Baramati Talika Sah. Dudh Utpadak Sangh ltd., Pune V. Dy.CIT, Spl. Range-3, Pune

ITA 395/PUN/2012

• Counselvise Citation: 39524514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-12-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 29-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NOS.395 & 396/PN/2012 (A.YS.1994-95 & 1995-96) BARAMATI TALUKA SAHKARI DUDH UTPADAK SANGH LTD., TAL. BARAMATI, DIST. PUNE-413102 APPELLANT VS. DY. CIT, SPL. RANGE-3, PUNE RESPONDENT APPELLANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY : SHRI P.L. PATHADE DATE OF HEARING : 04.12.2013 DATE OF ORDER : 31.12.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE FO R ABOVE MENTIONED TWO ASSESSMENT YEARS. SO THESE WERE HEAR D TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.395/PN/2012, THE ASSESSEE RAISED THE F OLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LOWER AUTHORITIES ERRED IN NOT ALLOWING DE DUCTION FOR 'VIKRIYA VIDHI COMMISSION'(REBATE) OF RS. 24,72,087 /- WHICH WAS DEBITED TO PROFIT & LOSS ACCOUNT FOR THE F.Y. 1 992-1993 RELEVANT TO THE A.Y. 1993-1994 AND WHICH EXPENDITUR E WAS RATIFIED BY THE ANNUAL GENERAL MEETING OF THE SOCIE TY AND IN RESPECT OF THIS CLAIM THE HON'BLE INCOME TAX APPELL ATE TRIBUNAL, PUNE IN THEIR ORDER FOR A.Y. 1993-1994 DA TED 2 03/12/2005 IN OUR OWN CASE DISALLOWED DEDUCTION FOR A.Y. 1993-1994 HOLDING INTER ALIA THAT THE LIABILITY FOR THIS EXPENDITURE WAS ASCERTAINED IN SUBSEQUENT YEAR. THE REFORE, APPELLANT IS ENTITLED FOR THIS CLAIM IN THIS SUBSEQ UENT YEAR. 2. THE APPELLANT CRAVES FOR TO LEAVE, ADD, ALTER, MODI FY, DELETE, ALTER ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME HEARING, IN THE INTEREST OF NATURAL JUSTICE. 3. THE ISSUE IN APPEAL OF ASSESSEE RELATES TO ADDIT ION OF RS.16,86,220/- AS VIKRAYA VRIDHI COMMISSION (DISCOU NT/REBATE) ON SALE OF CATTLE FEED. THE ASSESSING OFFICER HAS FOUN D DURING COURSE OF ASSESSMENT THAT THE ASSESSEE SOCIETY OUT OF THE PRO FIT EARNED FROM THE SALE OF CATTLE FEED DECIDED AFTER THE END OF TH E YEAR TO PART WITH AND ALLOW REBATE / COMMISSION ON THE SALES MADE TO THEM. IN VIEW OF THE SAME, HE CONCLUDED THAT THE PAYMENT IS OF THE N ATURE OF BONUS OR APPLICATION OF INCOME WHICH COULD NOT BE ALLOWED AS EXPENDITURE. THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE IN A.Y. 1993-94 IN ITA NO.552/PN/2000 DATED 3.12.2005. FOR THE REASONS DE TAILED THEREIN INCLUDING THE FACT THAT RESOLUTION TO PAY COMMISSIO N/REBATE WAS PASSED IN THE AGM HELD AFTER THE CLOSURE OF THE PRE VIOUS YEAR. AS THE AFORESAID FACTS OF THIS CASE ON THIS ISSUE WAS ADMITTEDLY THE SAME, THIS DISALLOWANCE WAS UPHELD FOLLOWING THE DE CISIONS OF THIS TRIBUNAL IN A.Y. 1993-94. EVEN IN A.Y. 1996-97, WE FIND THAT MATTER TRAVELLED TO THIS TRIBUNAL WHERE SIMILAR ISSUE WAS DECIDED ON 09.12.2005 THROUGH A CONSOLIDATED ORDER PASSED FOR A.Y. 1993-94 TO 1996-97. THE ASSESSEE THEREAFTER VIDE MISCELLANEOU S PETITION NO.128/PN/2006 FOR A.Y. 1996-97 WHICH WAS DECIDED V IDE ORDER DATED 4.1.2007. FROM THE PERUSAL OF THE SAME, IT WA S FOUND THAT THE MA WAS FOR ONE ISSUE FOR A.Y. 1996-97 ONLY, WHEREIN , IT WAS CONTENDED ON BEHALF OF ASSESSEE THAT VIKRAY VRIDHI COMMISSION DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED B Y THE CIT(A) WAS TAKEN BY THE ASSESSEE IN GROUND NO.2 BEFORE THIS TR IBUNAL. IN THE CONSOLIDATED ORDER PASSED BY THIS TRIBUNAL FOR A.Y. 1993-94 AND A.Y. 1996-97, THIS ISSUE RELATING TO A.Y 1993-94 WAS DEC IDED AGAINST THE ASSESSEE VIDE PARA 6.1 TO 6.10. THE OPERATING PART OF THE ABOVE 3 DECISION WAS CLAIMED TO BE APPEARING IN PARA 6.10 W HICH READS AS UNDER: '6.10. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. WE ARE UNABLE TO AGREE WITH THE LEARNE D CIT(A) IN RESPECT OF HIS FINDING THAT THE ISSUE AT HAND IS SI MILAR TO THE ISSUE DECIDED EARLIER IN RESPECT OF MILK RATE DIFFE RENCE. THE REASON IS THAT THE MILK RATE DIFFERENCE WAS PAID IN RESPECT OF THE MILK PURCHASED BY THE ASSESSEE AND THE COST OF THE MILK HAD TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF DETERMININ G THE PROFITS. THE DECISION OF HON'BLE GUJARAT HIGH CO URT IN THE CASE OF MEHASANA DISTRICT CO-OPERATIVE MILK PRODUCE RS UNION LTD. (SUPRA) WAS THAT AN EXPENDITURE IN RELATION TO EARNING THE INCOME HAS TO BE DEDUCTED IN ARRIVING AT TRUE PROFI TS. THE QUESTION IS HERE QUITE DIFFERENT. THE FACTS ARE TH AT THE ASSESSEE EXPECTED TO EARN SUBSTANTIAL PROFITS FROM ITS ACTIV ITY OF MANUFACTURING CATTLE-FEED AND SELLING IT TO ITS MEM BERS AND OTHERS. IN VIEW THEREOF ITS CLAIM IS THAT IT WAS DE CIDED TO PAY SOME REBATE TO THE MEMBERS ON THE BASIS OF ORAL AGR EEMENT. THERE IS NO EVIDENCE ON RECORD IN RESPECT OF THE OR AL AGREEMENT. THEREFORE, IT CANNOT BE ACCEPTED AS A MATTER OF FAC T THAT ANY SUCH ORAL AGREEMENT CAME INTO EXISTENCE IN THE RELE VANT PREVIOUS YEAR. THE ASSESSEE HAS ALSO NOT PRODUCED A NY EVIDENCE THAT THERE WAS ANY PRACTICE TO PAY COMMISSION IN TH E TRADE IN RESPECT OF SALE OF CATTLE FEED. THEREFORE, THE QUES TION IS WHETHER ANY LIABILITY CAME INTO EXISTENCE IN THE RELEVANT P REVIOUS YEAR. IN THIS CONNECTION, IT MAY BE MENTIONED THAT IF ANY LIABILITY EXISTED, IT WAS IN THE NATURE OF CONTRACTUAL LIABIL ITY. NO CONTRACT EXISTED BETWEEN THE PARTIES FOR PAYMENT OF COMMISSI ON. THE RESOLUTION IN THE AFORESAID BEHALF WERE PASSED AFTE R THE CLOSE OF THE PREVIOUS YEAR. THE LIABILITY WAS ALSO ASCERTAIN ED AFTER THE CLOSE OF THE PREVIOUS YEAR, THOUGH IT WAS ASCERTAIN ED WITH REFERENCE TO PROFITS OF THIS YEAR. CONTRACTUAL LIAB ILITY CAN BE ALLOWED IN THE YEAR IN WHICH IT HAS ACCRUED. THE AC CRUAL MAY BE ON THE BASIS OF PURCHASE OF GOODS, AVAILMENT OF SER VICES OR BY WAY OF ANY AGREEMENT TO THAT EFFECT BETWEEN THE CON TRACTING PARTIES. NO AGREEMENT EXISTED IN THE RELEVANT PREVI OUS YEAR. THE ASCERTAINMENT OF THE LIABILITY HAS ALSO BEEN MADE I N SUBSEQUENT YEAR AS THE RESOLUTION BY THE BOARD OF DIRECTORS WE RE PASSED MUCH AFTER THE CLOSE OF THE PREVIOUS YEAR. THE ACT OF GIVING REBATE WAS ON UNILATERAL ACT OF THE ASSESSEE. THERE FORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DE DUCT THE AFORESAID AMOUNT IN COMPUTATION OF ITS PROFITS.' 4. THROUGH THE ABOVE ISSUE WAS DECIDED AGAINST THE ASSESSEE IN A.Y. 1993-94, IT WAS CONTENDED THAT THE SAME ISSUE WAS DECIDED FOR A.Y. 1996-97 IN THE SAME CONSOLIDATED ORDER AGAINST THE ASSESSEE 4 TREATING THAT THE FACTS AND CIRCUMSTANCES ARE SAME. HOWEVER, IT WAS CONTENDED IN THE MA THAT THE ABOVE FINDING WAS ERRO NEOUS. THE ASSESSEE MADE DISTINCTION IN THE FACTS OF THE TWO Y EARS IN THE FOLLOWING MANNER AS QUOTED IN PARA 2.2 OF THE MA OR DER, THE SAME IS REPRODUCED AS UNDER: A) 'WITH THE PAYMENT OF VIKRAY VRIDHI COMMISSION FOR A Y 1993- 94 BY THE ASSESSEE, IT CAN BE SAID THAT THE PAYMENT WAS MADE AS PER THE PRACTICE FOLLOWED BY THE ASSESSEE I N EARLIER YEARS. B) THE BOARD OF DIRECTORS OF THE ASSESSEE PASSED A RES OLUTION NO. 3(A) ON 09,06.95 (SEE PAGE 13 OF THE PAPER BOOK FOR AY 1996-97) AND ITS ENGLISH TRANSLATION ON PAGE 142 IN PAPER BOOK NO. 2 FOR AY 1993-94 & 1996-97) TO THE EFFECT THAT THE ASSESSEE SOCIETY WILL CONSIDER WHETHER ANY REBATE C AN BE GIVE IN THE FORM OF VIKRAY VRIDHI COMMISSION IN VIEW OF PRESENT/ FUTURE INCREASING COST AND THAT SUCH A DECISION WIL L BE TAKEN BEFORE THE END OF THE FINANCIAL YEAR. THE PASSING O F THIS RESOLUTION WAS SORT OF A CONTRACT IN THE DIRECTION OF MAKING PAYMENT OF VIKRAY VRIDHI COMMISSION WITH THE PURCHA SERS OF CATTLE FEED. C) THE BOARD OF DIRECTORS OF THE ASSESSEE ALSO PASSED A RESOLUTION NO. 3(B) ON 12.03.1996 FOR PAYMENT OF RE BATE OF RS.4/- PER BAG OF CATTLE-FEED PURCHASED BY THE PURC HASERS DURING THE PERIOD 01.04.1995 TO 31.03.1996 (SEE COP Y OF THE RESOLUTION ON PAGE 15 OF THE PAPER BOOK FOR AY 1996 -97 AND TRANSLATION THEREOF AT PAGE 143 IN THE PAPER BO OK NO. 2 FOR AY 1993- 94 AND 1996-97. D) THUS THE ASCERTAINMENT OF THE LIABILITY FOR PAYMENT OF REBATE IN THE FORM OF VIKRAY VRIDHI COMMISSION FOR AY 1996 -97 WAS BEFORE THE CLOSE OF THE CONCERNED FINANCIAL YEAR AN D ENTRIES TO THAT EFFECT WERE MADE AS ON 31.03.1996. (SEE PAG ES 119A OF PAPER BOOK NO. 2 FOR AY 1993-94 AND 1996-97).' 5. IN VIEW OF THE AFORESAID DISTINCTION IN FACTS, T HE ASSESSEE CLAIMED THAT THIS TRIBUNAL COMMITTED A MISTAKE IN D ECIDING THE ABOVE REFERRED ISSUE AGAINST THE ASSESSEE BY FOLLOW ING THE FINDING GIVEN IN A.Y. 1993-94. THIS TRIBUNAL ADMITTED THE M A AND SUBSEQUENTLY HEARD THE CASE AGAIN ON THIS ISSUE AND DECIDED THE APPEAL ON THIS ISSUE IN ITA NO.553/PN/2000 ON 25.9. 2007 AND IN THIS ORDER THIS ISSUE WAS RESTORED TO THE FILE OF T HE CIT(A) FOR RE- 5 EXAMINATION IN THE LIGHT OF DIRECTIONS GIVEN IN THE ORIGINAL CONSOLIDATED ORDER DATED 04.01.2007. THIS ISSUE IS THEREFORE WAS BEING CONSIDERED IN COMPLIANCE TO THE AFORESAID DIR ECTION. IT HAS BEEN CLAIMED BY THE ASSESSEE DURING THIS SET ASIDE PROCEEDING THAT THE AFORESAID VIKRAY VRIDHI COMMISSION ON SALE OF C ATTLE FEED WAS INITIALLY DECIDED TO BE GRANTED IN VIEW OF THE RISI NG COST OF MILK PRODUCTION VIDE RESOLUTION DATED 09.06.1995. IT WAS CONTENDED THAT, THE BOARD THROUGH THE ABOVE REFERRED RESOLUTION DEC IDED TO LOOK INTO THE ISSUE AND DECIDED THE MATTER BEFORE THE END OF THE YEAR. THEREAFTER, IT WAS CLAIMED THAT THE BOARD IN THE ME ETING HELD ON 12.03.1996 DECIDED TO GRANT A REBATE OF RS.4 PER BA G OF CATTLE FEED SOLD DURING THE PERIOD 01.04.1995 TO 31.03.1996. IT WAS THEREFORE, CLAIMED THAT THE EXPENDITURE WAS FOR THE PURPOSE OF THE BUSINESS AND THE LIABILITY ACCRUED IN RESPECT OF THE SAME DU RING THE RELEVANT PREVIOUS YEAR. CIT(A) ON CONSIDERATION OF THE FACT S BROUGHT ON RECORD, OBSERVED THAT ONLY DIFFERENCE THAT ASSESSEE HAS BEEN ABLE TO DEMONSTRATE WAS IN RESPECT OF BOARD RESOLUTION PASS ED ON 09.06.1995 TO LOOK INTO THE DEMAND AND THE RESOLUTI ON DATED 12.03.1996 TO GRANT REBATE OF RS.4 PER BAG. CIT(A) OBSERVED THAT THIS TRIBUNAL IN THE AFORESAID ORDER HAS LAID PRINCIPLE AS PER WHICH IT WAS HELD THAT THE EXPENDITURE COULD BE ALLOWED IF SAME WAS A CONTRACTUAL LIABILITY OR COULD BE SEEN TO HAVE ACCRUED IN THE M ANNER THE BUSINESS WAS CONDUCTED. FROM THE MATERIALS AVAILABLE ON REC ORD, IT WAS FOUND THAT THE ASSESSEE HAS DECIDED TO GRANT REBATE ON TH E SALE OF CATTLE FEED AFTER NOTICING THE FACT THAT SUBSTANTIAL PROFI T WAS MADE FROM CATTLE FEED SALE AND THE CONSUMERS WANTED TO GET SO ME MONEY BACK. IN NORMAL COMMERCIAL TRANSACTIONS REBATE OR COMMISS ION ARE PAID TO CUSTOMERS WITH THE SALE. GENERALLY, SUCH FACILITIE S ARE ADVERTISED TO ALLURE CUSTOMERS BEFORE MAKING THE SALES. AS PER F ACTS OF THE PRESENT CASE THE LIABILITY TO INCUR THE REBATE WAS STATED T O HAVE BEEN INCURRED AT THE END OF THE YEAR. THE ENTIRE CONDUCT TO GRANT REBATE DO NOT SHOW THAT THE EXPENDITURE WAS INCURRED IN THE NORMA L COMMERCIAL SENSE. IT WAS MORE OF THE NATURE OF PARTING WITH TH E MONEY EARNED IN 6 THE BUSINESS OF CATTLE FEED. THE FINDING OF THE ASS ESSING OFFICER THAT THE PAYMENT IS OF THE NATURE OF APPROPRIATION OF PR OFIT WAS FOUND CORRECT IN THE FACTS OF THE CASE. THEREFORE, CONSI DERING THE DIRECTION GIVEN BY THIS TRIBUNAL AS DISCUSSED ABOVE, CIT(A) U PHELD THE ORDER OF ASSESSING OFFICE ON THE ISSUE WHICH NEED NO INTERFE RENCE FROM OUR SIDE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDG E WITH REGARD TO THE DECISION OF THIS TRIBUNAL AS DISCUSSED ABOVE. IN VIEW OF ABOVE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF CIT(A) WHO HAS PASSED THE ORDER AS PER DIRECTIONS OF THIS TRIBUNAL . THE SAME IS UPHOLD. 6. SIMILAR ISSUE AROSE IN ITA NO.396/PN/2012 FOR A. Y. 1996-97. FACTS BEING SIMILAR TO THAT OF ITA NO.395/PN/2012 A SSESSEES APPEAL, FOLLOWING ORDER OF THE CIT(A) ON THE ISSUE IS UPHELD WHO HAS DISALLOWED THE DEDUCTION FOR VIKRAY VRIDHI COMMISSI ON. 7. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 31 ST DECEMBER 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST DECEMBER, 2013 GCVSR COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. THE DR, A BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE