Addl. CIT, Muzaffarnagar V. M/s Gulshan Mercantile Urban Co-Operative Bank Ltd., Muzaffarnagar

ITA 4981/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4157 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Depreciation; Charitable institution; Period of limitation; Time period of passing order
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI DELHI DELHI DELHI, BENCH , BENCH , BENCH , BENCH C CC C , , , , NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI C. L. SETHI, JUDICIAL MEMBER AND SHRI K. D. RANJAN, ACCOUNTANT MEMBER ITA NO. 4981/DEL/2010 (ASSESSMENT YEAR 2007-08) ADDL. CIT, RANGE 2, VS. M/S. GULSHAN MERCANTILE MUZAFFARNAGAR URBAN COOPERATIVE BANK LTD., 45-B, NEW MANDI, MUZAFFARNAGAR (APPELLANT) (RESPONDENT) PAN AAAJG0808L APPELLANT BY: SMT. MONA MOHANTY, SR. DR RESPONDENT BY: SHRI ANIL JAIN, ADV. ORDER ORDER ORDER ORDER PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: PER K. D. RANJAN, AM: 1. THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YE AR 2007-08 ARISES OUT OF THE ORDER OF LD. CIT(A) MUZAFFARNAGAR . 2. THE 1 ST ISSUE FOR CONSIDERATION RELATES DELETING OF ADDITI ON OF ` 10,23,246/- ON ACCOUNT OF UNCLAIMED DIVIDEND. THE RELEVANT GROUND OF APPEAL IS REPRODUCED AS UNDER: THE LD. CIT(A) ERRED IN LAW AND ON FACT IN DELETIN G THE ADDITION OF ` 10,23,246/- MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF UNCLAIMED DIVIDEND BY IGNORING THE FACT THAT THE AMOUNT OF UNCLAIMED DIVIDEND WAS NEITHER DEPOSITED BY THE ASSESSEE IN GOVT. ACCOUNT NOR PAID TO THE SHAREHOLD ERS. 3. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT T HE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER COOPERATIVE SO CIETIES ACT 1965. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN UNCLAIMED DIVIDEND OF ` 10,23,246/- FOR DIFFERENT YEARS. ACCORDING TO THE ASSESSING OFFICER, WHENEVER LOAN WAS GIVEN TO A PERSON, HE WAS MADE ME MBER OF THE SOCIETY AND SHARES WERE ISSUED TO THE LOANEE. ON SUCH SHARES, THE I.T.A.NO. 4981/DEL/2010 2 DIVIDEND WAS PAYABLE BY THE BANK. THE AMOUNT OF ` 10,23,246/- WAS DIVIDEND WHICH REMAINED UNCLAIMED. IN VIEW OF THES E FACTS THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF UNCLAIMED DIVIDEND SHALL NOT BE ADDED TO THE INCOME OF THE ASSESSEE. IT WAS EXPLAINED BY THE ASSESSEE THA T DIVIDEND PAID BY THE BANK TO ITS SHAREHOLDERS WAS A PART OF PROFI T DISTRIBUTION. IT WAS POST LIABILITY AND NOT PART OF THE INCOME. HOW EVER THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSE SSING OFFICER. HE ADDED THE AMOUNT OF ` 10,23,246/-. 3. ON APPEAL BEFORE CIT(A), IT WAS SUBMITTED THAT T HE DIVIDEND PAID WAS NOT CHARGED OR A DEBT WAS NOT CHARGED TO P & L ACCOUNT. IT WAS NOT A DEBT ON THE ASSESSEE. THEREFORE, IT HAD NO LIMITATION PERIOD. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND THEREFORE, PROVISIONS OF SECTION 205A O F THE COMPANIES ACT WERE NOT APPLICABLE. IT WAS ALSO SUBMITTED THA T A BAD DEBT PRESUPPOSED THE EXISTENCE OF A DEBT AND RELATIONSHI P OF A DEBTOR AND CREDITOR. BUT IN THE CASE OF THE ASSESSEE, THE RE WAS NO SUCH RELATIONSHIP BETWEEN THE BANK AND THE SHAREHOLDERS. LD. CIT(A) ON CONSIDERATION OF THE FACTS, ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION. 4. BEFORE US, LD. SR. D.R. SUPPORTED THE ORDER OF T HE ASSESSING OFFICER. ON THE OTHER HAND, LD. A.R. FOR THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE HARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD AS WELL AS THE ORDER OF LD. CIT (A). THE ASSESSING OFFICER HAD MADE ADDITION ON THE GROUND THAT THE AM OUNT OF UNPAID DIVIDEND WAS TO BE DEPOSITED IN THE GOVERNMENT ACCO UNT AFTER CERTAIN PERIOD. IN THIS CASE, THERE IS NO DISPUTE THAT THE AMOUNT OF DIVIDEND PAID HAS NOT BEEN CHARGED TO P & L ACCOUNT . IT FORMS PART OF APPROPRIATION OF INCOME. THEREFORE, WHEN THE AS SESSEE PAID DIVIDEND TO THE SHAREHOLDERS, THE AMOUNT WAS NOT DE BITED TO P & L I.T.A.NO. 4981/DEL/2010 3 ACCOUNT AND, THEREFORE, THE PROVISIONS OF SECTION 4 1(1) ARE NOT APPLICABLE AS THERE IS NO CESSATION OF LIABILITY. THEREFORE, IN OUR CONSIDERED OPINION, LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION. 6. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TING OF ADDITION OF ` 1,51,236/- MADE BY THE ASSESSING OFFICER ON AC COUNT OF CHARITY AND DONATION. IN THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER NOTED THAT THE AMOUNT OF ` 1,84,3 36/- WAS SHOWN UNDER THE HEAD CHARITY, RESEARCH AND DEVELOPMENT AND DEFENCE FUNDS. THE ASSESSEE HAD SHOWN THE AMOUNT PAYABLE I N THE BALANCE SHEET. IT WAS EXPLAINED BY THE ASSESSEE THAT AS PE R U P COOPERATIVE SOCIETY ACT, 1965, THE NET PROFIT OF THE SOCIETY WA S TO BE APPROPRIATED UNDER DIFFERENT HEAD. IT WAS ALSO SUB MITTED THAT THE AMOUNT WAS NOT CHARGED TO P & L ACCOUNT. THEREFORE IT WAS NOT A LIABILITY INCURRED ON ACCOUNT OF BUSINESS TRANSACTI ON. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSE SSING OFFICER ON THE GROUND THAT IF THE LIABILITY WAS NOT GENUINE, I T WAS LIABLE TO BE ADDED AS INCOME U/S 68 OF THE INCOME TAX ACT, 1961. HE FURTHER NOTED THAT THE LIABILITY UNDER THE HEAD CHARITY AN D DONATION WAS SIMILAR TO THE AMOUNT UNDER THE HEAD UNCLAIMED DIV IDEND. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE AS SESSEE AND ADDED THE AMOUNT OF ` 1,51,336/- UNDER THE HEAD CHARITY & DONATIONS. 7. ON APPEAL, LD. CIT(A) DELETED THE ADDITION ON TH E GROUND THAT THE NET PROFITS OF THE SOCIETY WERE TO BE UTILIZED FOR VARIOUS PURPOSES. DONATION OF AMOUNT NOT EXCEEDING FOR ANY CHARITABLE PURPOSES AS DEFINED IN SECTION 2 OF CHARITABLE ENDO WMENT ACT 1890 WAS TO BE ALLOCATED AND SHOWING OF SUCH AMOUNT UNDE R THE HEAD CHARITY PAYABLE IN THE BALANCE SHEET WAS THE METH OD ADOPTED UNDER COOPERATIVE AUDIT SYSTEM AS THE AMOUNT OF DON ATION AND CHARITY WAS TO BE SENT TO THE GOVERNMENT OF U.P. AS THE ACT. THEREFORE, ADDITION ON ACCOUNT OF RESERVE MADE FOR CHARITY & DONATION COULD NOT BE ADDED AS INCOME OF THE ASSESS EE. HE ACCORDINGLY DELETED THE ADDITION. I.T.A.NO. 4981/DEL/2010 4 8. BEFORE US, LD. A.R. FOR THE ASSESSEE SUBMITTED T HAT AFTER COMPUTATION OF NET PROFIT, THE AMOUNT IS APPROPRIAT ED BY WAY OF DIVIDEND, DEFENCE FUND, BUILDING FUND, DEPRECIATION OF INVESTMENT, CHARITY FUND ETC. THE AMOUNT IS NOT CHARGED TO P & L ACCOUNT AND THEREFORE, AMOUNT PAYABLE TO THE GOVERNMENT SHOWN I N THE BALANCE SHEET CANNOT BE ADDED AS INCOME OF THE ASSESSEE. ON THE OTHER HAND, LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSI NG OFFICER. 9. WE HAVE HARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE AMOUNT OF CHARITY SHOWN IN THE BALANCE SHEET HAS NOT BEEN CHARGED TO P & L ACCOUNT. THE NET PROFIT IS TO BE APPROPRIATED UNDER VARIOUS HEADS ONE OF WHICH IS CHARITY FUND WHICH IS TO BE PAID TO U P GO VERNMENT AS PER REQUIREMENT OF LAW. THEREFORE THE AMOUNT OF ` 1,52 ,336/- CANNOT BE ADDED AS INCOME OF THE ASSESSEE AS THE SAME HAS NOT BEEN CHARGED TO P & L ACCOUNT. IN VIEW OF THESE PROVISIONS, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) IN DELETING THE ADDI TION. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APR., 2011. SD./- SD./- (C. L. SETHI) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:29 TH APR., 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI