Gujarat Co.Op. Milk Marketing Federation Ltd., Anand V. The ACIT.,Anand Circle, Anand

MA 117/AHD/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5646 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Business expenditure; Additional depreciation; Earning of tax free income; Capital receipt; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 234B; 14A; 32; 147; 148; 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER (I). MA NO. 07/AHD/2017 IN ITA NO.3037/AHD/2010 FO R A.Y.2007-08 (II). MA NO.08/AHD/2017 IN ITA NO. 1119/AHD/2012 FO R A.Y.2005-06 (III).MA NO. 09/AHD/2017 IN ITA NO.1900/AHD/2012 FO R A.Y.2008-09 (IV).MA NO.117/AHD/2017 IN ITA NO.2968/AHD/2010 FOR A.Y.2007-08 (V).MA NO. 118/AHD/2017 IN ITA NO.1977/AHD/2012 FOR A.Y.2008-09 (VI).MA NO. 119/AHD/2017 IN ITA NO.924/AHD/2013 FO R A.Y.2009-10 GUJARAT CO.OP MILK MARKETING FEDERATION LTD. AMUL DAIRY ROAD, ANAND / VS. THE ASST. COMMISSIONER OF INCOME TAX ANAND CIRCLE ANAND ! ./ '#$# ./ PAN/GIR NO. : AAACG 7189 H ( %&!' / APPELLANT ) .. ( (!' / RESPONDENT ) %&!' ) / APPELLANT BY : SHRI SUNIL TALATI, A.R. (!' * ) / RESPONDENT BY : SHRI, MUDIT NAGPAL, SR. D.R. + , * -. / DATE OF HEARING 16/06/2017 /012 * -. / DATE OF PRONOUNCEMENT 05/07/2017 # 3 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THESE SIX MISC. APPLICATIONS NOS. 07/AHD/2017, 08/AHD/2017, 09/AHD/2017, 117/AHD/2017, 118/AHD/2017, 119/AHD/20 17 ARE FILED BY THE ASSESSEE FOR THE A.Y.2007-08, 2005-06, 2008-09, 2007-08, 2008-09 & 2009-10 AGAINST THE ITA NO.3037/AHD/2010, 1119/AHD/2012, 1900/AHD/2012, 2968/AHD/2010, 1977/AHD/2012, 924/AH D/2013 MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 2 - RESPECTIVELY AND IT WAS MENTIONED THEREIN THAT MATTER CAME BEFOR E THE BENCH-D. ITAT PASSED THE ORDER DATED 30/09/2016 C OMPRISING OF HONBLE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND HONBLE S HRI MAHAVIR PRASAD, JUDICIAL MEMBER. IN THIS CONNECTION, ASSESSEE HAS RAISED THE GROUND NO.1 TO 6 IN ITA NO.3037/AHD/2010 FOR ASSESSMENT YEAR 2007-08. AT TH E TIME OF PASSING THE ORDER, BENCH HAS DECIDED THE APPEAL IN FAVOUR OF TH E ASSESSEE BY MENTIONING IN PARA NO.25.2 ON PAGE NO.27 OF THE ORDER THAT THEREFORE IN VIEW OF THE ABOVE JUDGEMENTS, APPEAL OF THE ASSESSEE IS ALLOWED AND DEPARTMENTAL APPEAL IS DISMISSED. HOWEVER, IT IS ALSO SUBMITTED BY THE ASSESSEE THA T AT THE SAME TIME THERE WAS NO SPECIFIC FINDING GIVEN BY TH E HONBLE BENCH ON FOLLOWING GROUNDS I.E. GROUND NO.3 TO 6, WHICH REQU IRES ADJUDICATION BASED ON THE ARGUMENT OF LEARNED AR AND LEARNED DR. GROUNDS OF APPEAL PRAYER BEFORE YOUR ITAT GROUND NO. 3 THE CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 72,855/- U/S 14A OF THE I.T. ACT, 1961. IN VIEW OF THE SUBMISSION MADE THERE WERE NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND, THE DISALLOWANCE OF RS.72,855/- OUGHT TO HAVE BEEN DELETED. THE APPELLANT HAD SUBMITTED THAT THIS GROUND IS NOT PRESSED AND THUS THE SAME BE DISMISSED ACCORDINGLY. GROUND NO.4 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.87,00,000/- BEING DISALLOWANCE OF EXPENSES ON REPAIRS TO THE PLANT CONSIDERING THE SAME AS CAPITAL THE APPELLANT ARGUED IN LENGTH ON THE BASIS OF PAPER BOOK & WRITTEN SUBMISSION FILED, BEFORE ITAT AND ACCORDINGLY THIS GROUND IS ALLOWED BUT NO SPECIFIC FINDING IS GIVEN IN THE ORDER. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 3 - IN NATURE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON THE BASIS OF THE DETAILS FILED, THE EXPENDITURE ARE IN THE NATURE OF CURRENT REPAIRS AND ARE NOT AT ALL IN THE NATURE OF CAPITAL EXPENDITURE. IN IS SUBMITTED THAT THE DISALLOWANCE OF RS. 87,00,000/- EFFECTIVELY RS.73,95,000/- AFTER GRANTING DEPRECIATION BE DELETED AND THE CLAIM OF THE APPELLANT THAT THE EXPENDITURE ARE OF REVENUE IN NATURE BE ALLOWED. NOTWITHSTANDING THE ABOVE, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT AND CIRCUMSTANCES OF THE CASE WITH REGARD TO THE SAID CLAIM THAT THE APPELLANT HAD RECEIVED THE INSURANCE CLAIM OF RS.72,83,686/- AND IN THE EVENT THE EXPENDITURE OF RS.87,00,000/- IS CAPITALIZED THEN THE AMOUNT OF INSURANCE CLAIM ON THE VERY SAME ITEMS, THOUGH CREDITED AND SHOWED AS INCOME IN THE SUBSEQUENT YEAR BE REDUCED FROM THE TREATMENT OF THE CAPITAL EXPENDITURE. IT IS THEREFORE PRAYED THAT IN THE EVENT RS.87,00,000/- ARE NOT ALLOWED AS REVENUE EXPENDITURE, THEN ADDITIONAL COST OF PLANT ENHANCED TO RS.87,00,000/- BE REDUCED BY RS.72,83,686/- AND THE NET ADDITION OF ONLY RS.14,16,314/- ONLY BE CAPITALIZED. GROUND NO.5 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE AMOUNT RECEIVED OF RS.237 LAKHS BEING SECURITY DEPOSITS WRITTEN BACK AS INCOME AND NOT AS CAPITAL RECEIPT. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE SECURITY DEPOSITS RECEIVED FROM VARIOUS VENDORS WERE NEVER ALLOWED AS A DEDUCTION IN THE THE APPELLANT HAD SUBMITTED THAT THIS GROUND IS NOT PRESSED AND THUS THE SAME BE DISMISSED ACCORDINGLY. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 4 - PREVIOUS YEAR, PROVISIONS OF SEC.41(1) ARE NOT APPLICABLE AND THEREFORE, WRITING OFF AND CREDITING SECURITY DEPOSITS AS NO MORE PAYABLE CANNOT BE TREATED AS INCOME. IT IS SUBMITTED THAT THE DEPOSITS SO WRITTEN OFF OF RS.237/- LAKHS AS NOT PAYABLE IS CAPITAL RECEIPT AND NOT AN INCOME AND THE SAME BE ALLOWED ACCORDINGLY. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS FURTHER ENHANCED THE ADDITION BY NOT FOLLOWING THE APPROPRIATE PROCEDURE OF ISSUING APPROPRIATE NOTICE AND BY MAKING A FURTHER ADDITION OF RS.239.07 LAKHS BEING SECURITY DEPOSITS WRITTEN OFF IN THE SUBSEQUENT YEAR. IT IS SUBMITTED THAT THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING DULY AUDITED AND WRITING OFF OF OTHER SECURITY DEPOSITS OF RS.239.07 LAKHS WAS NOT AT ALL AN ISSUE FOR THE YEAR UNDER APPEAL, BUT IS TO BE CONSIDERED AND DECIDED IN SUBSEQUENT ASST. YEAR 2008-09. IN ANY EVENT THE CREDIT OF AMOUNT OF DEPOSITS OF RS.239.07 LAKHS IN PROFIT & LOSS ACCOUNT AND ITS TREATMENT AS INCOME OR OTHERWISE IS NOT AT ALL AN ITEM OF INCOME IN THIS YEAR AND IT CANNOT BE ADDED IN THE HANDS OF THE INCOME OF THE APPELLANT IN THE ASST. YEAR 2007-08. THE ACTION OF LEARNED CIT(A) DIRECTING THE ASSESSING OFFICER TO ENHANCE THE INCOME FURTHER BY RS.239.07 LAKHS IS BAD IN LAW AND ALSO NOT CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE. IT IS SUBMITTED THAT THE SAME BE HELD ACCORDINGLY. GROUND NO.6 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE INTEREST CHARGED U/S.234 THE GROUND IS GENERAL IN NATURE AND BE DECIDED ACCORDINGLY AS CONSEQUENTIAL. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 5 - OF THE INCOME TAX ACT. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S.234B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIRMED BY THE LEARNED CIT(A) BE DELETED. THESE ARE EIGHT APPEALS, OUT OF WHICH FOUR APPEALS IN ITA NO.1119/AHD/2012, ITA NO.3037/AHD/2010, ITA NO.1900 /AHD/2012 AND ITA NO.597/AHD/2013 FOR A.Y.2005-06, 2007-08, 2008- 09 & 2009-10 HAVE BEEN PREFERRED BY THE ASSESSEE, WHEREAS ANOTHER FOU R APPEALS IN ITA NO.1226/AHD/2012, ITA NO.2968/AHD/2010, ITA NO.1977 /AHD/2012 AND ITA NO.924/AHD/2013 FOR A.Y.2005-06, 2007-08, 2008- 09 & 2009-10 HAVE BEEN REFERRED BY THE DEPARTMENT RESPECTIVELY AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(A). THESE ALL EIGHT APPE ALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. LEARNED AUTHORIZED REPRESENTATIVE (AR) SHRI SUNIL H . TALATI HAS STATED IN THE MISCELLANEOUS APPLICATION FOR RECTIFYING/COR RECTING CERTAIN MISTAKES, WHICH HAVE BEEN UNINTENTIONALLY CREPT IN THE ORDER. THE ASSESSEE HAD FILED THE MISC. APPLICATIONS FOR THE MISTAKES THAT CREPT IN I TS APPEALS AND SUBSEQUENTLY ALSO FILED ANOTHER MA FOR CERTAIN MISTAKES THAT CRE PT IN THE APPEALS FILED BY THE REVENUE. THEREFORE, ALL THE MISC. APPLICATIONS HAVE BEEN HEARD TOGETHER AND ARE DEALT WITH RECTIFYING THE ERRORS THAT REMAI NED IN THE SAID ORDER. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 6 - AFTER CAREFUL HEARING OF BOTH THE PARTIES AND AFTER PERUSING THE ORIGINAL GROUNDS FOR APPEAL AND DETAILED SUBMISSION MADE AT THE TIME OF HEARING ALONG WITH THE PAPER BOOK, WE FEEL THAT THE ENTIRE ORDER IS REQUIRED TO BE CANCELLED FOR ALL THE FOUR ASSESSMENT YEARS. THEREFORE, THE O RDER DATED 30 TH SEPTEMBER, 2016 FOR ALL THE FOUR YEARS, FOR ALL EIGHT APPEALS IS HEREBY CANCELLED/RECALLED AND THIS FRESH ORDER IS PASSED CONSIDERING THE MISC . APPLICATIONS AS WELL AS OTHER MISTAKES WHICH HAVE BEEN CREPT IN AND BROUGHT TO OUR NOTICE. ASSESSMENT YEAR 2005-06 ITA NO 1119/AND/2012 ASSESSMENT YEAR 2005-06, THE A SSESSEE HAS TAKEN FOLLOWING GROUNDS: 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN HOLDING TH AT ISSUANCE OF NOTICE U/S.147 OF THE I.T. ACT WAS VALID AND NOT AC CEPTING THE CONTENTION THAT THERE BEING NO ESCAPEMENT OF INCOME THE REOPENING IS BAD IN LAW. IT IS SUBMITTED THAT PROCEEDINGS INIT IATED U/S.147 AND 148 OF THE I.T. ACT ARE BAD IN LAW AND THE SAME BE HELD SO NOW. 2. THE LEARNED C.I.T.(APPEALS) ERRED BOTH IN LAW AND O N FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 1,50,00,000/- BE ING ASSISTANCE GIVEN TO JKMPC LTD. ON THE GROUND THAT THE SAID EXPENDITU RE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS AND THE APPELL ANT DID NOT GAIN ANY BENEFIT THEREON. IT IS SUBMITTED THAT THE CONCLUSIO N ARRIVED AT AND THE BASIS OF DISALLOWANCE IS TOTALLY INCORRECT ON FACTS AND ON LAW. THE EXPENDITURE INCURRED IN PROVIDING ASSISTANCE TO JAM MU & KASHMIR MILK PRODUCERS CO-OPERATIVE LIMITED WAS IN THE NATU RE OF CO- OPERATIVE DEVELOPMENT EXPENDITURE INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSES. IT IS ACCO RDINGLY SUBMITTED THAT THE DISALLOWANCE CONFIRMED BY THE LEARNED C.I.T. (A PPEALS) BE DELETED. 3. THE LEARNED C.I.T.(APPEALS) FURTHER ERRED BOTH IN L AW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ALLO WING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AMUL P ARLOURS. ON THE MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 7 - FACTS OF THE CASE AND IN VIEW OF THE LEGAL POSITION , THE LEARNED C.I.T.(APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DEP RECIATION AT 100% AS CLAIMED. IT BE SO HELD NOW AND THE DEPRECIATION BE ALLOWED AT 100%. 4. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO D ISALLOW THE EXPENSE INCURRED IN CONNECTION WITH DIRECTORS' VISIT TO VAR IOUS DAIRY PLANTS OF RS. 2,17,000/- ON THE GROUND THAT SUCH EXPENDITURE WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS. IT IS SUBMITTED THAT T HE DIRECTORS, WHO VISITED VARIOUS DAIRY PLANTS WERE INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE AND DIRECTLY CONNECTED WITH THE APPELLA NT'S BUSINESS ACTIVITIES OF PROCURING, PRODUCING MILK, MILK PRODU CTS AND POUCHES. IT IS SUBMITTED THAT THE EXPENDITURE ON DIRECTORS' VISIT OF RS.2,17,000/- BEING WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS, THE SAME BE ALLOWED. 5. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 51,800/- U/S. 14 A OF THE I.T. ACT, 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE WER E NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND, THE DISALLOWA NCE OF RS. 51,800/- OUGHT TO HAVE BEEN DELETED. IT IS SUBMITTED THAT TH E ASSESSING OFFICER HAS NOT BEEN ABLE TO PROVE ANY NEXUS BETWEEN MONEY BORROWED ON INTEREST AND IN TURN USED FOR EXEMPT INCOME. IT IS SUBMITTED THAT INVESTMENT BEING OLD IN NATURE, MADE OUT OF ITS OWN FUND, AND THE ASSESSEE IS IN A POSITION TO PROVE THE NEXUS, THE D ISALLOWANCE IS TOTALLY UNCALLED FOR. IT IS THEREFORE SUBMITTED THAT THE AD DITION BE DELETED. 6. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIRMIN G THE INTEREST CHARGED U/S. 234 OF THE INCOME TAX ACT. IT IS SUBMI TTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S. 234B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIR MED BY THE LEARNED C.I.T. (APPEALS) BE DELETED. DISPOSING EACH OF THE GROUND IN SERIATIM, SO FAR AS THE FIRST GROUND OF APPEAL IS CONCERNED, CHALLENGING THE ISSUANCE OF NO TICE U/S. 147 AND PASSING OF THE ORDER U/S. 148, A.R. SUBMITTED THAT THIS GROUND IS NOT MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 8 - PRESSED. IN VIEW OF THIS, THE GROUND CHALLENGING TH E RE-OPENING IS DISMISSED. THE SECOND GROUND OF APPEAL IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF RS.1,50,00,000/- BEING ASSISTANCE G IVEN TO JKMPC LTD. THE A.R. MADE A VERY DETAILED SUBMISSION AND FILED VOLUMINOUS PAPER- BOOK, EXPLAINING THE NATURE AND PURPOSE OF THE EXPE NDITURE. THE ASSESSEE IS A CO-OPERATIVE SOCIETY. IT DERIVES INCOME FROM B USINESS OF MARKETING AND MANUFACTURING OF MILK AND MILK PRODUCTS, PACKIN G POUCHED MILKS, CONSIGNEE AGENT OF MEMBER UNIONS FOR MILK PRODUCTS. ON GOING THROUGH THE P&L A/C. FILED WITH THE RETURN OF INCOME AND ANNUAL REPORT FOR THE YEAR 2004-2005, IT WAS FOUND THAT THE ASSESSEE HAS DEBITED RS.334.48 LACS TOWARDS COOPERATIVE DEVELOPM ENT EXPENSES WHICH INCLUDE THE ASSISTANCE OF RS.150 LACS GIVEN TO JKMP C LTD. (JAMMU& KASHMIR MILK PRODUCERS' CO-OPERATIVE LTD.). IT WAS FOUND THAT THE EXPENDITURE OF RS.334.48 LACS TOWARDS CO-OPERATIVE DEVELOPMENT EXPENSES IS OF CAPITAL EXPENDITURE IN NATURE AND TH EREFORE, NOT ALLOWABLE AS REVENUE EXPENDITURE AS PER THE PROVISIONS OF THE AC T. FURTHER, THE CO- OPERATIVE DEVELOPMENT EXPENSES INCLUDES ASSISTANCE OF RS.150 LACS TO JKMPC LTD. WHICH IS ALSO NOT ALLOWABLE EITHER U/S.3 6 OR U/S.37 OF THE ACT FOR THE SINGLE REASON THAT ANY EXPENSES IN THE NATU RE OF 'ASSISTANCE' WAS TO BE QUALIFIED AS CAPITAL EXPENDITURE ONLY. IN VIEW O F THE ABOVE, THE ASSESSEE WAS REQUIRED VIDE PARA-6 OF QUESTIONNAIRE LETTER DA TED 20/08/2010 TO EXPLAIN WITH COGENT AND SUFFICIENT EVIDENCES AS TO WHY CO-OPERATIVE MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 9 - DEVELOPMENT EXP. (INCLUDING ASSISTANCE OF RS.150 LA CS TO JKMPC LTD) OF RS.334.48 LACS SHOULD NOT BE TREATED AS CAPITAL EXP ENDITURE. IN RESPONSE TO THIS, A WRITTEN SUBMISSION DATED 24/11/2010 WAS FUR NISHED AND THE RELEVANT PARAGRAPHS OF THE SUBMISSION ARE REPRODUCED BELOW. I. 'APART FROM MARKETING AND DISTRIBUTION, THE KEY ROL E OF FEDERATION IS TO DEVELOP, PROMOTE AND SUPPORT CO-OP ERATIVE MOVEMENT. II. WE HAVE TO FURTHER STATE THAT WITH THE INTRODUCTION OF THE PRIVATE PARTIES IN THE MILK AND MILK PRODUCTS BUSINESS IN O RGANIZED MANNER, IT WAS FEARED THAT THE MILK PRODUCERS AT VI LLAGE LEVEL ARE LIKELY TO BE MISDIRECTED BY THE PRIVATE ENTREPRENEU RS AND THEREBY THE MILK PRODUCERS WOULD BE TEMPTED TO DIVERT SUPPL Y OF MILK TO THESE PRIVATE PARTIES AND IT WOULD RESULT INTO REDU CTION IN QUANTUM OF THE PROCUREMENT OF MILK AND AFFECT THE B USINESS OF THE FEDERATION ADVERSELY. III. FEDERATION STARTED THE COOPERATIVE DEVELOPMENT PROG RAMME IN THE EARLIER EARS ALSO AND DEVELOPED IN RESPECT OF M ILD COOPERATIVE, IT IS FINANCIAL INVOLVEMENT OF MEMBERS, DEVELOPMENT ACTIVITIES IN RESPECT OF FODDER, MILK PRODUCTION, ENHANCEMENT, SC IENTIFIC ANIMAL HUSBANDRY PRACTICES AND OVERALL STRUCTURAL D EVELOPMENT OF ANAND PATTERN DIARY COOPERATIVE BY DIRECT PARTIC IPATION OF THE MEMBER BASED ON INTERNATIONAL RECOGNIZED PRINCIPLES OF CO- OPERATION. DURING THE YEARS, ASSESSEE/APPELLANT HAVE EVOLVED F OLLOWING ACTIVITIES, IN RESPECT OF COOPERATIVE MOVEMENT. THEY HAVE IMPLE MENTED INTERNAL CONSULTANT DEVELOPMENT (ICD) INTERVENTION FOR DEVEL OPING SELF LEADERSHIP AMONG MEMBER PRODUCERS AND THEREBY ENABLING THEM TO MANAGE THEIR DAIRY BUSINESS EFFICIENTLY LEADING TO THEIR OVERALL DEVEL OPMENT. UNDER ICD THEY HAVE IMPLEMENTED MODULE ON VISION MISSION STRATEGY (VMS) FOR PRIMARY MILK PRODUCER MEMBERS & VILLAGE DAIRY COOPERATIVES. FACILITATED BY SPECIALLY TRAINED CONSULTANTS, VILLAGE DAIRY COOPER ATIVE SOCIETIES (VDCS) MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 10 - HAVE CONDUCTED MISSION STRATEGY WORKSHOPS, PREPARED THEIR MISSION STATEMENTS BUSINESS PLANS FOR NEXT FIVE YEARS. A CO PY OF THE BUSINESS PLAN DEVELOPED BY THE VILLAGE DAIRY COOPERATIVE SOCIETY IS ALSO ENCLOSED. THEY ALSO CARRY OUT CLEANLINESS AUDIT AT VDCS. IN ADDITI ON ON 2ND OCTOBER (GANDHI JAYANTI DAY) VDCS ALSO CARRY OUT RED TAG DA Y WHERE CLEANING OF VDCS, SURROUNDINGS, AND ITS RECORDS / REGISTER IS C ONDUCTED. BREAKUP OF CO-OPERATIVE DEVELOPMENT EXPENDITURE FOR THE FINANCIAL YEAR 2004-05 SR. NO. PARTICULARS RS.(IN LACS) 1. REIMBURSEMENT TO MEMBER UNIONS AGAINST CO-OPERATIVE DEVELOPMENT EXP. 124.60 2. ASSISTANCE TO JKMPCL 150.00 3. HACCP AUDIT REIMBURSEMENT TO MEMBER UNIONS (HAZARD ANALYSIS AND CRITICAL CONTROL POINT) 2.29 4. TECHNICAL TRAINING OF STAFF TO DENMARK & SWEDEN 14.86 5. DIRECTORS VISIT TO VARIOUS DAIRY PLANTS 2.17 6. AMUL YATRA EXPENSE (CO-OPERATIVE YATRA) AND OTHER MISC. EXP. 40.56 TOTAL 334.48 IT IS SUBMITTED THAT THOUGH IT IS DIFFICULT TO MEAS URE ECONOMIC BENEFIT IN MONEY TERMS, BUT IT WAS SEEN THAT THE MI LK PRODUCTION/PROCUREMENT IN THESE UNIONS HAVE BEEN IN CREASED BY 15 PER CENT WHEN COMPARED TO EARLIER YEAR. IT IS OBSERVED THAT OUT OF TOTAL EXPENDITURE 334.48 LACS, WHICH WERE DISALLOWED BY THE A.O., THE LEARNED CIT (APPEA LS) ALLOWED ALL OTHER EXPENDITURE EXCEPT ASSISTANCE GIVEN BY THE AS SESSEE CO-OP. SOCIETY TO JAMMU & KASHMIR MILK PRODUCERS' CO-OPERA TIVE LIMITED OF MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 11 - RS.150 LAKHS. THE ASSESSEE IS IN APPEAL FOR DISALLO WANCE AND SUBMITTED VEHEMENTLY THAT ALL THE EXPENDITURE OF RS .334.48 LAKHS ARE FULLY AND EXCLUSIVELY EXPENDITURE IN THE NATURE OF DAIRY DEVELOPMENT EXPENDITURE. IT WAS ARGUED THAT ALL THE EXPENDITURE INCURRED FOR THE UPLIFTMENT AND DEVELOPMENT OF THE DAIRY INCURRED IN THE NORMAL COURSE OF BUSINESS ACTIVITIES AND IN FURTHERANCE OF COOPER ATIVE MOVEMENTS TO PROCURE AND SELL MORE MILK, IS PART AND PARCEL OF T HE BUSINESS EXPENDITURE. THE RELIANCE WAS PLACED ON THE DECISIO N OF AHMEDABAD BENCH ITAT IN THE CASE OF VALSAD DISTRICT CO-OP. SO CIETY, WHEREIN THE ASSESSEE IS CLAIMED OF INCURRING EXPENDITURE ON DAI RY DEVELOPMENT EXPENDITURES WERE ALLOWED IN APPEAL NO.3356/AHD/200 8. COPY OF THE SAID DECISION IS FOR A.Y.2005-06 IS FILED. THE A.R. FURTHER SUBMITTED THAT COMING TO THE SPECIFIC DISALLOWANCE OF RS.150 LAKHS BEING ASSISTANCE TO JKMPC LTD. THE CRUX OF THE ARGUMENTS OF THE LEARNED A.R. WAS THAT IN SEPTEMBER 2012-13, HON'BLE CHIEF MINIST ER OF JAMMU & KASHMIR LATE SHRI MUFTI MOHAMMED SAYED VISITED ANAN D ALONG WITH VARIOUS SENIOR MINISTERS AND REQUESTED THE ASSESSEE THAT ANAND TYPE DAIRY CO-OPERATIVE INFRASTRUCTURE BE ESTABLISHED IN KASHMIR. THE OBJECTIVE WAS TO ASSOCIATE THE ASSESSEE IN PROCURIN G, PROCESSING AND PRODUCING MILK AND MILK PRODUCERS BY SETTING UP A F INANCIALLY VIABLE CO-OPERATIVE DAIRY IN JAMMU AND KASHMIR ON THE AMUL PATTERN. THE ASSESSEE THEREFORE ASSISTED THE SAID JKMPC LTD. IN ESTABLISHING THE DAIRY IN JAMMU AND KASHMIR SO THAT MILK AND MILK PR ODUCTS IN THE NAME OF AMUL CAN ALSO BE MANIFESTED AND MARKETED IN THE STATE OF JAMMU & KASHMIR. THE A.R. SUBMITTED THAT BY INCURRI NG SUCH MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 12 - EXPENDITURE A DAIRY WAS SET UP BY JKMPC LTD., WHICH SUPPLIED POUCH MILK OF 186.14 LAKH. WITH REFERENCE TO THE ASSISTANCE PROVIDED BY THE FE DERATION TO THE JAMMU & KASHMIR MILK PRODUCERS' CO-OPERATIVE LIMITE D, THE BOARD RESOLUTIONS FOR PROVIDING SUCH ASSISTANCE AND COPY OF MOU HAVE BEEN FILED. IT IS ONE OF THE OBJECTIVE OF FEDERATION TO PROMOTE CO-OPERATIVE MOVEMENT AND FOR THAT PURPOSE THESE WERE DEVELOPMEN T AND EDUCATION PROGRAMME EXPENDITURE AND EVERY YEAR SUCH EXPENDITU RE FOR CO- OPERATIVE DEVELOPMENT IS A ROUTINE NATURE OF EXPEND ITURE. WITH REFERENCE TO AMUL YATRA, IT IS SUBMITTED THAT TO GE T EXPOSURE TO OUR NETWORK OF CO-OPERATIVE INSTITUTION, WE ORGANIZE AM UL YATRA FOR OUR CHANNEL PARTNER, DISTRIBUTION AND MAJOR RETAILERS F ORM ACROSS THE COUNTRY TO COME TO ANAND IN AMUL YATRA PROGRAMME. S O FAR MORE THAN 7700 DISTRIBUTORS AND OTHER CHANNEL PARTNER HAVE VI SITED ANAND IN AMUL YATRA. TO SUBSTANTIATE INCURRENCE OF SIMILAR BUSINE SS EXPENSE AS REGULAR BUSINESS EXPENSES, THE FEDERATION PROVIDES DETAILS OF SIMILAR EXPENSE IN IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS AS UNDER : A.Y. 2003-04 RS. 186.36 LACS, A.Y. 2004-05 RS.213.66 LACS. FURTH ER, DURING THE YEAR UNDER CONSIDERATION, TOTAL EXPENDITURE IS RS.3 34.48 LACS INCLUDES ASSISTANCE OF RS.150 LACS TO JAMMU & KASHMIR MILK P RODUCERS' COOPERATIVE LTD. FURTHER, THE SAME BEING EXPENDED F OR CO-OPERATIVE DEVELOPMENT AND THEREFORE INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS AND DOES NOT GIVE ANY ENDURING BENEFIT AND BEING PARI MATERIAL SIMILAR TO THE EXPENSES INCURRED AND ALLOWED IN ALL EARLIER MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 13 - ASSESSMENTS YEAR AND ALSO DURING ASSESSMENT COMPLET ED U/S.143(3) OF THE ACT. FURTHER WE HAVE TO SUBMIT THAT JKMPC LTD. HAVE SUPPLIED POUCH MILK (MILK PRODUCT) OF RS.186.14 LACS DURING THE A.Y.2005-06 AND RS.951.21 DURING THE A.Y.2006-07 TO GCMMF LTD. JAMMU BRANCH. THUS, IT HELPED TO INTRODUCE AMUL POUCH MIL K IN JAMMU AND SRINAGAR AREA. IT WAS ALSO SUBMITTED THAT SUCH KIND OF EXPENDITURE WERE REGULARLY INCURRED BY THE FEDERATION AND SIMILAR EX PENDITURE IN IMMEDIATE 3 PRECEDING YEARS WERE INCURRED AND ALLOW ED. THE CRUX OF THE SUBMISSION OF THE APPELLANT WAS THA T SUCH EXPENDITURES ARE WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS, IT DOES NOT GIVE ANY ENDURING BENEFIT. SUCH KIND OF EX PENDITURES WERE INCURRED IN EARLIER YEARS ALSO WHEN DIARIES WERE SE T UP IN MAHARASHTRA AND IN OTHER STATES IN 1994-95 AND EARLIER ASSESSME NT YEARS AND THE SAME HAVE BEEN CONSISTENTLY ALLOWED. IT WAS ALSO AR GUED THAT SUCH EXPENDITURE DEBITED HAVE BEEN CONSIDERED CORRECTLY AS REVENUE EXPENDITURE BY A RENOWNED FIRM OF CHARTERED ACCOUNT ANT, WHICH AUDITED THE ACCOUNTS OF THE SOCIETY AND THAT THERE ARE NO OBJECTIONS FROM THE REGISTRAR OF CO-OPERATIVE SOCIETY ALSO FOR TREA TING SUCH EXPENDITURE AS REVENUE. ARGUING THE NECESSITY OF SUCH EXPENDITU RE FROM LAW POINT OF VIEW IT WAS SUBMITTED THAT DEVELOPMENT OF CO-OPE RATIVE MOVEMENT FOR WHICH THE APPELLANT ORGANIZATION WHICH IS MARKE TING AMUL MILK PRODUCTS WAS GUJARAT BUT ACROSS THE COUNTRY. SUCH E XPENDITURE INCURRED MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 14 - VOLUNTARILY ON THE GROUNDS OF COMMERCIAL EXPEDIENCY ARE ALLOWABLE EXPENDITURE BEING INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS AS ENVISAGED UNDER SECTION 37 OF THE INCOM E TAX ACT. RELIANCE WAS PLACED ON FOLLOWING DECISIONS:- (1) SASOON J. DAVID VS CIT - 118 ITR 261 (SC) (2) CIT VS. MALAYALAM PLANTATION LTD - 53 ITR 140 ( SC) (3) MADHAV PRASAD JATIAR VS CIT - 118 ITR 200 (SC) (4) SRI VENKATA SATYANARAYAN RICE MILL CONTRACTORS CO. VS CIT 223 ITR 101 (SC) (5) CJ. PATEL & CO. VS CIT - 158 ITR 487 (GUJ. HC) THE LEARNED D.R. HEAVILY RELIED ON THE ORDER OF THE LOWER AUTHORITIES NAMELY THE A.O. AND ALSO THE LEARNED CI T (APPEALS) AND STRONGLY SUBMITTED THAT THE EXPENDITURE IS OF ENDUR ING BENEFIT AND SHOULD BE TREATED AS CAPITAL EXPENDITURE OR SHOULD BE SPREAD OVER A PERIOD OF 3 TO 5 YEARS. THE LEARNED ASSESSING OFFICER HAS REPRODUCED THE SU BMISSION AND EXPLANATION GIVEN BY THE APPELLANT IN THE ASSES SMENT ORDER FROM PAGE 2 TO 6, BUT HAS SUMMARILY REJECTED THE CLAIM O N THE GROUND THAT THEY ARE NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE. IT IS SUBMITTED THAT THE FINDING GIVEN IS TOTALLY ERRONEOUS, INCORRECT AND ABSOLUTELY CONTRARY TO THE CONSISTENT FACT BEING ACCEPTED FOR ALL THESE YEARS. IN VIEW OF THESE FACTS, THE AD DITION MADE OF RS.334.48 LACS BE DELETED. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 15 - WITHOUT PREJUDICE TO THE ABOVE THE LEARNED ASSESSIN G OFFICER HAS GROSSLY ERRED IN CONTRADICTING HIMSELF BY HOLDING A SECOND ALTERNATIVE VIEW THAT DEVELOPMENT EXPENSES ARE OF ENDURING NATU RE AND THEY ARE CAPITAL IN NATURE, WITHOUT GRANTING ANY DEPRECIATIO N. THUS, THE ASSESSING OFFICER IS NOT AT ALL CONFIDENT AND SURE ABOUT THE TREATMENT OF THE DEVELOPMENT EXPENSES INCURRED BY THE APPELLANT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT IS SUBM ITTED THAT THE ADDITION MADE OF RS.334.48 LACS IS CONTRARY TO THE FACTS, CO NTRARY TO THE CONSISTENT PRINCIPLE AND AGAINST THE SETTLED LEGAL PROPOSITION. IN VIEW OF THIS, THE ADDITION OF RS.334.48 LACS BE DELETED. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICE R, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) AND AFTER CAREFULLY CONSIDERING THE SUBMISSIONS MADE BY THE L EANED AR AND THE LEARNED DR AND AFTER PURSUING THE PAPER BOOK AND WR ITTEN SUBMISSIONS WE ARE OF THE CONSIDERED VIEW THAT THE EXPENDITURE INCURRED BY WAY OF ASSISTANCE TO JAMMU & KASHMIR MILK PRODUCERS' CO-OP ERATIVE LIMITED ARE NOT AT ALL OF CAPITAL IN NATURE OR OF ANY BENEF IT ENDURING NATURE. THE SAME ARE INCURRED IN THE NORMAL COURSE OF BUSINESS ACTIVITIES AND IN FURTHERANCE OF MILK AND AMUL PRODUCTS. THE EXPENDIT URES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE DECISION CITED ABOVE IN CASE OF VALSAD DISTRICT CO.OP. SOCIETY IN THE RATIO DECIDED THEREIN IS FULLY APPLICABLE TO APPELLANT'S CASE, WE THEREFORE, HOLD THAT THE EXPENDITURE INCURRED OF RS.150 LAKHS BEING THE EXPENDITURE INCURRED AS ASSISTANCE TO JAMMU & KASHMIR MILK PRODUCERS' CO -OPERATIVE MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 16 - LIMITED ARE OF REVENUE IN NATURE AND SAME BE ALLOWE D. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. THE THIRD GROUND OF APPEAL IS WITH REGARD TO GRANTING DEPRECIATION OF AMUL PARLOUR AT 10% AS AGAINST 100% DEPRECIATION CLAIMED BY THE APPELLANT. SO FAR AS THE DEPRECIATIO N IS CONCERNED, AO ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% ON AM UL PARLOURS. IN THIS CASE, MATTER WAS DECIDED IN FAVOUR OF ASSESSE BY THE HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR A.Y.2002-03 IN ITA NO.47 5/AHD/2006 AND NOW ETH SAME HAS BEEN CONFIRMED BY THE HON'BLE GUJA RAT HIGH COURT IN ASSESSES OWN CASE IN TAX APPEAL NO.759 OF 2013, DAT ED 23/01/2014. IN THIS CASE, HON'BLE HIGH COURT HAS HELD HATS MILK DA IRY PROCURE LAND ON LEASE BASIS AND CONSTRUCTED TEMPORARY SHEDS FOR SAL E OF MILK PRODUCTS AND HON'BLE HIGH COURT HAS ALSO CITED SIMILAR DECIS ION IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD. REPORTED IN (2007) 293 ITR 432 (MAD) AND HELD THAT CONSTRUCTION OF BUILDING ON A L EASEHOLD LAND RESULTED INTO ASSESSEE ONLY A BUSINESS ADVANTAGE AN D THE ASSESSEE CANNOT BE STATED TO HAVE ACQUIRED ANY CAPITAL ASSET . THEREFORE IN VIEW OF THE ABOVE JUDGMENTS, APPEAL OF THE ASSESSEE IS A LLOWED AND DEPARTMENTAL APPEAL IS DISMISSED. THEREFORE THIS GR OUND OF APPEAL IS ALLOWED. THE NEXT GROUND NO.4 IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE OF DIRECTOR'S VISIT TO VARIOUS DAIRY PL ANTS AMOUNTING TO RS.2,17,000/-. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE BEING MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 17 - INCURRED BY THE DIRECTORS OF THIS CO-OPERATIVE SOCI ETY ON THE GROUND THAT THEY ARE NOT INCURRED FOR THE PURPOSE OF BUSINESS. LEARNED CIT (APPEALS) CONFIRMED THE DISALLOWANCE IN HIS ORDER H OLDING THAT DIRECTORS VISITED THE PLANT AT JAMMU & KASHMIR FROM WHICH THE APPELLANT IS GETTING THE POUCH MILK AND HELD THAT A SSESSEE COULD NOT EXPLAIN HOW THE VISIT OF DIRECTORS AT PLANT OF JAMM U & KASHMIR WAS MANIFESTED TO THE ASSESSEE AND HOW IT IS CONCERNED THAT THE STANDARD OF PLANT OF FEDERATION, WHICH IS SITUATED IN DIFFERENT STATES. THE LEANED AUTHORIZED REPRESENTATIVE STRONGLY ARGUED THAT THE EXPENDITURE INCURRED BY THE ASSESEEE FOR THE VISIT DONE BY THE DIRECTORS ARE IN NORMAL COURSE OF CO-OPERATIVE SOCIETIES BUSINESS AC TIVITIES AND SUCH EXPENDITURES ARE INCURRED EVERY YEAR. DIRECTORS NEE D TO VISIT THE PLANT SITUATED AT VARIOUS PLACES AND SATISFY THEMSELVES W ITH REGARD TO THE STANDARD MAINTAINED AND TO SEE WHETHER IT REQUIRES ANY IMPROVEMENT. THIS YEAR THE DIRECTORS VISITED JAMMU & KASHMIR AS IT WAS NOT POSSIBLE FOR SOCIETY TO RECEIVE THE MILK IN POUCHED PACK AS PER STANDARD FIXED BY THEM WITHOUT VISITING THE PLANT, VERIFYING THE HYGI ENIC CONDITION AND PURITY AND PACKING OF THE MILK. IT WAS SUBMITTED TH AT THEREFORE THE EXISTENCE WHOLLY AND EXCLUSIVE FOR THE PURPOSE OF B USINESS AND SAME SHOULD BE ALLOWED. AS AGAINST THIS, THE LEARNED DR RELIED ON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER AND THE LEARNED CIT (APPEALS). WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER , ORDER OF LEARNED CIT (APPEALS) AND THE SUBMISSIONS MADE BY T HE LEARNED A.R. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 18 - ONCE WE HAVE HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR DAIRY DEVELOPMENT INCURRED TO ASSIST JKMPC LTD. IS REVENUE EXPENDITURE, THEN THE EXPENDITURE INCURRED BY THE D IRECTORS OF THE CO- OPERATIVE SOCIETY ARE ALSO AKIN TO THE BUSINESS OF THE SOCIETY. THERE IS NO ELEMENT OF ANY CAPITAL EXPENDITURE INCURRED THER EIN. THE EXPENDITURE INCURRED OF RS.2,17,000/- ACCORDINGLY ARE ALLOWED A S REVENUE EXPENDITURE. THIS GROUND OF APPEAL IS ACCORDINGLY A LLOWED. THE FIFTH GROUND OF APPEAL BEING ADDITION MADE OF RS.51,800/- UNDER SECTION 14A IS NOT PRESSED BY THE APPELLANT L OOKING TO THE SMALLNESS OF AMOUNT INVOLVED THERE IN AND IS THEREF ORE DISMISSED ACCORDINGLY. THE SIXTH GROUND OF APPEAL BEING INTEREST CHARGED UNDER SECTI ON 234B, WE HELD THAT INTEREST HAS TO BE CHARGED UNDER SECTION 234B. HOWEVER, THE SAME SHALL BE CHARGED AFTER GIVING EFF ECT TO THIS ORDER. THIS GROUND IS ACCORDINGLY, PARTLY ALLOWED. THUS, T HE APPEAL FOR THE ASSESSEE FOR A.Y.2005-06 IS PARTLY ALLOWED. WE NOW COME TO THE APPEAL FILED BY THE REVENUE IN P ARA 23 OF THE TRIBUNAL ORDER. IN ITA NO.1226/AHD/2012 FOR ASSESSMENT YEAR 2005-06 , THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION OF R S. 124.60 LACS ON ACCOUNT OF REIMBURSEMENT OF MEMBER UNIONS AGAINS T CO-OP. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 19 - DEVELOPMENT EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE IS NOT CONNECTED WITH THE ORDINARY COUR SE OF BUSINESS OF THE ASSESSEE AND THAT THE COOPERATIVE DEVELOPMEN T EXPENSES ARE OF ENDURING NATURE AND THEREFORE THEY ARE CAPIT AL IN NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION OF R S.40.56 LACS ON ACCOUNT OF DISALLOWANCE OF AMUL YATRA EXPENSES ( CO- OPERATIVE DEVELOPMENT YATRA) WITHOUT APPRECIATING T HE FACT THAT SUCH EXPENDITURE IS OF ENDURING NATURE AND THEREFOR E, CAPITAL IN NATURE.' THE FIRST GROUND OF APPEAL OF REVENUE IS WITH REGARD TO THE DELETING THE ADDITION OF RS.124.60 LACS ON ACCOUNT OF REIMBU RSEMENT OF MEMBER UNIONS AGAINST CO-OP. DEVELOPMENT EXPENSES. THE LD. D.R. IN DETAIL READ OUT THE ASSESSMENT ORDER AS WELL AS THE FINDIN GS GIVEN BY THE LEARNED CIT (APPEALS). THE LEARNED A.O. HEAVILY REL IED ON HIS ARGUMENT THAT THESE ARE PART OF THE DAIRY DEVELOPME NT EXPENDITURE AND REITERATED THAT THE EXPENDITURE ARE FULLY COVERED B Y THE DECISION OF AHMEDABAD ITAT IN THE CASE OF VALSAD DISTRICT CO-OP . SOCIETY SUPRA. IN VIEW OF THIS, WE HELD THAT THE EXPENDITURE OF RS .124.60 LAKH INCURRED ON ACCOUNT OF EMOLUMENTS OF MEMBER UNIONS ARE ALLOW ED AS REVENUE EXPENDITURE. THE APPEAL OF THE REVENUE IS DISMISSED ACCORDINGLY. THE SECOND GROUND OF APPEAL IS WITH REGARD TO DELETING THE ADDITION OF RS.40.56 LACS ON ACCOUNT OF DISALLOWANCE OF AMUL YATRA EXPENSES. THE LEARNED D.R HEAVILY RELIED ON THE ORDERS AND OB SERVATIONS MADE BY THE LOWER AUTHORITIES AND STRONGLY ARGUED THAT THES E ARE NOT IN THE NATURE OF BUSINESS EXPENDITURE. WHEREAS LEARNED A.R. RELIE D ON THE SAME MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 20 - SUBMISSIONS MADE ON THE GROUND THAT IT IS PART OF D AIRY DEVELOPMENT EXPENDITURE AND INCURRED TO LET PUBLIC AT LARGE TO KNOW ABOUT AMUL MILK PRODUCTS. AFTER CAREFULLY PERUSING BOTH THE OR DERS AND SUBMISSIONS MADE BY THE A.R. WE HOLD THAT THE EXPEN DITURE INCURRED ON AMUL YATRA IS INCURRED BY THE APPELLANT FOR BUSINES S PURPOSE, THE SAME IS PART AND PARCEL OF THE DAIRY DEVELOPMENT EXPENDI TURE INCURRED IN NORMAL COURSE OF BUSINESS. IN VIEW OF THIS, THE EXP ENDITURE OF RS.14.66 LAKH INCURRED BY THE APPELLANT ARE ALLOWABLE EXPEND ITURE. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ASSESSMENT YEARS 2007-08 WE NOW COME TO THE APPEALS FILED BY ASSESSEE IN APPEAL NO.3037/AHD/2010 FOR THE ASSESSMENT YEARS 20 07-08. 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.3,64,32,000/- BEI NG AMOUNT TRANSFERRED TO RESERVE FUND U/S.67 OF GUJARAT CO.OP . SOCIETIES ACT. ON THE FACTS OF THE CASE AND IN LAW, THE DEDUC TION OF THE AFORESAID AMOUNT OUGHT TO HAVE BEEN GIVEN. IT BE SO HELD NOW AND THE SAID AMOUNT BE ALLOWED AS CLAIMED. 2. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AMUL PARLORS. ON THE FACTS OF THE CASE AND IN VIEW OF TH E LEGAL POSITION, THE LEARNED C.I. T. (APPEALS) OUGHT TO HA VE DIRECTED TO MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 21 - GRANT DEPRECIATION AT 100% AS CLAIMED. IT BE SO HEL D NOW AND THE DEPRECIATION BE ALLOWED AT 100%. 3. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.72,855/- U/S. 14A OF THE I.T.ACT, 1961. IN VIEW OF THE SUBMISSION MADE THAT THERE WERE NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND, THE DISALLOWANCE OF RS.72,855/- OUGHT TO HAVE BEEN DELETED. IT BE SO HELD NOW. 4. THE LEARNED C.I.T. (APPEALS) ERRED IN CONFIRMING TH E ADDITION OF RS.87,00,000/- BEING DISALLOWANCE OF EXPENSES ON RE PAIRS TO THE PLANT CONSIDERING THE SAME AS CAPITAL IN NATURE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON THE BASIS OF THE D ETAILS FILED, THE EXPENDITURE ARE IN THE NATURE OF CURRENT REPAIRS AN D ARE NOT AT ALL IN THE NATURE OF CAPITAL EXPENDITURE. IT IS SUBMITT ED THAT THE DISALLOWANCE OF RS.87,00,000/- EFFECTIVELY RS.73,95 ,0007- AFTER GRANTING DEPRECIATION BE DELETED AND THE CLAIM OF T HE APPELLANT THAT THE EXPENDITURE ARE OF REVENUE IN NATURE BE AL LOWED. NOTWITHSTANDING THE ABOVE, THE LEARNED C.I.T. (APPE ALS) HAS ERRED IN NOT APPRECIATING THE FACT AND CIRCUMSTANCE S OF THE CASE WITH REGARD TO THE SAID CLAIM THAT THE APPELLANT HA D RECEIVED THE INSURANCE CLAIM OF RS.49,00,000/- AND IN THE EVENT THE EXPENDITURE OF RS.87,00,000/- IS CAPITALIZED THEN T HE AMOUNT OF INSURANCE CLAIM ON THE VERY SAME ITEMS, THOUGH CRED ITED AND SHOWED AS INCOME IN THE SUBSEQUENT YEAR BE REDUCED FROM THE TREATMENT OF THE CAPITAL EXPENDITURE. IT IS THEREFO RE PRAYED THAT IN THE EVENT RS.87,00,000/- ARE NOT ALLOWED AS REVENUE EXPENDITURE, THEN ADDITIONAL COST OF PLANT ENHANCED TO RS.87,00, 000/- BE REDUCED BY RS.72,83,686/- AND THE NET ADDITION OF O NLY RS.14,16,314/- ONLY BE CAPITALIZED. 5. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN CONFIRMING THE AMOUNT RECEIVED OF RS.237 LAKHS BEING SECURITY DEPOSITS WR ITTEN BACK AS INCOME AND NOT AS CAPITAL RECEIPT. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE SECURITY DEPOSITS RECEIVED FROM VARIOUS VENDORS WERE NEVER ALLOWED AS A DEDUCTION I N THE MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 22 - PREVIOUS YEAR, PROVISIONS OF SEC.41(1) ARE NOT APPL ICABLE AND THEREFORE, WRITING OFF AND CREDITING SECURITY DEPOS ITS AS NO MORE PAYABLE CANNOT BE TREATED AS INCOME. IT IS SUBMITTE D THAT THE DEPOSITS SO WRITTEN OFF OF RS.237 LAKHS AS NOT PAYA BLE IS CAPITAL RECEIPT AND NOT AN INCOME AND THE SAME BE ALLOWED A CCORDINGLY. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED C.I.T. (APPEALS) HAS FURTHER ENHANCED THE ADDITION BY NOT FOLLOWING THE APPROPRIATE PROCEDURE OF ISSUING APPROPRIATE NOTICE AND BY MAKI NG A FURTHER ADDITION OF RS.239.07 LAKHS BEING SECURITY DEPOSITS WRITTEN OFF IN THE SUBSEQUENT YEAR. IT IS SUBMITTED THAT THE APPEL LANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING DULY AUDI TED AND WRITING OFF OF OTHER SECURITY DEPOSITS OF RS.239.07 LAKHS WAS NOT AT ALL AN ISSUE FOR THE YEAR UNDER APPEAL, BUT IS T O BE CONSIDERED AND DECIDED IN SUBSEQUENT ASST. YEAR 2008-09. IN AN Y EVENT THE CREDIT OF AMOUNT OF DEPOSITS OF RS.239.07 LAKHS IN PROFIT & LOSS ACCOUNT AND ITS TREATMENT AS INCOME OR OTHERWISE IS NOT AT ALL AN ITEM OF INCOME IN THIS YEAR AND IT CANNOT BE ADDED IN THE HANDS OF THE INCOME OF THE APPELLANT IN THE ASST. YEAR 2007- 08. THE ACTION OF LEARNED C.I.T,(APPEALS) DIRECTING THE ASSESSING OFFICER TO ENHANCE THE INCOME FURTHER BY RS.239.07 LAKHS IS BA D IN LAW AND ALSO NOT CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE. IT IS SUBMITTED THAT THE SAME BE HELD ACCORDINGLY. 6. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN CONFIRMING THE INTEREST CHARGED U/S. 234 OF THE INCOME TAX ACT. IT IS SUBMI TTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/ S.234B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHA RGED AND CONFIRMED BY THE LEARNED C.I.T. (APPEALS) BE DELETE D. WITH REGARD TO FIRST GROUND, THE MATTER WAS DECIDED AGAINST THE ASSESSEE BY HON'BLE ITAT AHMEDABAD IN ASSESSEE'S OW N CASE FOR A.Y.2006-07 IN ITA NO.3270/AHD/2009 ON PAGE 15, PAR A 11 OF THE ITAT ORDER. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 23 - SO FAR AS THE SECOND GROUND IS CONCERNED, THE A.O. ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION CLAIM ED BY THE APPELLANT ON AMUL PARLOR. SO FAR AS THE DEPRECIATIO N IS CONCERNED, AO ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% ON AM UL PARLOURS. IN THIS CASE, MATTER WAS DECIDED IN FAVOUR OF ASSESSEE BY THE HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR A.Y.2002-03 IN ITA NO.47 5/AHD/2006 AND NOW ETH SAME HAS BEEN CONFIRMED BY THE HON'BLE GUJA RAT HIGH COURT IN ASSESSES OWN CASE IN TAX APPEAL NO.759 OF 2013, DAT ED 23/01/2014. IN THIS CASE, HON'BLE HIGH COURT HAS HELD HATS MILK DA IRY PROCURE LAND ON LEASE BASIS AND CONSTRUCTED TEMPORARY SHEDS FOR SAL E OF MILK PRODUCTS AND HON'BLE HIGH COURT HAS ALSO CITED SIMILAR DECIS ION IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD. REPORTED IN (2007) 293 ITR 432 (MAD) AND HELD THAT CONSTRUCTION OF BUILDING ON A L EASEHOLD LAND RESULTED INTO ASSESSEE ONLY A BUSINESS ADVANTAGE AN D THE ASSESSEE CANNOT BE STATED TO HAVE ACQUIRED ANY CAPITAL ASSET . THEREFORE IN VIEW OF THE ABOVE JUDGMENTS, APPEAL OF THE ASSESSEE IS A LLOWED AND DEPARTMENTAL APPEAL IS DISMISSED. THEREFORE THIS GR OUND OF APPEAL IS ALLOWED. THE NEXT GROUND NO.3 OF APPEAL BEING ADDITION MADE OF RS.72,855/- UNDER SECTION 14A IS NOT PRESSED BY THE APPELLANT LOOKING TO THE SMALLNESS OF AMOUNT INVOLVED THEREIN AND IS THEREFORE DISMISSED ACCORDINGLY. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 24 - THE GROUND NO.4 IS REGARDING DISALLOWANCE FOR EXPEN SES OF RS.87,00,000/-. THE ASSESSING OFFICER TREATED THE E XPENDITURE CLAIMED AS REPAIR TO THE DAMAGE CAUSED TO THE PLANT CONSIDE RING THE SAME TO BE CAPITAL IN NATURE. THE A.O. FOUND THAT PAYMENT OF R S.87,00,000/- WAS MADE BY THE APPELLANT TO GEA PROCESSING ENGINEERING INDIA LTD. AND THE BILL RAISED DESCRIBED THE WORK AS 'DESIGN, SUPP LY, IRRIGATION AND COMMISSIONING OF 100 MTDP MILK POWDER PLANT'. THE A .O. OBSERVED THAT ALONG WITH THE BILL THERE ARE OTHER ITEMS OF P URCHASES AND THEREFORE TOOK A VIEW THAT IT IS NOT REVENUE OR REPAIRING EXP ENDITURE AND HELD THAT A NEW ASSET WAS CREATED GIVING BENEFIT OF ENDURING NATURE. AFTER ALLOWING THE DEPRECIATION THEREON THE A.O. MADE ADD ITION OF RS.73,95,000/-. THE LEARNED CIT (APPEALS) CONFIRMED THE SAME VIEW OF THE A.O. THE APPELLANT IS NOW IN APPEAL. THE LEARNE D A.R. VEHEMENTLY ARGUED THAT FROM THE COPY OF THE APPEAL FILED FROM THE PAPER-BOOK PAGE 59 IT CAN BE SEEN THAT VARIOUS PARTS WHICH WERE IMP ORTED AS WELL AS INDIGENOUS WERE SUPPLIED BY GEA PROCESSING ENGINEER ING INDIA LIMITED. IT WAS THE CONTENTION OF THE APPELLANT THA T THERE WAS HEAVY DAMAGE TO THE PLANT AND IT WAS REPAIRED BY TAKING C ORRECTIVE ACTIONS. IT WAS ARGUED THAT THIS REPAIR WAS DONE TO A BIG PLANT WHICH WAS OF RS.50 CRORES ALREADY IN EXISTENCE AND INCURRING REPAIR AN D REPLACING SOME PARTS OF RS.87 LAKH IS A NORMAL REPAIR TO MAINTAIN AND RESTORE THE PLANT AND NOT TO BRING ANY NEW CAPITAL ASSET INTO ASSIST, LEAST, ANY BENEFIT OF ENDURING NATURE AS IT WAS ONLY TO CONTINUE TO MAINT AIN AND RUN THE SAME PLANT. RELIANCE WAS ALSO PLACED ON THE COPY OF DECI SION FILED IN CASE OF CIT VS. SARAVANA SPINNING MILLS LIMITED 293 ITR 201 . LEARNED A.R. MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 25 - FURTHER ARGUED THAT THE APPELLANT RECEIVED AN INSUR ANCE CLAIM ON THE SAME OF RS.72,83,686/- IN THE NEXT YEAR WHICH WAS O FFERED AS INCOME ALSO IN THE NEXT YEAR. HE ACCORDINGLY SUBMITTED THA T IF INSURANCE CLAIM RECEIVED IS NOT CAPITALIZED AND IS NOT TREATED AS C APITAL RECEIPT IN SUBSEQUENT YEAR, THE EXPENDITURE INCURRED FOR SUCH REPAIRS MUST BE ALLOWED AS REVENUE EXPENDITURE. THE LEARNED D.R. SU PPORTED THE ORDER OF THE A.O. AND HEAVILY RELIED ON THE FINDINGS GIVE N BY THE CIT (APPEALS). WE HAVE CAREFULLY PERUSED THE ORDER OF THE ASSESSIN G OFFICER CIT(APPEALS) AND PAPERS FILED IN THE PAPER-BOOK. IT IS EVIDENT FROM THE APPEAL AND SUBMISSIONS THAT THE EXPENDITURE INCURRE D IS TO RESTORE AND REPAIR THE EXISTING PLANT AND COMMISSIONING THE SAM E WHICH WAS STOPPED DUE TO HEAVY DAMAGE. THE FACT THAT IN SUBSE QUENT YEAR INSURANCE RECEIPT HAS BEEN TAXED AS REVENUE INCOME IS ALSO CONFIRMED IN THE STATEMENT OF INCOME FILED FOR A.Y.2008-09. ONCE THE ASSESSEE AND DEPARTMENT HAVE TAKEN A VIEW THAT INSURANCE CLAIM R ECEIVED ON THE DAMAGE OF ONE BIG PLANT IS A REVENUE INCOME, THE CO RRESPONDING EXPENDITURE INCURRED TOWARDS SUCH INSURANCE CLAIM F OR REPLACEMENT AND REPAIR, EXPENDITURE INCURRED OF RS.87 LAKH HAS TO B E TREATED AS REVENUE IN NATURE. PARTICULARLY RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT VS. SARAVANA SPINNING MILLS LI MITED 293 ITR 201. THE ASSESSEE'S APPEAL, ACCORDINGLY ALLOWED CONSIDER ING THE EXPENDITURE OF RS.87 LAKHS AS REVENUE AND THE A.O. IS ACCORDINGLY DIRECTED TO DELETE THE DISALLOWANCE OF RS.73,95,000 /- MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 26 - THE NEXT GROUND NO.5 IS CIT (APPEALS) CONFIRMING THE AMOUNT RECEIVED ON RS.237 LAKHS BEING SECURITY DEPOSITS RE CEIVED AND IS ACCORDINGLY DISMISSED PARTICULARLY BECAUSE THE VERY SAME AMOUNT HAS BEEN TREATED AS INCOME BY THE ASSESSEE AND IS TAXED IN SUBSEQUENT ASSESSMENT YEAR 2008-09. THIS GROUND IS NOT PRESSED BY THE APPELLANT. THE GROUND NO.6 OF APPEAL IS WITH REGARD TO INTEREST CHARGED UNDER SECTION 234, WE HELD THAT INTEREST HAS TO BE CHARGE D UNDER SECTION 234B. HOWEVER, THE SAME SHALL BE CHARGED AFTER GIVI NG EFFECT TO THIS ORDER. THIS GROUND IS ACCORDINGLY, PARTLY ALLOWED. THUS, THE APPEAL FOR THE ASSESSEE FOR A.Y. 2007-08 IS PARTLY ALLOWED . WE NOW COME TO THE APPEAL FILED BY THE REVENUE IN I TAT NO.2968/AHD/2010 FOR ASSESSMENT YEAR 2007-08, WHERE IN THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIONAL DEPR ECATION OF RS. 54,00,000/- OVERLOOKING THE PROVISION OF SECTION 32 (1)(IIA) OF THE ACT, AND ALSO THE FACT THAT NO NEW IDENTIFIABLE PRO DUCT OR THING HAD COME INTO EXISTENCE.' THE ONLY GROUND OF APPEAL TAKEN BY THE REVENUE IS T HAT CIT(A) HAS ERRED IN DELETING THE ADDITIONAL DEPRECIATION O F RS. 54,00,000/- OVERLOOKING THE PROVISION OF SEC. 32(1)(IIA) OF THE ACT. THIS MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE BY HON'BLE ITAT I N ASSESSEE'S OWN MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 27 - CASE IN A.Y.2006-07 IN ITA NO.43/AHD/2010 ON PAGE 2 6, PARA 23 OF THE ITAT ORDER. THE COPY OF THE SAID ORDER IS PLACE D ON RECORD. IN VIEW OF THE SAME, ASSESSEE IS ENTITLED TO THE ADDITIONAL DEPRECIATION OF RS.54,00,000/- LACS. APPEAL OF THE REVENUE IS ACCOR DINGLY DISMISSED. A.Y.2008-09 WE NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1900/AHD/2012 FOR ASSESSMENT YEAR 2008-09, WHERE IN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.3,86,21,189/- BEI NG AMOUNT TRANSFERRED TO RESERVE FUND U/S.67 OF GUJARAT CO.OP . SOCIETIES ACT. ON THE FACTS OF THE CASE AND IN LAW, THE DEDUCTION OF THE AFORESAID AMOUNT OUGHT TO HAVE BEEN GIVEN. IT BE SO HELD NOW AND THE SAID AMOUNT BE ALLOWED AS CLAIMED. 2. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ALLOWING ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION ON AMUL PARLOURS. ON THE FACTS OF THE CASE AND IN VIEW OF T HE LEGAL POSITION, THE LEARNED C.I.T.(APPEALS) OUGHT TO HAVE DIRECTED TO GRANT DEPRECIATION AT 100% AS CLAIMED. IT BE SO HEL D NOW AND THE DEPRECIATION BE ALLOWED AT 100%. 3. THE LEARNED C.I.T.(APPEALS) ERRED BOTH IN LAW AND O N FACTS IN CONFIRMING THE DISALLOWANCE OF RS.63,929/- U/S. 14A OF THE I.T. ACT, 1961. IN VIEW OF THE SUBMISSION MADE THAT THER E WERE NO EXPENSES INCURRED TO EARN ANY EXEMPT DIVIDEND, THE DISALLOWANCE OF RS.63,929/- OUGHT TO HAVE BEEN DELETED. IT BE SO HELD NOW. 4. THE LEARNED C.I.T.(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.24,812/- SEPARATELY ON THE GROUND THAT INTEREST PERTAINS TO THE BORROWING TO MAKE PAY MENT OF MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 28 - ADVANCE TAX. IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE FINDING AND WORKING OUT OF THE INTE REST IS INCORRECT BOTH ON FACTS AND ON LAW AND THE SAME BE DELETED. 5. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN CONFIRMIN G THE INTEREST CHARGED U/S.234 OF THE INCOME TAX ACT. IT IS SUBMIT TED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE INTEREST U/S.23 4B IS NOT AT ALL CHARGEABLE TO THE APPELLANT AND INTEREST SO CHARGED AND CONFIRMED BY THE LEARNED C.I.T.(APPEALS) BE DELETED .' WITH REGARD TO FIRST GROUND, THE MATTER WAS DECIDED AGAINST THE ASSESSEE BY HON'BLE ITAT AHMEDABAD IN ASSESSEE'S OW N CASE FOR A.Y.2006-07 IN ITA NO.3270/AHD/2009 ON PAGE 15, PAR A 11 OF THE ITAT ORDER. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSE IS DISMISSED. SO FAR AS THE SECOND GROUND IS CONCERNED, THE A.O. ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% DEPRECIATION CLAIM ED BY THE APPELLANT ON AMUL PARLOR. SO FAR AS THE DEPRECIATIO N IS CONCERNED, AO ALLOWED ONLY 10% DEPRECIATION AS AGAINST 100% ON AM UL PARLOURS. IN THIS CASE, MATTER WAS DECIDED IN FAVOUR OF ASSESSEE BY THE HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR A.Y.2002-03 IN ITA NO.47 5/AHD/2006 AND NOW ETH SAME HAS BEEN CONFIRMED BY THE HON'BLE GUJA RAT HIGH COURT IN ASSESSES OWN CASE IN TAX APPEAL NO.759 OF 2013, DAT ED 23/01/2014. IN THIS CASE, HON'BLE HIGH COURT HAS HELD HATS MILK DA IRY PROCURE LAND ON LEASE BASIS AND CONSTRUCTED TEMPORARY SHEDS FOR SAL E OF MILK PRODUCTS AND HON'BLE HIGH COURT HAS ALSO CITED SIMILAR DECIS ION IN THE CASE OF CIT VS. TVS LEAN LOGISTICS LTD. REPORTED IN (2007) 293 ITR 432 MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 29 - (MAD) AND HELD THAT CONSTRUCTION OF BUILDING ON A L EASEHOLD LAND RESULTED INTO ASSESSEE ONLY A BUSINESS ADVANTAGE AN D THE ASSESSEE CANNOT BE STATED TO HAVE ACQUIRED ANY CAPITAL ASSET . THEREFORE IN VIEW OF THE ABOVE JUDGMENTS, APPEAL OF THE ASSESSEE IS A LLOWED AND DEPARTMENTAL APPEAL IS DISMISSED. THEREFORE THIS GR OUND OF APPEAL IS ALLOWED. THE NEXT GROUND NO.3 OF APPEAL BEING ADDITION MADE OF RS. 63,929/- UNDER SECTION 14A IS NOT PRESSED BY THE AP PELLANT LOOKING TO THE SMALLNESS OF AMOUNT INVOLVED THERE IN AND IS TH EREFORE DISMISSED ACCORDINGLY THE GROUND NO. 4 IS WITH REGARD TO THE DISALLOWANCE OF INTEREST OF RS.24,812/-. THE A.R. DURING COURSE OF HEARING AGRE ED NOT TO PRESS THIS GROUND LOOKING TO THE SMALLNESS OF AMOUNT INVOLVED IN ADDITION MADE. THE GROUND NO. 5 OF APPEAL IS WITH REGARD TO INTERE ST CHARGED UNDER SECTION 234, WE HELD THAT INTEREST HAS TO BE CHARGE D UNDER SECTION 234B. HOWEVER, THE SAME SHALL BE CHARGED AFTER GIVI NG EFFECT TO THIS ORDER. THIS GROUND IS ACCORDINGLY, PARTLY ALLOWED. NOW WE TAKE UP THE APPEAL FILED REVENUE FOR ASST YE AR 2008-09 IN ITA NO.1977/AHD/2012 FOR ASSESSMENT YEAR 2008-09, T HE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION OF RS. 616.36 LACS ON ACCOUNT OF CO-OP. DEVELOPMENT EXPENSES WHIC H INCLUDES MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 30 - BREED IMPROVEMENT EXPENSES WITHOUT APPRECIATING THE FACT THAT SUCH EXPENDITURE IS NOT CONNECTED WITH THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE AND THAT THE CO-OPERATIVE DEVELOPMENT EXPENSES ARE OF ENDURING NATURE AND THEREFORE THEY ARE CAPITAL IN NATURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN DELETED THE DIS-ALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.10.99 LACS, OVERLOOKING THE PROV ISIONS OF SECTION 32(1)(IIA) OF THE ACT AND ALSO THE FACT THA T NO NEW IDENTIFIABLE PRODUCT OR THING HAD COME INTO EXISTEN CE.' THE FIRST GROUND OF APPEAL IS WITH REGARD TO LEARNE D CIT (A) ERRED IN DELETING THE ADDITION OF RS.616.36 LACS ON ACCOUNT OF CO-OP. DEVELOPMENT EXPENSES WHICH INCLUDES BREED IMPROVEME NT EXPENSES LEARNED D.R. RELIED HEAVILY ON THE ASSESSMENT ORDER AND SUBMITTED THAT EXPENDITURE ARE IN NATURE OF ENDURING BENEFIT AND T HEREFORE CAPITAL IN NATURE. THE ENTIRE EXPENDITURE INCURRED OF RS.616.3 6 LAKHS ARE IN THE NATURE OF DAIRY DEVELOPMENT EXPENDITURE. WE HAVE IN APPELLANT'S CASE FOR A.Y.2005-06 IN DETAIL HAVE HELD THAT THE ENTIRE EXPENDITURE ON DAIRY DEVELOPMENT ARE WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS AND THEREFORE ARE ALLOWABLE AS REVENUE EXPENDITURE. IN VIEW OF THIS, THE EXPENDITURE OF RS.616.36 LAKHS ARE ALLOWED AS REVEN UE EXPENDITURE, THE APPEAL OF THE REVENUE IS DISMISSED ACCORDINGLY. THE SECOND GROUND OF REVENUE IS WITH REGARD TO ADDI TIONAL DEPRECIATION OF RS.10.99 LAKHS. AS HELD BY US IN AS SESSEE'S OWN APPEAL FOR A.Y. 2007-08 BY US AS WELL AS IN EARLIER APPEAL OF THE ASSESSEE IN A.Y 2006-07 WE HELD THAT APPELLANT IS ALLOWED FOR A DDITIONAL MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 31 - DEPRECIATION OF RS.10.99 LAKHS. THE APPEAL OF THE R EVENUE IS ACCORDINGLY DISMISSED. ASST. YEAR: 2009-10 NOW WE TAKE UP THE APPEAL FILED ASSESSEE FOR ASST Y EAR 2009-10 IN ITA NO.597/AHD/2013 FOR ASSESSMENT YEAR 2009-10, TH E REVENUE HAS TAKEN FOLLOWING GROUNDS : 1. CIT(A) ERRED IN BOTH LAW AND ON FACTS IN CONFIRMIN G THE DISALLOWANCE OF RS.5,40,09,134/- BEING AMOUNT TRANS FERRED TO RESERVE FUND U/S. 67 OF GUJARAT CO-OP, SOCIETIES AC T. 2. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIR MING THE ACTION OF A.O. ALLOWING ONLY 10% DEPRECIATION AS AGAINST 1 00% DEPRECIATION ON AMUL PARLOURS AND MAKING DISALLOWAN CE OF RS. 89,38,131/- CONNECTED WITH THE ORDINARY COURSE BUSI NESS AND THE CO. OP. DEVELOPMENT EXP. ARE OF CAPITAL NATURE. 3. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.34. 72 LACS ON ACCOUNT OF AMUL YATRA EXPENSES WHICH IS NOT CONNECT ED WITH THE ORDINARY COURSE BUSINESS AND THE CO. OP. DEVELOPMEN T EXP. ARE OF CAPITAL NATURE. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICE R, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND AFTER CAREFULLY CONSIDERING THE SUBMISSIONS MADE BY THE LEANED AR A ND THE LEARNED DR AND AFTER PURSUING THE PAPER BOOK AND WRITTEN SUBMI SSIONS, WE ARE OF THE CONSIDERED VIEW THAT ALL THESE THREE VARIOUS EXPEND ITURES INCURRED IN FORM OF CO. OP. DEVELOPMENT EXPENSES ARE NOT AT ALL OF C APITAL IN NATURE OR OF ANY BENEFIT ENDURING NATURE. THE SAME ARE INCURRED IN THE NORMAL COURSE OF BUSINESS ACTIVITIES AND IN FURTHERANCE OF MILK AND AMUL PRODUCTS. THE MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 32 - EXPENDITURES ARE INCURRED WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS. THIS ISSUE HAVE ALREADY BEEN DISCUSSED IN GREAT DETAILED BY US, IN GROUND NO. 2 RAISED BY ASSESSEE FOR A.Y.2005-06 IN ITA NO.1119/AHD/2012, WHEREIN FINALLY THE ISSUES HAS BE EN DECIDED IN FAVOUR OF APPELLANT. THUS ALL THE ABOVE THREE GROUNDS RAIS ED BY THE REVENUE ARE DISMISSED ACCORDINGLY. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVEN UE FOR A.Y.2009-10 IS HEREBY DISMISSED. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AR E PARTLY ALLOWED, WHEREAS THE APPEALS FILED BY THE REVENUE ARE DISMIS SED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05/07/2017 SD/- SD/ - . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/07/2017 PRITI YADAV, SR.PS MA NO.07,08,09,117,118,119/AHD/2017 (IN ITA NO.3037,1119,1900,2968,1977,924/AHD/2013) GUJARAT CO.OP MILK MARKETING FEDERATION LTD. VS.ACI T - 33 - ! '!# / COPY OF THE ORDER FORWARDED TO : 1. %&!' / THE APPELLANT 2. (!' / THE RESPONDENT. 3. 67- # # + 8- / CONCERNED CIT 4. # # + 8- (%&) / THE CIT(A) 5. 9:; -67 , # %&. %672 , % / DR, ITAT, AHMEDABAD 6. ;< =, / GUARD FILE. $ % / BY ORDER, (9&- - //TRUE COPY// &/% '( ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 21/06/2017 (DICTATION-PAD 3 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/06/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S ..27/06/02017 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER