2020 (11) TMI 403 - AT - Income Tax

ITAT Upholds CIT(A) Decisions on Revenue Appeal

ACIT, Circle-1, Kolhapur Versus Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd.

The ITAT upheld the CIT(A)'s decisions in favor of the assessee on all issues raised by the Revenue. The payments of rate difference were not considered ... Allowable exempenditure u/s 37(1) - Distribution of profit - payment of rate difference after the closure of the accounting year - commercial expediency - Whether amount to be paid was not out of the profits ascertained at the Annual General Meeting ? - HELD THAT:- The issue is covered in its own decision by the Hon’ble Bombay High [2009 (4) TMI 19 - BOMBAY HIGH COURT] while making the addition, the A. O. has only followed the assessment order of the earlier year without bringing any new facts on record. - Addition made on account of milk rate difference is deleted. The amount which is the subject-matter is paid to members who supply milk and in some case also to non-members. The payment is for the quantity of milk supplied and in terms of the quality supplied. The commercial expediency for payment of this price are the market conditions, and the need to procure more milk from the members and non-members to the assessee. To our mind, therefore, the amount paid by no stretch of imagination can be said to be dividend to the members or shareholders or payment in the form of bonus as bonus also has to be paid from the accrued profits. - Decided in favour of assessee. Depreciation on fixed assets on project without deducting subsidy received from National Dairy Development Board (NDDB) - HELD THAT:- The issue is decided in its favour by the ITAT, Pune Bench . [2018 (8) TMI 1996 - ITAT PUNE] - Also the Hon’ble Bombay High Court in assessee’s own case [2009 (4) TMI 19 - BOMBAY HIGH COURT] has dismissed the Revenue’s appeal on the above issue. Issues:1. Whether payment of rate difference amounts to distribution of profits.2. Whether payment on account of rate difference is out of commercial expediency.3. Deletion of addition made towards depreciation on fixed assets without deducting subsidy received from NDDB.Issue 1: Payment of Rate Difference and Distribution of ProfitsThe Revenue challenged the CIT(A)'s decision regarding the payment of rate difference of Rs. 43,73,21,677, arguing it was distribution of profits. The CIT(A) held that the payment was not out of profits ascertained at the Annual General Meeting and was not a dividend to shareholders. The issue was found to be covered by previous decisions in favor of the assessee. The ITAT upheld the CIT(A)'s decision, emphasizing that the Revenue accepted the issue was in favor of the assessee, and no new facts were presented to challenge the previous decisions. The grounds of appeal by the Revenue were dismissed.Issue 2: Commercial Expediency of PaymentThe Revenue also contested the CIT(A)'s decision that the payment on account of rate difference was out of commercial expediency. The CIT(A) relied on previous decisions and upheld the deletion of the addition. The ITAT concurred, noting that the issue was covered by the decision of the Hon’ble Jurisdictional High Court and the Pune Bench of the Tribunal in favor of the assessee. The grounds of appeal by the Revenue were dismissed.Issue 3: Deletion of Addition for Depreciation on Fixed AssetsThe Revenue challenged the deletion of an addition made towards depreciation on fixed assets without deducting subsidy received from NDDB. The CIT(A) found the issue covered by previous decisions and deleted the addition. The ITAT upheld the CIT(A)'s decision, citing the legal periphery of the decision of the Hon’ble Jurisdictional High Court favoring the assessee. The grounds of appeal by the Revenue were dismissed.In conclusion, the ITAT dismissed the appeal of the Revenue, upholding the decisions of the CIT(A) on all issues raised. The judgments were based on previous decisions and legal principles, leading to the rejection of the Revenue's grounds of appeal.