The DCIT, Circle-2, JUNAGADH V. Amreli Nagarik Sahakari Bank Ltd., AMRELI

ITA 482/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0131 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DM RINDANI
• Assessee Lawyers: AVINASH KUMAR
• Keywords: Gift
• Section: 37(1); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI B.R.JAIN, AM ITA NO. 482/RJT/2012 / ASSESSMENT YEAR 2009-10 THE DCIT, CIRCLE-2, BHUTHNATH CHAMBERS, COLLEGE ROAD, JUNAGAD, ( / APPELLANT) VS. AMRELI NAGRIK SAHAKARI BANK LTD., NAGRIK BHAVAN, KERIYA ROAD, AMRELI, PAN: AAATA3191J / RESPONDENT / ASSESSEE BY SHRI AVINASH KUMAR # / REVENUE BY SHRI D M RINDANI & / DATE OF HEARING 3.12.2012 & / DATE OF PRONOUNCEMENT 7.12.2012 / / / / ORDER B.R.JAIN, A. M. THIS APPEAL BY REVENUE AGAINST THE ORDER DATED 20.6.2012 OF LD. CIT(A)-IV, RAJKOT RAISES THE FOLLOW ING GROUNDS : 1. THE LD. CIT(A), RAJKOT HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.14,35,000/- MADE BY THE AO BY DISALLOWING THE EXPENDITURE INCURRED BY THE BANK TOWAR DS WELFARE OF THE MEMBERS, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO; 2. ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A CO-OPERA TIVE BANK AND RETURNED INCOME AT RS.1,27,16,766/-. THE ASSESSEE CLAI MED DEDUCTION OF RS.14,35,000/- TOWARDS EXPENDITURE COMPRISED OF RS.84,0 00/- FOR PRE- PATHOLOGY TESTES FOR ITS MEMBERS AND RS.13,51,000/- T OWARDS PURCHASE AND DISTRIBUTION OF SILVER METAL BRASS PLATE MEMENTOS FOR EDUCATIONAL ITA NO. 482/RJT/2012 2 ACHIEVEMENTS BY THE CHILDREN OF THE MEMBERS OF BANK. THE AO DISALLOWED THE EXPENDITURE ON THE GROUND THAT THIS EX PENDITURE DOES NOT FALL IN THE CATEGORY OF EXPENSES ALLOWABLE U/S 37 OF T HE INCOME TAX ACT, 1961 (THE ACT) AND THE EXPENDITURE HAS BEEN INCURRED VOLUNTARILY AND CANNOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS. SINCE THE EXPENDITURE HAS BEEN I NCURRED FOR THE BENEFIT OF THE MEMBERS THE SAME IS PERSONAL IN NATU RE. 3. THE LD. CIT(A) TAKING NOTE OF THE FACT THAT THE ME MBERS ARE AN INTEGRAL PART OF THE CO-OPERATIVE STRUCTURE OF THE BAN K WHO INVEST IN THE BANK AND ALSO BORROW FROM THE BANK WAS OF THE OPINION T HAT THE WELFARE EXPENDITURE ON ITS MEMBERS IS WITH THE OBJECTIVE OF APPRECIATING THEIR CONTRIBUTION TO THE BANK AND MOTIVATING THEM TO CONTI NUE THEIR SUPPORT TO THE BANK. SINCE THE EXPENDITURE SO INCURRED FOR THE WELFARE OF THE MEMBERS WHO ARE ESSENTIAL PART OF THE BUSINESS OF THE AP PELLANT BANK AND THE EXPENDITURE ALSO STANDS APPROVED IN BOARD ME ETINGS OF THE BANK, THE SAME WERE HELD TO HAVE BEEN INCURRED FOR THE PU RPOSE BUSINESS OF BANK. BY FOLLOWING THE RATIO OF THE JUDGMENT OF TH E HONBLE GUJARAT HIGH COURT IN CASE OF CIT V/S SLM MANEKLAL INDUSTRIES LTD (107 ITR 133), HE HELD THAT THE ENTIRE AMOUNT OF RS.14,35,000/- INCURRE D BY THE APPELLANT BANK IS ALLOWABLE DEDUCTION U/S 37(1) OF THE ACT. 4. WE HAVE HEARD PARTIES WITH REFERENCE TO THE MATER IAL ON RECORD AND THE PRECEDENT FOLLOWED BY THE LD. CIT(A) IN REACH ING THE DECISION IN THE IMPUGNED ORDER. ADMITTEDLY, THE ASSESSEE RECEIV ES DEPOSITS AND MAKES ADVANCES/LOANS FOR EARNING INTEREST TO ITS MEMBERS. THE ASSESSEES DOMINANT ACTIVITY IS CARRIED OUT WITH THE HELP OF MEMBERS OF ITA NO. 482/RJT/2012 3 THE CO-OPERATIVE SOCIETY WHICH IS DOING CO-OPERATIV E BANK BUSINESS. THE EXPENDITURE INCURRED FOR GETTING MEDICAL CHECK UP OF ITS MEMBERS AND DISTRIBUTION OF MEMENTOS TO THE CHILDREN OF ITS MEMBE RS FOR EDUCATIONAL ACHIEVEMENT ARE ESSENTIAL PART OF BUSINESS PURPOSE OF TH E ASSESSEE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KARJAN CO -OPERATIVE COTTON SALES V/S CIT (1993) 199 ITR 17 (GUJ) AFTER CONSIDERING THE VARIOUS CASE LAWS HAS HELD THAT THE GIFTS GIVEN BY A CO-OPERATIV E SOCIETY TO ITS MEMBERS WERE FOR THE PURPOSES OF BUSINESS. CONSIDERIN G THE ISSUE IN THE LIGHT OF THE ABOVE SAID PRECEDENT AS WELL AS THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT TAKEN AS THE BASIS FOR DE CIDING THE ISSUE BY THE LD. CIT(A), WE FIND OURSELVES IN AGREEMENT THAT T HE EXPENDITURE INCURRED ON WELFARE ACTIVITIES FOR ITS MEMBERS IS FOR THE PROSPERITY OF THE CO-OPERATIVE BANK BUSINESS AND THUS THE SAME SERVES THE BUSINESS PROPOSE WHICH ESSENTIALLY IS ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. FINDING NO INFIRMITY IN THE ORDER OF THE LD. CIT(A ), WE DECLINE TO INTERFERE WITH THE WELL REASONED CONCLUSION REACHED BY THE LD. C IT(A). 5. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISSED . THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 7.12.20 12. SD SD (T. K. SHARMA) ( B.R.JAIN) # /JUDICIAL MEMBER # / ACCOUNTANT MEMBER +/ ORDER DATE 7.12.2012. /RAJKOT ITA NO. 482/RJT/2012 4 SRL - - - - .- .- .- .- / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-, 2. / RESPONDENT- 3. 4 / CONCERNED CIT. 4. 4- / CIT (A). 5. - , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.