TMI Blog2020 (12) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... having a feeling of supplying milk to their own company. The assessee company will be able to procure milk from the milk producers continuously. Therefore, allotment of equity shares to the milk producers for the above reason has to be considered as business expediency. So far as case-laws relied on by the Assessing Officer are concerned, they have no relevancy to the facts and circumstances of the case. Keeping in view of the above, we find no infirmity in the order passed by the ld. CIT(A) and uphold the same - This appeal filed by the Revenue is dismissed. - I.T.A. No. 154/VIZ/2020 - - - Dated:- 26-11-2020 - V. Durga Rao, Member (J) And D. S. Sunder Singh, Member (A) For the Respondents : D.K. Sonawal, CIT-DR ORDER V. Durga Rao, Member (J) 1. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-3, Visakhapatnam, dated 29/01/2020 for the Assessment Year 2017-18. 2. In this appeal there is a delay of 76 days. The department has filed a petition for condonation of delay and submitted that office was under lockdown due to Covid-19, therefore there is a delay of 76 days. We find that there is a sufficient cause t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the amounts not actually paid but debited to profit loss account only to be capitalized and thus he opined that the assessee's case is a clear case of employing a device to increase its capital without paying taxes due to exchequer. The AO has calculated the amount of ₹ 22,90,84,000/- debited to profit loss account which was not actually paid to the milk suppliers and taken to the capital is not allowable and accordingly the said amount was disallowed and added to the total income of the assessee. 5. On appeal, ld. CIT(A) by following the decision in assessee's own case for the A.Y. 2010-11 in ITA No. 288/VIZ/2014 dated 27/09/2017 directed the AO to delete the addition. For the sake of convenience, the relevant portion of the order is extracted as under:- 9.1) I have carefully considered the written submissions filed by the appellant and gone through the ITAT's order relied upon by it for the assessment year 2010-11 in its own case in ITA No. 288/VIZ/2014, dated 27/09/2019 and found that the issue involved in the asst year under consideration, i.e. A.Y. 2017-18 and the A.Y. 2010-11 in respected of which the ITAT passed its order is one and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal is squarely covered by the decision of the coordinate bench of the tribunal in assessee's own case for the A.Y. 2010-11 in ITA No. 288/VIZ/2014 by order dated 27/09/2017 wherein the Tribunal has considered the issue in detail and directed the AO to delete the addition by upholding the order of the ld. CIT(A). The relevant portion of the order is extracted as under:- 31. We have heard both the sides, perused the material available on record and orders of the authorities below. 32. The assessee company M/s. Vijaya Visakha Milk Producers Company Ltd. incorporated under the Companies Act, 1956 as a producers company. The main object of the company is to procure milk from the farmers through the societies situated in villages of Srikakulam, Vizianagaram, Visakhapatnam, East Godavari and West Godavari Districts of Andhra Pradesh. The suppliers are the members of the assessee-company, from which milk is being procured every day. The company has been working on the cooperative principles even after it was registered under the Companies Act as Producer Company. In the assessment order, the Assessing Officer has noted that the assessee procures buffalo and cow milk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talized and the amount of ₹ 5,72,83,783/- was taken as contribution to the trust. Accordingly, the Assessing Officer took the view that the amount actually paid by the assessee can be held as made on commercial line to ensure claimed supplies that thereby aid in furthering of the business of the assessee, the amounts not actually paid but debited to profit loss account to be capitalized or contributed cannot said to have been based on commercial line. The Assessing Officer also took a view that the assessee is employing device to increase its capital without paying taxes which are due to exchequer. The Assessing Officer by considering the decisions of the Shahabad Cooperative Sugar Mills Ltd. Vs. CIT (226 ITR 582) and Budhewal Cooperative Sugar Mills Ltd. Vs. CIT (316 ITR 461) and held that the amount of ₹ 96,60,12,828/- which is debited to the profit loss account, but not actually paid to the milk suppliers, taken to capital contribution and also contribution to the trust, which is not allowable expenditure hence, liable to the disallowed. Accordingly, the addition of ₹ 46,96,02,293/- was added to the total income of the assessee. 33. On appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that there is no infirmity in the assessee's practice of procuring milk through initial payment and withheld price, and such practice is consistent with its Articles of Association and relevant statutory provisions governing the producer company. The payment of withheld price is also consistent with the principles of cooperative societies. The ld. CIT(A) has also considered that the equity shares allotted to the members, contribution to the M/s. Milk Producers Employees Educational Health and Medical Welfare Trust, which provides educational and medical facilities to the members and employees of the assessee company and it is approved under section 12A of the Act and it cannot be said that the above payments made by the assessee from the withheld price not in commercial lines as decided by the Assessing Officer is not correct. The ld. CIT(A) has further observed that the assessee company has allotted the shares from the withheld price to the tune of ₹ 41,20,66,000/-. Copy of Form No. 2 filed with Registrar for such allotment was filed and payment to the contribution made to the Trust of ₹ 5,72,83,783/-, bank statement also filed, which shows receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. 34. Insofar as contribution paid to the trust is concerned, as per Memorandum of Association of Companies Act, it is under obligation of the assessee to establish schools, colleges, training centres hospitals. Accordingly, the assessee has already established hospital and educational institutions and out of withheld price some portion is paid to the trust and same is received by the trust. Nowhere the Assessing Officer doubted the transaction. The only doubt expressed by the Assessing Officer is that the above payments are only made to avoid taxes. In our opinion, the assessee producer company running in the lines of mutuality basis for the benefit of the members, in the interest of the members instead of payment cash, some shares are allowed and established educational institutions and also hospitals for treatment of the members of the milk suppliers and certain payments made out of withheld price as per Companies Act and also Articles of Association followed by Board resolution. The Assessing Officer is not correct in saying that the assessee adopted device for avoidance of tax. We further observe that once the milk suppliers having shares in the company, they will be h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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