Dehradyb Dugdh Utpadak Sahkari Sangh Ltd., Dehradun V. ACIT, Dehradun

ITA 2927/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98079 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S GRANT MILK PARLOURS; LD C
• Keywords: Depreciation; Principle of natural justice; Capital receipt; Revenue expenditure

Judgement Text

1 ITA NO.2927/DEL/10 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 2927/DEL/2010 (ASSESSMENT YEA R-2006-07) DEHRADUN DUGDH UTPADAK SAHKARI SANGH LTD. RAIPUR ROAD, DEHRADUN AAAAD046QQ (APPELLANT) VS ACIT CIRCLE-2 DEHRADUN (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT(A), 1, DEHRADUN PASSED ON 16/02/2010. 2. THE GROUNDS OF APPEAL ARE AS FOLLOW:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APP ELLANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN ADDING AN AMOUNT OF RS.2,05,000/- RECEIVED BY THE APPELLANT A S GRANT FOR MILK PARLOURS AND THE LD. COMMISSIONER (APPEALS) IN CONFIRMING THE ADDITION. APPELLANT BY SH. A. K. BISHNOI, AAYUSH RANJAN, ADV. RESPONDENT BY SH. OM PRAKASH MEENA, SR. DR. DATE OF HEARING 02.12.2015 DATE OF PRONOUNCEMENT 15.12.2015 2 ITA NO.2927/DEL/10 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN ADDING AN AMOUNT OF RS.25,00,000/- RECEIVED BY THE APPELLANT AS GRANT FOR WORKING CAPITAL AND THE LD. COMMISSIONER(APPEALS) IN CONFIRMING THE ADDITION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN DISALL OWING A SUM OF RS.68,500/- ON ACCOUNT OF CONSULTANCY CHARGE S U/S 40(A)(IA) OF THE I.T. ACT 1961 AND THE LD. COMMISSI ONER (APPEALS) IN CONFIRMING THE ADDITION. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN DISALL OWING A SUM OF RS.1,24,334/- ON ACCOUNT OF RENT PAID U/S40( A)(IA) OF THE I.T. ACT 1961 AND LD. COMMISSIONER (APPEALS) IN CONFIRMING THE ADDITION. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN DISALL OWING A SUM OF RS.83,450/- ON ACCOUNT OF LEGAL EXPENSES U/S40(A)(IA) OF THE I.T. ACT, 1961 AND THE LD. COMM ISSIONER (APPEALS) IN CONFIRMING THE ADDITION. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN REJECT ING THES CLAIM OF THE APPELLANT FOR SET-OFF OF HIS BUSINESS LOSSES AND UN-ABSORBED DEPRECIATION OF EARLIER YEARS AGAINST H IS AGGREGATE INCOME OF THE YEAR UNDER ASSESSMENT AND T HE LD. COMMISSIONER (APPEALS) HAVE ERRED IN REMANDING THE SAME TO THE LD. ASSESSING OFFICER ALTHOUGH THE SAM E IS DULY SUPPORTED BY ACKNOWLEDGEMENTS OF HIS RETURNS F OR THE RELEVANT EARLIER YEARS. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE THE LD. ASSESSING OFFICER HAS ERRED IN NOT FO LLOWING THE PRINCIPLES OF NATURAL JUSTICE IN MAKING HIS ASS ESSMENT AND THE LD. COMMISSIONER (APPEALS) HAS ERRED IN SUSTAINING THE ASSESSMENT SO MADE. 3 ITA NO.2927/DEL/10 3. THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 AND IS DISMISSED. 4. THE ASSESSEE IS A STATE GOVT. ENTERPRISE, INCORP ORATED FOR UP- LIFTMENT OF POOR VILLAGER, SPECIALLY WOMEN OF THE W EAKER SECTION OF THE SOCIETY, AND TO PROVIDE THEM A CHANCE OF INCOME GENERATION IN THE FIELD OF PRODUCTION OF MILK AND AT THE SAME TIM E PROVIDE THEM A LEVEL PLAYING FIELD WITH OTHER CAPITALIST IN THIS F IELD. THE GOVT. ALSO USES THIS SOCIETY AS ITS EXTENDED HAND FOR DIRECTL Y PROVIDING ASSISTANCE TO THE VILLAGERS/SOCIETIES WORKING IN TH IS FIELD. 5. THE ASSESSEE IS A NON-PROFIT GENERATING ORGANIZA TION, THEREFORE, TIME TO TIME GOVERNMENTS (LOCAL, STATE, CENTRAL) PR OVIDE THE ASSESSEE WITH GRANT AND AIDS (A) TO MEET THE SHORT FALL IN R EVENUE EXPENDITURE, (B) TO INSTALL NEW MACHINERY, TOOLS AN D TECHNOLOGIES, TO UPGRADE THE OLD TECHNOLOGIES ETC. AND (C) TO ASSIST VILLAGES AND VILLAGE LEVEL SOCIETIES TO ENCOURAGE THE VILLAGES I N THE FIELD OF PRODUCTION OF MILK ETC. DURING THE YEAR UNDER CONS IDERATION THE ASSESSEE RECEIVED RS.1,82,74,989/- AS GRANT AND ASS ISTANCES DETAILS OF WHICH WERE PROVIDED TO THE AUTHORITIES. THE GRA NT AND SUBSIDY RECEIVED AGAINST REVENUE EXPENDITURE WAS DEBITED TO P & L A/C AS INCOME, GRANT AND AIDS RECEIVED FOR PURCHASE OF MAC HINERY ETC. IF REMAINED IN BALANCE AT THE END OF THE YEAR WAS TAKE N TO THE BALANCE SHEET AND SIMILARLY THE GRANT ETC. RECEIVED UNDER T HE HEAD (C) MENTIONED HEREIN ABOVE REMAINED AT THE END WAS ALSO TAKEN AS PART OF BALANCE SHEET. OPENING BALANCE IN THE HEAD OF G RANT AND SUBSIDY WAS RS.5,03,55,410 AND CLOSING BALANCE WAS RS.5,64, 61,998.31, DETAIL A/C OF GRANT/SUBSIDY RECEIVED DURING THE YEA R WAS BIFURCATED 4 ITA NO.2927/DEL/10 IN THE ANNEXED STATEMENT ALONG WITH THE COPIES OF LETTERS/DOCUMENTS SHOWING THE GRANT/SUBSIDY RECEIVE D HEAD-WISE THE SAME WAS PRODUCED BEFORE THE AUTHORITIES. THE A SSESSEE CLAIMED THAT OUT OF TOTAL GRANT RS.53,90,000/- WAS REVENUE GRANT UNDER DIFFERENT HEADS AND WERE TRANSFERRED TO P & L ACCOUNT UNDER DIFFERENT HEADS AS MENTIONED IN THE P & L A/C. 6. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE REC EIVED GRANTS AND SUBSIDIES TO TUNE OF RS. 1,82,74,899/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE SANCTION LETTERS/GOVERNMENT ORDERS INDICATING SUCH GRANTS AND SUBSIDIES WHICH WAS DULY SUBMITTED. THE ASSESSING O FFICER THEREFORE, ADDED RS.60,66,000/- GRANTS/SUBSIDIES MA DE BY THE GOVERNMENT TO THE INCOME OF THE ASSESSEE. 7. THE CIT(A) WHILE ALLOWING THE OTHER SUBSIDIES AN D GRANTS, HAS DISALLOWED RS.25,00,000/- GOVERNMENT GRANT GIVEN BY CENTRAL (IDDP) ON ACCOUNT OF WORKING CAPITAL OF HARIDWAR. T HE CIT(A) HELD THAT SINCE THIS GRANT WAS ATTRIBUTABLE TOWARDS MEET ING WORKING CAPITAL REQUIREMENT FOR RUNNING THE OPERATION OF TH E SOCIETY, THE NATURE OF SUCH GRANT CANNOT BE DEEMED TO BE CAPITAL IN NATURE. FURTHER, THIS AMOUNT WAS NOT UTILIZED DURING THE YE AR UNDER CONSIDERATION, HENCE DISALLOWED BY THE CIT(A). 8. THE LD. AR SUBMITTED THAT THERE WAS A SANCTIONED LETTER FROM THE GOVERNMENT WHICH IS ANNEXED AT PAGE 13 OF THE P APER BOOK AND THE SAME AMOUNT OF RS.25 LACS IS A CAPITAL INFUSION GIVEN BY THE GOVERNMENT FOR WORKING CAPITAL OF THE HARIDWAR UNIT . SINCE, IT IS A 5 ITA NO.2927/DEL/10 CAPITAL RECEIPT, THE ASSESSING OFFICER FAILED TO TA KE INTO COGNIZANCE THAT THE DEHRADUN DUGDH UTPADAK SAHKARI SANGH LTD. HAS TO RUN THE HARDIWAR UNIT. THEREFORE, THE ASSESSING OFFICE R HAS WRONGLY TREATED IT AS A REVENUE RECEIPT. THE LD. CIT(A) AL SO HAS NOT TAKEN INTO ACCOUNT THE ACTUAL FACTS OF THE CASE THAT THE GOVERNMENT GRANTS CENTRAL (IDDP) IS WORKING CAPITAL FOR HARIDW AR UNIT AND NOT A SUBSIDY. 9. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THAT OF CIT(A)S ORDER. 10. AS RELATES TO GROUND NO. 3, 4 AND 5, THE DISALL OWANCE U/S 40(A)(IA), THE ASSESSING OFFICER MADE ADDITION OF C ONSULTANCY CHARGES FOR RS.68,500/-, RENT PAID FOR RS. 1,24,334 /- AND LEGAL EXPENSES OF RS. 83,450/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. THE CIT(A) ALSO CONFIRMED THE SAME. 11. THE LD. AR SUBMITTED CASE LAWS I.E. JAIPUR VIDH YUT VITRAN NIGAM 123 TTJ 888 WHEREIN IT WAS HELD THAT SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 IS APPLICABLE ONLY WHEN THE AM OUNT IS PAYABLE I.E. DUE WHEREAS THE ASSESSEE WHEN MADE ACT UAL PAYMENT THE SECTION DOES NOT APPLY TO THE SAME. IN THE PRES ENT CASE, THE LD. AR SUBMITTED THAT THE PROVISION OF SECTION 40(A)(IA ) OF THE ACT IS ATTRACTED ONLY IN A CASE WHERE TAX HAS EITHER NOT B EEN DEDUCTED OR 6 ITA NO.2927/DEL/10 AFTER DEDUCTION HAS NOT BEEN PAID. IT IS INAPPLICAB LE IN A CASE WHERE TAX HAS BEEN DEDUCTED AT A LOWER RATE AND HAS BEEN PAID IN TO THE CREDIT OF THE CENTRAL GOVERNMENT. THE ADDITION CONS EQUENT TO THE DISALLOWANCE IS THEREFORE LIABLE TO BE DELETED. 12. THE LD. DR RELIED UPON THE CIT(A) S ORDER AS W ELL AS ASSESSMENT ORDER. 13. IN RESPECT OF GROUND NO. 6 THE SET OFF DIRECTIO N WAS GIVEN TO A.O BY THE LD. CIT(A) AS THERE WAS NO SCRUTINY. TH E SAME IS REFLECTED IN PAGE 16, PARA 13.2 OF THE LD. CIT(A)S ORDER. THEREFORE, THE ASSESSEE PRAYED THAT A.O SHOULD BE DIRECTED TO CARRY OUT THE DIRECTION GIVEN BY THE LD. CIT(A) WITH PROPER SPIRI T AND AS PER THE LAW. 14. THE LD. DR RELIED UPON THE LD. CIT(A)S ORDER A ND A.OS ORDER. 15. THE LD. AR IN REJOINDER HAS SUBMITTED THAT AT T HAT PARTICULAR TIME FOR THE RELEVANT ASSESSMENT YEAR THE HARIDWAR UNIT WAS RUN BY THE ASSESSEE AND SUBSEQUENTLY IT WAS MERGED AND THU S THERE WAS ONLY PASS THROUGH ENTRIES THE SAME IS REFLECTED IN THE LETTER GIVEN TO THE ASSESSING OFFICER. HENCE, THE WORKING CAPITAL CANNOT BE TREATED AS CAPITAL. 16. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH THE PARTIES. AS RELATES TO GROUND NO. 2, THE AMOUNT OF RS.25 LA CS IS A CAPITAL 7 ITA NO.2927/DEL/10 INFUSION GIVEN BY THE GOVERNMENT FOR WORKING CAPITA L FOR THE HARIDWAR UNIT WHICH WAS RUN BY THE ASSESSEE. SINCE , IT IS A CAPITAL RECEIPT, THE ASSESSING OFFICER FAILED TO TAKE INTO COGNIZANCE THAT THE DEHRADUN DUGDH UTPADAK SAHKARI SANGH LTD. WHICH IS AT DEHRADUN HAS TO WORK TOWARDS THE WORKING CONDITION OF THE HARDIWAR UNIT. THEREFORE, THE ASSESSING OFFICER HA S WRONGLY TREATED IT AS A REVENUE RECEIPT. THE LD. CIT(A) ALSO HAS N OT TAKEN INTO ACCOUNT THE ACTUAL FACTS OF THE CASE THAT THE GOVER NMENT GRANTS CENTRAL (IDDP) IS WORKING CAPITAL FOR HARIDWAR UNIT AND NOT A SUBSIDY. IT IS PROPERLY ESTABLISHED THAT THE SAME I S WORKING CAPITAL AND CANNOT BE TREATED AS REVENUE RECEIPT. THE CONT ENTION BY THE DR THAT THE ASSESSEE HAS NOT MADE ANY REFUND, CANNO T BE SOLE CRITERIA FOR DETERMINING, WHETHER PARTICULAR INCOME IS REVENUE OR CAPITAL IN NATURE. THERE IS A VAST DIFFERENCE BETWE EN WORKING CAPITAL PROVIDED BY THE GOVERNMENT AND SUBSIDY PROVIDED BY THE GOVERNMENT. THE SUBSIDY IS FOR THE INCENTIVES WHIC H HAS TO BE CREATED IN THE REGIONS WHERE THE LOW INCOME GROUP P EOPLE ARE SITUATED AND THERE ARE VERY LESS AVENUES GIVEN TO T HE BUSINESS PERSON TO DEVELOP THE BUSINESS AS WELL AS GENERATED EMPLOYMENT THE SUBSIDIES ARE GIVEN AT VARIOUS LEVELS TO BOOST THE ECONOMY OF THOSE STATES. IN THIS PRESENT CASE THE ASSESSEE HA S BEEN GIVEN A WORKING CAPITAL TO RUN THE HARIDWAR UNIT AND IT IS NOT NECESSARY A SUBSIDY. THEREFORE, IT IS NOT PROPER TO TREAT THE SAME AS REVENUE RECEIPT BY THE ASSESSING OFFICER AS WELL AS BY THE LD. CIT(A). AS RELATES TO GROUND NO. 3, 4 & 5 SHORT DEDUCTIONS DOE S NOT WARRANT SECTION 40(A)(IA) AS PER THE RATIO LAID DOWN IN CAS E OF JAIPUR VIDHYUT 8 ITA NO.2927/DEL/10 VITRAN NIGAM 123 TTJ 888 BY ITAT WHEREIN IT WAS HEL D THAT SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 IS NOT APPLIC ABLE WHEN SHORT DEDUCTION IS MADE, THEREFORE, THESE GROUNDS ARE ALL OWED IN FAVOUR OF THE ASSESSEE. AS RELATES TO GROUND NO. 6, THE DIREC TION GIVEN BY THE LD. CIT(A) IS YET TO BE IMPLEMENTED BY THE ASSESSIN G OFFICER. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO CARRY OUT THE DIRECTIONS GIVEN BY THE LD. CIT(A) IN PROPER SPIRIT AND AS PER THE LAW. 17. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS FOR THE DIRECTIONS GIVEN HEREINABOVE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15TH OF DECEMBER 2015. SD/- SD/- (S. V. MEHROTRA) (SUCHI TRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15/12/2015 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO.2927/DEL/10 DATE 1. DRAFT DICTATED ON 02.12.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 03.12.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .12.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. .12.2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 15.12.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON .12.2015 PS 7. FILE SENT TO THE BENCH CLERK 16.12.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.