The ACIT, Panchmahal Circle, Godhra V. The Panchmahal Dist. Co.Op.Milk Producers Union Ltd., Godhra

ITA 3036/AHD/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8454 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Recovery proceedings; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 3036/AHD/2013 2010-11 ACIT/DCIT PANCHMAHAL CIRCLE GODHRA THE PANCHMAHAL DIST.CO-OPERATIVE MILK PRODUCTS UNION LTD. LUNAWADA ROAD GODHRA PAN: AAATP 1372 N 2. 2759/AHD/2013 2010-11 ASSESSEE REVENUE 3. 2519/AHD/2015 2008-09 REVENUE ASSESSEE 4. 1964/AHD/2016 2011-12 REVENUE ASSESSEE ASSESSEE BY : SHRI SUNIL TALATI, AR REVENUE BY : SHRI RAJESH MEENA, SR.DR !' / DATE OF HEARING 05/04/2018 #$%&!' / DATE OF PRONOUNCEMENT 13 /04/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS AND CROSS-APPEAL HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX(APPEALS)- VI, BARODA [CIT(A) IN SHORT] DATED 14/05/2015, 19/ 09/2013 AND 29/03/2016 CONCERNING ASSESSMENT YEARS (AYS) 2008-0 9, 2010-11 & 2011-12 RESPECTIVELY. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 2 - 2. THE ASSESSEE BEING SAME AND THE ISSUES BEING C OMMON AND INTER- CONNECTED, ALL APPEALS HAVE BEEN DISPOSED BY WAY OF THIS COMMON ORDER. ITA NOS.3036/AHD/2013 AY 2010-11, 2519/AHD/2015 AY 2008-09 AND 1964/AHD/2016 AY 2011-12 - REVENUES AP PEALS 3. WE SHALL FIRST TAKE ITA NO.3036/AHD/2013 (REVEN UES APPEAL) CONCERNING AY 2010-11 FOR ADJUDICATION PURPOSES. 3.1. THE SOLITARY GRIEVANCE OF THE REVENUE IS TOWAR DS ACTION OF THE CIT(A)IN ADMITTING THE DISALLOWANCE OF RS.1,07,64,1 44/- MADE BY THE ASSESSING OFFICER (AO) ON ACCOUNT OF EXPENSES CLAIM ED AGAINST ANIMAL BREEDING AND CO-OPERATIVE DEVELOPMENT EXPENSES ETC. 3.2. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD .AR FOR THE ASSESSEE IN REVENUES APPEAL SUBMITTED THAT THE AO HAS DISALLOWED THE EXPENSES INCURRED TOWARDS ANIMAL BREEDING AND CO-OP ERATIVE DEVELOPMENT EXPENSES ON THE GROUND THAT EXPENSES RE SULTED IN BENEFIT OF ENDURING NATURE AND THEREFORE CAPITAL IN NATURE. IN THIS REGARD, THE LD.AR SUBMITTED THAT THE DISALLOWANCE MADE BY THE A O WAS AGITATED BEFORE THE CIT(A). THE CIT(A) AFTER ELABORATE DISC USSION HAS TREATED THE AFORESAID EXPENSES TO BE REVENUE IN NATURE AND ACCO RDINGLY ALLOWED THE EXPENDITURE INCURRED IN REVENUES ACCOUNT. THE LD. AR SUBMITTED THAT THE CIT(A) HAS EXAMINED THE NATURE OF EXPENDITURE I NCURRED IN DETAIL AND ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 3 - FOUND THAT THE EXPENDITURE INCURRED ARE REVENUE IN CHARACTER. THE LD.AR THEREAFTER ADVERTED TO THE DECISION OF THE COORDINA TE BENCH OF ITAT IN GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD. FOR AY 2008-09 IN ITA NO.1977/AHD/2012, WHEREIN THE SIMILAR ADDITION MADE BY THE REVENUE WAS DELETED. 3.3. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ASSESSMENT ORDER AND CONTENDED THAT THE EXPENDITURE IS CLEARLY OF CA PITAL IN NATURE AND THUS NOT ALLOWABLE UNDER S.37 OF THE ACT. 3.4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS MATE RIAL PLACED ON RECORD AND CASE-LAWS CITED. THE SHORT ISSUE IN THE CAPTIO NED APPEAL OF THE REVENUE IS MAINTAINABILITY OF CLAIM OF CO-OPERATIVE DEVELOPMENT EXPENSES AND ANIMAL BREED DEVELOPMENT PROGRAM EXPEN SES AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. 3.5. THE CIT(A) HAS ADDRESSED THE ISSUE IN THE F OLLOWING MANNER:- 4.2. DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT MADE ]FOLLOWING SUBMISSION: '1. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DI SALLOWANCE OF RS.1,07,64,144/- INCURRED ON ANIMAL BREEDING & CO-O PERATIVE DEVELOPMENT EXPENSES. THE LEARNED ASSESSING OFFICER ON PAGE 2 A ND 3 IN PARA 3, AFTER ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 4 - REPRODUCING THE SUBMISSION AND CONTENTION OF THE AS SESSEE HAS HELD THAT THESE EXPENSES ARE RELATED TO THE EFFORTS MADE TO ENHANC E MILK PRODUCTIVITY AND IMPROVING THE FUTURE BREED OF ANIMALS, THEREFORE TH E ASSESSEE GETS BENEFIT OF ENDURING NATURE AND AS SUCH THEY ARE NOT REVENUE EX PENDITURE BUT ARE CAPITAL EXPENDITURE. THIS IS THE ONLY BASE FOR DISALLOWING THIS ENTIRE EXPENDITURE WHICH HAS BEEN CONSISTENTLY ALLOWED SINCE LAST MANY YEARS . HOWEVER, THE APPELLANT RESPECTFULLY SUBMITS THAT THESE ARE THE EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLA NT AND HAS TO BE ALLOWED UNDER SEC. 37 OF THE I.T. ACT KEEPING THE ENTIRE PE RSPECTIVE AND WORKING OF THE DAIRY IN MIND. 1.1 THE DETAILS OF THE EXPENDITURE OF RS. 1,07,64,1 44/- PARTICULARS AMOUNT SPENT (RS.) A.I.EXP. 16,75,878 D.C.S.TRAINING EXP. 3,98,175 FIELD STAFF TA /DA EXPS. 4,18,881 FIP YOJNA 1,80,148 KANYA KELAVANI NIDHI FUND 6,00,000 KRUMI NIVARAN CAMP EXP. 19,13,654 MILK HOUSE SUBSIDY (SOCIETY) 3,00,000 SOCIETY MEMBERS WELFARE EXPS. 1,02,991 SOCIETY-SILVER JUBILY CELE.EXP 5,000 SPECIAL VISIT ALLOWANCE EXPS. 10,95,294 VETERINARY CONTRACT LABOUR EXPS. 11,65,469 ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 5 - VETERINARY EXP. 1,84,879 VETERINARY MEDICINE EXP. (I) 83,34,591 VETERINARY STAFF TRANSPORT EXPS (II) 21,72,5 98 VETERINARY TRANSPORT EXP. (III) 27,46.792 1,32,53,981 LESS : RECOVERIES 99,30,208 33,23,773 TOTAL 1,13,64,144 LESS: KANYA KELAVANI NIDHI FUND (DONATION) 6,00, 000 NET AMOUNT DISALLOWED BY A.O. 1,07,64,144 1.2 IN THIS CONNECTION THE APPELLANT HAS TO .RE SPECTFULLY SUBMIT AS UNDER: (1) APART FROM MARKETING AND DISTRIBUTION, THE KEY ROLE OF THE APPELLANT IS TO DEVELOP, PROMOTE AND SUPPORT CO-OPERATIVE DEVELOPME NT ACTIVITIES AND EVEN AS PER THE BYE LAWS WE ARE REQUIRED TO CARRY O UT CO-OPERATIVE DEVELOPMENT ACTIVITIES. OVER THE YEARS THE APPELLAN T HAS PLAYED THAT ROLE EFFICIENTLY AND INCURRED SIZABLE EXPENDITURE OVER T HE YEARS. (2) WE HAVE TO FURTHER STATE THAT WITH THE INTRODUCTIO N OF THE PRIVATE PARTIES IN THE MILK AND MILK PRODUCTS BUSINESS IN ORGANIZED MANNER, IT WAS FEARED THAT THE MILK PRODUCERS AT VILLAGE LEVEL ARE LIKELY TO BE MISDIRECTED BY THE PRIVATE ENTREPRENEURS AND THEREB Y THE MILK PRODUCERS WOULD BE TEMPTED TO DIVERT SUPPLY OF MILK TO THESE PRIVATE PARTIES AND IT WOULD RESULT INTO REDUCTION IN, QUANTUM OF THE PROC UREMENT OF MILK AND AFFECT THE BUSINESS OF THE APPELLANT', ADVERSELY. I T WAS THEREFORE ESSENTIAL THAT DEVELOPMENT OF CO-OPERATIVE PHILOS OPHY AND STRUCTURE ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 6 - SHOULD BE CANVASSED AT THE VILLAGE /EVE/ WHICH WOUL D INCREASE THE CO- OPERATIVE SPIRIT AND AWARENESS AMONG THE MEMBERS A ND THEREBY THE TEMPTATION TO SELL TO THE PRIVATE PARTIES WOULD BE CURBED. (3) KEEPING THIS IN MIND, THE APPELLANT STARTED THE CO- OPERATIVE DEVELOPMENT PROGRAMME SINCE MORE THAN 25 YEARS. L INITIALLY, THE PROGRAMME WAS STARTED IN FEW VILLAGES IN THE STATE OF GUJARAT WHEREIN THE SIGNS OF FALL IN PROCUREMENT WERE SEEN. SUCH PR OGRAMME WERE CARRIED OUT SPECIALLY IN THE VILLAGES WHICH WERE DE VELOPING IN RESPECT OF MILK CO-OPERATIVE, ITS FINANCIAL VIABILITY, INVOLVE MENT OF MEMBERS, DEVELOPMENTAL ACTIVITIES IN RESPECT OF FODDER, MILK PRODUCTION ENHANCEMENT, SCIENTIFIC ANIMAL HUSBANDRY PRACTICES AND OVERALL STRUCTURAL DEVELOPMENT OF ANAND PATTERN DAIRY CO-OP ERATIVE BY DIRECT PARTICIPATION OF THE MEMBERS, BASED ON INTERNATIONA L RECOGNIZED PRINCIPLES OF CO-OPERATION. (4) IT IS FURTHER STATED THAT THERE ARE SMALL MILK PROD UCERS CO-OPERATIVE SOCIETIES AT VILLAGE LEVEL AND IN EACH SOCIETY, THE RE ARE AT LEAST 500 MILK PRODUCERS AND THUS, OVER ONE LAKH MEMBERS GET BENEF IT OF TRAINING AND EDUCATION UNDER THIS MASSIVE DEVELOPMENT PROGRAMME WHICH WOULD ULTIMATELY KEEP THE MEMBER AT VILLAGE LEVEL ASSOCIA TED WITH THE CO- OPERATIVE SOCIETIES AND THEREBY CONTINUE TO SUPPLY THE MILK PRODUCED BY THEM TO THE CO-OPERATIVE SOCIETIES AND IT WOULD ULT IMATELY RESULT IN INCREASE IN THE PROCUREMENT, OF MILK BY THE FEDERAT ION DESPITE THE VIGOROUS ATTEMPT OF THE PRIVATE PARTIES WHO ARE ALS O ENTERING IN THE MILK AND MILK PRODUCTS BUSINESS. THE PURPOSE OF IMPARTIN G THE TRAINING AND EDUCATION TO THE MEMBERS WAS TO IMPRESS UPON THEM T HAT IT WOULD BE IN THEIR OWN INTEREST NOT ONLY TO CONTINUE TO SUPPLY M ILK TO-THE PRIMARY CO- OPERATIVES AND THROUGH THEM TO THE UNIONS, BUT ALSO TO INCREASE THE SUPPLY AND THAT OF BETTER QUALITY. (5) )DURING THE YEAR WE HAVE PERFORMED FOLLOWING ACTIVI TIES IN RESPECT OF COOPERATIVE DEVELOPMENT UNDER CO-OPERATIVE DEVELOPMENT WE HAVE IMPLEMENTED INTERNA CONSULTANT DEVELOPMENT (ICD) INTERVENTION OF DEVELO PING SELF LEADERSHIP ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 7 - AMONG MEMBER PRODUCERS AND THEREBY ENABLING THEM TO MANAGE THEIR DAIRY BUSINESS EFFICIENTLY LEADING TO THEIR OVERALL DEVEL OPMENT. UNDER ICD, WE HAVE IMPLEMENTED THE MODULE ON VISION MISSION STRATEGY ( VMS) FOR PRIMARY MILK PRODUCER MEMBERS & VILLAGE DAIRY CO-OPERATIVES. F ACILITATED BY SPECIALLY TRAINED CONSULTANTS, VILLAGE DAIRY CO-OPERA TIVE SOCIETIES (VDCS) HAVE CONDUCTED THEIR VISION MISSION STRATEGY WORKSHOPS, PREPARED THEIR MISSION STATEMENTS & BUSINESS PLANS FOR NEXT FIVE YEARS. THE VMS MODULE HAS PROMPTED MILK PRODUCERS TO INITIATE ACTIVITIES AT V ILLAGES, WHICH HAS DIRECT IMPACT ON THEIR MILK BUSINESS. SUCH BUSINESS PLA N, HELP 'AND STRENGTHEN VDCS TO FACE THE FIERCE COMPETITION AHEAD. TO SUP PORT AND BOOST THE PROGRESS OF VDCS, YEARLY REVIEW OF VMS IS BEING CAR RIED OUT. WE HAVE FORMED VILLAGE LEVEL CORE GROUP FORMED OF MILK PRODUCERS ' AND MANAGEMENT OF THE VDCS AND PROVIDED THEM VARIOUS TRAINING TO IMPROVE THE QUALITY OF MILK BY CARRYING OUT CLEANLINESS DRIVE AT VILLAGE LEVEL. THEY ALSO CARRY OUT CLEANLINESS AUDIT AT VDCS. IN ADDITION ON 2 ND OCTOBER (GANDHI JAYANTI DAY) VDCS ALSO CARRY OUT RED TAG DAY-WHERE CLEANING OF VDCS, SURRO UNDINGS, AND ITS RECORDS-/ REGISTER IS CONDUCTED. UNDER COOPERATIVE DEVELOPMENT, TO IMPROVE THE BREEDING SERVICES, WE HAVE IMPLEMENTED A RTIFICIAL INSEMINATION SERVICES IMPROVEMENT-PROGRAMME AND IMPARTED TRAI NING TO CORE GROUPS AT VILLAGE LEVEL. TO BOOST THIS MOVEMENT, WE HAVE ALS O CONDUCTED MASS DE- WORMING CAMPAIGN. WE HAVE ALSO IMPLEMENTED THE AI AUDIT COMPETITION TO IDENTIFY* BEST PERFORMING VDCS & AI WORKERS OF THESE SOCIETIES TO-MOTIVATE THEM TO FURTHER IMPROVE THEIR WORK. WE HAVE ALSO IMPLEMENTED VDCS CHAIRMEN & SECRETARI ES' ORIENTATION PROGRAMME TO INCREASE THEIR AWARENESS ABOUT DAIRY I NDUSTRY SCENARIO AND IMPART LEADERSHIP SKILLS TO THE CHAIRMEN & SECRETAR IES OF THE VILLAGE DAIRY COOPERATIVES. TO ENCOURAGE THE PARTICIPATION OF WOMEN MILK PRODUC ERS IN THE-DAIRY COOPERATIVE SOCIETIES AND TO DEVELOP THEIR SKILLS A ND ENHANCE LEADERSHIP QUALITIES, WE HAVE CONDUCTED SELF MANAGING LEADERSH IP .(SML) PROGRAMME FOR WOMEN RESOURCE PERSONS ALONG WITH CHAIRMEN AND SECR ETARIES VDCS. THROUGH THESE PROGRAMME THE MEMBERS ARE MADE AWARE ABOUT ECONOMICALLY READING OF MILK ANIMAL, REDUCTION IN COST OF MILK P RODUCTION, DISEASE CONTROL, ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 8 - FEED AND FODDER PRACTICES, LEAST COST FORMULA, AVOI D SOURAGE OF MILK BY CLEAN MILK PRODUCTION, AND EARNED BETTER RETURN BY ADOPTI NG ALL THESE PRACTICES AT VILLAGE LEVEL. (6) EXPENSES TOWARDS FERTILITY IMPROVEMENT PROGRAMME - FIP WITH REFERENCE TO EXPENDITURE AGAINST FERTILITY IMP ROVEMENT PROGRAMME, IT IS SUBMITTED THAT GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD. HAD DECIDED TO RUN FERTILITY IMPROVEMENT PROGRAMME IN A LL ASSOCIATE UNIONS AND, CO-OP. SOCIETIES. THERE HAD BEEN INCLUSION OF MILK CATTLE NOT YIELDING MILK ALONG WITH ADULT UNDERPRODUCTIVE COW / BUFFALO HEIF ERS. THE OBJECTIVE OF THIS PROGRAMME WAS TO ORGANIZE INFERTILITY PREVENTION CA MPS EVERY 45 DAYS INTERVAL IN EVERY VILLAGES SELECTED UNDERNEATH THIS PROGRAMME. THE EXPENDITURE IS THEREFORE RELATED TO THE BUSINESS OF THE ASSESSE E AND HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE APPEL LANT CONDUCTS ANIMAL ENUMERATION AT REGULAR INTERVALS AND ANALYSES THE D ATA COLLECTED THROUGH ENUMERATION TO REVEAL THE TRENDS IN VARIOUS PARAMET ERS SUCH AS NOT EVEN CALVED ONCE (NECO) AND NON-PREGNANT DRY (NPG DRY) A NIMALS, WHICH IN TURN HELPS IN FUTURE PLANNING, MAKING STRATEGIC AND MANAGERIAL DECISIONS FOR GROWTH IN DIARY BUSINESS. IN ORDER TO BRING THESE U NPRODUCTIVE ANIMALS INTO MILK PRODUCTION 'AND TO REDUCE THE ECONOMIC BURDEN TO THE MILK PRODUCERS, THE APPELLANT IMPLEMENTED THE FIP IN THE F.Y. 2006-07 M AINLY TO IMPROVE THE FERTILITY OF THE ANIMALS AND REDUCE THE NUMBER OF U NPRODUCTIVE ANIMALS AND IN TURN TO INCREASE THE QUANTITY AND QUALITY OF MILK. OBJECTIVES OF FERTILITY IMPROVEMENT PROGRAMME (FIP) MAJOR REASONS FOR INFERTILITY IN ANIMALS OF GUJARAT INCLUDES IMPROPER CALF REARING, LOW BODY WEIGHT OF ANIMALS, LACK OF IMPORT ANT -NUTRITION / MINERAL TO ANIMALS, LOW PRIORITY OF ANIMALS FOR BREEDING ACTIV ITY, POOR HEALTH OF ANIMALS AND LACK OF AWARENESS AMONG FARMERS REGAR DING IMPROVED BREEDING PRACTICES. CONSIDERING THESE ASPECTS FIP'S MAJOR OBJECTIVES AR E AS UNDER: ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 9 - 1. TO REDUCE NON-PREGNANT NOT EVEN CALVED ONCE (NPG NE CO) AND NON-PREGNANT DRY (NPG DRY) ANIMAL POPULATION FROM T HE SELECTED VILLAGES. 2. TO GENERATE DATABASE OF/WPG NECO ANIMALS BY TAGGING AND REGISTRATION PROCESS. 3. TO ESTABLISH INFORMATION NETWORK FOR ANIMAL BREEDIN G ACTIVITIES. 4. TO IMPROVE OVERALL HEALTH CONDITION OF MILK ANIMALS COOPERATIVE SOCIETY SELECTION CRITERIA: SINCE MORE THAN 5 YEARS FIP HAS BEEN IMPLEMENTED IN VARIOUS DCSS HAVING HIGHEST NPG NECO (NON PREGNANT / NON PREGNANT NOT E VEN CALVED ONCE) POPULATION AS PER ANIMAL SURVEY 2005. ACTIVITIES CARRIED OUT UNDER FIP: A) VILLAGE AWARENESS PROGRAMME (VAP) HAS BEEN CARRI ED OUT AT EACH OF THE SELECTED VILLAGES TO INCREASE INVOLVEMENT OF MEMBER S IN VARIOUS ACTIVITIES OF THE PROJECT AND ACHIEVE DESIRED RESULTS FOR REDUCTI ON OF NPG NECO ANIMALS. B) REVISIT OF AI MODULE 'HAS BEEN CARRIED OUT AT EA CH OF SELECTED DISTRICT COOPERATIVE SOCIETIES (DCS) TO IMPROVE AI QUALITY A T DCS. C) BASELINE SURVEY HAS BEEN CARRIED OUT TO KNOW THE CURRENT STATUS OF ANIMALS, ANIMAL HUSBANDRY (AH) ACTIVITIES IN VILLAGES. D) TAGGING AND REGISTRATION OF ANIMALS HAS BEEN CAR RIED OUT TO PROVIDE UNIQUE IDENTITY TO ALL NPG BECO ANIMALS AND FACILITATE DAT A ANALYSIS. E) FERTILITY CAMPS IN EACH OF SELECTED VILLAGES AT LEAST FOUR FERTILITY CAMP HAS BEEN CARRIED OUT TO TREAT NPG NECO ANIMALS. F) MASS DEWORMING HAS BEEN CARRIED OUT TO RE DUCE WORM LOAD AND IMPROVE OVERALL HEALTH CONDITION OF ANIMALS. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 10 - G) MINERAL MIXTURE HAS BEEN PROVIDED TO MILCH ANIMA LS TO REDUCE MINERAL DEFICIENCY. H) MASS VACCINATION PARTICULARLY FOR FMD AND HS HAS BEEN CARRIED OUT TO REDUCE CHANCE OF OUTBREAK OF DISEASES. I) BALANCED CATTLE FEED; TWO BAGS OF CATTLE FEED (140 KG.) HAS BEEN PROVIDED TO EACH NPG NECO ANIMALS FREE OF COST TO IMPROVE BO DY WEIGHT AND HEALTH OF MILCH ANIMALS. J) UREA STRAW TREATMENT DEMONSTRATION HAS BEEN CA RRIED OUT IN EACH SELECTED DCS TO ENCOURAGE FARMERS TO PROVIDE NUTRITIVE FEES TO ANIMALS. K) AI REFRESHER TRAINING HAS BEEN PROVIDED TO ALL A I WORKERS. 1.3 THE APPELLANT HAS TO FURTHER SUBMIT THAT (1)THE APPELLANT IS A PART OF LEADING CO-OPERATIV E ORGANIZATION OF THE DAIRY COOPERATIVES IN PANCHMAHAL & DAHOD. OVER THE LAST FIVE AND HALF DECADES, DAIRY COOPERATIVES IN PANCHMAHAL & DAHOD H AVE CREATED AN ECONOMIC NETWORK THAT LINKS MORE THAN 24 LAKHS VILL AGE MILK PRODUCERS WITH MILLIONS OF CONSUMERS IN INDIA AND ABROAD THROUGH A COOPERATIVE SYSTEM THAT INCLUDES 1894 VILLAGE DAIRY COOPERATIVE SOCIETIES ( VDCS) AT THE VILLAGE LEVEL. THESE COOPERATIVES COLLECTS ON AN AVERAGE 4.49 LAKH S LITERS OF MILK PER DAY FROM THEIR PRODUCER MEMBERS, MORE THAN 70% OF WHOM ARE SMALL, MARGINAL FARMERS AND LANDLESS LABOURERS AND INCLUDE A SIZEA BLE POPULATION OF TRIBAL FOLK AND PEOPLE BELONGING TO THE SCHEDULED CASTES. (2)EVER SINCE THE MOVEMENT WAS LAUNCHED IN 1946, GU JARAT'S DAIRY COOPERATIVES HAVE BROUGHT ABOUT A SIGNIFICANT SOCIA L AND ECONOMIC CHANGE TO THE RURAL PEOPLE. THE DAIRY COOPERATIVES HAVE HELPE D IN ENDING THE EXPLOITATION OF FARMERS AND DEMONSTRATED THAT WHEN OUR RURAL PRODUCERS BENEFIT, THE COMMUNITY AND NATION BENEFITS AS WELL. (3)THE APPELLANT CANNOT BE VIEWED SIMPLY AS A BUSIN ESS ENTERPRISE. IT IS AN INSTITUTION CREATED BY THE MILK PRODUCERS THEMSELVE S TO PRIMARILY SAFEGUARD - ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 11 - THEIR INTEREST ECONOMICALLY, SOCIALLY AS WELL AS DE MOCRATICALLY. THE SURPLUS GENERATED IS PLOUGHED BACK TO FARMERS THROUGH THE D ISTRICT UNIONS AS WELL AS THE VILLAGE SOCIETIES. THE CIRCULATION OF CAPITAL W ITH VALUE ADDITION WITHIN THE STRUCTURE NOT ONLY BENEFITS THE FINAL BENEFICIARY - THE FARMER - BUT EVENTUALLY CONTRIBUTES TO THE DEVELOPMENT OF THE VILLAGE COMMU NITY. THIS IS THE MOST SIGNIFICANT CONTRIBUTION OF THE AMUL MODEL THE COO PERATIVES OF WHICH THE APPELLANT IS THE APEX BODY. (4)TO OVERCOME THE MASSIVE CHALLENGES, IT BECAME I MPERATIVE TO COMMUNICATE TO MILK PRODUCERS THAT THEY HAVE TO CONSIDER AND OP ERATE ANIMAL HUSBANDRY AS A BUSINESS INSTEAD OF SUPPLEMENTARY ACTIVITY TO AGR ICULTURE. THEREFORE, IT WAS ESSENTIAL THAT DEVELOPMENT OF COOPERATIVE PHILOSOPHY AND STRUCTURE AND INCREASING MILK PRODUCTIVITY IS CANVASSED AT VI LLAGE LEVEL WHICH WOULD INCREASE THE COOPERATIVE SPIRIT TO OVERALL STRENGTH ENING OF DAIRY CO-OPERATIVE STRUCTURE] IN GUJARAT. CO-OPERATIVE DEVELOPMENT & BREED DEVELOPMENT PROGRA MME IN VIEW OF THE ABOVE, AS PER COOPERATIVE PRINCIPLE 'EDUCATION, TRAINING AND INFORMATION', THE APPELLANT STARTED CO-OPERATIVE DE VELOPMENT PROGRAMME FOR MEMBERS TO PREPARE THEM FOR NEW CHALLENGES AND HELP THEM TO IMPROVE EFFICIENCIES AND QUALITY OF LIFE. SUCH CO-OPERATIVE DEVELOPMENT PROGRAMME AIMS AT BUILDING GREATER MEMBER UNDERSTANDING OF TH E FUNCTIONS OF CO- OPERATIVES, IMBIBE LOYALTY TOWARDS CO-OPERATIVES, O RIENTING MILK PRODUCERS TO THEIR ROLE AND RESPONSIBILITIES AND PROMOTING THEIR PARTICIPATION IN THE FUNCTIONS OF THE CO-OPERATIVES. 1.4 TO SUMMARISE, THE APPELLANT HAS INCURRED THE AB OVE STATED EXPENDITURE FOR THE BRIEF PURPOSES AS UNDER: AI EXPS. : IT INCLUDES EXPENSES RELATED TO SEMEN DO SES AND AI GEN SUPPLIED TO THE MEMBER SOCIETIES AND ARTIFICIAL INSEMINATION FA CILITIES GIVEN TO THEM. DCS TRAINIG EXPS. : EXPENSES RELATED TO TRAINING GI VEN TO THE MEMBERS OF PRIMARY SOCIETIES FOR COLLECTION, CLEANING OF MILK AND KEEPING AND MAINTENANCE OF THE STORAGE AREA. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 12 - FIELD STAFF TA/DA EXPS, : TA/DA EXPENSES RELATED TO FIELD STAFF ATTENDING THE CALLS FROM MEMBER SOCIETIES. FIP YOJNA : THE FERTILITY IMPROVEMENT PROGRAM, IN W HICH WE ARE ORGANIZING VARIOUS CAMPS AT RURAL LEVEL FOR FERTILITY IMPROVEM ENT OF COWS AND BUFFALOS. KRUMI NIVARAN CAMP EXPS. : WE CONDUCT DE WARMING CA MPS AT RURAL AREAS FOR COWS AND BUFFALOS. EXPENSES OF CAMP , MEDICINE AND OTHER MISC. EXPENSES RELATED TO CAMP. MILK HOUSE SUBSIDY / EXPENSES : 5% OF THE TOTAL COS T OF MILK HOUSE AT DCS OF THE MEMBER SOCIETIES PAID BY UNION. IT IS NOT REIMB URSED OR RECOVERED, NOR ANY INCOME RECEIVED FROM THE MEMBERS, OTHER SOURCES. SOCIETY MEMBERS WELFARE EXPS. : IN CASE OF SPECIFIC PROBLEM OF MILK PRODUCERS, THE UNION IS EXTENDING HELP & EXPENSES RELATED TO WELFARE FACILITIES (I.E. MEDICAL EMERGENCY) PROVIDE D TO THE MEMBERS. SOCIETY SILVER JUBILEE EXPS. : AS AND WHEN A MILK SOCIETY COMPLETES 25YEARS OF EXISTENCE THE UNION REIMBURSED CELEBRATI ON EXPS OF THE SOCIETY : WHO COMPLETED 25 YEARS OF THEIR SERVICE. SPECIAL VISIT ALLOWANCE EXPS. : AT UNION WE HAVE EM ERGENCY MEDICAL UNIT FOR CATTIES, OUR DOCTORS REQUIRED TO VISIT THE MILK PRO DUCERS WITHIN 4-5 HOURS OF EMERGENCY AND FOR THIS SPECIAL ALLOWANCE PAID TO TH E VETERINARY DOCTORS TO VISIT AT RURAL AREAS FOR MEDICAL NEEDS. ; VETERINARY CONTRACT LABOUR EXPS. : THE UNION HAVE P OSTED SEMI SKILLED CONTRACT WORKERS IN VARIOUS VILLAGES, WAGES EXPS OF LABORS ENGAGED IN VETERINARY SERVICES. VETERINARY EXPS / VETERINARY MEDICINE EXPS. : EXPENSES RELATED TO MEDICINES WHICH ARE USED BY DOCTORS DURING GENERAL VETERINARY SERVICES AS [WELL AS PROVIDING EMERGENCY SERVICES. : . ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 13 - VETERINARY STAFF TRANSPORT EXPS. / VETERINAR Y TRANSPORT EXPS. EXPENSES RELATED TO TRANSPORTATION OF VETERINARY OFFICER TO THE VISITING PLACES TO ATTEND THE SICK CATTLE. 1.5 THUS IT CAN SEEN THAT THE ENTIRE AFORESAID EXPE NDITURE ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF IMPROVING THE BREEDI NG OF ANIMALS COLLECTING SEMEN FROM CATTLE AND POSSESS IT SO THAT MORE COWS AND BUFFALOES ARE PRODUCED TO POOR VILLAGERS, GIVE TRAINING TO THE MEMBERS OF THE PRIMARY SOCIETY AS TO HOW TO COLLECT MILK, KEEP IN CLEAN AND MAINTAIN THE SAM E IN THE STORAGE SO THAT POOR FARMERS AND VILLAGERS GET BETTER PRICE TO THEIR GOO D QUALITY MILK AND VARIOUS OTHER CAMPS ORGANIZED WHOLLY AND EXCLUSIVELY FOR SU CH FARMERS AND VILLAGERS AND THEIR FAMILY TO PROCURE MORE MILK FROM THEM SO THAT IN TURN WILL GET MORE MILK FROM THE COWS AND BUFFALOES AND IN TURN GIVE I T TO OUR DAIRY FOR A BETTER PRICE THAN OTHER PRIVATE PARTIES. ALL THE EXPENDITU RE ARE INCURRED BY THE DAIRY ON THEIR EMPLOYEES, WHO ARE VISITING REMOTE VILLAGE S AND GIVING VETERINARY MEDICINES AND OTHER SERVICES OF TAKING CARE OF THE ANIMALS, WHO ARE SUPPLIERS OF OUR BASIC RAW-MATERIAL I.E. MILK. 1.6 IN VIEW OF THIS IT IS SUBMITTED THAT EXPEND ITURE ARE INCURRED (I) WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THEREFORE ALLOWABLE U/S. 37 OF THE INCOME TAX ACT. (II) IT IS BEING INCURRED CONSISTENTLY SINCE LAST SEVERA L YEARS AND SUBSEQUENT YEARS. (III) IT IS FOR MAINTAINING THE BREED, I.E. COWS AND BUFF ALOES, WHO CAN GIVE GOOD QUALITY AND GOOD QUANTITY OF MILK. (IV) IT IS NOT OF ANY ENDURING BENEFIT BUT OF YEARLY PRO CUREMENT OF MILK. (V) NO CAPITAL IN NATURE AS NO TANGIBLE OR INTANGIBLE A SSET IN NATURE ARE RECEIVED OR COME IN TO EXISTENCE AND THEREFORE MUST BE ALLOWED AS REVENUE EXPENDITURE AS WHOLLY AND EXCLUSIVELY INCUR RED FOR THE PURPOSE OF BUSINESS. (VI) LASTLY, THE AFORESAID ISSUE IS FULLY COVERED BY THE DECISION OF HON'BLE COMMISSIONER OF INCOME TAX (APPEALS)-IV, BARODA IN CASE OF GUJARAT CO. OPERATIVE MILK MARKETING FEDERATION LIM ITED FOR ASST. YEAR 2008-09 AND 2009-10, COPIES OF WHICH ENCLOSED AT PAGE 4 TO 18. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 14 - IN VIEW OF THIS IT IS SUBMITTED THAT THE ADDITION O F RS.L,07,64,144/- BE DELETED. 4.3 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE ISSUE AT HAND. I HAVE ALSO CONSIDERED THE FACTS OF THE CASE AND THE MATERIAL A VAILABLE ON RECORD. I HAVE ALSO PERUSED THE DECISIONS PUT FORTH BY ; THE APPELLANT. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF CIT(A)-IV, BARODA IN THE CASE OF M/S GUJARAT CO- OPERATIVE MILK MARKETING FEDERATION LTD. IN AP PEAL NO. CAB/IV-A- 222/2010-11 FOR A.Y. 2008-09. IN THE SAID ORDER, AFTER CAREFUL CONSIDERATION OF ALL THE FACTORS INVOLVED, THE CIT( A)-IV, BARODA HAS HELD AS UNDER ON A SIMILAR ISSUE: '6.14 THE REASONS FOR MAKING THE ABOVE ADDITION OF RS.5,82,22,000/-(I.E. THE ADDITION OF RS.5,82,22,000/- WHICH IS PART OF TOTAL ADDITION OF RS.6,16,36,532/- AND WHICH WERE CLAIMED BY THE APPE LLANT ON ACCOUNT OF REIMBURSEMENT TO MEMBER UNIONS AGAINST CO-OPERATIVE DEVELOPMENT EXPENSES AND ON ACCOUNT OF EXPENSES TOW ARDS FERTILITY IMPROVEMENT PROGRAMME FOR THE YEAR UNDER CONSIDERATION) AS MENT IONED BY THE A.O. IN THE ASSESSMENT ORDER AS WELL AS ENTIRE ABOVE SUBMISSION OF THE APPELLANT, HAVE BEEN CONSIDERED. THE ADDITION OF RS.5,82,22,000/- I NCLUDES AN EXPENDITURE OF RS.1,82,68,000/- AND FURTHER EXPENDITURE OF RS.3,99 ,54,000/- THE APPELLANT IS IN THE BUSINESS OF MILK AND MILK PRODUCTS AND ANY E XPENDITURE INCURRED WITH A VIEW TO INCREASE THE BUSINESS, TO DEVELOP THE BUSIN ESS, TO EXPAND THE ACTIVITY TO INCREASE THE TURNOVER ARE DIRECTLY CONNECTED TO THE APPELLANT'S BUSINESS. WHEN THE NATURE OF EXPENSES ARE DIRECTLY RELATED T O TRADE AND OUT OF COMMERCIAL EXPEDIENCY SHOULD BE CONSIDERED AS 'WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS'. ONCE EXPENDITURE IS INCU RRED WHICH RESULTS INTO INCREASE IN THE TURNOVER AND CONSEQUENTLY TAXABLE P ROFIT, SUCH BENEFIT COULD NOT BE OF ENDURING NATURE OF MORE THAN ONE YEAR OR EVEN FOR ONE YEAR. BY INCURRING SUCH EXPENSES KNOWN NEW CAPITAL ASSET CAME INTO EXI STENTS. IN MY OPINION THE TEST FOR ALLOWANCE OF EXPENDITURE U/S 37 IS ENOUG H TO SHOW THAT ; THE MONEY WAS EXPENDED OUT OF NECESSITY AND WITH A VIEW TO D IRECT A MINIMUM BENEFIT TO THE TRADE, BUT VOLUNTARILY AND ON THE GROUND OF COMMERCIAL EXPEDIENCY AND IN ORDER TO FACILITATE DIRECTLY OR I NDIRECTLY THE : CARRYING ON OF THE BUSINESS. IN DECIDING WHETHER THE PAYMENT OF MO NEY IS A TAXABLE EXPENDITURE OR OTHERWISE ONE HAS TO TAKE INTO CONSI DERATION NOT ONLY; THE ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 15 - COMMERCIAL EXPEDIENCY BUT ALSO THE PRINCIPLES OF OR DINARY COMMERCIAL TRADING AND LEGITIMATE COMMERCIAL NECESSITY FOR INCURRING S UCH EXPENSES. CONSIDERING ALL THESE ASPECTS I AM OF THE VIEW THAT INCURRING O F EXPENDITURES OF RS.5,82,22,000/- ARE DIRECTLY BENEFITED TO THE APPE LLANT MORE THAN ONE WAY BESIDES INCREASE IN TURNOVER AND INCOME. THUS IT CA N BE SAID THAT THIS EXPENDITURE OF RS.5,82,22,000/- ON ACCOUNT OF REIMB URSEMENT OF MEMBER UNIONS AGAINST CO-CO. DEVELOPMENT EXPENSES AND EXPE NSES TOWARDS FERTILITY IMPROVEMENT PROGRAMME ARE WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT AND, THEREFORE, THE A.O. IS NOT CORRECT IN MAKING . ADDITION OF THIS AMOUNT OF RS.5,82,22,000/- TO T HE TOTAL INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. SUPPORT IS DRAWN FROM THE DECISION OF HON'BLE ITAT BENCH 'A' IN THE CASE OF VALSAD DIS TRICT CO-OPERATIVE SOCIETY IN ITA NO. 3356/AHD/2007. IN VIEW OF THESE FACTS I, THEREFORE, DELETE THE ADDITION OF RS.5,82,22,000/- AS MADE BY THE AO. 4.4 RESPECTFULLY FOLLOWING THE SAME, THE ADDITI ON OF RS.1,07,64,144/- ON ACCOUNT OF ANIMAL BREEDING EXPENSES IS DELETED. THIS GROUND OF APPEAL SUCCEEDS. 3.6. WE INTER ALIA NOTICE THAT THE CIT(A) HAS FOLLOWED THE DECISION O F THE FIRST APPELLATE AUTHORITY IN THE CASE OF GUJARA T CO-OPERATIVE MILK MARKETING FEDERATION LTD. RELEVANT TO AY 2008-09. IT IS SEEN THAT THE AFORESAID DECISION OF THE CIT(A) HAS BEEN CONSIDERE D WITH APPROVAL IN FAVOUR OF ASSESSEE BY THE COORDINATE BENCH IN ITA N O.1977/AHD/2012 & ORS. READ WITH MA NO.118/AHD/2017. THUS, IN PARIT Y WITH THE DECISION OF THE COORDINATE BENCH ON THE ISSUE, WE FIND NO RE ASON TO INTEREFERE WITH THE ORDER OF THE CIT(A). ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 16 - 4. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.3 036/AHD/2013 FOR AY 2010-11 IS DISMISSED. 5. THE APPEAL OF THE REVENUE IN ITA NO.2519/AHD/201 5 RELEVANT TO AY 2008-09 AND ITA NO.1964/AHD/2016 RELEVANT TO AY 2011-12 RAISED IDENTICAL GRIEVANCES OF SIMILAR FACTS. THEREFORE, IN CONSONANCE WITH THE CONCLUSION DRAWN IN ITA NO.3066/AHD/2013 FOR AY 201 0-11, THE CAPTIONED REVENUES APPEALS IN ITA NO.2519/AHD/2015 FOR AY 2008-09 AND ITA NO.1964/AHD/2016 FOR AY 2011-12 STANDS DISM ISSED. ITA NO.2759/AHD/2013 ASSESSEES APPEAL AY 2010- 11 6. NOW WE SHALL ADVERT TO CROSS-APPEAL OF THE ASSES SEE IN ITA NO.2759/AHD/2013 RELEVANT TO AY 2010-11. 6.1. AS PER ITS CROSS-APPEAL, THE ASSESSEE IS ALSO AGGRIEVED BY THE ORDER OF THE CIT(A) DATED 19/09/2013 RELEVANT TO AY 2010- 11 FOR WHICH THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UN DER:- 1. THE LEARNED C.I.T.(A) HAS ERRED IN DISALLOWING A ND CONFIRMING THE ADDITION OF RS.1,49,42,167/- BEING EXPENDITURE CLAI MED AND SUFFERED AS MISAPPROPRIATION OF LOSS OF MILK. IT IS SUBMITTED T HAT BASED ON THE SUFFICIENT AND SUBSTANTIAL DETAILS FILED AND AS CON FIRMED BY CO- OPERATIVE AUDITOR THE APPELLANT HAS SUFFERED A LOSS OF RS.1,49,42,467/-, QUANTIFICATION OF WHICH IS NOT DI SPUTED. IT IS SUBMITTED THAT THE LOSS HAVING BEEN SUFFERED, INCURRED AND CR YSTALLIZED DURING THIS YEAR, THE SAME BE ALLOWED AND THE OBSERVATION AND F INDING OF THE CIT(A) ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 17 - THAT THE LOSS HAS NOT BEEN CRYSTALLIZED DURING THIS YEAR IS NOT CORRECT AND THE SAME BE NOT ACCEPTED. WITHOUT PREJUDICE TO THE ABOVE IT IS SUBMITTED THAT NOTWITHSTANDING THE PROVISION OF SUCH LOSS IN PROFIT & LOSS ACCOUNT OF THE AUDITED ACCOUNTS OF THE APPELLANT, THE APPELLANT CO-OPERATIVE SOCIET Y HAS SUFFERED THE LOSS OF RS.1,49,42,167/- BY WAY OF MISAPPROPRIATION BY EMPLOYEES AND IN VIEW OF THAT THE SAME BE ALLOWED AS A DEDUCTION AS THERE IS NO RELEVANCE WITH REGARD TO THE PROVISION AND ACCOUNTI NG ENTRY PASSED IN THE BOOKS AS HELD BY SUPREME COURT. 2. IN THE ALTERNATIVE THE APPELLANT SUBMITS THAT T REATMENT OF SHOWING THE MISAPPROPRIATED SALES IN THIS RELEVANT ASSESSMENT Y EAR AS PER THE DIRECTION OF THE CO-OPERATIVE AUDITOR BE CONSIDERED AND SUCH SALES BE REDUCED WHILE COMPUTING THE TOTAL INCOME. IT IS SUB MITTED THAT ON THE BASIS OF THE FACTS AND DETAILS SUBMITTED, THERE WAS NO EFFECTIVE SALES MADE BY THE APPELLANT DURING THIS YEAR AND SALES SH OWN IN PROFIT & LOSS ACCOUNT ON THE INSISTENCE OF GOVERNMENT CO-OPERATIV E AUDITOR BE REDUCED WHILE COMPUTING THE TOTAL INCOME. 6.2. THE ASSESSEE, IN ESSENCE, SEEKS TO CHALLENGE T HE ACTION OF THE CIT(A) IN DENYING RELIEF TO THE ASSESSEE TOWARDS AD DITION OF RS.1,49,42,167/- ON ACCOUNT OF LOSS CLAIMED DUE TO MISAPPROPRIATION OF MILK SALE PROCEEDS IN THE NATURE OF EMBEZZLEMENT. 6.3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF MILK PROCESSING AND PRODUCTION OF MILK PRODUCTS. THE AS SESSEE INTER ALIA CLAIMED DEDUCTION OF RS.1,49,42,167/- OUT OF ITS P ROFITS TOWARDS BUSINESS LOSS DUE TO MISAPPROPRIATION BY EMPLOYEES UNDER S.28 OF THE ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 18 - ACT. ON ENQUIRY IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE SUPPORTED THE CLAIM AND SUBMITTED THAT DURING THE Y EAR IN APPEAL, IT DETECTED MISAPPROPRIATION ON SALE OF CERTAIN QUANTI TY OF LIQUID MILK PERTAINING TO EARLIER YEAR. THE ASSESSEE MADE OUT A CASE BEFORE THE AO THAT THE MISMATCH FOUND BETWEEN THE QUANTITY OF MIL K SOLD AND QUANTITY OF SALE OF MILK RECOGNIZED IN THE BOOKS ON RECONCIL IATION WAS DEBITED TOWARDS BUSINESS LOSS DUE TO MISAPPROPRIATION BY E MPLOYEES. THE ASSESSEE CLAIMED THAT THE CONCERNED EMPLOYEES FAILE D TO GIVE ACCOUNT FOR THE SALE OF THE QUANTITY FOUND AS A MISMATCH BETWEE N THE SUPPLY FOR SALE AND ACTUAL SALE RECORDED. IT WAS FURTHER POINTED O UT THAT THE AFORESAID AMOUNT ALTHOUGH RELATING TO FINANCIAL YEAR 2009-10 (AY 2010-11) WAS DETECTED SUBSEQUENTLY IN THE COURSE OF AUDIT AND TH EREFORE THE SALE ACCOUNT WAS CREDITED AND INCREASED TO THE EXTENT OF THE UNDERREPORTING OF SALE IN THE EARLIER YEAR AND CORRESPONDINGLY THE AM OUNT WAS SHOWN AS RECOVERY OUTSTANDING IN THE NATURE DEBT FROM THE CO NCERNED EMPLOYEE. THE AO DID NOT FIND MERIT IN THE ELIGIBILITY OF CLA IM OF LOSS TOWARDS MISAPPROPRIATION ON THE GROUND THAT THE MATTER CONT INUES TO BE UNDER INVESTIGATION AND IS NOT CONCLUDED. THE LOSS IS TH US NOT CRYSTALLIZED. THE AO ALSO REJECTED THE CLAIM OF THE ASSESSEE ON THE G ROUND THAT THE LOSS, IF ANY, PERTAINS TO FINANCIAL YEAR (FY) 2008-09 RELEVA NT TO AY 2009-10 AS POINTED OUT BY THEIR OWN SPECIAL AUDITORS WHO HAS P OINTED OUT THE SHORT FALL IN SALES CONCERNING FY 2008-09 BY NOT ACCOUNTI NG THE ENTIRE MILK LOADED IN TRUCKS AND HANDED OVER TO AGENTS/EMPLOYE ES AND CONSEQUENTLY ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 19 - DIRECTED THE ASSESSEE TO RECOVER THE SALE PROCEEDS AND RECORD THE SHORT- FALL IN SALES. IT WAS ALSO NOTICED BY THE AO THAT SPECIFIC AMOUNT OF RECOVERABLE WAS IDENTIFIABLE TO SPECIFIC UNITS/MEMB ERS FOR WHICH THE MATTER WAS STILL BEING INVESTIGATED. BESIDES, THE AO OBSERVED THAT THE ASSESSEE HAS NOT EVEN FILED ANY FIR OR HAS NOT INIT IATED ANY LEGAL ACTION FOR ALLEGED EMBEZZLEMENT LOSS. THE AO FURTHER OBSE RVED THAT THE ASSESSEE HAS NOT EVEN DEBITED THIS ALLEGED LOSS/MIS APPROPRIATION IN ITS PROFIT AND LOSS ACCOUNT BUT, ON THE CONTRARY, HAS S HOWN THE SAME AS RECOVERABLE FROM THE TAINTED EMPLOYEES. OWING TO T HE ADMITTED POSITION THAT THE MATTER IS UNDER INVESTIGATION AND THUS PEN DING, THE AO OBSERVED THAT THE ALLEGED LOSS, IF ANY, HAS NOT CRYSTALLIZED AT ALL. THUS, THE AO TOOK A VIEW THAT THE LOSS SO CLAIMED BY THE ASSESSEE TOW ARDS MISAPPROPRIATION IS NOT SUPPORTED BY THE FACTS AND THE CIRCUMSTANCES OF THE CASE. THE AO ACCORDINGLY PROCEEDED TO DISALLOW THE LOSS OF RS.1, 49,42,167/- CLAIMED ON ACCOUNT OF MISAPPROPRIATION BY THE ASSESSEE. 7. AGGRIEVED BY THE ACTION OF THE AO, THE ASSESSEE RAISED THE GRIEVANCES BEFORE THE CIT(A). 8. THE CIT(A) TOOK DETAILED NOTE OF THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD BUT FOUND LITTLE MERIT IN T HE CLAIM OF THE ASSESSEE. THE RELEVANT OPERATIVE PARA OF THE APPELLATE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER:- ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 20 - 5.3 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT, JUDICIAL PRONOUNCEMEN TS AND THE MATERIAL AVAILABLE ON RECORD. THE ISSUE RELATES TO SALE OF M ILK BY THE APPELLANT, WHICH WAS NOT ACCOUNTED FOR BY CERTAIN UNITS OF THE APPEL LANT AND NO REALIZATION, AS PER APPELLANT WAS MADE FROM THIS SALE. THERE IS NO DISPUTE ON THE FACT THAT THE ISSUE DOES NOT RELATE TO THE YEAR UNDER CONSIDERATI ON BUT RELATES TO F.Y. 08-09 RELEVANT TO A.Y. 09-10. THE APPELLANT REITERATES TH AT ON THE INSISTENCE OF THE GOVERNMENT AUDITOR, THE SALE WAS ACCOUNTED FOR IN F .Y. 09-10 RELEVANT TO A.Y. 10-11. HOWEVER, THE APPELLANT FURTHER STATES THAT I T DID NOT DEBIT THE AMOUNT OF SUCH SALE IN THE PROFIT AND LOSS ACCOUNT AS THE GOV ERNMENT AUDITOR INSISTED THAT IT SHOULD BE RECOVERED FROM THE CONCERNED EMPL OYEES AND SHOULD BE SHOWN, FOR THE TIME BEING, AS 'RECOVERABLE' IN THE BALANCE SHEET. IT IS CLEAR THAT THE APPELLANT HAS NOT LET GO OF ITS CLAIM ON T HE SALE PRICE. IT IS ALSO NOT DISPUTED THAT THE MATTER IS STILL BEING INVESTIGATE D. IT IS ALSO BEYOND DISPUTE THAT THE APPELLANT HAS NOT TAKEN ANY LEGAL ACTION AGAINS T THE ALLEGED CULPRITS. EVEN AN FIR HAS NOT BEEN FILED IN THE CASE. NO RECOVERY PROCEEDINGS HAVE BEEN LAUNCHED BY THE APPELLANT AGAINST THE ALLEGED PERPE TRATORS OF THE ALLEGE CRIME. THE ASSESSING OFFICER HAS CLEARLY NOTED THAT THE S HOW CAUSE NOTICES ISSUED TO FOUR PERSONS DO NOT MENTION ANY SPECIFIC CHARGE ABO UT MISAPPROPRIATION AND EVEN THE AMOUNT OF MISAPPROPRIATION HAS NOT BEEN QU ANTIFIED IN THIS NOTICE. IT IS ALSO A FACT THAT WHEN SALES HAVE BEEN RECORDED I N THE BOOKS OF ACCOUNTS, SALE AMOUNT HAS ACCRUED TO IT. 5.4 THE APPELLANT HAS NOT DEBITED THIS AMOUNT OF A LLEGED MISAPPROPRIATION/LOSS IN THE PROFIT AND LOSS ACCOUN T AND HAS DIRECTLY CLAIMED IT AS A DEDUCTION IN THE COMPUTATION OF INCOME. IT HAS NOT WRITTEN IT OFF BY DEBITING IT TO THE PROFIT AND LOSS ACCOUNT, RATHER, IT HAS MAINTAINED ITS CLAIM OVER THE MONEY BY SHOWING IT AS 'RECOVERABLE' IN TH E BALANCE SHEET. FROM THE ABOVE, IT IS CLEAR THAT THE LOSS HAS NOT CRYSTALLIZ ED DURING THE YEAR. 5.5 IT IS ALSO CLEAR FROM THE EVENTS THAT THE LIAB ILITY OF THE RELEVANT EXPENDITURE HAS NOT ACCRUED, SINCE THE APPELLANT HAVE KEPT HIS LIEN OVER THE MONEY ALIVE BY SHOWING IT AS 'RECOVERABLE' IN BALANCE SHEET, IT HA S NOT BEEN CRYSTALLIZED. THE APPELLANT HAS ITSELF CONCEDED THAT IT DID NOT WRITE OFF THE AMOUNT IN ITS PROFIT AND LOSS ACCOUNT BECAUSE INQUIRIES WERE PENDING AND FIR AND CRIMINAL ACTION ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 21 - WERE NOT INITIATED. THE CASES CITED BY THE APPELLAN T IN THIS REGARD, DO NOT APPLY TO THE FACTS OF THE APPELLANT'S CASE. 5.6 IT IS A FACT THAT THE APPELLANT HAD NOT RECORDE D/ACCOUNTED FOR THIS SALE IN ITS BOOKS OF ACCOUNTS DURING THE IMMEDIATELY PRECEDING ASSESSMENT YEAR (I.E. F.Y. 08-09, A.Y. 09-10) ALSO AND BASED ON ITS ACCOUNTING POLICIES, IT WAS FOR THE FIRST TIME ACCOUNTED FOR IN F.Y. 09-10 RELEVANT TO A.Y. 1 0-11. THE DEFICIENCY IN SALES FIGURES WAS DETECTED DURING THE CURRENT YEAR AND TH E SAME WAS ACCOUNTED FOR DURING THE CURRENT YEAR. APPELLANT'S PLEA THAT INCO ME HAD NOT ACCRUED TO IT ALSO DOES NOT APPEAL TO ME CONSIDERING THE FACT THAT SAL E IS EFFECTED AS SOON AS THE MILK IS LOADED IN TO THE SUPPLY TRUCKS ALONG WITH P ROPER CHALLANS AND BILLS/VOUCHERS. AT THIS POINT, SALE IS EFFECTED AND CORRESPONDING INCOME ACCRUES TO THE APPELLANT. THEREFORE, APPELLANT'S ALTERNATE PLEA THAT THE SALES FIGURE FOR THE CURRENT YEAR SHOULD BE REDUCED BY AN AMOUNT OF RS. 1,49,42,467/- CANNOT BE ACCEPTED. WHEN SALES ARE ACCOUNTED FOR, AS A COR OLLARY, LOSS, IF ANY, SHOULD BE ALLOWED TO BE WRITTEN OFF, WHEN THE LOSS CRYSTAL LIZES. SINCE IT HAS NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, I T CANNOT BE ALLOWED AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THIS, THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD IS CONFIRMED. THE APPELLANT FAILS ON THESE TWO GROUNDS OF APPEAL. THE CIT(A) ACCORDINGLY CONFIRMED THE ACTION OF THE AO TOWARDS DISALLOWANCE OF LOSS CLAIMED TOWARDS MISAPPROPRIATI ON OF MILK. 9. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 10. BEFORE US, THE LD.AR FOR THE ASSESSEE REITERATE D THE VARIOUS SUBMISSIONS MADE BEFORE THE CIT(A) AS REPRODUCED IN PARA 5.2 OF HIS ORDER AND SUBMITTED, IN ESSENCE, THAT THE ASSESSEE REALIZED THE ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 22 - DISCREPANCY AND MISMATCH IN THE QUANTITY OF MILK LO ADED AND QUANTITY OF MILK RECORDED IN THE BOOKS IN SALES ACCOUNT ON BEI NG POINTED OUT BY THE AUDIT TEAM IN THE CURRENT YEAR. THE LD.AR ACCORDIN GLY SUBMITTED THAT THE LOSS WAS CRYSTALLIZED IN THE IMPUGNED YEAR IN APPEA L WHEN THE DISCREPANCY WAS FOUND. THE LD.AR SUBMITTED THAT THE CORRECTIVE ACTIONS WERE TAKEN AS PER THE DIRECTIONS OF THE DIS TRICT REGISTRAR AS THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED UNDER GUJARAT CO-OPERATIVE SOCIETIES ACT, 1961 . IT WAS POINTED OUT THAT AS PER THE INSISTENCE OF THE GOVERNMENT CO-OPERATIVE AUDITOR, THE SALES ACCOUNT WAS CREDITED IN THE ASSESSMENT YEAR IN APPEAL TO SET RIGHT AND COMPENSA TE FOR THE UNRECORDED SALES OF THE FY 2008-09 AND CORRESPONDING RECOVERAB LE AMOUNT WAS SHOWN IN THE ASSETS SIDE. 10.1. THE LD.AR THEREAFTER ADMITTED THAT THE LOS S SO CLAIMED WAS IN FACT NOT DEBITED IN THE P&L ACCOUNT AS THE ENQUIRY IS NOT CONCLUDED AND THE ASSESSEE HAS BEEN DIRECTED BY THE SUPERVISORY A UTHORITIES TO RECOVER THE AMOUNT FROM THE RESPECTIVE UNITS/EMPLOYEES IN D UE COURSE. IN THE SAME VAIN, THE LD.AR SUBMITTED THAT NOT MAKING ENTR Y IN THE BOOKS OF ACCOUNTS TOWARDS SUCH LOSS IS OF NO ADVERSE CONSEQU ENCE AS THE ENTRIES IN THE BOOKS OR OTHERWISE ARE NOT DECISIVE FOR THE PU RPOSES OF DETERMINATION OF TRUE INCOME OF THE ASSESSEE TAXABLE UNDER THE AC T. THE LD.AR SUBMITTED THAT NOTWITHSTANDING THE TRANSFER OF LOSS TO PROFIT & LOSS ACCOUNT FORMALLY, FOR ALL PRACTICAL PURPOSES, THE A MOUNT IS NOT ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 23 - RECOVERABLE AT ALL AND THUS CLAIMED AS LOSS TOWARDS MISAPPROPRIATION/ EMBEZZLEMENT BY THE EMPLOYEES HANDLING THE SALE OF MILK IN FIVE VILLAGES. 10.2. ON QUERY PUT BY THE BENCH, THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE FIR AND CRIMINAL ACTIONS WERE ADMITTEDLY NOT INITIATED BY THE ASSESSEE AGAINST THE EMPLOYEES SINCE IT REQUIRES AP PROVAL AND SANCTION OF THE DISTRICT REGISTRAR FOR INITIATING LEGAL ACTION AGAINST THE UNSCRUPULOUS EMPLOYEES. THE LD.AR HOWEVER SUBMITTED IN THE SAME VAIN THAT NOTWITHSTANDING THE ABSENCE OF FORMAL LEGAL ACTION, THE FACTS REMAINS THAT THE ASSESSEE HAS INCURRED IRRETRIEVABLE BUSINESS LO SS ON ACCOUNT EMBEZZLEMENT OF FUNDS COLLECTED BY THE EMPLOYEES AN D BY NOT GIVING ACCOUNT FOR THE ENTIRE QUANTITY LOADED/SUPPLIED FO R SALE. THE LD.AR ACCORDINGLY SUBMITTED THAT THE CIT(A) HAS MISDIRECT ED ITSELF IN LAW AND ON FACTS IN DENYING THE BONAFIDE BUSINESS LOSS CLAI MED BY THE CO- OPERATIVE SOCIETY. 10.3. THE LD.AR ALSO ADVERTED TO THE ALTERNATIVE P LEA THAT IN THE EVENT, THE LOSS ON ACCOUNT OF MISAPPROPRIATION SALES IS NO T ALLOWED IN THE IMPUGNED ASSESSMENT YEAR, THE SALES REPORTED BY THE ASSESSEE DURING THIS YEAR OWING TO THE INSISTENCE OF THE GOVERNMENT CO -OPERATIVE AUDITOR BE DIRECTED TO REDUCE FROM THE TOTAL INCOME AS THE SA LES DO NOT PERTAIN TO THIS YEAR. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 24 - 11. THE LD.DR, ON THE OTHER HAND, STRONGLY RELIED U PON THE ORDERS OF THE AO AND THE CIT(A). IN FURTHERANCE, THE LD.DR C ONTENDED THAT THE ASSESSEE ITSELF HAS NOT RECOGNIZED THE SUPPOSED BUS INESS LOSS IN ITS BOOKS OF ACCOUNTS AND HAS SHOWN THE SAME AS RECOVERABLE FROM THE DEFAULTER EMPLOYEES IN DUE COURSE. THE LD.DR SUBMITTED THAT, THIS APART, THE ASSESSEE HAS ADMITTEDLY NOT TAKEN ANY LEGAL ACTION FOR ALLEGED MISAPPROPRIATION OF SUCH STAGGERING AMOUNT. THE L D.DR THEREAFTER SUBMITTED THAT THE ASSESSEE ITSELF HAS NOT RECOGNIZ ED THE EMBEZZLEMENT AND HAS FAILED TO PRODUCE ANY COGENT DOCUMENTARY EV IDENCE TO CORROBORATE THE PLEA OF MISAPPROPRIATION/EMBEZZLEME NT OF FUNDS. THE MISAPPROPRIATION ETC. HAS NOT BEEN BELIEVED BOTH BY THE GOVERNMENT AUDITOR AS WELL AS BY THE DISTRICT REGISTRAR CO-OPE RATIVE SOCIETY. THE DISTRICT REGISTRAR HAS NOT ADVISED THE ASSESSEE TO RECOGNIZE THE DIFFERENTIAL SALE AMOUNT TOWARDS EMBEZZLEMENT BUT H AS INSISTED UPON THE ASSESSEE TO MAKE RECOVERY ATTEMPTS. THE LD.DR SUBM ITTED THAT THE ONUS IS SQUARELY ON THE ASSESSEE TO PROVE THE SERIOUS AL LEGATION OF MISAPPROPRIATION/EMBEZZLEMENT WHICH HAS NOT BEEN DI SCHARGED AT ALL. THE LD.DR ACCORDINGLY SUBMITTED THAT THE CIT(A) HAS CORRECTLY APPRECIATED THE FACTS OF THE CASE IN PERSPECTIVE AN D DENIED THE CLAIM OF THE ASSESSEE. ADDRESSING THE ALTERNATIVE PLEA, THE LD.DR CONTENDED THAT THE SALES HAVE BEEN RECOGNIZED DURING THE YEAR ON W RONGFULNESS DETECTED BY THE ASSESSEE AND ITS AUDITORS. THE REVENUE HAS MERELY ACCEPTED THE ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 25 - ACTION OF THE ASSESSEE. THE SALE, IN ANY RATE, IS REQUIRED TO BE RECOGNIZED EITHER IN FY 2008-09 OR IN 2009-10. THEREFORE, NOT HING TURNS ON THIS PLEA OF THE ASSESSEE. THE LD.DR ACCORDINGLY SUBMITTED TH AT THE CIT(A) HAS RIGHTLY REFUSED TO ENTERTAIN THE ALTERNATIVE PLEA O F THE ASSESSEE TOO. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE CIT(A) AND AO. 12.1. THE SOLITARY QUESTION INVOLVED IN THE ASSESSE ES APPEAL RELEVANT TO AY 2010-11 IS WHETHER THE BUSINESS LOSS CLAIMED BY ASSESSEE TOWARDS MISAPPROPRIATION/EMBEZZLEMENT OF SALE PROCEEDS OF M ILK BY ITS EMPLOYEES IS JUSTIFIED IN THE FACTS AND THE CIRCUMS TANCES OF THE CASE OR NOT. IT IS THE CASE OF THE ASSESSEE THAT THE ASSES SEE CO-OPERATIVE SOCIETY IS GOVERNED BY THE DIRECTIONS OF THE DISTRICT REGISTR AR AND SUBJECTED TO INDEPENDENT AUDIT BY THE SPECIAL AUDITORS. IN THE COURSE OF AUDIT OF THE FINANCIAL ACCOUNTS, THE AUDIT DEEM DISCOVERED UNDER REPORTING OF SALES IN THE EARLIER YEAR I.E. FY 2008-09. THIS LEAD TO THE REALIZATION OF MISAPPROPRIATION/EMBEZZLEMENT OF SALE PROCEEDS OF M ILK BY ITS EMPLOYEES IN VARIOUS UNITS AGGREGATING TO RS.1,49,4 2,167/-. THE ASSESSEE, WHILE COMPUTING THE TAXABLE INCOME SEEKS DEDUCTION OF THE AFORESAID BUSINESS LOSS SADDLED UPON THE ASSESSEE O WING TO EMBEZZLEMENT DISCOVERED DURING THE YEAR AND THUS PURPORTEDLY CRY STALLIZED DURING THE YEAR. ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 26 - 12.2. THE REVENUE, ON ITS PART, CLAIMS THAT SUCH LOSS IS NOT ALLOWABLE BUSINESS LOSS FIRSTLY ON THE GROUND THAT THE ALLE GED MISAPPROPRIATION/EMBEZZLEMENT LOSS HAS NOT BEEN CH ARGED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE ITSELF. SECONDLY, THE REVENUE FURTHER CONTENDS THAT SUCH ALLEGED LOSS CANNOT BE RECOGNIZE D IN THE ABSENCE OF ANY LEGAL ACTION INITIATED AGAINST THE UNSCRUPULOUS EMPLOYEES. THIRDLY, THE ASSESSEE HAS ADMITTEDLY RECORDED THE UNACCOUNTE D SALES RELEVANT TO FINANCIAL YEAR (FY) 2008-09 AS RECORDED BY THE ASSE SSEE IN FY 2009-10 (AY 2010-11 IN QUESTION) ON DETECTION OF ERROR BY THE AUDIT PARTY. THE ASSESSEE HAVING RECOGNIZED THE SALE AND CORRESPONDI NG DEBT OUTSTANDING TO BE RECOVERED FROM THE EMPLOYEES SO INDULGED PROB ABLE IMPROPRIETY, THERE IS NO SCOPE FOR CLAIMING BUSINESS LOSS IN SUC H CIRCUMSTANCE. 12.3. NOTWITHSTANDING THE MERIT IN THE PLEA OF THE ASSESSEE THAT THE BOOK ENTRY IS NOT NECESSARILY REQUIRED TO BE PASSED IN T HE PROFIT & LOSS ACCOUNT FOR THE PURPOSES OF CLAIM OF DEDUCTION, WE SIMULTAN EOUSLY OBSERVE THAT THE NARRATIVE GIVEN ON BEHALF OF THE ASSESSEE TOWAR DS EMBEZZLEMENT OF LOSS IS NOT SUPPORTED BY ANY COGENT EVIDENCE. THE CORRECTNESS OF THE VERSION OF THE ASSESSEE THAT MISAPPROPRIATION/EMBEZ ZLEMENT OF SALE PROCEEDS HAS IRRETRIEVABLY HAPPENED IS NOT CORROBOR ATED BY ACTION TAKEN BY THE ASSESSEE THUS FAR. THE ASSESSEE HAS NEITHER RECOGNIZED THE SALE PROCEEDS AS NOT RECOVERABLE NOR HAS INITIATED ANY C RIMINAL ACTION AGAINST THE IDENTIFIABLE EMPLOYEES FOR CLAIMING NET OF EMB EZZLEMENT ON ACCOUNT ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 27 - OF MISAPPROPRIATION ETC. THE ASSESSEE HAS FAILED T O THROW LIGHT AS TO WHAT HAPPENED IN THE SUBSEQUENT YEARS TILL TODAY ON THIS SCORE. THEREFORE, THE NARRATIVE OF THE ASSESSEE TO CLAIM SUCH WHOPPING L OSS DOES NOT INSPIRE ANY CONFIDENCE. NEEDLESS TO SAY, THE ONUS FOR JUS TIFICATION OF CLAIM IS ON ASSESSEE. THE ASSESSEE HAS TOTALLY FAILED TO DISCH ARGE ONUS. WE THUS FIND THAT THE IMPUGNED ACTION OF THE AO AND CIT(A) IN DISALLOWING SUCH BUSINESS LOSS IS ON A SOUND FOOTING. THEREFORE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 12.4. WE ALSO TAKE A LOOK AT THE ALTERNATIVE PLEA OF THE ASSESSEE THAT UNRECORDED SALE RELEVANT TO FY 2008-09 AS ACCOUNTED BY THE ASSESSEE IN FY 2009-010 (AY 2010-11 IN QUESTION) REQUIRES TO BE EXCLUDED FROM THE COMPUTATION BUT HOWEVER, FIND LITTLE MERIT IN SUCH PLEA. THE MILK FOR THE PURPOSES OF SALE HAS ADMITTEDLY BEEN LOADED AND TRA NSFERRED TO THE EMPLOYEES OF VARIOUS UNITS. THE SALE PROCEEDS IN R ESPECT OF THE QUANTITY OF MILK LOADED IN THE TRUCK WAS THUS ORDINARILY REQ UIRED TO BE ACCOUNTED FOR IN FY 2008-09 ITSELF. THE ASSESSEE HAS RECORDE D THE SAME IN THE DIFFERENT (CURRENT) YEAR ON DETECTION OF MISMATCH. THE ACTION OF THE ASSESSEE IS THUS REVENUE NEUTRAL AND DOES NOT CALL FOR ANY INTERFERENCE. THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE THEREFO RE ALSO FAILS. CONSEQUENTLY, WE DECLINE TO INTERFERE WITH THE ORD ER OF THE CIT(A). ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 28 - 12.5. AT THIS JUNCTURE, WE MAY HASTEN TO ADD THAT T HE OBSERVATIONS MADE IN THE PRESENT APPEAL SHALL NOT OPERATE AS ANY KIND OF ESTOPPEL IN ANY MANNER FOR CLAIM OF ANY DEDUCTION/LOSS/EXPENSE ARIS ING FROM THE IMPUGNED ISSUE IN ANY SUBSEQUENT YEAR, WHEN FOUND A LLOWABLE IN ACCORDANCE WITH LAW. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .2759/AHD/2013 FOR AY 2010-11 IS DISMISSED. 16. IN THE COMBINED RESULT, ALL THE REVENUES APPEA LS AS WELL AS ASSESSEES APPEAL ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13/ 04/2018 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/ 04 /2018 ,..,.../ T.C. NAIR, SR. PS ITA NO S.3036,2759/AHD/2013 2519/AHD/2015 AND 1964/AHD/2016 ACIT VS. PANCHMAHAL DIST.CO-OP.MILK PRODUCTS UNION LTD (CROSS-APPEAL) ASST.YEARS 2010-11, 2008-09 & 2011-12 - 29 - ! ' / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT. 3. 234' 5' / CONCERNED CIT 4. 5' ( . ) / THE CIT(A)-VI, BARODA 5. 678'34 , ..34& , .2 / DR, ITAT, AHMEDABAD 6. 8: / GUARD FILE. / BY ORDER, 16'' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 5/11.4.18 (DICTATION-PAD 34+10 PAGES ATTACHED AT THE END OF THIS APPEAL- FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.4.18/12.4.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.4.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.4.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER