The Dy. Commissioner of Income-tax, Pathankot V. M/s. the Gurdaspur Co-operative Sugar Mills, Ltd, Gurdaspur

ITA 474/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85903 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 22-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.474(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN :AAAT0586H DY.COMMR. OF INCOME TAX, VS. THE GURDASPUR CO-OP S UGAR MILLS LTD. CIR.VI, PATHANKOT. G.T.ROAD, PANIAR, GURDASPUR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.TARSEM LAL, DR RESPONDENT BY:SH. PADAM BAHL, CA DATE OF HEARING:05/02/2015 DATE OF PRONOUNCEMENT:19/02/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), AMRITSAR, DATED 05.05.2014 FOR THE ASSESSMENT YEAR 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I) WHETHER THE LD. CIT(APPEALS) IS RIGHT ON FACTS A ND LAW IN DELETING ADDITION OF RS.27,81,468/- AS THE SAME PAY MENT WAS IN NATURE OF FINE/PENALTY FOR INFRACTION OF LAW. II) WHETHER THE LD. CIT(APPEALS) IS RIGHT ON FACTS AND LAW IN DELETING ADDITION OF RS.68,18,000/- ON THE GROUND T HAT THE RDF IS NOT COVERED U/S 43B OF THE ACT. HOWEVER, THE FAC T IS THAT THE ITA NO.474(ASR)/2014 2 RDF IS ESTABLISHED UNDER THE ACT (RURAL DEVELOPMEN T ACT, 1987) OF THE GOVERNMENT OF PUNJAB. III) WHETHER THE LD. CIT(APPEALS) IS RIGHT ON FACTS AND LAW IN DELETING ADDITION OF RS.3,93,343/- CESS PAYABLE TO PARENT BODY. HOWEVER, THE FACT IS THAT THE SAID PARENT BODY LEVI ES CESS WHICH IS BASED ON PURCHASE/PRODUCTION OF THE MEMBER SOCIE TY. THIS AMOUNT IS PAYABLE TO SUGARFED WHICH IS A GOVERNMENT BODY, ALLOWING RELIEF OF RS.15,00,000/- ON ACCOUNT OF STC G AS THE ASSESSEE FAILED TO FILE DOCUMENTARY EVIDENCES IN SU PPORT OF SALE OF SHOPS. VI) THE APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY OR M ORE GROUNDS OF APPEAL. 2. THE BRIEF FACTS IN GROUND NO.1, AS PER AOS ORDE R AT PAGE 2 & 3, ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE HAS PAID LIQUIDATORY DAMAGES TO PROVIDENT FUND AMOU NTING TO RS.27,81,468/- DURING THE YEAR. THIS QUERY WAS RAIS ED VIDE LETTER DATED 14.12.2012. IN RESPONSE THE ASSESSEE VIDE LET TER DATED 26.12.12, STATED THAT RS.27,81,468/- HAS BEEN TAKEN AWAY BY PROVIDENT FUND DEPARTMENT IN THE YEAR 2009-10 AS DAMAGES. THE ASSE SSEE FILED AN APPEAL AGAINST THE ORDER. THE HONBLE PUNJAB & HARY ANA HIGH COURT HAS SET ASIDE THE ORDER OF THE PROVIDENT FUND DEPA RTMENT VIDE ORDER DATED 30.08.2011 AND DIRECTED THE DEPARTMENT TO REF UND RS.15,34,257/- AND TO EXAMINE THE ISSUE AFRESH. 3.1. REPLY OF THE ASSESSEE WAS CONSIDERED. THIS PAY MENT, AS PER INTERNAL AUDITORS REPORT, IS SHOWN AS CLAIMS RECEI VABLE IN THE BALANCE SHEET OF THE ASSESSEE MEANING THEREBY THAT IT HAS B EEN PASSED THROUGH THE P & L ACCOUNT. IT IS NOT CORRECT TO CHARGE A PA YMENT OF THE NATURE OF FINE/PENALTY FOR INFRACTION OF LAW, TO THE PROFI TS FOR INCOME TAX PURPOSE. A PAYMENT MADE UNDER A STATUTORY OBLIGATIO N, BECAUSE THE ASSESSEE WAS IN DEFAULT, COULD NOT CONSTITUTE EXPEN DITURE LAID OUT FOR THE PURPOSE OF BUSINESS. DAMAGES ON ACCOUNT OF PROV IDENT FUND RULES VIOLATION, ARE NOT DEDUCTIBLE IN NATURE. IN FACT, THE HONBLE SUPREME COURT IN THE CASE OF ORGANICS CHEMICALS INDUSTRIES IR 1979 SC 1803 ITA NO.474(ASR)/2014 3 HAS CLEARLY HELD SUCH PAYMENTS AS NOT ALLOWABLE. TH E LEGAL POSITION ON THIS MATTER IS VERY CLEAR AS CAN BE OBSERVED FRO M THE FOLLOWING CASES. CIT VS. ALBUQUERQUE AND SONS (KAR) 198 ITR 609 HASIMARA INDUSTRIES LTD. VS. CIT (CAL) 200 ITR 659 ROHTAK TEXTILE MILLS LTD. VS. CIT (DEL) 226 ITR 485 CIT VS. BHARATH PLYWOOD AND TIMBER PRODUCTS P. LTD. (KER) 233 ITR 315. THE FACT THAT THE HONBLE HIGH COURT HAS DIRECTED F OR FRESH EXAMINATION OF THE ISSUE IS ALL THE MORE REASON WHY THE ASSESSEE SHOULD NOT HAVE CLAIMED THIS EXPENDITURE. IN VIEW O F THE NATURE OF THE SAID EXPENDITURE, THE SAME IS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. I AM SATISFIED THAT THE CLA IMING A WRONG DEDUCTION THE ASSESSEE HAS CONCEALED INCOME AND HAS FURNISHED INACCURATE PARTICULARS OF INCOME. PENALTY PROCEEDI NGS U/S 271(1)(C) ARE BEING INITIATED ACCORDINGLY. 3. THE LD. CIT(A) DELETED THE ADDITION AS THE ASSES SEE HAS NEVER CLAIMED EXPENSES IN THE PROFIT & LOSS ACCOUNT AND THEREFORE , THE SAME ARE NOT DISALLOWABLE U/S 43B OF THE ACT. 4. AS REGARDS GROUND NO.2, THE BRIEF FACTS, AS PER AOS ORDER AT PAGE 3 & 4 ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UN DER: DURING THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT THE ASSESSEE HAS CHARGED INTEREST PAYMENT ON LOAN FROM RDF (RURA L DEVELOPMENT FUND) AMOUNTING TO RS.68,18,000/-. THIS AMOUNT IS D EBITED IN THE P & L ACCOUNT AS INTEREST ON TERM LOAN IN FINANCIAL EXP ENSES. THE SAME IS INCLUDED IN THE INTEREST PAYABLE 0 DUE TO GOVT. IN THE BALANCE SHEET AS PART OF TOTAL LIABILITY RS.4,92,56,795/- OUT OF WH ICH RS.4,24,38,795/- IS COMING DOWN FROM THE LAST YEAR. THE QUERY REGARDIN G THE INTEREST PAYABLE WAS RAISED VIDE LETTER DATED 14.12.2012 AND IT WAS ASKED THAT WHY SHOULD THE INTEREST ACCRUED NOT BE DISALLOWED U /S 43B. ITA NO.474(ASR)/2014 4 REPLY OF THE ASSESSEE WAS RECEIVED VIDE LETTER DATE D 26.12.2012 THAT INTEREST ACCRUED RS.4,92,56,795/- IS PAYABLE TO PU NJAB GOVT. WHICH IS NOT COVERED U/S 43B. REPLY OF THE ASSESSEE WAS CONSIDERED. THE INTEREST PAYMENT IN QUESTION HAS ACCRUED TO THE RDF . THUS, CONTENTION OF THE ASSESSEE IS THAT RDF IS NOT A PUBLIC FINANCIAL INSTITUTION AND THUS SECTION 43B IS NOT ATTRACTED IN THIS CASE. A PERUSAL OF PROVISIONS OF SECTION 43B SHOWS THAT IT WAS INCORPORATED TO SAFE GUARD THAT INTERESTS OF THE GOVERNMENTS AND THEIR INSTITUTIONS. THAT IS WHY IT WAS PROVIDED THAT THE EXPENSES OF THE NATURE OF INTEREST AND TAXES PA YABLE TO THE GOVERNMENT AND ITS INSTITUTION, IF OTHERWISE ALLOWA BLE, WOULD BE ALLOWED ONLY ON ACTUAL PAYMENT BASIS. FROM THE NATURE OF RDF IT IS CLEAR THAT IT IS A GOV ERNMENT BODY. RDF IS CONSTITUTED UNDER PUNJAB RURAL DEVELOPMENT ACT, 1987. THE INCOME OF THE PUNJAB RURAL DEVELOPMENT BOARD UNDER WHICH IT FUNCTIONS, IS FROM RURAL DEVELOPMENT FREE LEVIED O N SALE/PURCHASE BY THE GOVERNMENT. IT IS SUPPOSED TO BE USED FOR AG RICULTURAL DEVELOPMENT. THUS, IT IS ESTABLISHED THAT RDF IS A PUBLIC FINANCIAL INSTITUTION AND FALLS UNDER AMBIT OF SEC.43B. ACCORDINGLY, THE INTEREST PAYMENT OF RS.68,18,000/- IS NOT ALLOWABLE AND IS ADDED BACK TO THE INCOME OF THE ASSESSEE. I AM SATISFIED THAT BY CLAIMING THIS EXPENDITURE THE ASSESSEE HAS CONCEALE D INCOME AND HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND PENA LTY PROCEEDINGS U/S 271(1)(C) AS BEING INITIATED. 5. THE LD. CIT(A) DELETED THE ADDITION BY GIVING FI NDING THAT THE AO HAS NOT PROVED ANYWHERE HOW RDF IS A PUBLIC FINANCIAL I NSTITUTIONS COVERED U/S 43B OF THE ACT AND ACCORDINGLY, AS PER CLEAR LIST P UBLISHED BY THE GOVERNMENT IN THIS REGARD OF PUBLIC FINANCIAL INST ITUTIONS, RURAL DEVELOPMENT FUND OF PUNJAB GOVT. CANNOT BE CONSIDER ED AS PUBLIC FINANCIAL INSTITUTIONS. ACCORDINGLY, SECTION 43B OF THE ACT A RE NOT APPLICABLE. ITA NO.474(ASR)/2014 5 6. AS REGARDS, GROUND NO. 3, THE BRIEF FACTS OF THE CASE AS PER AOS ORDER AT PAGE 4 & 5 ARE REPRODUCED FOR THE SAKE OF CONVEN IENCE AS UNDER: DURING THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT THE ASSESSEE HAS CHARGED A SUM OF RS.3,93,343/- AS PROD UCTION-CESS PAYABLE TO SUGARFED. THIS PAYMENT WAS OUTSTANDING AT THE END OF THE YEAR AND REMAINED UNPAID FOR THE PURPOSES OF SECTIO N 43B. THE QUERY REGARDING THE PRODUCTION-CSS PAYABLE WAS RAISED VID E LETTER DATED 14.12.2012 AND IT WAS ASKED THAT WHY SHOULD THE SAM E NOT BE DISALLOWED U/S 43B. REPLY OF THE ASSESSEE WAS RECEIVED VIDE LETTER DATE D 26.12.2012 THAT RS.3,93,343/- IS PRODUCTION CESS PAYABLE TO SUGAR FED WHICH IS NOT COVERED U/S 43B. REPLY OF THE ASSESSEE WAS CONSIDERED. SECTION 43B O F THE ACT CLEARLY SAYS THAT (A) ANY SUM PAYABLE BY THE ASSESSEE BY W AY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE.SHALL BE ALLOWED (IRRESPECTIVE OF THE PR EVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTIO N 28 OF THAT PREVIOS YEAR IN WHICH THE SUM IS ACTUALLY PAID BY HIM.. IT IS THUS STATED IN UNAMBIGUOUS TERMS THAT ANY TA X OR CESS BY WHATEVER NAME CALLED. UNDER ANY LAW FALLS IN THE AMBIT OF SECTION 43B. THUS, THE CONTENTION OF THE ASSESSEE CANNOT B E ACCEPTED. ACCORDINGLY, THE EXPENDITURE OF RS.3,93,343/- IS DI SALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. I AM SATISFIED THAT BY CLAIMING THIS EXPENDITURE THE ASSESSEE HAS CONCEALED INCOME AND H AS FURNISHED INACCURATE PARTICULARS OF INCOME AND PENALTY PROCEE DINGS U/S 271(1)(C) AS BEING INITIATED. 7. THE LD. CIT(A) DELETED THE ADDITION FOR THE REAS ONS THAT THE SAID CESS IS NOT COVERED U/S 43B(A) OF THE ACT. ITA NO.474(ASR)/2014 6 8. THE LD. DR RELIED UPON THE ORDER OF THE A.O. WHE REAS THE LD. COUNSEL FOR THE ASSESSEE, MR. PADAM BAHL, CA RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE ORDER OF THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS GROUND NO.1 WITH REGARD TO THE DELETION OF ADDITION OF RS.27,81,468/- ON ACCOUNT OF PROVIDENT FUND DAMAGES RECOVERED BY THE PROVIDENT FUND DEPARTMENT DURING THE YEAR. THE ASSU MPTION MADE BY THE AO THAT THE AMOUNT MUST HAVE PASSED THROUGH THE PR OFIT & LOSS ACCOUNT. THEREFORE, THE SAID AMOUNT WAS DISALLOWED BY THE AO . ON PERUSAL OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT ON RECORD, THE SAID AMOUNT HAS NEVER BEEN CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT. THUS, THE AO IS NOT JUSTIFIED IN DISALLOWING THE SAME U/S 43B OF THE A CT. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HA S RIGHTLY DELETED THE ADDITION MADE BY THE AO. THUS, GROUND NO.1 OF THE REVENUE IS DISMISSED. 9.1. AS REGARDS GROUND NO.2 WITH REGARD TO DELETION OF ADDITION OF RS.68,18,000/- ON ACCOUNT OF INTEREST CLAIMED BY T HE ASSESSEE ON GOVT. LOAN AND RDF LOAN GIVEN BY THE PUNJAB GOVERNMENT TO CO-O PERATIVE SUGAR MILLS., IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT SUCH LOAN DOES NOT FALL UNDER SECTION 43B(D) OR SECTION 43B(E). THE PROVIS ION OF SECTION 43B(D) APPLIES TO PUBLIC FINANCIAL INSTITUTIONS OR STATE F INANCIAL CORPORATION OR ITA NO.474(ASR)/2014 7 STATE INDUSTRIAL DEVELOPMENT CORPORATION. SUCH PUBL IC FINANCIAL INSTITUTIONS ARE HELD BY THE GOVERNMENT AND WITH REGARD TO SECTI ON 43B(E), THE SAME COVERS LOAN TAKEN FROM SCHEDULE BANKS. THEREFORE, I N VIEW OF THE FINDINGS GIVEN BY THE AO HIMSELF THAT RDF IS A GOVT. BODY, CONSTITUTED UNDER PUNJAB RURAL DEVELOPMENT ACT, 1987. IN THE ABSENCE OF ANYTHING ON RECORD BY THE AO THAT HOW RDF IS A PUBLIC FINANCIAL INSTI TUTIONS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) THAT THE S AID RDF CANNOT BE CONSIDERED AS A PUBLIC FINANCIAL INSTITUTION AND AC CORDINGLY SECTION 43B(D) & SECTION 43B(E) ARE NOT APPLICABLE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION SO MAD E BY THE AO. THUS, GROUND NO.2 OF THE REVENUE IS DISMISSED. 9.2. AS REGARDS GROUND NO.3 OF THE REVENUE WITH REG ARD TO DELETION OF ADDITION OF RS.3,93,343/- ON ACCOUNT OF CESS COLL ECTED BY M/S. SUGARFED BY APPLYING PROVISION OF SECTION 43B, IT WAS SUBMIT TED BEFORE THE LD. CIT(A) AND BEFORE US THAT M/S. SUGARFED IS A PARENT BODY W HICH COLLECTS CESS FROM ALL SUGAR MILLS AND CESS IS NOT A TAX OR A LEVY BUT IT IS A CONTRIBUTION TO ITS PARENT BODY. IT IS UTILISED FOR THE USE OF CO-OPER ATIVE BODIES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE L D. CIT(A), DELETING SAID ITA NO.474(ASR)/2014 8 ADDITION, SINCE THE SAME IS NOT COVERED U/S 43B OF THE ACT. ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.474(ASR)/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH FEBRUARY, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19TH FEBRUARY, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. THE GURDASPUR CO-OPERATIVE SUGAR MILL, PANIAR, GURDASPUR. 2. THE DCIT, PATHANKOT. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.