TMI Blog2011 (8) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... s were heard together and are being disposed off by way of a consolidated order for the sake of convenience and brevity. 2. The common issue involved in the appeals for the assessment years is with regard to the disallowance under section 40A(9) of the Income-tax Act, 1961 (in short "the Act") made by the Assessing Officer with respect to the contributions made by the assessee to MSW Karmachari Welfare Fund. The assessee is a Corporation established under the provisions of Agricultural Produce (Development and Warehousing) Corporation Act, 1956 (28 of 1956) and carries on the business of warehousing. The assessee has a total of 17 warehousing centres with a total storage capacity of 1,25,475 metric tones. 3. We shall first deal with the appeal of the assessee for the assessment year 2005-06. The substantive controversy in the captioned appeals relates to the allowability of the contribution amounting to Rs 16,77,170/- made by the assessee to MSWC Karmachari Welfare Fund in terms of the provisions of section 40A(9) of the Act. As per the Revenue, such contribution is hit by the provisions of section 40A(9) of the Act, which read as under: "40A(9):No deduction shall be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly controlled and managed by the Government. The appellant Corporation contributed a sum of Rs 16,77,170/- during the assessment year 2005-06 to a Karmachari Welfare Fund and the said Trust was spending the contributions exclusively for the welfare of the employees of the Corporation and their family members. It is stated that all the office bearers of the said Trust are out of the employees of the appellant Corporation and the disbursements are in terms of the scheme formulated by the Trust. As per the appellant, since it is a State Government undertaking under the control of Cooperation and Rural Development Department of the Government of Maharashtra, the contribution in question is in accordance with the directive issued by the Government of Maharashtra and therefore, the contributions carry an obligation of law and, as such, are covered by the exceptions provided in section 40A(9) of the Act. 6. Before us, learned Counsel for the assessee has vehemently pointed out that the contribution has been made in terms of the Board Resolution and the understanding with the Karmachari Welfare Fund which is backed by the standing approval given by the Co-operation and Rural Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs 16,77,170/- by way of contribution to the Karmachari Welfare Fund, as an employer, and therefore, its deductibility is governed by the provisions of section 40A(9) of the Act. The disallowance envisaged in section 40A(9) of the Act is subject to certain exceptions. As per the said exceptions, no disallowance would be made where such sum is paid: (i) for the purpose and to the extent provided under clauses (iv) or (v) of section 36(1) of the Act; or, (ii) as required by or under any other law for the time being in force. The claim of the assessee is that the contribution to the Karmachari Welfare Fund in question is covered by the second exception provided in section 40A(9) of the Act, as it has been paid as mandated by law. 10. In order to test the efficacy of the assessee's plea, the moot question to be addressed is as to whether the Regulations in terms of which the payment has been made by the assessee, carry the force of law or not. In this connection, we may refer to the judgment of the Hon'ble Supreme Court in the case of U P Warehousing Corporation (supra) relied upon by the appellant before us. The status of the entity before the Hon'ble Supreme Court was analog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporations are 'State' within the meaning of Article 12 of the Constitution? Ray, C.J., speaking for himself and Chandrachud and Gupta, JJ., held that the regulations framed by these statutory bodies for the purpose of defining the duties, conduct and conditions of its employees have the force of law. The form and content of the contract with a particular employee is prescriptive and statutory. The notable feature is that these statutory bodies have no free hand in framing the conditions and terms of service of their employees. They are bound to apply the terms and conditions as laid down in the regulations. These regulations are not only binding on the authority but also on the public. They give the employees a statutory status and impose obligations on the statutory authorities, who cannot deviate from the conditions of service." 11. The Hon'ble Supreme Court held that the regulations framed by the Corporations, being framed under the statutory provisions would have the force of law. The Hon'ble Supreme Court further went on to hold that there was no distinction on principle between a person directly under the employment of the Government and a person under the employment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CWT v. Apar Ltd. 267 ITR 705 (Bom). 16. We have carefully considered the rival submissions on this aspect. In our view, the Commissioner of Income-tax (Appeals) was not justified in refusing to entertain the claim of the assessee against the disallowance under section 40A(9) of the Act. Quite clearly the assessee had filed its return of income wherein disallowance was made under section 40A(9) qua the impugned amount; so however, a caveat was also appended in the very same return of income contained in the computation statement resisting the disallowance on a point of law. Quite clearly, it emerges that the disallowance was made in the return without prejudice to its lawful right to assail the applicability of section 40A(9) qua the impugned amount. This clearly implied that the assessee was denying its liability to be assessed under the Act qua the impugned amount and certainly this invested the assessee with a right to appeal before the Commissioner of Income-tax (Appeals). Therefore, in our view, the Commissioner of Income-tax (Appeals) erred in not entertaining the grievance raised by the assessee. In this context, we may refer to the judgment of the Hon'ble De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of book values of assets as appearing in its Books of account and not on the basis of written down values of various assets as computed by the appellant from time to time in his returns of income and the learned AO may please be directed to compute and grant the depreciation allowance accordingly. The ld AO may please be further directed to allow the depreciation on Warehouses by treating the same as Plant." 19. The learned Counsel for the assessee requested that the above Additional Ground may be admitted in view of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. v. CIT (229 ITR 383) (SC) as it is a pure question of law and does not involve investigation into fresh facts. The learned Counsel for submitted that in view of the retrospective insertion of Explanation 6 to section 43(6) by the Finance Act, 2008, the assessee is entitled to claim depreciation on various assets on the basis of book values of assets as appearing in its Books of account and that the Assessing Officer may be directed to compute and grant depreciation allowance accordingly. It was further submitted that the Assessing Officer may also be directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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