ITO, Nashik V. Nashik District Labour Society Co-Op Federation., Nashik

ITA 64/PUN/2013

• Counselvise Citation: 6424514 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Difference of opinion; Commercial expediency; Change of opinion; Revenue expenditure
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.62, 63 & 64/PN/2013 (A.YS. 2006-07, 2008-09 & 2009-10) ITO, WARD 1(2), NASHIK APPELLANT VS. NASHIK DISTRICT LABOUR SOCIETY CO-OP. FEDERATION, SHRAM-SAHAKAR, CHUMBLE MARG, TIDKE COLONY, NASHIK-422002 PAN: AAABN0028M RESPONDENT ASSESSEE BY : SHRI C.H. NA NIWADEKAR DEPARTMENT BY : SHRI P.L. PATHADE DATE OF HEARING : 20.02.2014 DATE OF ORDER : 24.02.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL THE APPEALS FILED BY THE REVENUE PERTAIN TO TH E SAME ASSESSEE FOR DIFFERENT ASSESSMENT YEARS. SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.62/PN/2013, THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 01. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT (A) IS NOT JUSTIFIED IN QUASHING THE PR OCEEDINGS U/S 147 & 148 OF THE I.T. ACT, 1961 AND HOLDING THA T SUBSEQUENT ASSESSMENT ORDER PASSED BASED UPON SUCH PROCEEDINGS IS VOID AB INITIO AND HENCE ANNULLED. 2 02. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT (A) WAS NOT JUSTIFIED IN QUASHING THE PROCEEDINGS U/S 147 & 148 OF THE I.T. ACT, 1961 IGN ORING THE FACT THAT THE ASSESSEE'S CASE IS SQUARELY COVER ED BY EXPLANATION 2(B) U/S 147 OF THE I.T. ACT, 1961 AS T HERE IS NO CHANGE OF OPINION INVOLVED AS THERE WAS NO ASSES SMENT ORDER IN THE ASSESSEE'S CASE FOR THE RELEVANT A.Y. 03. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT (A) IS NOT JUSTIFIED IN ALLOWING THE DE DUCTION U/80P(2)(A)(VI), WHEN IN FACT THE ASSESSEE ITSELF I S NOT A CO- OPERATIVE SOCIETY BUT A DISTRICT FEDERATION OF LAB OUR CO- OPERATIVE SOCIETIES AND THE INCOME EARNED B Y THE FEDERATION CANNOT BE SAID TO BE ATTRIBUTABLE TO THE COLLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS AS CONTEMPLATED IN SECTION 80P(2)(A)(VI) OF THE I.T. A CT, 1961. 04. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT (A) IS NOT JUSTIFIED IN HOLDING THAT ADVERTISEMENT EXPENSES OF RS.1,68,600/- IS WHOLLY A ND EXCLUSIVELY FOR THE GROWTH OF BUSINESS BECAUSE AS P ER STATUTORY AUDIT REPORT IT WAS ATTRIBUTABLE TO THE A CTIVITIES OF THE SOCIETY AND THE ASSESSEE ALSO COULD NOT JUSTIFY THE CLAIM OF EXPENSES. 05. THE ORDER OF THE LD. CIT (A) BE CANCELLED AND THAT OF THE A.O. BE RESTORED. 06. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND GROUN DS OF APPEAL. 3. THE ASSESSEE IS A COOPERATIVE BANK PROVIDING VAR IOUS SERVICES TO ITS MEMBERS. THE MAIN OBJECTS OF THE ASSESSEE IS T O WORK AS FEDERATION OF SKILLED AND UNSKILLED LABOURERS AND T O WORK AS LIAISON BETWEEN VARIOUS GOVERNMENT DEPARTMENTS ON BEHALF OF THE MEMBERS OF SOCIETY. THE ASSESSEE HAS FILED A RETURN OF INC OME DECLARING TOTAL INCOME AT NIL ON 31.10.2006 FOR A.Y. 2006-07 AFTER CLAIMING DEDUCTION U/S.80P(2)(A)(VI) WHICH WAS ACCEPTED U/S. 143(1). THEREAFTER, THE ASSESSING OFFICER INITIATED THE PRO CEEDINGS U/S.147 ISSUING NOTICE U/S.148 ON 08.10.2010. 3.1 THE ASSESSING OFFICER THEREFORE, EXAMINED THE R ETURN OF ASSESSEE WHO HAD CLAIMED DEDUCTION OF 36,76,912/- 3 U/S.80P(2)(A)(VI) AND DISALLOWED THE ADVERTISEMENT EXPENSES OF 1,68,600/-. THE MATTER WAS CARRIED BEFORE THE FIRS T APPELLATE AUTHORITY, WHEREIN THE RELIEF HAS BEEN GRANTED TO T HE ASSESSEE ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA SUBMITTED THAT THE CIT(A) WAS N OT JUSTIFIED IN ALLOWING DEDUCTION U/S.80P(2)(A)(VI) WHEN THE ASSES SEE ITSELF IS NOT A COOPERATIVE SOCIETY BUT A DISTRICT FEDERATION OF LA BOURERS COOPERATIVE SOCIETY AND INCOME EARNED BY FEDERATION CANNOT BE S AID TO BE ATTRIBUTABLE TO THE COLLECTIVE DISPOSAL OF LABOUR O F ITS MEMBERS AS CONTEMPLATED IN SECTION 80P(2)(A)(VI) OF I.T. ACT. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORD ER OF CIT(A) AND SUBMITTED THAT THIS ISSUE IS COVERED IN ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO.195/PN/2011, WHEREIN, THIS ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 3. AFTER HEARING THE LEARNED DR AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION DESPITE THE FACT THAT IN ASSESSEES OWN C ASE IN ITA NO. 1064/PN/1984 DATED 5-5-2006 FOR A.Y. 1980-81 TH E TRIBUNAL ALLOWED THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT. 4. WE FURTHER FIND SIMILAR DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEA RS BUT THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 495/PN/2006 FOR A.Y. 2003- 04 DATED 30-6-2008 AND IN ITA NO.1336/PN/2008 FOR A.Y.2005-06 DATED 28-11-2008 HAS CONFIRMED THE OR DERS OF THE \ CIT(A) IN ALLOWING THE CLAIM OF ASSESSEE. NOT HING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. WE ARE THEREFORE, OF THE OPINION THAT THE CIT(A) WAS JUSTI FIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. THIS VIEW IS FORTIFIED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF KERALA STATE CO-OPERAT IVE MARKETING FEDERATION LTD & OTHERS VS. CIT (231 ITR 841 (SC). WE ACCORDINGLY, UPHOLD THE ORDER OF THE CIT(A) IN A LLOWING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(VI) OF THE ACT. 3.2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF REVENUE. SO, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF CIT(A) WHO HAS ALLOWED THE DEDUCTION U/S.80P(2)(A)( VI). WE UPHOLD THE SAME. SIMILAR ISSUE AROSE IN A.Y. 2008-09 AND 2009-10. FACTS 4 BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE UPHOLD THE ORDER OF CIT(A) ON THE ISSUE FOR THE REASONS STATED ABOVE . 4. NEXT ISSUE IN A.Y. 2006-07 IS WITH REGARD TO ALL OWABILITY OF ADVERTISEMENT EXPENSES OF 1,68,600/-. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE IN THE ASSESSMENT ORDER, IN APPEAL, THE SAME WAS ALLOWED. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. WE FIND THAT A SIMILAR ISSUE AROSE IN A.Y. 2009-10 WHICH IS A SPEAKING ORDER ON THE ISSUE, WHEREIN, THE ASSE SSING OFFICER DISALLOWED THE ENTIRE ADVERTISEMENT EXPENDITURE OF 3,32,320/- BY RESORTING ONLY TO AUDITORS REMARK IN THE STATUTORY AUDIT. IN APPEAL, THE CIT(A) ALLOWED THE SAME. IT IS A SETTLED LEGAL POSITION THAT BY WAY OF EXPENDITURE BUSINESSMANS BUSINESS MAY BE BENEFI TTED IN A NUMBER OF WAYS. THE ASSESSEE WHO CAN SEE THE REASO NABILITY OF THE EXPENDITURE INCURRED IN QUESTION IN THE INTEREST OF BUSINESS, SO THE PAYMENT HAS TO BE VIEWED IN THE LARGER INTEREST OR EXPEDIENCY OF ASSESSEES BUSINESS. THE ASSESSEE HAS INCURRED EXP ENDITURE OF 3,32,320/- ON ACCOUNT OF ADVERTISEMENT IN SAID YEAR AND THE SAME WAS CLAIMED IN THE NATURE OF BUSINESS. IT WAS SUBM ITTED THAT CERTAIN DIGNITARIES VISITED THE ORGANIZATION AND ASSESSEE W AS REQUIRED TO INCUR EXPENSES OUT OF COMMERCIAL EXPEDIENCY BY GIVI NG WIDE PUBLICITY OF SUCH VISITS IN THE LOCAL PRINT MEDIA IN ORDER TO DERIVE CERTAIN COMMERCIAL BENEFITS. THE ASSESSEE CLAIMED THAT BY VIRTUE OF INTERACTION WITH VARIOUS DIGNITARIES, THE ASSESSEE WAS ABLE TO GET MONETARY LIMIT OF CONTRACT TO LABOUR CONTRACT SOCIE TIES ENHANCED. THE EXPENDITURE WAS, THEREFORE, INCURRED AND CLAIME D AS REVENUE EXPENDITURE. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE HAS NOT PROVIDED PROOF THA T IT WAS FOR THE PURPOSE OF BUSINESS PURPOSE. IT IS NOT A CASE OF T HE ASSESSING OFFICER THAT THE EXPENDITURE HAS NOT BEEN INCURRED. SINCE THE ASSESSEE HAS ESTABLISHED THE EXPENDITURE INCURRED ON ACCOUNT OF COMMERCIAL EXPEDIENCY, SO THE COMMERCIAL EXPEDIENCY IS TO BE V IEWED FROM THE VIEW POINT OF BUSINESSMAN / ASSESSEE. THE FACTS ON RECORD INDICATE 5 THE IMPUGNED EXPENDITURE IS ON ACCOUNT OF PUBLIC VI SITS OF STATE MINISTERS, LOCAL ELECTED REPRESENTATIVES AND OTHER DIGNITARIES TO THE CITY OF NASHIK AND THE PREMISES OF SOCIETY, WHO HAV E HELPED THE ASSESSEE IN GETTING MORE CONTRACTS FOR LABOUR, THER EFORE, COMMERCIAL EXPEDIENCY ESTABLISHED. IN THE FACTS AND CIRCUMSTA NCES, THE EXPENDITURE WAS RIGHTLY MADE BY THE ASSESSEE FOR BU SINESS PURPOSE AND THE SAME WAS RIGHTLY DIRECTED BY THE CIT(A) TO DELETED THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE GROWTH OF ASSESSEES BUSINESS. ACCORDINGLY, THE SAME IS UPHE LD. A SIMILAR ISSUE AROSE IN OTHER YEARS. FACTS BEING SIMILAR, S O FOLLOWING THE SAME REASONING, THE ORDER OF CIT(A) IS UPHELD WHO HAS AL LOWED THE EXPENDITURE WHICH WAS DISALLOWED BY THE ASSESSEE ON ACCOUNT OF NON BUSINESS PURPOSE. 5. IN THE RESULT, ALL THREE APPEALS FILED BY THE RE VENUE ARE DISMISSED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF FEBRUARY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 24 TH FEBRUARY, 2014 GCVSR COPY TO:- 1. DEPARTMENT 2. ASSESSEE 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE DR, A BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE