ACIT, Coimbatore V. The Coimbatore District Co operative Milk Producers Union Limited, Coimbatore

ITA 60/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2392 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: K RAGHU
• Keywords: Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO.60/MDS/2013 ASSESSMENT YEAR : 2009-10 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-II, COIMBATORE. V. THE COIMBATORE DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD., PACHAPALAYAM, KALAMPALAYAM POST, COIMBATORE-641 010. (PAN : AAAAT7787L) (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S. MOHARANA, CIT-DR RESPONDENT BY : SHRI K. RAGHU, CA DATE OF HEARING : 20.03.2013 DATE OF PRONOUNCEMENT : 11.04. 2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS)-I, COIMBATORE DATED 19-10-2012 FOR THE ASSESSMENT YEAR 2009-10. THERE IS A DELAY OF 6 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE ASSESSI NG OFFICER ITA NO.60/MDS/2013 : 2 : HAS EXPLAINED THE DELAY DUE TO NON-AVAILABILITY OF ASSESSMENT RECORDS. CONSIDERING THE CAUSE FOR THE DELAY WHICH WAS NEITHER INTENTIONAL NOR WANTON, WE CONDONE THE DELA Y AND ADMIT THE APPEAL. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS A CO-OPERAT IVE SOCIETY. IT FILED A RETURN OF INCOME ADMITTING TOT AL INCOME OF ` 24,97,393/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AFTER FOLLOWING THE DUE PROCESS AND CA LLING FOR VARIOUS DETAILS THE ASSESSING OFFICER OBSERVED THAT IN THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET THE ASSESSEE HAD SHOWN SUNDRY CREDITORS TO THE TUNE OF ` 37,52,29,151/-. THE ASSESSING OFFICER ASKED THE BREAK-UP OF THE ABOVE A MOUNT. ACCORDINGLY, BREAK-UP WAS SUBMITTED TO THE ASSESSIN G OFFICER. IT WAS OBSERVED FROM THE BREAK-UP THAT THE PURCHASE PRICE OF MILK PROCUREMENT WAS INCREASED @ ` 1.65 PER LITRE AND DURING THE YEAR 2008-09 A TOTAL OF 740.56 LAKH LITRES OF M ILK WERE PROCURED AND THE TOTAL LIABILITY WITH REGARD TO PUR CHASE COST WAS ARRIVED AT ` 12,21,91,888/-. THEREAFTER, THE ASSESSING OFFICER AGAIN CALLED FOR VARIOUS DETAILS IN RESPECT OF THE INCREASE IN THE PURCHASE PRICE OF MILK, NECESSARY COMMUNICATIONS, D ATE OF RESOLUTION PASSED AND APPROVAL GIVEN BY THE COMMISS IONER FOR MILK PRODUCTION & DAIRY DEVELOPMENT IN RESPECT OF I NCREASING ITA NO.60/MDS/2013 : 3 : THE PURCHASING PRICE. FROM THE DETAILS IT WAS NOTI CED BY THE ASSESSING OFFICER THAT A SUM OF ` 12,21,91,888/- HAD BEEN DEBITED ON 30-03-2009 IN THE BOOKS TOWARDS PURCHASE OF MILK ACCOUNT AND CREDITED TO ADDITIONAL MILK PRICE PAYAB LE ACCOUNT UNDER SUNDRY CREDITORS. THIS REPRESENTED THE ADDIT IONAL MILK ACCOUNT AND CREDITED TO ADDITIONAL MILK PRICE PAYAB LE ACCOUNT. THIS SHOWED THE ADDITIONAL PRICE PAYABLE ON THE ENT IRE QUANTITY OF 740.56 LITRES OF MILK PURCHASED DURING THE YEAR @ 1.65 PER LITRE. IT WAS SUBMITTED BEFORE THE ASSESSING OFFI CER THAT THE AMOUNT OF ` 1.65 PER LITRE WAS RAISED BECAUSE OF THE DEMANDS OF THE FARMERS AND THIS AMOUNT ULTIMATELY WOULD GO TO THE FARMERS AFTER APPROVAL OF THE GOVERNMENT. IT WAS A LSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT EVEN IN THE ASSESSMENT YEAR 2008-09 SIMILAR ENHANCEMENT WAS MAD E AND THE SAME WAS APPROVED BY THE GOVERNMENT AND PAYMENT S WERE ALSO MADE. THE COMMISSIONER APPROVED THAT THE PAYMENT MADE TO THE SOCIETY WAS ASCERTAINED LIABILI TY AND THE SAME HAS TO BE ALLOWED. THE ASSESSING OFFICER AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THE RESOLUTION PASSED BY THE GENERAL BODY OF THE CDCMPU (COIMBATORE DISTRICT CO-OPERATIVE MILK PRODUCERS UN ION LTD.) THE ISSUE OF PROVISION FOR LIABILITY FOR PURCHASE H AS CROPPED UP ITA NO.60/MDS/2013 : 4 : ONLY BECAUSE OF THE OBSERVATION OF THE INTERNAL CHA RTERED ACCOUNTANT OF THE CDCMPU LTD. FOR THE YEAR 2008-09 THAT LIKELIHOOD OF HUGE INCOME-TAX LIABILITY ON ACCOUNT OF THE ACCUMULATION OF THE PROFIT BY THE CDCMPU LTD DURING THAT PERIOD AND IN THE RESOLUTION IT WAS STATED THAT IN ORDER TO AVOID INCOME-TAX LIABILITY, A PORTION OF THE PROFIT HAD T O BE APPORTIONED TO THE MILK SUPPLIERS IN THE FORM OF PROVISION. TH E PROVISION FOR LIABILITY FOR PURCHASE HAD NOT ACTUALLY CRYSTALLIZE D DURING THE FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT Y EAR 2009- 10 AND IT IS NOT KNOWN WHEN THE APPROVAL WAS GRANTE D BY THE COMMISSIONER OF MILK PRODUCTION & DAIRY DEVELOPMENT , CHENNAI, TO INCREASE THE PROCUREMENT PRICE. THEREF ORE, IT COULD NOT BE TERMED AS ASCERTAINED LIABILITY AND TH E PROVISION FOR LIABILITY FOR PURCHASE CLAIMED BY THE ASSESSEE TO THE TUNE OF ` 12,21,91,888/- WAS NOT ALLOWED AND THE SAME WAS AS SED AS INCOME OF THE ASSESSEE. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE CIT(APPEALS). IT WAS SUBMITTED B EFORE THE CIT(APPEALS) THAT THE PROVISION WAS MADE BY THE ASS ESSEE ON THE BASIS OF DEMANDS MADE BY THE MEMBERS OF THE SOC IETY AND THEREFORE, IT CANNOT BE QUESTIONED AS A COLOURABLE DEVICE OR IT CANNOT ALSO BE SAID THAT THE LIABILITY IS UNASCERTA INED LIABILITY. ITA NO.60/MDS/2013 : 5 : THE CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER : I HAD GONE THROUGH THE SUBMISSIONS MADE BY THE APP ELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. ON SI MILAR SET OF FACTS FOR THE ASSESSMENT YEAR 2008-09, THE ISSUE WA S DECIDED IN FAVOUR OF THE APPELLANT. THE DISTRICT C OLLECTOR, COIMBATOR AS SPECIAL OFFICER OF COIMBATORE DISTRICT CO- OPERATIVE MILK PRODUCERS UNION LTD., IN HIS LETTER TO THE ASSESSING OFFICER DATED 28.05.2011 HAS STATED THAT, BASED ON THE DEMANDS OF THE FARMERS PROCUREMENT PRICE PAY ABLE BY THE MILK PRODUCERS UNION WAS INCREASED BY ` 1.65 PAISA PER LITER AND HENCE A PROVISION WAS MADE ON 31.03.2 009 FOR ` 12,21,91,888/- FOR THE YEAR 2008-09. AS SEEN FROM THE DETAILS FURNISHED, IT IS CLEAR THAT THE PROVISION M ADE BY THE APPELLANT, IS AN ASCERTAINED LIABILITY ON 31.03.200 9 AND THE PAYMENT WAS DISBURSED TO THE SOCIETIES AFTER THE AP PROVAL AS PER THE ADMINISTRATIVE PROCEDURAL REQUIREMENTS. IN A RECENT DECISION, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INSILCO LIMITED 179 TAXMAN 55 HELD THAT AS PER MERC ANTILE SYSTEM OF ACCOUNTING, WHICH WAS FOLLOWED BY THE ASS ESSEE, THE PROVISIONS FOR LIABILITY ASCERTAINED DURING THE COURSE OF RELEVANT ACCOUNTING PERIOD WHICH WAS PAYABLE AT A F UTURE DATE WAS ADMISSIBLE. IN MY OPINION, THE PROVISION FOR LIABILITY IS ALLOWABLE AS A DEDUCTION, IF THERE IS AN ELEMENT OF CERTAINTY. AS SEEN FROM THE FACTS OF THE APPELLANT CASE, THIS IS AN ASCERTAINED LIABILITY WHICH WAS CRYSTALLIZED DURING THE ASSESSMENT YEAR AND DISTRIBUTED SUBSEQUENTLY UPON T HE RECEIPT OF APPROVAL FROM THE GOVERNMENT. HENCE, TH E ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N AND ALLOW THE CLAIM OF THE APPELLANT. ITA NO.60/MDS/2013 : 6 : 4. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR POINTED OUT T HAT THE ENHANCEMENT OF THE PRICE I.E RAS 1.65 PER LITRE BY THE RESOLUTION OF THE CDCMPU LTD. WAS SUBJECTED TO APPR OVAL OF THE TAMILNADU GOVERNMENT. THEREFORE IT CANNOT BE SA ID AS AN ASCERTAINED LIABILITY UNLESS THE GOVERNMENT GIVES A N APPROVAL OF THE PROPOSAL MADE BY THE SPECIAL OFFICER. THE B OARD HAS TAKEN A DECISION TO INCREASE THE PRICE BECAUSE THER E IS A LIKELIHOOD OF HUGE INCOME-TAX LIABILITY AND THEREFO RE IT IS A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE NOT TO PA Y THE TAXES. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 AND THE TRIBUNAL IN ITA NO. 2002/MDS/2011 DATED 26-11-2012 UPHELD THE ORDER OF THE CIT(APPEALS) AND GRANTED RELIEF TO THE ASSESSEE. H E SUBMITTED THAT SUBSEQUENT TO THE PROPOSAL MADE BY THE SPECIAL OFFICER OF THE BOARD, THE GOVT. OF TAMILNADU HAD APPROVED THE ENHANCEMENT OF THE PRICE AND THE AMOUNTS WERE ALSO DISTRIBUTED TO THE MEMBERS. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE ONLY ISSUE ITA NO.60/MDS/2013 : 7 : FOR OUR CONSIDERATION IS WHETHER THE PROVISION MADE BY THE ASSESSEE OF ` 12,21,91,888/- IS AN ASCERTAINED LIABILITY OR NOT. THE ASSESSEE IS A MILK PRODUCERS UNION AND THE DIS TRICT COLLECTOR IS THE SPECIAL OFFICER OF THE UNION. THE ASSESSEE BY PASSING A RESOLUTION INCREASED THE PRICE OF MILK BY ` 1.65 PER LITRE AND ACCORDINGLY THE TOTAL AMOUNT PAYABLE TO T HE MILK PRODUCERS WAS CALCULATED AT ` 12,21,91,888/- AND THE SAME WAS DEBITED IN THE BOOKS TOWARDS PURCHASE OF MILK A CCOUNT AND CREDITED TO THE ADDITIONAL PRICE PAYABLE ACCOUNT UN DER SUNDRY CREDITORS. ACCORDING TO THE ASSESSEE THIS LIABILIT Y IS AN ASCERTAINED LIABILITY AND ONLY FORMAL APPROVAL WAS REQUIRED FROM THE GOVERNMENT OF TAMILNADU. ACCORDING TO THE ASSE SSING OFFICER THE LIABILITY IS NOT CRYSTALLIZED AND IT IS A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE NOT TO PAY TAX. WE FIND NO MERIT IN THE OBSERVATION OF THE ASSESSING OFFICER. FROM THE ORDER OF THE CIT(APPEALS) IT IS VERY CLEAR THAT THE PRICE ENHANCED BY THE ASSESSEE WAS APPROVED SUBSEQUENTLY BY THE GOVT. OF TAMILNADU AND THE AMOUNTS WERE ALSO DISTRI BUTED TO THE MILK PRODUCERS. SIMILAR ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ITA NO. 2002/MDS/2011 DATED 26-1 1-2012 FOR THE EARLIER ASSESSMENT YEAR 2008-09. TAKING INTO C ONSIDERATION THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE ITA NO.60/MDS/2013 : 8 : DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEAR, WE FIND NO INFIRMITY IN THE ORDER PASSED BY T HE CIT(APPEALS). THEREFORE THIS GROUND OF APPEAL RAIS ED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 11 TH OF APRIL, 2013, AT CHENNAI. SD/- SD/- (N. S. SAINI) (V.DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 11 TH APRIL, 2013. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE