THE DCIT(EXEMPTION), Bhopal V. M/s. INDORE DEVELOPMENT AUTHORITY, Indore

ITA 870/IND/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7145 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 23-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Charitable institution; Rule of consistency; Earning of tax free income; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 14A; 37(1); 12A; 12AA; 10B; 250; 143(2); 37; 12; 11; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.847/IND/2016 ASSESSMENT YEARS: 2011-12 INDORE DEVELOPMENT AUTHORITY, IDA BUILDING,7, RACE COURSE ROAD, INDORE / VS. DCIT-5(1) INDORE ( APPELLANT ) (RE VENUE) PAN: AAAJI0103J ITA NO.870/IND/2016 ASSESSMENT YEAR: 2011-12 DCIT- (EXEMPTION) BHOPAL / VS. INDORE DEVELOPMENT AUTHORITY, IDA BUILDING,7, RACE COURSE ROAD, INDORE (RE VENUE) ( RESPONDENT ) PAN: AAAJI0103J ITA NO.1355/IND/2016 ASSESSMENT YEARS: 2012-13 INDORE DEVELOPMENT AUTHORITY, IDA BUILDING,7, RACE COURSE ROAD, INDORE / VS. DCIT-5(1) INDORE ( APPELLANT ) (RE VENUE) INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 2 PAN: AAAJI0103J APPELLANT BY SHRI ANIL KAMAL GARG & ARPIT G AUR, CA S RE VENUE BY SMT . ASHIMA GUPTA, CIT - DR DATE OF HEARING: 23.09.2019 DATE OF PRONOUNCEMENT: 31.10.2019 / O R D E R PER MANISH BORAD, A.M: THE ABOVE CAPTIONED CROSS APPEALS FOR A.Y. 2011-12 & ASSESSEES APPEAL FOR 2012-13 ARE DIRECTED AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-II, INDORE, (IN SHORT CIT(A)), DATED 31.05.2016 AND 16.09.2016 WHICH IS ARISING OU T OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER C ALLED AS THE ACT) FRAMED ON 30.03.2014 AND 26.03.2015 BY DCIT- 5(1), INDORE & ACIT (EXEMPTION) (CIRCLE) BHOPAL RESPECTIVELY. 2. AS THE ISSUE RAISED IN ALL THESE APPEALS ARE SIM ILAR, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. FOR THE PURPOSE OF ADJUDICATION OF THE COMMON IS SUE WE WILL TAKE THE FACTS FOR A.Y. 2011-12 AS THE BASIS. 4. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS A LOCAL AUTHORITY CONSTITUTED U/S. 38 O F THE MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973 . THE MAIN OBJECT OF THE ASSESSEE AUTHORITY [INDORE DEVELOPMEN T AUTHORITY OR IN INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 3 SHORT, THE IDA] IS TO PREPARE AND IMPLEMENT SCHEM ES FOR DEVELOPMENT, IMPROVEMENT AND MAINTENANCE OF LAND AN D OTHER REAL ESTATE IN THE NOTIFIED TOWN I.E. INDORE. THE ASSE SSEE AUTHORITY FURNISHED ITS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2011-12, U/S. 139 OF THE INCOME-TAX ACT, 1961, ON 13-03-2012 DECLARING TOTAL INCOME OF RS. NIL AFTER CLAIMING EXEMPTION UN DER SEC. 11 & 12 OF THE ACT. 5. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY AND NOTICES U/S. 143(2) AND 142(1) WERE SERVED UPON THE ASSESSE E. THE ASSESSEE MADE COMPLIANCE OF ALL SUCH NOTICES BY MAKING WRITT EN SUBMISSIONS AND BY PRODUCING BOOKS OF ACCOUNT AND O THER DOCUMENTS. ASSESSEE FURNISHED COPY OF AUDIT REPORT IN FORM NO. 10B OBTAINED BY IT UNDER SECTION 12A(B) OF THE INCO ME-TAX ACT, 1961 AND COPY OF AUDITED FINANCIAL STATEMENTS PERT AINING TO THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER COM PLETED THE ASSESSMENT U/S.143(3) OF THE INCOME-TAX ACT, 1961 , ON 30-03- 2014, BY DETERMINING TOTAL INCOME OF THE ASSESSEE A UTHORITY AT RS.36,88,67,656/- AS AGAINST THE RETURNED INCOME OF RS. NIL THEREBY RESULTING INTO ADDITIONS OF RS.36,88,67,656 /- IN THE RETURNED INCOME OF THE ASSESSEE AUTHORITY ON FOLLOW ING COUNTS: SNO. DESCRIPTION AMOUNT 1 DISALLOWANCE OF THE EXEMPTION UNDER SS. 11 & 12 BY HOLDING THE ENTIRE NET PROFIT SHOWN IN P&L ACCOUNT AS THE TAXABLE INCOME OF THE APPELLANT AUTHORITY 18,81,37,048 2 ADDITION BY MAKING 4/5 TH DISALLOWANCE 15,73,65,419 INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 4 OUT OF CITY ENVIRONMENTAL EXPENSES CLAIMED AT RS.19,67,06,774/- BY HOLDING THE SAME AS IN THE NATURE OF CAPITAL EXPENDITURE 3 ADDITION ON ACCOUNT OF DISALLOWANCE OF GOVERNMENT AUDIT FEES BY HOLDING THE SAME AS PERTAINING TO EARLIER YEARS 1,67,93,500 4 ADDITION BY WAY OF DISALLOWANCE OF DONATION EXPENSES 31,27,208 5 ADDITION BY DISALLOWING EMPLOYEES REMUNERATION AND BENEFITS BY HOLDING THE PROVISION MADE AS IN THE NATURE OF CONTINGENT LIABILITY 21,27,835 6 ADDITION ON ACCOUNT OF DEPRECIATION 13,10,185 7 ADDITION ON ACCOUNT OF DISALLOWANCE U/S. 14A 6,461 TOTAL ADDITIONS 36,88,67,656 AGAINST THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A)-II, INDORE. THE LD. CIT(A) DI SPOSED OFF THE APPEAL OF THE ASSESSEE GIVING PARTIAL RELIEF.HOWEVER, IN R ESPECT OF CLAIM OF EXEMPTION UNDER SS.11 & 12, THE LD. CIT(A), AT PARA 3.2, PAGE NO. 6 OF HIS ORDER, HAS GIVEN A FINDING THAT THE ISSUE R EGARDING GRANT OF EXEMPTION OF INCOME SHALL BE RE-EXAMINED IF THE HON 'BLE MP HIGH COURT GIVES A DECISION IN FAVOUR OF THE APPELLANT A UTHORITY FOR GRANT OF EXEMPTION UNDER S. 12A/12AA OF THE ACT. LIKEWISE , IN RESPECT OF THE ISSUE OF DEPRECIATION, THE LD. CIT(A) DISMISSED THE GROUND BY GIVING A FINDING THAT THE SIMILAR ISSUE FOR EARLIER YEARS IS PENDING FOR ADJUDICATION BEFORE THE HON'BLE MP HIGH COURT. 6. NOW BOTH THE REVENUE AND ASSESSEE ARE IN CROSS A PPEAL BEFORE US FOR A.Y.2011-12. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 5 7. WE WILL FIRST TAKE UP REVENUES APPEAL VIDE ITAN O.870/IND/2016 WHEREIN FOLLOWING GROUNDS ARE AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION O F RS.15,73,65,419/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF SOME EXPENSES BEING CAPITAL IN NATU RE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION O F RS.21,27,835/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF DISALLOWANCE OF PROVISIONAL EXPENSES CLAIMED UNDER HEAD EMPLOYEES REMUNERATION AND BENEFITS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION O F RS.6,461 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLO WANCE OF EXPENSES U/S 14A. 4. THE REVENUE RESERVES THE RIGHT TO ADD, URGE OR A LTER ALL OR ANY OTHER GROUND/GROUNDS ON OR BEFORE THE DATE OF HEARI NG. 8. AS REGARDS GROUND NO.1 OF REVENUES APPEAL FOR A .Y.2011-12 RELATING TO DELETION OF ADDITION OF RS.15,73,65,419 /- MADE BY THE LD. AO ON ACCOUNT OF DISALLOWANCE OF SUM EXPENSES B EING CAPITAL IN NATURE. BRIEF FACTS ARE THAT IN THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS.19,67,06,774/- IS DEBITED UNDER THE HE AD CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES . IT WAS CONTENDED BY THE ASSESSEE BEFORE THE LD. AO THA T THESE EXPENSES ARE DONE FOR THE DEVELOPMENT OF THE CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION ON THE DIRECTION OF THE STATE GOVERNMENT AND THUS THESE AR E PART OF THE REVENUE EXPENDITURE. LD. AO HOWEVER WAS NOT SATISFIED AND TREATED THE EXPENDITURE AS CAPITAL IN NATURE AND ALLOWED THE EXPENSES TO THE EXTENT OF 1/5 TH OF THE INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 6 TOTAL EXPENSES, THEREBY GIVING BENEFIT OF EXPENDITU RE OF RS.3,93,41,355/- AND DISALLOWED THE REMAINING 4/5 TH AMOUNT AT RS.15,73,65,419/-. THE ASSESSEE SUCCEEDED IN GETTING RELIEF FROM LD. CIT(A) AND THE IMPUGNED DISALLOWANCE WAS DELETED. 9. LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF THE LD. AO AND IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS ENGAGED IN DEVELOPMENT OF COLONIES. NONE OF THE ALL EGED EXPENSES ARE HAVING ANY NEXUS WITH THE PROJECTS UNDERTAKEN BY THE ASSESSEE I.E. INDORE DEVELOPMENT AUTHORITY (IDA). THE CLAIM OF EXPENSES IS ALLOWED O NLY IF THEY ARE INCURRED FOR EARNING THE REVENUE. SINCE TH E ALLEGED EXPENSES HAVE NO CORRELATION WITH THE PROJE CT UNDERTAKEN BY THE ASSESSEE, THE SAME SHOULD HAVE BE EN DISALLOWED. 10. PER CONTRA LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY ARGUED REFERRING TO THE FOLLOWING WRITTEN SUBMISSIO NS: 1. THAT, THE ASSESSEE AUTHORITY IS A STATUTORY AUTH ORITY CONSTITUTED UNDER SECTION 38 OF 'MADHYA PRADESH NAG AR TATHA GRAM NIVESH ADHINIYAM, 1973', UNDER A NOTIFICATION NO. 1688- XXXII-77 ISSUED BY THE GOVERNMENT OF MADHYA PRADESH W.E.F. 13-02-1974. 2. THAT, THE PRIME OBJECT OF THE ASSESSEE IS TO IMP LEMENT DEVELOPMENT PLAN, PREPARE ONE OR MORE TOWN DEVELOPM ENT SCHEMES AND DEVELOPMENT OF LAND FOR THE PURPOSE OF EXPANSION OR IMPROVEMENT OF THE AREA SPECIFIED IN THE NOTIFIC ATION. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 7 3. THAT, IN FURTHERANCE OF ITS OBJECTS OF DEVELOPME NT AND IMPLEMENTATION OF VARIOUS SCHEMES, THE ASSESSEE AUT HORITY ACQUIRES LAND FROM PUBLIC UNDER THE PROVISIONS OF LAND ACQUISITION ACT, 1894 FOR THE COMPENSATION DETERMIN ED IN ACCORDANCE WITH SUCH LAND ACQUISITION ACT, 1894. AF TER DEVELOPMENT OF THE SCHEMES, THE ASSESSEE AUTHORITY PART WITH THE LAND AND BUILDING SO DEVELOPED IN THE SCHEMES I N ACCORDANCE WITH THE RULES MADE BY THE STATE GOVERNM ENT IN THIS BEHALF BY VIRTUE OF SECTION 58 OF THE MADHYA PRADES H NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973. THE ASSESSEE AUT HORITY ALSO UNDERTAKES TO CARRY OUT THE DEVELOPMENT WORK O F GENERAL IN NATURE WHICH IS UTILIZED BY PUBLIC AT LARGE. 4. THAT, ONE OF THE PRIME OBJECTIVES OF THE ASSESSE E AUTHORITY IS TO ENSURE PRESERVATION OF ENVIRONMENT AND DEVELOPME NT OF THE NOTIFIED AREA IN A PLANNED MANNER. IN PURSUANCE OF SUCH OBJECTIVE, THE ASSESSEE AUTHORITY HAD CONSISTENTLY BEEN INCURRING EXPENDITURE ON BUILDING OF BRIDGES, DEVEL OPMENT OF ROADS, GARDENS, STREET LIGHTING, CONSTRUCTION OF AD MINISTRATIVE OFFICES FOR THE GOVERNMENT, ETC IN THE NOTIFIED ARE A. 5. THAT, DURING THE RELEVANT PREVIOUS YEAR, THE ASS ESSEE AUTHORITY INCURRED AND CLAIMED EXPENSES UNDER THE H EAD 'CITY ENVIRONMENTAL DEVELOPMENT & PRESERVATION EXPENSES', AGGREGATING TO RS.19,67,06,774/- UNDER VARIOUS SUB- HEADS AS PER THE DETAILS GIVEN AT SCHEDULE-20 OF THE AUDITED FINANCIAL STATEMENTS [KINDLY REFER PB PAGE NO. 24]. 6. YOUR HONOURS, THE AO GROSSLY ERRED IN HOLDING TH AT THE EXPENSES INCURRED BY THE ASSESSEE AUTHORITY UNDER T HE HEAD CITY ENVIRONMENTAL & DEVELOPMENT EXPENSES ARE OF CAPITAL NATURE. THE AO FURTHER HELD THAT SUCH EXPENDITURE I S NOT AN ITEM OF SALE OR REVENUE GENERATING ITEM. AFTER GIVING TH ESE FINDINGS, THE AO DISALLOWED THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE AUTHORITY UNDER THE HEAD 'CITY ENVIRONMENT AL EXPENSES' AT RS.23,10,17,503/- AND ADDED TO THE TOT AL INCOME OF THE ASSESSEE AUTHORITY. 7. BEING AGGRIEVED WITH THE ADDITION MADE BY THE AO , THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A), VIDE PARA 4.2 TO 4.2.3 AT PAGE NO. 9 TO 11 OF HIS O RDER, WAS PLEASED TO DELETE THE ENTIRE ADDITION MADE ON THIS COUNT. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 8 8. THE ADDITION SO DELETED BY THE LD. CIT(A) DESERV ES TO BE MAINTAINED IN VIEW OF THE FOLLOWING : I) THE AO HAS NOT DISPUTED THAT THE ASSESSEE AUTHOR ITY HAS GENUINELY INCURRED THESE EXPENDITURE IN PURSUANCE O F ITS OBJECTIVES FOR WHICH IT HAS BEEN CONSTITUTED UNDER AN ENACTMENT OF STATE LEGISLATION. THE AO HAS ALSO NOT DOUBTED THE GENUINENESS OF THE INCURRENCE OF EXPEND ITURE AS CLAIMED BY THE ASSESSEE AUTHORITY. II) THE EXPENSES INCURRED BY THE ASSESSEE AUTHORITY UNDER THE HEAD CITY ENVIRONMENTAL & DEVELOPMENT EXPENSES DO NOT HAVE ANY CONNECTION WITH THE VARIOUS SCHEMES DEVELOPED BY THE ASSESSEE. IN OTHER WORDS, BY INCUR RING SUCH EXPENDITURE, THE STOCK OF THE ASSESSEE AUTHORI TY DOES NOT GET AFFECTED. FURTHER, THE ENTIRE EXPENDITURE H AVE BEEN INCURRED FOR THE DEVELOPMENT OF THE NOTIFIED AREA W ITHOUT HAVING ANY ACCRETION TO ITS ASSET OR WITHOUT CREATI NG ANY BENEFIT OF ENDURING NATURE. III) THE ASSESSEE AUTHORITY IS REQUIRED TO INCUR TH ESE EXPENSES FOR THE GENERAL DEVELOPMENT AND MAINTENANCE OF THE CITY OF INDORE. FOR EXAMPLE, THE DEVELOPMENT OF ROADS SUCH AS MR-3, MR-10 ETC., CENTRAL LIGHTING ON VARIOUS MAIN ROADS, PLANTATION ON VARIOUS ROADS, ROB JUNI INDORE RAILWA Y CROSSING, CONSTRUCTION OF OPD AT M.Y. HOSPITAL, CONSTRUCTION OF COLLECTORATE ADMINISTRATIVE BLOCK E TC. YOUR HONOURS, BY NO STRETCH OF IMAGINATION, THE EXPENDIT URE INCURRED BY THE ASSESSEE AUTHORITY ON CONSTRUCTION OF OPD AT MYH OR CONSTRUCTION OF ADMINISTRATIVE BUILDING OF COLLECTORATE CAN BE CONSIDERED TO BE A N EXPENDITURE GIVING ENDURING BENEFIT TO THE ASSESSEE AUTHORITY. LIKEWISE, AFTER CONSTRUCTING AUDITORIUM AND HAVING IT HANDED OVER TO THE MUNICIPAL CORPORATION, THE ASSESSEE AUTHORITY WAS NOT HAVING VESTED INTEREST O R OWNERSHIP IN THE SAID AUDITORIUM. THE ASSESSEE AUTH ORITY IS NEITHER ELIGIBLE NOR IT IS DERIVING ANY REVENUE FROM SUCH AUDITORIUM. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 9 V) IT SHALL BE PERTINENT TO NOTE THAT THE EXPENSES UNDER THE HEAD CITY ENVIRONMENTAL & DEVELOPMENT EXPENSES HA VE BEEN REGULARLY INCURRED BY THE ASSESSEE AUTHORITY F ROM THE PAST SEVERAL YEARS. FOR SUCH ASSERTION, KIND ATTENT ION OF YOUR HONOURS IS INVITED TO THE COPIES OF THE RELEVA NT SCHEDULE OF CITY ENVIRONMENTAL & DEVELOPMENT EXPEN SES AS APPEARING IN THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE AUTHORITY FOR THE PREVIOUS YEARS RELEVANT TO A.Y. 2009-10, A.Y. 2010-11, A.Y. 2012-13 AND A.Y. 2013-1 4, AS PLACED AT PAGE NO. 238 TO 241 OF OUR PAPER BOOK. VI) IT SHALL ALSO BE WORTHWHILE TO NOTE THAT THE ASSESS EE AUTHORITY IS CONSISTENTLY UNDERGOING SCRUTINY ASSES SMENTS UNDER S.143(3) OF THE ACT FOR OTHER ASSESSMENT YEAR S AS WELL AND IN ALL SUCH YEARS, THE EXPENSES INCURRED B Y THE ASSESSEE AUTHORITY UNDER THE HEAD CITY ENVIRONMENT AL & DEVELOPMENT EXPENSES HAVE BEEN HELD AS THAT OF REV ENUE IN NATURE BY THE DEPARTMENT AND, CONSEQUENTLY, THE SAME HAVE FULLY BEEN ALLOWED WITHOUT ANY INTERFERENCE. I T SHALL BE APPRECIATED THAT EVEN FOR THE SUBSEQUENT ASSESSM ENT YEARS I.E. A.Y. 2012-13 AND A.Y. 2013-14, NO DISALL OWANCE ON THIS COUNT HAS BEEN MADE BY THE CONCERNING AOS. FOR SUCH ASSERTION, KIND ATTENTION OF YOUR HONOURS IS I NVITED TO THE COPIES OF THE ASSESSMENT ORDERS FOR TWO YEARS B EFORE AND AFTER THE ASSESSMENT YEAR UNDER CONSIDERATION I .E. FOR THE A.Y. 2009-10, A.Y. 2010-11, A.Y. 2012-13 AND A. Y. 2013-14 WHICH HAVE BEEN PLACED IN OUR COMPILATION A T PAGE NO. 71 TO 117]. VII) IT SHALL BE PERTINENT TO NOTE THAT THERE HAS B EEN NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE PREVAILI NG IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND THOSE PREVA ILING IN THE AFORESAID ASSESSMENT YEARS. IN SUCH A SITUAT ION, TAKING AN ADVERSE VIEW IN THE ASSESSMENT YEAR UNDER CONSIDERATION BY THE LEARNED AO IS COMPLETELY UNJUS TIFIED AND UNWARRANTED. FOR SUCH PROPOSITION, WE PLACE REL IANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHA SOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) . INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 10 11. LD. COUNSEL FOR THE ASSESSEE ALSO REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 29 REA D WITH RULE 18(4) OF THE APPELLATE TRIBUNAL RULES,1963 FIL ED IN SUPPORT OF THE CLAIM THAT THE EXPENDITURE INCURRED UNDER THE CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES ARE REVENUE IN NATURE. THE PRAYER MADE BY THE ASSESSEE REQUESTING FOR DELETION OF ADDITIONAL EVID ENCES READS AS FOLLOWS: IN THE ABOVE CONTEXT, IT IS MOST HUMBLY SUBMITTED A ND PRAYED AS UNDER: 1. THAT, TWO SEPARATE APPEALS AGAINST THE APPELLATE ORDERS DATED 31-05-2016 AND 16- 09-2016 PASSED BY THE LEAR NED COMMISSIONER OF INCOME-TAX (APPEALS)-II, INDORE, HA VE BEEN PREFERRED BY THE REVENUE BEFORE THIS HON'BLE BENCH FOR THE CAPTIONED ASSESSMENT YEARS. ONE OF THE GROUNDS OF A PPEAL RAISED BY THE REVENUE IN BOTH THE APPEALS PERTAINS TO THE DISALLOWANCE OF CITY ENVIRONMENTAL DEVELOPMENT & PRESERVATION EXPENSES DELETED B THE LD. CIT(A). 2. THAT, DURING THE COURSE OF LAST HEARING THIS HON 'BLE BENCH HAD DIRECTED THE UNDERSIGNED TO FURNISH DOCUMENTARY EVIDENCES (WORK ORDERS FROM STATE/ CENTRAL GOVERNMENT ETC.) I N SUPPORT OF THE CLAIM FOR 'CITY ENVIRONMENTAL DEVELOPMENT & PRESERVATION EXPENSES' . 3. ACCORDINGLY, IN COMPLIANCE OF THE DIRECTIONS ISS UED B THIS HON'BLE BENCH, THE ASSESSEE AUTHORITY, IN ORDER TO ESTABLISH ITS CLAIM FOR DEDUCTION OF THE AFORESAID EXPENSES, WISH TO FURNISH CERTAIN DOCUMENTARY EVIDENCES. THESE DOCUMENTARY EV IDENCES ARC QUITE RELEVANT FOR ADJUDICATING THE ISSUE IN HA ND BY YOUR HONOURS AND THEREFORE, THE APPELLANT WISH TO FILE S UCH DOCUMENTS AS ADDITIONAL EVIDENCES UNDER RULE 29 REA D WITH RULE 18(4) OF THE APPELLATE TRIBUNAL RULES, 1963. 12. FROM PERUSAL OF THE ADDITIONAL EVIDENCES PLACED BEFORE US, WE ARE INCLINED TO ADMIT THEN FOR ADJUDICATION SINCE INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 11 THEY GO TO THE ROOT CAUSE OF THE ISSUE WHICH WILL E NABLE US TO ADJUDICATE THE FACTS RELEVANT TO THE GROUNDS RAI SED BEFORE US. 13. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE REVENUE HAS CHALLENGED THE FINDING O F LD. CIT(A) DELETING, THE DISALLOWANCE OF RS.15,73,65,419/- ON ACCOUNT OF 4/5 TH DISALLOWANCE OUT OF CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES. 14. WE OBSERVE THAT THE PRIMARY OBJECT OF THE ASSES SEE IS TO IMPLEMENT DEVELOPMENT PLAN, PREPARE ONE OR MORE TOWN DEVELOPMENT SCHEMES AND DEVELOP OF LAND IN ACCORDAN CE WITH RULES MADE BY THE STATE GOVERNMENT, BY VIRTUE OF SECTION 58 OF THE MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973. THE ASSESSEE AUTHORITY ALSO UNDERTAKES TO CARRY OUT THE DEVELOPMENT WORK OF GEN ERAL IN NATURE WHICH IS UTILIZED BY THE PUBLIC AT LARGE. SUCH EXPENSES HAVE BEEN CONSISTENTLY INCURRED BY THE ASS ESSEE IN THE PAST ALSO AND SUCH CLAIM HAVE BEEN ALLOWED B Y THE REVENUE AUTHORITIES AFTER CONDUCTING SCRUTINY ASSES SMENT PROCEEDINGS U/S 143(3) OF THE ACT FOR THE YEAR UNDE R APPEAL. 15. WE OBSERVED THAT LD. CIT(A) DELETED THE IMPUGNE D DISALLOWANCE GIVING FOLLOWING OF FACTS: INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 12 4.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES O F THE CASE, THE FINDING OF THE AO, THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT AND ALSO VARIOUS DOCUMENTS PLACED ON RECORD. AFTER CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THE AO HAS NOT BEEN JUSTIFIED IN MAKING THE IMPUGNED ADDITION. IT IS FOUND THAT IN THE INSTANT CASE, THE AO HAS NOT DOUBTED THE GENUINENESS OF THE CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES AGGREGATING TO RS.19,67,06,774/- CLAIMED BY THE APPELLANT. IT I S ALSO NOT THE CASE OF THE AO THAT THESE EXPENSES HAV E NOT BEEN INCURRED BY THE APPELLANT IN PURSUING ITS CORE ACTIVITIES. THE AO HAS ONLY DISPUTED THE NATUR E OF THE EXPENDITURE CLAIMED BY THE APPELLANT AS REVENUE. ACCORDING TO THE AO, THE EXPENDITURE IS THAT OF CAPITAL IN NATURE. THE AO WITHOUT ASSESSING ANY BASIS HELD THAT ONLY 1/5 TH OF THE, TOTAL EXPENDITURE OF RS.19,67,06,774/- CLAIMED BY THE APPELLANT 1S ALLOWABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO THE APPELLANT, THE R EMAINING 4/5 TH PART OF THE EXPENDITURE HAS NEVER BEEN ALLOWED TO IT IN THE SUBSEQUENT YEARS. 4.2.2. I HAVE GONE THROUGH THE AUDITED INCOME & EXPENDITURE ACCOUNT OF THE APPELLANT FOR THE RELEVA NT ASSESSMENT YEAR WHICH IS PLACED ON ' RECORD. I FIND THAT IN THE AUDITED ACCOUNTS, THE APPELLANT HAS CLAIMED EXPENDITURE AGGREGATING TO RS 4,10,97,853/ - AND RS.82,78,48,077/RESPECTIVELY UNDER THE HEAD 'LAND ACQUISITION AND DIVERSION EXPENSES FOR SCHEMES' AND 'DEVELOPMENT AND IMPLEMENTATION EXPENSES FOR CHEMES'. BESIDES CLAIMING THESE EXPENDITURE, THE APPELLANT HAS ALSO CLAIMED EXPENDITURE AGGREGATING TO RS.19,67,06,774/ - UNDER THE HEAD CITY ENVIRONMENTAL DEVELOPMENT & PRESERVATION EXPENSES'. ONGOING THROUGH THE DETAILS OF DEVELOPMENT & IMPLEMENTATION EXPENSES FOR SCHEMES, AS GIVEN IN SCHEDULE 19 OF THE AUDITED FINANCIAL STATEMENTS, IT IS FOUND THAT THE APPELLAN T HAS CLAIMED EXPENSES UNDER THE VARIOUS SUB-HEADS INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 13 SUCH AS ROADS, CULVERTS, UNDERGROUND SERVICES, LANDSCAPING AND GARDEN DEVELOPMENT, CONSTRUCTION OF BUILDING, ARCHITECT FEES ETC. THE CONTENTION OF THE APPELLANT HAS BEEN FOUND TENABLE TO THE EXTENT THAT WHENEVER EXPENDITURE OF DEVELOPMENT OF VARIOUS SCHEMES PROMOTED BY THE APPELLANT AUTHORITY ARE INCURRED, THE SAME ARE CLASSIFIED UNDER A DIFFERENT HEAD VIZ. 'DEVELOPMENT AND IMPLEMENTATION EXPENSES FOR SCHEMES' AND WHILE MAKING THE VALUATION OF THE INVENTORY, THESE EXPENSES, BEING OF RECOVERABLE NATURE, ARE TAKEN INTO CONSIDERATION. IT IS ALSO OBSERVED THAT UNDER THE HEAD 'CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES' ALSO, THE APPELLANT HAS CLAIMED THE EXPENDITURE ON ROADS, CULVERTS, STREET LIGHTING, CONSTRUCTION OF BUILDING , FEES TO ARCHITECTS, ETC .. IT IS ALSO OBSERVED THAT THE AO HIMSELF IN THE BODY OF THE ASSESSMENT ORDER, HAS GIVEN A FINDING THAT THE FACILITIES ON WHICH SUCH C ITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES HAVE BEEN INCURRED ARE NOT AN ITEM OF SALE OR REVENUE GENERATING ITEM. THUS, BY GIVING THIS FINDING, THE AO HAS IMPLIEDLY ACCEPTED THE CLAIM OF THE APPELLANT THAT THESE EXPENDITURE ARE IN THE NAT URE OF SUNK COST IN THE HANDS OF THE APPELLANT. I FIND FORCE IN THE CONTENTION OF THE APPELLANT THAT THESE EXPENDITURE HAVE BEEN INCURRED BY THE APPELLANT IN PURSUANCE OF' ITS MAIN OBJECTIVE OF DEVELOPMENT OF NOTIFIED AREA. FURTHER, BY INCURRING THESE EXPENDIT URE, THE APPELLANT AUTHORITY WOULD NOT BE DERIVING ANY REVENUE IN FUTURE AS IS THE FINDING OF THE AO HIMSE LF. FURTHER, THESE EXPENDITURE CANNOT BE SAID TO BE INCOME GENERATING APPARATUS OF THE APPELLANT AUTHORITY AND IN MY VIEW, BY INCURRING THESE EXPENDITURE, THE APPELLANT WOULD NOT BE DERIVING AN Y BENEFIT OF ENDURING NATURE. 4.2.3 I ALSO FIND THAT THESE EXPENDITURE HAVE CONSISTENTLY BEEN CLAIMED BY THE APPELLANT FOR THE LAST MANY YEARS AND EVEN IN THE SUBSEQUENT EARS THESE EXPENDITURE HAVE BEEN CLAIMED BY THE APPELLANT. IT INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 14 HAS BEEN CLAIMED THAT THE ASSESSMENTS OF THE APPELLANT SINCE A.Y. 2003-04 ARE CONSISTENTLY BEING FRAMED UNDER S. 143(3) OF THE I.T.ACT,1961 AND IN N ONE OF THE ASSESSMENTS, ANY ADVERSE VIEW ON THIS ISSUE HAS BEEN TAKEN BY ANY OF THE AOS. IT HAS FURTHER BE EN CONTENDED THAT ALL THESE ASSESSMENT ORDERS WERE ALS O SUBJECT MATTER OF APPEALS BEFORE THE APPELLATE AUTHORITIES. FROM THE COPIES OF THE ASSESSMENT ORDE RS OF VARIOUS OTHER ASSESSMENT YEARS FILED BY THE APPELLANT BEFORE ME, I FOUND THAT IN NONE OF THE OT HER ASSESSMENT YEARS, ANY PART OF THESE EXPENDITURE HAV E BEEN DISALLOWED FOR THE REASONS HAS BROUGHT DOWN BY THE AO IN THE INSTANT CASE. I FIND MERIT IN THE CONTENTION OF THE APPELLANT THAT IN THE INCOME-TAX PROCEEDINGS, THE PRINCIPLE OF RESJUDICATED DOES NOT APPLY BUT CERTAINLY THE PRINCIPLE OF CONSISTENCY APPLIES. ACCORDINGLY, IN ABSENCE OF ANY CHANGE IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, AN ASSESSING OFFICER CANNOT BE PERMITTED TO TAKE A DIFFERENT VIE W FROM THAT CONSISTENTLY TAKEN BY HIS PREDECESSORS. I N VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT THERE WAS NO JUSTIFICATION ON THE PART OF AO IN MAK ING ADDITION OF RS.15,73,65,419/- IN THE APPELLANT'S INCOME BY MAKING AD-HOC DISALLOWANCE OF 4/5 TH OF CITY ENVIRONMENTAL DEVELOPMENT AND PRESERVATION EXPENSES CLAIMED BY THE APPELLANT. ACCORDINGLY, THE ADDITION IS DIRECTED TO BE DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 16. FROM PERUSAL OF THE FINDING OF THE LD. CIT(A) A ND THE UNDISPUTED FACT THAT IN THE ASSESSMENT PROCEEDINGS COMPLETED FOR THE PRECEDING YEARS SUCH CLAIM OF EXP ENSES HAVE BEEN CONSISTENTLY ALLOWED AND APPLYING SUCH PRINCIPLE OF CONSISTENCY OUGHT TO BE ALLOWED SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CAS E IN INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 15 THE YEAR UNDER APPEAL BEFORE US. LD. DEPARTMENTAL REPRESENTATIVE ALSO FAILED TO REBUT THE FINDING OF LD. CIT(A) AND ALSO COULD NOT CONTROVERT THE FACT THAT THE LD. AO HAS HIMSELF ALLOWED 1/5 TH OF THE EXPENSES AS REVENUE IN NATURE WITHOUT MENTIONING THE PROVISIONS OF LAW WHI CH ALLOWS SUCH CLAIM. THE ALLEGED EXPENSES ARE NOT PREOPERATIVE EXPENDITURE WHICH NEEDS TO BE ALLOWED @ 1/5 TH FOR 5 YEARS. THE SAID EXPENSES CAN BE EITHER TERME D AS NON BUSINESS EXPENSES OR BUSINESS EXPENDITURE. I F THEY ARE TERMED AS BUSINESS EXPENDITURE THEN THEY CAN BE EITHER TERMED AS REVENUE OR CAPITAL EXPENDITURE. NO SUCH DISTINCTION HAS BEEN MADE BY THE LD. AO ABOUT THE A LLEGED EXPENSES. 17. FURTHER, IT IS NOTEWORTHY THAT THE ASSESSEE COMPANY IS WORKING UNDER THE DIRECTION OF STATE GOVERNMENT. IT GETS THE POWER TO ACQUIRE THE LAND, DEVELOP HOUSING PROJ ECT AND OTHER AMENITIES FOR THE PUBLIC AT LARGE. SUCH LAND ARE ACQUIRED ON CONCESSIONAL RATES. MAJOR REASON FOR GI VING SUCH WIDE POWERS AND PROVIDING OF PRECIOUS LAND TO THE ASSESSEE AUTHORITY IS TO DEVELOP THE CITY IN A WELL - ORGANIZED MANNER KEEPING THE INTEREST OF PUBLIC AT LARGE. CONSTRUCTION OF FLYOVER, PARKS, CENTRAL LIGHTING ON VARIOUS MAIN ROADS, PLANTATION ON VARIOUS ROADS, CONSTRUCTION OF OPD AT M.Y. HOSPITAL ARE FEW OF SUC H WORK WHICH ARE FOR THE OVERALL DEVELOPMENT OF THE CITY A ND INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 16 PROVIDES FACILITY FOR THE PUBLIC. INCURRING OF SUCH EXPENSES INCREASES THE BRAND VALUE OF IDA AND ALSO POSES CONFIDENCE OF PUBLIC AT LARGE IN THE WORKING OF IDA . 18. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND ALSO LOOKING TO THE CONSISTENCY OF SU CH EXPENSES ALLOWED BY THE REVENUE AUTHORITIES IN THE PAST AS WELL AS IN THE FUTURE ASSESSMENT PROCEEDINGS AND AL SO BECAUSE THE IMPUGNED EXPENSES HAVE DIRECT BEARING W ITH THE OVERALL BUSINESS MODEL OF THE ASSESSEE, FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) WHO HAS D ELETED THE IMPUGNED DISALLOWANCE. GROUND NO.1 OF REVENUES APP EAL STANDS DISMISSED. 19. NOW WE TAKE THE GROUND NO.2 OF REVENUE APPEAL RELATING TO DELETION OF ADDITION OF RS.21,27,835/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF PROVISIONAL EXPENSES CLAIMED UNDER THE HEAD EMPLOY EES REMUNERATION AND BENEFITS. 20. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT DUR ING THE YEAR UNDER APPEAL UNDER THE HEAD EMPLOYEES REMUNERATION AND BENEFITS, THE ASSESSEE MADE CERTAI N ADJUSTMENT BY ADDING AN AMOUNT OF RS.72,70,135/- AS PROVISION OF SALARY AND THEREAFTER REDUCED THE ACTU AL EXPENDITURE OF RS.51,42,300/-. THE NET EFFECT OF IN CREASES INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 17 IN PROVISION AT RS.21,27,835/- WAS DISALLOWED BY TH E LD. AO TREATING IT TO BE A CONTINGENT LIABILITY. LD. CI T(A) DELETED THE ADDITION. NOW REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. 21. LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF TH E LD. AO. 22. PER CONTRA LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY ARGUED REFERRING TO THE FOLLOWING WRITTEN SUBMISSIO NS: DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE A UTHORITY HAS CLAIMED AN EXPENDITURE ON ACCOUNT OF EMPLOYEES REMU NERATION & BENEFITS FOR RS.11,89,51,088/- WHICH IS SHOWN U NDER SCHEDULE-23 OF EMPLOYEES REMUNERATION & BENEFITS OF THE AUDITED INCOME & EXPENDITURE ACCOUNT FOR THE RELEVA NT PREVIOUS YEAR. THE HEAD-WISE BREAK-UP OF SUCH EXPENDITURE IS GIVEN UNDER SCHEDULE-23 OF THE AUDITED INCOME & EXPENDITU RE ACCOUNT [KINDLY REFER PB PAGE NO. 25]. 16.02 FURTHER, A PROVISION OF RS.21,27,835/- ON ACC OUNT OF SALARY EXPENSES FOR THE MARCH MONTH OF THE RELEVANT PREVIOUS YEAR AT RS.72,70,135/- NET OF THE PROVISION FOR THE MARCH MONTH OF THE IMMEDIATELY PRECEDING PREVIOUS YEAR AT RS.51 ,42,300/-, HAS BEEN ADDED TO THE AFORESAID EXPENDITURE OF RS.11,89,51,088/-, THEREBY MAKING A TOTAL EXPENDITU RE OF RS.12,10,78,923/- ON ACCOUNT OF EMPLOYEES REMUNERAT ION & BENEFITS DURING THE RELEVANT PREVIOUS YEAR. 17.00 THE AO MADE AN ADDITION OF RS.21,27,835/- ON ACCOUNT OF CREATION OF PROVISIONS BY TOTALLY MISCON STRUING THE FACTS OF THE CASE THAT THESE ARE CONTINGENT LIABILI TIES AND ONLY ASCERTAINED LIABILITIES ARE ALLOWED UNDER THE PROVI SIONS OF THE INCOME-TAX ACT, 1961. 18.00 BEING AGGRIEVED WITH THE ADDITION MADE BY THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) . THE LD. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 18 CIT(A), VIDE PARA 7.2 AT PAGE NO. 19 OF HIS ORDER, WAS PLEASED TO DELETE THE ENTIRE ADDITION MADE ON THIS COUNT. 19.00 THE ADDITION SO DELETED BY THE LD. CIT(A) DES ERVES TO BE MAINTAINED IN VIEW OF THE FOLLOWING : I) THE ASSESSEE AUTHORITY HAS NOT DEBITED ANY CONTING ENT LIABILITY ON ACCOUNT OF SALARY OR ON ANY OTHER ACCO UNT IN ITS AUDITED INCOME & EXPENDITURE ACCOUNT FOR THE RELEVA NT PREVIOUS YEAR. THE AMOUNT OF RS.21,27,835/- IS ONLY AN ASCERTAINED LIABILITY OF THE ASSESSEE AUTHORITY WHI CH IS EXPLAINED IN THE ENSUING PARAS. II) IT IS SUBMITTED THAT THE PAYMENT POLICY OF THE ASSE SSEE AUTHORITY IN RESPECT OF SALARY TO ITS EMPLOYEES IS MARCH PAID IN APRIL, APRIL PAID IN MAY AND SO ON. THE ASSESSEE AUTHORITY UNDER SEPARATE LEDGER ACCOUNTS OF SALARY HEADS WITH VARIOUS GL-CODES VIZ. 927110-257 : SALARY TO MANAGEMENT STAFF, 927316-475 : SALARY TO PROJECT ST AFF, 927512-671: SALARY TO PLANNING STAFF, 927718-811: S ALARY TO FINANCE STAFF, 927914-8072: SALARY TO ADMINISTRA TION STAFF, 928119-278: SALARY TO LEGAL STAFF AND 928315 -474: SALARY TO ESTATE STAFF, USED TO RECORD THE SALARY O NLY ON PAYMENT BASIS. IN OTHER WORDS, THE SALARY TO ALL TH E STAFF SHOWN UNDER PART-A OF SCHEDULE-23 PERTAINS TO THE S ALARY OF MARCH MONTH OF PRECEDING PREVIOUS YEAR AND DOES NOT INCLUDE THE SALARY OF MARCH MONTH OF RELEVANT PREVI OUS YEAR. III) THUS, IN ORDER TO RECORD THE CORRECT EXPENDITURE ON MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE AUTHO RITY HAS MADE AN ADDITION OF RS.72,70,135/- ON ACCOUNT O F PROVISION OF SALARY FOR THE MONTH OF MARCH, 2011 AN D REDUCED A SUM OF RS.51,42,300/- ON ACCOUNT OF PROVI SION OF SALARY FOR THE MONTH SALARY OF MARCH, 2010, THER EBY GIVING A NET INCREASE OF RS.21,27,835/- TO THE OVER ALL EXPENDITURE OF SALARY. IV) YOUR HONOURS, IT SHALL BE OBSERVED THAT THE ASSESSE E AUTHORITY, IN ORDER TO MAINTAIN THE ACCOUNTING METH OD, HAS GIVEN SUCH TREATMENT TO THE SALARY EXPENSES CONSIST ENTLY OVER THE LAST MANY YEARS AND SUCH TREATMENT, BEING INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 19 PERFECTLY IN ACCORDANCE WITH THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE, HAS DULY BEEN ACCEPTED AN D ALLOWED BY THE INCOME-TAX AUTHORITIES IN THE SCRUTI NY ASSESSMENTS OF THE ASSESSEE FRAMED UNDER S.143(3) O F THE ACT FOR THE EARLIER ASSESSMENT YEARS AS WELL AS FOR THE SUCCEEDING ASSESSMENT YEARS AND IN V) NONE OF THE ASSESSMENT YEARS, THE TREATMENT GIVEN BY THE ASSESSEE AUTHORITY HAS BEEN DOUBTED BY THE DEPARTME NT [KINDLY REFER THE ASSESSMENT ORDERS PLACED AT PB PA GE NO. 71 TO 117]. IT SHALL BE APPRECIATED THAT EVEN FOR THE SUBSEQUENT ASSESSMENT YEARS, NO DISALLOWANCE ON THIS COUNT HAS BEEN MADE BY THE CONCERNING AOS. VI) THE PROVISIONS SO CREATED BY THE ASSESSEE AUTHORITY ARE NOT CONTINGENT LIABILITIES BUT THESE ARE ACTUAL AND ASCERTAINED LIABILITIES WHICH HAVE BEEN PAID OFF BY THE ASSESSEE AUTHORITY DURING THE NEXT MONTH FROM THE E ND OF THE RELEVANT PREVIOUS YEAR. 20.00 IT SHALL THUS BE APPRECIATED BY YOUR HONOURS THAT THE ASSESSEE AUTHORITY HAS GIVEN A CORRECT TRE ATMENT TO THE SALARY EXPENSES INCURRED BY IT AND THE TREAT MENT GIVEN BY IT AS REGARD TO PROVISION OF THE SALARY EX PENSES. NEEDLESS TO STATE THAT THE ENTIRE SALARY EXPENSES S HOWN IN THE AUDITED INCOME & EXPENDITURE ACCOUNT OF THE ASS ESSEE AUTHORITY ARE ASCERTAINED LIABILITIES OF THE ASSESS EE AUTHORITY WHICH HAVE BEEN PAID-OFF DURING THE NEXT MONTH FROM THE END OF THE RELEVANT PREVIOUS YEAR. 23. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RELATES TO DISALLOWANCE OF PRO VISION OF RS.21,27,835/-. THE LD. AO HAS TREATED AS CONTINGEN T LIABILITY WHEREAS THE ASSESSEE HAS CLAIMED IT TO BE ASCERTAIN ED LIABILITY. 24. THE LD. CIT(A) DELETED THE IMPUGNED ADDITION OB SERVING AS FOLLOWS: 7.2 I HAVE GONE THROUGH THE CONTENTS OF THE ASSESSM ENT INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 20 ORDER AND ALSO THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT. ON CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE APPELLAN T HAS MADE A PROVISION ON ACCOUNT OF SALARY FOR THE MONTH OF MARCH 2011 AT RS.72,70,135/- AND REVERSED THE PROVISION OF SALARY MADE BY IT IN PRECEDING PREVIOU S YEAR FOR THE MONTH OF MARCH 2010 AT RS.51,42,300/-, THEREBY GIVING A NET EFFECT ON THE PROVISION OF RS.21,27,835/-. I FOUND THAT SUCH TREATMENT ON ACCO UNT OF PROVISION FOR SALARY IS GIVEN BY THE APPELLANT CONSISTENTLY ON YEAR TO YEAR BASIS WHICH IS PERFECT LY IN ACCORDANCE WITH THE ACCOUNTING METHOD FOLLOWED BY I T. I ALSO FIND THAT THE PROVISION SO MADE BY THE APPEL LANT IS AN ASCERTAINED LIABILITY OF THE APPELLANT AND NO T A CONTINGENT LIABILITY AS WRONGLY CONSTRUED BY THE AO . I FOUND THAT THE ACCOUNTING TREATMENT OF PROVISION FO R SALARY HAS DULY BEEN ACCEPTED AND ALLOWED BY THE REVENUE IN THE SCRUTINY ASSESSMENTS OF THE APPELLAN T UNDER S.143(3) OF THE I.T.ACT,1961 FOR THE EARLIER ASSESSMENT YEARS AS WELL AS FOR THE SUBSEQUENT ASSESSMENT YEARS. THEREFORE, THE ADDITION SO MADE B Y THE AO BY TREATING THE PROVISION FOR SALARY AS CONTINGENT LIABILITY OF THE APPELLANT IS BASELESS A ND DEVOID OF MERIT HAS SUCH THE SAME IS DIRECTED TO BE DELETED. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. 25. FROM PERUSAL OF THE FINDING AS WELL AS GOING TH ROUGH PAPERS FILED IN THE PAPER BOOK, WE OBSERVE THAT SUCH WORKI NG OF MAKING PROVISION FOR THE EXPENSES AND REVERSING THE ACTUAL EXPENSES INCURRED HAS BEEN CARRIED OUT CONSISTENTLY FROM YEA R TO YEAR BASIS AND THE PROVISIONS ARE MADE AS PER THE WELL CALCULA TED ASCERTAINED LIABILITY. THERE MAY BE SOME EXCESS PROVISION IN SO ME YEARS AND MAY BE LESS PROVISION IN SAME YEARS BUT THE PROCESS KEEPS ON GOING INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 21 BECAUSE FOR THE PURPOSE OF MAINTAINING ACCOUNTS ON MERCANTILE BASIS PROVISIONING OF EXPENSES HAS TO BE MADE BY TH E ASSESSEE IN THE BOOKS OF ACCOUNT. THEREFORE, FINDING OF LD. CIT (A) NEEDS NO INTERFERENCE. THUS, GROUND NO.2 OF THE REVENUES AP PEAL IS STANDS DISMISSED. 26. APROPOS GROUND NO.3 AGAINST THE DELETION OF ADD ITION OF RS.6,461/- U/S 14A OF THE ACT. AT THE OUTSET, LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STANDS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE DELHI HI GH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT-VI (20 15) 9 TMI 238 (DEL.) SINCE NO EXEMPT INCOME WAS EARNED DURING THE YEAR. THUS, NO DISALLOWANCE WAS CALLED FOR U/S 14A OF THE ACT. 27. LD. DR COULD NOT CONTROVERT THE SUBMISSIONS MAD E BY THE LD. COUNSEL FOR THE ASSESSEE. 28. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. IN GROUND NO.3 REVENUE HAS CHALLENGED TH E DELETION OF DISALLOWANCE U/S 14A AT RS.6,461/-. THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS FOLLOWS: 9.2 I H AVE GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND ALSO THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT. AFTER CONSIDERING THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE INVESTME NT IN SHARES HAVE BEEN MADE BY THE APPELLANT IN THE EARLI ER YEARS. I ALSO FIND FORCE IN THE CONTENTION OF THE A PPELLANT INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 22 THAT THE INTEREST EXPENSES OF RS.12,36,761/ - INCURRED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATIO N HAVE NO NEXUS WITH THE INVESTMENT MADE B . IT IN TH E SHARES. I HAVE ALSO TAKEN A NOTE OF THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CHEMINVE ST LTD. VS. CIT-VI (20 15) 9 TMI 238 (DEL.) AS RELIED UPON BY THE APPELLANT THAT NO DISALLOWANCE UNDER THE PROVISIONS OF SECTION 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE. CONSIDERING THE ENTIRE SET OF FACTS, THE AO HAS NOT BEEN JUSTIFIED IN MAKING THE ADDITION BY INVOKI NG THE PROVISIONS OF SECTION 14A OF I.T.ACT, 1961. ACCORDI NGLY, THIS GROUND OF APPEAL IS ALLOWED. 29. WE FIND FORCE IN THE CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE AND THE FINDING OF LD. CIT(A) WHO WAS RIGH TLY FOLLOWED THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN CASE OF CHEMINVEST LTD. (SUPRA). SINCE THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR DISALLOWANCE U/S 14A OF THE ACT WAS UNCALLED FOR. THUS, THERE IS NO INFIRMITY IN THE FINDING OF LD. C IT(A). GROUND NO.3 OF REVENUES APPEAL STANDS DISMISSED. 30. GROUND NO.4 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 31. IN THE RESULT APPEAL OF THE REVENUE FOR A.Y. 20 11-12 STANDS DISMISSED. 32. NOW WE TAKE UP ASSESSEES APPEAL IN ITANO.847/I ND/2016 FOR A.Y. 2011-12 WHEREIN FOLLOWING GROUNDS HAVE BEEN RA ISED: GROUNDS OF INCOME-TAX APPEAL BEFORE THE HON'BLE IN COME-TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE, AGAINST O RDER UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 PASSED BY T HE LEARNED INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 23 COMMISSIONER OF INCOME-TAX (APPEALS)-II, BHOPAL, PE RTAINING TO THE ASSESSMENT YEAR 2011-12 IN RESPONSE TO THE APPE AL FILED AGAINST THE ASSESSMENT ORDER PASSED BY THE ASSISTAN T COMMISSIONER OF INCOME- TAX, 5(1) EXEMPTION, BHOPAL 1. THAT, THE LD. CIT(A) GROSSLY ERRED, IN CONFIRMING T HE DISALLOWANCE OF RS.5,99,000/- MADE BY THE ASSESSING OFFICER, OUT OF THE LOCAL FUND (GOVERNMENT AUDIT FEES OF RS.2,23,92,500/- CLAIMED BY THE APPELLANT. 2(A) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS. 13,27,208/- MADE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISA LLOWING THE EXPENDITURE INCURRED BY IT IN RESPECT OF AID GIVEN FOR 'JHANKI- PRADARSHANI' & SEMINAR. (B) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.10,00,000/- M ADE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISA LLOWING THE EXPENDITURE INCURRED BY IT IN RESPECT OF DONATION M ADE FOR 'DEVI AHILYA UTSAV'. (C) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.8,00,0 00/- MADE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISALLOWING THE EXPENDITURE INCURRED BY IT IN RESPE CT OF DONATION MADE FOR 'MALWA UTSAV'. 3. THAT, THE APPELLANT FURTHER CRAVES LEAVE TO ADD, ALTER, OMIT AND/OR AMEND ANY OF THE ABOVE STATED GROUNDS OF APP EAL AS AND WHEN CONSIDERED NECESSARY. 33. APROPOS GROUND NO.1 RELATING DISALLOWANCE OF AU DIT FEES OF RS.5,99,000/-. BRIEF FACTS ARE THAT DURING THE YEAR UNDER APPEAL EXPENDITURE OF RS.2,23,92,500/- WAS CLAIMED AS PAYM ENT MADE TO THE LOCAL FUND/AUDIT DEPARTMENT OF THE STATE GOVERN MENT WHICH INCLUDED FEES OF RS.1,67,93,500/- PERTAINING TO F.Y . 2009-10. LD. AO DISALLOWED THIS SUM OF RS.1,67,93,500/- AS PRIOR PERIOD EXPENSES. WHEN THE MATTER TRAVEL BEFORE THE LD. CIT (A), ASSESSEE INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 24 WAS ABLE TO GET MAJOR RELIEF AS ONLY THE DISALLOWA NCE OF AUDIT FEES OF RS.5,99,000/- WAS SUSTAINED BY LD. CIT(A) OBSERVING AS FOLLOWS: 5.2.1 I HAVE GONE THROUGH THE FINDINGS OF THE AO, WRITTEN SUBMISSIONS AND THE DOCUMENTARY EVIDENCES FILED BY THE APPELLANT. IT IS OBSERVED THAT DURING THE RELEVANT PREVIOUS YEAR, THE APPELLANT HAS CLAIMED A SUM OF RS.2,23,92,500/- AS EXPENSES ON ACCOUNT OF GOVERNMENT AUDI FEES. THE APPELLANT CLAIMS THAT OUT OF SUCH AUDIT FEES 0F RS.2,23,92,500/-, ONLY A SUM OF RS.5,99,000/- PERTAINS TO AUDIT FEES FOR F.Y. 20 09- 10 [A.Y. 2010-11} AND THE ENTIRE REMAINING SUM OF RS.2,17,93,500/- PERTAINS TO THE RELEVANT PREVIOUS YEAR ONLY. THE APPELLANT HAS CONTENDED THAT DUE TO INADVERTENT MISTAKE IN THE LAST PARA OF THE SUBMISSION MADE BEFORE THE AO ON THE SUBJECT ISSUE, THE AMOUNT OF AUDIT FEES PERTAINING TO EARLIER YEAR I.E. F.Y. 2009-10 HAS GOT MISSTATED AT RS.1 ,61,94,500/ - BUT THE FACT REMAINS THAT THE AUDIT FEES PERTAINING TO PRIOR PERIOD WAS ONLY OF RS.5,99,000/-. IT WAS SUBMITTED THAT FOR THE FINANCIAL YEAR 2009-10, GOVERNMENT AUDIT FEES AMOUNTING TO RS. 1,55,95,500/ - HAS BEEN SHOWN AS PAYABLE IN THE AUDITED FINANCIAL STATEMENTS. IN SUPPORT OF SUCH CONTENTION, THE GROUPING OF THE EXPENSES WAS FILED WHICH IS PLACED AT PAGE NO. 96 OF THE PAPER BOOK. I T HAS BEEN CONTENDED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , A SUM OF RS.1,61,94,500/- WAS PAID TOWARDS GOVERNMENT AUDIT FEES FOR F.Y. 2009-10 AND OUT OF SUCH FEES PAYMENT, THE PROVISION OF RS.1,55,95,500/ - WAS ALREADY MADE IN F.Y. 2009-10 AND ACCORDINGLY, THE EXPENDITURE TO THAT EXTENT WAS CLAIMED IN F.Y. 2009-10 ONLY. IT WAS CONTENDED THAT TOWARDS THE PRIOR PERIOD AUDIT FEES I.E. FOR F.Y. 2009-10, ONLY A SUM OF RS.5,99,000/- HAS BEEN DEBITED AND CLAIMED IN INCOME & EXPENDITURE ACCOUNT FOR THE ASSESSMENT INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 25 YEAR UNDER CONSIDERATION AND IT IS INCLUDED IN THE FEES OF RS.2,23,92,500 [: CLAIMED IN INCOME & EXPENDITURE ACCOUNT. IT WAS REITERATED THAT DUE TO INADVERTENT MISTAKE IN THE SUBMISSION MADE BEFORE THE AO, INSTEAD OF MENTIONING THE AMOUNT OF RS.5,99,OOO/-, THE ENTIRE SUM OF RS.1,61,94,500/- [RS.1,55,95,500 + RS.5,99,000] HAS GOT MISSTATED. 5.2.2 I FIND THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT HAS MADE A PROVISION F OR PAYMENT OF GOVERNMENT AUDIT FEES AT RS.2,17,93,500/-. IT IS ALSO OBSERVED THAT FOR F.Y. 2009-10, THE APPELLANT HAS SHOWN PROVISION FOR PAYMENT OF AUDIT FEES AT RS.1,55,95,500/- TOWARDS GOVERNMENT AUDIT FEES WHICH IS FORMING PART OF THE TOTAL PROVISIONS OF RS.2,09, 90,927/ - AS SHOWN IN THE SCHEDULE-VL OF PREVIOUS YEAR'S FIGURES OF AUDITED BALANCE SHEET AS OF 31-03-2011. THUS, THE EXPLANATION OF THE APPELLANT REGARDING COMMITMENT O F MISTAKE IN THE SUBMISSION LETTER BEFORE THE AO STANDS VERIFIED. IT IS ALSO FOUND THAT THE ADVICE ISSUED BY THE ASSISTANT RESIDENT DIRECTOR, LOCAL FUND AUDITORS FOR THEIR FEES FOR F.Y. 2010-11 FOR RS.2,33,42,500/ - AS PLACED AT PAGE NO. 98A OF THE PAPER BOOK. I FIND THAT AS AGAINST SUCH ADVICE OF RS.2,33,42,500/ -, THE APPELLANT HAS PASSED THE BILL FOR A SUM OF RS.2,17,93,500/ - VIDE THEIR PROCEEDING SHEET ENTRY DATED 23-08-2011 AS PLACED AT PAGE NO. 97 & 98B OF THE PAPER BOOK. THEREFORE, I FIND THAT OUT OF THE TOTAL AUDIT FEES OF RS.2,23,92,500/-, TH E AUDIT FEES AMOUNTING TO RS.2,17,93,500/- PERTAINED TO THE ASSESSMENT YEAR UNDER CONSIDERATION ONLY AND ACCORDINGLY, THE SAME IS ELIGIBLE FOR DEDUCTION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, SINCE THE SUM OF RS.5,99,000/- PERTAINS TO THE F.Y. 2009-10 .WHICH FALLS IN A.Y. 2010-11, AND FURTHER SINCE THE APPELLANT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING, SUCH EXPENSES CANNOT BE ALLOWED IN A.Y. 2011-12. IN NUTSHELL, OUT OF THE TOTAL DISALLOWANCE OF RS.1,67,93,500/-, ONLY A SUM OF RS.5,99,000/- IS INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 26 FOUND PERTAINING TO PRIOR PERIOD AND THE REMAINING SUM HAS BEEN FOUND PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, OUT OF THE TOTAL ADDITION OF RS.1,67,93,500/- MADE BY THE AO, THE ADDITION TO THE EXTENT OF RS.1 ,61,94,500/ - IS DELETED AND THE ADDITION TO THE EXTENT OF RS.5,99,000/- IS SUSTAINED. THESE GROUNDS OF APPEAL ARE ALLOWED PARTLY. 34. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LIABILITY FOR PAYIN G THE AUDIT FEES OF RS.5,99,000/- CRYSTALIZED DURING THE YEAR UNDER APP EAL BECAUSE THE CLAIM OF AUDIT FEES WAS SETTLED DURING THE YEAR AND THEREFORE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5,99,000/-. 35. PER CONTRA LD. DR SUPPORTED THE ORDERS OF BOTH THE LOWER AUTHORITIES. 36. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THROUGH GROUND NO.1 THE ASSESSEE HAS CHA LLENGED THE FINDING OF LD. CIT(A) CONFIRMING THE DISALLOWANCE O F AUDIT FEES OF RS.5,99,000/-. WE OBSERVE THAT THE ALLEGED AMOUNT R ELATES TO AUDIT FEES FOR F.Y. 2009-10 I.E. A.Y. 2010-11. THE INSTAN T APPEAL RELATES TO A.Y.2011-12. THE ASSESSEE BEING A QUASI-GOVERNMENT AUTHORITY ALL ITS FINANCIAL TRANSACTIONS ARE SUBJECT TO VERIFICAT ION AND AUDIT BY THE LOCAL FUND AUDITOR OF THE STATE GOVERNMENT OF MADHY A PRADESH. IN CONSIDERATION OF PROVIDING SUCH SERVICES, AUDIT FEE S IS CHARGED BY THE DEPARTMENT OF LOCAL FUND ON YEAR TO YEAR BASIS. GENERALLY THE BILLS ARE RAISED IN THE SUBSEQUENT FINANCIAL YEAR I .E. AFTER THE INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 27 COMPLETION OF THE AUDIT WORK. THE ASSESSEE MAKES TH E PROVISION FOR THE GOVERNMENT AUDIT FEES AND WHEN THE ACTUAL AMOUN T IS PAID THE SAME IS ADJUSTED FROM THE PROVISIONAL ACCOUNT. FOR F.Y.2009-10, THE ASSESSEE MADE A PROVISION OF RS.1,55,95,500/-. THE ACTUAL BILL WAS SETTLED AT RS.1,61,94,500/-. THE DIFFERENCE OF THE ACTUAL BILL LESS THE PROVISIONS WORKED OUT TO RS.5,99,000/-. TH IS AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. THERE REMAINS N O DISPUTE TO THE FACT THAT THE LIABILITY OF THE GOVERNMENT AUDIT FEE S PERTAINING TO F.Y. 2009-10 GOT SETTLED AND CRYSTALIZED DURING THE F.Y. 2010-11. THEREFORE, THE ASSESSEE HAS RIGHTLY CLAIMED IT AS B USINESS EXPENDITURE ELIGIBLE FOR DEDUCTION U/S 37(1) OF THE ACT, THE PROPOSITION OF ALLOWING THE EXPENSES OF PRIOR PERIO D ON THE BASIS OF LIABILITY GETTING CRYSTALIZED IN SUBSEQUENT YEAR, H AVE BEEN CONSISTENTLY HOLD BY HON'BLE COURTS. FEW OF SUCH JU DGMENTS REFERRED AND RELIED BY THE ASSESSEE ARE MENTIONED B ELOW: 1. CIT VS. BAGALKOT TOWN DEVELOPMENT AUTHORITY (2015) 12 TMI 1422 (KAR) 2. HOSHIARPUR IMPROVEMENT TRUST AND OTHERS VS. ITO (20 15) 9 TMI 902 (I.T.A.T., AMR) 3. CIT VS. JODHPUR DEVELOPMENT AUTHORITY (2016) 139 DT R (RAJ.) 1 4. ACIT VS. MODIPON LTD. & VICE-VERSA (2015) 12 TMI 46 0 (I.T.A.T., DEL.) INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 28 37. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND FOLLOWING THE JUDICIAL PRECEDENCE AS WELL AS LO OKING TO THE FACT THAT LOCAL GOVERNMENT AUDIT FEES BILL OF PRECEDING YEAR WAS SETTLED DURING THE YEAR AND GENUINENESS OF BUSINESS EXPENDI TURE IS NOT IN DOUBT, WERE ARE OF THE VIEW THAT LOWER AUTHORITIES ERRED IN DENYING THE CLAIM TO THE ASSESSEE. THUS, WE DELETE THE DISA LLOWANCE OF AUDIT FEES OF RS.5,99,000/- AND ALLOWED GROUND NO.1 RAISE D BY THE ASSESSEE FOR A.Y. 2011-12. 38. APROPOS TO GROUND NO.2 WHICH RELATES TO DISALLO WANCE OF THREE EXPENSES AT RS.13,27,208/-, RS.10,00,000/- & RS.8,0 0,000/- INCURRED TOWARDS JHANKI-PRADARSHANI & SEMINAR, DEVI AHILYA UTSAV & MALWA UTSAV RESPECTIVELY, LD. AO TREATED THESE AM OUNTS AS DONATION AND CHARITY AND NOT FOR BUSINESS PURPOSE. LD. CIT(A) ALSO CONFIRMED THE VIEW OF THE LD. AO OBSERVING AS FOLLO WS: I HAVE GONE THROUGH THE CONTENTS OF THE ASSESSMENT ORDER AND ALSO THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT . AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE CASE, I DO NOT FIND ANY MERIT IN CONTENTION OF THE APPELLANT. IF FIND THAT THE STATUS OF THE APPELLANT HAS NOT BEEN TAKEN AS THAT OF A CHARITABLE ORGANIZATION OR INSTITUTION AND ITS INCO ME IS ASSESSABLE AS BUSINESS INCOME. ONCE THIS BEING THE POSITION, ANY CHARITY OR DONATION, MADE FOR ANY PURPOSE, IS N OT ALLOWABLE UNDER THE PROVISIONS OF SECTION 37(1) OF THE I.T. A CT, 1956. ACCORDINGLY, I DO NOT FIND ANY INFIRMITY IN THE ACT ION OF AO IN MAKING DISALLOWANCE OF RS.31,27,208/-. THEREFORE, T HIS GROUND OF APPEAL IS DISMISSED. 39. LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FO LLOWING WRITTEN SUBMISSIONS: INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 29 1. THAT, DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT AUTHORITY HAS INCURRED A SUM OF RS.13,27,208/-, RS. 8, 00,000/ - AND RS.1O, 00, 000/ - RESPECTIVELY ON ACCOUNT OF CONTRIBUTION MADE TOWARDS 'AID FOR JHANK I PRADARSHANI & SEMINARS', 'DONATION FOR DEUI AHILYA UTSAV' AND 'DONATION FOR MALWA UTSAV' UNDER 'SCHEDULE-21 OF CONTRIBUTION & GRANT-IN-AIDS MADE' OF THE INCOME & EXPENDITURE ACCOUNT FOR THE RELEVANT PREVIOUS YEAR. 2. THE LEARNED AO, WITHOUT EVEN AFFORDING ANY SINGL E OPPORTUNITY AS REGARD TO THE AFORESAID ISSUE, MADE AN ADDITION OF RS.13,27,2081-, RS.8,00,0001- AND RS. 10,00,0001 - IN THE HANDS OF THE APPELLANT MERELY ON HIS GUESS WORK, SURMISES AND CONJECTURES WITHOUT EVEN GOING INTO MERITS OF THE CASE. THE LEARNED AD, WHILE GIVING HIS FINDING ON THE CAPTIONED ISSUE, HE LD THAT THE OBJECTS OF THE APPELLANT AUTHORITY DOES NO T INCLUDE FINANCING OR FUNDING OF THE CULTURAL ACTIVI TIES AND IT IS NOT THE STATUTORY OBLIGATION OF THE APPELLANT TO INCUR SUCH EXPENSES. THE LEARNED AD FINALLY HELD TH AT THE AMOUNT HAS NOT BEEN EXPENDED TO MEET THE STATUTORY OR BUSINESS INTERESTS OF THE APPELLANT AN D THEREFORE THE SAME IS DISALLOWED. 3. YOUR HONOUR, IN THIS CONTEXT, AT THE OUTSET, IT IS SUBMITTED THAT THE FINDING OF THE LEARNED AD THAT T HE EXPENSES DO NOT MEET THE OBJECTS OF THE APPELLANT AUTHORITY IS FACTUALLY INCORRECT. IT IS SUBMITTED THAT THE OBJECTS OF THE APPELLANT AUTHORITY ARE THAT OF CHAR ITABLE IN NATURE AND THE SAME ARE COVERED UNDER THE LAST L IMB OF THE EXPRESSION 'CHARITABLE PURPOSE' AS DEFINED UNDER S.2(1S) OF THE ACT I.E. 'GENERAL PUBLIC UTILITY'. T HEREFORE, IT CANNOT BE SAID THAT THE AFORESAID CONTRIBUTIONS MADE BY THE APPELLANT AUTHORITY ARE NOT IN CONSONANCE WI TH THE OBJECTS OF THE APPELLANT AUTHORITY. 4. YOUR HONOUR, IT IS SUBMITTED THAT THE APPELLANT AUTHORITY IS REQUIRED TO MAKE CONTRIBUTIONS TOWARD SUCH PRADARSHANIS AND UTSAVS IN ORDER TO MAINTAIN AND CONTINUE THE PROUD TRADITION OF THE CITY OF IND ORE. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 30 FURTHER, EVERY YEAR, THE CLOSED MILLS OF INDORE MAK E REQUEST TO THE COMMISSIONER, INDORE AND TO THE CHAIRMAN OF THE APPELLANT AUTHORITY FOR MAKING CONTRIBUTION TOWARDS CONSTRUCTION OF JHANKIS. THEREFORE, THE APPELLANT AUTHORITY, BEING A STATUTO RY AUTHORITY CONSTITUTED UNDER SECTION 38 OF 'MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973~ IS ALSO STATUTORILY REQUIRED TO MAKE SUCH CONTRIBUT IONS ON SUCH COUNTS. XEROX COPIES OF NOTE SHEETS PREPARE D BY THE APPELLANT AUTHORITY BEFORE MAKING SANCTION O F SUCH CONTRIBUTIONS TO THE CONCERNING JHANKIS ARE BE ING SUBMITTED HEREWITH FOR KIND PERUSAL AND RECORD OF Y OUR HONOUR, AS ANNEXURE A-9. 01 TO A-9. 06 [PB PAGE NO. 103 TO 108}. 5.00 YOUR HONOUR, IT IS SUBMITTED THAT THE APPELLANT AUTHORITY HAS BEEN MAKING ITS CONTRIBUTIONS TOWARDS JHANKI PRADARSHANI & SEMINARS, DEVI AHILYA UTSAV, MALWA UTSAV ETC. OVER THE LAST MANY YEARS AND SUCH CONTRIBUTIONS HAVE DULY BEEN ACCEPTED AND ALLOWED BY THE INCOM E-T'AX AUTHORITIES IN THE SCRUTINY ASSESSMENTS OF THE APPELLANT FRAMED UNDER S.143(3) OF THE ACT AND IN NONE OF THE PREVIOUS ASSESSMENT YEARS, THE CL AIM OF THE APPELLANT AUTHORITY AS REGARD TO THE AFORESAID CONTRIBUTIONS HAVE BEEN DOUBTED BY THE DEPARTMENT. IT IS SUBMITTED THAT THERE IS NO CHANGE IN THE CIRCUMSTANCES OF THE CASE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND, THEREFORE, CONSIDERING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF RADHA SOAMI SATSANG (SUPRA) THE CLAIM OF THE APPELLANT FOR THE PRESENT YEAR TOO DESERVES TO BE ALLOWED FULLY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS.31,27,208/- SO MADE BY THE LD. AO ON ACCOUNT OF CONTRIBUTION MADE TO VARIOUS JHANKI AND UTSAV DESERVES TO BE DELETED IN TOTO. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 31 40. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 41. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RELATES TO DISALLOWANCE OF EXP ENSES OF RS.31,27,208/-INCURRED TOWARDS THE FOLLOWING: 1. JHANKI-PRADARSHANI & SEMINAR, RS.13,27,208/- 2. DEVI AHILYA UTSAV RS.10,00,000/- 3. MALWA UTSAV RS.8,00,000/- TOTAL RS.31,27,208/- THE ONLY ISSUE WHICH NEEDS TO BE DECIDED IS THAT WH ETHER THE ALLEGED AMOUNT IS LIABLE TO BE DISALLOWED AS DONATI ON AND CHARITY OR WHETHER SUCH AMOUNT INCURRED BY THE ASSESSEE IS ALL OWABLE AS BUSINESS EXPENDITURE. THE OBJECTS OF THE APPELLANT AUTHORITY IS THAT OF CHARITABLE IN NATURE AND THE SAME ARE COVERED UN DER THE LAST LIMB OF THE EXPRESSION CHARITABLE PURPOSE AS DEF INED UNDER SECTION 2(15) OF THE ACT I.E. GENERAL PUBLIC UTIL ITY. THE ASSESSEE HAS ALSO CLAIMED EXEMPTION U/S 11 & 12 OF THE ACT. HOWEVER, IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 06.07.2010 IN ITANO.366/IND/2008 THE CL AIM OF EXEMPTION U/S 11 & 12 OF THE ACT WAS DECLINED. THE MATTER IS PENDING BEFORE THE HON'BLE JURISDICTIONAL HIGH COUR T. THUS, THE ASSESSEE AUTHORITY HAS TREATED THE ACTIVITIES CARRI ED OUT BY THE ASSESSEE IN THE COURSE OF BUSINESS AND NOT FOR THE PURPOSE OF CHARITY. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 32 42. NOW LOOKING TO THE NATURE OF ALLEGED EXPENDITUR E WHICH HAVE BEEN INCURRED TOWARDS JHANKI-PRADARSHANI & SEMINAR, DEVI AHILYA UTSAV & MALWA UTSAV WHICH PRIMARILY ARE NOT DIRECTL Y RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE BUT AS WE DISCUSS EARLIER IN THE PRECEDING PARAS THAT THE ASSESSEE AUTHORITY IS WORK ING AS A QUASI- GOVERNMENT AUTHORITY AND WORKS UNDER THE DIRECTIONS OF THE STATE GOVERNMENT. AGAINST THE BENEFITS OF GETTING THE PRE MIUM LANDS, HOUSING PROJECTS, OTHER DEVELOPMENT PROJECT FROM TH E GOVERNMENT ASSESSEE IS ALSO CASTED WITH THE RESPONSIBILITY OF INCURRING EXPENDITURE ON THE PUBLIC UTILITY PROGRAMS. THE ASS ESSEE IS ABLE TO EARN PROFITS BECAUSE THE STATE GOVERNMENT GIVE THE BENEFIT OF PROVIDING POWERS TO ACQUIRE URBAN AND RURAL LAND FO R VARIOUS PROJECTS AT CONCESSIONAL RATES. GOVERNMENT IS ABLE TO GETS LAND AT CONCESSIONAL RATES BECAUSE IT HAS TO WORK IN PUBLIC INTEREST AND ALSO PROVIDE VARIOUS FACILITIES, SUCH AS PUBLIC AME NITIES FLYOVERS, TREE PLANTATION, STREET LIGHTS, CULTURAL EVENTS, BU SINESS SEMINARS, ETC. 43. IT WAS BROUGHT TO OUR NOTICE THAT THE ALLEGED E XPENSES WERE NOT INCURRED BY THE AUTHORITY SUO MOTO BUT IT WAS INCURRED AS PER THE DIRECTIONS OF THE STATE GOVERNMENT. THE EVENTS I.E. JHANKI- PRADARSHANI & SEMINAR, DEVI AHILYA UTSAV & MALWA U TSAV ARE EVENTS WHERE PUBLIC AT LARGE PARTICIPATE. IT IS WEL L EVIDENT THAT FOR SUCH EVENTS THE ASSESSEE IS SPONSOROR. SUCH TYPE OF EXPENSES ARE IN THE NATURE OF ADVERTISEMENT SINCE IT GIVES NAME AND FAME TO THE IDA INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 33 AND INCREASE THE BRAND VALUE WHICH INDIRECTLY HEL PS IN GETTING MORE BUSINESS. 44. WE OBSERVE THAT SIMILAR ISSUE CAME UP BEFORE TH E HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. M/S INDIAN F ARM FORESTRY DEVELOPMENT DATED 31 ST OCTOBER 2018 WHEREIN HON'BLE COURT HELD AS FOLLOWS: 13. IN THE FACTS OF THE PRESENT CASE, THE OBJECT A ND PURPOSE OF THE RESPONDENT-ASSESSEE' IS, TO ENGAGE AND WORK FOR SOCIAL AND ECONOMIC UPLIFTMENT OF THE RURAL POOR, CONSTRUCT WA TER RESERVOIRS .ETC. IT IS ESTABLISHED FOR THIS PURPOSE AND RECEIV ES GRANTS AND DONATIONS FROM THIRD PARTIES WITH THE SAID OBJECTIV E AND PURPOSE. M/S INDIAN FARMERS FERTILIZER COOPERATIVE LTD. HAD SOLD' AND SUPPLIED FERTILIZER THAT WAS MARKETED/SOL D BY THE RESPONDENT-ASSESSEE TO EARN PROFIT INCOME, BECAUSE THE RESPONDENT-ASSESSEE WAS ENGAGED, IN SOCIAL AND ECON OMIC DEVELOPMENT ACTIVITIES, ASSOCIATION AND BUSINESS RE LATIONSHIP WITH MIS' INDIAN FARMERS FERTILIZER COOPERATIVE LTD . WAS PREDICATED AND CONNECTED ON THE RESPONDENT-ASSESSE~ PERFORMING AND UNDERTAKING THE SOCIAL-WELFARE ECONO MIC ACTIVITIES. GRANTS RECEIVED FROM GOVERNMENT AND FOR EIGN' AGENCIES WERE TO BE UTILIZED FOR THE SPECIFIC PURPO SE I.E. THE OBJECT AND PURPOSE OF SOCIAL AND ECONOMIC UPLIFTMEN T ETC. IF THE RESPONDENT ASSESSEE WAS NOT ENGAGED IN AND HAD NOT UNDERTAKEN THE AFORESAID ACTIVITIES, IT WOULD NOT H AVE RECEIVED THE GRANTS AND WOULD NOT HAVE UNDERTAKEN SALE AND M ARKETING OF FERTILIZERS. THE RESPONDENT-ASSESSEE WAS THEREFO RE REQUIRED TO INCUR THE SAID EXPENDITURE, IN ORDER TO RUN, OPERAT E AND CONTINUE ITS BUSINESS. 14. WE PERCEIVE THAT THERE IS A DEGREE OF CONTRADIC TION IN THE PLEA RAISED BY THE REVENUE, WHEN THEY CLAIM THAT TH E RESPONDENT-ASSESSEE WAS NOT ENGAGED IN 'BUSINESS' O R THE EXPENDITURE INCURRED WAS NOT ON ACCOUNT OF BUSINESS INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 34 EXPEDIENCY. INCOME EARNED BY THE RESPONDENT-ASSESSE E HAS BEEN TREATED AND TAXED UNDER THE HEAD PROFITS AND G AINS OF BUSINESS AND PROFESSION. IN THE GIVEN FACTS, IT WOU LD BE INCONGRUOUS FOR THE REVENUE TO URGE THAT THE PURPOS E AND GOAL BEHIND THE ACTIVITIES UNDERTAKEN BY THE RESPONDENT- ASSESSEE WAS NOT COMMERCIAL BUT CHARITY AS THE INTENT AND MO TIVE BEHIND THEM WAS NOT TO EARN PROFIT. THE EXPENDITURE INCURR ED TO CARRY OUT SOCIAL AND ECONOMIC DEVELOPMENT WOULD IN THIS B ACKGROUND CONSTITUTE A 'BUSINESS' OR 'COMMERCIAL' ACTIVITY UN DERTAKEN BY THE RESPONDENT ASSESSEE. IT WOULD BE A, CONTRADICTION I N TERMS, IF WE HOLD THAT THE EXPENDITURE WOULD BE NON-DEDUCTIBL E EXPENDITURE OR EXPENDITURE WITHOUT BUSINESS EXPEDIE NCY, UNDER SECTION 37 OF THE ACT IT DOES NOT MATTER WHETHER OR NOT THE EXPENDITURE WAS IN THE NATURE OF DONATION OR SECTIO N BOG OF THE ACT WAS NOT ATTRACTED. THE CONDITIONS STATED IN SEC TION 37 OF THE ACT MATTER AND CONSTITUTE THE TEST. EXPENDITURE INC URRED IN FURTHERANCE OF AND CONNECTED WITH THE BUSINESS AND COMMERCIAL ACTIVITIES FOR WHICH THE RESPONDENT-ASSESSEE WAS ES TABLISHED CANNOT BE DISALLOWED AS EXPENDITURE NOT RELATABLE A ND INCURRED FOR 'BUSINESS' PURPOSES. 15. ON THE QUESTION OF CAPITAL EXPENDITURE, THE ASS ESSING OFFICER DID NOT REFER TO OR EXAMINE WHETHER THE CAP ITAL ASSETS CREATED ,WERE FOR THIRD PARTY VILLAGERS. THE RESPON DENT- ASSESSEE WAS NOT THE OWNER OF THE ASSETS CREATED AN D DEVELOPS, THE, ASSETS CREATED WERE NOT-CAPITAL ASSETS IN THE HANDS OF THE RESPONDENT-ASSESSEE. THE RESPONDENT AS SESSEE HAD CONTRIBUTED, DEVELOPED, FINANCED AND CREATED AS SETS WHICH BELONGED TO THIRD PERSONS. THE EXPENDITURE IN CURRED THEREFORE WOULD NOT BE 'CAPITAL' IN NATURE IN THE H ANDS OF THE RESPONDENT ASSESSEE: 16. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE HA S NO MERIT AND IS DISMISSED, WITHOUT ANY ORDER AS TO COSTS. 45. THE FACTS OF THE ABOVE REFERRED JUDGMENT AND SI MILAR TO THE FACTS PLACED BEFORE US. WE, THEREFORE, RESPECTFULLY FOLLO WING THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. M/S. INDIAN INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 35 FARM FORESTRY DEVELOPMENT, ARE OF THE CONSIDERED VIEW THAT THE ALLEGED AMOUNT SHOULD BE ALLOWED AS BUSINESS EXPEND ITURE AS IT INDIRECTLY HELP TO INCREASE BUSINESS OF THE ASSESSE E AUTHORITY. THUS, DISALLOWANCE OF RS.32,27,208/- STANDS DELETED AND T HE GROUND NO.2 OF THE ASSESSEE IS ALLOWED. 46. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 47. IN THE RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 2011-12 IS ALLOWED. 48. NOW WE TAKE UP ASSESSEE APPEAL FOR A.Y. 2012-13 VIDE ITA NO. 1355/IND/2016 FOLLOWING GROUNDS OF APPEAL ARE AS UN DER: 1. THAT, THE LEARNED CIT(A), GROSSLY ERRED IN LAW, IN NOT GIVING A SPECIFIC FINDING/DIRECTION TO THE EFFECT THAT IN TH E EVENT OF ULTIMATE GRANT OF REGISTRATION TO THE APPELLANT AUT HORITY UNDER THE PROVISIONS OF SECTION 12AI12AA OF THE INCOME TA X ACT, 1961, THE INCOME OF THE APPELLANT AUTHORITY SHOULD BE COM PUTED IN ACCORDANCE WITH THE PROVISIONS OF SS. 11 & 12 OF THE INCOME- TAX ACT, 1961. 2(A) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.L6,18,275/- M ADE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISALLOWING THE EXPENDITURE INCURRED BY IT IN RESPE CT OF AID GIVEN FOR 'JHANKI-PRADARSHANI' & SEMINAR. (B) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.1O,OO,OOO/- M ADE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISALLOWING THE EXPENDITURE INCURRED BY IT IN RESPE CT OF DONATION MADE FOR 'DEVI AHILYA UTSAV'. (C) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.2,00,0 00/- MADE BY THE ASSESSING OFFICER IN THE APPELLANT'S IN COME BY DISALLOWING THE EXPENDITURE INCURRED BY IT IN RESPE CT OF DONATION MADE FOR 'MALWA UTSAV'. INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 36 (D) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.3,75,065/- MA DE BY THE ASSESSING OFFICER IN THE APPELLANT'S INCOME BY DISALLOWING THE EXPENDITURE INCURRED BY IT IN RESPE CT OF OTHER DONATIONS. 3. THAT, THE APPELLANT FURTHER CRAVES LEAVE TO ADD, ALTER, OMIT AND/OR AMEND ANY OF THE ABOVE STATED GROUNDS OF APP EAL AS AND WHEN CONSIDERED NECESSARY. 49. APROPOS TO GROUND 1 RELATING TO DENIAL OF EXEMP TION U/S 11 & 12 OF THE ACT, AT THE OUTSET, LD. COUNSEL FOR THE A SSESSEE FAIRLY CONCEDED THAT THE I.T.A.T., INDORE BENCH IN ITS ORD ER DATED 06.07.2010 VIDE ITA NO.366/IND/2008 DISMISSED THE A PPEAL OF THE ASSESSEE THEREBY UPHOLDING THE ORDER OF LD. CIT-I I NDORE REJECTING THE ASSESSEES APPLICATION FOR REGISTRATION U/S 12A A OF THE ACT. 50. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT AGAINST THE ORDER OF HON'BLE I.T.A.T.,INDORE ASSESSEE PREFERRED AN APPEAL BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT WHICH IS PEND ING. 51. WE FIND THAT SINCE THE ISSUE IS SQUARELY DECIDE D AGAINST THE ASSESSEE BY THE COORDINATE BENCH CONFIRMING THE REJ ECTION OF ASSESSEES APPLICATION FOR REJECTION U/S 12AA OF TH E ACT, BOTH THE LOWER AUTHORITIES WERE JUSTIFIED IN DENYING THE BEN EFIT OF EXEMPTION U/S 11 & 12 OF THE INCOME TAX ACT. WE, THEREFORE, D ISMISS GROUND NO.1 RAISED BY THE ASSESSEE FOR A.Y. 2012-13. 52. NOW WE TAKE UP GROUND NO.2(A) (B )(C) & D FOR T HE DISALLOWANCE OF FOLLOWING EXPENSES TOTALLING TO RS. 31,93,340/- INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 37 1. JHANKI PRADARSHANI & SEMINAR RS.16,18,275/- 2. DEVI AHILYA UTSAV RS.10,00,000/- 3. MALWA UTSAV RS.2,00,000/- 4. OTHER DONATION RS.3,75,065/- 53. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. WE OBSERVE THAT THE ISSUE RAISED IN GROU ND NO.2 OF THE ASSESSEES APPEAL FOR A.Y. 2012-13 ALSO CAME FOR AD JUDICATION BEFORE US IN THE ASSESSEES APPEAL FOR A.Y.2011-12 WHEREIN WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT SUCH EXPENSES WHICH ARE INCURRED ON THE DIRECTION OF THE STATE GOVERNMENT FOR VARIOUS EVENTS IN WHICH PUBLIC AT LA RGE TAKES PART, ARE THE EXPENSES IN THE NATURE OF ADVERTISEMENT AND BRAND BUILDING OF THE ASSESSEE NAMELY IDA. SUCH EXPENSES SHOULD BE CONSIDERED TO HAVE BEEN INCURRED IN THE NORMAL COURSE OF BUSIN ESS ALLOWABLE U/S 37(1) OF THE ACT. RELIANCE WAS ALSO PLACED BY U S ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. M/S. INDIAN FARM FORESTRY DEVELOPMENT(SUPRA) . HOWEVER, IN THE INSTANT APPEAL FOR A.Y. 2012-13 DISALLOWANCE OF IMPUGNED AM OUNT ALSO INCLUDES THE DISALLOWANCE FOR RS.3,75,065/- DEBITED BY THE ASSESSEE UNDER THE HEAD OF OTHER DONATION. NO DETAILS HAVE B EEN PLACED BEFORE US ABOUT THE ACTUAL PURPOSE OF THIS AMOUNT. IT IS ALSO NOT EMANATING FROM THE RECORD THAT THE ALLEGED AMOUNT O F RS.3,75,065/- HAS BEEN PAID ON THE DIRECTION OF THE STATE GOVERNMENT. WE, THEREFORE, ARE OF THE CONSIDERED VI EW THAT OUT OF TOTAL DISALLOWANCE OF RS. 31,93,340/-, DISALLOWANCE FOR OTHER INDORE DEVELOPMENT AUTHORITY IT ANOS.847 870 & 1355/IND/2016 38 DONATION OF RS.3,75,065/- STANDS CONFIRMED. THE AS SESSEE GETS PARTIAL RELIEF. THUS, GROUND NO.2 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 54. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 55. AS A RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 20 12-13 IS PARTLY ALLOWED. 56. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2 011-12 IS DISMISSED, APPEALS OF THE ASSESSEE FOR A.Y. 2011-12 IS ALLOWED AND THAT FOR A.Y. 2012-13 IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31.10.20 19. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 31/10/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR