TMI Blog2013 (2) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the CIT(A) in confirming the disallowance of expenditure claimed by the assessee to the tune of ₹ 7,38,36,280/-. 3. The brief facts of the case are that the assessee is an Apex Cooperative bank. It filed its return of income and during the assessment proceeding u/s 143(3), the AO examined the assessee s claim of expenditure towards different funds created from the surplus profits/ appropriation of profits. He found that the assessee has claimed the following expenditure on payment basis : a) PACS/DCCB Development fund - Rs.6,13,74,622/- b) Co-operative Education fund - Rs.47,77,530/- c) Farmers Welfare Fund - Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it is lawful for the bank to engage and subject to the guidelines issued by the RBI and NABRAD from time to time. He observed that these objectives are apart from the other objectives which include the obligation of the bank towards DCC banks, other member banks and the farmer society as a whole. Therefore, he came to the conclusion that the banking business of the assessee is separate from the other objectives of the bank and, therefore, the main business of the assessee is only banking business and the expenditure towards other objectives cannot be said to be wholly and exclusively for the assessee s business of banking to be allowable u/s 37 of the Incometax Act. He further observed that as per the By-laws of the company, the rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the jurisdictional High Court in the case of CIT Vs. Pandavapura Sahakara Sakkare Karkhane Ltd. reported in 174 ITR 475, wherein Hon ble High Court has held that contribution to the education fund is diversion of profits at source on account of overriding liability and, therefore, is liable for deduction. 7. As regards the other contributions, he submitted that the assessee, being a Apex Bank for all the co-operative banks in Karnataka, is under an obligation to make the respective contributions under Bye-laws of the society and, therefore, these contributions also are covered by the statutory obligation and the issue is also covered by the decision of the Hon ble High Court of Karnataka in the case of Pandavapura Sahakara Sakkare Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the society, the contribution to cooperative education fund is a statutory obligation and, therefore, diversion of income at source by overriding title, we hold that disallowance is not justified and the ground of appeal of the asseseee relating to this disallowance is allowed. 10. As far as the contributions of the assessee to the other funds are concerned, we find that that the objectives of the assessee bank are to assist the other co-operative banks under it, and for this purpose, have to make contributions out of its net profits. It is the contention of the assessee that net profit of the assessee is computed and taxes are paid thereon and, thereafter, the reserves are created out of the net profit which has already suffered th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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