JANATA GRAHAK MADHYAVARTI SAHAKARI SANGH MARYADIT,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

For the sake of convenience, the facts are extracted from the appeal of assessee for assessment year 2009-10. The brief facts of the case as emanating from records are : The assessee is a Co-operative Society registered under Maharashtra State Co-operative Societies Act, 1960 and is engaged in running a department store. In re-assessment proceedings the Assessing Officer observed that the assessee is debiting provision for rebate expenses every year and the unutilized rebate is subsequently written off by treating it as capital receipt. The Assessing Officer held that the part of rebate written off as cessation of liability u/s. 41(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and thus made addition of Rs.86,46,377/-.

Shri Nikhil Pathak appearing on behalf of the assessee submitted that the assessee co-operative society offers rebate to its members ranging between 1% to 2% on the principles of co-operative movement. The rebate offered to the members is not paid in cash but in kind. The members have the option to utilize/redeem rebate within a period of 2 years. The assessee is following mercantile system of accounting. In the first year of rebate the assessee creates a provision in the books of account for the liability on account of such rebate. The un-utilized part of rebate amount is transferred to reserves. The ld. AR submitted that the rebate is an expenditure resulting in the reduction of sales turnover. The un-utilized part of rebate which is credited to reserve fund is not an income of the assessee. The authorities below have erred in holding un-utilized rebate written off as cessation of liability u/s. 41(1) of the Act. The ld. AR reiterated his submissions made before the authorities below.

On the other hand Shri Ashok Babu representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. DR submitted that the assessee for the first time has raised the issue of mutuality before the Tribunal. The assessee had never raised this ground before the authorities below. No reason has been given by the assessee for not raising this plea before the Assessing Officer or the Commissioner of Income Tax (Appeals), therefore, the additional ground raised by the assessee deserves to be rejected.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the order of Commissioner of Income Tax (Appeals) in confirming the addition of Rs.82, 35,000/- in respect of un-utilized rebate being written off and transferred to reserve account. The addition has been made by Revenue under the provisions of section 41(1) of the Act. The assessee before us has raised additional ground of appeal invoking the principles of mutuality. We find that the fresh plea of mutuality raised in additional ground by the assessee emanates from the facts already on record. No fresh evidence is required to be adduced to adjudicate this ground. The additional ground raised would have bearing on the tax liability of the assessee. Therefore, in the light of decision of Hon’ble Supreme Court of India in the case of NTPC Ltd. Vs. Commissioner of Income Tax reported as 229 ITR 383. We are admitting additional ground raised by the assessee.

Both the sides are unanimous in admitting that since the plea of principles of mutuality has been raised for the first time before the

In the result, the appeal of assessee for assessment year 2009-10 is allowed for statistical purpose.

The ld. AR submitted that addition in assessment year 2011-12 has been made on similar lines as was made by the Assessing Officer in assessment year 2009-10. The grounds / additional ground raised by the assessee are also identical to the grounds / additional ground raised in assessment year 2009-10. Therefore, the submissions made in respect of assessment year 2009-10 would equally apply to assessment year 2011-12.

The ld. DR also admitted the fact that the addition and the grounds of appeal in both the assessment years i.e. assessment years 2009-10 and 2011-12 are identical.

Both sides heard. Orders of the authorities below perused. It is not in dispute that the grounds/additional ground raised in assessment year 2011-12 is identical to the assessment year 2009-10. We have restored the appeal of assessee to the file of Assessing Officer for de-novo adjudication in the light of fresh plea raised in assessment year 2009-10.

In the result, both the appeals of assessee are allowed for statistical purpose.