DEPUTY COMMISSIONER OF INCOME TAX, Jaipur V. THE RAJASTHAN STATE CO-OPERATIVE BANK LTD., Jaipur

ITA 331/JPR/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6166 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Assessee Lawyers: S R SHARMA
• Keywords: Commercial expediency
• Section: 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 331/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15 THE DCIT, CIRCLE- 6, JAIPUR. CUKE VS. THE RAJASTHAN STATE CO-OPERATIVE BANK LTD., APEX BANK BUILDING, DC-1, LALKOTHI, TONK ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAT 0824 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.R. SHARMA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C.KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/05/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 02/05/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 08.12.2017 FOR ASSESSMENT YE AR 2014-15 WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING SOLE GR OUND OF APPEAL AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 1,07,25,060/- MADE BY THE A.O. ON ACCOUNT OF CONTRIBUTION ITA NO. 331/JP/2018 DCIT VS. M/S THE RAJASTHAN STATE CO-OPERATIVE BANK LTD. 2 TO PRIMARY AGRICULTURE CREDIT CO-OPERATIVE SOCIETY (PACS) DEVELOPMENT FUND WITHOUT APPRECIATING THE FACT THAT NO COMMERCIAL EXPEDIENCY HAS BEEN ESTABLISHED 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE CONTRIBUTED A SUM OF RS. 1,07,25,060/- TOWARDS PACS DEVELOPMENT FUND. AS THE ASSESSING OFF ICER, THE SAID CONTRIBUTION IS IN THE NATURE OF APPLICATION OF FUN DS AND THE SAME CANNOT BE HELD AS LAID DOWN OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE HAS ALSO NOT P ROVED THE NEXUS OF THE EXPENDITURE WITH ITS BUSINESS. IT WAS FURTHER O BSERVED BY THE AO THAT IN EARLIER YEARS ALSO, THE SAID EXPENDITURE H AS BEEN DISALLOWED AND THE DECISION OF THE LD. CIT(A) AND THE COORDINATE B ENCHES OF THE TRIBUNAL WHEREIN THE MATTER HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL HAS BEEN FILED. ACCORDINGLY, THE AO MADE AN ADDITION OF RS. 1,07,25,060/- IN THE HANDS OF THE ASSESSEE. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE RELIEF TO THE ASSESS EE BY FOLLOWING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN ASSESS EES OWN CASE (DB INCOME TAX APPEAL NO. 18/2012 AND OTHERS DATED 5.9. 2017 ) FOR THE EARLIER YEARS. THE RELEVANT FINDINGS OF THE LD. CIT (A) ARE CONTAINED AT PARA 2.3 WHICH IS REPRODUCED AS UNDER:- 2.3 I HAVE PERUSED THE FACTS OF THE CASE AND THE S UBMISSIONS OF THE APPELLANT. THE ISSUE RELATING TO CLAIM OF EXPEN DITURE OF RS. 1,07,25,060/- BEING CONTRIBUTION TO THE PACS DEVELO PMENT FUND ITA NO. 331/JP/2018 DCIT VS. M/S THE RAJASTHAN STATE CO-OPERATIVE BANK LTD. 3 HAS NOW BEEN DECIDED BY THE HONBLE RAJASTHAN HIGH COURT VIDE ITS ORDER DATED 05.092017 WHEREIN THE ISSUE HAS BEE N DECIDED AS FOLLOWS:- 16 BEFORE PROCEEDING, IT WILL NOT BE OUT OF PLACE TO MENTION THAT RESPONDENT IS STATUTORY AUTHORITY REGISTERED UNDER THE RAJASTHAN COOPERATIVE SOCIETY ACT AND THEY ARE REQUIRED TO FO LLOW THE RULES WHICH ARE MANDATORY IN NATURE AND IF INCUR DISQUALI FICATION EITHER THEY WILL BE SUPERSEDED OR THEY WILL INCUR DISQUALI FICATION. 17. IN THAT VIEW OF THE MATTER, WHILE INTERPRETING LOCAL ACT, THE COURT HAS VERY GUARDED UNDER THE INCOME TAX ACT WH ETHER THE DEDUCTION OR THE EXPENSES WHICH ARE INCURRED ARE AD MISSIBLE UNDER SECTION 37 OR NOT. 18. LOOKING TO THE PROVISIONS OF THE RULE 2003 REFE RRED HEREINABOVE, THE EXPENSES ARE MANDATORY IN NATURE, THUS, THEY ARE REQUIRED TO BE DEDUCTED TO BE KEPT IN RESERVE F UND AND THEY ARE EXPENSES AS STATED UNDER RULE 28. 19. IN THAT VIEW OF THE MATTER, IT IS TO BE KEPT RE SERVE FUND AND THE VIEW TAKEN BY THE AO IS VERY CONSERVATIVE AND C ONSIDERING THE OPINION NEITHER THE TRIBUNAL NOR THE CIT(A) HAS COM MITTED ANY ERROR. 20. HENCE, THE FIRST ISSUE IS REQUIRED TO BE ANSWER ED IN FAVOUR OF THE ASSESSEE AGAINST THE DEPARTMENT. FOLLOWING THE ABOVE JUDGMENT OF HONBLE RAJASTHAN H IGH COURT THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED . 4. THE LD. DR HAS RELIED UPON THE ORDERS OF THE ASS ESSING OFFICER AND FURTHER SUBMITTED THAT THE DEPARTMENT IS IN THE PROCESS OF MOVING ITA NO. 331/JP/2018 DCIT VS. M/S THE RAJASTHAN STATE CO-OPERATIVE BANK LTD. 4 AN SLP BEFORE THE HONBLE SUPREME COURT AGAINST THE ORDER OF THE HONBLE OF RAJASTHAN HIGH COURT DATED 05.09.2017. 5. PER CONTRA, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD CIT(A) AND HAS SUBMITTED THAT THE MATTER IS SQUA RELY COVERED BY THE DECISION IN ASSESSEES OWN CASE BY THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL IN EARLIER YEARS AND WHICH HAS ALSO BEEN CONFIRMED BY THE HONBLE RAJASTHAN HIGH COURT VIDE ITS ORDER DATED 05.09.2017 WHICH HAS RIGHTLY BEEN FOLLOWED BY THE L D CIT(A). 6. IN D.B. INCOME TAX APPEAL NO. 290/2016, THE ISSU E RAISED FOR CONSIDERATION BEFORE THE HONBLE RAJASTHAN HIGH COU RT WAS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT W AS JUSTIFIED IN DELETING THE ADDITION OF RS. 50,24,076/- MADE BY TH E ASSESSING OFFICER BY DISALLOWING THE CONTRIBUTION TO PRIMARY AGRICULT URAL CREDIT COOPERATIVE SOCIETY DEVELOPMENT FUND BEING NON BUSI NESS EXPENDITURE. SIMILAR ISSUE WAS RAISED IN D.B. INCOME TAX APPEAL NO. 294/2016 AND THE RELEVANT FINDING OF THE HONBLE RAJASTHAN HIGH COURT IN ITS ORDER DATED 5.9.2017 ARE CONTAINED AT PARA 16 TO 20 WHICH ARE REPRODUCED AS UNDER:- 16 BEFORE PROCEEDING, IT WILL NOT BE OUT OF PLACE TO MENTION THAT RESPONDENT IS STATUTORY AUTHORITY REGISTERED UNDER THE RAJASTHAN COOPERATIVE SOCIETY ACT AND THEY ARE REQUIRED TO FO LLOW THE RULES WHICH ARE MANDATORY IN NATURE AND IF INCUR DISQUALI FICATION EITHER THEY WILL BE SUPERSEDED OR THEY WILL INCUR DISQUALI FICATION. 17. IN THAT VIEW OF THE MATTER, WHILE INTERPRETING LOCAL ACT, THE COURT HAS VERY GUARDED UNDER THE INCOME TAX ACT WH ETHER THE ITA NO. 331/JP/2018 DCIT VS. M/S THE RAJASTHAN STATE CO-OPERATIVE BANK LTD. 5 DEDUCTION OR THE EXPENSES WHICH ARE INCURRED ARE AD MISSIBLE UNDER SECTION 37 OR NOT. 18. LOOKING TO THE PROVISIONS OF THE RULE 2003 REFE RRED HEREINABOVE, THE EXPENSES ARE MANDATORY IN NATURE, THUS, THEY ARE REQUIRED TO BE DEDUCTED TO BE KEPT IN RESERVE F UND AND THEY ARE EXPENSES AS STATED UNDER RULE 28. 19. IN THAT VIEW OF THE MATTER, IT IS TO BE KEPT RE SERVE FUND AND THE VIEW TAKEN BY THE AO IS VERY CONSERVATIVE AND C ONSIDERING THE OPINION NEITHER THE TRIBUNAL NOR THE CIT(A) HAS COM MITTED ANY ERROR. 20. HENCE, THE FIRST ISSUE IS REQUIRED TO BE ANSWER ED IN FAVOUR OF THE ASSESSEE AGAINST THE DEPARTMENT. 7. RESPECTIVELY FOLLOWING THE ORDER OF THE HONBLE RAJASTHAN HIGH COURT IN ASSESSEES OWN CASE (SUPRA), WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE AO TOWARDS CONTRIBUTION TO PACS DEVELOPMENT FUND AMOUNTING TO RS 1,07,25,060. IN THE RESULT, THE GROUND OF APP EAL TAKEN BY THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/05/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 331/JP/2018 DCIT VS. M/S THE RAJASTHAN STATE CO-OPERATIVE BANK LTD. 6 TK;IQJ@ JAIPUR FNUKAD@ DATED:- 02/05/2018. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S THE RAJASTHAN STATE CO-OPERATIV E BANK LTD., JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 331/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR