The Principal Commissioner of Income Tax, Vadodara 4 V. The Panchmahal Dist Co-operative Milk Products (SIS. Producers) Union Ltd

TAXAP/154/2019

AI Insights

The case revolves around a tax appeal by the Principal Commissioner of Income Tax, Vadodara 4, against the Panchmahal District Co-operative Milk Products Union Ltd. The core issue was the classification of Animal Breeding Expenses amounting to Rs.3,95,49,392 as capital expenditure by the assessing officer, which was contested. The Appellate Tribunal had earlier deleted this disallowance, a decision which the Revenue challenged in the High Court. The High Court, referencing a similar case, upheld the Tribunal's decision, emphasizing that the expenses were aimed at improving fertility among milk animals and thus were business expenditures, not capital expenditures.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 820433 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-06-2019
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop, Op. Milk Marketing Federation Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: VARUN PATEL
• Keywords: Capital expenditure; Tax appeal; Animal Breeding Expenses
• Section: 260-A

Judgement Text

"C/TAXAP/154/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 154 of 2019 ============================================= THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 4 Versus THE PANCHMAHAL DIST CO-OPERATIVE MILK PRODUCTS (SIS. PRODUCERS) UNION LTD ============================================= Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 24/06/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260-A of the Income Tax Act, 1961 (for short ”the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Appellate Tribunal, “C” Bench, Ahmedabad in ITA No.168/Ahd/2017 for the Assessment Year 2012-13. 2. The Revenue has proposed the following substantial question of law in its memorandum of the Tax Appeal : “Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in confirming the deletion of disallowance of Animal Breeding Expenses of Rs.3,95,49,392/- made by the assessing officer as capital expenditure?” Page 1 of 3 C/TAXAP/154/2019 ORDER 3. The question, as raised, is no longer res integra in view of the decision of this Court in the case of Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop, Op. Milk Marketing Federation Ltd. [Tax Appeal No.1266 of 2018 and allied appeal decided on 22nd October 2018]. We quote the relevant observations: “9. Unfortunately, neither Commissioner of Income Tax (Appeals) nor the Tribunal addressed the question of expenditure being capital in nature and focused entire attention on the allowability of the expenditure as business expenditure. With respect to these findings, we have no hesitation in concurring. Nevertheless, since the authorities below have not in detail examined the nature of the expenditure, we have taken note of the details of the programme and the nature of activities undertaken by GCMMF through such programme. We may note that even the Assessing Officer has not cited detailed reasons as to why in his opinion the expenditure was capital in nature. We may note that the activities carried on by GCMMF under the said programme were all aimed at fertility improvement amongst milk animals. As part of the programme, the GCMMF would address the typical reasons for infertility such as improper practice in calf rearing, low body weight of animals, lack of nutrition/mineral, poor health condition, lack of awareness amongst farmers about improved breeding practices etc. In furtherance of such objectives, the GCMMF would hold camps for village awareness, in select villages would carry out tagging and registration of animals, would hold fertility camps, would carry out mass deworming programmes, would distribute mineral mixture, carry out vaccination at mass scale, provide balanced cattle feed etc. 10. It can thus be seen that the expenditure was general in nature and aimed at improving the practices for better fertility amongst milk animals by addressing the issues which caused infertility. The expenditure therefore was for the purpose of its business and would not be co-relatable to any tangible returns which can be expected out of such expenditure.” Page 2 of 3 C/TAXAP/154/2019 ORDER 4. The judgement of this Court referred to above was carried in appeal before the Supreme Court. The S.L.P. Preferred by the Revenue came to be dismissed vide order dated 26th April, 2019. 5. In view of the above, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) Dolly Page 3 of 3 "