ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 1,, KOLHAPUR vs. KOLHAPUR ZILLA SAHAKARI DUDH UTPADAK SANGH LTD,, KOLHAPUR

This Revenue’s appeal for A.Y. 2015-16 is directed against the CIT(A) - 1, Kolhapur’s order dated 12/03/2019 passed in case No. KOP/77/2017-18, involving proceedings u/s. 143 (3) of the Income Tax Act, 1961 ; in short “the Act”. Heard both the parties. Case file perused.

Coming to the Revenue’s first substantive grievance that the CIT(A) has erred in law and on facts in reversing the assessment finding disallowing the assessee’s deduction claim of Rs.46,02,85,111/- on account of the milk procurement price in the nature of “final rate difference”, we note the impugned lower appellate discussion to this effect reads as under:-

On the facts and in circumstances of the case the Learned A.O. has erred in law and on merit in disallowing the the Final Milk Rate / Rate difference paid by the assessee at Rs. 46,02,85,111/- when such Final Milk Rate paid was held as an allowable expenditure by Honorable Bombay High Court in the assessee’s own case for earlier year as reported in 315 ITR 304.

During the course of assessment proceedings, the A. O. noticed that the assessee has made payment of Rs 46,02,85,111 to the member co-operative societies over and above regular purchase price of milk paid to these milk societies, under the guise of final rate difference. The A.O. held that the said payment is nothing but distribution of profit amongst the members and therefore not deductible as expenditure.

During the course of appellate proceedings, the appellant submitted that the above issue was decided in its own case by the honourable Bombay High Court as reported in 315 ITR 304. The appellant pleaded that the disallowance made on account of milk rate difference be deleted in full following the above decision.

I have considered the appellant’s submission. I find that this ground is squarely covered by the decision of Hon’ble ITAT in the appellant’s own case for A.Ys. 1996-97 to 1999-2000 and 2001-02 in ITA No. 401/PN/2005 to 405/PN/2005 dt. 26/09/2005 and also covered in the latest decision of Hon’ble Bombay High Court dt. 04/04/2009 in appellant’s own case reported in 315 ITR 304. I also find that similar additions were deleted by the CIT(A), Kolhapur for A.Ys. 2005-06, 2006-07, 2012-13 to 2014-15. Respectfully following the above decision, the addition made on account of milk rate difference is deleted. In view of the above, ground 1 is allowed.”

Suffice to say, it has come on record that not only the assessee has succeeded on the very issue before hon’ble jurisdictional high court in it’s own case (supra) in preceding assessment years but also the Revenue’s special leave petition filed in hon’ble apex court stands declined. That being the case, we are of the opinion that there is hardly any need for us to adopt a different approach in the impugned assessment year in absence of any distinction pinpointed in all these assessment years. The CIT(A)’s conclusion granting the impugned relief to the assessee is upheld therefore.

Next comes the Revenue’s latter substantive ground that the CIT(A) has erred in law and on facts in deleting additional depreciation disallowance of Rs.67,73,998/- as follows :-

During assessment proceedings, the AO noticed that the appellant had claimed additional depreciation in the AY relevant to the financial year in which the machinery was installed. The amount of depreciation claimed is Rs. 67,73,998. The AO was of the view that the provisions of section 32(1)(iia) are effective from 01/04/2016. He therefore, disallowed the excess claim of additional depreciation, which was added back to the appellant’s total Income.

During appellate proceedings, the appellant has contended that the machinery purchased was put to use for less than 180 days and that it had claimed additional depreciation @ 10% in the previous year and claimed the balance 10% in the current year. In support of its claim for additional depreciation the appellant has placed reliance on the decision of the ITAT, Pune in the cases of Dy.CIT vs Shri Madhavan Nanu Pillai in ITA No. 2222/PN/2013 and honourable Karnataka High Court in the case of CIT V/s Rittal India (P) Ltd.

I have carefully considered the submissions of the appellant on this issue. I find that my predecessor has been dismissing this ground for the earlier AYs, against which the appellant had filed further appeal before the Hon’ble ITAT, Pune Bench. I further find that vide order dated 18/12/2018 for AYs 2009-10 to 2011-12 in ITA Nos. 616 to 618/PUN/2016, the ITAT has allowed this ground of appeal. This 3rd ground raised before me is identical to the single ground raised before the ITAT by the assessee in the above mentioned appeals. On this ground, the Honhle ITAT has held as under:

This Revenue’s appeal is dismissed in above terms.