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TMI Blog2016 (1) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of Nil after set off of unabsorbed losses. While completing assessment the deduction on account of Area Development Fund at Rs. 6,95,775/- was not allowed relying on the decision in the cases of CIT (UP-II) Vs. Bazpur Cooperative Sugar Factory. In appeal the CIT(A) upheld the disallowance. The Tribunal subsequently restored the issue to the file of the AO to decide the issue denovo after considering the nature of receipts and expenditure as directed by Hon'ble Supreme Court in the case of Siddeshwar SSK Ltd. Vs. CIT reported in 270 ITR 1. The AO accordingly issued notice to the assessee and after considering the submissions concluded that the asessee Karkhana has not incurred any expenditure out of the Area Development Fund. He accordingly did not allow any deduction on account of Area Development Fund. The CIT(A) vide his order dated 11-01- 2009 upheld the view taken by the AO. On further appeal the Tribunal following the decision in the case of Loknete Balasaheb Desai Sahakari Sakhar Karkhana Ltd. Vs. DCIT reported in 148 ITD 0372 (Pune) directed the AO to decide the issue after getting answers to the following questions : "1. What was the exact nature of the scheme pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in the case of Loknete Balasaheb Desai Sahakari Sakhar Karkhana Ltd. Vs. DCIT reported in 148 ITD 0372 (Pune) wherein it has been held that amount collected under the Area Development Fund is not trading receipt in the hands of the assessee when such fund is impressed with obligation to spend same for specified purposes. He accordingly submitted that this being a covered matter the ground raised by the assessee should be allowed. 8. The Ld. Departmental Representative on the other hand fairly conceded that the Tribunal has decided the issue in favour of the assessee by the decision of the Tribunal. 9. We have considered the arguments made by both the sides. We find an indentical issue had come up before the Tribunal in the case of Loknete Balasaheb Desai Sahakari Sakhar Karkhana Ltd. (Supra). The Tribunal after considering the various submissions made by both the sides held that the amount collected under the Area Development Fund is not trading receipt in the hands of the assessee when such fund is impressed with obligation to spend the same for specified purposes. Accordingly, the Tribunal directed the AO to exclude fully the amount included towards Area Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minor Irrigation and KT Weirs, Including in partnership or otherwise with the Government (Note For KT Weirs follow order of the Government issued by Irrigation Dept. Sr. No. 1088/636/88/LI-1 dated 31/7/1988 and orders issued from time to time by that Dept.) (c). Educational or Cultural Programmes, Medical Assistance, Social Security Programmes and Sanatoriums. (d). Dairy and Poultry Farming (e). Financial assistance for Drought Relief, Natural Calamities and various Economic Development Programmes implemented by Central and State Governments as per their policies. (f). For purposes (a) to (e) above but outside area of operation and financial assistance for other specified programmes. (g. Programmes for benefit of Members. 16. The Sugar Factories were directed to comply the following terms and conditions: (a). Members should be informed in General Meeting as to how and for what purposes the deductions are planned to be used and approval for the meeting be obtained. (b). The funds so collected shall be spent by the Board of Directors as per the policy approved in the General Meeting. For spending money personally for an individual, prior permission of Director of Suga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made towards "ADF" by the assessee sugar factory is impressed with the specific obligation or assessee hold this money as a trustee as held in the case of Bijlee Cotton Mills (P.) Ltd. (supra)? Our answer is yes. In this case, even if initially it was by way of discretion the Sugar Cooperative 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 before us 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). The assessee has to submit the report every year in respect of the collection and utilization of the amount under the ADF to the Government. Nowhere, it is the case of the Revenue that any money is diverted by the assessee sugar factory for any other purpose other than approved in the AGM of the members. Merely because the amount collected is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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