Shree Bileshwar Khand Udyog Khedut Sahakari Mandli Ltd., Kodinar V. The Jt. Commr. of Income Tax, Range-1, JUNAGADH

ITA 633/RJT/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5198 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-09-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Gift; Business expenditure; Rule of consistency; Commercial expediency; Revenue expenditure; Set aside
• Section: 143(3); 139(1); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./I.T.A. NO.633/RJT/2014 ( / ASSESSMENT YEAR : 2009-10) SHREE BILESHWAR KHAND UDYOG, KHEDUT SAHAKARI MANDLI LTD., 1 ST FLOOR, ADMINISTRATIVE BUILDING, VERAVAL ROAD, KODINAR / VS. J.C.I.T, RANGE-1, JUNAGADH. ./ ./PAN/GIR NO. : AAAAB0936H ( /APPELLANT ) .. ( !' / RESPONDENT ) / APPELLANT BY : SHRI M.J. RANPURA, A.R !' $ / RESPONDENT BY : SHRI ANIL KUMAR DAS, D.R. $ ( / DATE OF HEARING 18/09/2019 $ ( / DATE OF PRONOUNCEMENT 25/10/2019 / O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-IV, AHMEDABAD [LD. CIT (A) IN SHORT] DATED 28/08/2014, ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') RELEVANT TO ASSESSMENT YEAR (A.Y) 2009- 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE W ITHOUT PREJUDICE TO ONE ANOTHER. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 2 - 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX( APPEAL) -IV, RAJKOT [HEREINAFTER REFERRED TO AS THE 'CIT(A)'] ERRED ON FACTS AS ALS O IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.13,79,996/- MADE BY THE AO ALLEG ING THAT THE EXPENDITURE INCURRED ON ERECTION OF STATUE OF FOUNDER IS OF PE RSONAL NATURE AND NOT A BUSINESS EXPENDITURE AND THAT THE SAME CANNOT BE CLAIMED AS REVENUE EXPENDITURE IN TERMS PROVISION OF SECTION 37 OF THE INCOME-TAX ACT,1961 [HEREINAFTER REFERRED AS TO THE 'ACT'] AS THE SAME WAS FOR CREATING NEW ASSET. THE DISALLOWANCE IS TOTALLY UNJ USTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE DELETED. 3.0 THE LD. CIT(A) GRIEVOUSLY ERRED ON FACTS AS ALS O IN LAW IN ALLEGING THAT THE APPELLANT HAD FAILED TO (I) SUBSTANTIATE WITH ANY COGENT EVIDENCE, THE NATURE OF SUGARCANE DEVELOPMENT EXPENDITURE PAYABLE TO SUGAR CANE FARMERS, (II) ESTABLISH NEXUS BETWEEN SUCH EXPENDITURE AND BUSINESS CARRIE D ON BY IT, (III) DEMONSTRATE AS TO HOW THE PROFITS OF THE APPELLANT HAD BEEN INCRE ASED BY SUCH EXPENDITURE, AND THAT THE APPELLANT'S OUTSTANDING LIABILITIES OF RS .1,98,83,655/- BASED ON ACCRUAL SYSTEM OF ACCOUNTING CONSTITUTED CONTINGENT LIABIL ITIES AND NOT ACTUAL LIABILITIES. THE ALLEGATIONS LEVELED BY THE LD. CIT(A)'S ARE TOTALLY BASELESS AND IN TOTAL DISREGARDS TO THE PAST HISTORY OF THE APPELLANT'S BUSINESS AS AL SO THE BUSINESS ACTIVITIES BEING CARRIED OUT UNDER THE SAME LINE OF BUSINESS AND UNJ USTIFIED ON FACTS AS ALSO IN LAW AND DESERVES TO BE QUASHED AND THE ADDITION MAY KI NDLY BE DELETED. 4.0 THE LD. CIT(A) GRIEVOUSLY ERRED IN LAW AND ON F ACTS IN RETAINING ADDITION OF RS.2,72,42,900/- BEING BASED ON THE ALLEGATIONS MEN TIONED IN ABOVE GROUND NO. 3.0 ON ACCOUNT OF SUGARCANE DEVELOPMENT EXPENSES. THE L D. CIT(A)'S RETENTION IS WITHOUT CONSIDERING THE SUBMISSION MADE BEFORE HIM AS ALSO BEFORE THE AO AND DESERVES TO BE DELETED AND THEREFORE, IT IS PRAYED THAT THE DISALLOWANCE OF RS.2,72,42,900/- RETAINED BY THE LD. CIT(A) BE DELE TED. 5.0 YOUR HONOR'S APPELLANT CRAVES LEAVE TO ADD, AME ND, ALTER OR WITHDRAW ANY OR MORE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF APPEAL. THE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED C IT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO BY TREATI NG THE EXPENDITURE OF RS. 13,79,996/- BEING PERSONAL IN NATURE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A CO- OPERATIVE SOCIETY AND ENGAGED IN THE BUSINESS OF MA NUFACTURING AND SALE OF SUGAR AND ITS BY-PRODUCTS. IT ALSO OPERATES THE PAT ROL PUMP. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED AN EXPENDI TURE OF RS 13,79,996/- UNDER THE HEAD REPAIR OF BUILDING WHICH WAS ACTUALL Y INCURRED ON CONSTRUCTION OF THE STATUE OF LATE SHRI R.N. VALA, THE FOUNDER C HAIRMAN OF THE SOCIETY. AS PER THE ASSESSEE, SUCH EXPENDITURE WAS INCURRED AND APPROVED BY GENERAL BODY OF THE SOCIETY TO PROVIDE TRIBUTE TO THE FOUND ER MEMBER. THE ASSESSEE ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 3 - ALSO CLAIMED THAT THE STATUE HAS INSPIRED THE PERSO NS ENGAGED IN THE BUSINESS OF THE ASSESSEE AND THEREFORE THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 37 OF THE ACT. 2.1 HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING THAT SUCH EXPENDITURE IS REPRESENTING PER SONAL IN NATURE AND HAVING NO CONNECTION WITH THE BUSINESS OF THE ASSES SEE. 2.2 THE AO ALSO OBSERVED THAT SUCH EXPENDITURE CANN OT BE TREATED AS REVENUE IN NATURE. AS SUCH IT IS CAPITAL EXPENDITUR E AS NEW ASSET HAS COME INTO EXISTENCE WHICH HAS NO CONNECTION WITH THE BUS INESS. IN VIEW OF THE ABOVE, THE AO DISALLOWED THE EXPENDI TURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). 3. BEFORE THE LEARNED CIT (A) IT WAS SUBMITTED THAT IT IS THE DOMAIN OF THE ASSESSEE TO DECIDE THE EXPENSES TO BE INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. AS SUCH THE ASSESSEE KNOWS THE BENEFIT OF THE EXPENDITURE INCURRED BY IT. 3.1 HOWEVER THE LEARNED CIT (A) DISREGARDED THE CON TENTION OF THE ASSESSEE BY OBSERVING THAT SUCH EXPENDITURE HAS NOT BEEN INCURRED IN CONNECTION WITH THE BUSINESS ACTIVITIES OF THE ASSE SSEE. 3.2 THE LEARNED CIT (A) WAS OF THE VIEW THAT SUCH E XPENDITURE AT THE MOST, MIGHT BE TREATED AS GOODWILL WHICH CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 37 OF THE ACT. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 4 - BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT-A, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNN ING FROM PAGES 1 TO 72 AND SUBMITTED AS FOLLOWS: THE CO-OPERATIVE MOVEMENT WAS INITIATED BY THE LAT E SHRI R.N. VALA SOMETIMES IN 1956 AND BECAME FOUNDER PRESIDENT OF T HE SOCIETY. DUE TO HIS EFFORTS THE SOCIETY REACHED THE PRESENT LEVEL IN TH E FILED OF CO-OPERATIVE MOVEMENT. THUS, THE EXPENSE HAS DIRECT NEXUS WIT H THE ACTIVITIES OF THE SOCIETY AND THE. STATUE PROVIDES MOTIVATION AND ENC OURAGEMENT TO THE MEMBERS AND NEW GENERATION IN THE FIELD OF COOPERAT IVE MOVEMENT. THE EXPENDITURE WAS APPROVED BY THE AGM BY PASSING A RESOLUTION ON 29.12.2007 AND THE SAME HAS NOT BEEN OBJECTED BY TH E REGISTRAR OF THE CO-OPERATIVE SOCIETY WHO IS MONITORING THE ACTIVITI ES OF THE APPELLANT. DETAILED EXPLANATION WAS FURNISHED VIDE LETTER DATED 1 9.1 2.2011 [PAGE NO. 12 & 13 OF PAPER BOOK]. THE APPELLANT BEING A REGISTERED CO-OPERATIVE SOCIE TY CANNOT HAVE ANY PERSONAL ELEMENT IN ITS EXPENDITURE IF ANY EXPENDIT URE GOES TO BENEFIT ITS MEMBERS, IT WOULD ONLY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT SOCIETY AND IN ANY TERM, EXPENDITURE CANNOT BE EQUA TED WITH THE PERSONAL EXPENDITURE. THE APPELLANT INCURRED SUCH EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS AND NO ONE EXCEPT THE APPEL LANT ITSELF WOULD HAVE BEEN BENEFITTED BY SUCH EXPENDITURE. IT WAS ONLY THE NOMENCLATURE GIVEN TO SUCH EXPENDITURE THAT MISGUIDED THE AO TO TREAT SUCH EXPENDITURE AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. RELIANCE IS PLACED ON DECISION OF HON'BLE ITAT-AHME DABAD BENCH A IN CASE OF ACIT VS. CHANASMA NAGRIK SAHAKARI BANK LTD [2017] 86 TAXMANN.COM 8 (PAGE 83 TO 67 OF PAPER BOOK). 5. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW BY REITERATING THE FINDING S CONTAINED THEREIN. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 5 - 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISION OF SECTION 37 OF THE ACT IS A RESIDUARY SECTION ALLOWING THE DEDUCTION OF THE BUS INESS EXPENDITURE AND THE SAME IS GIVEN BELOW: 37. (1)ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE N ATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITUR E OR PERSONAL EXPENSES OF THE ASSESSEE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUS INESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDIT URE.] FROM THE ABOVE PROVISIONS, THE FOLLOWING CONDITIONS FOR ALLOWANCE OF THE EXPENDITURE NEED TO BE SATISFIED UNDER SECTION 37 O F THE ACT. SUCH EXPENDITURE SHOULD NOT BE COVERED UNDER THE SP ECIFIC SECTION I.E. SECTIONS 30 TO 36. EXPENDITURE SHOULD NOT BE OF CAPITAL NATURE. THE EXPENDITURE SHOULD BE INCURRED DURING THE PREVI OUS YEAR. THE EXPENDITURE SHOULD NOT BE OF PERSONAL NATURE. THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY O R EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION. NOW, WE HAVE TO ADJUDICATE WHETHER THE IMPUGNED EXP ENDITURE INCURRED BY THE ASSESSEE ON THE BUILDING OF THE STATUE AS DISCUSSED ABOVE REPRESENTS THE EXPENSES INCURRED PERSONAL IN NATURE. IN THIS REGAR D, WE NOTE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY HAVING SEPARATE LEGAL ENT ITY FROM THE PERSONS WHO ARE THE MEMBERS OF SUCH SOCIETY AS WELL AS HOLDING THE POST OF THE GOVERNING BODY. SUCH EXPENDITURE INCURRED WAS APPROVED IN THE ANNUA L GENERAL MEETING OF THE SOCIETY. MOREOVER, THE ASSESSEE BEING A SEPARATE LE GAL ENTITY IN THE FORM OF CO- OPERATIVE SOCIETY, DOES NOT HAVE ANY PERSONAL RELAT IONS LIKE AN INDIVIDUAL. THEREFORE, THERE CANNOT BE ANY EXPENDITURE TO BE CA LLED FOR THE PERSONAL BENEFIT OF THE SOCIETY. AS SUCH, THERE CANNOT BE ANY BENEFI T TO THE GOVERNING BODY/MEMBERS OF THE SOCIETY OUT OF SUCH EXPENDITURE INCURRED BY THE SOCIETY. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 6 - HOWEVER THERE IS NO SUCH ALLEGATION BY THE AO/LEARN ED CIT (A) THAT THE BENEFITS WERE DERIVED BY THE MEMBERS OF THE GOVERNING BODY O F THE SOCIETY OR MEMBERS OF THE SOCIETY. THUS WE DISAGREE WITH THE FINDING O F THE AUTHORITIES BELOW THAT THERE WAS SOME PERSONAL BENEFIT OUT OF THE IMPUGNED EXPENSES TO THE SOCIETY. THERE IS NO DOUBT ABOUT THE GENUINENESS OF THE EXPE NSES VIZ A VIZ THE APPROVAL OF SUCH EXPENSES IN THE AGM OF THE SOCIETY. WE ALSO FIND THAT ITAT IN CASE OF ACIT VS. CHANASMA NAGRIK SAHKARI BANK LTD REPORTED IN 86 TAXMANN.COM 8 HAS DECIDED THE SIMILA R ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THE IS SUE. WE FIND OURSELVES IN AGREEMENT WITH THE CONTENTION RAISED ON BEHALF OF T HE ASSESSEE THAT THE EXPENSES INCURRED ARE REVENUE IN NATURE AND NO ENDURING BENE FIT CAN BE STATED TO BE DERIVED BY THE ASSESSEE. WE TAKE NOTICE OF THE PLEA THAT TH E PROPERTY IN STATUE ALSO DID NOT VEST IN THE ASSESSEE-BANK. SIMILARLY, WE OBSERVE TH AT THE EXPENSES CAN BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS FOR THE SIMPLE REASON THAT SUCH INCURRING OF EXPENSES ADDS TO THE VISIBILITY OF THE ASSESSEE-BANK AMONGST ITS STAKEHOLDERS. THE EXPENDITURE THUS INCURRED CAN BE RATIONALLY SAID TO HAVE BEEN INCURRED FOR THE PROMOTION OF THE ASSESSEE'S ONGOIN G BUSINESS AND THUS AN ALLOWABLE BUSINESS EXPENDITURE. SUCH INCURRING OF EXPENDITURE WOULD PRESUMABLY ENHANCE THE BRAND IMAGE OF THE ASSESSEE. THE EXPENDITURE INCURR ED IS THUS FOR BUSINESS PURPOSES WHEN NOT ALLEGED FOR ANY EXTRANEOUS CONSIDERATION. IT IS ANOTHER MATTER TO QUESTION THE EXPEDIENCY OF SUCH EXPENDITURE WHICH IN ANY CAS E IS NOT FOR THE REVENUE LOOK INTO. IT IS TRITE THAT 'FOR THE PURPOSE OF BUSINESS ' CONTEMPLATED UNDER S.37 IS WIDER IN SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNI NG PROFITS' AND MAY COMPREHEND MANY ACTS INCIDENTAL TO THE CARRY ON OF A BUSINESS. THUS, SO LONG AS THE EXPENDITURE HAS BEEN INCURRED ON THE GROUNDS OF COMMERCIAL EXPE DIENCY AND IN ORDER TO DIRECTLY OR INDIRECTLY FACILITATE THE CARRY OF THE BUSINESS, THE FACT THAT THERE WAS NO COMPELLING NECESSITY TO INCUR THE EXPENDITURE ON WHICH DEDUCTI ON IS CLAIMED IS AN IRRELEVANT CONSIDERATION. THE EXPENDITURE IN THE INSTANT CASE HAS GONE IRRETRIEVABLY IN THE COURSE OF CARRYING ON OF BUSINESS. THE EXPENSES INC URRED HAS POTENTIAL TO INCREASE THE VISIBILITY OF THE ASSESSEE IN THE PUBLIC AT LAR GE AND THUS HAS BEARING ON BUSINESS ACCELERATION. THEREFORE, WE FIND CONSIDERABLE MERIT IN THE CLAIM OF THE ASSESSEE. CONSEQUENTLY, CLAIM OF THE ASSESSEE TOWARDS URBAN D EVELOPMENT EXPENDITURE OF RS.4,35,821/- DESERVES TO BE ALLOWED. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF SUCH EXPENDITURE UNDER THE PROVISIONS OF SECTION 37 (1) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT- A AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 7 - 6. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 AND 4 IS INTERCONNECTED. THEREFORE WE HAVE CLUBBED BOTH OF T HEM FOR THE SAKE OF CONVENIENCE AND ADJUDICATION. 7. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED C IT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO FOR RS. 2 ,72,42,900/- ON THE GROUND THAT SUCH EXPENDITURE WAS NOT INCURRED IN CO NNECTION WITH THE BUSINESS. 8. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCURRED CERTAIN EXPENSES UNDER THE HEAD SUGAR DEVELOPMENT SCHEME WHICH WAS PAID TO THE MEMBERS OF THE SOCIETY FOR THE SUGARCANE DEVELOPMEN T. THE DETAILS OF THE EXPENSES STAND AS UNDER: SR.NO. DESCRIPTION AMOUNT 1 PAID FOR BETTER QUALITY O F SEEDS OF SUGARCANE AT THE TIME OF PLANTATION 53,45,294/ - 2. PAID AGAINST PESTICIDES AND MEDICINES 10,24,933 3 PAID FOR THE QUALITY OF SUGARCANE WHICH ARE GROW FAST AND GIVES MORE RECOVERY (QTY. NO.671 AND 86032) 9,89,018 4 PROVIDED FOR SUPPLY OF BETTER QUALITY OF SUGARCANE FOR CRUSHING AND PAYMENT HAS BEEN MADE BEFORE FILING OF RETURN OF INCOME U/S.139(1) 1,98,83,655 TOTAL 2,72,42,900/ - 8.1 THE ASSESSEE FURTHER SUBMITTED THAT THE IMPUGNE D AMOUNT HAS BEEN PAID TO THE MEMBERS FOR THE DEVELOPMENT OF THE SUGA RCANE EXCEPT A SUM OF RS. 1,98,83,655/- WHICH WAS INCURRED DURING THE YEA R BUT PAID IN THE SUBSEQUENT YEAR. THE ASSESSEE ALSO SUBMITTED THAT T HE IMPUGNED PAYMENT WAS MADE TO THE MEMBERS OF THE SOCIETY OVER AND ABO VE THE REGULAR PRICE PAID TO THEM FOR THE DEVELOPMENT OF THE SUGARCANE. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 8 - 8.2 HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDIN GS DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDER: I. THE ASSESSEE OUT OF THE IMPUGNED EXPENDITURE HAS SH OWN OUTSTANDING LIABILITY FOR RS. 1,98,83,655/- WHICH C ANNOT BE TREATED AS AN EXPENSE OF THE CURRENT YEAR. II. IN CASE THE ASSESSEE CLAIMED THE DEDUCTION OF SUCH EXPENSES ON PAYMENT BASIS THEN THE SAME CANNOT BE ALLOWED ON AC CRUAL BASIS. III. THERE WAS NO DOCUMENTARY EVIDENCE FILED BY THE ASSE SSEE THAT THE EXPENDITURE WAS INCURRED FOR THE DEVELOPMENT OF SUG ARCANE AND THE PAYMENT WAS MADE TO THE FARMERS/GROWERS OF SUGA RCANE OVER AND ABOVE THE PRICE OF THE SUGARCANE. IN VIEW OF THE ABOVE THE AO HELD THAT THE IMPUGNED EXPENDITURE IS NOT GENUINE AND ACCORDINGLY ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 9. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A). THE ASSESSEE BEFORE THE LEARNED CIT (A) CLAIMED THA T IT HAS INCURRED THE IMPUGNED EXPENSES FOR THE DEVELOPMENT OF THE SUGARC ANE. THEREFORE THE SAME SHOULD BE ALLOWED AS DEDUCTION. 10. HOWEVER THE LEARNED CIT (A) OBSERVED THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CONTENTION THAT THE IMPUGNED EX PENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS AND THERE WAS NO COMMERCIAL EXPEDIENCY FOR SUCH EXPENSES. 10.1 THERE WAS NO EVIDENCE WITH THE ASSESSEE SUGGES TING THAT IT HAS RECEIVED ANY BENEFIT BY INCURRING SUCH EXPENSES. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 9 - THE IMPUGNED EXPENSES WERE REPRESENTING THE GIFTS/W ELFARE EXPENSES FOR THE FARMERS AND THEREFORE THE SAME CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 37 OF THE ACT. 10.2 THERE WAS AN OUTSTANDING LIABILITY OF RS. 1,98 ,83,655/- OUT OF THE IMPUGNED EXPENSES WHICH IS REPRESENTING A CONTINGEN T LIABILITY. THEREFORE, THE SAME CANNOT BE ALLOWED AS DEDUCTION UNDER SECTI ON 37 OF THE ACT. 10.3 IN VIEW OF THE ABOVE, THE LEARNED CIT (A) DISR EGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT-A, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED AR BEFORE US SUBMITTED AS UNDER: A. THE APPELLANT IS USED TO PURCHASE SUGARCANE FRO M REGISTERED FARMERS FOR MANUFACTURE OF SUGAR. ITS BUSINESS IS MAINLY SE ASONAL, AND ITS PERIOD IS RANGING FROM OCTOBER TO APRIL EVERY YEAR (NORMAL LY AS CRUSHING SEASON). B. THE APPELLANTS 100% MANUFACTURING IS MAINLY CARRIE D OUT DURING CRUSHING SEASON. HOWEVER, THE APPELLANT HAS TO STAR T PURCHASE/PROCUREMENT OF SUGARCANE AS SOON AS THE MO NSOON STARTS AND THEREFORE FOR CULTIVATION OF SUGARCANE, THE APPELLA NT IS SUPPOSED TO MAKE PAYMENT TO GROWERS OF SUGARCANE, WHO ARE MEMBE RS OF THE APPELLANT, FOR EARLY CULTIVATION OR QUALITY OF SUGA RCANE TO BE GROWN. THUS, IT HAPPENS THAT DUE TO DIFFERENCE BETWEEN SEA SONS PERIOD AND PERIOD OF PREVIOUS YEAR, SOME PART OF LIABILITIES R ELATING TO PURCHASE OF SUGARCANE MAY BE INCURRED IN THE ENSUING PREVIOUS Y EAR DEPENDING UPON GROWERS SUGARCANE QUALITY AND OTHER FACTORS. SUCH LIABILITIES, WHICH IS VERY SMALL IN PERCENTAGE TERM AS COMPARED TO TOTAL LIABILITIES OF SUGARCANE DEVELOPMENT, IS ALWAYS CRYSTALLIZED ON LY WHEN THE MANAGEMENT OF THE APPELLANT SOCIETY AND GROWERS REA CHED TO CONSENSUS REGARDING QUALITY, QUANTITY, DELIVERY SCHEDULE ETC OF SUGARCANE BY THE GROWERS. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 10 - C. THE PATTERN/MODUS OPERANDI OF THE APPELLANTS BUSIN ESS IS FROM ITS INCEPTION AND NOTHING WAS CHANGED DURING THE RELEVA NT PREVIOUS YEAR PART OF TOTAL LIABILITIES IS TREATED AS CRYSTALLIZE D ONLY ON ACRTUAL DISBURSEMENT TIME SINCE ITS INCEPTION AND THE SAID TREATMENT IS ACCEPTED AS ITS IS. D. THE APPELLANTS PROFITABILITY DEPENDS UPON INTER AL IA QUALITY OF SUGAR AND QUALITY OF SUGAR IN TURN IS PURELY DEPENDS UPON QUALITY OF SUGARCANE. FOR PROCURING HIGHER STANDARDS OF SUGAR CANE, THE APPELLANT HAS BEEN SINCE ITS INCEPTION ASSISTING ITS MEMBERS/ SUPPLIERS N CULTIVATION OF SUGARCANE BY PROVIDING FUNDS FOR PROCUREMENT OF PESTICIDES, BETTER QUALITY OF SEEDS, TIMELY SUPPLY OF SUGARCANE, ETC. SR.NO. DESCRIPT ION AMOUNT 4 PROVIDED FOR SUPPLY OF BETTER QUALITY OF SUGARCANE FOR CRUSHING AND PAYMENT HAS BEEN MADE BEFORE FILING OF RETURN OF INCOME U/S.139(1) 1,98,83,655 TOTAL 2,72,42,900/ - (I) DURING THE PERIOD 27.11.2007 TO 25.04.2008, SUG ARCANE WEIGHING 4,12,608.300 MT WERE RECEIVED. OUT OF THIS 3,59,15 5.360 WAS RECEIVED TILL 31.03.2008 THEREFORE SUBSIDY OF 3,59,15,536 @ 100/MT ON 3,59,155.360 M.T WAS ACCOUNTED FOR IN AY 2008-09. THE SUBSIDY FOR TH E PERIOD 0L.04.2008 TO 25.04.2008 FOR 53,452.940 MT AMOUNTING TO 53,45,294 HAS BEEN ACCOUNTED FOR IN AY 2009-10. (II).THE INCENTIVES OF 1,98,83,655 ON 1,98,836.550 MT ON THE .QUALITY OF S UGAR CANE WHICH ARE GROWN FAST DURING 07.11.2008 TO 31.03.200 9 RELEVANT TO AY 2009-10 WAS INCURRED AND DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT. (III) PESTICIDES OF 10,25,933 PROVIDED TO THE FARMERS WHO HAD REPORTED THEIR SUGARCANE TO BE SOLD TO THE FACTORY, TO FIGHT WITH THE DECAY ETC, IN THE CROPS. (IV) IN ORDER TO GET MORE CROPS ON 671 AND 36032 QU ALITY OF SUGARCANE, IT WAS DECIDED THAT THE FACTORY SHALL BEAR 380/MT AND ' 1000/- SHALL BE BORNE BY THE FARMERS. THUS, EXPENSE OF 9,89,018 WAS INCURRED ON SEEDS OF SUGARCANE DURING THE YEAR. E. THE APPELLANT'S INCOME FOR THE EARLIER ASSESSM ENT YEAR HAD BEEN FINALIZED BY T:E DEPARTMENT AND SUGARCANE DEVELOPMENT EXPENSE S WERE ALLOWED WITHOUT ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 11 - ANY MODIFICATION. DURING THE YEAR UNDER CONSIDERATI ON NO NEW FACTS HAD BEEN EMERGED AND THEREFORE, DECISION OF EARLIER YEAR MUS T BE FOLLOWED AND ACCEPTED IF THE FACTS ARE THE SAME AND NO NEW FACTS HAVE COM E U P WHICH MAY REQUIRE THE AUTHORITY TO TAKE A DIFFERENT VIEW. !N THIS CONNECT ION, THE APPELLANT RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN BHARAT SANCHAR NIGAM LTD. VS. UNION OF INDIA (282 ITR.273). F. REGARDING GENUINENESS OF EXPENDITURE, COPI ES OF ABSTRACT FROM SUGARCANE PLANTATION REGISTER, SAMPLE COPY OF SUGAR CANE CULTIVATION PROGRAM SHOWING DETAILS OF MEMBER WISE CULTIVATION PLANS, S AMPLE COPIES OF WEIGHING SLIPS OF SUGARCANE, ABSTRACT FROM REGISTER SHOWING DETAILS OF MEMBER FARMER WEIGHT OF SUGARCANE, VEHICLE NUMBERS ETC, ABSTRACT FROM REGISTER FRO ADVANCES GIVEN TO MEMBERS, COPIES OF VOUCHERS FOR SU GARCANE DEVELOPMENT EXPENSES PAYABLE TO MEMBERS, COPIES OF. ACCOUN TS OF MEMBERS SHOWING SUGARCANE DEVELOPMENT EXPENSES AND LIST FOR SUGARC ANE DEVELOPMENT INCENTIVE PAYABLE TO MEMBER FOR FY 2008-09 ARE ATTACHED AT PAGE 55 TO 82 OF PAPER BOOK . G. AS REGARDS AO'S ALLEGATION AS TO PROVISION FOR EXPENSES OF 1,98,83,655/- WAS NOT PAID BY THE END OF RELEVANT P REVIOUS YEAR AND THEREBY MADE DISALLOWANCE OF THE SAME, IT IS SUBMITTED THAT THE AO WAS NOT CLEAR WITH HIS PROPOSAL FOR DISALLOWANCE. AT FIRST, HE CONTEND ED TO DISALLOW 53,45,294/- BECAUSE CLAIM THEREOF WAS ALLEGED TO HAVE BEEN MADE ON PAYMENT BASIS AND THEN ARGUED TO DISALLOW 1,98,83,655/-BECAUSE CLAIM THEREOF WAS MADE ON ACCRUAL BASIS. H. THE APPELLANT IS ALSO RELYING ON THE FOLLOWING DECISIONS: (I) HON'BLE ITAT AHMEDABAD BENCH 'D' IN THE CASE OF ACIT VS. SHREE KHEDUT SAHAKARI KHAND UDHYOG MANDLI LTD. 51 TAXMANN.COM 12 9 [PAGE 68 TO 71 OF PAPER BOOK]. (II) HON'BLE ITAT BANGLORE BENCH'B' ; BANGLORE IN THE CASE OF MYSORE SUGAR CO. LTD. . VS. DCIT [(2006) 8 SOT 486.] (III) HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. SYNPASE SYSTEMS PVT LTD. [(2012) 80 CCH 068 (GUJ HC)] (VI) HON'BLE SUPREME COURT IN THE CASE OF CIT VS. P ANIPAT WOOLLEN & GENERAL MILLS CO. LTD. [(1976) 103 ITR 66, 71 (SC)] (V) HON'BLE SUPREME COURT IN THE CASE OF C!T VS. DH ANRAJGIRJI RAJA NARANSINGIRJI [91 ITR 544] ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 12 - (VI) HON'BLE HIGH COURT OF DELHI IN THE CASE OF ITO VS. DALRNIA CEMENT (BHARAT) LIMNED 254 ITR 377 (DEL) (VIII) HON'BLE SUPREME COURT IN THE CASE OF S.A. BU ILDERS VS. CIT [288 ITR 1 (SC). 12. ON THE OTHER HAND, THE LEARNED DR SUBMITTED TH AT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE EXPENSES . ACCORDINGLY THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIE S BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSU E IN THE INSTANT CASE RELATES TO THE PROVISION MADE BY THE ASSESSEE FOR T HE EXPENSES TO BE INCURRED FOR RS. 2,72,42,900.00 ON ACCOUNT OF SUGAR DEVELOPM ENT EXPENSES. THERE IS NO DISPUTE TO THE FACTS OF THE CASE AS ELABORATED I N THE PRECEDING PARAGRAPHS. THEREFORE, WE ARE NOT INCLINED TO REPEAT THE SAME F OR THE SAKE OF BREVITY. AT THE OUTSET WE NOTE THAT THERE WAS SIMILAR CLAIM MADE BY THE AS SESSEE IN THE OWN CASE PERTAINING TO THE AY 2005-06 AND 2007- 08 DATED 10-12- 2007 AND 29-07-2009 RESPECTIVELY WHICH WAS ADMITTED BY THE REVENUE. THIS FACT CAN BE VERIFIED FROM THE ASSESSMENT ORDER S FOR THE AYS 2005- 06 AND 2007-08 AVAILABLE ON RECORD. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE ALLOWED FOR THE DEDUCTION OF SUC H EXPENSES ON THE BASIS OF PRINCIPLES OF CONSISTENCY. IN THIS REGARD WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VERSUS EXCEL INDUSTRIES LTD REPORTED IN 358 ITR 295 WHEREIN IT WAS HELD AS UNDER: 28. SECONDLY, AS NOTED BY THE TRIBUNAL, A CONSISTENT V IEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE ON THE QUESTIONS RA ISED, STARTING WITH THE ASSESSMENT YEAR 1992-93, THAT THE BENEFITS UNDER TH E ADVANCE LICENCES OR UNDER THE DUTY ENTITLEMENT PASS BOOK DO NOT REPR ESENT THE REAL INCOME OF THE ASSESSEE. CONSEQUENTLY, THERE IS NO R EASON FOR US TO TAKE A ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 13 - DIFFERENT VIEW UNLESS THERE ARE VERY CONVINCING REA SONS, NONE OF WHICH HAVE BEEN POINTED OUT BY THE LEARNED COUNSEL FOR TH E REVENUE. 29. IN RADHASOAMI SATSANG SAOMI BAGH V. CIT [1992] 193 ITR 321/60 TAXMAN 248 (SC) THIS COURT DID NOT THINK IT APPROPRIATE TO ALLOW T HE RECONSIDERATION OF AN ISSUE FOR A SUBSEQUENT ASSESS MENT YEAR IF THE SAME 'FUNDAMENTAL ASPECT' PERMEATES IN DIFFERENT ASSESSM ENT YEARS. IN ARRIVING AT THIS CONCLUSION, THIS COURT REFERRED TO AN INTERESTING PASSAGE FROM HOYSTEAD V. COMMISSIONER OF TAXATION, 1926 AC 155 (PC) WHEREIN IT WAS SAID: 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO N BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE , OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHE R OF THE CONSTRUCTION OF THE DOCUMENTS OR THE WEIGHT OF CERT AIN CIRCUMSTANCES. IF THIS WERE PERMITTED, LITIGATION W OULD HAVE NO END, EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. IT I S A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED AND THERE IS ABUN DANT AUTHORITY REITERATING THAT PRINCIPLE. THIRDLY, THE SAME PRINC IPLE, NAMELY, THAT OF SETTING TO REST RIGHTS OF LITIGANTS, APPLIE S TO THE CASE WHERE A POINT, FUNDAMENTAL TO THE DECISION, TAKEN OR ASSU MED BY THE PLAINTIFF AND TRAVERSABLE BY THE DEFENDANT, HAS NOT BEEN TRAVERSED. IN THAT CASE ALSO A DEFENDANT IS BOUND B Y THE JUDGMENT, ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSE QUENT LIGHT OR INGENUITY MIGHT SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKEN. IN VIEW OF THE ABOVE AND AFTER CONSIDERING THE FACT S IN TOTALITY, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR DEDUC TION OF THE SUGAR CANE DEVELOPMENT EXPENSES AS DISCUSSED ABOVE. THE LD. DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD SUGGESTING ANY MATERIAL CHANGE I N THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER CONSID ERATION VIZ A VIZ EARLIER ASSESSMENT YEAR. IT IS ALSO PERTINENT TO NOTE THAT THE OUTSTANDING P AYMENT OF RS. 1,98,83,655.00 TO THE PARTIES WAS MADE BEFORE THE D UE DATE OF FILING THE INCOME TAX RETURN UNDER SECTION 139(1) OF THE ACT. THIS FACT HAS NOT BEEN DOUBTED BY THE AUTHORITIES BELOW. ITA NO.633/RJT/ 2014 A.Y. 2009-10 - 14 - IN VIEW OF THE ABOVE, THE ASSESSEE SUCCEEDS ON THE PRINCIPLE OF CONSISTENCY. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. H ENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 25/10/201 9 SD/- SD/- ( ) ( ) (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 25 /10 /2019 MANISH /TC NAIR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. , ( % -( / CONCERNED CIT 4. % -( ( ) / THE CIT(A)- II, RAJKOT 5. ./0 !(& , , /DR,ITAT, RAJKOT 6. 012 / GUARD FILE. / BY ORDER, '.( !( //TRUE COPY// / (DY./ASSTT.REGISTRAR) % & , / ITAT, RAJKOT 1. DATE OF DICTATION 19/09/2019 ( WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DRA GON) . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.10.2019 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S25/10/2019. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25/ 10/2019 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER