ACIT, Chandigarh V. M/s Morinda Co-op Sugar Mills Ltd., Ropar

ITA 650/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68468 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, JM ITAS NO. 650 & 1256/CHD/2012 ASSESSMENT YEAR : 2007-08 & 2008-09 A.C.I.T. CIRCLE 2(1) VS. M/S MORINDA COOP SUGAR CHANDIGARH MILLS LTD. KAINAUR ROAD, MORINDA ROPAR AAACT 6169 J ITAS NO. 657 & 1220/CHD/2012 ASSESSMENT YEAR : 2007-08 & 2008-09 M/S MORINDA COOP SUGAR VS. ADDL C.I.T. RANGE II MILLS LTD. CHANDIGARH KAINAUR ROAD, MORINDA ROPAR AAACT 6169 J (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI AMAR VEER SINGH ASSESSEE BY: SHRI HARRY RIKHY DATE OF HEARING 21.8.2013 DATE OF PRONOUNCEMENT 6.9.2013 O R D E R PER BENCH THESE APPEALS ARE FILED BY THE REVENUE AND THE ASSE SSEE AGAINST THE ORDERS DATED 1.3.2012, 3.9.2012, 1.3.20 12 & 3.9.20123 OF THE LD. CIT(A), CHANDIGARH. ITA NO. 650/CHD/2012 REVENUES APPEAL 2 IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING G ROUNDS: 1 THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS. 59,81,538/- ON ACCOUNT OF SHARE DEDUCTION MONE Y. 2 THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 47,86,474/- ON ACCOUNT OF RETENTION MONEY. 3 GROUND NO. 1 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT T HE ASSESSEE HAS NOT MADE PAYMENT OF RS. 59,81,538.84 T O THE 2 CANE GROWERS AS MONEY WAS RETAINED FOR THE PURPOSE OF ISSUING SHARE OF THE SOCIETY TO SUCH GROWERS. ON F URTHER ENQUIRY IT WAS SUBMITTED AS UNDER: THE SHARE DEDUCTION MONEY ACCOUNT AMOUNTING TO RS. 59,81,538/- REFLECTED IN THE BALANCE SHEET UNDER TH E HEAD SHARE CAPITAL IS BASICALLY THE SHARE APPLICATION MO NEY PENDING ALLOTMENT WHICH IS TAKEN FROM THE GROWERS I N THE FORM OF DEDUCTION FROM THE PAYMENTS MADE TO THEM AN D THE SAME IS PURELY CAPITAL IN NATURE. IT IS PURELY CAPITAL IN NATURE WHICH IS FURTHER SUPPORTED WITH THE FACT THA T THE AMOUNT IN THIS ACCOUNT IS SUBSEQUENTLY TRANSFERRED TO SHARE CAPITAL ACCOUNT AS EXPLAINED EARLIER. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS AND OBSERVED SINCE THE PAYMENT HAS NOT BEEN MADE, THERE FORE, THIS EXPENDITURE WAS NOT ALLOWABLE AND ACCORDINGLY ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. 4 ON APPEAL BEFORE THE LD. CIT(A) SIMILAR SUBMISSIO NS AS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED. THE LD. CIT(A) FOUND FORCE IN THE SAME AND ALLOWED THE APPE AL. 5 BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUPPORTED THE IMPUGNED ORDER. 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE P ARA 3.3 WHICH IS AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL OF THE ASSESSEE. THE AMOUNT ADDED BY THE ASSESSING OFFICER IS RS.1/- PER QUINTAL OF SUGARCANE OUT OF D EDUCTION FROM THE PAYMENT MADE. THE AMOUNT REMAINS AS SHARE DEDUCTION MONEY AND WHEN IT REACHES RS. 1,000/- IN EACH CASE, IT IS TRANSFERRED TO SHARE CAPITAL ACCOUNT. T HE SHARE CAPITAL IS ACCORDINGLY INCREASED AND THIS PRACTICE HAS BEEN FOLLOWED BY THE APPELLANT FOR THE LAST SO MANY YEARS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE LIABI LITY IS CEASED, RATHER THE MONEY PAID IS TO BE CONVERTED I NTO SHARE CAPITAL AND IT CANNOT BE SAID THAT IT HAS BEC OME INCOME OF THE APPELLANT. THE ADDITION HAS WRONGLY BEEN MADE BY THE ASSESSING OFFICER AND IS ACCORDINGLY DELETED. GROUND OF APPEAL NO. 2 IS DISMISSED. WE ARE OF THE OPINION THAT THE LD. CIT(A) HAS CORRE CTLY ADJUDICATED THE ISSUE BECAUSE THE MONEY WHICH REMAI NED 3 PAYABLE TO THE CANE GROWERS WAS ULTIMATELY ADJUSTE D BY ISSUE OF SHARES WHICH MEANS THE SHARE CAPITAL HAS GONE UP AND INCREASED THE LIABILITY OF THE ASSESSEE. ACCORDING LY WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 8 GROUND NO. 2 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS FURTHER NOTICE D THAT THE ASSESSEE HAS RETAINED A SUM OF RS. 47,86,474/-. ON ENQUIRY IT WAS EXPLAINED AS UNDER: THE RETENTION MONEY IS A PART OF CANE PRICE PAYABLE WHICH IS RELEASED AT THE TIME OF END OF THE CRUSHIN G OPERATION. THE AMOUNT RETAINED AT THE END AFTER MA KING THE FINAL PAYMENT HAS BEEN SHOWN AS INCOME UNDER TH E HEAD PENALTY RECEIVED IN THE PROFIT AND LOSS ACCOUN T. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS AND DISALLOWED THIS AMOUNT. 9 ON APPEAL BEFORE THE LD. CIT(A) SIMILAR SUBMISSIO NS WERE REITERATED. THE LD. CIT(A) FOUND FORCE IN THE SAME AND ALLOWED THE APPEAL. 10 BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON THE ORDER OF ASSESSING OFFICER. 11 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUPPORTED THE IMPUGNED ORDER. 12 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE P ARA 4.3 WHICH IS AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL OF THE ASSESSEE. THE RETENTION MONEY IS BASICALLY THE MONEY RETAINED TO BE SET OFF AGAINST THE PENALTY IM POSED, IF THE REQUISITE SUPPLY IS NOT MADE BY THE CANE GRO WER. IF ANY PENALTY IS LEVIED ON THE CANE GROWER, THE SAME IS SQUARED UP BY WAY OF TRANSFERRING MONEY FROM RETENT ION MONEY ACCOUNT AND THE BALANCE AMOUNT IS PAID TO THE MEMBERS. IT CANNOT BE SAID THAT THIS AMOUNT, IN AN Y WAY, IS INCOME OF THE APPELLANT. THE ADDITION OF THIS A MOUNT HAS BEEN WRONGLY MADE BY THE ASSESSING OFFICER AND THE SAME IS DELETED. GROUND OF APPEAL NO. 3 IS DELETED . 4 13 IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY ADJ UDICATED THE ISSUE BECAUSE THE MONEY WAS RETAINED BY THE ASS ESSEE SO THAT SAME CAN BE ADJUSTED IF THERE WAS A SHORT FAL L IN THE SUPPLY BY THE FARMERS BECAUSE UNDER THE AGREEMENT T HE ASSESSEE HAD A RIGHT TO IMPOSE PENALTY FOR SUCH SHO RT FALL. IN CASE NO PENALTY IS IMPOSED THIS AMOUNT IS SETTLED T HROUGH FINAL PAYMENT. ACCORDINGLY WE FIND NOTHING WRONG IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 14 IN THE RESULT, APPEAL NO. 650/CHD/2012 IS DISMIS SED. ITA NO. 1256/CHD/2012 REVENUES APPEAL 15 IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 THE LD. CIT(A) HAS ERRED IN FACTS AS WELL LAS LA WS IN DELETING THE ADDITION OF RS. 671/-MADE BY THE ASSES SING OFFICER ON ACCOUNT OF SHARE DEDUCTION MONEY. 2 THE LD. CIT(A) HAS ERRED IN FACTS AS WELL AS LAW IN DELETING THE ADDITION OF RS. 22,91,833/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF SHARE RETENTION MO NEY. 16 GROUND NO. 1 THIS ISSUE HAS BEEN ADJUDICATED B Y US VIDE PARA 3 OF THIS ORDER. SINCE THE FACTS ARE IDE NTICAL AND THEREFORE, FOLLOWING OUR DECISION IN PARA 7, WE DE CIDE THIS ISSUE AGAINST THE REVENUE. 17 GROUND NO. 2 - GROUND NO. 2 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS RETAINED A SU M OF RS. 22,91,833/-. ON ENQUIRY IT WAS EXPLAINED AS UNDER: THE RETENTION MONEY IS A PART OF CANE PRICE PAYABLE WHICH IS RELEASED AT THE TIME OF END OF THE CRUSHIN G OPERATION. THE AMOUNT RETAINED T THE END AFTER MAK ING THE FINAL PAYMENT HAS BEEN SHOWN AS INCOME UNDER TH E HEAD PENALTY RECEIVED IN THE PROFIT AND LOSS ACCOUN T. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS AND DISALLOWED THIS AMOUNT. 5 18 ON APPEAL BEFORE THE LD. CIT(A) SIMILAR SUBMISSI ONS WERE REITERATED. THE LD. CIT(A) FOUND FORCE IN THE SAME AND ALLOWED THE APPEAL. 19 BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON THE ORDER OF ASSESSING OFFICER. 20 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUPPORTED THE IMPUGNED ORDER. 21 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE P ARA 4.3 WHICH IS AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNS EL OF THE ASSESSEE. THE RETENTION MONEY IS BASICALLY THE MONEY RETAINED TO BE SET OFF AGAINST THE PENALTY IM POSED, IF THE REQUISITE SUPPLY IS NOT MADE BY THE CANE GRO WER. IF ANY PENALTY IS LEVIED ON THE CANE GROWER, THE SAME IS SQUARED UP BY WAY OF TRANSFERRING MONEY FROM RETENT ION MONEY ACCOUNT AND THE BALANCE AMOUNT IS PAID TO THE MEMBERS. IT CANNOT BE SAID THAT THIS AMOUNT, IN AN Y WAY, IS INCOME OF THE APPELLANT. THE ADDITION OF THIS A MOUNT HAS BEEN WRONGLY MADE BY THE ASSESSING OFFICER AND THE SAME IS DELETED. GROUND OF APPEAL NO. 3 IS DELETED . 22 IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY ADJ UDICATED THE ISSUE BECAUSE THE MONEY WAS RETAINED BY THE ASS ESSEE SO THAT SAME CAN BE ADJUSTED IF THERE WAS A SHORT FAL L IN THE SUPPLY BY THE FARMERS BECAUSE UNDER THE AGREEMENT T HE ASSESSEE HAD A RIGHT TO IMPOSE PENALTY FOR SUCH SHO RT FALL. IN CASE NO PENALTY IS IMPOSED THIS AMOUNT IS SETTLED T HROUGH THE FINAL PAYMENT. ACCORDINGLY WE FIND NOTHING WRONG IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 23 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ITA NO. 657/CHD/2012 ASSESSEES APPEAL 24 IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUND: THAT THE LD. CIT(A) CHANDIGARH IS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER REGARD ING THE ADDITION OF RS. 7,93,127/- MADE BY APPLYING PROVISI ONS OF SECTION 14A OF IT ACT. THIS ADDITION IS UNCALLED F OR AS THE 6 PROVISIONS OF SECTION 14A OF THE IT ACT ARE NOT APP LICABLE TO THE PRESENT CASE. 25 AFTER HEARING BOTH THE PARTIES WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAD MADE INVESTMENT IN SHARES AND EARNED DIVIDEND INCOM E. ACCORDINGLY SECTION 14A OF IT ACT R.W. RULE 8D OF IT RULES WAS INVOKED AND A SUM OF RS. 7,93,127/- WAS DISALLOWED OUT OF THE EXPENDITURE. 26 ON APPEAL THE LD. CIT(A) DISMISSED THIS ISSUE BY STATING THAT IT WAS SUBMITTED THAT THE ASSESSEE DOES NOT WA NT TO PRESS THIS GROUND. 27 BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT FINDING OF THE LD. CIT(A) IS NOT CORRECT. IN THIS REGARD HE REFERRED TO SUBMISSIONS MADE BEFORE THE LD. CIT(A) (COPY OF WHICH IS SUBMITTED AT PAGE 1 TO 12 OF THE PAPER BOO K) WHEREIN AT PAGE 4 OF WRITTEN SUBMISSIONS WERE MADE ON THIS RESPECT. HE FURTHER SUBMITTED THAT RULE 8D OF IT RULES IS NO T APPLICABLE IN ASSESSMENT YEAR 2007-08 BECAUSE OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MANUFAC TURING VS. DVIT, 328 ITR 81 (BOM). 28 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDER OF LD. CIT(A) AND ASSESSING OFF ICER. 29 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ASSESSEE HAD MADE DETAILED SUBMISSIONS BEFORE THE L D. CIT(A) AND THEREFORE, IT WAS WRONG ON THE PART OF THE LD. CIT(A) TO SAY THAT THIS GROUND WAS NOT PRESSED. IT HAS BEEN HELD BY HON'BLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE THAT RU LE 8D CANNOT HAVE RETROSPECTIVE APPLICATION AND THE SAME WAS APPLICABLE ONLY FOR ASSESSMENT YEAR 2008-09. AT TH E SAME TIME REASONABLE DISALLOWANCE HAS TO BE MADE. THERE FORE, CONSIDERING OVERALL CIRCUMSTANCES OF THE CASE, WE A RE OF THE OPINION THAT AGAINST THE DIVIDEND INCOME OF RS. 2,1 3,916/- IT WOULD BE REASONABLE TO DISALLOW EXPENDITURE OF RS. 25,000/-. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND DIRECT THE ASSESSING OFFICER TO MAKE DISALLOWANCE OF RS. 2 5,000/- 30 IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALL OWED. 7 ITA NO. 1220/CHD/2012 ASSESSEES APPEAL 31 IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUND: THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER REGARDING THE ADDITION OF RS. 3,49,459/- MADE BY APPLYING PROVISIONS OF SECTION 1 4A OF THE IT ACT. THIS ADDITION IS UNCALLED OR AS THE PR OVISIONS OF SECTION 14A OF THE IT ACT ARE NOT APPLICABLE TO THE PRESENT CASE. 32 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAD MADE INVESTMENT IN SHARES AND RECEIVED A DIVIDEND I NCOME OF RS. 2,11,000/-. THEREFORE, HE INVOKED SECTION 14A OF IT ACT R.W. RULE 8D OF IT RULES AND MADE DISALLOWANCE OF RS. 3,49,459/-. 33 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT INVESTMENT IN SHARES WAS MADE OUT OF COMPULSIONS TO MEET THE SURRENDERED STATUTORY REQUIREMENTS. 34 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S TRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 35 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THERE ARE NO EXCEPTIONS PROVIDED IN SECTION 14A OF IT ACT . THE PLAIN REQUIREMENT OF THE PROVISION IS THAT IF THE ASSESSE E HAS EARNED EXEMPTED INCOME THEN THE CORRESPONDING EXPENDITURE HAS TO BE DISALLOWED. FURTHER THE DISALLOWANCE IS TO BE WORK ED AS PER RULE 8D WHICH HAS BEEN HELD TO BE CONSEQUENTLY FOLL OWED BY HON'BLE BOMBAY HIGH COURT FROM ASSESSMENT YEAR 2008 -09. WE FURTHER FIND THAT THE LD. CIT(A) HAS REMITTED TH E MATTER TO THE FILE OF ASSESSING OFFICER TO WORK OUT THE DISAL LOWANCE AFTER HOLDING THAT NO DISALLOWANCE WAS MADE UNDER RULE 8D (2)(I) THEREFORE, WE FIND NOTHING WRONG IN THE ORDER OF T HE LD. CIT(A) AND CONFIRM THE SAME. 36 IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS DI SMISSED. 8 37 IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED WHEREAS ITA NO. 657/CHD/2012 FILED BY THE ASSESSEE IS PARTLY ALLOWED AND ITA NO. 1220/CHD/2012 IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6.9.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6.9.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR