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TMI Blog2023 (3) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment of Farm Forestry and other social welfare activities. ii. Trading of fertilizer through various societies/agencies. 3. The Assessing Officer from the Profit & Loss account submitted by the Assessee, noted that the Assessee has claimed expenses to the tune of Rs. 6,28,66,118/- under the head expenses on "Social & Rural Development Programme", which the Assessee was claiming under the head Project Development in earlier years. Therefore, vide note sheet dated 9.12.2016, the Assessee was asked to explain social & Rural Development Programmes (Project Development) and to file the necessary evidence in support of these expenses being claimed as Revenue Expenses in nature in the return. 4. The Assessee filed its reply dated 13.12.2016, which was not found acceptable by the AO, who by perusing/reproducing the provisions of section 37(1) of the Act held that the project expenses of 6,28,66,118/- does not fulfill the condition of Section 37(1) and cannot be treated as revenue expenditure by concluding as under: "The other issue in the case is as to whether the expenditure is laid out wholly and exclusively for the purpose of business. The word "exclusively" refers to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,118/- does not fulfill the condition of section 37(1) and cannot be treated as Revenue Expenditure. The expenses should be claimed by assessee below the lone and should not be charged to P&L A/c. Accordingly, the expenses of Rs.6,28,66,118/- is disallowed and will be added in the income of assessee U/s 37(1) of the Income-tax Act, 1961." 5. The Assessee being aggrieved, also challenged this addition before learned Commissioner. 6. The learned Commissioner by relying upon various orders passed by its predecessor, as well as by the Hon'ble Tribunal in Assessee's own cases for A.Y. 2008-09 & 2009-10, allowed the claim of the Assessee by considering the amount of Rs. 6,28,66,118/- as "revenue in nature" by holding as under: "5.2a It is gathered from the appellant's submissions at para 4 above that it's object is to carry out the business of social development activities for the benefit of the rural poor by way of forestry development, water harvesting, employment (job opportunities) creation, SHGs for inculcating domestic savings, family planning projects, etc. Basically, it undertakes the programme implementation work of NGOs, Central and State Governments aimed at benefiting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011 - CIT (A)'s order for AY 2012-13 (Appeal No. 67/15-16) dated 28/10/2016 it is observed that the disallowance made on this issue in the relevant AYs has been deleted. Further, it is observed that the facts of the case therein are similar to those of the present case. In fact, the ITAT has upheld the order of the CIT(A) for AY 2008-09 on two grounds - no capital expenses where claimed as deduction by the appellant and such expenditures were accepted in earlier years. It is mentioned, inter alia, "...On above consideration, we find that the Assessing Officer has treated the claimed expenditure as capital in nature keeping in mind that the purpose of business of the assessee society is trading of fertilizers, which is not correct rather the assets created namely forest on waste land, check dams, ponds etc. became the property of the villages managed through village community and the assessee society only provided expertise and funding to them. Considering material aspects of the case, we are of the view that the Ld. CIT(A) has rightly hold that the Assessing Officer was not correct in holding that expenditure were not incurred wholly and exclusively for the purpose of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial and economic upliftment of the rural poor, construct water reservoirs etc. It is established for this purpose and receives grants and donations from third parties with the said objective and purpose. M/s. Indian Farmers Fertilizer Co-operative Ltd. had sold and supplied fertilizer that was marketed/sold by the respondent- assessee to earn profit/income, because the respondent-assessee was engaged in social and economic development activities. Association and business relationship with M/s. Indian Farmers Fertilizer Cooperative Ltd. was predicated and connected on the respondent-assessee performing and undertaking the social-welfare economic activities. Grants received from government and foreign agencies were to be utilized for the specific purpose i.e. the object and purpose of social and economic upliftment etc. If the respondent assessee was not engaged in and had not undertaken the aforesaid activities, it would not have received the grants and would not have undertaken sale and marketing of fertilizers. The respondent-assessee was therefore required to incur the said expenditure, in order to ran, operate and continue its business. 14. We perceive that there is a degree ..... X X X X Extracts X X X X X X X X Extracts X X X X
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