TMI Blog2017 (7) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... Parlour at 10% as against 100% depreciation claimed by the Appellant - HELD THAT:- Matter was decided in favour of assessee by the Hon'ble ITAT in assessee's own case for A.Y.2002-03 [ 2010 (3) TMI 1246 - ITAT AHMEDABAD] and now the same has been confirmed by the Hon'ble Gujarat High Court in assesses own case [ 2014 (2) TMI 31 - GUJARAT HIGH COURT] as held hats milk dairy procure land on lease basis and constructed temporary sheds for sale of milk products and Hon'ble High Court has also cited similar decision in the case of CIT vs. TVS Lean Logistics Ltd. [ 2007 (6) TMI 44 - HIGH COURT, MADRAS] and held that construction of building on a leasehold land resulted into assessee only a business advantage and the assessee cannot be stated to have acquired any capital asset. Disallowance of expenditure of Director's visit to various Dairy plants - AO disallowed the expenditure being incurred by the Directors of this co-operative society on the ground that they are not incurred for the purpose of business - CIT (A) confirmed the disallowance in his order holding that Directors visited the plant at Jammu Kashmir from which the Appellant is getting the Pouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as revenue in nature. Particularly relying on the decision of CIT vs. Saravana Spinning Mills Limited [ 2007 (8) TMI 16 - SUPREME COURT] . The Assessee's appeal, accordingly allowed considering the expenditure of ₹ 87 lakhs as revenue Allowable revenue expenditure - Expenditure on Dairy Development are wholly and exclusively for the purpose of business and therefore are allowable as revenue expenditure - various expenditures incurred in form of Co. Op. Development expenses are not at all of capital in nature or of any benefit enduring nature. The same are incurred in the normal course of business activities and in furtherance of milk and Amul products. The expenditures are incurred wholly and exclusively for the purpose of business - Assessee appeal allowed. - MA No. 07, 08, 09, 117, 118, 119/Ahd/2017 in ITA No.3037, 2968/Ahd/2010, 1119, 1900, 1977/Ahd/2012, 924/Ahd/2013 - - - Dated:- 5-7-2017 - Shri N.K. Billaiya And Shri Mahavir Prasad, JJ. Appellant by: Shri Sunil Talati, A.R. Respondent by: Shri, Mudit Nagpal, Sr. D.R. ORDER Shri Mahavir Prasad, These six Misc. applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned CIT(A) has erred in not appreciating the fact and circumstances of the case with regard to the said claim that the appellant had received the insurance claim of ₹ 72,83,686/- and in the event the expenditure of ₹ 87,00,000/- is capitalized then the amount of insurance claim on the very same items, though credited and showed as income in the subsequent year be reduced from the treatment of the capital expenditure. It is therefore prayed that in the event ₹ 87,00,000/- are not allowed as revenue expenditure, then additional cost of plant enhanced to ₹ 87,00,000/- be reduced by ₹ 72,83,686/- and the net addition of only ₹ 14,16,314/- only be capitalized. The Appellant argued in length on the basis of Paper Book written submission filed, before ITAT and accordingly this ground is allowed but no specific finding is given in the order. Ground No.5 The learned CIT(A) has erred in confirming the amount received of ₹ 237 lakhs being Security deposits written back as income and not as capital receipt. It is submitted that on the facts and circumstances of the case Security Deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hd/2012 and ITA No.924/Ahd/2013 for A.Y.2005-06, 2007-08, 2008-09 2009-10 have been referred by the Department respectively against the order of the Commissioner of Income Tax(A). These all eight appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. Learned Authorized Representative (AR) Shri Sunil H. Talati has stated in the Miscellaneous Application for rectifying/correcting certain mistakes, which have been unintentionally crept in the order. The assessee had filed the Misc. Applications for the mistakes that crept in its Appeals and subsequently also filed another MA for certain mistakes that crept in the Appeals filed by the Revenue. Therefore, all the Misc. Applications have been heard together and are dealt with rectifying the errors that remained in the said order. After careful hearing of both the parties and after perusing the original grounds for Appeal and detailed submission made at the time of hearing along with the Paper Book, we feel that the entire order is required to be cancelled for all the four Assessment Years. Therefore, the order dated 30th September, 2016 for all the four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities of procuring, producing milk, milk products and pouches. It is submitted that the expenditure on Directors' visit of ₹ 2,17,000/- being wholly and exclusively incurred for the purpose of business, the same be allowed. 5. The learned C.I.T. (Appeals) erred both in law and on facts in confirming the disallowance of ₹ 51,800/- u/s. 14A of the I.T. Act, 1961. In view of the submission made that there were no expenses incurred to earn any exempt dividend, the disallowance of ₹ 51,800/- ought to have been deleted. It is submitted that the Assessing Officer has not been able to prove any nexus between money borrowed on interest and in turn used for exempt income. It is submitted that investment being old in nature, made out of its own fund, and the assessee is in a position to prove the nexus, the disallowance is totally uncalled for. It is therefore submitted that the addition be deleted. 6. The learned C.I.T. (Appeals) has erred in confirming the interest charged u/s. 234 of the Income Tax Act. It is submitted that on the facts and circumstances of the case interest u/s. 234B is not at all chargeable to the appellant and intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milk and milk products business in organized manner, it was feared that the milk producers at village level are likely to be misdirected by the private entrepreneurs and thereby the milk producers would be tempted to divert supply of milk to these private parties and it would result into reduction in quantum of the procurement of milk and affect the business of the Federation adversely. iii. Federation started the cooperative development programme in the earlier ears also and developed in respect of mild cooperative, it is financial involvement of members, development activities in respect of fodder, milk production, enhancement, scientific Animal husbandry practices and overall structural development of Anand pattern diary cooperative by direct participation of the member based on international recognized principles of cooperation. During the years, assessee/appellant have evolved following activities, in respect of cooperative movement. They have implemented Internal Consultant Development (ICD) intervention for developing self leadership among member producers and thereby enabling them to manage their dairy business efficiently leading to their overa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 150 lakhs. The Assessee is in Appeal for disallowance and submitted vehemently that all the expenditure of ₹ 334.48 lakhs are fully and exclusively expenditure in the nature of Dairy Development Expenditure. It was argued that all the expenditure incurred for the upliftment and development of the dairy incurred in the normal course of business activities and in furtherance of cooperative movements to procure and sell more milk, is part and parcel of the business expenditure. The reliance was placed on the decision of Ahmedabad Bench ITAT in the case of Valsad District Co-op. Society, wherein the Assessee is claimed of incurring expenditure on dairy development expenditures were allowed in Appeal No.3356/Ahd/2008. Copy of the said decision is for A.Y.2005-06 is filed. The A.R. further submitted that coming to the specific disallowance of ₹ 150 lakhs being assistance to JKMPC Ltd. the crux of the arguments of the learned A.R. was that in September 2012-13, Hon'ble Chief Minister of Jammu Kashmir late Shri Mufti Mohammed Sayed visited Anand along with various Senior Ministers and requested the assessee that Anand type Dairy Co-operative infrastructure be established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UL Pouch milk in Jammu and Srinagar area. It was also submitted that such kind of expenditure were regularly incurred by the Federation and similar expenditure in immediate 3 preceding years were incurred and allowed. The crux of the submission of the Appellant was that such expenditures are wholly and exclusively for the purpose of business, it does not give any enduring benefit. Such kind of expenditures were incurred in earlier years also when diaries were set up in Maharashtra and in other States in 1994-95 and earlier Assessment Years and the same have been consistently allowed. It was also argued that such expenditure debited have been considered correctly as revenue expenditure by a renowned firm of Chartered Accountant, which audited the accounts of the society and that there are no objections from the Registrar of Co-operative Society also for treating such expenditure as revenue. Arguing the necessity of such expenditure from law point of view it was submitted that development of co-operative movement for which the Appellant organization which is marketing Amul milk products was Gujarat but across the country. Such expenditure incurred voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the considered view that the expenditure incurred by way of assistance to Jammu Kashmir Milk Producers' Co-operative Limited are not at all of capital in nature or of any benefit enduring nature. The same are incurred in the normal course of business activities and in furtherance of milk and Amul products. The expenditures are incurred wholly and exclusively for the purpose of business. The decision cited above in case of Valsad District Co.op. Society in the ratio decided therein is fully applicable to Appellant's case, we therefore, hold that the expenditure incurred of ₹ 150 lakhs being the expenditure incurred as assistance to Jammu Kashmir Milk Producers' Co-operative Limited are of revenue in nature and same be allowed. This ground of appeal is accordingly allowed. The Third Ground of Appeal is with regard to granting depreciation of Amul Parlour at 10% as against 100% depreciation claimed by the Appellant. So far as the depreciation is concerned, AO allowed only 10% depreciation as against 100% on Amul Parlours. In this case, matter was decided in favour of assesse by the Hon'ble ITAT in assessee's own case for A.Y.2002-03 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer and the learned CIT (Appeals). We have carefully gone through the Assessment Order, order of learned CIT (Appeals) and the submissions made by the learned A.R. Once we have held that the expenditure incurred by the Assessee for dairy development incurred to assist JKMPC Ltd. is revenue expenditure, then the expenditure incurred by the Directors of the cooperative society are also akin to the business of the society. There is no element of any capital expenditure incurred therein. The expenditure incurred of ₹ 2,17,000/- accordingly are allowed as revenue expenditure. This ground of Appeal is accordingly allowed. The fifth ground of Appeal being addition made of ₹ 51,800/- under Section 14A is not pressed by the appellant looking to the smallness of amount involved there in and is therefore dismissed accordingly. The sixth ground of Appeal being interest charged under Section 234B, we held that interest has to be charged under Section 234B. However, the same shall be charged after giving effect to this order. This ground is accordingly, partly allowed. Thus, the appeal for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submissions made by the A.R. we hold that the expenditure incurred on Amul Yatra is incurred by the appellant for business purpose, the same is part and parcel of the dairy development expenditure incurred in normal course of business. In view of this, the expenditure of ₹ 14.66 lakh incurred by the appellant are allowable expenditure. This ground of Appeal of Revenue is dismissed. In the result the Appeal of the Assessee is partly allowed and Appeal of the Revenue is dismissed. Assessment Years 2007-08 We now come to the Appeals filed by Assessee in Appeal No.3037/Ahd/2010 for the Assessment Years 2007-08. 1. The learned C.I.T. (Appeals) erred both in law and on facts in confirming the disallowance of ₹ 3,64,32,000/- being amount transferred to reserve fund u/s.67 of Gujarat Co.op. Societies Act. On the facts of the case and in law, the deduction of the aforesaid amount ought to have been given. It be so held now and the said amount be allowed as claimed. 2. The learned C.I.T. (Appeals) further erred both in law and on facts in confirming the action of the Assessing Officer allowing only 10% depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff and crediting Security deposits as no more payable cannot be treated as income. It is submitted that the deposits so written off of ₹ 237 lakhs as not payable is capital receipt and not an income and the same be allowed accordingly. Without prejudice to the above, the learned C.I.T. (Appeals) has further enhanced the addition by not following the appropriate procedure of issuing appropriate notice and by making a further addition of ₹ 239.07 lakhs being security deposits written off in the subsequent year. It is submitted that the appellant is following Mercantile system of accounting duly audited and writing off of other security deposits of ₹ 239.07 lakhs was not at all an issue for the year under appeal, but is to be considered and decided in subsequent Asst. Year 2008-09. In any event the credit of amount of deposits of ₹ 239.07 lakhs in Profit Loss Account and its treatment as income or otherwise is not at all an item of income in this year and it cannot be added in the hands of the income of the appellant in the Asst. Year 2007-08. The action of learned C.I.T,(Appeals) directing the Assessing Officer to enhance the income further by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in nature. The A.O. found that payment of ₹ 87,00,000/- was made by the Appellant to GEA Processing Engineering India Ltd. and the bill raised described the work as design, supply, irrigation and commissioning of 100 MTDP Milk Powder Plant . The A.O. observed that along with the bill there are other items of purchases and therefore took a view that it is not revenue or repairing expenditure and held that a new asset was created giving benefit of enduring nature. After allowing the depreciation thereon the A.O. made addition of ₹ 73,95,000/-. The learned CIT (Appeals) confirmed the same view of the A.O. The Appellant is now in Appeal. The learned A.R. vehemently argued that from the copy of the appeal filed from the paper-book Page 59 it can be seen that various parts which were imported as well as indigenous were supplied by GEA Processing Engineering India Limited. It was the contention of the appellant that there was heavy damage to the plant and it was repaired by taking corrective actions. It was argued that this repair was done to a big plant which was of ₹ 50 crores already in existence and incurring repair and replacing some parts of ₹ 87 lakh is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged under Section 234B. However, the same shall be charged after giving effect to this order. This ground is accordingly, partly allowed. Thus, the appeal for the assessee for A.Y. 2007-08 is partly allowed. We now come to the Appeal filed by the Revenue in ITAT No.2968/Ahd/2010 for Assessment Year 2007-08, wherein the Revenue has taken following grounds:- On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the additional deprecation of ₹ 54,00,000/- overlooking the provision of Section 32(1)(iia) of the Act, and also the fact that no new identifiable product or thing had come into existence. The only ground of appeal taken by the Revenue is that CIT(A) has erred in deleting the additional depreciation of ₹ 54,00,000/- overlooking the provision of Sec. 32(1)(iia) of the Act. This matter is decided in favour of the Assessee by Hon'ble ITAT in Assessee's own case in A.Y.2006-07 in ITA No.43/Ahd/2010 on Page 26, Para 23 of the ITAT Order. The copy of the said order is placed on record. In view of the same, Assessee is entitled to the additional depreciation of ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as the Second Ground is concerned, the A.O. allowed only 10% depreciation as against 100% depreciation claimed by the Appellant on Amul Parlor. So far as the depreciation is concerned, AO allowed only 10% depreciation as against 100% on Amul Parlours. In this case, matter was decided in favour of assessee by the Hon'ble ITAT in assessee's own case for A.Y.2002-03 in ITA No.475/Ahd/2006 and now eth same has been confirmed by the Hon'ble Gujarat High Court in assesses own case in Tax Appeal No.759 of 2013, dated 23/01/2014. In this case, Hon'ble High Court has held hats milk dairy procure land on lease basis and constructed temporary sheds for sale of milk products and Hon'ble High Court has also cited similar decision in the case of CIT vs. TVS Lean Logistics Ltd. Reported in (2007) 293 ITR 432 (Mad) and held that construction of building on a leasehold land resulted into assessee only a business advantage and the assessee cannot be stated to have acquired any capital asset. Therefore in view of the above judgments, appeal of the assessee is allowed and Departmental appeal is dismissed. Therefore this ground of appeal is allowed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the expenditure of ₹ 616.36 lakhs are allowed as revenue expenditure, the Appeal of the Revenue is dismissed accordingly. The second ground of Revenue is with regard to additional depreciation of ₹ 10.99 lakhs. As held by us in Assessee's own Appeal for A.Y. 2007-08 by us as well as in earlier appeal of the Assessee in A.Y 2006-07 we held that appellant is allowed for additional depreciation of ₹ 10.99 lakhs. The Appeal of the Revenue is accordingly dismissed. Asst. Year: 2009-10 Now we take up the appeal filed Assessee for Asst Year 2009-10 in ITA No.597/Ahd/2013 for Assessment Year 2009-10, the Revenue has taken following grounds : 1. CIT(A) erred in both law and on facts in confirming the disallowance of ₹ 5,40,09,134/- being amount transferred to reserve fund u/s. 67 of Gujarat Co-op, societies Act. 2. CIT(A) has erred both in law and on facts in confirming the action of A.O. allowing only 10% depreciation as against 100% depreciation on Amul Parlours and making disallowance of ₹ 89,38,131/- connected with the ordinary course business and the Co. op. Development Exp. are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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