Tribunal Decision on Reserve Fund, Education Fund, Depreciation, Donation, Costs

The Tribunal upheld the addition of Rs. 1,81,38,000/- to the Reserve Fund, disallowed Rs. 2,00,000/- contribution to the Education Fund, allowed Rs. 1,43,15,579/- depreciation on Plant and Machinery, dismissed Rs. 10,62,107/- depreciation on temporary structures, disallowed Rs. 4,48,04,410/- u/s 80G for donation to Amul Relief Trust, and remanded the treatment of costs not related to export as indirect costs u/s 80HHC for fresh consideration. Interest u/s 234B and 234D was confirmed to be charged. The appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Addition of Rs. 1,81,38,000/- transferred to Reserve Fund.
2. Disallowance of Rs. 2,00,000/- contribution to Education Fund.
3. Disallowance of Rs. 1,43,15,579/- depreciation on Plant and Machinery.
4. Disallowance of Rs. 10,62,107/- depreciation on temporary structures.
5. Disallowance of Rs. 4,48,04,410/- u/s 80G for donation to Amul Relief Trust.
6. Treatment of costs not related to export as indirect costs u/s 80HHC.
7. Charging of interest u/s 234B and 234D.

Summary:

1. Addition of Rs. 1,81,38,000/- Transferred to Reserve Fund:
The Tribunal upheld the CIT(A)'s decision confirming the addition of Rs. 1,81,38,000/- transferred to the Reserve Fund u/s 67 of the Gujarat Co-operative Societies Act. This decision was based on the precedent set in the assessee's own case for A.Y. 2000-01 and earlier years, where similar additions were confirmed.

2. Disallowance of Rs. 2,00,000/- Contribution to Education Fund:
The Tribunal decided in favor of the assessee, allowing the deduction of Rs. 2,00,000/- contributed to the Education Fund. This decision followed the precedent set in the assessee's own case for A.Y. 1998-99, where such contributions were deemed allowable business expenditures as per the Gujarat High Court decision in Mehsana Dist. Co-op. Milk Producers Union Ltd. vs. CIT (203 ITR 601).

3. Disallowance of Rs. 1,43,15,579/- Depreciation on Plant and Machinery:
The Tribunal allowed the assessee's claim for depreciation on Plant and Machinery without reducing the grant from the cost. This decision followed the precedent set in the assessee's own case for A.Y. 2000-01, where it was held that the grant was for the entire project and not for specific assets, thus not affecting the actual cost for depreciation purposes.

4. Disallowance of Rs. 10,62,107/- Depreciation on Temporary Structures:
The Tribunal found that the A.O. had rectified the order u/s 154, allowing the claim of the assessee for 100% depreciation on temporary structures. Since the related ground was not pressed before the CIT(A), this issue was treated as dismissed and the ground became infructuous.

5. Disallowance of Rs. 4,48,04,410/- u/s 80G for Donation to Amul Relief Trust:
The Tribunal upheld the CIT(A)'s decision to disallow 100% deduction u/s 80G(2)(d) for the donation to Amul Relief Trust, allowing only 50% deduction. This was because the donee trust did not fulfill the conditions laid down in section 80G(5C), specifically regarding the utilization of funds and transfer of unutilized amounts to the Prime Minister's National Relief Fund by the stipulated date.

6. Treatment of Costs Not Related to Export as Indirect Costs u/s 80HHC:
The Tribunal restored the matter to the file of the A.O. to take a uniform decision, following the precedent set in the assessee's own case for A.Y. 2000-01, where similar issues were set aside for fresh consideration.

7. Charging of Interest u/s 234B and 234D:
The Tribunal noted that the charging of interest u/s 234B and 234D is consequential and must be allowed as per the assessed income. Interest u/s 234D is to be charged with effect from 1-6-2003, as per the law. The decision of the CIT(A) was confirmed.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes. The order was pronounced in Open Court on 22-03-2010.

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