The Dy. CIT, Indore V. M/s. Krishi Upaj Mandi Samiti, Dhar

ITA 68/IND/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2759 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: RAKESH NAHAR
• Keywords: Diversion of income; Capital expenditure; Set aside

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.60/IND/2010 A.Y. 2006-07 DY. COMMISSIONER OF INCOME TAX CIRCLE-1(1), INDORE APPELLANT VS KRISHI UPAJ MANDI SAMITI, KUKSHI PAN AAALK 0259 P RESPONDENT AND, ITA NO.68/IND/2010 A.Y. 2006-07 DY. COMMISSIONER OF INCOME TAX CIRCLE-1(1), INDORE APPELLANT VS KRISHI UPAJ MANDI SAMITI, BADNAWAR PAN AAALS 0497 H RESPONDENT APPELLANT BY : SHRI K.K. SINGH, CIT, DR RESPONDENTS BY : SHRI RAKESH NAHAR, CA 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER BOTH THESE APPEALS ARE BY THE REVENUE AGAINST THE C OMMON ORDER OF THE LEARNED CIT(A)-I, INDORE, DATED 13.11.2009 O N THE COMMON GROUND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON FACTS AND CIRCUMSTANCES DIRECTING THE ASSESSING OFF ICER TO DELETE THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF MANDI SAMIT BOARD FEE AND SADAK NIDHI. 2. DURING THE HEARING OF THESE APPEALS, THE LD. COU NSEL FOR THE ASSESSEE SHRI RAKESH NAHAR ASSERTED THAT THESE APPE ALS ARE COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF KRIS HI UPAJ MANDI SAMITI, BURHANPUR (12 ITJ 12/INDORE BENCH). THE LD. CIT, DR SHRI K.K. SINGH FAIRLY AGREED TO THE ASSERTION OF THE LD. COUNSEL F OR THE ASSESSEE BEING FACTUALLY CORRECT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. SINCE BOTH THE APPEALS WERE HEARD TOGETHER AND THE ISSUES ARE IDENTICAL, THEREFORE, THESE CAN BE DISPOSED OF BY A COMMON AND CONSOLIDATED ORDER. AS FAR AS THE ISSUE OF MANDI SA MITI BOARD FEE IS CONCERNED, THIS ISSUE HAS BEEN DELIBERATED UPON BY THE INDORE BENCH IN THE CASE OF KUMS, BURHANPUR (12 ITJ 12), WHICH HAS BEEN FOLLOWED BY 3 THE LD. FIRST APPELLATE AUTHORITY. THE RELEVANT POR TION OF THE SAME IS REPRODUCED HEREUNDER: 13. ON GROUND NO.5 , ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.1,73,97,154/- BEING STATUTORY PA YMENTS PAID UNDER THE MANDI ACT AND WAS ALLOWABLE U/S 36(1 )(XII) R.W.S. 37 OF THE IT ACT. THE ASSESSEE CLAIMED THE A BOVE AMOUNT AS DEDUCTION IN THE INCOME AND EXPENDITURE ACCOUNT IN THE FORM OF BOARD FEES. THE AO NOTED THA T IT WAS A TRANSFER OF FUND TO THE MOTHER CONCERN AND CA NNOT BE ALLOWED. IT WAS SUBMITTED BY THE ASSESSEE THAT B OARD FEES IS PAID AS PER THE ACT WHICH IS STATUTORY PAYM ENT. THE LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE BECAU SE FOR CLAIMING THE DEDUCTION THE AMOUNT SHOULD HAVE BEEN AN EXPENDITURE BUT IN THE CASE OF THE ASSESSEE, IT WAS NOT A EXPENDITURE BUT WAS A CONTRIBUTION THEREFORE, LD. C IT(A) REJECTED THE CLAIM OF THE ASSESSEE AND DISALLOWANCE WAS CONFIRMED. 14. LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT AS PER SEC.43(1) OF MP KRISHI UPAJ MANDI ADHINIYAM, THE AS SESSEE HAS TO PAY THE BOARD FEES TO THE STATUTORY BOARD TO WHICH, THE ASSESSEE IS SUBORDINATE. UNDER THE SAME ACT, AS SESSEE RECEIVED THE RECEIPTS AND SHALL HAVE TO SPEND THE A MOUNT TOWARDS ACHIEVING THE OBJECTS OF THE ASSESSEE INSTI TUTION. THE RECEIPTS OF ASSESSEE ARE TREATED AS INCOME THER EFORE, THE BOARD FEES COMPULSORILY PAID TO THE BOARD SHOUL D HAVE BEEN CONSIDERED AS AN EXPENDITURE U/S 36(1)(XII) OF THE IT ACT BECAUSE IT WAS PAID FOR THE OBJECTS AND PURPOSE S OF THE ASSESSEE AUTHORIZED BY THE SPECIAL ACT FOR WHICH, T HE ASSESSEE WAS CONSTITUTED UNDER THE ACT. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THIS ISSUE WAS CONSIDERED B Y ITAT, JABALPUR BENCH IN THE CASE OF KRISHI UPAJ MANDI SAM ITI, SINHORA VS. ITO & OTHERS IN ITA NO.280/JAB/2006 AND VIDE ORDER DATED 12.10.2007, THE DEPARTMENTAL APPEAL ON THIS ISSUE HAS BEEN DISMISSED. ON THE OTHER HAND, LD. DR SUBMITTED THAT FEES IS NOT RELATED TO ANY SERVICE R ENDERED BY THE BOARD AND ASSESSEE HAS NO CONTROL OVER THE B OARD. HE HAS SUBMITTED THAT ONE SENTENCE FROM THE ORDER M AY NOT BE PICKED AS RATIO AND RELIED UPON DECISION IN THE CASE OF SUN ENGG., 198 ITR 297 AND SUBMITTED THAT IT IS A CASE OF DIVERSION OF INCOME AND RELIED UPON 227 ITR 557 AND 290 ITR (AT) 344. 4 15. ON CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE OF TH E VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE ORDER OF ITAT, JABALPUR BENCH IN TH E CASE OF KRISHI UPAJ MANDI SAMITI & OTHERS (SUPRA) IN WHI CH, IN PARA 12 THE TRIBUNAL HELD WE HAVE CAREFULLY CONSIDERED THE ISSUE. THE VIEW OF THE AO THAT THE PAYMENT MADE TO THE BOARD FOR ROAD DEVELOPMENT AND AGRICULTURAL RESEARCH WAS FOR CAPITAL EXPENDITURE AND HENCE NOT ALLOWABLE U/S 37 OF THE ACT, CANNOT BE CONSIDERED CORRECT BECAUSE THE PAYMENT WAS MADE AS STATUTORY LIABILITY AS PER SEC. 43 OF THE RELEVANT ACT. SIMIL ARLY, BOARD FEES WERE ALSO MADE AS PER PROVISIONS OF THE RELEVANT STATUTE AND WAS ALLOWABLE EXPENDITURE. THE AO IS THEREFORE, NOT CORRECT TO DISALLOW THE SAME O N THE GROUND THAT THE PAYMENT IN QUESTION WAS IN THE NATU RE OF APPLICATION OF INCOME. IN OUR CONSIDERED OPINION , THE ORDER OF THE LD. CIT(A) DESERVES NO INTERFERENCE. T HE APPEAL OF THE DEPARTMENT IS THEREFORE, DISMISSED. WE FIND THAT THE CASE OF THE ASSESSEE IS ON IDENTI CAL FACTS BECAUSE THE BOARD FEES IS PAID AS PER SEC. 43 OF MP KRISHI UPAJ MANDI ADHINIYAM WHICH IS STATUTORY LIAB ILITY OF THE ASSESSEE TO PAY IN ORDER TO ACHIEVE ITS OBJECTI VES. IT IS THEREFORE, ALLOWABLE DEDUCTION AS WAS SPENT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. AS PER SEC. 36(1)(XII), ANY EXPENDITURE INCURRED BY TH E CORPORATION OR BODY CORPORATE BY WHATEVER NAME CALL ED CONSTITUTED OR ESTABLISHED BY CENTRAL, STATE OR PRO VINCIAL ACT FOR THE OBJECTS AND PURPOSES AUTHORIZED BY THE ACT FOR WHICH, IT WAS ESTABLISHED SHALL BE ALLOWED AS DEDUC TION. THE LD. CIT(A) MISUNDERSTOOD THIS ISSUE BY TREATING THE BOARD FEES TO BE THE TRANSFER OF FUNDS. IN THE AFOR ESAID SEC. 36(1)(XII), IT IS SPECIFICALLY MENTIONED THAT THE EXPENDITURE INCURRED COULD HAVE ANY NAME WHATSOEVER THEREFORE, THE LD. CIT(A) SHOULD HAVE CONSIDERED TH E ISSUE IN THE BROAD PERSPECTIVE CONSIDERING THE NATURE AND FUNCTIONING OF THE ASSESSEE INSTITUTION UNDER THE S PECIAL ACT. IN VIEW OF THE ABOVE, THE ORDERS OF THE AUTHOR ITIES BELOW ARE SET ASIDE AND ENTIRE ADDITION IS DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. SINCE THE PAYMENT OF FEE BY THE MANDI SAMITI BOARD IS STATUTORY LIABILITY, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE AND ESP ECIALLY WHEN NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE, WE FIN D NO INFIRMITY IN THE 5 ORDER OF THE LD. CIT(A), CONSEQUENTLY, THIS GROUND OF THE REVENUE IS DISMISSED. 4. AS FAR AS THE ISSUE OF SADAK NIDHI IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THIS ISSUE IS ALSO COVE RED BY THE AFORESAID DECISION (12 ITJ 12). THIS ASSERTION WAS ALSO NOT C ONTROVERTED BY THE REVENUE BEING FACTUALLY CORRECT. ON PERUSAL OF RECO RD AND AFTER HEARING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT THIS ISSU E HAS ALSO BEEN DELIBERATED UPON BY THE BENCH IN THE AFORESAID CASE OF KUMS, BURHANPUR, THE RELEVANT PORTION OF WHICH IS REPRODU CED HEREUNDER: GROUND NO.6 : THE ASSESSEE CHALLENGED THE DISALLOWANCE OF KISAN SADAK NIDHI PAID TO THE BOARD AT RS.4,18,02,411/- BEING STATUTORY PAYMENTS PAID UNDE R MANDI ACT AND WAS CLAIMED DEDUCTION U/S 36(1)(XII) OF THE IT ACT. IT IS STATED THAT THIS ISSUE IS SAME AS IS CONSIDERED ON GROUND NO.5 ABOVE. LD. DR ADDED THAT IT WAS CAPI TAL IN NATURE. HOWEVER, ON CONSIDERATION OF THE FINDINGS O F THE AUTHORITIES BELOW, WE FIND THAT THE ISSUE IS SAME A S WAS CONSIDERED ON GROUND NO.5 ON ACCOUNT OF BOARD FEES. BY FOLLOWING THE REASONS FOR DECISION ON THAT ISSUE, W E SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELET E THE ENTIRE ADDITION. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. IN THE ABSENCE OF ANY CONTRARY DECISION BY THE REVE NUE, WE DISMISS THIS GROUND OF THE REVENUE. FINALLY, BOTH THE APPEALS OF THE REVENUE ARE DISMIS SED. 6 ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 14 TH JUNE, 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.6.2010 COPY TO: APPELLANT, RESPONDENTS, CIT, CIT(A), DR, GUARD FILE !VYAS!