VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 79, 80 & 81/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11,11-12 & 12-13 . DY. COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S. RAJASTHAN CO-OPERATIVE DAIRY FEDERATION LTD., SARAS SANKUL, J.L.N. MARG, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAAR 0278 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI S.K. JAIN (DCIT) /KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VARUN BANSAL (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/05/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE THREE APPEALS FILED BY THE REVENUE AGAINS T THE SEPARATE ORDERS OF LD. CIT (APPEALS)-II, JAIPUR DATED 14.11.2014 FOR T HE A.YS. 2010-11, 2011-12 & 2012-13. 2. GROUND NO. 1 IN ALL THE APPEALS IS AGAINST DELET ING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPEN SES. SINCE THIS GROUND IS COMMON IN ALL THE YEARS EXCEPT IN FIGURES, WE DISPO SE THIS GROUND FOR ALL THE ASSESSMENT YEARS TOGETHER. 2.1. THE AO WHILE MAKING THE ASSESSMENT, HAS NOTICE D THAT THE ASSESSEE HAS CLAIMED A SUM OF RS. 23,060/- ON ACCOUNT OF EXPENSE S RELATED TO PREVIOUS YEAR. THE AO CONSIDERING THAT THESE EXPENSES RELATED TO PRIOR PERIOD, PRIMA FACIE, THE SAME 2 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. ARE NOT DEDUCTIBLE EXPENDITURE WHILE COMPUTING THE PROFITS OF THE BUSINESS OF CURRENT YEAR. HE, HOWEVER, AFFORDING AN OPPORTUNITY TO THE ASSESSEE, REQUESTED TO SHOW CAUSE AS TO WHY SUCH EXPENSES SHOULD NOT BE DISALLO WED. IN COMPLIANCE, THE ASSESSEE FILED REPLY DATED 17.10.2012 AS UNDER :- IT IS SUBMITTED THAT FEDERATION HAS ITS UNITS SP READ OVER AT VARIOUS PLACES IN THE STATE OF RAJASTHAN AND THEREFORE, LOO KING TO THE VOLUME OF THE TRANSACTIONS AND ACTIVITY INVOLVED SOME EXPE NDITURE REMAINS UNADJUSTED FOR WANT OF PROPER AND TIMELY INFORMATIO N. THE RATE OF TAX BEING THE SAME, IT DOES NOT MATTER WHETHER IT IS AL LOWED AS DEDUCTION IN THE YEAR IN WHICH THE EXPENDITURE IS BOOKED OR I N EARLIER YEAR. WE MAY ALSO SUBMIT THAT FEDERATION IS STATE GOVERNMENT UNDERTAKING. SINCE ALL THESE PRIOR PERIOD EXPENSES HAS BEEN ACCO UNTED AFTER OBTAINING ALL THE SUPPORTING DOCUMENTS, VOUCHERS AN D OBTAINING APPROVAL OF CONCERNED HIGHER AUTHORITY, HENCE SAME HAS BEEN CRYSTALLIZED DURING THE YEAR AND ALLOWABLE AS CURRE NT YEAR EXPENSES. BEFORE THE AO, THE LD. A/R FURTHER PLEADED THAT THE CLAIM OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF ITAT JAIPUR BENCH IN T HE CASE OF RIICO LTD., INSTRUMENTATION LTD. AND MANY OTHER PUBLIC SECTOR U NDERTAKINGS. ALTERNATIVE, THE LD. A/R REQUESTED THE AO TO ALLOW PRIOR PERIOD EXPENSES DEBITED IN SUBSEQUENT FINANCIAL YEAR AS THOSE EXPENSES ARE PERTAIN TO THE YEAR UNDE R CONSIDERATION. 2.2. THE AO CONSIDERED THE REPLY OF THE ASSESSEE, B UT HE COULD NOT FOUND IT ACCEPTABLE. HE HELD THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, ACCORDING TO WHICH, AN EXPENDITURE IS BOOKED AS SOO N AS IT IS INCURRED OR LIABILITY TO PAY ARISES IRRESPECTIVE OF THE TIME WHEN IT IS ACTU ALLY PAID. IF SOME EXPENDITURE REMAINS UNADJUSTED FOR WANT OF PROPER AND TIMELY IN FORMATION, IT IS A FAULT ON THE PART OF THE ASSESSEE. THE AO FURTHER HELD THAT THE RECEIPTS RELATED TO A PARTICULAR 3 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. YEAR ONLY ARE CHARGEABLE IN THAT YEAR. SIMILARLY, T HE EXPENDITURE RELATING TO THAT PARTICULAR YEAR ONLY CAN BE CLAIMED AGAINST THOSE R ECEIPTS. ANY DEVIATION FROM THIS RULE WILL NOT DEPICT THE TRUE AND CORRECT PROFITS O F THE BUSINESS. ON THIS PRINCIPLE, THE RECEIPTS OR EXPENSES NOT PERTAINING TO THE YEAR UND ER CONSIDERATION SHOULD BE EXCLUDED WHILE COMPUTING INCOME OF THIS YEAR. THE P RIOR PERIOD EXPENSES CAN NEITHER BE ALLOWED AS PER ACCOUNTING PRINCIPLE NOR AS PER L EGAL PROVISIONS. THE AO FURTHER REJECTED THE ASSESSEES ALTERNATIVE PLEA TO ALLOW T HE PRIOR PERIOD EXPENSES OF SUBSEQUENT YEAR IN THIS YEAR AND THUS DISALLOWED TH E PRIOR PERIOD EXPENSES OF RS. 23,060/-. 3. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFOR E LD. CIT (A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY DIRECTING THE AO TO DE LETE THE ADDITION ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENDITURE, BY OBSERV ING AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSEE HAS ITS UNITS SPREAD AT VARIOUS PLACES IN THE STATE OF RAJASTHAN. IT ACCOUN TS FOR EXPENDITURE AFTER GETTING APPROVAL FROM HIGHER AUTHORITIES. THI S SYSTEM OF ACCOUNTING OF EXPENDITURE HAS BEEN REGULARLY FOLLOW ED BY THE APPELLANT. THE GENUINENESS OF THESE EXPENSES HAS NO T BEEN DOUBTED BY THE ASSESSING OFFICER. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THERE HAS BEEN A DISTORTION OF PROFITS OR THAT THE BOOKS OF ACCOUNTS DO NOT REFLECT THE CORRECT PICTURE. THIS ISSUE IS C OVERED IN FAVOUR OF APPELLANT BY THE ORDER OF CIT (A)-II, JAIPUR FOR A. Y. 2007-08 (APPEAL NO. 444/9-10), A.Y. 2008-09 (APPEAL NO. 268/10-11) AND A.Y. 2009-10 (APPEAL NO. 380/11-12, IN THE APPELLANTS OWN CASE. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE ABOVE ORDERS OF THE CIT (A)-II, JAIPUR, IT IS HELD THAT PRIOR PERIOD EXPENSES ARE A LLOWABLE IN THIS YEAR. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADD ITION ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENDITURE. WITH THIS DIRECTION, THE ISSUE OF ALLOWING PRIOR PERIOD EXPENSES OF A.Y. 11-12 IN THIS YEAR, DOES NOT ARISE. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. 4 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. 4.1. THE LD. D/R FOR THE REVENUE SUPPORTED THE ORDE R OF AO AND REQUESTED THAT THE ORDER OF LD. CIT (A) BE SET ASIDE AND THAT OF THE A O MAY BE CONFIRMED. 4.2. ON THE OTHER HAND, THE LD. A/R FOR THE ASSESSE E VEHEMENTLY SUBMITTED THAT SIMILAR DISALLOWANCE OF PRIOR PERIOD EXPENSES WAS M ADE BY THE AO IN ASSESSEES OWN CASE IN A.Y. 2007-08 TO A.Y. 2009-10. THE DISALLOWA NCE WAS DELETED BY THE LD. CIT(A) VIDE APPEAL NO. 444/09-10, 268/10-11 AND 380 /11-12 RESPECTIVELY. THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE ITAT AG AINST THE ORDER OF LD. CIT (A) THEREBY ACCEPTED THE DECISION OF THE LD. CIT (A). THE LD. A/R FOR THE ASSESSEE HAS REPRODUCED THE FINDING OF THE LD. CIT (A) IN APPEAL NO. 380/11-12 ORDER DATED 24.09.2012, IN HIS WRITTEN SUBMISSION AS UNDER :- IT IS SEEN THAT THROUGH ORDER DT. 24.10.2011, MY PREDECESSOR HAS ALLOWED PRIOR PERIOD EXPENSES OF RS. 90,977/- IN A. Y. 08-09. FACTS REMAIN SAME THIS YEAR AS WELL. THE ASSESSEE FEDERAT ION HAS ITS UNITS SPREAD AT VARIOUS PLACES IN THE STATE OF RAJASTHAN AND LOOKING TO THE VOLUME OF THE TRANSACTIONS AND THE ACTIVITY INVOLVE D, SOME EXPENSES REMAIN UNADJUSTED FOR WANT OF NECESSARY APPROVAL. T HE EXPENSES HAVE BEEN INCURRED AND THEIR GENUINENESS HAS NOT BEEN DO UBTED BY THE AO, IN THE INTEREST OF JUSTICE SUCH EXPENDITURE SHOULD BE ALLOWED EVEN IF PERTAINING TO THE PRIOR PERIOD AS NECESSARY APPROVA L FOR THE SAME CAME DURING THE YEAR UNDER CONSIDERATION, THIS INCLUDES APPROVAL FOR SALARY REIMBURSEMENT EXPENSES OF RS. 13,97,207/- TO JAIPUR DAIRY DURING THIS YEAR. THE AO IS DIRECTED TO DELETE DISALLOWANCE OF RS. 15,66,047/- AS APPROVAL OF THESE PRIOR PERIOD EXPENSES WHOSE GENUI NENESS IS NOT DOUBTED BY THE AO, WAS RECEIVED DURING THE YEAR BY THE APPELLANT AND WITHOUT APPROVAL IT WAS NOT POSSIBLE FOR THE APPELL ANT TO MAKE THE PAYMENT. IN SUPPORT OF HIS SUBMISSION, THE LD. A/R HAS PLACE D RELIANCE ON THE FOLLOWING DECISIONS :- CIT VS. EXCEL INDUSTRIES LTD. 358 ITR 295 (SC) SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CIT 213 ITR 523 (GUJ.HC) 5 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INV. COR PN. LTD. VS. ACIT, (ITA NO. 66 & 354/JP/08, DATED 30.09.2008 & ITA NOS . 138 & 235/JP/09 DATED 08.01.2010). INSTRUMENTATION LTD. VS. IAC (ITA NO. 1163/JP/82 DATED 28.09.1984) THEREFORE, HE PRAYED THAT THE ORDER OF LD. CIT (A) BE CONFIRMED. 4.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE OF PRIOR PERIOD EXPE NSES HAS EARLIER DECIDED BY THE LD. CIT (A) IN ASSESSEES OWN CASE FOR THE A.YS. 2007-0 8 TO A.Y. 2009-10 IN APPEAL NOS. 444/09-10, 268/10-11 AND 380/11-12 VIDE ORDER DATED 24.09.2012 WHEREBY THE DISALLOWANCE WAS DELETED BY THE LD. CIT(A) AND NO A PPEAL AGAINST THE SAME WAS PREFERRED BY THE REVENUE. CONSIDERING THAT THE ISS UE INVOLVED IN THE YEARS UNDER CONSIDERATION IS SAME AND ALSO IN VIEW OF THE JUDIC IAL PRECEDENTS, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND THE SAME IS CONFIRM ED. THE GROUND OF THE REVENUE FOR ALL THE THREE ASSESSMENT YEARS IS DISMISSED. 5. GROUND NO. 2 IN THE APPEALS FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 IS AGAINST DELETING THE ADDITION MADE BY THE AO BEI NG CONTRIBUTION MADE BY THE ASSESSEE TO REHABILITATION FUND BY NOT TREATING THE SAME AS BUSINESS RELATED EXPENDITURE. SINCE THIS GROUND IS COMMON IN BOTH TH E YEARS EXCEPT IN FIGURES, WE DISPOSE OFF THIS GROUND FOR THE ASSESSMENT YEARS UN DER CONSIDERATION TOGETHER. 5.1. THE AO WHILE MAKING THE ASSESSMENT, NOTED THAT THE ASSESSEE HAS MADE CONTRIBUTION TOWARDS REHABILITATION FUND TO MILK UN IONS. TO JUSTIFY THE CONTRIBUTION TO REHABILITATION FUND, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THESE EXPENSES MAY NOT BE DISALLOWED WHILE COMPUTING THE TOTAL INC OME OF THE ASSESSEE. IN 6 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. COMPLIANCE, THE LD. A/R FOR THE ASSESSEE VIDE HIS L ETTER DATED 17.10.2012 HAS STATED THAT THE LEVY CHARGES TO THE REHABILITATION FUND HA D BEEN PAID BY THE FOUR CATTLE FEED PLANTS WHICH ARE THE UNITS OF THE ASSESSEE FEDERATI ON. THE FEDERATION HAS SET UP A FUND FOR PROVIDING FINANCIAL ASSISTANCE AND REVIVAL OF MILK UNIONS AND DISTRICT CO- OPERATIVE SOCIETIES. THE LD. A/R FURTHER SUBMITTED THAT DURING THE YEAR, ALL THE CATTLE FEED PLANTS HAVE INCURRED EXPENSES FOR THE PURPOSE OF REVIVAL/SETTING UP OF MILK UNIONS AND DISTRICT CO-OPERATIVE SOCIETIES. THE FIN ISHED GOODS OF CATTLE FEED PLANT IS PURCHASED BY THESE SOCIETIES AND HENCE THE ASSESSEE IS INCURRING EXPENSES ON WELFARE OF THEM SO THAT ASSESSEE MAY INCREASE ITS B USINESS. THE AO CONSIDERED THE REPLY OF THE ASSESSEE BUT HE FOUND NO MERIT IN IT. THE AO DISALLOWED THE CLAIM OF EXPENSES ON THE GROUND THAT IT IS NOT AN EXPENDITUR E ACTUALLY INCURRED, CONTRIBUTION IS IN THE NATURE OF SUBSIDY OR GRANT FOR WELFARE OF THE CONCERNED ENTITIES AND CONTRIBUTION MADE TO ANY FUND IS NOT AN ALLOWABLE E XPENDITURE EXCEPT FOR CERTAIN SPECIFIC PURPOSES FUNDS WHICH ARE APPROVED BY THE C OMPETENT AUTHORITY UNDER THE IT ACT AND ADMITTEDLY NO SUCH APPROVAL IS THERE IN CAS E OF THE FUND FOR WHICH CONTRIBUTION HAS BEEN MADE BY THE ASSESSEE. 6. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A) WHO ALLOWED THE APPEAL OF THE ASSESSEE BY DIRECTING THE AO TO DELETE THE DISALLOWANCE BY OBSERVING AS UNDER :- 3.3.2. THE APPELLANT IS A FEDERAL SOCIETY OPERATI NG AT THE APEX LEVEL OF THE DAIRY COOPERATIVE STRUCTURE IN THE STA TE OF RAJASTHAN. THE MILK IS COLLECTED BY THE VILLAGE LEVEL, PRIMARY SOC IETIES AND SUPPLIED TO SOCIETIES AT THE DISTRICT LEVEL TO PROCESS THE MILK . THIS MILK IS MARKETED BY THE APPELLANT. THE RCDF REHABILITATION AND DEVEL OPMENT FUND HAS BEEN SET UP TO PROVIDE FINANCIAL ASSISTANCE TO THE MEMBER COOPERATIVE SOCIETIES TO HELP THEM ACHIEVE THE BREAKEVEN POINT AND EXPAND INTO RURAL AREAS. THIS ENABLES THE APPELLANT TO GET AN U NINTERRUPTED SUPPLY OF MILK FROM ITS MEMBER SOCIETIES AND REDUCES THE T HREAT FROM PRIVATE 7 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. MILK PRODUCERS. THIS FUND HAS BEEN GRANTED REGISTRA TION U/S 12AA BY THE CIT-II, JAIPUR ON 31.01.2008. THE FACTS OF THIS ISSUE ARE DIFFERENT FROM THE FACT S IN A.Y. 2007- 08 AND 2008-09 WHEREIN NO EXPENDITURE HAD BEEN INCU RRED BUT ONLY A PROVISION HAD BEEN MADE TOWARDS THE REHABILITATION FUND. EVEN THE FUND HAD NOT BEEN ESTABLISHED. HOWEVER, IN THIS YEA R, EXPENDITURE HAS BEEN INCURRED, THE FUND HAS ALREADY BEEN CREATED AN D IT HAS GOT REGISTRATION U/S12AA OF THE IT ACT. 3.3.3. THIS EXPENDITURE HAS BEEN INCURRED TO PROVID E FINANCIAL ASSISTANCE TO THE MEMBER COOPERATIVE SOCIETIES SO A S TO ENSURE AN UNINTERRUPTED AND TIMELY SUPPLY OF MILK. THIS CONTR IBUTION MADE BY THE APPELLANT TO THE FUND IS DIRECTLY CONNECTED WITH TH E CARRYING ON THE ASSESSEES BUSINESS AND RESULTS IN BENEFITS TO THE ASSESSEES BUSINESS. THIS EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSES OF THE ASSESSEES BUSINESS. FOLLOWING, THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTH AN SPINNING & WEAVING MILLS LTD. 274 ITR 465, IT IS HELD THAT THE ABOVE EXPENDITURE IS ALLOWABLE AS A DEDUCTION U/S 37(1) OF THE I.T. ACT. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ABOVE DISALLOWANC E. THIS GROUND OF APPEAL IS ALLOWED. 7. NOW THE REVENUE IS BEFORE US. 7.1. THE LD. D/R FOR THE REVENUE SUPPORTED THE ORDE R OF THE AO AND REQUESTED TO SET ASIDE THE ORDER OF LD. CIT (A) AND CONFIRM THE ORDER OF AO. 7.2. ON THE OTHER HAND, THE LD. A/R FOR THE ASSESSE E SUBMITTED THAT DAIRY CO- OPERATIVES IN RAJASTHAN FOLLOW VERTICAL INTEGRATED THREE TIER STRUCTURE AS UNDER :- - PRIMARY SOCIETY I.E. VILLAGE DAIRY CO-OPERATIVE AT THE BOTTOM LEVEL. - UNION I.E. DISTRICT PROCESSING UNION AT THE MIDDLE/ CENTRE LEVEL. - FEDERAL SOCIETY I.E. STATE CO-OPERATIVE DAIRY FEDER ATION. EACH OF THESE SOCIETIES IS HAVING DIFFERENT FUNCTIO NAL RESPONSIBILITIES. THE VILLAGE LEVEL PRIMARY SOCIETIES ARE RESPONSIBLE FOR COLLECTION OF MILK, DISTRICT PROCESSING UNIONS PROCESS THE MILK COLLECTED BY THE PRIMARY SOCIETIES /VILLAGE LEVEL SOCIETIES. THE FEDERAL SOCIETY/STATE LEVEL SOCIETY I.E. RCDF (ASSESSEE) IS AN APEX BODY WHICH MARKET THE 8 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. MILK AND MILK PRODUCTS OF THEIR MEMBERS UNION LIKE, JAIPUR ZILA DUGDH UTPADAK SANGH (JAIPUR MILK UNION) AND OTHER UNION. IN THIS SYSTEM, ASSESSEE IS AN APEX BODY. THESE SOCIETIES ARE STRUCTURED FOR GIVING CO-OPERAT IVE MOMENTUM TO WHITE REVOLUTION. THESE SOCIETIES CANNOT WORK IN ISOLATIO N AND WORK CUMULATIVELY FOR A COMMON OBJECTIVE I.E. MAXIMIZING MILK PRODUCERS SH ARE. ALL THE PRIMARY LEVEL SOCIETIES AND DISTRICT LEVEL SOCIETIES ARE MEMBERS OF THE RCDF I.E. ASSESSEE. 7.3. THE LD. A/R SUBMITTED THAT RCDF, AS AN APEX BO DY, ALONG WITH ITS MEMBER PRIMARY SOCIETIES AND MILK UNION CONSTITUTED RCDF REHABILITATION AND DEVELOPMENT FUND ON 05.10.2004 WHEREIN CONTRIBUTION IS MADE B Y THE ASSESSEE AS WELL AS OTHER MEMBERS MILK UNIONS. THEREAFTER, A SEPARATE TRUST W AS CREATED ON 26.03.2008 WITH THE OBJECT OF PROVIDING INTEREST FREE FINANCIAL ASS ISTANCE TO THE LOSS MAKING DAIRY CO- OPERATIVE MEMBERS SOCIETIES TO HELP THEM TO ACHIEVE THEIR BREAKEVEN POINT AND TO EXPAND/EXPLORE EXISTING/NEW RURAL MARKET. THIS TRUS T IS ALSO REGISTERED U/S 12AA W.E.F. 02.05.2008. IN PURSUANCE TO THESE OBJECTIVES , THE FUND IS PROVIDING INTEREST FREE LOANS IN ACCORDANCE WITH THE APPROVED SCHEME O F THE FUND TO THE NEEDY MILK UNIONS AND CATTLE FEED PLANTS, WHICH ARE MEMBERS OF THE ASSESSEE, SO AS TO ENABLE THE LOSS MAKING MILK UNIONS TO HELP/ACHIEVE THEIR B REAKEVEN POINT OR TO HELP PUSH MILK UNIONS INTO A PROFIT MAKING ZONE FROM THEIR TH RESHOLD LEVEL OF PROFIT/LOSS MAKING, EXPLORATION OF NEW RURAL MARKETS, EXPANSION OF THE EXISTING ONES AND PROVIDING LONG TERM FINANCES FOR INVESTMENT IN FIXED ASSETS, MAINL Y PLANT AND MACHINERY AT DAIRY PLANTS/ CATTLE FEED PLANTS. THE WORKING OF ALL THE MEMBERS MILK UNIONS AS WELL AS MEMBERS PRIMARY SOCIETIES ARE INTERCONNECTED WITH T HE ASSESSEE. THE ASSESSEE IS GETTING THE MILK FROM THESE MEMBER SOCIETIES/UNIONS . THEREFORE, TO PROCURE THE UNINTERRUPTED AND TIMELY SUPPLY OF MILK AND TO RESO LVE THE CHRONIC PROBLEM I.E. 9 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. THREAT FROM PRIVATE MILK PRODUCERS, ASSESSEE MAKES SUCH CONTRIBUTION AS PER THE SCHEME OF THE FUND. THUS, THE EXPENDITURE INCURRED BY ASSESSEE BY WAY OF CONTRIBUTION IS DIRECTLY CONNECTED WITH THE BUSINES S OF ASSESSEE. 7.4. THE LD. A/R FURTHER SUBMITTED THAT FOR CLAIMIN G OF DEDUCTION U/S 37(1), THE EXPENDITURE SHOULD BE INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS. THE TERM WHOLLY REFERS TO QUANTUM OF EXPENDITURE AND THE TERM EXCLUSIVELY REFERS TO MOTIVE, OBJECT AND PURPOSE OF EXPENDITURE. THE S UPREME COURT IN CASE OF SASSON J DAVID & CO P. LIMITED V. CIT 118 ITR 261 HELD THA T THE EXPRESSION WHOLLY AND EXCLUSIVELY DOES NOT MEAN NECESSARILY. THE FACT TH AT SOMEBODY OTHER THAN THE ASSESSEE IS ALSO BENEFITED BY THE EXPENDITURE SHOUL D NOT COME IN THE WAY OF DEDUCTION IF IT SATISFY OTHERWISE THE TEST LAID DOW N BY LAW. IF THE EXPENDITURE IS INCURRED VOLUNTARILY, EVEN WITHOUT NECESSITY, BUT I F IT IS FOR PROMOTING THE BUSINESS, THE DEDUCTION WOULD BE PERMISSIBLE. IN PRESENT CASE THE CONTRIBUTION MADE BY THE ASSESSEE TO THE FUND IS UTILIZED IN PROVIDING FINAN CIAL HELP TO NEEDY MEMBERS MILK UNIONS/SOCIETIES. FROM THESE MEMBERS MILK UNIONS/SO CIETIES, ASSESSEE PROCURES MILK. THIS HELPS IN UNINTERRUPTED AND TIMELY SUPPLY OF MI LK TO THE ASSESSEE. THUS, EXPENDITURE IS WHOLLY AND EXCLUSIVELY FOR THE PURPO SE OF BUSINESS AND ALLOWABLE U/S 37(1). FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- CIT VS. RAJASTHAN SPINNING AND WEAVING MILLS LTD. 2 74 ITR 465 (RAJ.) CIT VS. SHRI RAJASTHAN SALES TAX LTD. 221 CTR 410 ( RAJ) 7.5. THE LD. A/R FAIRLY ADMITTED THAT IN THE A.YS. 07-08 AND 08-09, CONTRIBUTION TO RCDF REHABILITATION FUND WAS DISALLOWED BECAUSE IN THAT YEAR NO SEPARATE TRUST WAS CREATED AND THE AMOUNT CONTRIBUTED TO RCDF REHABIL ITATION AND DEVELOPMENT FUND 10 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. REMAINED WITH RCDF. HOWEVER, IN THE YEARS UNDER CON SIDERATION, RCDF REHABILITATION AND DEVELOPMENT FUND HAS BEEN CREATE D AS A SEPARATE TRUST ON 26.03.2008 WHICH WAS REGISTERED U/S 12AA W.E.F. 02 .05.2008 AND ACTUAL CONTRIBUTION WAS MADE TO THE FUND WHICH IS DIRECTLY CONNECTED WITH THE BUSINESS OF ASSESSEE AND RESULTS INTO BENEFIT. SIMILAR CONTRIBU TION MADE IN A.Y. 12-13 HAS BEEN ALLOWED BY THE AO. CONSIDERING THESE FACTS, THE HON BLE ITAT IN CASE OF JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD. IN ITA NO. 128 & 142/JP/13 FOR A.Y. 09-10 HAS GIVEN THE FOLLOWING FINDINGS VIDE PARA 7 OF ITS ORD ER DT. 17.07.2015 :- WE FIND MERIT IN THE ALTERNATIVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IN VIEW OF THE FACT THAT ASSESSEE CREATED A SEPARATE REHABILITATION TRUST WHICH IS REGISTERED U/S 12AA O F THE IT ACT AND IN THE CASE OF RCDF ON THESE FACTS THE CLAIM HAS BEEN ALLOWED IN A.Y. 10- 11, WE SET ASIDE THE MATTER TO DECIDE THE SAME AFRE SH IN ACCORDANCE WITH LAW AFTER GIVING ASSESSEE AN OPPORTUNITY OF BE ING HEARD. THE LD. A/R CONCLUDED HIS SUBMISSION STATING THAT I N VIEW OF ABOVE FINDING, THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE AND THU S THE GROUNDS OF THE DEPARTMENT BE DISMISSED. 7.6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT FOR THE YEARS UNDER CONSIDERAT ION, RCDF REHABILITATION AND DEVELOPMENT FUND WAS CREATED AS A SEPARATE TRUST ON 26.03.2008 AND WAS DULY REGISTERED UNDER SECTION 12AA W.E.F. 02.05.2008 AND THE ACTUAL CONTRIBUTION MADE TO THE FUND IS DIRECTLY CONNECTED WITH THE BUSINESS OF THE ASSESSEE WHICH HAS RESULTED INTO BENEFIT. SIMILAR CONTRIBUTION MADE IN A.Y. 20 12-13 HAS BEEN ALLOWED BY THE AO. RECENTLY, THE COORDINATE BENCH OF THE TRIBUNAL IN T HE CASE OF JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD. IN ITA NO. 128 & 142/JP /2013 FOR A.Y. 2009-10 HAS 11 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. REMANDED THE MATTER TO THE DEPARTMENTAL AUTHORITIES TO DECIDE THE MATTER AFRESH BY OBSERVING AS UNDER :- WE FIND MERIT IN THE ALTERNATIVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. IN VIEW OF THE FACT THAT ASSESSEE CREATED A SEPARATE REHABILITATION TRUST WHICH IS REGISTERED U/S 12AA O F THE IT ACT AND IN THE CASE OF RCDF ON THESE FACTS THE CLAIM HAS BEEN ALLOWED IN A.Y. 10- 11, WE SET ASIDE THE MATTER TO DECIDE THE SAME AFRE SH IN ACCORDANCE WITH LAW AFTER GIVING ASSESSEE AN OPPORTUNITY OF BE ING HEARD. IN THE LIGHT OF ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A), THE SAME IS CONFIRMED. THE GROUND OF THE REVENUE FOR BOTH THE Y EARS IS DISMISSED. 8. GROUND NO. 2 (A) AND 2 (B) FOR THE ASSESSMENT YE AR 2012-13 RELATES TO DELETION OF ADDITION OF RS. 6,70,168/- MADE FOR DEP OSITING THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEYOND THE PRESCRIBED TI ME LIMIT AND HOLDING THAT EMPLOYEES CONTRIBUTION TO PF AND ESI ARE GOVERNED BY PROVISIONS OF SEC. 43B AND NOT BY SEC. 36(1)(VA) READ WITH SECTION 2(24)(X) OF THE IT ACT. 8.1. THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAS MADE THE PAYMENTS OF EMPLOYEES CONTRIBUTION TO PF AND ESI AFTER THE DUE DATE OF PAYMENT RELEVANT TO PF & ESI ACTS. ON BEING ASKED T O JUSTIFY THE LATE PAYMENT, THE ASSESSEE VIDE ITS LETTER DATED 12.02.2014 SUBMITTED THAT - THE CONTRIBUTION ON ACCOUNT OF P.F. RECEIVED FROM THE EMPLOYEE HAS BEEN DEPOSITED BEFORE DUE DATE OF SUBM ISSION OF THE RETURN EVEN WITHIN THE FINANCIAL YEAR ITSELF. I T IS FURTHER SUBMITTED THAT IT IS WELL DECIDED MATTER BY VARIOUS COURT THAT DEDUCTION OF STATUTORY LIABILITY TOWARDS PF AND OTH ER FUND REFERRED TO IN CLAUSE (B) OF SECTION 43B AND SECTIO N 36(1)(VA) READ WITH SECTION 2(24)(X) IS PERMISSIBLE IF THE PA YMENT ARE MADE BY ASSESSEE BEFORE DUE DATE OF SUBMISSION OF R ETURN U/S 139(1) EVEN IF CONTRIBUTION ARE PAID BEYOND THE DUE DATES UNDER RESPECTIVE ENACTMENTS. WE REFER SOME OF JUDICIAL DE CISION AS UNDER :- 12 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. THE RAJASTHAN HIGH COURT IN THE CASE OF UDAIPUR DUGDH UTPADAK 217 TAXMANN 64. THE KARNATAKA HIGH COURT IN CASE OF CIT VS. SABA RI ENTERPRISES 213 CTR 269 .MINOR DELAY IN DEPOSIT OF EMPLOYEES CONTRIBUTION TO ESI WHICH HAS BEEN DEPOSITED WITH SOME DELAY IS NOT LIA BLE TO BE DISALLOWED UNDER THE PROVISIONS OF THE INCOME TAX A CT, 1961. THE AO BEING NOT SATISFIED WITH THE REPLY, MADE THE ADDITION OF RS. 6,70,168/- ON THE GROUND THAT THE ASSESSEE HAS NOT MADE THE PAYME NTS WITHIN DUE DATES OF THE RESPECTIVE LAWS. HE HELD THAT AS PER THE PROVISIONS OF SECTION 36(VA) OF THE IT ACT, 1961 THESE PAYMENTS CAN NOT BE ALLOWED AS SUCH AND LIABLE TO BE DISALLOWED U/S 36(VA) OF THE ACT. 9. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL B EFORE LD. CIT (A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS U NDER :- 4.3. I HAVE PERUSED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. ADMITTEDLY, EMPLOYEE S CONTRIBUTION TOWARDS PF HAS BEEN PAID BEFORE THE DUE DATE OF FIL ING OF RETURN OF INCOME U/S 139(1). THIS FACT IS THEREFORE NOT IN DI SPUTE. IN VIEW OF THE JUDGMENTS OF THE RAJASTHAN HIGH COURT IN THE CASE O F JAIPUR VIDHYUT VITHRAN NIGAM LTD., 265 CTR 62 (RAJ.), CIT VS. STAT E BANK OF BIKANER & JAIPUR (2014) 99 DTR 131 (RAJ.), AND OTHER CASE LAW S ON THIS ISSUE, THE CLAIM OF THE APPELLANT IS ALLOWABLE. ACCORDINGLY, T HE ADDITION MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. GR OUND NO. 3 IS ALLOWED. 10. NOW THE REVENUE IS BEFORE US. 10.1. THE LD. D/R FOR THE REVENUE PLACED RELIANCE O N THE ORDER OF THE AO AND REQUESTED TO REVERSE THE ORDER OF LD. CIT (A) AND C ONFIRM THE ORDER OF AO. 13 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. 10.2. ON THE OTHER HAND, THE LD. A/R FOR THE ASSESS EE CONTENDED THAT THERE IS NO DISPUTE AS TO THE FACT THAT ASSESSEE HAS DEPOSITED THE PF BEFORE FILING OF THE RETURN. THE VARIOUS HIGH COURTS INCLUDING THE RAJASTHAN HIG H COURT HAS HELD THAT IF THE EMPLOYEES CONTRIBUTION TO PF IS DEPOSITED BEFORE TH E DUE DATE OF FILING OF THE RETURN, THE SAME IS ALLOWABLE. IN SUPPORT OF HIS SUBMISSIO NS, HE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS :- CIT VS. STATE BANK OF BIKANER & JAIPUR (2014) 99 DTR 131 (RAJ.HC) CIT VS. JAIPUR VIDYUT VITRAN NIGAM LTD. 98 DTR 105 (RAJ.HC) CIT VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. (2013) 98 DTR 109 (RAJ.HC) THE LD. A/R THEREFORE PRAYED THAT THE ORDER OF LD. CIT (A) BE CONFIRMED. 10.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE ORDERS OF THE LOWE R AUTHORITIES, AND ALSO VARIOUS CASE LAWS CITED BY THE LD. A/R, WE FIND NO INFIRMIT Y IN THE ORDER OF LD. CIT (A), THE SAME IS CONFIRMED. THE GROUND OF THE REVENUE IS DISMISSED. 11. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/05/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/05/2016 DAS/ 14 ITA NOS. 79-81/JP/2015 DCIT VS. RAJASTHAN COOP. DAIRY FED. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S. RAJASTHAN COOPERATIVE DAIRY FE DERATION LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.79-81/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR