Gujarat Co.Op. Milk Mktg. Federation Ltd., Anand V. The ACIT., Anand Circle, Anand

ITA 475/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8766 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 23-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAILY JINDALCIT
• Assessee Lawyers: TALATI
• Keywords: Depreciation; Business expenditure; Rectification of order; Charitable institution; Capital expenditure; Set aside
• Section: 80HHC; 234B; 80G; 12A; 12AA; 10; 154

Judgement Text

ITA.475/06 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M GUJARAT CO.OP. MILK MARKETING FEDERATION LTD., AMUL DAIRY ROAD, ANAND. VS THE ASSTT.COMMISSIONER OF INCOME TAX,ANAND CIRCLE, ANAND. PAN NO.AAACG 7189 H (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.H. TALATI. RESPONDENT BY:- SHRI SHAILY JINDAL,CIT D.R. O R D E R PER SHRI D.C.AGRAWAL, J.M. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GROUND S :- 1. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS I N CONFIRMING THE ADDITION OF RS.1,81,38,000/- MADE BY THE LD. A. O. BEING THE AMOUNT TRANSFERRED TO RESERVE FUND AS REQUIRED BY T HE STATUTORY PROVISIONS OF SECTION 67 OF THE GUJARAT CO-OPERATIV E SOCIETIES ACT. THE SAID AMOUNT BEING DEDUCTIBLE AND NOT INCLUDIBL E IN THE TOTAL INCOME, BE DIRECTED TO BE ALLOWED TO BE DEDUCTED. 2. THE LD. CIT(A) FURTHER ERRED BOTH IN LAW AND ON FAC TS IN CONFIRMING THE DISALLOWANCE OF RS.2,00,000/- BEING ITA NO. 475/AHD/06 ASST. YEAR :2002-03 ITA.475/06 2 CONTRIBUTION TO EDUCATION FUND. THE LD. CIT(A) ERRE D IN NOT APPRECIATING THE SUBMISSIONS MADE IN THIS REGARD. 3. THE LD. CIT(A) FURTHER ERRED BOTH IN LAW AND ON FAC TS IN CONFIRMING THE DISALLOWANCE OF AMOUNT OF RS.1,43,15 ,579/- BEING DEPRECIATION ON THE PLANT AND MACHINERY BY TR EATING GRANT AS DEDUCTIBLE FROM THE COST. THE DEPRECIATION BE AL LOWED ON THE GROSS VALUE AS CLAIMED. 4. THE LD. CIT(A) ERRED BOTH IN LAW AND ON FACTS IN DI SMISSING THE GROUND FOR CLAIM OF DEPRECIATION AT 100% ON THE TEM PORARY STRUCTURES OF AMUL PARLOUR AND THEREBY REDUCING THE DEPRECIATION CLAIM BY RS.10,62,107/-. THE LD. CIT(A ) OUGHT TO HAVE ALLOWED THE DEPRECIATION AT 100% AS CLAIMED. 5. THE LD. CIT(A) HAS GROSSLY ERRED IN MENTIONING THAT THE GROUND WITH REGARD TO ASSESSEES CONTENTION THAT DEPRECIAT ION ON AMUL PARLOURS BEING IN THE NATURE OF TEMPORARY CONSTRUCT ION BE ALLOWED AT 100% WAS NOT PRESSED FOR THE REASON THAT THE A.O. HAS RECTIFIED THE SAME. IT IS SUBMITTED THAT NO SUC H RECTIFICATION ORDER HAS BEEN PASSED BY THE A.O. GRANTING DEPRECIA TION AT 100% ON SUCH TEMPORARY STRUCTURES, AND THAT OBSERVA TION AND DECISION OF LD. CIT(A) THAT THIS GROUND WAS NOT PRE SSED IS NOT CORRECT. IT IS SUBMITTED THAT THE LD. CIT(A) BE DIR ECTED TO DECIDE THIS ISSUE ON MERITS AGAIN AFTER CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LD. CIT(A) PATENTLY ERRED BOTH IN LAW AND ON FA CTS IN CONFIRMING DISALLOWANCE OF DEDUCTION OF RS.4,48,04, 410/- U/S. 80G OF THE INCOME TAX ACT AND IN CONFIRMING THE ACT ION OF THE LD. A.O. ALLOWING ONLY RS.76,95,590/- OUT OF RS.5,2 5,00,000/- ITA.475/06 3 DONATED BY THE APPELLANT. THE DEDUCTION BE ALLOWED IN FULL AS CLAIMED. 7. THE LD. C.I.T.(A) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE A.O. IN TREATING COST NOT RELATED TO EXPORT AS INDIRECT COST WHILE COMPUTING DEDUCTION U /S. 80HHC OF THE INCOME TAX ACT. THE DEDUCTION BE ALLOWED AS CLAIMED. 8. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALL OWING IN FULL, THE GROUND OF APPEAL AGAINST CHARGING OF INTE REST U/S. 234-B AND 234-D. THE INTEREST UNDER ABOVE PROVISIONS BE N OW HELD TO BE NOT CHARGEABLE. 2. THERE ARE SIX EFFECTIVE GROUNDS IN THIS APPEAL W HICH ARE DISCUSSED AS UNDER. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING AND MARKETING MILK AND MILK PRODUCTS. IT IS ALSO A CONS IGNEE AGENT OF NDDB EDIBLE OIL AND SAFAL DRINK AND CONSIGNEE AGENT OF M EMBERS OF UNION FOR MILK PRODUCT. 4. THE FIRST GROUND RELATES TO CONFIRMING THE ADDIT ION OF RS.1,81,38,000/- BEING THE AMOUNT TRANSFERRED TO RE SERVE FUND. 5. WE HAVE HEARD THE PARTIES. THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE IN ASSESSEES OWN CASE IN ITA NO.102/AHD/20 06 FOR THE ASSESSMENT YEAR 2000-01 VIDE PARAGRAPHS 4 AND 5 AS UNDER :- 4. THE SECOND GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.1,44,62,415 BEING TRANSFER OF RESERVE FUND U/ S.67 OF THE GUJARAT ITA.475/06 4 CO-OPERATIVE SOCIETIES ACT. THIS ISSUE STANDS COVER ED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CAS E OF ASSESSEES OWN CASE FOR A.Y. 1994-95 WHEREIN THE TRIBUNAL DECIDED THE MATTER AGAINST THE ASSESSEE VIDE DISCUSSION IN PARAGRAPH 8 OF THE ORDER, WHICH READS AS UNDER :- 8. THE ONLY GROUND WHICH REMAINS TO BE CONSIDERED IN REVENUES APPEAL IS GROUND NO.1 WHICH IS REPRODUCED BELOW :- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING TO ALLOW THE ASSESSE ES CLAIM FOR DEDUCTION FOR THE SUM OF RS.19,71,528/- TRANSFERRED TO RESERVE FUND ACCOUNT. 8.1. AT THE OUTSET, THE LD. REPRESENTATIVES OF BOTH SIDES COMMENDED THAT THIS ISSUE IS ALSO COVERED AGAINST T HE ASSESSEE BY EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES O WN CASE FOR A.Y. 1993-94 (SUPRA). THE TRIBUNAL IN PARA 2.1 OF T HEIR ORDER HAVE GIVEN THE FOLLOWING FINDINGS : 2.1 IT IS COMMON CONTENTION THAT ISSUE INVOLVE D IN THIS GROUND OF APPEAL IS COVERED AGAINST THE ASSESSEE BY ORDER OF THE TRIBUNAL DT.19.12.2002 IN ASSESSEES OWN CASE FOR T HE A.YS. 1984-85, 1987-88 & 1988-89 IN APPEAL NOS.1252 TO 1253/AHD/95. IN THE SAID ORDER THIS TRIBUNAL, FOLLO WING THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF MEH SANA DIST. CO-OP. MILK PRODUCERS UNION LTD., IN ITA NO.2091/AHD/90 AND OTHERS DATED 31.8.95 HELD THAT T HE AO HAD RIGHTLY DENIED DEDUCTION IN RESPECT OF AMOUNT TRANS FERRED TO RESERVE FUND ACCOUNT AS REQUIRED U/S. 67 OF THE GUJ ARAT CO- OPERATIVE SOCIETIES ACT. WE, THEREFORE, RESPECTFULL Y FOLLOWING ITA.475/06 5 THE SAME, REVERSE THE ORDER OF LD. CIT(A) AND RESTO RE THE ADDITION OF RS.76,19,692/-. 8.2. WE THEREFORE, RESPECTFULLY FOLLOWING THE AFOR ESAID ORDER OF THE TRIBUNAL, HOLD THAT THE CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW DEDUCTION FOR THE SUM OF RS.19,71,528 /- TRANSFERRED TO RESERVE FUND ACCOUNT. THE ORDER PASS ED BY THE CIT(A) IS SET ASIDE AND THAT OF THE A.O. IS RESTORE D IN RELATION TO THIS POINT. 5. SINCE THE FACTS AND CIRCUMSTANCES IN TH E AFORE SAID CASE ARE SIMILAR TO THAT OF THE ISSUE UNDER CONSIDERATION, O N THE SAME LINE, WE UPHOLD THE ORDER OF THE CIT (A) IN THIS YE AR AS WELL. 6. RESPECTFULLY FOLLOWING THE ABOVE, WE DECIDE THE ISSUE AGAINST THE ASSESSEE THIS YEAR ALSO. THIS GROUND OF THE ASSESSE E IS REJECTED. 7. THE SECOND ISSUE IS REGARDING THE CO NFIRMATION OF DISALLOWANCE OF RS.2 LACS BEING THE CONTRIBUTION TO EDUCATION FUND. 8. WE HAVE HEARD THE PARTIES. THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN A.Y. 2000-01 AS UNDER : - 6. THE NEXT GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.2,00,000/- BEING CONTRIBUTION TO EDUCATION FUND. SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1998-99, WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSES SEE VIDE DISCUSSION IN PARAGRAPH 34 OF ITS ORDER, WHICH READS AS UNDER :- ITA.475/06 6 34. THE FOURTH GROUND IS AGAINST THE DELETION O F ADDITION OF RS.3,00,000/- ON ACCOUNT OF CONTRIBUTION MADE TO ED UCATIONAL FUND OF THE STATE GOVERNMENT. THIS ISSUE STANDS COV ERED IN FAVOUR OF THE ASSESSEE BY THE GUJARAT HIGH COURT DE CISION IN THE CASE OF MEHSANA DIST. CO-OP. MILK PRODUCERS UNION L TD. VS. CIT (203 ITR 601), WHEREIN SIMILAR PAYMENT TO EDUCA TION WAS HELD TO BE AS AN ALLOWABLE BUSINESS EXPENDITURE. RE SPECTFULLY FOLLOWING THE SAME, WE ALLOW THE CLAIM OF THE ASSES SEE. 7. SINCE THE FACTS AND CIRCUMSTANCES ARE SIMILAR, R ESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE CLAIM OF THE ASSES SEE IN THIS YEAR AS WELL. 9. RESPECTFULLY FOLLOWING THE ABOVE DECISION, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THIS GROUND IS ACCORDING LY ALLOWED. 10. THE THIRD GROUND RELATES TO CONFIRMING THE DISA LLOWANCE OF RS. 1,43,15,579/- BEING THE DEPRECIATION ON PLANT AND M ACHINERY BY TREATING GRANT AS DEDUCTIBLE FROM THE COST. 11. WE HAVE HEARD THE PARTIES. THE ISSUE WAS DECIDE D IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN A.Y. 2000-01 AS UND ER :- THE NEXT GROUND IS AGAINST THE CONFIRMATION OF DIS ALLOWANCE OF DEPRECIATION OF RS.2,45,04,358 ON GRANTS RECEIVED I N EARLIER YEAR BY REDUCING W.D.V. SIMILAR MATTER CAME UP BEFORE TH E TRIBUNAL AND THE TRIBUNAL IN ITS EARLIER ORDER ALLOWED THE C LAIM OF THE ASSESSEE VIDE DISCUSSION IN PARAGRAPHS 16 & 17 WHIC H READ AS UNDER:- ITA.475/06 7 16. WE HAVE HEARD THE PARTIES AND CONSIDERED THE R IVAL SUBMISSIONS. IN OUR OPINION, THE CIT(A) IS RIGHT IN HOLDING THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF P.J. CHEMICALS WOR KS LTD. (SUPRA). THE ASSESSEE HAS SET UP A MILK PROCESSING PLANT CALLED MOTHER DAIRY PLANT AT GANDHINAGAR HAVING MILK PRO CESSING CAPACITY OF 4 LAC LITRES PER DAY. THE SAID PROJECT INITIALLY ESTIMATED AT A COST OF RS.16.04 CRORES WAS FINANCED UNDER THE NATIONAL DAIRY PROJECT-II/OPERATION FLOOD-III BY TH E NATIONAL DAIRY DEVELOPMENT BOARD. THE FINANCING BY THE NDDB IS UNDERTAKEN BY 70% LOAN AND 30% GRANT BASIS. AS PER THE AGREEMENT DT.30 TH OCTOBER,1991 SIGNED BETWEEN THE ASSESSEE AND NDDB WHAT COMES OUT IS THAT BY CLAUSE (1) OF TH E AGREEMENT NDDB HAS GIVEN DISBURSEMENT TO BORROWERS A SUM OF RS.13058.98 LACS AS GRANTS TOWARDS PART-FINANCE FOR THE PROJECT AS PER THE TERMS AND CONDITIONS. SUBJECT TO PARAGRAPH 4 OF THE AGREEMENT, THE ESTIMATED COST FOR DISBURSEME NT IS STATED AS UNDER:- ITEM. ESTIMATED TOTAL COST AMOUNT OF GRANT OF (30% OF COST) PROCESSING FACILITIES 37914.23 LACS 11,247.07 TECHNICAL INPUTS 4009.86 LACS 1,102.95 MILK MARKETING 395.86 LACS 118.53 17. THE NDDB BY CLAUSE (4) OF THE AGREEMENT HAS BEEN GI VEN OPTION THAT INSTEAD OF GIVING THE AMOUNT OF GRANT B Y WAY OF CASH THEY CAN GIVE SPECIFIC MACHINERY AND/OR EQUIPM ENT REQUIRED FOR THE PROJECT AS GRANT. IN SUCH A CASE T HE ACTUAL COST OF PLANT, EQUIPMENT OR MACHINERY WILL BE CONSI DERED TOWARDS GRANT FOR PURPOSE OF PARAS 2 AND 3, AND SUC H ACTUAL COST WILL BE THE AMOUNT AS COMPUTED BY THE NDDB AND MAY INCLUDE DIRECT AND INDIRECT EXPENSES AND ALL COSTS OF PURCHASING, ACQUISITION, TRANSPORTATION, INSURANCE, TRIAL RUNS, INVENTORY HOLDING COSTS, SERVICE CHARGES AND INTERE ST CHARGED AS COMPUTED BY THE NDDB AND THE AMOUNT OF GRANT TO BE GIVEN WILL BE REDUCED BY THE AMOUNT OF COST OF THE ITA.475/06 8 MACHINERY AND/OR EQUIPMENT SO SUPPLIED TO THE BORRO WER AND ONLY THE BALANCE OF THE AMOUNT IF ANY, WILL BE GRANTED/PAYABLE BY THE NDDB IN CASH. THE ASSESSEE H AS NOT BEEN GIVEN ANY SPECIFIC MACHINERY. IT HAS BEEN GIVE N A GRANT, WHICH IS NOT GIVEN AS A DIRECT COST OF THE P LANT AND MACHINERY BUT IT WAS GIVEN AS A GRANT FOR THE PROJE CT AS A WHOLE INCLUDING PROCESSING FACILITY, TECHNICAL INPU TS MILK MARKETING. THE CIT(A) IS, THEREFORE, RIGHT IN HOLDI NG THAT IT IS A GRANT THAT WAS NOT GIVEN FOR PURCHASE OF ANY SPECIFIC PLANT OR MACHINERY OR ACQUISITION OF ASSETS. IT HAS BEEN GIVEN FOR THE ENTIRE PROJECT AND ACCORDINGLY, THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF P.J. CHEMICALS WORKS LTD. (SUPRA). THE RELIANCE ON THE EXPLANATION (10) TO SEC. 43(1) ALSO CANNOT B E OF ANY HELP TO THE REVENUE, AS IT WAS INCORPORATED W.E.F. 1.4.1999 AND WOULD NOT BE APPLICABLE TO THE YEAR UNDER CONSI DERATION. THE DECISION OF SAHNEY STEEL & PRESS WORKS LTD.(SUP RA) IS ALSO OF NO HELP AS THE ISSUE IN THAT CASE WAS WHETH ER THE AMOUNT RECEIVED BY THE ASSESSEE WAS A REVENUE INCOM E OR CAPITAL EXPENDITURE AND NOTHING TO DO WITH COST OF THE ASSETS. WE, ACCORDINGLY, UPHOLD THE ORDER OF THE CIT(A) AN D REJECT THE GROUND OF THE REVENUE. 9. SINCE FACTS AND CIRCUMSTANCES ARE SIMILAR IN T HIS YEAR, WE ALLOW THE CLAIM OF THE ASSESSEE, IN THIS YEAR AS WE LL. 12. THE LEARNED A.R. SUBMITTED THAT EXPLANATION 10 TO SECTION 43(1) INTRODUCED W.E.F. 1-4-1999 SHOULD HAVE BEEN CONSIDE RED IN AS MUCH AS IF ANY SUBSIDY/GRANT HAS BEEN GIVEN FOR PURCHASING ANY ASS ET AFTER 1-4-1999 THEN IT SHOULD BE REDUCED FROM THE COST AND DEPRECIATION SH OULD BE ALLOWED ONLY ON THE BALANCE. 13. THIS ISSUE HAD ALSO ARISEN BEFORE THE TRIBUNAL IN A.Y. 2000-01 WHEREIN PARAGRAPH 10, THE TRIBUNAL HAD CONSIDERED T HE SAME AND AFTER ITA.475/06 9 FOLLOWING THE DECISION OF HONBLE S.C. IN THE CASE OF P.J.CHEMICALS WORKS LTD., (1994) 210 ITR 830 (SC) HELD THAT SUBSIDY IS GIVEN FOR THE PROJECT AS A WHOLE AND NOT IN RESPECT OF AN INDIVIDUAL ASSET. TH EREFORE, IT WILL NOT AFFECT THE ACTUAL COST OF ANY SPECIFIC PLANT AND MACHINERY AND ACCORDINGLY WILL NOT BE REDUCED FOR CALCULATING THE DEPRECIATION. SINCE THE ISSUE IS COVERED IT DOES NOT REQUIRE TO TAKE A DIFFERENT VIEW THAN WHA T HAS BEEN TAKEN BY THE TRIBUNAL IN EARLIER YEARS. AS A RESULT, FOLLOWING T HE DECISION OF THE TRIBUNAL IN A. Y. 2000-01 WE ALLOW THE CLAIM OF THE ASSESSEE . THIS GROUND IS ACCORDINGLY ALLOWED. 14. GROUND NO.4 RELATES TO CONFIRMING THE DI SALLOWANCE OF DEPRECIATION OF RS.10,62,107/- AT 100% ON STRUCTURE WHICH ASSESS EE CALLS AS TEMPORARY STRUCTURE. AFTER GOING THROUGH THE ORDER OF THE LD. CIT (A) WE NOTICE THAT A.O. HAS RECTIFIED HIS ORDER U/S. 154 ALLOWING THE CLAIM OF THE ASSESSEE. THE RELATED GROUND WAS NOT PRESSED BEFORE THE LD. CIT ( A) BY THE ASSESSEE. IN THIS REGARD WE REPRODUCE THE RELEVANT PORTION FROM THE ORDER OF THE CIT(A) AS UNDER :- IT HAS BEEN CONTENDED IN THIS GROUND OF APPEAL TH AT THE A.O. HAS ERRED IN ALLOWING DEPRECIATION @ 10% ON TEMPORARY S TRUCTURES OF AMUL PARLOURS AS AGAINST 100% CLAIMED BY THE APPELL ANT. IT HAS ALSO BEEN CONTENDED THAT THE A.O. HAS ERRED IN REDUCING THE DEPRECIATION CLAIMED TO RS.10,62,107/- EVEN THOUGH NO SUCH CLAIM WAS MADE IN THE RETURN OF INCOME. AT THE TIME OF THE HEARING OF APPEAL, THIS GROUND W AS NOT PRESSED FOR THE REASON THAT THE A.O. HAD RECTIFIED THE ISSUE VI DE HIS ORDER DATED ITA.475/06 10 4.3.2005 PASSED U/S. 154 OF THE ACT. IN VIEW OF THI S, THE GROUND IS TREATED AS DISMISSED. 15. IN VIEW OF THE ABOVE WE DO NOT FIND ANY REASON TO INTERFERE ON THIS ISSUE AND ACCORDINGLY THIS GROUND BECOMES INFR UCTUOUS AND IS REJECTED. 16. GROUND NO.5 RELATES TO CONFIRMING THE DISALLOWA NCE OF RS. 4.8 CRORES BEING DONATION UNDER SECTION 80G TO AMUL REL IEF TRUST. THE A.O. OBSERVED THAT ASSESSEE HAD DONATED A SUM OF RS.5 CR ORES DURING THE YEAR TO AMUL RELIEF TRUST ON WHICH ASSESSEE HAD CLAIMED DED UCTION AT 100% UNDER SECTION 80G. THE DONATION WAS GIVEN FOR RELIEF OF G UJARAT EARTHQUAKE VICTIMS. THE PRESENT ASSESSEE HAD CLAIMED DEDUCTION U/S.80G(2)(D) WHICH COVERS ANY SUM PAID BY THE ASSESSEE TO ANY TRUST, I NSTITUTION OR FUND BETWEEN 26.01.2001 AND 30-09-2001 PROVIDING RELIEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT. THE PROVISIONS OF SECTION 80 G(2)(D) ARE SUBJECT TO PROVISIONS OF SECTION 80G(5C) ACCORDING TO WHICH TH E DONEE IS REQUIRED TO UTILIZE THE FUNDS FOR EARTHQUAKE RELIEF WORK PRIOR TO 31.03.2004 AND TRANSFER THE BALANCE UNUTILIZED AMOUNT TO THE PRIME MINISTER S NATIONAL RELIEF FUND BY 31.03.2004. THE AMOUNT REMAINING UNUTILIZED UP T O 31-3-2004 WAS RS.3,19,92,720/-. THUS, THE AMOUNT ACTUALLY UTILIZE D WAS RS.1,80,07,730/-. ACCORDING TO THE ASSESSEE REST OF THE SUM BEING RS. 3,19,92,720/- WAS COMMITTED FOR CONSTRUCTION OF AMUL SCHOOL, FEES FOR ARCHITECTURAL WORK AND STRUCTURAL CONSULTANCY. ACCORDING TO THE ASSESSEE SINCE THE ENTIRE AMOUNT WAS COMMITTED FOR CHARITABLE WORK INCLUDING PROVIDI NG RELIEF TO EARTHQUAKE VICTIMS THEN IT CAN BE TREATED AS APPLICATION OF TH E FUND AND ACCORDINGLY 100% DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE ON WHOLE OF THE AMOUNT. BUT ACCORDING TO THE LEARNED A.O. CONDITIONS LAID D OWN UNDER SECTION ITA.475/06 11 80G(5C) WERE NOT FULFILLED THEREFORE ASSESSEE, WAS NOT ENTITLED TO 100% DEDUCTION U/S. 80G(2)(D). 17. THE LD. C.I.T.(A) ANALYZED THE PROVISIONS OF SECTION 80G(5C) AND INFERRED THAT IF APPLICATION OF DONATION IS NOT DON E IN ACCORDANCE WITH SECTION 80G(2)(D) READ WITH SEC.80G(5C) THEN WHOLE OBJECT OF IMPLEMENTATION OF RELIEF WORK WOULD BE DEFEATED. TH ESE 2 PROVISIONS WERE SPECIFICALLY INCORPORATED TO PROVIDE RELIEF TO THE VICTIMS OF GUJARAT EARTHQUAKE AND IF THE CONDITIONS LAID DOWN IN THESE PROVISIONS ARE NOT COMPLIED WITH THEN 100% DEDUCTION SHOULD NOT BE ALL OWED. HE FINALLY HELD AS UNDER :- AS PER THE PROVISIONS OF SECTION 80G(5C) SUB CLAUS E (IV), THE UNUTILIZED PORTION OF THE DONATION HAD TO BE TRANSF ERRED TO THE P.M. NATIONAL RELIEF FUND BY 31.3.2004 BUT THE APPELLANT BY ITS OWN ADMISSION HAS STATED THAT A SUM OF RS. 1 CRORE WAS TRANSFERRED ON A MUCH LATER DATE I.E. ON 29.12.2004. FURTHER, THE AC TUAL UTILIZATION OF THE DONATION FOR THE SPECIFIC PURPOSE UP TO 31.3.20 04 WAS ONLY RS.1,80,07,730/- AS AGAINST THE DONATED AMOUNT OF R S.5 CRORE. THUS, THE TRUST HAS FAILED ON BOTH THE COUNTS I.E. REGARD ING CONDITION LAID DOWN IN SUB CLAUSE (III) AS WELL AS LAID DOWN IN SU B CLAUSE (IV). THEREFORE, IN THE CIRCUMSTANCES OF THE CASE, I HOLD THAT THE A.O. WAS JUSTIFIED IN REFUSING 100% DEDUCTION U/S. 80G(2)(D) AND IN CONSEQUENCE, ALLOWING DEDUCTION AT 50% U/S. 80G. AC CORDINGLY, THE A.O. IS ALSO JUSTIFIED IN FURTHER RESTRICTING THE A MOUNT OF DEDUCTION TO 10% OF THE GROSS TOTAL INCOME IN VIEW OF THE PROVIS IONS OF SECTION 80G(4). ITA.475/06 12 18. BEFORE US THE LD. A.R. FOR THE ASSESSEE S UBMITTED THAT DONOR ASSESSEE IS NOT RESPONSIBLE AS TO HOW THE DONEE UTILIZED THE FUNDS. IT SHOULD GET DEDUCTION IF DONEE TRUST IS ALLOWED A CERTIFICATE U /S. 80G(5). IN CASE DONEE TRUST DOES NOT UTILIZE THE FUNDS RECEIVED BY IT THE N IT SHOULD BE TREATED AS DONEES INCOME. SO FAR AS THE DONOR IS CONCERNED IT HAS NO CONTROL OVER THE FUNDS DONATED BY IT TO THE DONEE TRUST. IN ADDITIO N, THE PROVISIONS OF SECTIONS 11, 12 AND 13 WOULD BECOME REDUNDANT IF ON NON UTI LIZATION OF FUNDS BY THE DONEE TRUST, THE DONOR IS PENALIZED BY WAY OF NOT A LLOWING DEDUCTION OTHERWISE AVAILABLE UNDER THE ACT AND NO ACTION IS TAKEN AGAINST DONEE. FURTHER, REGISTRATION GRANTED U/S. 80G(5) READ WITH SECTION 12AA WOULD ALSO BECOME REDUNDANT IF DONOR IS PENALIZED BY NOT GIVIN G THE DEDUCTION FOR WHICH HE HAS GIVEN THE DONATION. 19. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED T HAT DONE HAS TO COMPLY WITH THE PROVISIONS OF SECTION 80G(5C) AND 8 0G(2)(D) AND IF IT IS NOT SO DONOR WILL NOT GET DEDUCTION. HE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SECTIONS 80G(5C) AND 80G(2)(D) AS UNDER :- 80G. DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN F UNDS, CHARITABLE INSTITUTIONS, ETC.--(1) IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION,-- (I) IN A CASE WHERE THE AGGREGATE OF THE SUMS SPECI FIED IN SUB- SECTION (2) INCLUDES ANY SUM OR SUMS OF THE NATURE SPECIFIED 3 IN ITA.475/06 13 SUB-CLAUSE (I) OR IN SUB-CLAUSE (IIIA) OR IN SUB-CL AUSE (IIIAA) OR IN SUB-CLAUSE (IIIAB) OR IN SUB-CLAUSE (IIIE) OR IN SU B-CLAUSE (IIIF) OR IN SUB-CLAUSE (IIIG) 5 OR IN SUB-CLAUSE (IIIGA) OR SUB-CLAUSE (IIIH) OR SUB-CLAUSE (IIIHA) OR SUB-CLAUSE (IIIHB) OR SUB- CLAUSE (IIIHC) OR SUB-CLAUSE (IIIHD) OR SUB-CLAUSE (IIIHE) OR SUB-CLA USE (IIIHF) OR SUB-CLAUSE (IIIHG) OR SUB-CLAUSE (IIIHH) OR SUB-CLA USE (IIIHI) OR IN SUB-CLAUSE (VII) OF CLAUSE (A) 4 OR IN CLUSE (C) 5 OR IN CLAUSE (D) THEREOF, AN AMOUNT EQUAL TO THE WHOLE OF THE SUM OR , AS THE CASE MAY BE, SUMS OF SUCH NATURE PLUS FIFTY PER CEN T. OF THE BALANCE OF SUCH AGGREGATE; AND (II) XXXXXXXXXXXXXXXXXXXXX (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY:-- XXXXXXXXXXXX XXXXXXXXXX 5 (D) ANY SUMS PAID BY THE ASSESSEE, DURING THE PERIO D BEGINNING ON THE 26TH DAY OF JANUARY, 2001, AND END ING ON THE 30TH DAY OF SEPTEMBER, 2001, TO ANY TRUST, INSTITUT ION OR FUND TO WHICH THIS SECTION APPLIES FOR PROVIDING RELIEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT. XXXXXXXXX XXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 5 (5C) THIS 8 SECTION APPLIES IN RELATION TO AMOUNTS REFERRED TO IN CLAUSE (D) OF SUB-SECTION (2) ONLY IF THE TRUST OR INSTITUTION OR FUND IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AN D IT FULFILLS THE FOLLOWING CONDITIONS, NAMELY : (I) IT IS APPROVED IN TERMS OF CLAUSE (VI) OF SUB-S ECTION (5) ; ITA.475/06 14 (II) IT MAINTAINS SEPARATE ACCOUNTS OF INCOME AND E XPENDITURE FOR PROVIDING RELIEF TO THE VICTIMS OF EARTHQUAKE I N GUJARAT ; (III) THE DONATIONS MADE TO THE TRUST OR INSTITUTIO N OR FUND ARE APPLIED ONLY FOR PROVIDING RELIEF TO THE EARTHQUAKE VICTIMS OF GUJARAT 8 ON OR BEFORE THE 31ST DAY OF MARCH, 9 2004 ; 8 (IV) THE AMOUNT OF DONATION REMAINING UNUTILISED ON THE 31ST DAY OF MARCH, 2003 IS TRANSFERRED TO THE PRIME MINI STER'S NATIONAL RELIEF FUND ON OR BEFORE THE 31ST DAY OF M ARCH, 9 2004; (V) IT RENDERS ACCOUNTS OF INCOME AND EXPENDITURE T O SUCH AUTHORITY AND IN SUCH MANNER AS MAY BE PRESCRIBED, 8 ON OR BEFORE THE 30TH DAY OF JUNE, 9 2004. 21. SECTION 80G(1) PROVIDES FOR DEDUCTION TO T HE DONOR OF 100% OF SUM DONATED AS PER CLAUSE 2(D) TO ANY TRUST, INSTITUTIO N OR FUND TO WHICH THIS SECTION APPLIES ( MEANING THEREBY THAT THIS IS A CE RTIFICATION U/S. 80G(5) TO THE TRUST INSTITUTION OR FUND READ WITH SECTION 12A OF THE ACT) FOR PROVIDING RELIEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT. SEC TION 80G(5C) RESTRICTS THE APPLICATION OF 80G ONLY IF THE TRUST OR THE INSTITU TION OR FUND TO WHICH DONATION IS GIVEN FULFILLS THE CONDITIONS LAID DOWN IN THIS SUB SECTION. THAT IS (I) IT SHOULD BE APPROVED IN TERMS OF SUB SECTION ( 5)(C), (II) IT MAINTAINS SEPARATE INCOME AND EXPENDITURE ACCOUNT FOR PROVIDI NG RELIEF TO THE VICTIMS OF EARTHQUAKE IN GUJARAT, (III) THE DONATION MADE T O THE TRUST OR INSTITUTION ARE APPLIED ONLY FOR PROVIDING RELIEF TO THE EARTHQUAKE VICTIMS OF GUJARAT ON OR BEFORE 31.3.2004 AND (IV) UNUTILIZED FUNDS ARE TRAN SFERRED TO THE PRIME MINISTERS NATIONAL RELIEF FUND ON OR BEFORE 31ST D AY OF MARCH,2004 AND FINALLY THAT (V) IT SURRENDERS THE ACCOUNT AND EXPE NDITURE TO THE PRESCRIBED AUTHORITY BEFORE 30-6-2004. WHAT LD. A.R. IS CONVAS SING IS THAT IF TRUST INSTITUTION OR FUND (AMUL RELIEF TRUST IN THE PRESE NT CASE) IS APPROVED IN ITA.475/06 15 TERMS OF CLAUSE (VI) OF SUB-SECTION 5 OF SECTION 80 G THEN IT SHOULD BE SUFFICIENT COMPLIANCE AND ASSESSEE SHOULD GET DEDUC TION U/S. 80G(1). BUT IN OUR CONSIDERED VIEW ALL THE 5 CONDITIONS ARE REQUIR ED TO BE SATISFIED CUMULATIVELY AND SIMULTANEOUSLY BY THE TRUST INSTIT UTION OR FUND TO WHICH DONATION IS GIVEN. EVEN THOUGH THE DONOR MAY NOT HA VE ANY CONTROL OVER THE DONEE TRUST AS TO HOW AND WHEN IT IS SPENDING THE M ONEY BUT AS THE LAW STANDS OTHER CONDITIONS MENTIONED IN SECTION 80G(5C ) ARE TO BE TREATED AS ESSENTIAL AS CONDITION NO.1 IN SECTION 80G(5C). IF CONDITION NO.1 IS NOT FULFILLED AND ALL OTHER CONDITIONS ARE FULFILLED ST ILL THEN ASSESSEE WILL NOT GET DEDUCTION AS PER SECTION 80G (1). SIMILARLY, IF OTH ER CONDITIONS ARE NOT SATISFIED AND ONLY CONDITION (I) AT 80G (5C) IS FUL FILLED THEN SAME INFERENCE IS TO BE DRAWN. CONCLUSION IN SUCH A SITUATION CANNOT BE DIFFERENT. IT IS UNDISPUTED FACT THAT FUNDS WERE NOT UTILIZED BY THE DONEE TRUST AND THE OTHER CONDITIONS NAMELY CONDITIONS AT CLAUSE 2, 3 AND 4 W ERE ALSO NOT FULFILLED. THEN AS PER INITIAL WORDS USED IN 80G(5C), DEDUCTIO N U/S. 80G WOULD NOT BE AVAILABLE TO THE DONEE TRUST. NO CONTRARY AUTHORIT Y IS CITED BEFORE US BY THE LD. A.R. WE ACCORDINGLY UPHOLD THE ORDER OF THE LD. CIT(A). THIS GROUND OF THE ASSESSEE IS ACCORDINGLY REJECTED. 22. GROUND NO.6 OF THE ASSESSEE RELATES TO THE CONF IRMATION OF ACTION OF THE A.O. IN TREATING THE COST NOT RELATED TO EXPORT AS INDIRECT COST WHILE COMPUTING THE DEDUCTION U/S. 80-HHC OF THE AC T. 23 SIMILAR ISSUE HAD COME UP BEFORE U S IN A.Y. 2000-01 WHEREIN THE MATTER WAS SET ASIDE TO THE FILE OF THE A.O. AS UNDER :- ITA.475/06 16 THE NEXT GROUND WITH REGARD TO THE CONFIRMATION O F NON ALLOWANCE OF PROPER DEDUCTION U/S. 80HHC ON INTERES T AND COMMISSION, DEPRECIATION, AUDIT FEES AND CO-OPERATI VE DEVELOPMENT EXPENSES AS INDIRECT COST ATTRIBUTABLE TO THE TRADING GOODS EXPORTED, WHICH HAS BEEN SET ASIDE BY THE CIT (A), AND THEREFORE, NO GRIEVANCE CAN BE RAISED AT THIS STAGE AND THE ASSESSEE WOULD BE AT LIBERTY TO ADVANCE ITS CLAIM B EFORE THE ASSESSING OFFICER IN THE FRESH PROCEEDINGS. 24. IN VIEW OF THE ABOVE RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL WE RESTORE THE MATTER TO FILE OF THE A.O. TO TAKE A DE CISION UNIFORMLY THIS YEAR ALSO. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOS ES. 25. THE LAST GROUND RELATES TO CHARGING OF INTER EST U/S. 234B & 234D. THESE ARE CONSEQUENTIAL IN NATURE AND HAS TO BE ALL OWED AS PER THE ASSESSED INCOME. INTEREST U/S. 234D IS TO BE CHARGED WITH E FFECT FROM 1-6-2003 AS THIS SECTION HAD COME INTO PLACE WITH EFFECT FROM THIS D ATE. ACCORDINGLY THE DECISION OF THE LD. CIT(A) BEING IN ACCORDANCE WITH LAW, IS CONFIRMED. THIS GROUND IS ACCORDINGLY REJECTED. AS A RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- ( BHAVNESH SAINI) (D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER AHMEDABAD, ORDER PRONOUNCED IN OPEN COURT ON 22 -03-2010 ITA.475/06 17 DATED : 22-03-2010 PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD