TMI Blog2014 (10) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... e of tax between the two years, it is immaterial whether the deduction is allowed in one year or the other - the liability of prior period expenses for consumption of raw material has been stated to have arisen in the earlier year, but got crystallized on a later date. The expenditure and the liability have been certified by the tax auditors, and there appears to be no dispute that the appellant had 'actually incurred the expenditure - the claim of assessee has been allowed by the AO for last several years – as held in Radhasoami Satsang Versus Commissioner of Income-Tax [1991 (11) TMI 2 - SUPREME Court] - principle of res judicata does not apply to income tax proceedings - each assessment year being an independent unit, what is decided in one year may not apply in the following year, but where fundamental aspect permeating through the different assessment year has been found as a fact one way or other and parties have allowed, that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year – thus, Revenue is not permitted to take a different stand in the year under consideration – thus, the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance can be made on the basis of notional expenditure. 8. That on the facts and in the circumstances of the case, the learned CIT (A) has ignored the fact that there is no finding by the A.O. against the submissions made by the assessee that no expenditure has been incurred for earning exempted income, hence disallowance under section 14A cannot be made. 9. That on the facts and in the circumstances of the case, whether a mechanical allegation in respect of non satisfaction without examining the correctness of the claim of the assessee and the nature of expenditure incurred, empowers the assessing officer to invoke the provisions of Section 14A of the Income-tax Act, 1961. 10. That on the facts and in the circumstances of the case, the learned CIT (A) has erred in law by ignoring the fact that there is no nexus between earning of exempted income and incurring of expenditure for earning such income, thereby wrongly upholding the disallowance of ₹ 21,43,45,000/- against the exempted income of ₹ 10,11,91,381/-. 11. That without prejudice to the above grounds the learned CIT (A) has erred in law by ignoring the fact that against exempted income of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the same shows that the benefit of the decision of the Jurisdictional High Court in the case of Maxopp Investment was not available to the AO. In view of the same, considering the request of the parties on record we deem it appropriate to restore the issue back to the file of the AO with the direction to pass a speaking order considering the mandate of the Hon ble High Court in Maxopp Investment. Needless to say that before passing of the order he shall give a reasonable opportunity to the assessee of being heard. The decision it is seen is fortified by the decision of the Delhi High Court in the case of assessee itself wherein their Lordships clarified their earlier order dated 02.02.2012 in ITA No.1293/Del/2011 vide their order dated 17.04.2012 by stating that the necessary working and computation of the deduction u/s 14A of the Income Tax Act, 1961 and the appeal effect has to be given/undertaken by the AO following Maxopp Investment Ltd. vs CIT in ITA No-687/2009. Accordingly the AO in view of the above direction shall pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 4. In the result the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) and the finding recorded therein. Invited attention to the copy of the order of the ITAT placed at pages 25-34. 9.1. It was further submitted that the said order of the ITAT has been confirmed by the Jurisdictional High Court. For the said purpose specific attention was invited to paper book page no-35-56A wherein ITA No-1293/11, the Lordships held as under:- The second aspect raised by the Revenue relates to payment of 1% of the net profits to the Cooperative Education Fund maintained by the National Cooperative Union of India. The said obligation is a statutory obligation under Rules 25 of the Multi State Cooperative Rules, 2002. A similar issue was raised in ITA No.274/2003 and other connected matters, which were decided on 14.12.2004. The contention of the Revenue was dismissed. We may note that in the present case, payments have been made and the question of applicability of Section 43B is not an issue. On the second aspect, we are not inclined to admit the present appeal as no substantial question of law arises. 10. We have heard the rival submissions and perused the material available on record. It is seen that the ITAT in the immediately preceding asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i State Coop. Society Rules, 2002, to be credited as contribution to Coop. Education Fund which is maintained by National Coop. Union of India Ltd., New Delhi. It is statutory requirement to contribute 1 % of its net profits to Coop. Education fund. The amount of 1 % of net profit is, therefore, not in control of the assessee. The funds have been vested in third party outside corpus of assessee itself. Therefore, the amount contributed to Coop. Education Fund is diversion of profits at source which is eligible for deduction u/s 37 of the Act. The decisions relied upon by the Revenues are distinguishable on facts as in those cases there was no diversion of income. The amount claimed as diversion of income remained with the assessee and formed' part of the corpus of the assessee. 13. However, as mentioned above, the claim of assessee has been allowed by the AO for last several years. Hon'ble Supreme Court in the case Radhasoami Satsang, 193 I.T.R. 321 has held that principle of res judicata does not apply to income tax proceedings. Again, each assessment year being an independent unit, what is decided in one year may not apply in the following year, but where fundamental a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Jurisdictional High Court in the case of Ram Pistons and Rings Ltd. [2008] 220 CTR 404, it was his submission that merely because expense relates to a transaction of an earlier year, it does not become a liability payable in the year unless it can be said that the liability was determined and crystallized in the year in question. It was his submission that the Courts have held that when there was no change in the rate of tax between the two years, it is immaterial whether the deduction is allowed in one year or the other. Reliance was further placed upon Saurastra Cement and Chemical Industries Ltd. 213 ITR 523 (Guj.) which decisions had infact been considered and followed by the Jurisdictional High Court. 15. We have heard the rival submissions and perused the material on record. On a careful consideration of the same in the facts as they stand we find no good reason to interfere with the finding arrived at by the CIT(A) which is found supported by the judgement of the Delhi High Court in the case of CIT vs Ram Pistons and Rings Ltd. (cited supra) wherein their Lordships have relied upon Saurastra Cement and Chemicals Industries Ltd. (cited supra) and the decision of the Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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