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TMI Blog2023 (12) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... clubbed, heard together and disposed off in this consolidated order. 2. In both the appeals, the Revenue has raised the identical grounds of appeal and therefore, for the sake of convenience, we shall first take up the ITA No. 244/Viz/2020, AY 2012-13 as a lead appeal. ITA No. 244/Viz/2020 (AY 2012-13) 3. This appeal is filed by the Revenue against the order of the Ld. CIT(A)-3, Visakhapatnam. 4. Briefly stated the facts of the case are that the assessee filed its return of income for the AY 2012-13 admitting a total income of Rs. 90,39,400/-. The assessee is a Producer Company as defined U/s. 581E of the Companies Act, 1956 and is in the business of procuring milk from farmers through Cooperative Societies which are situated in the villages of North Costal Districts of Andhra Pradesh viz., Srikakulam, Vizianagaram, Visakhapatnam, East Godavari and West Godavari. The case was selected for scrutiny and statutory notices U/s. 143(2) and 142(1) of the Act were issued and served on the assessee along with the detailed questionnaire calling for various details in connection with the scrutiny proceedings. In response to the notices, the Authorized Representative of the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board of Management. Therefore, the differential price of Rs. 146,06,81,638/- was paid on 31/3/2012 to the milk producers. It was also submitted before the Ld. AO that the Articles of Association as well as the Companies Act, 1956 empowers the assessee-company to pay additional price / withheld price to the suppliers of milk as per the following calculation: The differential price / withheld price for the year Rs. 146,06,81,638/- Less: Amount transferred to MP & EEH & MW Trust as per the resolution passed in the general body meeting Rs. 15,00,00,315/- Balance paid to Societies directly Rs. 131,06,81,323/- Further, it was also explained to the Ld. AO that donation was given to Employee's Educational Health and Medical Welfare Trust (MPEEH & MW) in which all the Members of the assessee-company are members and beneficiaries of the Trust. The Ld. AO observed that the Revenue is in appeal before the ITAT on similar issue for the earlier assessment year. The Ld. AO further observed that out of the withheld price of Rs. 146,06,81,638/-, the assessee has paid Rs. 15,00,00,315/- to the Trust and paid the balance amount of Rs. 131,06,81,323/- to the suppliers of the milk after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a Finance Cost as claimed by the assessee. The Ld. DR also further submitted that the limited return is an appropriation of the profit and it cannot be claimed as interest. The Ld. DR relied on the following case laws: (i) Krishak Bharati Cooperative Ltd vs. CIT [2014] 45 taxmann.com 437 (Delhi); (ii) Commissioner of Income Tax-IV, Ahmedabad vs. Shree Rama Multi Tech Ltd [2018] 403 ITR 426 (SC); (iii) Commissioner of Income Tax, Bangalore vs. GMR Industries Ltd [2020] 122 taxmann.com 8 (Karnataka) The Ld. DR therefore pleaded that the order of the Ld. AO be upheld. 7. On the contrary, the Ld. Authorized Representative [Ld. AR] submitted that the assessee-company is a special category company under the Companies Act and is covered by the Part-IXA of the Companies Act, 1956. The Ld. AR referred to the provisions of section 581E(3) of the Companies Act, 1956 and stated that as per these provisions, the limited return has been paid to the Members of the assessee-company. The Ld. AR further submitted that the above provision of the Companies Act, 1956 operate on cooperative principles. It was further submitted that this section of the Companies Act, 1956 refers to Members and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital contributed. Further, it is also required to extract section 581A(c) of the Companies Act, 1956 for the sake of brevity wherein the term "limited return" has been defined. "581A(c) "limited return" means the maximum dividend as may be specified by the articles;" From the plain reading of the above definition, we are of the considered view that the limited return is nothing but a maximum dividend payable / paid to the Members of the Producer Company as authorized by the Articles of Association and hence it cannot be considered as an expenditure and claimed as expenditure. It is not a charge to the P & L Account but only an appropriation of the profit and hence the Ld. AO has rightly disallowed the same. We therefore allow the Grounds No. 1 & 2 raised by the Revenue. 9. With respect to Ground No.3, the Ld. DR relied on the order of the Ld. AO. Per contra, the Ld. AR submitted that this is has already been covered in the assessee's own case for the AY 2010-11 by the Coordinate Bench decision in ITA No. 288/Viz/2014 (AY: 2010-11), dated 27/09/2017. He therefore pleaded that the order of the Ld. CIT(A) be upheld. Countering the arguments of the Ld. AR, the Ld. DR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producers who were also Members of the assessee-company. We also find that these gifts are made to the Members who were also suppliers of milk and are also shareholders of the assessee-company. Hence we are of the considered view that these expenditures are in the nature of business promotion expenditure which shall be allowed as deduction U/s. 37 of the Act. We therefore find no infirmity in the order of the Ld. CIT(A) on this ground and hence no interference is required. Thus, the Ground No.4 raised by the Revenue is dismissed. 13. Ground No.5 is general in nature and needs no adjudication. 14. In the result, appeal of the Revenue is partly allowed for statistical purposes. ITA NO. 243/Viz/2020 (AY: 2011-12) 15. This appeal filed by the Revenue against the order of the Ld. CIT(A)-3, Visakhapatnam. 16. The Revenue has raised the following grounds in its appeal: "1. The Ld. CIT(A) erred in deleting the disallowance made by the Ld. AO towards general body expenses based on business expediency wherein distribution of gifts are not encouraged in AGM to curb corporate misdoing and is against established practice of corporate governance. 2. The Ld. CIT(A) erred in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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