Kisan Sehkari Chini Mills Ltd., V. DCIT,

ITA 839/DEL/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2221 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-12-2009
• Assessment Year: 1990-1991
• Appeal Filed On: 25-02-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOHATA
• Keywords: Business expenditure; Opportunity of being heard
• Section: 43B; 37(1); 37

Judgement Text

ITA NO. 839/DEL/03 A.Y. 1990-91 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 839/DEL/2003 A.Y. : 1990-91 M/S KISAN SEHKARI CHINI MILLS LTD., VS. DY. CO MMISSIONER OF INCOME NAUNUTA (SAHRANPUR) TAX, SPL. RANGE-2, DEHRADU N C/O S.P. JAIN & ASSOCIATES, F-83, (GROUND FLOOR), GREEN PARK (MAIN) NEW DELHI 110 016 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ANIL JAIN, CA DEPARTMENT BY : SH. G.S. SOHATA, SR. DR O R D E R PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE HAD EARLIER TRAVELLED TO THE TRIBUNAL AND THE TRIBUNAL VIDE ORDERS DATED 12.11.2 008 HAD PARTLY ALLOWED THE ASSESSEES APPEAL. IN THIS R EGARD, MISC. APPLICATION WAS FILED BY THE ASSESSEE PERTAINING TO ASSESSEES CLAIM OF BUSINESS EXPENDITURE OF RS. 84,50,380/- WH ICH WAS CLAIMED TO BE EXPENDITURE ALLOWABLE UNDER SECTION 3 7(1) OF THE IT ACT. IN THE ORDER ON THE MISC. APPLICATION, IT WAS FOUND BY THE TRIBUNAL THAT THOUGH THE ARGUMENT WAS NOTED, IN THIS REGARD, THE SAME WAS NOT DEALT BY THE TRIBUNAL. ACCORDINGLY, ITA NO. 839/DEL/03 A.Y. 1990-91 2 THE TRIBUNAL HAD RECALLED ITS ORDER WITH REGARD TO ABOVE ONLY. AS RESULT OF THE ABOVE RECALL ORDER THE APPEAL HAS BEEN HEARD BY US. 2. THE ISSUE RAISED IN THE GROUNDS OF APPEAL READS AS UNDER:- THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DE CISION OF THE LD. AO IN NOT ALLOWING AN AMOUNT OF RS. 84,50,3 30/- (RUPEES EIGHT FOUR LAC, FIFTY THOUSAND, THREE HUNDR ED AND THIRY) CLAIMED BY THE ASSESSEE, BEING THE AMOUNT TRANSFERRED TO COOPERATIVE SUGAR MILLS REVOLVING C ESS NIDHI FUNDS. 3. THE AO ON THIS ISSUE HAS FOUND THAT THE ASSESSEE HAS TRANSFERRED A SUM OF RS. 84,50,330/- BY APPROPRIATI ON OF PROFIT TO COOPERATIVE SUGAR MILLS REVOLVING CESS NIDHI FUN D. THE ASSESSEE HAD ARGUED THAT THE CESS WAS ALLOWABLE UND ER SECTION 43B OF THE IT ACT. THE AO OBSERVED THAT HE HAD CAR EFULLY GONE INTO THE SAID ORDER OF THE UP GOVERNMENT. ITS AIM WAS TO PROMOTE AND STRENGTHEN INTENSIVE EQUITY PARTICIPATI ON IN THE NEW COOPERATIVE SUGAR MILLS AS WELL AS FOR EXPANSIO N CUM MODERNIZATION OF EXISTING SUGAR UNITS IN THE COOPER ATIVE SECTOR. FROM THIS THE AO OPINED THAT THE SUBSCRIPTION IS NO T FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HENCE IT IS NOT ALLOWABLE UNDER SECTION 37 OF THE IT ACT. IN THE AOS OPINIO N ONCE IT WAS NOT ALLOWABLE UNDER SECTION 37, IT WAS NOT ALLOWABL E UNDER SECTION 43B OF THE IT ACT ALSO. THE AO ALSO HELD THAT THE ORDER OF THE UP GOVERNMENT LACKED LEGISLATIVE APPRO VAL. HENCE ITA NO. 839/DEL/03 A.Y. 1990-91 3 IN HIS OPINION IT WAS NOT DEDUCTIBLE UNDER SECTION 43B. EVEN, IT WAS HELD TO BE ALLOWABLE UNDER SECTION 37 OF TH E IT ACT. 4. ASESSEE APPEALED BEFORE THE LD. CIT(A) BY INTER -ALIA DRAWING THE ATTENTION TOWARDS THE DECISION OF THE TRIBUNALS COCHIN BENCH IN THE CASE OF TRAVANCORE TITANIUM PR ODUCTS LTD. VS. DCIT 57 ITD 16, WHEREIN IT WAS HELD THAT T HE GOVERNMENT CAN MAKE LEVY INCLUDING SERVICE CHARGES IN SELECTED AREAS OR ON SELECTED PERSONS AND IF SUCH L EVY ARE HELD TO BE ULTRA-VIRUS ITS POWERS UNTIL IT IS SO DECLARE D THE LEVY IS BINDING ON THE PERSONS AND WHOM IT IS IMPOSED. CONSIDERING THE ASSESSEES SUBMISSION THE LD. CIT(A ) HELD THAT IT IS ADMITTED FACT THAT THE PURPOSE FOR IMPOSITIO N OF CESS WAS PROMOTION AND STRENGTHENING INTENSIVE EQUITY PARTIC IPATION IN THE NEW COOPERATIVE SUGAR MILLS AS WELL AS FOR EXPA NSION / MODERNIZATION OF EXISTING SUGAR MILLS IN THE COOPER ATIVE SECTORS. THE VERY PURPOSE OF THE CESS INDICATES THAT THE SAME IS NOT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BU SINESS OF THE APPELLANT. THIS CONTRIBUTION BY THE APPELLANT IS A S PER THE DIRECTION OF THE GOVERNMENT OF UP AND AS SUCH IS AP PROPRIATION ITA NO. 839/DEL/03 A.Y. 1990-91 4 OF PROFITS OF THE APPELLANT WHICH IS NOT DIRECTLY R ELATED TO THE APPELLANTS BUSINESS. IT IS TRUE THAT THE ASSESS EE IS FREE TO UTILIZE ITS INCOME IN THE MANNER IN WHICH IT SO DE SIRES AND IF IT IS DIRECTED BY THE OTHER AUTHORITIES AS PER THE DIR ECTIONS OF THE STATE AUTHORITY. EVERY PAYMENT COULD NOT BECOME ALLOWABLE DEDUCTION U/S 37(1) WHICH RESTRICTS ITSELF TO EXPEN DITURE INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES BUSINESS. THE DECISION OF HONBLE COCHIN BENCH IN THE CASE OF TRAVANCORE TITANIUM PRODUCTS LTD. (SUPRA) IS DISTIN GUISHABLE ON THE FACTS. IN THAT CASE, THE ASSESSEE WAS PAYIN G CERTAIN SERVICE CHARGES TO THE GOVERNMENT AS PER THE DEMAND RAISED IN THE GOVERNMENTS ORDER, FOR CERTAIN SERVICES RENDER ED BY THE GOVERNMENT TO THE ASSESSEE. IN THE PRESENT CASE, T HE GOVERNMENTS ORDER IN COMPLIANCE TO WHICH THE ASSE SSEE HAS MADE CONTRIBUTION DOES NOT SPEAK OF ANY SERVICES RE NDERED BY THE GOVERNMENT FOR WHICH SUCH CONTRIBUTION WAS MADE . THUS, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS FUL LY JUSTIFIED IN ITA NO. 839/DEL/03 A.Y. 1990-91 5 MAKING DISALLOWANCE OF RS. 84,50,330/- TREATING THE SAME AS APPROPRIATION OF PROFIT. THE DISALLOWANCE IS CONFI RMED. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. LD. COUNSEL OF THE ASSESSEE VEHEMENTLY ARGUED TH AT THE AMOUNT IS CLEARLY ALLOWABLE UNDER SECTION 37(1) OF THE IT ACT. HE SUBMITTED THAT IN ALL THE SUBSEQUENT YEARS THE P AYMENT HAS BEEN DULY ALLOWED AND IT IS ONLY THE YEAR WHICH IS THE FIRST YEAR THAT THE DISALLOWANCE HAS BEEN MADE. HE FURTHER SU BMITTED THAT AMOUNT WAS CLEARLY ALLOWABLE UNDER SECTION 43B OF THE IT ACT. 6.1 LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION AND PERUSED THE RECORDS. FROM THE FACTS ON RECORD, WE FIND I T IS NOT CLEAR AS TO WHAT PURPOSE THE CONTRIBUTION OF THE ASSESSE E IN THIS REGARD IS MEANT TO BE UTILIZED. WHETHER THE SAME HA S ANY LINKAGES WITH THE ASSESSEES INVESTMENT / EXPENDIT URE IN THE CAPITAL FIELD HAS NOT BEEN CLEARLY BROUGHT OUT. H ENCE, WE FIND THAT IT WILL BE APPROPRIATE TO REMIT THIS ISSUE TO THE FILES OF THE AO TO GIVE A FINDING IN THIS REGARD. BOTH THE COUN SELS FAIRLY ITA NO. 839/DEL/03 A.Y. 1990-91 6 AGREED TO THIS PROPOSITION. ACCORDINGLY, THIS I SSUE IS REMITTED TO THE FILES OF THE AO TO EXAMINE THE ISSUE ON THE DIRECTIONS AS GIVEN ABOVE. NEEDLESS TO ADD THAT THE ASSESSEE S HOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. BEF ORE PARTING WE WOULD LIKE TO OBSERVE THAT IF THE AMOUNT INVOLVE D IS FOUND TO BE CESS THE ALLOWABILITY OF THE SAME SHALL BE CONS IDERED AS PER PROVISIONS OF SECTION 43B OF THE IT ACT. THE DEC ISION OF THE TRIBUNAL, COCHIN BENCH IN THE CASE OF TRAVANCORE TITANIUM PRODUCTS LTD. VS. DCIT 57 ITD 16 SHALL ALSO BE BORN E IN MIND. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07/12/2009 AFTER CONCLUSION OF THE HEARING . SD/- SD/- [R.P. TOLANI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/12/2009 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DR, ITAT, DELHI BENCH