THE DCIT, CIRCLE-1, RAJKOT vs. M/S. BILESHWAR KHAND UDHYOG KHEDUT SAHAKARI MANDALI LTD., KODINAR, KODINAR, DIST. GIR - SOMNATH
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.140/Rjt/2020 (Assessment Year: 2010-11) DCIT Vs. M/s. Bileshwar Khand Udyog Circle-(1), Khedut Sahakari Mandali Ltd., 1st Floor, Administrative Rajkot Building, Veraval Road, Kodinar, Dist. Gir-Somnath [PAN No.AAAAB0936H] (Appellant) .. (Respondent) Appellant by : Shri B. D. Gupta, Sr. D.R. Respondent by: Shri Mehul Ranpura, A.R. Date of Hearing 01.06.2023 14.06.2023 Date of Pronouncement
O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Revenue against the order passed by the Ld. CIT(Appeals)-3, Rajkot in Appeal No. CIT(A)-3/10113/13-14 vide order dated 09.03.2013 passed for Assessment Year 2010-11.
The Revenue has taken the following grounds of appeals:-
“1. Whether the Ld. CIT(A)-3, Rajkot has erred in law and on facts in deleting the additions made on account of disallowance of expenditure on statue for an amount of Rs. 6,24,28/- made vide assessment order passed u/s 143(3) of the IT Act.
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 2 - 2. Whether the Ld. CIT(A)-3, Rajkot has erred in law and on facts in deleting the additions made on account of disallowance of sugarcane development expenditure for an amount of Rs. 1,96,16,400/- vide assessment order passed u/s 143(3) of the IT Act.
Whether the Ld. CIT(A)-3, Rajkot has erred in law and on facts in deleting the additions made on account of disallowance of 15% of the miscellaneous expenses of Rs. 16,28,076/- amounting to Rs. 2,44,211/-”
Ground No. 1 of the Department’s appeal:- CIT(A) erred in deleting disallowance of expenditure of construction of statue amounting to Rs. 6,24,128/-.
The brief facts in relation to this ground of appeal are that the assessee had claimed expenditure of Rs. 6,24,128/- for erecting statue of late Shri R. N. Wala, founder Chairman of the Society. The same was disallowed by the Assessing Officer. In appeal, the assessee contended that this expenditure is not of a capital nature and neither is it a personal expenditure and that it has been expended wholly and exclusively for the purpose of business and profession. The Ld. CIT(Appeals) allowed the appeal of the assessee on the ground that the ITAT in assessee’s own case for A.Y. 2009-10 vide order dated 25.10.2019, had allowed similar expenditure to the assessee. The Ld. CIT(Appeals) allowed the appeal of the assessee with the following observations:-
“…The assessee has placed reliance on decision of ITAT in assessee’s own case for A.Y. 2009-10 in ITAT no. 633/RJT/2014 vide order dated 25.10.2019 wherein the similar expenditure has been allowed to the
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 3 - assessee. The relevant extracts of findings of the Hon’ble ITAT in A.Y. 2009-10 is reproduced as under:-
“We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 37 of the Act is a residuary section allowing the deduction of the business expenditure and the same is given below: ………..
Now, we have to adjudicate whether the impugned expenditure incurred by the assessee on the building of the statue as discussed above represents the expenses incurred personal in nature. In this regard, we note that the assessee is a co-operative society having separate legal entity from the persons who are the members of such society as well as holding the post of the governing body. Such expenditure incurred was approved in the annual general meeting of the society. Moreover, the assessee being a separate legal entity in the form of cooperative society, does not have any personal relations like an individual. Therefore, there cannot be any expenditure to be called for the personal benefit of the society. As such, there cannot be any benefit to the governing body/members of the society out of such expenditure incurred by the society. However there is no such allegation by the AO/learned CIT (A) that the benefits were derived by the members of the governing body of the society or members of the society. Thus we disagree with the finding of the authorities below that there was some personal benefit out of the impugned expenses to the society. There is no doubt about the genuineness of the expenses viz a viz the approval of such expenses in the AGM of the society.
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 4 -
We also find that ITAT in case of ACIT vs. Chanasma Nagrik Sahkari Bank Ltd reported in 86 taxmann.com 8 has decided the similar issue in favour of assessee by holding as under
“We have considered the rival submissions on the issue. We find ourselves in agreement with the contention raised on behalf of the assessee that the expenses incurred are revenue in nature and no enduring benefit can be stated to be derived by the assessee. We take notice of the plea that the property in statue also did not vest in the assessee-bank. Similarly, we observe that the expenses can be said to have been incurred for the purposes of business for the simple reason that such incurring of expenses adds to the visibility of the assessee-bank amongst its stakeholders. The expenditure thus incurred can be rationally said to have been incurred for the promotion of the assessee's ongoing business and thus an allowable business expenditure. Such incurring of expenditure would presumably enhance the brand image of the assessee. The expenditure incurred is thus for business purposes when not alleged for any extraneous consideration. It is another matter to question the expediency of such expenditure which in any case is not for the Revenue look into. It is trite that 'for the purpose of business' contemplated under s.37 is wider in scope than the expression 'for the purpose of earning profits' and may comprehend many acts incidental to the carry on of a business. Thus, so long as the expenditure has been incurred on the grounds of commercial expediency and in order to directly or
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 5 - indirectly facilitate the carry of the business, the fact that there was no compelling necessity to incur the expenditure on which deduction is claimed is an irrelevant consideration. The expenditure in the instant case has gone irretrievably in the course of carrying on of business. The expenses incurred has potential to increase the visibility of the assessee in the public at large and thus has bearing on business acceleration. Therefore, we find considerable merit in the claim of the assessee. Consequently, claim of the assessee towards urban development expenditure of Rs.4,35,821/- deserves to be allowed.”
In view of the above, we hold that the assessee is eligible for deduction of such expenditure under the provisions of section 37(1) of the Act. Accordingly, we set aside the order of the ld. CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.”
In view of facts and the circumstances of the case and respectfully following the decision of Hon’ble ITAT, Rajkot dated 25/10/2019 in appellant’s own case, I direct the A.O. to delete the impugned addition. Hence, the ground of appeal of the assessee is allowed.”
The Department is in appeal before us against the aforesaid relief provided by the Ld. CIT(Appeals) to the assessee, on this issue. We observe that the Hon’ble ITAT has allowed the appeal of the assessee in respect of this expenditure in the immediately previous Assessment Year
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 6 - i.e. A.Y. 2009-10 in ITA No. 633/Rjt/2014 vide order dated 25.10.2019, where similar expenditure with respect to expenditure incurred towards building of statute was allowed in favour of the assessee. Accordingly, we are of the considered view, that Ld. CIT(Appeals) has not erred in facts and in law in allowing the appeal of the assessee while placing reliance on the order passed by Hon’ble ITAT in assessee’s own case for A.Y. 2009-10.
In the result, Ground No. 1 of the Department’s appeal is dismissed.
Ground No. 2:- Ld. CIT(Appeals) erred in deleting additions made on account of disallowance of sugarcane development expenditure for an amount of Rs. 1,96,16,400/-.
The brief facts in relation to this ground of appeal are that the assessee had claimed expenditure of Rs. 1,96,16,400/- as sugarcane development expenditure. The Assessing Officer, in the assessment proceedings, disallowed the expenses holding that sugarcane development expenses did not relate to the previous year relevant to the assessment year and that genuineness of the expenses was not established.
In appeal before Ld. CIT(Appeals), the assessee contended that aforesaid sugarcane development expenses has been incurred as these payments were made for supply of better quality of sugarcane for crushing and such expenses were duly approved by the Board of the
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 7 - Society. The assessee contended that this practice has been consistently followed over the years and the final payments are made to the bank by a common cheque, with a direction to deposit the respective amount in the bank account of the members and the payments have been deposited in the bank account of the individual members. The assessee further submitted that the payments have been made before furnishing of return of income under Section 139(1) of the Act. The assessee further contended that the same issue was involved in assessee’s own case for A.Y. 2009-10, where on identical set of facts, Hon’ble ITAT, Rajkot has allowed the appeal of the assessee. Accordingly, Ld. CIT(Appeals) allowed the appeal of the assessee by following the order of Hon’ble ITAT, in assessee’s own case for A.Y. 2009-10, with the following observations:-
“…It is seen that the same issue was involved in appellant’s own case in the assessment year 2009-10. The Hon’ble ITAT, Rajkot in ITA No. 633/Rjt/2014 has decided the issue in favour of the assessee. The relevant extracts of the order of the Hon’ble ITAT in A.Y. 2009-10 is reproduced as under:-
“We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the provision made by the assessee for the expenses to be incurred for Rs. 2,72,42,900.00 on account of sugar development expenses. There is no dispute to the facts of the case as elaborated in the preceding paragraphs. Therefore, we are not inclined to repeat the
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 8 - same for the sake of brevity. At the outset we note that there was similar claim made by the assessee in the own case pertaining to the AY 2005-06 and 2007-08 dated 10-12- 2007 and 29-07-2009 respectively which was admitted by the Revenue. This fact can be verified from the assessment orders for the AYs 2005- 06 and 2007-08 available on record. Thus, we are of the view that the assessee should be allowed for the deduction of such expenses on the basis of principles of consistency. In this regard we find support and guidance from the judgment of Hon’ble Supreme Court in the case of CIT versus Excel Industries Ltd reported in 358 ITR 295 wherein it was held as under:
“28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue.
In Radhasoami Satsang Saomi Bagh v. CIT [1992] 193 ITR 321/60 Taxman 248 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said:
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 9 - "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.”
In view of the above and after considering the facts in totality, we are of the view that the assessee is eligible for deduction of the sugar cane development expenses as discussed above. The ld. DR has also not brought anything on record suggesting any material change in the facts and circumstances of the case for the year under consideration viz a viz earlier assessment year.
In view of facts and circumstances of the case, and respectfully following the decision of Hon’ble ITAT, Rajkot dated 25/10/2019 in appellant’s own case, I direct the A.O. to delete the impugned addition. The ground of appeal of the assessee is allowed.”
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 10 - 8. The Department is in appeal before us against the order passed by Ld. CIT(Appeals) on this issue. Before us, the Ld. D.R. submitted that as of 31.03.2010, the payments are outstanding in the assessee’s books. The Ld. D.R. drew our attention to Para 4.1 of the assessment order and submitted that the above expenditure relates to different years and as such it cannot be said that the entire expenditure relates to A.Y. 2010-11. Further the Ld. D.R. placed reliance on the observations made by the Assessing Officer in the assessment order to the effect that the assessee has not been able to establish that genuine payment has been made to sugarcane growers. In response, the Counsel for the assessee drew our attention to Page 15 of the order passed by Ld. CIT(Appeals) and submitted that all the payments have been settled / made by the assessee before the due date of filing of return of income. He further submitted that this practice has been consistently followed by the assessee for the previous assessment years as well and taking note of this consistent practice, on identical set of facts Hon’ble ITAT has allowed the appeal of the assessee in assessee’s own case for A.Y. 2009-10. Accordingly, the Counsel for the assessee submitted that the issue is directly covered in favour of the assessee by the order of Hon’ble ITAT, Rajkot in assessee’s own case for A.Y. 2009-10.
We have heard the rival contentions and perused the material on record. We observe that Hon’ble ITAT, Rajkot in assessee’s own case for A.Y. 2009-10 has allowed the appeal of the assessee on identical set of facts. Further, it is also observed that both ITAT as well Ld.
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 11 - CIT(Appeals) has noted that this practice has been followed by the assessee on a consistent basis for previous assessment years as well. The relevant extracts of the order of Hon’ble ITAT, Rajkot have been reproduced by the Ld. CIT(Appeals), while allowing the appeal of the assessee with respect to this ground of appeal. Accordingly, in our considered view, looking into the facts of the case we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in allowing the appeal of the assessee on this issue.
In the result, Ground No.2 of the Department’s appeal is dismissed.
Ground No.3:- Ld. CIT(A) erred in deleting the additions made on account of disallowance of 15% of the miscellaneous expenses of 16,28,076/-, amounting to Rs. 2,44,211/-.
The brief facts relating to this ground of appeal are that during the course of assessment, the Assessing Officer held that expenditure under the heads medicine expenses, miscellaneous expenses of data, flood calamity were debited and these expenses are not entirely verifiable and accordingly, he made disallowance of 15% of such expenses amounting to Rs. 2,44,211/-.
In appeal, the assessee submitted that the books of the accounts of the assessee have been duly audited and the Assessing Officer has made the above disallowance without pointing out any defect in the books of the assessee. The assessee submitted that the aforesaid expenses are in
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 12 - the nature of uniform expenses, medicine expenses, bank commission, license for miscellaneous expenses, convenience expenses, office finance expenses, sales taxes etc. and none of these expenses are of personal nature as the assessee is not a profit organization and no expenses have been brought out to be not related to the activities of the society. In view of the submissions of the assessee, the Ld. CIT(Appeals) allowed the appeal of the assessee with the following observations:-
“Having considered the facts and circumstances of the case, I find that the AO has not brought out any specific instance of non verifiable expenditure. The addition is solely based on surmises and conjectures without pointing out any specific defect or any specific expenditure which is not verifiable or is of personal nature. Such addition without any basis in my considered opinion cannot be sustained. The same is directed to be deleted. The ground of appeal is allowed.”
The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) granting relief to the assessee on this issue. On going through the facts of the case and the arguments put forth before us by the Ld. D.R. and Counsel for the assessee, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that in the instant facts, the Department has not pointed out to any defect in the assessee’s books of accounts and nor has the Department pointed out any specific expenditure which is not verifiable or is of a personal nature. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) with respect to this ground of appeal.
ITA No.140/Rjt/2020 DCIT vs. M/s. Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. Asst.Year –2010-11 - 13 -
In the result Ground No. 3 of the Department’s appeal is dismissed.
In the combined result, the appeal of the Revenue is dismissed. This Order pronounced in Open Court on 14/06/2023
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 14/06/2023 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot
Date of dictation 09.06.2023 2. Date on which the typed draft is placed before the Dictating Member 09.06.2023 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 12.06.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .06.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 14.06.2023 7. Date on which the file goes to the Bench Clerk 14.06.2023 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………………………………
