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

ITA 727/AHD/2023Status: DisposedITAT Ahmedabad23 June 2025AY 2017-1825 pages
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What did the Tribunal hold?

The Tribunal decided on various issues. Regarding Section 36(1)(viii) deduction, the Tribunal noted that a Coordinate Bench had set aside the issue to the CIT(A) for determination of lease type, which was subject to a Miscellaneous Application. Therefore, the matter was remanded to the AO for fresh adjudication based on the outcome of the MA and providing an opportunity of hearing. For Section 14A, the Tribunal dismissed the Revenue's ground, upholding the CIT(A)'s order which had restricted the disallowance to Rs. 10,00,000/-. Regarding rental income, the Tribunal set aside the issue to the AO for re-adjudication, considering the outcome of the Miscellaneous Application concerning whether the lease was operating or finance lease. The issue of interest paid to the North Kerala Project Development Fund was also remanded to the AO for fresh adjudication, subject to the outcome of the Miscellaneous Application. The Tribunal dismissed the Revenue's ground concerning the adjustment of disallowance under Section 14A to book profits under Section 115JB, following a Coordinate 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. The judgment does not explicitly record findings on the disallowance of contribution to the Employee's Recreation club or the VRS payments, nor does it provide specific operative directions for these issues.

What were the facts?

The appeals by the Assessee (National Dairy Development Board - NDDB) and the Revenue arise from assessment orders for Assessment Years 2012-13 to 2018-19, passed under Section 143(3) of the Income Tax Act, 1961. The Assessee, a statutory body promoting dairy industries, filed returns declaring losses. The Assessing Officer (AO) made various disallowances and additions, including claims for deduction under Section 36(1)(viii), disallowance under Section 14A read with Rule 8D, taxing of rental income as 'Income from House Property' instead of 'business income', disallowance of interest paid to a project fund, disallowance of contribution to an employee recreation club, disallowance of VRS payments, and applicability of Minimum Alternate Tax (MAT) under Section 115JB. The Commissioner of Income Tax (Appeals) partly allowed the Assessee's appeals. These cross-appeals challenge the CIT(A)'s orders.

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: Satisfied conditions, deduction should be allowed. Revenue: No deduction without share capital). 2. Whether the disallowance under Section 14A of the Act, read with Rule 8D, for expenses incurred in earning exempt income, is justified and whether the CIT(A) erred in restricting it to Rs. 10,00,000/-. (Assessee: No disallowance required as revenue could not prove expenditure, or at most 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 as per Section 14A(2) and Rule 8D(2)(iii)). 3. Whether rental income from buildings leased out should be treated as 'Income from House Property' or 'Profits and Gains from Business and Profession', and whether depreciation and other expenses on buildings are allowable. (Assessee: Should be business income, allowing depreciation and expenses. Revenue: CIT(A) erred in holding lease agreements as operating lease without appreciating that Assessee is not in the business of leasing). 4. Whether deduction for interest paid to the North Kerala Project Development Fund is allowable. (Assessee: Should be allowed without condition of withdrawing appeal). 5. Whether contribution to the Employee's Recreation (BOHO Club) is allowable as a deduction. (Assessee: No disallowance required). 6. Whether monthly payments to employees under a VRS scheme after retirement are allowable as a deduction under Section 37(1) or Section 35DDA. (Assessee: Allowable under Section 37(1) as not eligible under Section 35DDA, or alternatively, allow provision from AY 2011-12). 7. Whether the adjustment of disallowance under Section 14A to book profits under Section 115JB of the Act is applicable. (Revenue: Adjustment is applicable. Assessee: Section 115JB is not applicable to the Assessee). 8. Whether bad debts written off in respect of loans given to a cooperative union are allowable as a deduction under Section 36(1)(vii) read with Section 36(2). (Revenue: CIT(A) erred in allowing bad debts written off as expenditure. Assessee: As a Public Financial Institution, lending is in ordinary course of business, hence allowable).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 36(1)(viii),Section 14A,Section 8D,Section 37(1),Section 35DDA,Section 115JB,Section 36(1)(vii),Section 36(2)

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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

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

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 the Commissioner of Income Tax (Appeals),

I.T.A Nos: 722 to 728/Ahd/2023 and ors. A.Ys.2012-13 to 2018-19 Page No 2 Na

The order continues below.

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