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2016 (1) TMI 572

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..... on account of collection towards Area Development Fund amounting to ₹ 6,95,775/- in A.Y. 1992-93 and ₹ 16,44,743/- in A.Y. 1994-95. 3. First we take up ITA No.1021/PN/2014 for A.Y. 1992-93 as the lead case. Facts of the case, in brief, are that original assessment for the impugned assessment year was completed u/s.143(3) on 30-09-1994 on total income of Nil after set off of unabsorbed losses. While completing assessment the deduction on account of Area Development Fund at ₹ 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) vi .....

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..... .CIT(A) upheld the action of the AO in taxing the Area Development Fund collected by the assessee amounting to ₹ 6,95,775/- during the impugned assessment year and ₹ 16,44,743/- for A.Y. 1994-95. 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 7. The Ld. Counsel for the assessee at the outset filed a copy of the decision of the Pune Bench 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 Karkha .....

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..... irected that the deductions made towards the ADF are to be generally used in accordance to the guidelines from time to time issued by National Cooperative Development Corporation (NCDC), New Delhi as well as by the Govt. for following purposes as per priority decided by the Board of Directors of the factory: (a). Agricultural Development and Cane Development. (b). Water Supply and Irrigation, 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 .....

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..... e have to keep in mind that in respect of the nature of this fund the Hon'ble Supreme Court has already observed 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. 18. Now the question before us is whether this collection 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 proj .....

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