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The ACIT, Circle-6, Jaipur Versus M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd.

2016 (6) TMI 734 - ITAT JAIPUR

Disallowance of contribution made to Trust - whether an allowable business expenditure? - proof of direct business nexus - Held that:- Similar orders were passed by the Tribunal for the assessment year 2009- 10 and 2010-11. There is no change of circumstances brought to our notice after passing of the orders referred hereinabove or no change in law has been brought to our notice by either of parties. We have heard the rival contentions and perused the material available on record. The issue in q .....

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eposited by the assessee with the Provident fund on the next day immediately it was due. The Provident fund Act by which the deposit of the contribution by the assessee within the grace period of 5 days from the date when it becomes due. The ld. CIT(A) has given the finding that the payments of ESI & PF were made before the due date of filing of income tax return. In light of decision of Hon’ble Rajasthan High Court in the case of CIT vs. State Bank of Bikaner and Jaipur and Jaipur Vidhyut Vitra .....

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the revenue has taken following grounds of appeal: (i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the disallowance of contribution made to Sparsh Trust of ₹ 1,23,63,091/- made by the AO without appreciating the fact that assessee failed to prove direct business nexus and it is not an allowance expenditure u/s 37(1). (ii) (a) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in dele .....

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e is a co-operative society engaged in the business of procurement of milk, processing the same to prepare its product and sale thereof. The milk is procured at village level through primary societies. To obtain better quality of milk as well as milk in good quantity, assessee society is providing various facilities to the milk animal owners like vaccination of animals, medical treatment of animals, emergency services etc. Earlier all these services were provided by the assessee himself but feel .....

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/- to this trust during the year under consideration. 2.1 The AO disallowed the amount of contribution of ₹ 1,23,63,091/- by stating that the trust is registered u/s 12AA and has been granted certificate u/s 80G, therefore, any payment made by assessee to this trust falls within the definition of donation & cannot be treated as an expenditure u/s 37(1). The AO stated that on one side, assessee claims that it simply makes contribution for reimbursing the expenses incurred by the trust o .....

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us, how a contribution for development of cattle has nexus with the business of the assessee. Therefore, the contribution cannot be held to be incurred wholly and exclusively for the purpose of the business. 2.2 At the outset, the ld AR submitted that the issue is covered in favour of the assessee by orders of Hon ble ITAT in assessee s own case for AY 2008-09, 2009-10 and 2010-11 respectively. 2.3 The ld AR further submitted that the various observations made by AO for disallowing the contribut .....

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Karnataka High Court in case of Mysore Kirloskar Ltd. Vs. CIT 166 ITR 836 & Hon ble Mumbai Tribunal in case of Hindustan Petroleum Corporation Ltd. Vs. DCIT 96 ITD 186. Therefore, the disallowance of contribution by the AO simply on the ground that the trust is registered u/s 12A & granted certificate u/s 80G & thus any payment made by assessee to the trust falls within the definition of donation & cannot be treated as an expenditure u/s 37(1) is misconceived. It is a settled la .....

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see created the Trust through whom these expenses are incurred. The Profit & Loss account of the Trust is maintained, copy of which is placed in the compilation and it is seen that whatever amount has been given by assessee or reimbursed by assessee, that has been spent by the trust on the animals to get better quality and quantity of milk. The assessee has contributed @ ₹ 0.05 per litre of milk procured to its trust for the purpose of incurring expenditure for better quality of milk. .....

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ture in providing vaternity care, regular treatment, emergency care, preventive care, breed improvement through A.I. uninterrupted supply of nutritional supplement etc. Therefore, in our considered view, contribution made by assessee to this trust is an expenditure incurred wholly and exclusively for the purpose of business which is allowable u/s 37(1). From the income and expenditure account of the trust, it can be noted that it has incurred an expenditure in pursuance of its objectives and aft .....

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diture. The Id. CIT (A) has disallowed the claim of assessee by observing that since assessee has made donation u/s 80G and, therefore, deduction u/s 80G is allowable whereas the facts are otherwise. The assessee has not made any donation but has contributed to the trust for a specific purpose i.e. to incur the expenditure to get better milk from milk animal. Various case laws relied upon by the assessee are in support of the case of the assessee. We are not getting into details in respect of th .....

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