Addl. CIT, Muzaffarnagar V. M/s. Co- Operative Cane Development Union Ltd., Muzaffarnagar

ITA 4528/DEL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1697 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PREM PRAKASH
• Keywords: Business income
• Section: 43B; 143(3)

Judgement Text

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. I.C.SUDHIR, JM AND SH. PRASHANT MAHARI SHI, AM ITA NO.4528/DEL/2011: ASSTT. YEAR: 2007-08 ADDL. CIT RANGE 2, MUZAFFARNAGAR VS CO-OPERATIVE CANE DEVELOPMENT UNION LTD., TITAWI MUZAFFARNAGAR (APPELLANT) (RESPONDENT) PAN NO. AAAJC0256C APPELLANT BY: SH. SUJIT KUMAR, SR. DR. RESPONDENT BY: SH. PREM PRAKASH, ADV. DATE OF HEARING : 05.10 .2015 DATE OF PRONOUNCEMENT : 09 . 10 .2015 ORDER PER PRASHANT MAHARISHI, AM: 01. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF TH E CIT (A) MUZAFFARNAGAR DATED 23 RD JUNE, 2011 AGAINST ALLOWING DEDUCTION U/S 80P ON (A ) INCOME TAX REFUND OF RS. 16,162/- (B) ADDITION OF MISCELLANEOUS INCOME OF RS . 33,431/- . THE REVENUE IS FURTHER ALSO AGGRIEVED BY THAT ORDER DELETING ADDIT ION ON ACCOUNT OF CONTRIBUTION OF EMPLOYEES AND EMPLOYERS TOWARDS PROVIDENT FUND AN D INTEREST THEREON. 02. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED AS CANE CO-OPERATIVE SOCIETIES AND IS ENGAGED IN ACTIV ITIES OF MARKETING OF SUGARCANE GROWN BY ITS MEMBERS AND ALSO PROVIDING C REDIT FACILITIES FOR PURCHASE OF SEEDS, FERTILIZERS ETC. THE SOCIETY IS UNDISPUTE DLY ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. 03. FOR THE IMPUGNED ASSESSMENT YEAR, ASSESSEE FILE D ITS RETURN OF INCOME ON 31 ST OCTOBER 2007 DECLARING NIL INCOME CLAIMING EXEMPTIO N U/S 80P. IN PROCEEDINGS U/S 143(3) AO HELD THAT INTEREST ON TDS AMOUNTING T O RS. 16,162/- AND MISCELLANEOUS INCOME OF RS. 33,431 ARE WRONGLY CLAI MED AS EXEMPT BY ASSESSEE U/S 80P. AO REDUCED THE ELIGIBLE INCOME BY THESE TW O ITEMS OF INCOME. FURTHER ITA NO. 4528/DEL/2011 CO-OPERATIVE CANE DEVELOPMENT A Y 2007-08 2 DURING THE YEAR ASSESSEE HAS RECEIVED RS. 11,79,842 /- AS CONTRIBUTION FROM ITS EMPLOYEES AND THE ASSESSEE HAS ALSO CONTRIBUTED RS. 5,10,634/- TOWARDS EMPLOYEES PROVIDENT FUND SCHEME. ON THE PAYMENT OF SUCH CONTRIBUTION FURTHER INTEREST OF RS. 1,24,563/- WAS ALSO PAID. LD. AO DI SALLOWED RS. 11,79,852/- BEING EMPLOYEES CONTRIBUTION TOWARDS UNRECOGNISED PROV IDENT FUND, RS. 1,24,563/- INTEREST ON UNRECOGNISED PF AND RS. 5,10,634/- EMPL OYERS CONTRIBUTION IS ALSO ADDED TO THE TOTAL INCOME ALONG WITH INTEREST THERE ON OF RS. 1,24,563/- APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT. AGAINST T HIS ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO IN TURN ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT INTEREST ON INCOME TAX OF RS. 16,162/- AND MISCELLA NEOUS INCOME OF RS. 33,431/- ARE ELIGIBLE FOR DEDUCTION U/S 80P AND THAT EMPLO YEES CONTRIBUTION OF PROVIDENT FUND OF RS 11,79,842/-, RS 5,10,634/- EMPLOYERS CO NTRIBUTION AND INTEREST THERE ON OF RS 1,24,653/- IS NOT DISALLOWABLE U/S 43B AS THE AMOUNT IS PAID TO RECOGNISED FUND WHICH IS GOVERNED BY UP CO-OPERATIV E UNION FEDERATION EMPLOYEES PF TRUST FUND RULES, 1979. HE FURTHER HE LD THAT EVEN IF THE ADDITION IS MADE THE TOTAL INCOME, SO INCREASED INCOME AFTE R DISALLOWANCE WOULD ALSO BE ELIGIBLE FOR DEDUCTION U/S 80 P OF THE ACT. AGAINST THIS REVENUE HAS PREFERRED THIS APPEAL. 04. THE GROUND NO. 1 IS ON ACCOUNT OF INTEREST ON I NCOME TAX REFUND OF RS 16,162/- AND ITS ELIGIBILITY FOR DEDUCTION U/S 80P. BEFORE U S, LD. DR RELIED ON THE ORDER OF AO STATING THAT INTEREST ON INCOME TAX CANNOT BE CO NSIDERED AS INCOME ELIGIBLE FOR DEDUCTION U/S 80P. AGAINST THIS AR OF THE APPEL LANT SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT VS. HARYANA STATE CO-OPERATIVE APEX BANK LTD. (322 ITR 404). HE FURTHER RELIED ON THE DECISI ON OF SPECIAL BENCH OF ITAT IN CASE OF MAHARASHTRA STATE CO-OPERATIVE LTD. VS. ACI T (129 TTJ 521) (SB)(MUM). 05. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE RIVAL PARTIES ON THE ISSUE WHETHER THE INTEREST ON INCOME TAX IS ELIGIBLE FOR DEDUCTION U/S 80P. NOW THIS ISSUE HAS BEEN DECIDED BY HONOURABLE PUNJAB AND HAR YANA HIGH COURT IN CIT VS. HARYANA STATE CO-OPERATIVE APEX BANK LTD. 322 I TR 404 THAT IT COULD NOT BE HELD THAT THE INTEREST ON REFUND OF INCOME-TAX PAID IN EXCESS WAS NOT ATTRIBUTABLE ITA NO. 4528/DEL/2011 CO-OPERATIVE CANE DEVELOPMENT A Y 2007-08 3 TO THE INCOME DERIVED FROM THE BUSINESS OF BANKING WITHIN THE MEANING OF SECTION 80P (2) ( A ) (I). ONCE THE INCOME TAX PAID WAS DERIVED FROM TH E BUSINESS INCOME THEN INTEREST INCOME WOULD PARTAKE OF THE CHARACTER OF THE PRINCIPAL AMOUNT BECAUSE THE INTEREST PAID TO THE ASSESSEE-RESPONDEN T WAS COMPENSATION ON ACCOUNT OF DEPRIVATION OF THE USE OF MONEY. AS THE ASSESSEE IS ALSO ENGAGED IN ACTIVITY OF CREDIT FACILITY TO ITS MEMBERS THE RATI O LAID DOWN CLEARLY APPLIES TO THE FACTS OF THIS CASE AS IN THAT CASE OVER AND ABOVE B ANKING BUSINESS ASSESSEE WAS ENGAGED IN CREDIT FACILITY TO ITS MEMBERS. THEREFO RE RESPECTFULLY FOLLOWING THE DECISION OF PUNJAB AND HARYANA HIGH COURT, WE HOLD THAT INCOME ARISING OUT OF INTEREST ON INCOME TAX REFUND OF RS. 16,162/- ASSES SEE IS ELIGIBLE FOR DEDUCTION U/S 80P. WE CONFIRM THE ORDER OF LD. CIT (A). GROUN D NO. 1 OF THE APPEAL IS DISMISSED. 06. SECOND GROUND OF APPEAL RELATES TO THE MISCEL LANEOUS INCOME EARNED BY THE ASSESSEE OF RS. 33,431/- COMPRISING OF REFUND OF EX CESS SALARY TO EMPLOYEES OF RS. 22,135/-, AMOUNT RECEIVED FROM CANE DEVELOPMENT COUNCIL AS CONTRIBUTION OF RS. 10,100/- AND OTHER INCOME OF RS. 1196/- TOTAL LING TO RS. 33,431 WHETHER ELIGIBLE FOR DEDUCTION U/S 80P. BEFORE US, THE LD. DR SUBMITTED THAT THESE INCOMES ARE NOT ATTRIBUTABLE TO THE BUSINESS OF CO-OPERAT IVE SOCIETIES AND THEREFORE THEY ARE NOT ELIGIBLE FOR DEDUCTION U/S 80P. BEFORE US L D. AR SUBMITTED THAT THESE INCOMES ARE DEFINITELY ATTRIBUTABLE TO THE ACTIVIT IES PRESCRIBED U/S 80P (2) OF THE ACT AND THEREFORE SAME ARE ELIGIBLE FOR DEDUCTION U /S 80P. 07. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. THE REFUND OF EXCESS SALARY TO EMPLOYEES RELATES TO EXCESS SALARY PAID TO ONE E MPLOYEE SUBSEQUENTLY IT WAS REALISED THAT INSTEAD OF PAYMENT OF RS. 17,891/- DU E TO THAT EMPLOYEE AN AMOUNT OF RS. 40,026/- HAS BEEN MISTAKENLY PAID TO HIM AND THEREFORE THERE IS A REVERSAL OF SALARY EXPENDITURE TO THE EXTENT OF RS. 22,135/-. REGARDING REFUND OF 10,100/- IS THE COST OF SHARING OF RENT AND LEGAL E XPENSES OF RS. 20,200/- OUT OF WHICH 50% IS TO BE BORNE BY CANE DEVELOPMENT COUNC IL AND THEREFORE THE AMOUNT OF RS. 10,100/- IS RELATED TO RENT AND LEGAL EXPENSES. THE MISCELLANEOUS INCOME OF RS. 1,196/- IS ALSO EARNED BY THE ASSESSE E OUT OF ITS ACTIVITIES. IN VIEW OF THE NATURE OF THESE INCOMES, SUCH AS SALARY AN D LEGAL FEES AND RENT AS SMALL ITA NO. 4528/DEL/2011 CO-OPERATIVE CANE DEVELOPMENT A Y 2007-08 4 AMOUNT OF MISCELLANEOUS INCOME WHICH ARE ATTRIBUTAB LE TO THE ACTIVITIES OF THE ASSESSEE. WE HOLD THAT THESE INCOMES ARE ATTRIBUTAB LE TO THE BUSINESS OF ASSESSEE AND ARE THEREFORE, ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. WE CONFIRM THE ORDER OF CIT (A) ON THIS COUNT AND DISMISS GROU ND NO. 2 OF THE APPEAL. 08. GROUND NO. 3 OF THE APPEAL IS AGAINST DELETION OF THE ADDITION U/S 43B OF RS. 11,79,842/- AND RS. 5,10,634/- ON ACCOUNT OF CONTRI BUTION OF EMPLOYEES AND EMPLOYERS TOWARDS UNRECOGNISED PROVIDENT FUND AND INTEREST PAYMENT THEREON OF RS. 1,24,563/-. BEFORE US LD. DR ADMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF DELHI TRIBUNAL IN CA SE OF ITA NO. 304/DEL/2011 DATED 12 TH APRIL, 2013. LD. AR ALSO RELIED ON THE ORDER OF TH E HONBLE ITAT DELHI IN CASE OF ITA NO. 304/DEL/2011 WHEREIN PARA NO. 8 OF THE DECISION IDENTICAL ADDITION HAS BEEN DELETED. 09. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ON. AO HAS MADE THE ADDITION HOLDING THAT THE CONTRIBUTION HAS BEEN MADE TO UNRE COGNISED FUND AND THEREFORE SAME IS NOT ELIGIBLE FOR DEDUCTION. WE HAVE ALSO PE RUSED THE DECISION OF CO- ORDINATE BENCH IN ITA NO. 304/ DEL/2011 DATED 12 TH APRIL, 2013 WHEREIN DELETING THE IDENTICAL ISSUE HONBLE ITAT HAS HELD AS UNDER :- WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF TH E MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT THE CONTRIBUTIO N TO PF TO PERMANENT STAFF IN THIS CASE GOES TO UP CANE FEDERATION TRUST , LUCKNOW WHICH IS A RECOGNIZED TRUST HEADED BY CANE COMMISSIONER, UP GO VERNMENT. IT IS CONSTITUTED UNDER THE UP COOPERATIVE SOCIETIES ACT, 1965 AND CONTROLLED BY COOPERATIVE CANE UNION FEDERATION AND EMPLOYEES PF TRUST FUNDS RULES, 1979 THROUGH A BOARD OF TRUSTEES. THUS, WE A GREE WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT IT IS A SPECIAL CASE OF ITS OWN AS THE ASSESSEE HAS A SEPARATE REGULATION OF THEIR OWN FOR ADMINISTRATION OF PF CONCERNED AND THUS PROVISIONS OF SECTION 43B OF ACT ARE NOT APPLICABLE. IN THIS REGARD, WE ALSO DRAW SUPPORT FROM THE ORDER OF THIS TRIBUNAL IN ITA NO. 5553/DEL/2010 (A.Y. 2007-08) IN THE CASE OF ADDL. C .I.T., VS. M/S RAMRAJ COOPERATIVE CANE DEVELOPMENT UNION LTD., THE TRIBUN AL VIDE ITS ORDER DATED 6.1.2002 HAS NOTED THAT IN THIS CASE THE PF T O PERMANENT SEASONAL STAFF WAS GOVERNED BY THE STATE GOVERNMENT RULES. T HE TRUST CREATED FOR THE PURPOSE IS DULY REGISTERED UNDER THE I.T. ACT. BY THE RULES ITSELF, THE ASSESSEE WAS PERMITTED TO CONVERT SUCH CONTRIBUTION S INTO MEMBERS DEPOSITS AND PAY THE STIPULATED INTEREST THEREON. S UCH INTEREST PAYMENTS HAVING BEEN MADE AS PER THE STATE GOVERNMENT RULES ARE NOT COVERED U/S 43B. ITA NO. 4528/DEL/2011 CO-OPERATIVE CANE DEVELOPMENT A Y 2007-08 5 10. WE ARE OF THE VIEW THAT THE FACTS OF THAT CASE AND THE CASE OF THE ASSESSEE ARE IDENTICAL AND FURTHER BOTH THE PARTIES ALSO HAVE AG REED THAT THE ISSUE IS COVERED BY THIS ORDER, THEREFORE RESPECTFULLY FOLLOWING TH E DECISION OF CO-ORDINATE BENCH, WE CONFIRM THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION MADE U/S 43B OF RS. 11,79,842/- AND RS. 5,10,634/- ON ACCOUNT OF CONTRI BUTION OF EMPLOYEES AND EMPLOYERS TOWARDS PROVIDENT FUND RESPECTIVELY AND INTEREST PAYMENT THEREON OF RS. 1,24,563/-. GROUND NO. 3 OF THE APPEAL OF REVEN UE IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. (ORDER PRONOUNCED IN THE COURT ON 09/10/2015) SD/- SD/- (I.C.SUDHIR) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:09/10/2015 *B. RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO. 4528/DEL/2011 CO-OPERATIVE CANE DEVELOPMENT A Y 2007-08 6 DATE INITIAL 1. DRAFT DICTATED ON 07/10/2015 2. DRAFT PLACED BEFORE AUTHOR 07/10/2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 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.