DCIT, Jaipur V. JAIPUR ZILA DUDH UTPADAK SAHAKARISANGH LTD., Jaipur

ITA 850/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5200 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S DAGUR CIT DHK
• Keywords: Business expenditure
• Section: 37(1); 80G; 12A; 12AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 850/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 DY.CIT, CIRCLE -6, JAIPUR CUKE VS. M/S JAIPUR ZILA DUGADH UTPADAK SAHAKARI SANGH LTD. , JAIPUR DAIRY, NR. GANDHI NAGAR RLY STATION, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAAJ 07676 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DAGUR (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.06.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/06/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 16.10.2014 WHEREIN THE REVENUE HAS TAK EN FOLLOWING GROUND OF APPEAL: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS. 1, 19,39,836/- MADE BY THE AO BY DISALLOWING CONTRIBUTION MADE TO SPARSH TRUST WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO PROVE DIRECT BUSINESS NEXUS AND IT IS NOT AN ALLOWABLE EXPENDITURE U/S 37(1). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROCUREMENT OF MILK, PRO CESSING THE SAME TO ITA NO. 850/JP/14 JAIPUR ZILA DUGDH UTPADAK SAHKARI SANGH VS. DCIT , CIRCLE-6, JAIPUR 2 PREPARE ITS PRODUCT AND SALE THEREOF. THE MILK IS P ROCURED AT VILLAGE LEVEL THROUGH PRIMARY SOCIETIES. TO OBTAIN BETTER QUALITY OF MILK AS WELL AS MILK IN GOOD QUANTITY, ASSESSEE SOCIETY IS PROVIDING VARIOU S FACILITIES TO THE MILK ANIMAL OWNERS LIKE VACCINATION OF ANIMALS, MEDICAL TREATME NT OF ANIMALS, EMERGENCY SERVICES ETC. EARLIER ALL THESE SERVICES WERE PROVI DED BY THE ASSESSEE HIMSELF BUT FEELING DIFFICULTIES IN MANAGING AND CONTROLLIN G THE SAME, IT WAS DECIDED TO CREATE A TRUST FOR THIS PURPOSE. ACCORDINGLY, A TRU ST IN THE NAME OF PASUDHAN KALYAN AND UPBHOKTA SAMVARDHAN TRUST ALIAS SPARSH FOR PRODUCTIVITY OF ANIMALS AND RURAL SELF HELP WAS CONSTITUTED VIDE TR UST DEED DT. 12.03.2004. THE TRUST IS REGISTERED U/S 12A AND ALSO GRANTED CERTIF ICATE U/S 80G . ASSESSEE DECIDED TO CONTRIBUTE 5 PAISA PER LITER OF THE MILK PROCURED BY IT AND ACCORDINGLY, ASSESSEE CONTRIBUTED RS. 1,19,39,836/- TO THIS TRUST DURING THE YEAR UNDER CONSIDERATION. 2.1 THE AO DISALLOWED THE AMOUNT OF CONTRIBUTION OF RS. 1,19,39,836/- BY STATING THAT THE TRUST IS REGISTERED U/S 12AA AND H AS BEEN GRANTED CERTIFICATE U/S 80G, THEREFORE, ANY PAYMENT MADE BY ASSESSEE TO THIS TRUST FALLS WITHIN THE DEFINITION OF DONATION & CANNOT BE TREATED AS AN EX PENDITURE U/S 37(1). THE AO STATED THAT ON ONE SIDE, ASSESSEE CLAIMS THAT IT SI MPLY MAKES CONTRIBUTION FOR REIMBURSING THE EXPENSES INCURRED BY THE TRUST ON B EHALF OF THE ASSESSEE WHILE ON OTHER HAND, IT STATES THAT IT IS NOT CONTRACT GI VEN TO THE TRUST. BOTH SUCH CLAIMS ARE CONTRADICTORY TO EACH OTHER. ASSESSEE SI MPLY CONTRIBUTES IN THE TRUST AT THE STIPULATED RATES AND THEREFORE CLAIM OF ASSE SSEE REGARDING REIMBURSEMENT OF ITS EXPENDITURE IS NOT ACCEPTABLE. ASSESSEE FAILED TO FURNISH ANY DOCUMENT/EVIDENCE TO SUBSTANTIATE ITS CLAIM EVE N OTHERWISE. CONTRIBUTION TO SPARSH IS MADE AS A CATTLE DEVELOPMENT FUND AN D ASSESSEE DEALS IN DAIRY PRODUCTS. THUS, HOW A CONTRIBUTION FOR DEVELOPMENT OF CATTLE HAS NEXUS WITH THE BUSINESS OF THE ASSESSEE. THEREFORE, THE CONTRI BUTION CANNOT BE HELD TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. 2.2 AT THE OUTSET, THE LD AR SUBMITTED THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDERS OF HONBLE ITAT IN ASSESSEE S OWN CASE FOR AY 2008-09, 2009-10 AND 2010-11 RESPECTIVELY. ITA NO. 850/JP/14 JAIPUR ZILA DUGDH UTPADAK SAHKARI SANGH VS. DCIT , CIRCLE-6, JAIPUR 3 2.3 THE LD AR FURTHER SUBMITTED THAT THE VARIOUS OB SERVATIONS MADE BY AO FOR DISALLOWING THE CONTRIBUTION MADE BY ASSESSEE T O TRUST IS INCORRECT AS THE BASIC REQUIREMENTS FOR INVOKING SECTIONS 37(1) AND 80G ARE QUITE DIFFERENT, BUT NONETHELESS THE TWO SECTIONS ARE NOT MUTUALLY EXCLU SIVE. EVEN, IF CONTRIBUTION MADE BY AN ASSESSEE IS IN THE FORM OF DONATIONS OF THE CATEGORY SPECIFIED U/S 80G, IT COULD STILL BE TERMED AS AN EXPENDITURE OF THE CATEGORY FALLING U/S 37(1), IF SUCH CONTRIBUTION IS LAID OUT OR EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS HAS BEEN SO HELD BY HON BLE KARNATAKA HIGH COURT IN CASE OF MYSORE KIRLOSKAR LTD. VS. CIT 166 ITR 836 & HONBLE MUMBAI TRIBUNAL IN CASE OF HINDUSTAN PETROLEUM CORPORATION LTD. VS. DC IT 96 ITD 186. THEREFORE, THE DISALLOWANCE OF CONTRIBUTION BY THE AO SIMPLY O N THE GROUND THAT THE TRUST IS REGISTERED U/S 12A & GRANTED CERTIFICATE U/S 80G & THUS ANY PAYMENT MADE BY ASSESSEE TO THE TRUST FALLS WITHIN THE DEFINITIO N OF DONATION & CANNOT BE TREATED AS AN EXPENDITURE U/S 37(1) IS MISCONCEIVED . IT IS A SETTLED LAW THAT DONATION ARE ALLOWABLE AS BUSINESS EXPENDITURE IF T HEY SATISFY THE EXPENDITURE TEST. 2.4 THE LD AR FURTHER SUBMITTED THAT THE WORD 'WHOL LY' REFERS TO THE QUANTUM OF EXPENDITURE AND THE WORD 'EXCLUSIVELY' R EFERS TO THE MOTIVE, OBJECT OR PURPOSE OF THE EXPENDITURE. AS FAR AS QUA NTUM OF EXPENDITURE IS CONCERNED, ASSESSEE VIDE ITS AGENDA NOTE DT. 17.11. 2003 DECIDED TO CONTRIBUTE 5 PAISA PER LITER OF THE MILK PROCURED BY IT. THIS AGENDA NOTE CLEARLY STATES THAT THE PURPOSE OF CONTRIBUTION IS FOR MEDICAL & HEALTH FACILITY OF THE ANIMALS OF THE MILK PRODUCERS AT THE DISTRICT LEVEL. THE CONTRIBUT ION MADE BY ASSESSEE TO TRUST IS THUS DIRECTLY LINKED WITH THE PROCUREMENT OF BET TER QUALITY, HYGIENIC AND MORE QUANTITY OF THE MILK. IT IS IN THE INTEREST OF THE ASSESSEE THAT THE MILK ANIMALS AT THE VILLAGE LEVEL FROM WHERE IT PROCURES THE MILK ARE HEALTHY & FOR THIS PURPOSE, THE SPARSH TRUST INCURRED EXPENDITURE IN PROVIDING VATERNITY CARE, REGULAR TREATMENT, EMERGENCY CARE, PREVENTIVE CARE, BREED IMPROVEMENT THROUGH A.I., UNINTERRUPTED SUPPLY OF NUTRITIONAL S UPPLEMENTS ETC. THEREFORE, THE CONTRIBUTION MADE BY THE ASSESSEE TO THIS TRUST IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS AND THE ENTIRE CONTRIBUTION IS ALLOWABLE U/S 37(1). ITA NO. 850/JP/14 JAIPUR ZILA DUGDH UTPADAK SAHKARI SANGH VS. DCIT , CIRCLE-6, JAIPUR 4 2.5 THE COORDINATE BENCH VIDE ITS ORDER DT. 15.03.2 012 IN ITA NO. 820/JP/11 FOR A.Y. 08-09 HAS GIVEN ITS FINDINGS AS UNDER: AFTER CONSIDERING THE SUBMISSIONS, ORDERS OF THE A UTHORITIES BELOW, WE FIND THAT ASSESSEE DESERVE TO SUCCEED IN ITS GROUND RAISED. IT IS NOTICED THAT BEFORE CREATING SPARSH, THE ASSESSEE WAS DOING ALL THESE EXPENDITURE ITSELF. JUST FOR BETTERMENT OF ADMINISTRATION SERVI CES, THE ASSESSEE CREATED THE TRUST THROUGH WHOM THESE EXPENSES ARE INCURRED. THE PROFIT & LOSS ACCOUNT OF THE TRUST IS MAINTAINED, COPY OF WHICH I S PLACED IN THE COMPILATION AND IT IS SEEN THAT WHATEVER AMOUNT HAS BEEN GIVEN BY ASSESSEE OR REIMBURSED BY ASSESSEE, THAT HAS BEEN S PENT BY THE TRUST ON THE ANIMALS TO GET BETTER QUALITY AND QUANTITY OF M ILK. THE ASSESSEE HAS CONTRIBUTED @ RS.0.05 PER LITRE OF MILK PROCURED TO ITS TRUST FOR THE PURPOSE OF INCURRING EXPENDITURE FOR BETTER QUALITY OF MILK . AN AGENDA NOTE WAS PREPARED WHICH CLEARLY STATES THAT THE PURPOSE OF C ONTRIBUTION IS FOR MEDICAL AND HEALTH FACILITY OF THE ANIMALS OF THE M ILK PRODUCERS AT THE DISTRICT LEVEL. THE CONTRIBUTION MADE BY ASSESSEE T O TRUST IS THUS DIRECTLY LINKED WITH THE PROCUREMENT OF BETTER QUALITY, HYGI ENIC AND MORE QUANTITY OF THE MILK. IT IS IN THE INTEREST OF THE ASSESSEE THAT THE MILK ANIMALS AT THE VILLAGE LEVEL FROM WHERE IT PROCURES THE MILK ARE H EALTHY AND FOR THIS PURPOSE, SPARSH TRUST INCURRED EXPENDITURE IN PROVI DING VATERNITY CARE, REGULAR TREATMENT, EMERGENCY CARE, PREVENTIVE CARE, BREED IMPROVEMENT THROUGH A.I. UNINTERRUPTED SUPPLY OF NUTRITIONAL SU PPLEMENT ETC. THEREFORE, IN OUR CONSIDERED VIEW, CONTRIBUTION MADE BY ASSESS EE TO THIS TRUST IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH IS ALLOWABLE U/S 37(1). FROM THE INCOME AND E XPENDITURE ACCOUNT OF THE TRUST, IT CAN BE NOTED THAT IT HAS INCURRED AN EXPENDITURE OF RS. 80,35,447/-IN PURSUANCE OF ITS OBJECTIVES AND AFTER CONSIDERING THE RECEIPTS, THERE IS DEFICIT OF RS. 23,48,303/- TO TH E TRUST IN THE YEAR UNDER CONSIDERATION. SUCH DEFICIT IS MET OUT OF THE CONTR IBUTION MADE BY ASSESSEE TO THE TRUST. IT IS FURTHER SEEN THAT BEFORE CREATI NG THIS TRUST, THE ASSESSEE WAS INCURRING ALL THESE EXPENSES ITSELF AND ALL THE SE EXPENSES WERE ALLOWED BY THE DEPARTMENT WHILE COMPLETING ASSESSMENT U/S 1 43(3).THEREFORE, THIS IS NOT A CASE THAT ASSESSEE HAS MADE DONATION TO AN Y TRUST AND, THEREFORE, THE SAME CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. THE ID. CIT (A) HAS DISALLOWED THE CLAIM OF ASSESSEE BY OBSERVING THAT SINCE ASSESSEE HAS ITA NO. 850/JP/14 JAIPUR ZILA DUGDH UTPADAK SAHKARI SANGH VS. DCIT , CIRCLE-6, JAIPUR 5 MADE DONATION U/S 80G AND, THEREFORE, DEDUCTION U/S 80G IS ALLOWABLE WHEREAS THE FACTS ARE OTHERWISE. THE ASSESSEE HAS N OT MADE ANY DONATION BUT HAS CONTRIBUTED TO THE TRUST FOR A SPECIFIC PUR POSE I.E. TO INCUR THE EXPENDITURE TO GET BETTER MILK FROM MILK ANIMAL. VA RIOUS CASE LAWS RELIED UPON BY THE ASSESSEE ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. WE ARE NOT GETTING INTO DETAILS IN RESPECT OF THOSE CASES AS THEY HAVE ALREADY BEEN MENTIONED IN THE WRITTEN SUBMISSIONS WHICH ARE REPR ODUCED HEREIN ABOVE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE HOLD T HAT THE EXPENDITURE/CONTRIBUTION MADE BY ASSESSEE IS ALLOWA BLE AS BUSINESS EXPENDITURE. ACCORDINGLY, THE ADDITION MADE AND CON FIRMED BY LOWER AUTHORITIES IS DELETED. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ISSUE IN QUESTION IS COVERED IN FAVO UR OF THE ASSESSEE BY THE EARLIER DECISIONS OF THE COORDINATE BENCHES IN ASSE SSEES OWN CASE. RESPECTFULLY FOLLOWING THE EARLIER DECISIONS OF THE COORDINATE BENCHES, THE CONTRIBUTION OF RS. 1,19,39,836/- MADE BY THE ASSES SEE TO SPARSH TRUST IS ACCORDINGLY ALLOWED AS AN ELIGIBLE BUSINESS EXPENDI TURE UNDER SECTION 37(1) OF THE ACT. THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 13/ 06 /2016 PILLAI ITA NO. 850/JP/14 JAIPUR ZILA DUGDH UTPADAK SAHKARI SANGH VS. DCIT , CIRCLE-6, JAIPUR 6 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE JAIPUR ZILA DUNGDH UTPADAK SAHK ARI SANGH LTD. 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 850/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR