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2014 (9) TMI 264 - AT - Income TaxReceipts towards Area Development Fund (ADF) Money collected towards Area Development Activities used for business purposes or not Held that:- The assessee sugar factory has to get the approval of the members of the assessee society in the annual general meeting and then only the ADF can be utilized - The assessee has filed some of the resolution in the compilation from which it is seen that the ADF is used for giving incentive for primary school, incentive for wrestlers, help to persons affected by fire, incentive for wage, road developments, medical assistance, subsidiary for digging wells, assistance for group marriages etc. - the assessee has not kept the amount deducted from the bills payable to the members and non-members in separate Bank Account but separate account is maintained in the books - in respect of the nature of this fund it has been already held that purposes for which this fund is utilized i.e. ADF is unconnected with the growth of sugar factory and this fund is promoted for Socio-economic Development in the area of operation and this fund is distinct from the Cane Development Fund. Whether the collection made towards "ADF" by the assessee sugar factory is impressed with the specific obligation or assessee hold this money as a trustee Held that:- Even if initially it was by way of discretion the Sugar Co-operative factories were collecting the fund and spending the same on the different projects undertaken in the area of operation but subsequently the collection and use of fund was regulated by the intervention of the Govt. by issuing the order u/s. 79A of the Maharashtra Co-operative Society Act - The assessee has maintained the separate account in respect of this fund and as per the statement filed it is seen that the assessee sugar factory is utilizing the ADF on different projects as per the approval given in the annual general meeting (AGM) - Merely because the amount collected is not kept separately in the bank account, the character of the amount will not change as decided in Commissioner of Income-Tax (Central), New Delhi Versus Bijli Cotton Mills Pvt. Limited [1978 (11) TMI 1 - SUPREME Court] - the assessee is required to submit the Auditor's Report to the Director of Sugar, Govt. of Maharashtra each year showing the opening balance of the ADF, amount collected during the year and utilized during the year. The collection made by the assessee towards the ADF by way of deduction made from the sugarcane bills payable to the members and non-members is impressed with an obligation to spend the same for the specified purposes and the persons/Members paying contribution to ADF are aware before the deduction is made that for what purpose the assessee Co-operative Factory is collecting the said fund and where the fund will be utilized - the assessee's role is like a trustee of the "Area Development Fund" - the amount collected under the ADF is not a trading receipt in the hands of the assessee, the deduction given by the AO in the respective assessment years towards ADF is to be withdrawn - The AO is direct to exclude fully the amount included towards "Area Development Fund" in the income of the assessee and also to withdraw the amount allowed as a business expenditure towards ADF Decided in favour of Assessee.
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