The Kalupur Commercial Co.Op.Bank Ltd., Ahmedabad V. The ACIT.,Range-7, Ahmedabad

ITA 2676/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9896 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Commercial expediency
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 2676/AHD/2013 ( / ASSESSMENT YEAR : 2009-10) THE KALUPUR COMMERCIAL CO-OP. BANK LTD., KALUPUR BANK BHAVAN, NR. INCOME TAX, ASHRAM ROAD, AHMEDABAD / VS. THE ACIT, RANGE-7, AHMEDABAD ./ ./ PAN/GIR NO. : AAAAT9360R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PARIN SHAH, AR / RESPONDENT BY : SHRI PRASOON KABRA, SR.DR / DATE OF HEARING 19/10/2016 / DATE OF PRONOUNCEMENT 25/11/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD DATED 07/10/2013 FOR ASSESSMENT YEAR (AY) 2009-10. THE APPELLANT-ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEAL-XIV, AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN FRAMING APPELLATE ORDER U/S.250 OF THE I.T.ACT. FOR A.Y.2009-10 ON 7 TH OCTOBER, 2013. 2. THE LEARNED CIT(A) XIV, AHMEDABAD HAS ERRED IN CONFIRMING THE FOLLOWING DISALLOWANCES/ADDITIONS MADE BY ASSESSING OFFICER. ITA NO.2676/AHD/2013 KALUPUR COMMERCIAL CO-OP. BANK LTD VS. ACIT ASST.YEAR 2009-2010 - 2 - SR. NO. NATURE OF DISALLOWANCE AMOUNT (A) SCHOLARSHIP TO STUDENTS RS. 4,64,732 (B) PAYMENT TO LEGAL HEIRS OF MEMBERS RS.16,54,700 3. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT ASSESSEE HAS CLAIMED FOLLOWING EXPENSES WHICH IS NOT PERTAIN TO THE BUSINESS EXPENDITURE AND JUSTIFIABLE, LOOKING TO THE BUSINESS OF THE ASSESSEE AS:- (I) PAYMENT TOWARDS SCHOLARSHIP CHILDREN OF MEMBERSRS.4,64,732/-. (II) PAYMENT TO NOMINEE / LEGAL HEIRS OF MEMBERS RS.16,54,700/-. 4. ON BEING ASKED ABOUT THE SAME VIDE BY THE ASSESSING OFFICER (AO) ABOUT ABOVE SAID EXPENDITURE, THE APPELLANT-ASSESSEE SUBMITTED THAT IN COMMERCIAL EXPEDIENCY, THE TERM COMMERCIAL EXPEDIENCY IS NOT LIMITED TO EXISTING PRACTICE PREVAILING IN ANY PARTICULAR TRADE OR BUSINESS. IT MEANS EVERYTHING THAT SERVES TO PROMOTE COMMERCE AND INCLUDES EVERY MEANS SUITABLE TO THAT END. THE COMMERCIAL EXPEDIENCY OF A BUSINESS, BUSINESSMAN DECISION TO INCUR AN EXPENDITURE CANNOT BE TESTED ON THE TOUCH STONE OF STRICT LEGAL LIABILITY TO INCUR SUCH EXPENDITURE. THE BUSINESSMAN IS THE BEST JUDGE TO DETERMINE THE BUSINESS EXPEDIENCY AND, THEREFORE, EXPENDITURE INCURRED SHOULD BE VIEWED FROM THE VIEW POINT OF ITA NO.2676/AHD/2013 KALUPUR COMMERCIAL CO-OP. BANK LTD VS. ACIT ASST.YEAR 2009-2010 - 3 - BUSINESSMAN AND ASSESSEE SUBMITTED SEVERAL FOLLOWING JUDGMENT IN SUPPORT OF HIS CONTENTION. (I) INDIAN LEAF TOBACCO DEVELOPMENT CO. LTD. V. C.I.T.(EX-GRATIA PAYMENTS TO THE DEPENDENTS OF FORMER EMPLOYEES) 137 ITR 827 (CAL.) (II) CIT V. HINDUSTAN MOTORS LTD. (PAYMENT OF PENSION TO THE WIFE OF A DECEASED EMPLOYEES AS ALSO TO A RETIRED EMPLOYEE) 175 ITR 411 (CAL.) (III) CIT V. DEVELOPMENT TRUST PVT. LTD. (EXPENDITURE INCURRED BY ASSESSEE ON CONSTRUCTION OF A SCHOOL BUILDING IN A COLONY) 198 ITR 766 (ALL.) (IV) CONTRIBUTION MADE BY A CO. OP. SOCIETY TO EDUCATION FUND IN ORDER TO BE ABLE TO PAY A HIGH, DIVIDEND TO ITS MEMBERS IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. - MEHSANA DIST. CO. OP. MILK PRODUCES V. UNION OF INDIA 203 ITR 601 (GUJARAT) - CIT V. KAIRA DIST. CO.OP. MILK PRODUCES V. UNION OF INDIA 209 ITR 898 (GUJARAT) BUT THE LEARNED AO WAS NOT CONVINCED WITH THE CONTENTION OF THE ASSESSEE AND TOTAL DISALLOWANCE WERE MADE TO THE TUNE OF RS. 43,40,15,140/-. 6. AGAINST THIS SAID ORDER ASSESSEE/APPELLANT PREFERRED FIRST APPEAL BEFORE THE CIT APPEAL WHO CONFIRMED THE ORDER OF THE ASSESSMENT PASSED BY THE ASSESSING OFFICER AND STATED IN HIS ORDER THAT CLAIM OF PAYMENT TOWARDS SCHOLARSHIP TO CHILDREN OF MEMBERS OF RS.4,64,732/-AND PAYMENT TO NOMINEE/LEGAL HEIRS OF MEMBERS OF RS.16,54,700/- AND ADDITION MADE BY AO FOR THESE RESPECTIVE AMOUNT. BOTH BEFORE AO AS WELL AS BEFORE ITA NO.2676/AHD/2013 KALUPUR COMMERCIAL CO-OP. BANK LTD VS. ACIT ASST.YEAR 2009-2010 - 4 - ME, THE APPELLANTS CONTENTIONS ARE SIMILAR. ON THE SAME ISSUE AND ON SIMILAR CONTENTIONS IN THE CASE OF APPELLANT, MY PREDECESSOR IN AY 2008- 09 ALREADY HELD AGAINST THE APPELLANT. I AM INCLINED WITH THE CONTENTION OF AO AS WELL AS RATIO OF MY PREDECESSOR THAT THESE EXPENDITURE ARE IN THE NATURE OF APPLICATION OF INCOME AND APPROPRIATION OF PROFIT AND THEREFORE THE SAME ARE NOT ALLOWABLE U/S 37(1) OF THE ACT. 7. CIT FURTHER HELD THE APPELLANT BEING A COOPERATIVE SOCIETY DOES NOT HAVE MUTUAL BENEFIT ACTIVITIES BUT IN THE BUSINESS OF BANKING AT LARGE WHERE ALL PERSONS ARE NOT A MEMBER OF THE CO OPERATIVE SOCIETY CAN PLACE DEPOSIT OR TAKE ADVANCES. THE EXPENDITURE LIMITED TO MEMBERS OUT OF INCOME / RECEIPT OF SUCH BANKING ACTIVITIES ARE THEREFORE CANNOT BE HELD WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BECAUSE THE SAME IS LIMITED TO MEMBERS ONLY THOUGH APPELLANT HAS BUSINESS AT LARGE AND THERE IS NO CORRELATION BETWEEN SUCH EXPENDITURE AND BUSINESS OF APPELLANT. RESPECTFULLY FOLLOWING RATIO OF MY PREDECESSOR, THE DISALLOWANCES AND ADDITION SO MADE BY AO ARE JUSTIFIED AND UPHELD. 8. AGAINST THE SAID ORDER ASSESSEE PREFERRED APPEAL BEFORE US. 9. WE HAVE GONE THROUGH THE IMPUGNED ORDERS AND HEARD BOTH THE PARTIES AS IT IS HELD IN THE CASE OF KRANTI ASSOCIATE PVT. LTD. AND ANOTHER VS. MANSOOR AHMAD KHAN BY THE SUPREME COURT HAS HELD, THAT THE FACE OF AN ORDER PASSED BY A QUASI JUDICIAL AUTHORITY OR BY AN ADMINISTRATIVE ITA NO.2676/AHD/2013 KALUPUR COMMERCIAL CO-OP. BANK LTD VS. ACIT ASST.YEAR 2009-2010 - 5 - AUTHORITY AFFECTING THE RIGHTS OF PARTIES, MUST SPEAK, IT MUST NOT LIKE THE INSCRUTABLE FACE OF SPHINX AND IT IS FURTHER HELD THAT MERELY KEEPING AN OPPORTUNITY OF HEARING IS NOT ENOUGH AND FURTHER POINTED OUT WHERE THE ORDER IS SUBJECT TO APPEAL, THE NECESSITY OF RECORD IS EVEN GREATER AND DECISION OF THE DISPUTED CLAIM AND SHARE THAT THIS IS NOT A RESULT OF CAPRICE, WHIMS OR FANCIES OUGHT TO HAVE IN OUR CONSIDERED OPINION A LEARNED CIT(A) OUGHT TO HAVE PASS SPEAKING ORDER. 10. MOREOVER, SINCE THE COORDINATE BENCH IN ITA NO. 2614/AHD/2011 FOR THE AY 2008-09 HAS ALLOWED SIMILAR EXPENDITURE IN ASSESSEES OWN CASE, THEREFORE, WE FOLLOWING THE JUDGMENT OF THE TRIBUNAL, WE ALLOW THE APPEAL AND THE ORDER OF THE CIT(A) IS HEREBY SET ASIDE. 11. IN THE RESULT, THE APPEAL OF THE APPELLANT IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 25/11/2016 SD/- SD/- (PRAMOD KUMAR ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 25/11/2016 PRITI YADAV / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XIV, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD