ACIT, Meerut V. M/s. The Baghpat Co-opperative Sugar Mills Ltd., Meerut

ITA 6157/DEL/2012

• Counselvise Citation: 615720114 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 29-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Assessee Lawyers: P S KASHYAP
• Keywords: Business expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMB ER ITA NO: 6157/DEL/2012 AY : - 2007-08 ACIT VS. THE BAG HPAT CO-OPERATIVE SUGAR CIRCLE-2, MILLS LTD. MEERUT BAGHPAT MEERUT (PAN AAAT0568P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.P. CHANDREKAR, SR. DR RESPONDENT BY :SHRI P.S. KASHYAP, CA DATE OF HEARING :29.7.2015 DATE OF PRONOUNCEMENT :7.8 .2015 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTE D AGAINST THE ORDER OF THE CIT(A) MEERUT DATED 4.9.2012 FOR THE ASSTT. YEAR 2007-08. THE ASSESEE IS A CO-OPERATIVE SOCIETY AND IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 18.10.2007 DECLARING TOTAL LOSS AT RS. 18,48,23,232 /-. THE AO COMPLETED THE LOSS OF RS. 1,66,35,600/- DISALLOWING THE FOLLOWING :- 1. SUBSCRIPTION TO FEDERATION RS. 16,29,918/- 2. INTEREST TO FEDERATION RS. 1,65,29,427 /- 3. PAYMENT OF PENAL INTEREST RS. 3,07,922/ - ITA NO.6157/DEL/2012 ACIT VS. THE BAGHPAT CO-OP ERATIVE SUGAR MILLS LTD. 2 2. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY ALLOWED THE APPEAL OF THE ASSESSEE. AGG RIEVED THE REVENUE IS IN APPEAL ON THE FOLLOWING GROUNDS :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW IN DELETING THE DISALLOWANCE OF RS. 16,29,918/- TOWARDS SUBSCRIPTIO N OF UP, CO-OPERATIVE SUGAR FACTORIES FEDERATION LTD. IGNORING THE FACT T HAT THE ASSESEE FAILED TO PROVE THE SERVICES PROVIDED BY THE FEDERATION FO R BUSINESS PURPOSES AND THE DEDUCTION WAS ADMISSIBLE UNDER SECTION 37 T O THE IT ACT,1961. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETIN G THE DISALLOWANCE OF ADDITIONAL INTEREST OF RS. 3,07,922/- PAID TO THE S UGAR DEVELOPMENT FUND (GOVT. OF INDIA) 1991 IGNORING THE FACT THAT THE SA ME WAS IN THE NATURE OF PENALTY. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETIN G THE DISALLOWANCES OF ADDITIONAL INTEREST OF RS. 1,65,29,427/- DUE TO BE PAID TO SHAKKAR VISHESH NIDHI (SVN) AND U.P. CO-OPERATIVE SUGAR FACTORIES F EDERATION IGNORING THE FACT THAT THE SAME WAS NOT PAID BEFORE THE FILI NG OF THE RETURN OF INCOME AND THAT THE DISALLOWANCE WAS COVERED U/S 43 B (D) OF THE I.T. ACT, 1961. 3. WE HAVE HEARD SHRI J.P. CHANDREKAR, SR. DR ON BEHALF OF THE REVENUE AND SHRI P.S. KASHYAP, LD. COUNSEL ON BEHALF OF THE ASSESSEE . 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND PERUSAL OF THE FINDINGS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS. 5. GROUND NO. 1 OF THE REVENUE HAS TO BE DISMISS ED BY UPHOLDING PARA 5.3 OF THE ORDER OF THE LD. CIT (A) WHEREIN HE FOLLOWED HIS OR DER FOR THE ASSESSMENT YEAR 2003-04 AND ALLOWED THE CLAIM OF THE ASSESSEE. IN F ACT THE AO IN HIS ORDER DISALLOWED THE AMOUNT BY MERELY FOLLOWING HIS ORDE R FOR THE ASSESSMENT YEAR 2003- 04. THE DEPARTMENT ACCEPTED THE ORDER OF THE FIRST APPELLATE AUTHORITY FOR THE ITA NO.6157/DEL/2012 ACIT VS. THE BAGHPAT CO-OP ERATIVE SUGAR MILLS LTD. 3 ASSESSMENT YEAR 200304. UNDER THESE CIRCUMSTANCES WE SEE REASON TO INTERFERE IN THE ORDER OF THE FIRST APPELLATE AUTHORITY, SPECIFI CALLY AS THE SUBSCRIPTION IS ALLOWABLE U/S 37 (1) OF THE ACT. THE AMOUNT PAID AS SUBSCRIPT ION TO FEDERATION IS NECESSARY BUSINESS EXPENDITURE. THE NECESSITY / REQUIREMENT O F INCURRING THIS EXPENDITURE IS EXPLAINED. HENCE THIS GROUND IS DISMISSED. 6. THE SECOND ISSUE IS DISALLOWANCE OF INTEREST PAID TO FEDERATION. THE AO DISALLOWED THE AMOUNT ON THE GROUND THAT THE PAYMEN T OF INTEREST IS OUTSIDE THE PURVIEW OF BUSINESS OF THE ASSESSEE. LD. CIT(A) GA VE A FINDING THAT THE ASSESSEE HAS TAKEN LOAN FROM GOVT. OF INDIA AND UP GOVERNMEN T, FOR THE PURPOSE OF BUSINESS, AND THAT THIS IS EVIDENT FROM THE SANCTIONED LETTER S AND HENCE THE INTEREST IN QUESTION IS ALLOWABLE U/S 36(1). WE HAVE SEEN REASO N TO INTERFERE IN THIS FINDING OF THE FIRST APPELLATE AUTHORITY . THE REVENUE HAS RAI SED A LEGAL ARGUMENT THAT, THE INTEREST IN QUESTION CANNOT BE ALLOWED, AS IT IS HI T BY THE PROVISIONS OF SECTION 43B(D) OF THE ACT. 7. SECTION 43B(D) OF THE ACT READS AS FOLLOW S :- D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION (OR A STATE F INANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION), IN ACCO RDANCE WITH THE TERM AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING AS THE INTEREST IN QUESTION IS PAYABLE TO GOVT. OF INDIA AND THE STATEMENT OF UP GOVERNMENT, SECTION 43(B)(D) DOES NOT APPLY. HEN CE WE DISMISS THIS GROUND. 8. GROUND 3 IS AGAINST THE DELETION OF DISALLO WANCE OF ADDITIONAL INCOME ON THE GROUND THAT IT IS IN THE NATURE OF PENALTY. IN OUR VIEW THE FIRST APPELLATE AUTHORITY HAS RIGHTLY HELD THAT THE EXPENDITURE IN QUESTION I.E A DDITIONAL INTEREST, IS A CONTRACTUAL ITA NO.6157/DEL/2012 ACIT VS. THE BAGHPAT CO-OP ERATIVE SUGAR MILLS LTD. 4 OBLIGATION AND HENCE ALLOWABLE AS EXPENSES. HE FOLL OWED HIS PREDECESSORS ORDER ON THE SAME ISSUE FOR THE ASSESSMENT YEAR 2002-03 AND REVENUE HAS ACCEPTED THIS ORDER. THUS WE DISMISS THIS GROUND OF THE REVENUE. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2015. SD/- SD/- (G.C. GUPTA) (J. SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 7. 8. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 4.8.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 5.8.20 15 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER