ACIT, ANAND CIRCLE, ANAND, ANAND vs. NATIONAL DAIRY DEVELOPMENT BOARD, ANAND

ITA 742/AHD/2023Status: DisposedITAT Ahmedabad23 June 2025AY 2013-14Bench: DR. BRR Kumar, Vice President\nAnd Shri T. R. Senthil Kumar (Judicial Member)25 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal addressed the issues as follows: Regarding the claim of deduction under Section 36(1)(viii) (Issue 1), the Tribunal noted that the AO disallowed it as the amount was transferred to a special reserve which was a component of the general fund. The CIT(A) had also disallowed it. The Tribunal, however, referred to a co-ordinate bench decision in the case of ACIT vs. Gujarat State Financial Corporation (2013) 354 ITR 319 (Guj) and the Supreme Court decision in ICDS Ltd. v. CIT (350 ITR 527), and set aside the issue to the file of the AO for fresh adjudication after considering the assessee's submissions and the relevant case law. The Tribunal did not decide the applicability of the proviso or the absence of share capital on merits but remanded the issue. On the disallowance under Section 14A (Issue 2), the Tribunal noted that the CIT(A) had restricted the disallowance to Rs. 10,00,000/-. The Revenue's appeal contested this restriction. The Tribunal observed that the issue was covered by the decision of the Supreme Court in the case of CIT vs. D.P.S. Educational Society (2019) 414 ITR 354 (SC), which was applied by the co-ordinate bench. The Tribunal held that the CIT(A)'s order was to be followed, and the Revenue's ground was dismissed. However, the judgment also mentions setting aside the matter back to the AO for determining lease classification, which seems to relate to a different issue, and the specific finding on Section 14A is that the CIT(A)'s order was to be followed, implying the Rs. 10,00,000/- cap was upheld. Regarding rental income and lease classification (Issue 3), the Tribunal noted that a co-ordinate bench had set aside this issue to the CIT(A) for determining whether it was an operating or finance lease, and this order was subject to a miscellaneous application. Therefore, the Tribunal set aside the matter back to the AO for fresh adjudication, subject to the outcome of the miscellaneous applications, and to pass orders in accordance with law after providing an opportunity of hearing. Revenue's grounds 2 & 3 were partly allowed. Concerning the deduction for interest returned to the North Kerala Project Development Fund (Issue 4), the judgment does not contain a specific finding or decision on this issue, nor does it mention the condition imposed by the NFAC. It appears this specific point was not adjudicated in the provided excerpt. For the contribution to the Employee's Recreation Club (Issue 5), the judgment does not contain a specific finding or decision. Regarding the VRS payments (Issue 6), the judgment does not contain a specific finding or decision. On the applicability of Section 115JB (Issue 7), the Tribunal noted that a co-ordinate bench had held that Section 115JB was not applicable to the assessee in ITA No. 733/Ahd/2023 & Ors. Therefore, the Tribunal dismissed this ground raised by the Revenue. On the issue of bad debts written off (Issue 8), the Tribunal found no infirmity in the CIT(A)'s order which directed the AO to verify and allow the claim of bad debts in accordance with law, holding that the assessee was engaged in financing as per the NDDB Act. The Revenue's ground was dismissed as devoid of merit. The operative direction was to allow the claim after verification by the AO. Overall, the appeals filed by the Revenue were partly allowed.

What were the facts?

The appeals before the Income Tax Appellate Tribunal (ITAT) Ahmedabad 'B' Bench involved cross-appeals by the Assessee, National Dairy Development Board (NDDB), and the Revenue, against appellate orders dated 26-07-2023. These orders arose from assessment orders passed under section 143(3) for Assessment Years (AY) 2012-13 to 2018-19. NDDB, a statutory body promoting dairy industries, had its income determined by the Assessing Officer (AO) with several disallowances and additions. These included claims for deduction under section 36(1)(viii), disallowance under section 14A read with Rule 8D, treatment of rental income, disallowance of interest, contribution to an employee recreation club, payments under a VRS scheme, and applicability of Minimum Alternate Tax (MAT) under section 115JB. The Commissioner of Income Tax (Appeals) had partly allowed and partly dismissed the assessee's appeals.

What were the issues?

The Tribunal had to decide several issues, including: 1. **Question of Law:** Whether the National Faceless Appeal Centre (NFAC) erred in disallowing the appellant's claim of Rs. 5,19,29,489/- for deduction under Section 36(1)(viii) of the Income-tax Act, 1961, and whether the NFAC erred in holding that no deduction under Section 36(1)(viii) can be allowed in the absence of share capital. * **Assessee's Contention:** The assessee argued that it satisfied the necessary conditions for deduction under Section 36(1)(viii). It contended that the proviso to Section 36(1)(viii) limits the deduction, and the absence of share capital makes this limitation inapplicable rather than the entire section. * **Revenue's Contention:** Not explicitly recorded for this specific point, but impliedly against the allowance of deduction. 2. **Question of Law:** Whether the NFAC erred in confirming an ad-hoc disallowance capped at Rs. 10,00,000/- under Section 14A, and whether Rule 8D was applied by the AO without recording dissatisfaction with the assessee's expenditure claims. * **Assessee's Contention:** The assessee argued that no disallowance under Section 14A was required as the revenue could not prove any expenditure directly incurred for earning exempt income. It also argued that Rule 8D was applied without the AO recording his dissatisfaction. * **Revenue's Contention:** The Revenue argued that the CIT(A) erred in restricting the disallowance to Rs. 10,00,000/- as against Rs. 1,86,46,037/- computed by the AO under Section 144(2) read with Rule 8D(2)(iii), and that Section 14A(2) mandates invoking Rule 8D where the AO has recorded satisfaction. 3. **Question of Law:** Whether the NFAC erred in directing the AO to tax rental income from leased buildings as 'Income from House Property' instead of 'Profits and Gains from Business and Profession', thereby denying deductions for depreciation and other building expenses. * **Assessee's Contention:** The assessee submitted that the rental income should be taxed as business income. * **Revenue's Contention:** The Revenue argued that the CIT(A) erred in holding that lease agreements were operating leases, without appreciating that the assessee is not in the business of leasing. 4. **Question of Law:** Whether the NFAC erred in imposing a condition of withdrawal of appeal for allowing deduction of interest returned to the North Kerala Project Development Fund. * **Assessee's Contention:** The assessee submitted that the NFAC erred in imposing this condition and should have allowed the deduction without it, with directions to avoid double deduction. 5. **Question of Law:** Whether the NFAC erred in not granting deduction for contribution to the Employee's Recreation (BOHO Club). * **Assessee's Contention:** The assessee argued that no disallowance was required. 6. **Question of Law:** Whether the NFAC erred in not granting deduction for monthly payments under a VRS scheme, on the ground that expenditure eligible under Section 35DDA cannot be claimed under Section 37(1), and alternatively, whether directions should be given to allow deduction of the provision made in AY 2011-12. * **Assessee's Contention:** The assessee argued that the expenditure was not eligible under Section 35DDA as it was post-retirement monthly payment, and that it should be allowed under Section 37(1) or as a provision from AY 2011-12. 7. **Question of Law:** Whether the provisions of Section 115JB are applicable to the assessee, specifically regarding the adjustment of disallowance under Section 14A to book profits. * **Assessee's Contention:** The assessee argued that Section 115JB is not applicable, citing a co-ordinate bench decision. * **Revenue's Contention:** Not explicitly recorded for this specific point, but impliedly against the deletion of additions. 8. **Question of Law:** Whether the Revenue's ground regarding bad debts written off for AY 2014-15 is devoid of merit. * **Assessee's Contention:** The assessee argued that it is a public financial institution engaged in money lending, and the bad debt written off was in the ordinary course of business, allowable under Section 36(1)(vii) r.w.s 36(2)(i). * **Revenue's Contention:** The AO disallowed the deduction, contending the loan was not part of the P&L and the assessee was not in the money lending business. The Revenue's grounds of appeal are not explicitly detailed for this point but support the AO's disallowance.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 36(1)(viii),Section 14A,Section 8D,Section 35DDA,Section 37(1),Section 115JB,Section 36(1)(vii),Section 36(2)(i),Section 144(2)

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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

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

For Appellant: Shri Milin Mehta, Shri Bhavin, Ms. Amrin Pathan
For Respondent: 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 the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, arising out of separate assessment orders passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') relating to the respective Ass

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