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TMI Blog2015 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary societies in order to facilitate the purchases of Milk Testing Machines and Milking Machines in bulk for and on behalf of these Primary Co-operative Societies and erroneously holding that this contribution made by these primary societies is income on revenue account. 3. On the facts and in the circumstances of the case the CIT(A) has erred in sustaining the disallowance of deprecation of Rs. 10,12,500/- treating the amount of grant of Rs. 1,35,00,000/- received from the Central Government under the sponsored scheme called "Strengthening the Infrastructure for Quality and Clean Milk Production" erroneously holding that the said grant is provided to meet the cost of Capital Asset namely the bulk coolers. 4. On the facts and in the circumstances of the case the CIT(A) has erred in not sustaining the claim of exemption made u/s. 80P(2) (d) of Rs. 8,24,156/- that represents the interest income from the fixed deposits held with the Cooperative Bank and confirming the action of the Assessing Officer of adjusting the same to the amount of interest paid on the secured bank loan. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in view of the ratio laid down by the Hon'ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate in 262 CTR 252 (Cal) and by the Hon'ble Gujarat High Court in the case of CIT Vs. Sikandarkhan N. Tunvar 357 ITR 312 (Guj). The contrary decision by the Hon'ble Allahabad High Court in the case of CIT Vs. Vector Shipping Pvt. Ltd. was not adopted as the facts of that case were different. 7. The assessee is in appeal against the order of CIT(A). 8. The learned Authorised Representative for the assessee pointed out that the entire amount on account of advertisement expenditure had been paid and consequently the said expenditure is allowable in view of the ratio laid down by the Hon'ble Allahabad High court in the case of CIT Vs. Vector Shipping Pvt. Ltd. 357 ITR 642 (All). It was also pointed out by the learned AR that the SLP filed by the department has been dismissed by the Hon'ble Supreme Court and other reliance was placed on the ratio laid down by the Pune Benches of the Tribunal in the case of ITO Vs. M/s. Gaurimal Mahajan & Sons vide ITA No.1852/PN/2012 relating to assessment year 2008-09 order dated 06-01-2014. 9. The learned Departmental Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody of the assessment order disallowed an amount of Rs. 7,20,252/- u/s.40(a)(ia) for non deduction of tax. We find the Ld.CIT(A) distinguishing various decisions cited before him upheld the disallowance made by the Assessing Officer. It is the case of the Ld. Counsel for the assessee that in view of the decision of Hon'ble Allahabad High Court in the case of M/s. Vector Shipping Service Pvt. Ltd. (Supra) no disallowance u/s.40(a)(ia) can be made since no amount was payable at the end of the year. 8.1 We find the Hon'ble High Court while deciding the issue has relied on the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transport Ltd. reported in 136 ITD 23 (SC). We find the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transport Ltd. (Supra) was reversed by the Hon'ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate vide order dated 03-04-2013 reported in TIOL-404-HC-KOL. The relevant observation of the Hon'ble High Court read as under : "We requested Mr. Khaitan, learned Senior Advocate to assist the Court in resolving the issue. The matter was directed to be listed for further hearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot be read into the section as contended by the assessee. 13. Section 40(a)(ia) is to be interpreted harmoniously with the TDS provision as its operation solely depends on the provisions contained under Chapter XVII-B. It contemplates one of the consequences of non-deduction of tax and ,therefore, has to be interpreted in the light of mandatory provisions contained under Chapter XVII-B. It would be appropriate to reproduce Section 40(a)(ia), which reads as under:- Section 40(a)(ia):- any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, [has not been paid,- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of Section 139; or (B) in any other case, on or before the last day of the previous year:] [Provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the year in which such tax has been deducted. The explanation to this Section defines various amounts contemplated in this Section. The relevant Sections in Chapter XVII-B are re-produced hereunder:- Interest on securities. 193. The person responsible for paying [to a resident] any income [by way of interest on securities] shall, [at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier], deduct income-tax [***] at the rates in force on the amount of the interest payable: Payments to contractors and sub-contractors. 194C. (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and - ** ** ** shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent in case of advertising, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (I) of section9; (ba) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly. If we examine the aforementioned sections, we find that identical considerations permeate through all the aforementioned Sections which are as under:- (i) any person responsible for paying any sum to any resident in respect of aforementioned items; (ii) shall; (iii) at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed under the head 'profits and gains of business or profession' ". 16. A bare reading of the above provision would make it clear that the term 'paid' does not only mean actual payment but if the liability has been incurred according to the method of accounting followed by the assessee, then the same also comes within the purview of term 'paid'. If the assessee is following mercantile system of accounting then as soon as the liability accrues in its favour, the same is accounted for by crediting the amount of payee. Thus, it is evident that the emphasis is on liability to pay and not on actual payment. If we accept the contention of assessee, then Section 40(a)(ia) would become otiose and the section will not be attracted where payment is made though without deducting tax at source. Ld. Counsel has referred to the various decisions and in the case of Jaipur Vidyut Vitaran Nigam Limited (supra), the Tribunal had relied on the definition of Section 43(2) but the import of phrase 'incurred in accordance with the method of accounting followed' was not considered. Therefore, the finding that by implication the word 'payable' does not include 'pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Ltd.'s case (supra). The contention of Ld. Counsel for the assessee is that this decision was rendered in the context of constitutional validity of the provisions of section 40(a)(ia) and, therefore, in view of the decision of Hon'ble Delhi High Court in the case of Lachman Dass Bhatia Hingwala (P) Ltd.'s case (supra), the said decision is not relevant. It is true that this decision has been rendered in the context of examining of constitutional validity of the provisions of section 40(a)(ia) of the Act but in course of examining the constitutional validity, Hon'ble Madras High Court has extensively considered the import of section 40(a)(ia) and, therefore, in our opinion, this decision has strong bearing on the present issue. 20. Hon'ble Madras High Court has noticed various contentions of assessee. We re-produce some contentions, which have direct bearing on the present issue:- "At para 5 of judgment: Mr. C. Natarajan, learned senior counsel appearing for the petitioners in Writ Petn. Nos. 10750 and 10751 of 2009 contended that while contractors business has no nexus to the determination of profits and gains of the business of the petitioner, s. 40(a)(ia) mutates itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia) and consequently the non-income viz., the expenditure cannot be treated as deemed income in the hands of the assessee. The learned counsel also contended that since the recipient of the expenditure of the assessee is also taxed, the imposition of tax by invoking s. 40(a)(ia) would result in double taxation which cannot be permitted. At para 25 of judgment: The learned counsel by pointing out ss. 205 and 64 of the Act contended that in similar situations the legislature has made specific exoneration of double taxation. The learned counsel relied upon: (i) CIT v. Indo Nippon Chemicals co. Ltd. [2003] 182 CTR 291/[2003] 261 ITR 275 (SC); (ii) K.P. Varghese v. CIT [1981] 24 CTR 358 [1981] 131 ITR 597 (SC); (iii) Navnit Lai C. Javeri v. K.K.Sen, AAC [1065] 56 ITR 198 (SC); (iv) Govind Saran Ganga Saran v. CST [1985] 155 ITR 144 (SC); (v) Godhira Electricity Co. Ltd. v. CIT [1997] 139 (JR 564/ [1997] 225 ITR 746 (SC) in support of his submissions. At para 33 of judgment: It was then contended that an expenditure is not an income and consequently the collection of tax as envisaged under Art. 265 is not permissible. It was also contended that s. 40(a)(ia) conflicts with S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed along with other provisions. (ii) The provisions of section 40(a)(ia) were compared with the provisions of section 201 of the Income Tax Act and, it was, inter alia, observed that as far as section 201 is concerned that would relate to the amount of tax that could be deducted by way of TDS. However, as far as section 40(a)(ia) is concerned, which would result in the disallowance of whole of the expenditure and thereby the entire sum expended would attract the levy of tax at a prescribed rate with all other conditions such as surcharge, etc. Thus, Hon'ble Madras High Court has also held in para 61 of its judgment that "whole of the expenditure claimed without making TDS is to be disallowed and not only part of the expenditure". (iii) The Finance Bill No.2 of 2004 states that the insertion of clause (ia) in clause (a) to section 40 of the Act was with a view to augment compliance of TDS provisions. (iv) When the provisions and procedures relating to TDS are scrupulously applied, first and foremost it ensures the identification of the payees and thereby network of assessees gets confirmed. When once such identity of assessees, who are in receipt of the income can be ascertained, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 40(a)(ia) would be frustrated. 21. In view of above discussion, we answer the question as under:- The provisions of section 40(a)(ia) of the Income Tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of revenue and against the assessee." Before dealing with the submissions of the learned Counsel appearing for the assessees in both the appeals we have to examine the correctness of the majority views in the case of Merilyn Shipping. We already have quoted extensively both the majority and the minority views expressed in the aforesaid case. The main thrust of the majority view is based on the fact "that the Legislature has replaced the expression "amounts credited or paid" with the expression 'payable' in the final enactment. Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achieved by an amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment." The contention raised with reference to what was there in the bill was rejected by the Supreme Court by holding as follows:- "It must, at this juncture, be noted that in spite of Section 2(11), which included the words "but for the provisions of this Act is not adequately protected by legislation for welfare and benefits of the labour force in the State", these precise words were removed by the legislature and the definition was made limited as it has been finally legislated upon. It is to be noted that when the Bill came to be passed and received the assent of the Vice- President on 05-06- 1969 and was first published in the Maharashtra Government Gazette Extraordinary, Part IV on 13-06-1969, the aforementioned words were omitted. Therefore, this would be a clear pointer to the legislative intent that the legislature being conscious of the fact and being armed with all the Committee reports and also being armed with the factual data, deliberately avoided those words. What the appellants are asking was to read in that definition, these precise words, which were consciously and deliberately omitted from the definition. That would amount to supplying the casus omissus a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a manner which was not intended by the legislature. This is our answer to the submission of Mr. Bagchi. The submission of Ms. Roychowdhuri that the second proviso sought to become effective from 1st April, 2013 should be held to have already become operative prior to the appointed date cannot also be acceded to for the same reason indicated above. The law was deliberately made harsh to secure compliance of the provisions requiring deductions of tax at source. It is not the case of an inadvertent error. For the reasons discussed above, we are of the opinion that the majority views expressed in the case of Merilyn Shipping & Transports are not acceptable. The submissions advanced by learned advocates have already been dealt with and rejected. The appeal is, thus, allowed in favour of the revenue." 8.2 We find the Hon'ble Gujarat High Court in the case of CIT Vs. Sikandarkhan N. Tunvar in the order dated 02-05-2013 reported in 2013-TIOL-389-HC-AHM has held as under : "5. In all these appeals the Tribunal has followed the decision of the Special Bench in the case of M/s. Merilyn Shipping & Transports vs. ACIT (supra) and deleted the disallowance on this limited ground. As in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of statutes cannot be a mechanical exercise." 8. Counsel also contended that interpretation made by the Tribunal leads to results wholly unintended by the legislature. If disallowance under Section 40(a)(ia) is applied only in case of amounts payable as on 31st March of the year under consideration, in large number of cases where the assessees might have actually paid the amounts but might not have either deducted tax at source though required under the Act or even after deduction not deposited with the Government, would escape the consequences envisaged under the said provision. It was further contended that Section 40(a)(ia) of the Act in its plain language does not permit such interpretation adopted by the Tribunal in the case of M/s. Merilyn Shipping & Transports vs. ACIT(supra). Even on the premise of literal construction, the view adopted by the Tribunal should be rejected. 9. On the other hand, counsel appearing for the assessees supported the view of the Tribunal. They contended that in taxing statute there is no room for intendment. The provisions must be construed strictly on the basis of plain language used by the legislature. According to them only meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. This decision, however, was rendered in the background of Section 43B of the Act, which used the expression "actually paid". Reliance was placed in the case of Commissioner of Income- Tax vs. Upnishad Investment P. Ltd and others reported in [2003] 260 ITR 532, wherein the Division Bench of this Court had an occasion to interpret expressions "receivable" and "due". It was observed that expressions "receivable" is used with reference to the recipient and the word "payable" is used with reference to the payer. 13. Our attention was drawn to the decision of the Supreme Court in the case of Commissioner of Income-Tax, Gujarat vs. Ashokbhai Chimanbhai reported in [1965] 56 ITR 42, wherein while explaining the concept of taxability of income, when it accrues, arises or is received, it was observed that the receipt is not the only test of chargeability to tax and if income accrues or arises, it may become liable to tax. In this context, it was observed that "Working of company from day to day would certainly not indicate any profit or loss, even working of the company from month to month could not be taken as a reliable guide for this purpose. If the profit or loss has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who is required to deduct any sum in accordance with the provisions of the Act or referred to in sub-Section (1) of Section 192 being an employer but does not deduct or does not pay or after so deducting fails to pay whole or part of the tax as required under the Act, then such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the said tax. Section 271C of the Act provides for penalty for failure to deduct tax at source. 16. In addition to such provisions already existing, the legislature introduced yet another provision for ensuring compliance with the requirement of deducing tax at source and depositing it with the Central Government. Section 40(a) (ia) relevant for our purpose reads as under:- "(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d observed as under: "12.4 In our considered opinion, there is no ambiguity in the section and term 'payable' cannot be ascribed narrow interpretation as contended by assessee. Had the intentions of the legislature were to disallow only items outstanding as on 31st March, then the term 'payable' would have been qualified by the phrase as outstanding on 31st March. However, no such qualification is there in the section and, therefore, the same cannot be read into the section as contended by the assessee." 20. On the other hand, learned Judicial Member speaking for majority adopted a stricter interpretation. Heavy reliance was placed on the Finance Bill of 2004, which included the draft of the amendment in Section 40 and the ultimate amendment which actually was passed by the Parliament. It was observed that from the comparison between the proposed and the enacted provision it can be seen that the legislature has replaced the words "amounts credited or paid" with the word "payable" in the enactment. On such basis, it was held that this is a case of conscious omission and when the language was clear the intention of the legislature had to be gathered from language us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext differently, for the purpose of Section 40(a)(ia) of the Act, term "payable" cannot be seen to be including the expression "paid". The term "paid" and "payable" in the context of Section 40(a)(ia) are not used interchangably. In the case of Birla Cement Works and another vs. State of Rajasthan and another reported in AIR 1994 (SC) 2393, the Apex Court observed that "the word payable is a descriptive word, which ordinarily means that which must be paid or is due or may be paid but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to "due". 23. Despite this narrow interpretation of section 40(a)(ia), the question still survives if the Tribunal in case of M/s. Merilyn Shipping & Transports vs. ACIT (supra) was accurate in its opinion. In this context, we would like to examine two aspects. Firstly, what would be the correct interpretation of the said provision. Secondly, whether our such understanding of the language used by the legislature should waver on the premise that as propounded by the Tribunal, this was a case of consc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose case the amount remained payable till the end of the year. We simply do not see any logic why the legislature would have desired to bring about such irreconcilable and diverse consequences. We hasten to add that this is not the prime basis on which we have adopted the interpretation which we have given. If the language used by the Parliament conveyed such a meaning, we would not have hesitated in adopting such an interpretation. We only highlight that we would not readily accept that the legislature desired to bring about an incongruous and seemingly irreconcilable consequences. The decision of the Supreme Court in the case of Commissioner of Income-Tax, Gujarat vs. Ashokbhai Chimanbhai (supra), would not alter this situation. The said decision, of course, recognizes the concept of ascertaining the profit and loss from the business or profession with reference to a certain period i.e. the accounting year. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Chose and another vs. Arabinda Bose and another reported in A.I.R. 1952 SC 369 in a Constitution Bench decision of (Coram: Patanjali Sastri, CJ.), observed that:- "33. .....It was urged that acceptance or rejection of amendments to a Bill in the course of Parliamentary proceedings forms part of the pre-enactment history of a statute and as such might throw valuable light on the intention of the Legislature when the language used in the statue admitted of more than one construction. We are unable to assent to this preposition. The reason why a particular amendment was proposed or accepted or rejected is often a matter of controversy, as it happened to be in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the Legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid sought to be resorted to by the parties in the case must be excluded from consideration in ascertaining the true object and intention of the Legislature." 29. In yet another Constitution Bench j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be gathered from mere comparison of the two sets of provisions. There may be variety of reasons why the ultimate provision may vary from the original draft. In the Parliamentary system, two Houses separately debate the legislations under consideration. It would all the more be unsafe to refer to or rely upon the drafts, amendments, debates etc for interpretation of a statutory provision when the language used is not capable of several meanings. In the present case the Tribunal in case of M/s. Merilyn Shipping & Transports vs. ACIT (supra) fell in a serious error in merely comparing the language used in the draft bill and final enactment to assign a particular meaning to the statutory provision. 32. It is, of course, true that the Courts in India have been applying the principle of deliberate or conscious omission. Such principle is applied mainly when an existing provision is amended and a change is brought about. While interpreting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, we notice from var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition clause inserted in Section 10(20) of the 1961 Act vide Finance Act, 2002. Therefore, in our view, it would not be correct to say that the entire definition of the word "local authority" is bodily lifted from Section 3(31) of the 1897 Act and incorporated, by Parliament, in the said Explanation to Section 10(20) of the 1961 Act. This deliberate omission is important." 34. The Apex Court in the case of Greater Bombay Cooperative Bank Ltd. vs. M/s. United Yarn Tex. Pvt. Ltd & Ors. reported in AIR 2007 SC 1584, in the context of question whether the Cooperative Banks transacting business of banking fall within the meaning of 'banking company' defined in the Banking Regulation Act, 1949, observed as under:- "59. The RDB Act was passed in 1993 when Parliament had before it the provisions of the BR Act as amended by Act No.23 of 1965 by addition of some more clauses in Section 56 of the Act. The Parliament was fully aware that the provisions of the BR Act apply to co-operative societies as they apply to banking companies. The Parliament was also aware that the definition of 'banking company' in Section 5(c) had not been altered by Act No.23 of 1965 and it was k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 'slimes' for quantifying the amount of royalty. This deliberate omission of Parliament cannot be made good by interpretative process so as to charge royalty on 'slimes' by reading Section 9 of the Act divorced from the provisions of the Second Schedule. Even if slimes were to be held liable to charge of royalty, the question would still have remained at what rate and on what quantity which questions cannot be answered by Section 9." 36. In the case of Gopal Sardar, vs. Karuna Sardar reported in AIR 2004 SC 3068, the Apex . Court in the context of limitation within which right of preemption must be exercised and whether in the context of the relevant provisions contained in West Bengal Land Reforms and Limitation Act, 1963 applied or not, observed as under:- "8....Prior to 15-2-1971, an application under Section 8 was required to be made to the "Revenue Officer specifically empowered by the State Government in this behalf." This phrase was substituted by the phrase "Munsif having territorial jurisdiction" by the aforementioned amendment. Even after this amendment when an application is required to be made to Section 8 of the Act either to apply Section 5 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court the same were not brought to the notice of the Hon'ble Bench and the Bench relying on the decision of the Special Bench in the case of Merilyn Shipping and Transport Ltd. (Supra) upheld the decision of the Tribunal. Under these circumstances, following the decision of the Hon'ble Gujarat High Court and Hon'ble Calcutta High Court (Supra) we uphold the order of the CIT(A) sustaining the disallowance made by the Assessing Officer. We further find the Co-ordinate Bench of the Tribunal in the case of ACIT Vs. Shri Bharat Dhanpal Patil vide ITA No.600/PN/2012 order dated 30-07-2013 following the decision of Hon'ble Calcutta High Court and Gujarat High Court cited (Supra) had allowed the appeal filed by the revenue wherein the CIT(A) had held that provisions of section 40(a)(ia) would apply when the amount is payable and where the expenditure is paid. The argument of the Ld.counsel for the assessee that when two views are possible the view favourable to the assessee has to be followed in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd.(Supra) is not applicable to the facts and circumstances of the present case. In this view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above Resolution that the members have decided to contribute the amount of 0.40 paise per litre to the Society on irrevocable basis. Further, the Resolution states that 'the amount of such charges accumulated at the credit of the society may be repaid to the beneficiary societies at the time of dismembership'. The use of the word may in the Resolution indicate that the member's charge on the contributions made by it is not absolute. The repayment of members' contribution on their dismembership is at the discretion of the Society. In these circumstances, in my considered view, this amount would constitute income of the Society. For this conclusion, I derive support from the decisions in the case of Siddeshwar Sahkari Sakharkarkhana Limited vs CIT(2009) 270ITR 1 (SC). In this case, the Supreme Court held that, contributed by members for 'Cane development fund' constitute income of the assessee. Accordingly, I confirm the addition of Rs. 40,71,516/-". 15. The learned Authorised Representative for the assessee pointed out that the amount was collected from the identified primary cooperative societies, which in turn was authorized by the resolution passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately identified in the names of the respective cooperative milk societies. The total collection made by the assessee under the Process, Project and Research Fund as on 31-03-2007 was Rs. 3,22,24,186.88. The assessee had furnished the list of members of primary cooperative societies from whom the said amounts were collected and the copy of the same is available at pages 14 to 17 of the paper book. The amounts were collected from the primary cooperative societies in order to provide milk testing machines and milking machines to all the members. The purpose of the creation of the said fund was that in view of the total number of primary cooperative societies, which were members of the assessee society, the estimated expenditure of the milk testing machines and milking machines could be collected by 31-03-2012. During the year under consideration, the assessee had collected a sum of Rs. 44,93,125/- and addition to the extent of Rs. 40,71,516/- was made in the hands of the assessee on the surmises that the assessee was unable to explain the source of addition of the above fund. 18. We find no merit in the order of the AO and the CIT(A) in this regard. The assessee had given the bifurc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support from the ratio laid down by the Pune Bench of the Tribunal in the case of Loknete Balasaheb Desai Sahakari Sakhar Karkhana (Supra). Accordingly, we direct the AO to delete the addition of Rs. 40,71,516/-. Ground of appeal No.2 raised by the assessee is thus allowed. 20. The issue in ground of appeal No.3 raised by the assessee is with regard to the treatment of the subsidy received from the Central Government. 21 The brief facts relating to the issue are that the assessee had received a sum of Rs. 1.35 crores as grant from Central Government. The Assessing Officer noted that the assessee had purchased bulk coolers of Rs. 2,48,11,010/- after September 2006 on which the assessee claimed depreciation @7.5%. The case of the Assessing Officer was that the cost of bulk coolers should have been reduced by the subsidy of Rs. 1.35 crores received from Central Government and the depreciation on the balance value should be allowed in the hands of the assessee. The Assessing Officer thus disallowed the excess claim of depreciation at Rs. 10,12,500/- as per the recomputation of depreciation worked out under para 10 of page 6 of the assessment order. 22. The CIT(A) was of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the said letter, both physical targets and financial targets were enlisted. The assessee was to train the farmer members in its District and also to install bulk coolers. Further laboratories had to be strengthened. The assessee in view thereof received Rs. 1.35 crores during the year under consideration which was shown as capital receipt in the hands of the assessee. 26. The issue arising in the present appeal is whether the said amount is a capital receipt in the hands of the assessee. The perusal of the terms of scheme reflects that the same was proposed for Strengthening Infrastructure for Quality and Clean Milk Production in Sangamner Taluka in Ahmednagar District of Maharashtra State, which in turn was to be implemented by the assessee society and another society known as Prakriya Sangh Ltd., Sangamner. Under the scheme, the District covered was Sangamner Tauka in Ahmednagar District, wherein total number of farmers were to be trained over a period of 3 years, i.e. 1250 farmers at a total cost of Rs. 3,12,000/-. Further, under the said scheme bulk milk cooling facilities with accessories had to be purchased and installed, i.e. 49 Nos. of 20001 Leap @6.00 lakh/unit and 51 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Extractions Ltd. Vs. ACIT (Supra) wherein it was held as under : "Even after insertion of Expln. 10 to s. 43(1) of the Act, the basic principle underlying in the decision of the apex Court in the case of P.J. Chemicals Ltd. still holds the field. Only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant would fall within the expression 'met', whereas the subsidy received merely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets. A careful perusal of 'Target 2000' scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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