M/s Krishi Upaj Mandi, Dewas V. The ITO, Ujjain

ITA 248/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1464 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJPAL SINGH
• Assessee Lawyers: S K AGRAWAL
• Keywords: Depreciation; Revised return; Revenue expenditure
• Section: 260A; 12A; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.248/IND/2009 AY: 2005-06 M/S. KRISHI UPAJ MANDI SAMITI, DEWAS DIST. DEWAS (PAN AAALK 0247 M) .....APPELLANT V/S. INCOME TAX OFFICER 2(1), UJJAIN .....RESPONDENT ASSESSEE BY : SHRI S.K. AGRAWAL, CA DEPARTMENT BY : SHRI RAJPAL SINGH, SR. DR ORDER PER BENCH THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-UJJAIN, DATED 24.3.2009. THE FIRST GROUND RAISED IS THAT TH E LD. FIRST APPELLATE AUTHORITY ERRED IN REJECTING THE REVISED RETURN FIL ED BY THE ASSESSEE FOR CLAIMING EXEMPTION U/S 11 OF THE ACT IN VIEW OF THE REGISTRATION U/S 12A/12AA OF THE ACT RECEIVED BY THE ASSESSEE ON 23. 12.2006. DURING HEARING, WE HAVE HEARD THE LD. REPRESENTATIVES FROM BOTH SIDES. AT THE OUTSET, IT WAS CLAIMED BY THE LD. COUNSEL FOR THE A SSESSEE THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF TRIBUNAL IN THE CASE OF KRISHI UPAJ MANDI SAMITI, KHATEGOAN VS. ITO (ITA NO.250/IND/2009). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REV ENUE. IN VIEW OF THIS 2 ASSERTION, WE ARE REPRODUCING HEREUNDER THE RELEVAN T PORTION OF THE ORDER DATED 27.11.2009: 3. GROUND NO.1 READS AS UNDER :- THAT THE LD. CIT(A) HAS ERRED IN REJECTING REVISED RETURN FILED BY THE ASSESSEE FOR CLAIMING THE EXEMPTION U/S 11 OF THE INCOME- TAX ACT, 1961, IN VIEW OF THE REGISTRATION U/S 12A/12AA RECEIVED BY THE ASSESSEE ON 23.12.2006. 4. THE FACTS, IN BRIEF, ARE THAT INSPITE OF ORDER OF T HE TRIBUNAL DIRECTING THE LD. CIT(A) TO GRANT REGISTRATION TO THE ASSESSEE UNDER SECTION 12A BEING COMPLIED WITH BY THE LD. CIT, THE A.O. HAS HELD THAT THE ASSESSEE SAMITI WAS NOT ENTITLED FOR EXEMPTION U/S 11 IN VIEW OF THE FACT THAT THE DEPARTMENT HAD NOT ACCEPTED THE SAID DECISION OF THE TRIBUNAL AND APPEAL HAD BEEN FILED BEFORE THE HON'BLE HIGH COURT U/S 260A AND HAD BEEN ADMITTED ALSO. ON A QUERY FROM US, THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT PRODUCE THE COPY OF STAY, IF ANY, GRANTED BY THE HON'BLE HIGH COURT AGAINST THE SAID ORDER OF THE TRIBUNAL. THUS, IN OUR VIEW, THE ACTION OF THE A.O., WHICH HAS ALSO BEEN CONFIRMED BY THE CIT(A) IS NOT CORRECT IN LAW, AS AT THE RELEVANT POINT OF TIME, THE ORDER OF THE TRIBUNAL IS BINDING ON BOTH SUCH AUTHORITIES. ACCORDINGLY, WE HOLD THAT THE ASSESSEES INCOME SHOULD BE COMPUTED ON THE BASIS THAT THE ASSESSEE IS ENTITLED TO 3 EXEMPTION U/S 11OF THE ACT. THUS, GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. IN THE LIGHT OF THE ARGUMENTS PUT FORTH BY THE LD. RESPECTIVE COUNSEL AND THE AFORESAID DECISION OF THE TRIBUNAL, AND ALS O THE FACT THAT THE GROSS RECEIPTS OF THE ASSESSEE ARE TO THE TUNE OF RS.5,69 ,29,352/- OUT OF WHICH THE ASSESSEE APPLIED THE INCOME TO THE TUNE OF RS.5,24, 50,886/- (92%), THEREFORE, THE ASSESSEE HAS APPLIED MORE THAN 85% O F THE INCOME, CONSEQUENTLY, THE CONDITIONS LAID DOWN FOR GETTING EXEMPTION U/S 11 OF THE ACT IS FULFILLED, THEREFORE, IN VIEW OF THE DECISIO N IN CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION (2001) (116 TAXMAN 608) (SC) , THE AFORESAID DECISION OF THE TRIBUNAL WHEREIN BOTH OF US ARE SIG NATORY TO THE ORDER, AND IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT TO OUR NOTICE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 2. THE NEXT GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) ERRED IN RESTRICTING THE CLAIM OF THE DEPRECIATION ON FIXED ASSETS WITH REFERENCE TO WRITTEN DOWN VALUE WORKED OUT ON THE BASIS OF ADMIS SIBLE CLAIM OF DEPRECIATION IN EARLIER YEARS AND CONSEQUENT DISALL OWANCE OF RS.8,83,853/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND, THEREFORE, IT IS DISMISS ED AS NOT PRESSED. 3. THE NEXT GROUNDS RAISED ARE THAT THE LD. CIT(A) ERRED IN DISALLOWING RS.45,15,018/- AS KISAN SADAK NIDHI EXPENSES, KRISH I ANUSANDHAN EXPENSES AND RS.13,94,705/- AS BOARD SHULK EXPENSES ON THE F ACTS AND CIRCUMSTANCES 4 OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE EXPLA INED THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING, THEREFORE, THI S ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN THE CASE OF KRISHI UPAJ MANDI SAMITI, BURHANPUR (12 ITJ 12). ON THE OTHER HAND, T HE LD. SR. DR CONTENDED THAT SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING, THEREFORE, IN THE IMPUGNED YEAR, IT CANNOT BE ALLOWED. 4. ON PERUSAL OF RECORD AND AFTER CONSIDERING THE S UBMISSIONS, IT IS SEEN THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF KRISHI UPAJ MANDI SAMITI, KHATEGOAN VS. ITO (ITA NO.250/IND/2009), THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREUNDER: 5. GROUND NOS. 2 TO 5 READ AS UNDER :- 2) THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING OF RS. 21,55,675/- AS KISAN SADAK NIDHI EXP. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3) THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING OF RS. 3,80,411/- AS KRISHI ANUSANDHAN NIDHI EXP. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4) THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING OF RS. 6,33,722/- AS BOARD SHULK EXP. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5) THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING OF RS. 7,77,662/- AS ARAKSHIT NIDHI EXP. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE FACTS, IN BRIEF, ARE THAT THESE EXPENSES WERE DISALLOWED MAINLY FOR THE REASON THAT DRAFTS F OR SUCH PAYMENTS HAD ACTUALLY BEEN PREPARED AND DELIVERED SUBSEQUENT TO THE CLOSURE OF THE RELEVANT 5 FINANCIAL YEAR AND, THEREFORE, AS PER CASH SYSTEM O F ACCOUNTING, WHICH WAS FOLLOWED BY THE ASSESSEE, THE SAME COULD NOT BE ALLOWED AS EXPENDITURE OF THIS YEAR. THE A.O. ALSO HELD THAT THE ASSESSEE HAD WITHDRAWN THE EQUIVALENT AMOUNT IN VIEW OF THE PRACTICE FOLLOWED BY VARIOUS GOVERNMENT BODIES/AUTHORITIES, SO AS TO CONSUME THE FUNDS BEFO RE CLOSURE OF THE FINANCIAL YEAR AND IT WAS DONE AS PE R THE APPROVAL OF THE CONCERNED COMPETENT AUTHORITIES AND SUBSEQUENTLY PAYMENT WAS ALSO MADE ACCORDINGLY. THE A.O., HOWEVER, HELD THAT SUCH FACT S RESULTED INTO A PROVISION IN THE ACCOUNTS, WHICH COULD NOT BE EQUATED WITH THE ACTUAL PAYMENT. THE LD. CIT(A) ALSO CONFIRMED THIS ACTION OF THE A.O. THE LEARNED COUNSEL FOR THE ASSESSEE, IN THE COURSE OF HEARING, HAD SUBMITTED THAT CHEQUES WERE ACTUALL Y DELIVERED BEFORE THE CLOSURE OF THE FINANCIAL YEAR AND ON THAT BASIS, THE HEARING WAS CONCLUDED. HOWEVER, WHEN THE FACTS, AS STATED ABOVE, ARE TAKEN INTO CONSIDERATION, IT IS ABUNDANTLY CLEAR THAT IT IS NOT A CASE OF DELIVERY OF CHEQUES PRIOR TO THE END OF THE FINANCIAL YEAR AND REALIZATION THEREOF SUBSEQUENTLY. HENCE, THIS CANNOT BE TREATED AS PAYMENT MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, ALL THESE GROUNDS OF TH E ASSESSEE ARE DISMISSED. ON A QUERY FROM THE BENCH, IT WAS FAIRLY AGREED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE CHEQUES WERE REALIZED SUBSEQU ENTLY, CONSEQUENTLY, 6 THESE PAYMENTS CANNOT BE TREATED TO BE PAYMENT MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, THEREFORE, BOTH THESE GROUNDS OF THE ASSESSEE ARE DISMISSED. 5. THE NEXT GROUND I.E. NO.5 RAISED IS THAT THE LD. CIT(A) ERRED IN DISALLOWING RS.9,76,371/- AS ARAKSHIT NIDHI EXPENSE S. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE PAYMENT W AS MADE TO M.P. AGRICULTURAL BOARD, BHOPAL. THE IMPUGNED PAYMENT WA S CLAIMED TO BE 1/3 RD AMOUNT OF 8% DEBITED TO ARAKSHIT NIDSHI ACCOUNT, WH ICH IS SENT TO THE MANDI BOARD FOR PAYMENT OF PENSION/GRATUITY TO THE RETIRE D EMPLOYEES. IT WAS CLAIMED THAT THE ASSESSEE IS LOCAL AUTHORITY REGIST ERED UNDER THE MADHYA PRADESH KRISHI UPAJ MANDI ADHINIYAM, 1972, THEREFOR E, THE ASSESSEE IS LIABLE TO PAY PENSION TO ITS EMPLOYEES, HENCE, IT IS AN RE VENUE EXPENDITURE. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. ON CONSIDERATION OF RIVAL SUBMISSIONS AND THE FACT S NARRATED ABOVE AND VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING KRISHI UPAJ MANDI SAMITI, BURHANPUR VS. ITO (2009) (12 ITJ 12) (INDORE ITAT), THIS GROUND OF THE ASSESSEE IS ALLOWED. 6. THE NEXT GROUND RAISED IS THAT THE LD. CIT(A) ER RED IN DISALLOWING RS.2343/- AS DRAFT COMMISSION AGENT. AFTER HEARING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT THE DRAFTS WERE PURCHASED ON 7.4 .2005 I.E. NOT INCURRED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R 2005-06 SPECIALLY WHEN THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING , CONSEQUENTLY, IT CANNOT BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR. THIS GR OUND IS DISMISSED. 7 7. THE NEXT GROUND RAISED PERTAINS TO DISALLOWANCE OF RS.46,000/- AS GRISHM KALIN EXPENSES. IT WAS CLAIMED BY THE LD. CO UNSEL FOR THE ASSESSEE THAT THE IMPUGNED EXPENSES WERE PAID FOR PURCHASE O F MOTOR/BORE-WELL TO PROVIDE WATER FACILITIES TO THE HAMMALS/LABOURS WHO ARE WORKING FOR THE ASSESSEE SAMITI IN SCORCHING HEAT. HOWEVER, THIS CA NNOT BE ALLOWED AS A REVENUE EXPENDITURE BEING OF CAPITAL IN NATURE, THE REFORE, THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED. FINALLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 25.3.2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25.3.2010 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GUARD FILE