NATIONAL DAIRY DEVELOPMENT BOARD,ANAND vs. THE DY.CIT, ANAND CIRCLE, ANAND

ITA 725/AHD/2023Status: DisposedITAT Ahmedabad23 June 2025AY 2015-16Bench: DR. BRR Kumar, Vice President\nAnd Shri T. R. Senthil Kumar (Judicial Member)25 pages
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What did the Tribunal hold?

The Tribunal decided on several issues. Regarding the claim of deduction under Section 36(1)(viii), the Tribunal noted that a co-ordinate bench had set aside the issue to the CIT(A) for determination, and this order was subject to a pending Miscellaneous Application. Therefore, the matter was set aside to the Jurisdictional Assessing Officer (AO) to pass an order subject to the outcome of the MA, with a direction to provide an opportunity of hearing. Consequently, the Revenue's grounds related to this issue were partly allowed. On the issue of disallowance under Section 14A, the Tribunal dismissed the Revenue's appeal concerning the restriction of disallowance to Rs. 10,00,000/-, implying the CIT(A)'s order was upheld on this point. The Tribunal dismissed the Revenue's ground regarding the applicability of Section 115JB, following a co-ordinate bench's decision that Section 115JB is not applicable to the Assessee. For bad debts written off, the Tribunal found no infirmity in the CIT(A)'s order directing the AO to verify and allow the claim in accordance with law, thus dismissing the Revenue's ground on this issue for AY 2014-15. The judgment does not explicitly state findings on all grounds raised by the Assessee, such as the taxation of rental income, deduction for interest to North Kerala Project Development Fund, contribution to Employee's Recreation, or VRS payments, but the overall result indicates partial allowance of appeals.

What were the facts?

The appeals concern the National Dairy Development Board (NDDB), a statutory body, and the Dy. CIT/ACIT, Anand Circle, for assessment years 2012-13 to 2018-19. The Assessee's returns declared losses, but the Assessing Officer (AO) made several disallowances and additions, including claims for deduction under Section 36(1)(viii), disallowance under Section 14A read with Rule 8D, taxation of rental income as 'Income from House Property' instead of business income, disallowance of interest paid to North Kerala Project Development Fund, disallowance of contribution to Employee's Recreation (BOHO Club), disallowance of monthly benefits under VRS, and applicability of Minimum Alternate Tax (MAT) under Section 115JB. The Commissioner of Income Tax (Appeals) partly allowed and partly dismissed the Assessee's appeals. Both the Assessee and the Revenue have filed cross-appeals before the ITAT.

What were the issues?

1. Whether the Assessee is eligible for deduction under Section 36(1)(viii) of the Income Tax Act, 1961, in respect of transfer of funds to a special reserve, particularly in the absence of share capital. (Assessee: Yes, conditions satisfied; Revenue: No, absence of share capital makes the section inapplicable). 2. Whether the disallowance under Section 14A read with Rule 8D for expenses incurred in earning exempt income was correctly computed and applied by the AO and CIT(A). (Assessee: No disallowance is required as no expenditure was proven; alternatively, disallowance should be restricted to Rs. 2,63,441/-. Revenue: CIT(A) erred in restricting disallowance to Rs. 10,00,000/- against Rs. 1,86,46,037/- computed by AO, and erred in not mandatorily invoking Rule 8D). 3. Whether rental income from buildings should be taxed as 'Income from House Property' or 'Profits and Gains from Business and Profession', and whether depreciation on buildings is allowable. (Assessee: Should be taxed as business income, allowing depreciation and other expenses). 4. Whether the Assessee is entitled to a deduction for interest returned to the North Kerala Project Development Fund without the condition of withdrawing its appeal. (Assessee: Yes, deduction should be allowed without such a condition). 5. Whether the Assessee is eligible for deduction for contribution to Employee's Recreation (BOHO Club). (Assessee: Yes, no disallowance required). 6. Whether the Assessee is eligible for deduction for monthly payments to employees under VRS, either under Section 35DDA or Section 37(1), or alternatively, for the provision made in AY 2011-12. (Assessee: Yes, expenditure not eligible under Section 35DDA as it's post-retirement payment, but eligible under Section 37(1) or alternatively, the provision from AY 2011-12 should be allowed). 7. Whether the provisions of Section 115JB are applicable to the Assessee for adjustment of disallowance to book profits. (Assessee: No, Section 115JB is not applicable). 8. Whether bad debts written off by the Assessee, a public financial institution, are allowable as a deduction under Section 36(1)(vii) read with Section 36(2)(i). (Assessee: Yes, loan was in the ordinary course of money lending business; Revenue: AO disallowed, CIT(A) directed AO to verify and allow).

Which sections of the Income-tax Act were involved?

Section 36(1)(viii),Section 14A,Section 35DDA,Section 37(1),Section 115JB,Section 36(1)(vii),Section 36(2)(i),Section 143(3)

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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: DR. BRR Kumar & Shri T. R. Senthil Kumar

For Respondent: Shri Milin Mehta, Shri Bhavin Marfatia & Ms. Amrin Pathan, Shri V Nandakumar, CIT-DR & Shri Ankit Jain, Sr. D.R
Pronounced: 07/05/2025

PER BENCH:- These cross appeals are filed by the Assessee and Revenue as against the separate appellate orders all dated 26-07-2023 passed by t

The order continues below.

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