ACIT, Nashik V. The Nashik Dist Central Co-Op Bank Ltd.,

ITA 70/PUN/2013

• Counselvise Citation: 7024514 RSA 2013
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-12-2013
• Assessment Year: 1995-1996
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GARIMA CHOUHARY
• Keywords: Benefit of exemption; Capital expenditure
• Section: 68; 37; 6

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 NO. 69, 70 AND 71/PN/2013 (ASSTT.YEARS : 1994-95, 1995-96 AND 1997-98) ACIT, CIRCLE-1, NASHIK .. APPELLANT VS. THE NASHIK DIST. CENTRAL CO-OP BANK LTD., OLD AGRA ROAD, NASHIK .. RESPONDENT PAN NO.AAAAT3794P ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SMT. GARIMA CHOUHARY DATE OF HEARING : 26-12-2013 DATE OF PRONOUNCEMENT : 30-12-2013 ORDER PER R.K. PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE SEPARATE ORDERS DATED 05-10-2012 OF THE CIT(A)-I, N ASHIK RELATING TO ASSESSMENT YEARS 1994-95, 1995-96 AND 1997-98 RESPE CTIVELY. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS, TH EREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO.69/PN/2013 (A.Y. 1994-95) : 2. IN GROUND OF APPEAL NO.1 THE REVENUE HAS CHALLEN GED THE ORDER OF THE CIT(A) IN ALLOWING THE DEDUCTION OF RS.78,94 ,686/- U/S.80P(2)(A) OF THE ACT WHICH WAS DENIED BY THE ASSESSING OFFICE R. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN APEX DISTRICT COOPERATIVE BANK REGISTERED UNDER THE MAHARASHTRA S TATE COOPERATIVE SOCIETIES ACT, 1925 WHICH WAS REGISTERED IN THE YEA R 1943. IT IS ALSO 2 REGISTERED UNDER THE BANKING REGULATION ACT, 1949 A ND GOVERNED BY THE RBI REGULATIONS. THE ASSESSEE FILED RETURN OF INC OME FOR THE IMPUGNED ASSESSMENT YEAR ON 18-10-1994 DECLARING TOTAL INCOM E OF RS.74,332/-. SUBSEQUENTLY, IN RESPONSE TO NOTICE U/S.148 THE ASS ESSEE STATED THAT THE INCOME TAX RETURN WHICH HAS ALREADY BEEN FILED MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S.148. THE ASSESSIN G OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASS ESSEE HAS DECLARED COMMISSION AND EXCHANGE INCOME OF RS.78,94,686/- (R S.92,15,862/- - RS.13,21,176/-) AND CLAIMED THE SAME AS EXEMPT. ON BEING QUESTIONED BY THE ASSESSING OFFICER TO GIVE THE BREAK-UP OF IN COME FROM COMMISSION AND EXCHANGE THE ASSESSEE GAVE THE DETAI LS WHICH ARE AS UNDER : 1. ASSESSMENT YEAR 93-94 COMMISSION RECEIVED FROM I) MSEB RS.7,12,762/- AND (II) ZILLA PARISHAD RS.4,47 ,350/- IN TOTAL RS.11,60,112/-. THIS RECEIPT WAS INCLUDED IN COMMISSION AND VATAV OF RS.64,10,648/- AS DISCLOSED ON PAGE NO.39 OF ANNUAL REP ORT OF FINANCIAL YEAR 1992-93. 2. ASSESSMENT YEAR 94-95 COMMISSION RECEIVED FROM I) MSEB RS.8,05,628/- AND (II) ZILLA PARISHAD RS.5,15, 548/- IN TOTAL RS.13,31,171/-. THIS RECEIPT WAS INCLUDED IN RS.92,15, 662/- AMOUNT DISCLOSED AS COMMISSION AND VATAV ON PAGE NO.55 OF ANNUA L REPORT OF FINANCIAL YEAR 1993-94. 3. THE REMAINING PART OF COMMISSION AND VATAV FOR BOT H THESE YEARS FROM BANKING BUSINESS. NATURE OF THE RECEIPT IS AS FOLLOWS. 4. COMMISSION IS CHARGED TO ACCOUNT HOLDERS FOR CLEARI NG OF CHEQUES AND RECEIVING AND MAKING PAYMENTS AGAINST CHEQ UES. 5. FOR PURPOSES OF DEMAND DRAFTS AND FOR MAKING PAYMEN TS AGAINST DEMAND DRAFT COMMISSION IS CHARGED. 6. INCIDENTAL CHARGES ARE COLLECTED FROM ACCOUNT HOL DERS WHICH ARE CREDITED TO COMMISSION AND VATAV ACCOUNT. 2.2 HOWEVER, THE AO WAS NOT SATISFIED WITH THE ABOV E EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THAT THE ASSESS EE HAS GIVEN A VERY GENERAL REPLY TOWARDS THE COMMISSION AND EXCHANGE I NCOME OF 3 RS.78,94,686/- AND NO HEAD-WISE DETAILS HAVE BEEN G IVEN. ON BEING FURTHER QUESTIONED BY THE AO THE ASSESSEE REITERATE D THE SAME AND SUBMITTED THAT THE COMMISSION AND EXCHANGE INCOME H AS ARISED OUT OF BUSINESS OF BANKING AND HENCE IT IS NOT TAXABLE. T HE AO DID NOT ACCEPT THE ABOVE REPLY OF THE ASSESSEE. HE ACCORDINGLY RE JECTED THE CLAIM OF EXEMPTION U/S.80P(2)(A) ON THIS COMMISSION INCOME. 2.3 THE ASSESSEE APPEALED BEFORE THE CIT(A) BUT WIT HOUT ANY SUCCESS. ON FURTHER APPEAL THE TRIBUNAL VIDE ITA N O.732 AND OTHER CONNECTED APPEALS ORDER DATED 19-08-2005 FOR A.YRS. 1993-94, 1998-99 AND 1989-1990 RESTORED THE ISSUE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. IN APPEAL THE LD.CIT(A) FOLLOWING HI S ORDER FOR A.Y. 1993-94 ALLOWED THE CLAIM OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE THE RELEVANT ORDER OF THE CIT(A) FOR A.Y. 1993-94 I S REPRODUCED AS UNDER : 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS. THE CONTENTION OF THE APPELLANT THAT THE COMMISSION INCOME IN RESPECT OF BANK CHEQUES, DEMAND DRAFTS, ETC. IS INCOME FROM BANKING BUSINESS AND HENCE IS ELIGIBLE FOR DEDUCTION U/ S.80P(2)(A)(I) IS FOUND TO BE CORRECT AND HENCE ACCEPTED. AS REGARDS COMMISSION RECEIVED FROM MSEB AND ZILLA PARISHAD FOR COLLECTION OF BILLS AMOUNTING TO RS.11,60,112/- THE APPELLANT HAS CLAIMED THAT THE COMMISSION IS ALLOWABLE AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF AHMEDNAGAR DISTRICT CENTRAL BANK LTD. REPORTED IN 264 ITR 38 WHEREIN IT HAS BEEN LAID DOWN THAT COMMISSION RECEIVE D BY CO- OPERATIVE SOCIETY FROM COLLECTION OF BILLS IS INCOME FROM BANKING BUSINESS. HOWEVER, IT HAS BEEN NOTICED THAT IN THE CASE UNDER APPEAL THE ASSESSMENT ORDER IS PASSED U/S.147 AFTER ISSUING NOTICE U/S.148 FOR THE REASON THAT THE INCOME OF THE APPELLANT HAS ESCAP ED ASSESSMENT. THE HONBLE ITAT IN PARA 8 OF THEIR ORDER HAS STATED /DIRECTED AS UNDER : IT IS A SETTLED POSITION OF LAW THAT WHILE PASSING THE REASSESSMENT ORDER U/S.147 NO RELIEF CAN BE ALLOWED WITH REFERENCE TO THE INCOME ALREADY ASSESSED. IN THE CIRCU MSTANCES, THEREFORE, THE CLAIM MADE BY THE ASSESSEE THROUGH THE A DDITIONAL GROUND CANNOT BE ALLOWED. IN TAKING THIS VIEW WE AR E FORTIFIED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF C IT VS. SUN ENGINEERING WORKS P. LTD. 1992 198 ITR 297 AND MADRA S HIGH COURT IN THE CASE OF INDIA FORGE AND DROP STAMPINGS L TD. VS. CIT 1998 233 ITR 113. 4 IN THE CASE UNDER APPEAL, IT IS UNDISPUTED FACT THAT IN THE RETURN OF INCOME FILED BY THE APPELLANT THE COMMISSION RECEIVED FROM MSEB AND ZP HAS BEEN TREATED AS NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT. HENCE, IN VIEW OF THE ABOVE DIRECTION/DECISION OF HO NBLE ITAT THE CLAIM OF THE APPELLANT THAT IN VIEW OF THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF AHMEDNAGAR DISTRICT CENTRAL BANK LTD. REPORTED IN 264 ITR 38 THE COMMISSION RECEIVED FROM MSEB AND ZILLA PA RISHAD AMOUNTING TO RS.11,60,112/- IS ALLOWABLE U/S.80P IS REJ ECTED. 7.3 IN VIEW OF THE ABOVE, THE APPELLANT GETS RELIEF OF PROFIT ON COMMISSION INCOME OF RS.52,50,536/- (THE APPELLANT HAS ERRONEOUSLY MENTIONED THIS FIGURE AS RS.53,50,536/-) @ 9.28% BEING ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE AO IS DIR ECTED ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 2.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE NATURE OF COMMISSION INCOME HAS ALREADY BEEN GIVEN BY THE ASSESSEE BEFOR E THE AO WHICH HAS BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. W E FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OPERATIVE BANK LTD. AND OTHERS REPORTED IN 264 ITR 38 HAS OBSERVED AS UNDER : AT THE OUTSET, WE WOULD LIKE TO DEAL WITH THE MAIN CONTENTION ADVANCED ON BEHALF OF THE DEPARTMENT. SECTION 5(B) DEFINES 'B ANKING' TO MEAN ACCEPTANCE OF DEPOSITS FOR THE PURPOSE OF LENDING OR INVESTMENT WHEREAS, SECTION 6(1) STATES, INTER ALIA, THAT IN ADDIT ION TO THE BUSINESS OF BANKING, A BANKING COMPANY MAY ENGAGE IN THE FOL LOWING FORMS OF BUSINESS AS ENUMERATED IN SECTION 6(1)(A) TO (O). THEREF ORE, THERE IS A CLEAR DICHOTOMY BETWEEN THE BUSINESS OF BANKING AND OT HER FORMS OF BUSINESS. TO TAKE AN EXAMPLE, UNDER SECTION 6(1)(A) PRO VIDING OF SAFE DEPOSIT VAULTS TO THE CUSTOMER IS MENTIONED. IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. V. ITO [2001 ] 251 ITR 522, THE SUPREME COURT HAS HELD THAT THE INCOME DERIVED BY TH E CO-OPERATIVE BANK BY WAY OF RENT FROM THE CUSTOMER FOR ENJOYING SA FE DEPOSIT VAULT AS A FACILITY, WOULD SQUARELY COME UNDER SECTION 6(1)( A) OF THE BANKING REGULATION ACT AND THAT SUCH INCOME DERIVED BY THE A SSESSEE-BANK FROM HIRING OUT SAFE DEPOSIT VAULTS WAS INCOME FROM THE BUSIN ESS OF BANKING AND, THEREFORE, DEDUCTIBLE UNDER SECTION 80P(2)(A)(I ) OF THE INCOME-TAX ACT. NOW, IN THE PRESENT CASE, MSEB AND MPCS ARE THE PUBLIC UNDERTAKINGS. BOTH THESE PUBLIC UNDERTAKINGS WERE THE CUSTOMERS OF 5 THE ASSESSEE-BANKS. THEY WERE HAVING CURRENT ACCOUNT WIT H THE ASSESSEE-BANK. THE ASSESSEE-BANK UNDERTOOK ON BEHALF OF TH ESE TWO CUSTOMERS THE WORK OF COLLECTING ELECTRICITY DUES FROM THE CONSUMERS OF ELECTRICITY WHO WERE CHARGED BILLS BY THE TWO PUBLIC UNDERTAKINGS. THIS WAS A FACILITY GIVEN BY THE ASSESSEE-BANK TO THE AFORESTA TED TWO PUBLIC UNDERTAKINGS WHO WERE THEIR CUSTOMERS. BANKING, TODAY, COVERS A LARGE NUMBER OF ACTIVITIES. WITH GLOBALISATION, BANKING IS N OT RESTRICTED TO RECEIVING DEPOSITS FOR THE PURPOSES OF LENDING. BANKS OF FER VARIOUS FACILITIES TO ITS CUSTOMERS. THEY PROVIDE LOCKERS, SAFE D EPOSIT VAULTS, FINANCE FOR MARGIN TRADING, COLLECTING DUES AND CHAR GES FOR AND ON BEHALF OF THE GOVERNMENT, LOCAL AUTHORITY, MTNL, BE ST, MSEB, ETC. SECTION 6(1)(A) OF THE BANKING REGULATION ACT IS AN ENABLING PROVISION. IT PROVIDES FOR VARIOUS FORMS OF BUSINESS AKIN TO BANKIN G. THEREFORE, SECTION 6(1) STATES, INTER ALIA, THAT IN ADDITION TO T HE BANKING BUSINESS, A BANKING COMPANY MAY ENGAGE IN SPECIFIED FORMS OF BUS INESS ENUMERATED IN SECTION 6(1)(A) TO (O). WE ARE CONFINI NG OUR CASE TO THE ACTIVITY OF THE BANK COLLECTING CHARGES FOR AND ON B EHALF OF MSEB, MPCS FOR COMMISSION/FEES. THE CONSTRUCTION PUT BY THE DEPART MENT ON THE WORD 'BANKING' IS VERY NARROW. IT IS TRUE THAT, IN TH IS CASE, WE ARE REQUIRED TO CONSIDER THE BENEFIT OF EXEMPTION UNDER SECTION 80P(2)(A)(I). IT IS EQUALLY TRUE THAT THE SAID SECTIO N IS REQUIRED TO BE READ IN THE STRICT SENSE. HOWEVER, THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. [2001] 251 ITR 522 SHOWS THAT THE WORD 'BANKING' IS NOT RESTRICTE D ONLY TO ACCEPTING DEPOSITS FROM CUSTOMERS FOR THE PURPOSES OF LEN DING AND THAT THE WORD 'BANKING' HAS BEEN INTERPRETED BY THE SUPRE ME COURT TO COVER EVEN RENT CHARGED BY THE BANKS FOR HIRING OUT SAFE DEPOSIT VAULTS TO ITS CUSTOMERS. IN THE CIRCUMSTANCES, WE HOLD THAT INC OME EARNED BY THE ASSESSEE-BANK BY WAY OF COMMISSION/FEES FROM ITS CUSTOME RS BEING PUBLIC SECTOR UNDERTAKINGS WOULD BE EXEMPT UNDER SECT ION 80P(2)(A)(I). OUR VIEW IS ALSO SUPPORTED BY SECTION 6(1 )(B) OF THE BANKING REGULATION ACT, 1949, WHICH STATES THAT IN A DDITION TO THE BUSINESS OF BANKING, A BANKING COMPANY MAY ENGAGE ITSEL F AS AGENT FOR GOVERNMENT OR LOCAL AUTHORITY OR ANY OTHER PERSON FO R GIVING RECEIPTS AND DISCHARGES THAT IS TO SAY FOR COLLECTING ELECTRICI TY BILLS FROM THE CUSTOMERS FOR AND ON BEHALF OF MSEB AND MPCS. 3.1 SINCE COMMISSION INCOME RECEIVED ON ACCOUNT OF CLEARING OF CHEQUES, DD COMMISSION AND OTHER INCIDENTAL CHARGES RECEIVED FROM THE CUSTOMERS AMOUNT TO INCOME FROM BANKING BUSINES S, THEREFORE, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COU RT CITED ABOVE THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT ON SUCH COMMISSION INCOME. WE FURTHER FIND ALTHOUGH SIMILA R CLAIM WAS REJECTED BY THE AO IN A.Y. 1993-94 AND THE CIT(A) H AS ALLOWED THE CLAIM, HOWEVER, THE REVENUE IS NOT IN APPEAL AGAINS T THE SAID ORDER OF THE CIT(A) AS STATED BY THE LD. COUNSEL FOR THE ASS ESSEE AND NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . SO FAR AS THE 6 DECISION OF HONBLE SUPREME COURT IN THE CASE OF MA DHYAPRADESH CO- OP. BANK LTD. VS. ADDL.CIT REPORTED IN 218 ITR 438 RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IS CONCERNED WE FIN D THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN TH AT CASE, THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS REGARDING THE ALLOWAB ILITY OF BENEFIT OF SECTION 81 OF THE I.T. ACT. ON INTEREST EARNED ON S ECURITIES EARMARKED AGAINST RESERVES AND INTEREST EARNED ON PROVIDEND F UND DEPOSITS. UNDER THIS CONTEXT, IT WAS HELD THAT THE SAID INCOME IS N OT ENTITLED TO SPECIAL DEDUCTION. THEREFORE, THE ABOVE DECISION IS NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE SINCE THE FACTS IN THAT CASE AR E UNDER ALTOGETHER DIFFERENT FOOTINGS. IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY T HE REVENUE ON THIS ISSUE IS DISMISSED. 4. THE SECOND GROUND BY THE REVENUE RELATES TO THE ORDER OF THE CIT(A) IN ALLOWING THE PROVISION OF RS.30,000/- TOW ARDS EDUCATION FUND. 4.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO IN THE ASSESSMENT ORDER DISALLOWED AN AMOUNT OF RS.30,000/- BEING EDUCATION FUND PROVISION MADE BY THE ASSESSEE. IN APPEAL THE LD.CIT(A) UPHE LD THE ADDITION AND ON FURTHER APPEAL BY THE ASSESSEE THE TRIBUNAL REST ORED THE MATTER TO THE FILE OF THE LD.CIT(A). THE CIT(A) FOLLOWING HIS OR DER FOR A.Y. 1993- 94 DELETED THE ADDITION MADE BY THE AO. FOR THE SA KE OF READY REFERENCE THE ORDER OF THE CIT(A) ON THIS ISSUE FOR A.Y. 1993-94 IS REPRODUCED AS UNDER : 8.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSIONS OF THE APPELLANT. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE SAID CONTRIBUTIONS TOWARDS EDUCATION FUND RS.30,000/- 7 AND STATE CADRE FUND RS.21,30,500/- HAVE BEEN MADE B Y THE APPELLANT AS STATUTORILY REQUIRED BY THE PROVISIONS OF MAHARASHTRA CO-OPERATIVE SOCIETIES ACT. IT IS UNDISPUTED FACT THAT THE APPELLA NT CO-OPERATIVE BANK IS REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIE S ACT AND IS BOUND BY THE PROVISIONS OF THE SAID ACT. IN THE FOLLO WING CASES IT HAS BEEN LAID DOWN IF ANY CONTRIBUTION IS TO BE MADE TO EDUCATION FUND OR OTHER FUND AS PER STATUTORY REQUIREMENT THEN THE SAID EXPENDITURE IS ALLOWABLE EXPENDITURE : 1. KRISHNA SAHAKARI SAKHAR KARKHANA LTD. VS. CIT (199 8) 229 ITR 577 (BOM.). 2. MAHESANA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD. VS. CIT (2002) 258 ITR 780 (GUJ.). IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFUL LY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE MENTIONED DECISIONS, I A M OF THE CONSIDERED VIEW THAT THE ABOVE EXPENDITURE CLAIMED B Y THE APPELLANT AT RS.30,000/- AND RS.21,30,500/- IS AN ALLOWABLE EXPENDI TURE. THE AO IS DIRECTED ACCORDINGLY. GROUND NO.2 IS PARTLY ALLOWED . 4.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. WE FIND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF KRISHNA SAHAKARI SAKHAR KARKHANA LTD. VS. CIT REPORTED IN 2 29 ITR 577 WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER (S HORT NOTES) : SECTION 37 OF THE INCOME-TAX ACT, 1961, PROVIDES FO R DEDUCTION OF ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSES OF THE BUSINESS IN COMPUTING THE INCOME CHARGEABLE UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE ONLY E XCEPTION IS CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE OR EXPENDITURE OF THE NATURE DESCRIBED IN OTHER SECTIONS OF CHAPTER I V OF THE ACT. THE EXPRESSION 'FOR THE PURPOSE OF THE BUSINESS' IS WIDER IN SC OPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNING PROFITS'. ITS RAN GE IS WIDE : IT MAY TAKE IN NOT ONLY THE DAY TO DAY RUNNING OF A BUSINE SS BUT ALSO THE RATIONALISATION OF ITS ADMINISTRATION AND MODERNIZATIO N OF ITS MACHINERY ; IT MAY INCLUDE MEASURES FOR THE PRESERVATION OF THE BU SINESS AND FOR THE PROTECTION OF ITS ASSETS AND PROPERTY FROM EXPROPRIATIO N, COERCIVE PROCESS OR ASSERTION OF HOSTILE TITLE ; IT MAY ALSO COMPREHEND PAYMENT OF STATUTORY DUES AND TAXES IMPOSED AS A PRE-CONDITION TO COMMENCE OR FOR THE CARRYING ON OF A BUSINESS; IT MAY COMPREHEND MANY OTHE R ACTS INCIDENTAL TO THE CARRYING ON OF A BUSINESS. THE ONLY LIMITATION IS THAT IT SHOULD BE FOR THE PURPOSE OF THE BUSINESS, THAT IS TO SAY, THE EXPENDIT URE INCURRED SHOULD BE FOR THE CARRYING ON OF BUSINESS AND THE ASSESSEE SHOULD INCUR IT IN HIS CAPACITY AS A PERSON CARRYING ON THE BUSINESS. IT CANNOT INCLUDE SUMS SPENT FOR PURPOSES UNCONNECTED WITH THE BUSINESS. 8 THE ASSESSEE WAS A CO-OPERATIVE SOCIETY REGISTERED UNDER T HE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960. IT WAS E NGAGED IN THE MANUFACTURE AND SALE OF SUGAR. UNDER SECTION 68 OF THE MAHARASHTRA CO- OPERATIVE SOCIETIES ACT, IT WAS REQUIRED TO MAKE A CO NTRIBUTION TO THE EDUCATION FUND OF THE STATE FEDERAL SOCIETY AT THE P RESCRIBED RATES. THE ASSESSEE-SOCIETY PAID A SUM OF RS. 50,000 IN EACH OF THE T WO PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS 1978-79 AND 1979-8 0. THE ASSESSEE CLAIMED DEDUCTION OF THE ABOVE AMOUNTS AND THE INCOME-TAX OFFICER ALLOWED THE DEDUCTION. HOWEVER, THE COMMISSIO NER OF INCOME-TAX DISALLOWED THE CLAIM IN REVISION PROCEEDINGS AND HIS AC TION WAS UPHELD BY THE TRIBUNAL. ON A REFERENCE: HELD, THAT THERE WAS NO DISPUTE IN THIS CASE ABOUT THE FACT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF CONTRIBU TION TO THE EDUCATION FUND WAS NOT A CAPITAL EXPENDITURE OR EXPE NDITURE IN THE NATURE OF PERSONAL EXPENSES, OR EXPENDITURE DESCRIBED IN ANY OF THE SECTIONS IN CHAPTER IV OF THE ACT. IT WAS CLEAR FROM T HE PROVISIONS OF SECTION 68 OF THE MAHARASHTRA CO-OPERATIVE SOCIETIES A CT READ WITH RULE 53 OF THE RULES THAT IT WAS A STATUTORY OBLIGATION OF THE CO-OPERATIVE SOCIETY TO CONTRIBUTE TO THE EDUCATION FUND. THE CON TRIBUTION WAS NOT VOLUNTARY. THE ASSESSEE WAS LIABLE TO PAY TO THE EDUCATI ON FUND AT THE RATE OF 25 PAISE PER TON OF SUGARCANE CRUSHED PER YEAR, SUB JECT, HOWEVER, TO THE MAXIMUM OF RS. 50,000. THIS CONTRIBUTION THE ASSESSE E HAD TO PAY BECAUSE IT WAS CARRYING ON THE BUSINESS OF RUNNING THE SU GAR FACTORY AND WAS ENGAGED IN CRUSHING SUGARCANE. IF NO SUGARCANE WAS CRUSHED, NO CONTRIBUTION WAS REQUIRED TO BE PAID TO THE EDUCATIO N FUND. THAT BEING SO, IT WAS CLEAR THAT THE CONTRIBUTION MADE BY THE ASSE SSEE TO THE STATE FEDERAL SOCIETY UNDER SECTION 68 OF THE MAHARASHTRA CO -OPERATIVE SOCIETIES ACT READ WITH RULE 53 OF THE RULES WAS AN E XPENDITURE DIRECTLY CONNECTED OR RELATED TO THE CARRYING ON OF THE ASSESSEE S BUSINESS. SUCH AN EXPENDITURE SQUARELY FELL WITHIN THE SCOPE AND AM BIT OF SECTION 37 OF THE ACT AND THE SAME WAS AN ALLOWABLE DEDUCTION. 5.1 SINCE THE LD.CIT(A) FOLLOWING THE DECISION OF T HE JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE AGAINST THE DECISION OF THE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING THE CLAIM OF THE ASSES SEE. ACCORDINGLY, THIS GROUND BY THE REVENUE IS DISMISSED. 5.2 OTHER GROUNDS BEING GENERAL IN NATURE ARE DISMI SSED. ITA NO. 70/PN/2013 (A.Y. 1995-96) : 6. GROUND OF APPEAL NO.1 RELATES TO THE ORDER OF TH E CIT(A) IN ALLOWING DEDUCTION OF RS.86,02,111/- U/S.80P(2)(A) OF THE I.T. ACT. 9 6.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 BY THE REVENUE I N ITA NO.69/PN/2013. WE HAVE ALREADY DECIDED THE ISSUE A ND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWIN G THE SAME RATIO, THE FIRST GROUND BY THE REVENUE IS DISMISSED. 7. THE SECOND GROUND BY THE REVENUE RELATES TO THE ORDER OF THE CIT(A) IN ALLOWING THE PROVISION OF RS.30,000/- TOW ARDS EDUCATION FUND AND PROVISION OF RS.25,98,000/- TOWARDS STATE CADRE FUND. 7.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.69/PN/ 2013. ALTHOUGH IN THAT GROUND THE ISSUE WAS ONLY PROVISION TOWARDS ED UCATION FUND AND THERE WAS NO ISSUE REGARDING PROVISION TOWARDS STAT E CADRE FUND, HOWEVER, IN OUR OPINION, THE PROVISION TOWARDS STAT E CADRE FUND WILL HAVE THE SAME TREATMENT LIKE PROVISION TOWARDS EDUC ATION FUND. THEREFORE, THIS GROUND BY THE REVENUE IS ALSO DISMI SSED. 7.2 OTHER GROUNDS BEING GENERAL IN NATURE ARE DISMI SSED. ITA NO.71/PN/2013 (A.Y. 1997-98) : 8. THE FIRST GROUND BY THE REVENUE RELATES TO THE ORDER OF THE CIT(A) IN ALLOWING DEDUCTION OF RS.1,15,55,672/- U/ S.80P(2)(A) OF THE I.T. ACT. 8.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.1 BY THE REVENUE I N ITA NO.69/PN/2013. WE HAVE ALREADY DECIDED THE ISSUE A ND THE GROUND 10 RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWIN G THE SAME RATIO, THE FIRST GROUND BY THE REVENUE IS DISMISSED. 8.2 THE SECOND GROUND OF APPEAL BY THE REVENUE RELA TES TO THE ORDER OF THE CIT(A) IN ALLOWING PROVISION OF RS.30,000/- TOWARDS EDUCATION FUND. 8.3 AFTER HEARING BOTH THE SIDES, THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.69/PN/2013. WE HAV E ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVE NUE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO, THIS GROUND B Y THE REVENUE IS DISMISSED. 8.4 OTHER GROUNDS BEING GENERAL IN NATURE ARE DISMI SSED. 9. IN THE RESULT, ALL THE 3 APPEALS FILED BY THE R EVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-12-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PAN DA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 30 TH DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE