAT THE ASSESSEE BANK WAS HOLDING GOVERNMENT SECURITIES UNDER THE AVAILABLE FOR SALE CATEGORY. AS PER THE SYSTEM OF VALUATION OF GOVERNMENT SECURITIES GIVEN IN THE AUDITORS REPORT THESE SECURITIES HAD TO BE VALUED AT COST PRICE OR ITS MARKET VALUE, WHICHEVER IS LESS. THE ASSESSEE HAS CLAIMED IN THE P&L ACCOUNT A SUM OF RS.16,29,30 6/- AS PREMIUM AMORTIZED ON GOVERNMENT SECURITIES. HOWEVER, THE AUDITOR IN ITS REPORT DATED 29.05.2007 IN PARA 4 ITA NO.243/JODH/2011 A.Y. 2007-08 NO.8 OF THE REPORT, HAS OBSERVED THAT HOLDING OF GO VERNMENT SECURITIES IS AN INVESTMENT AND FURTHER STATED AMORTIZATION OF THE EXPENSES AMOUNTING TO RS.13,00,000/- OUT OF RS39,00,000/- FOR THE NEXT TH REE YEARS ON ACQUISITION OF SECURITIES WORTH RS86,32,032/- IN THE FINANCIAL YEA R 2003-04 AND FURTHER AMOUNT OF RS.3,29,306/- OUT OF EXPENSES OF RS.26,34,444/- OVER THE NEXT 8 YEARS. THE AUDITOR HAS FURTHER STATED THAT SECTION OF ASSETS H AS MENTIONED THAT THERE IS NO BRANCH OF THE BANK AND INVESTMENT HAS BEEN MADE AT ITS H.O. ONLY. THE A.O. ALSO FOUND THAT IN THE BALANCE SHEET THE ASSESSEE HAS SH OWN THE GOVERNMENT SECURITIES UNDER THE INVESTMENT AMOUNTING TO RS.7,43,38,000/ - AND THE FACE VALUE OF THESE SECURITIES COMES TO RS7,45,00,000/- AND MARKET VALU E OF THESE SECURITIES AT RS.7,88,38,100/-. THE ASSESSEE HAD PAID A PREMIUM AMOUNTING TO RS.36,05,138/- ON ACQUISITION OF GOVERNMENT SECURITIES FOR THE PUR POSE OF INVESTMENT. BY FOLLOWING GUIDELINES OF THE RBI AND TREATING IT AS INVESTMENT HE HAS CONSIDERED THIS AS INVESTMENT IN RESPECT OF HELD TO MATURITY. TH EREFORE, THE A.O. HAS TREATED THE PREMIUM PAID ON THE PURCHASE OF GOVERNMENT SECURITI ES AMOUNTING TO RS.16,29,306/- AS CAPITAL EXPENDITURE AND NOT AS RE VENUE EXPENDITURE AS HAS BEEN CLAIMED BY THE ASSESSEE. THEREFORE, HE HAS ADDED T HIS AMOUNT TO ASSESSEES TOTAL INCOME OF THE YEAR. 5 ITA NO.243/JODH/2011 A.Y. 2007-08 8. AGGRIEVED, THE ASSESSEE WENT IN APPEAL. THE LD. CIT(A) AFTER CONSIDERING THE VARIOUS ASPECT OF SECTION 24 OF THE BANKING REG ULATION ACT, 1949 HAS OPINED THAT EVERY PRIMARY (URBAN) CO-OPERATIVE BANK IS REQ UIRED TO MAINTAIN LIQUID ASSETS WHICH AT THE CLOSE OF THE BUSINESS ON ANY DAY SHOUL D NOT BE LESS THAN 25% OF ITS DEMAND AND TIME LIABILITIES IN INDIA. AS PER THE G UIDELINES, THE ASSESSEE COULD HELD SUCH LIQUID ASSETS IN THE FORM OF APPROVED SECURITI ES. ON THE PERUSAL OF BALANCE SHEET OF DETAILS OF GOVERNMENT SECURITIES VALUATION AS ON 31.03.2007 IT WAS NOTICED THAT THE FACE VALUE OF ALL THE SECURITIES ARE RECOR DED AT RS.7,45,00,000/-, PREMIUM PAID THEREON IS RS.1,23,09,500/- TILL THE END OF TH E ACCOUNTING YEAR RELEVANT TO A.Y. 2007-08. THUS, THE TOTAL ACQUISITION COST OF THE S ECURITIES AS ON 31.03.2007 COMES TO RS.8,66,47,500/- AND BOOK VALUE COMES TO R.7,43, 38,000/-. THE ASSESSEE DECLARED MARKET VALUE OF THE SECURITIES AT RS.7,87, 85,500/- AND THE PREMIUM HAS BEEN AMORTIZED TILL 31.03.2006 AT RS.70,75,056/- AN D AMORTIZATION DURING THE YEAR UNDER CONSIDERATION AT RS.16,29,306/- AND THE BALAN CE AMOUNT OF RS.36,05,138/- HAS TO BE AMORTIZED IN THE SUBSEQUENT YEARS. 9. ON PERUSAL OF THE BALANCE SHEET AS ON 31.03.2007 , IT WAS NOTICED THAT UNDER THE ITEM NO.4 UNDER THE HEADING INVESTMENTS, THE ASSESSEE HAS SHOWN GOVERNMENT SECURITIES AS AVAILABLE FOR SALE. ACCORDINGLY, T HE ASSESSEE HAS DISCLOSED ALL THE INVESTMENT AT COST OR MARKET PRICE WHICHEVER WAS LE SS AND THAT IS WHY THE A.O. GOT 6 ITA NO.243/JODH/2011 A.Y. 2007-08 CONFUSED. THE ASSESSEE HAS DISCLOSED FACE VALUE OF ALL GOVERNMENT SECURITIES AVAILABLE AS ON 31.3.2007 AT RS.7,45,00,000/- AND T HE PREMIUM PAID THEREON CAME TO RS.1,23,09,500/-. THEREFORE, COST OF THE SECURI TIES COME TO RS.8,66,47,500/-. THIS AMOUNT HAS BEEN TREATED BY THE A.O. AS THE TOT AL INVESTMENT IN THE GOVERNMENT SECURITIES. THE LD. CIT(A) HAS ALSO CON FIRMED THIS ADDITION ON ALMOST SIMILAR REASON. NOW THE ASSESSEE IS FURTHER AGGRIE VED. 10. AFTER HEARING BOTH THE SIDES, WE HAVE FOUND THA T THERE IS FORCE IN THE SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE SHR I U.C. JAIN THAT THIS GROUND STANDS COVERED BY THE TRIBUNAL ORDER IN FAVOUR OF T HE ASSESSEE. IN FACT, WE HAVE NOTICED THAT RBI DIRECTIONS ARE ONLY IN THE CONTEXT OF PRESENTATION OF PREMIUM PAID ON ACQUISITION OF THE GOVERNMENT SECURITIES BY SPRE ADING OVER TO THE REMAINING PERIOD OF THE SECURITIES IS FOR THE PURPOSE OF DISC LOSING OVER TO THE REMAINING PERIOD OF THE SECURITIES IS FOR THE PURPOSE OF DISCLOSING IN THE BALANCE SHEET BUT IT HAS NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME OR ACCOUNTING CONCEPTS. IN THE ALTERNATIVE, THE CASE OF THE ASSESSEE IS THAT THE P REMIUM PAID ON GOVERNMENT SECURITIES SHOULD BE ALLOWED IN TOTO IN THE YEAR IN WHICH THE SAME WAS PAID I.E. THE YEAR IN WHICH THE ACQUISITION OF INVESTMENT TOOK PL ACE. THE ISSUE OF AMORTIZATION HAS BEEN DECIDED BY THE DIFFERENT BENCHES OF THE AP PELLATE TRIBUNAL IN FAVOUR OF THE ASSESSEE RELYING ON INSTRUCTION NO.17/2008 DATE D 26.11.2008 ISSUED BY CBDT. 7 ITA NO.243/JODH/2011 A.Y. 2007-08 THESE INSTRUCTIONS ETC. ARE AVAILABLE IN ASSESSEES PAPER BOOK. THE FOLLOWING JUDGMENTS/ORDERS FAVOUR THE CASE OF THE ASSESSEE:- M/S NATIONAL CO-OPERATIVE BANK LIMITED VS. JCIT (IT A NO.1090/BANG/2010 DATED 11.05.2012). M/S KRISHNA GRAMEENA BANK VS. ADDL. CIT (ITA NO.22 4/BANG/2011 DATED 15.06.2012. DCIT VS. M/S THE BANK OF RAJASTHAN LIMITED (ITA NO .3238/MUM/2010. 11. UNDER IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL HAS TAKEN A VIEW IN THE FAVOUR OF THE ASSESSEE. WE HAVE GONE THROUGH THE INSTRUCTION NO.17/2008 DATED 26.11.2008 AND THE TRI BUNAL ORDERS ON WHICH RELIANCE HAS BEEN PLACED. THE RELEVANT PARA OF THE TRIBUNAL ORDER IN THE CASE OF M/S NATIONAL CO-OPERATIVE BANK LIMITED VS. JCIT PAS SED IN ITA NO.1090/BANG./2010 & 7/(BANG)/2011 FOR A.YS. 2007-0 8 & 2008-09, ORDER DATED 11.05.2012 IS 4.6 (ASSESSEES PAPER BOOK PAGE NO.10 8). WE EXTRACT THIS PARAGRAPH AS UNDER :- 4.6 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBM ISSIONS AND DILIGENTLY PERUSED THE RELEVANT CASE RECORDS. WE HAVE ALSO DULY PERUSED THE FINDINGS OF VARIOUS BENCHES OF THE TRIBUNALS WH ICH ARE CONSIDERED AS UNDER: (I) CATHOLIC SYRIAN BANK LTD. VS. ACIT (2010) 38 SOT 5 53 (COCH) : AN IDENTICAL ISSUE TO THAT OF THE SUBJECT MATTER U NDER CONSIDERATION HAD ARISEN BEFORE THE COCHIN BENCH. AFTER ANALYZING TH E ISSUE IN DEPTH, THE BENCH HAS OBSERVED THAT WITH REGARD TO AMORTIZATION OF PREMIUM ON 8 ITA NO.243/JODH/2011 A.Y. 2007-08 PURCHASE OF GOVERNMENT SECURITIES, IT WAS CLARIFIED THAT THIS WAS MADE AS PER THE PRUDENTIAL NORMS OF THE RBI. FOLLOWING THE TRIBUNAL DECISION (IN ASSESSEE'S OWN CASE) AND CONSIDERING THAT THE ASSES SEE BANK IS FOLLOWING CONSISTENT AND REGULAR METHOD OF ACCOUNTING SYSTEM, THERE IS NO JUSTIFICATION IN INTERFERING WITH THE ORDER OF THE CIT (A) ON THIS ISSUE OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. UNITED COMMERCIAL BANK VS. CIT (1999) 156 CTR (SC) 380; (1999) 240 IT R 355 (SC) AND SOUTH INDIAN BANK LTD. (ITA NO.126/COCH/2004 DATED. 219 TH SEPT. 2005 FOLLOWED (II) THE KHANAPUR CO-OP. BANK LTD. VS. ITO - ITA NO.141/PNJ/2011 DATED: 8.9.2011 : THE HON'BLE BENCH OF PANAJI TRIBUNAL HAD RECORDED I TS FINDINGS THAT 6. LIKEWISE, THE PREMIUM AMORTIZED AT RS.1,78,098/- IS CLAIMED TO BE IN RESPECT OF SECURITIES HELD UNDER THE CATEGORY HELD TO MATURITY. THE ASSESSING OFFICER HAS TAKEN THEM AS LONG TERM INVES TMENTS. IN OTHER WORDS, HE HAS ACCEPTED THE ASSESSEES CLAIM THAT TH E SECURITIES ARE HELD TO MATURITY. THAT BEING SO AND HAVING REGARD TO T HE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008 AS REPRODUCED HEREIN ABOVE, THE PREMIUM PAID ON SUCH GOVERNMENT SECURITIES IS REQUI RED TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY............' (III) IN THE CASE OF CORPORATION BANK VS. ACIT IN I TA NO.112/BANG/2008 FOR THE ASSESSMENT YEAR 2004-05, THE EARLIER BENCH HAD ALSO HELD A SIMILAR VIEW. 4.61 TAKING INTO ACCOUNT THE TOTALITY OF THE ISSUE AS DISCUSSED ABOVE AND IN CONFORMITY WITH THE FINDINGS OF THE HONBLE BENC HES OF THE TRIBUNALS CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION. IT IS ORDERED ACCORDINGLY. 12. THEREFORE, BY RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL ORDER, WE ALLOW THIS GROUND IN FAVOUR OF THE ASSESSEE. WE MAY MENTION T HAT IN THE SUBSEQUENT ASSESSMENT YEAR, THE LD. CIT(A) HAS HIMSELF ALLOWED SIMILAR CLAIM OF THE ASSESSEE. 9 ITA NO.243/JODH/2011 A.Y. 2007-08 COPY OF THIS ORDER HAS BEEN FILED FOR OUR PERUSAL. WE HAVE GONE THROUGH IT AND ARE SATISFIED THAT PRINCIPLE OF CONSISTENCY APPLIES HER E. ACCORDINGLY, WE ALLOW THIS GROUND IN FAVOUR OF THE ASSESSEE. 13. THE FACTS OF GROUND NO.2 PERTAINING TO CONFIRMA TION OF ADDITION MADE BY THE A.O. OF RS.8,39,403/- BEING THE CONTRIBUTION TO WEL FARE FUND, ARE THAT IN THE P&L ACCOUNT THE ASSESSEE UNDER THE HEADING OF CONTRIBU TION TOWARDS FUND AND PROVISIONS IT HAS DEBITED THE SAME TO P&L ACCOUNT BY AN AMOUNT RS.8,39,403/-. A PERUSAL OF THE BALANCE SHEET AS ON 31.03.2007 REV EALED THAT IN THE LIABILITY SIDE UNDER THE HEADING OF FUND THE ASSESSEE HAS DISCL OSED WELFARE FUND (MEMBERS & STAFF) AMOUNTING TO RS.42,05,718/-. IT WAS STATED THAT THIS IS A CONTRIBUTION BY WAY OF PROVISION TO THE MEMBERS AND STAFF WELFARE FUND. THE PERUSAL OF BYLAWS OF THE ASSESSEE SOCIETY IN ITEM NO.57 BEING THE DISPOSAL O F NET PROFIT IT HAS BEEN REPORTED THAT THE BOARD OF DIRECTORS MAY APPROPRIATE THE NET PROFIT IN THE MANNER DESCRIBED IN THE ABOVE ITEMS. THE LD. CIT(A), AFTER CONSIDER ING THE RIVAL SUBMISSION, HAS SUSTAINED DISALLOWANCE OF RS.8,39,403/- AND HAS DIR ECTED THE A.O. TO VERIFY THE CONTRIBUTION MADE TOWARDS WELFARE FUND DURING THE Y EAR UNDER CONSIDERATION. THE LD. CIT(A) SUSTAINED THIS ADDITION. HOWEVER, GIVE N DIRECTION TO THE A.O. TO VERIFY THE CONTRIBUTION MADE TO WELFARE FUND DURING THE YE AR UNDER CONSIDERATION. HE HAS FURTHER DIRECTED TO VERIFY CONTRIBUTION MADE OF THE WELFARE FUND. 10 ITA NO.243/JODH/2011 A.Y. 2007-08 14. AFTER HEARING BOTH THE SIDES, IT WAS FOUND THAT THE BYLAWS OF RBI HAVE BEEN TRULY AND FULLY COMPLIED BY THE PARTIES. WE HAVE A LSO GONE THROUGH THE BYLAWS AND THE SUBMISSIONS MADE FROM THE ASSESSEES SIDE, THE SAME FOR READY REFERENCE IS REPRODUCED AS UNDER: - THAT THE LD. A.O. DISALLOWED THE EXPENSES INFLUE NCED BY HIS PREOCCUPIED MIND THAT ALL THE MEMBERS OF THE SOCIET Y ARE NOT BE THE CUSTOMER OF THE SOCIETY ON THE GROUND THAT THE MEMB ERSHIP OF THE SOCIETY FOR ALL OF THE (I) EMPLOYEES OF THE NORTH WESTERN R AILWAY EMPLOYED WITHIN THE TERRITORY COVERED BY THE JODHPUR DIVISIO N, (II) EMPLOYEES OF STATUTORY AUDIT ATTACHED TO THE JODHPUR DIVISION OF NORTH WESTERN RAILWAY PROVIDED THAT THEY RESIDE IN THE TERRITORIA L JURISDICTION OF THE JODHPUR DIVISION AND (III) EMPLOYEES OF SOCIETY AUT OMATICALLY. - THAT BEFORE THE LD. CIT(A) IT WAS SUBMITTED THA T THE LD. A.O. ERRED IN DISALLOWING THE EXPENDITURE AS THE FINDING RECORDED BY THE LD. AO IS CONTRARY TO THE FACTUAL POSITION AND IT WAS EXPLAIN ED THAT: - AS PER PARA 9 OF BY LAWS - MEMBERSHIP THE SOCIET Y HAS TWO CATEGORIES OF MEMBERSHIP (I) REGULAR MEMBERS AND (II) NOMONAL / ASSOCIATE MEMBERS. - AS PER PARA 10 OF BY LAWS - REGULAR MEMBERS FOLL OWING ARE ADMITTED AS REGULAR MEMBERS OF THE SOCIETY: I) EMPLOYEES OF THE NORTH WESTERN RAILWAY EMPLOYED WITHIN THE TERRITORY COVERED BY THE JODHPUR DIVISION. II) EMPLOYEES OF STATUTORY AUDIT ATTACHED TO THE J ODHPUR DIVISION OF NORTH WESTERN RAILWAY PROVIDED THAT THEY RESIDE I N THE TERRITORIAL JURISDICTION OF THE JODHPUR DIVISION . III) EMPLOYEES OF SOCIETY. - THAT THE MEMBERSHIP AS MENTIONED IN PARA 10 OF BY L AWS WOULD NOT AUTOMATIC BUT PARA 11 OF THE BY LAWS LAID DOWN COND ITIONS FOR REGULAR MEMBERSHIP AS UNDER: 11 ITA NO.243/JODH/2011 A.Y. 2007-08 11- CONDITIONS FOR REGULAR MEMBERSHIP A) HE HAS APPLIED IN WRITING IN THE PRESCRIBE D FORM; B) HE HAS PAID ADMISSION FEE RS.100/- AND ACQU IRED AT LEAST ONE SHARE OF THE SOCIETY; C) HE HAS GIVEN A DECLARATION THAT HE IS NOT A MEMBER OF ANY OTHER SIMILAR CO-OPERATIVE SOCIETY; D) HE HAS FULFILLED ALL OTHER CONDITIONS LAID DOWN IN THE ACTS, THE RULES AND THE BYE-LAWS; E) THE BOARD OF DIRECTORS OF THE SOCIETY APPR OVES THE APPLICATION TO ADMIT AS A MEMBER. - THAT THE CONDITIONS FOR REGULAR MEMBERSHIP AS LAID DOWN IN THE BY- LAWS OF THE CO-OPERATIVE SOCIETY MADE IT VERY CLEAR THAT THE MEMBERSHIP OF THE SOCIETY IS NOT AUTOMATIC BUT THE PERSON NEED TO APPLY FOR THE MEMBERSHIP. FURTHER UNDER PARA - 15 DISQUALIFICATI ONS FOR MEMBERSHIP LAID DOWN THAT NO PERSON SHALL BE ELIGIB LE FOR BEING OR CONTINUING AS A MEMBER OF THE SOCIETY IF HE HAS NOT USED FOR TWO CONSECUTIVE YEARS, ANY OF THE SERVICES OF THE SOCIE TY. THESE PROVISIONS MAKE IT CLEAR THAT THE ALL MEMBERS OF THE SOCIETY A RE THE CUSTOMER OF THE SOCIETY. - THAT PARA 19 OF THE BY LAW DEALS WITH THE NOMINAL/A SSOCIATE MEMBER AND CONTAINS THAT THE SOCIETY AT ITS DISCRETION MAY ADMIT A PERSON ON PAYMENT OF A NON REFUNDABLE FEE OF RS.500/- AS A NO MINAL/ASSOCIATE MEMBER PROVIDED THAT NO SUCH NOMINAL/ASSOCIATE MEMB ER SHALL BE ENTITLED TO SUBSCRIBE TO THE SHARES OF THE SOCIETY OR HAVE ANY INTEREST IN THE MANAGEMENT THEREOF INCLUDING RIGHT TO VOTE, BE ELECTED AS A DIRECTOR OF THE BOARD OR PARTICIPATE IN THE GENERAL BODY MEE TINGS. - THAT ALL THE MEMBERS OF THE CO-OPERATIVE SOCIETY A RE CUSTOMER OF THE CO-OPERATIVE SOCIETY AND THE MEMBERSHIP WILL AUTOMA TICALLY CEASE IF HE HAS NOT USED ANY OF THE SERVICE OF THE SOCIETY FOR TWO CONSECUTIVE YEARS. THIS MAKES VERY CLEAR THAT THE WELFARE EXPENSES INC URRED BY THE ASSESSEE CO-OPERATIVE SOCIETY WAS FOR THE CUSTOMERS WHO ARE ENJOYED SERVICES OF THE BANK AND FOR GENERAL PUBLIC OR ANY CLASS OF PUBLIC. - THAT THE LD. AO CIT(A) SUSTAINED THE DISALLOWANCE ON THE FINDING THAT THE CONTRIBUTION TO WELFARE FUND IS ONLY AN APPROPR IATION OF PROFIT AND NOT ACTUAL EXPENDITURE THEREFORE NOT ALLOWABLE, - THAT THE LD. CIT(A) ERRED IN SUSTAINING THE DISAL LOWANCE WITHOUT CONSIDERING THE AMOUNT ACTUALLY EXPENDED DURING THE YEAR UNDER 12 ITA NO.243/JODH/2011 A.Y. 2007-08 CONSIDERATION. THE AMOUNT ACTUALLY SPENT DURING TH E YEAR OUT OF CURRENT YEAR AND EARLIER YEAR'S CONTRIBUTION OUGHT TO BE ALLOWED WHEN THE CONTRIBUTION WAS TREATED AS APPLICATION OF INCO ME AND NOT EXPENDITURE OF THE YEAR UNDER CONSIDERATION. THE AP PELLANT SPENT RS.10,56,153/- DURING THE YEAR UNDER CONSIDERATION AND DIRECTION MAY KINDLY BE ISSUED TO ALLOW THE SAME AS EXPENDITURE O F THE YEAR. THE AMOUNT SPENT DURING THE YEAR WORKED OUT AS UNDER: OPENING BALANCE OF WELFARE FUND (MEMBER & STAFF) RS .44,22,468.38 ADD: CONTRIBUTION DURING THE YEAR RS. 8,39,40 3.00 RS. 52,61,871.38 LESS: CLOSING BALANCE OF WELFARE FUND (MEMBER & STAFF) RS.42,05,718.38 AMOUNT EXPENDED DURING THE YEAR RS. 10,56,153.00 IN LIGHT OF ABOVE SUBMISSION EXPENDITURE OF RS.10, 56,153/- MAY KINDLY BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND RBI GUIDELINES AND THE JUDGMENTS RELIED UPON BY THE LD. AUTHORIZED REPRESE NTATIVE, WE ARE OF THE CONSIDERED OPINION THAT THIS AMOUNT CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE AS THIS HAS BEEN LEGALLY CLAIMED. ACCORDINGLY, WE ORD ER TO DELETE THE SAME AND ALLOW GROUND NO.2 OF THIS APPEAL. 16. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2013) SD/- SD/- (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH NOVEMBER, 2013 PBN/* 13 ITA NO.243/JODH/2011 A.Y. 2007-08 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, JODHPUR