1991 (2) TMI 205 - AT - Income Tax

Appeal dismissed, deductions allowed for contributions to TARRA & molasses storage fund reserve.

Inspecting Assistant Commissioner. Versus Salem Co-operative Sugar Mills Limited.

The appeal was dismissed, affirming the CIT (Appeals) decisions on both issues. The deduction under Section 35CCA for contributions to Tamil Nadu Rural ... Deduction In Respect Issues Involved:1. Deduction under Section 35CCA for contribution to Tamil Nadu Rural Reconstruction Association (TARRA).2. Allowance of contribution towards molasses storage fund reserve.Issue-wise Detailed Analysis:1. Deduction under Section 35CCA for contribution to Tamil Nadu Rural Reconstruction Association (TARRA):The Revenue's appeal contested the CIT (Appeals) decision allowing a deduction of Rs. 65 lakhs under Section 35CCA of the Income-tax Act, 1961. The primary contention was that the payment was made before the approval of the rural development programme by the prescribed authority, a precondition for deduction under Section 35CCA. The assessing officer had disallowed the claim, asserting that the programmes were not approved at the time of payment and were not executed by TARRA but by the assessee itself. The IAC found discrepancies in the implementation of the programmes and alleged collusion between the assessee and TARRA to avoid tax, citing the Supreme Court's decision in McDowell & Co. Ltd. v. CTO.The CIT (Appeals) disagreed, noting that the approval of programmes on 11-11-1982 did not preclude the deduction. He found that the State Level Committee had given implied approval for the construction of a school building accommodating higher secondary classes and vocational courses. The CIT (Appeals) concluded that the payment was used for approved rural development programmes and directed the assessing officer to allow the entire deduction of Rs. 70 lakhs.The Tribunal upheld the CIT (Appeals) decision, stating that neither the section nor the CBDT Circulars required approval to precede the expenditure. They emphasized that the section does not stipulate that the approval of the rural development programme should precede the payment. The Tribunal also dismissed the relevance of the execution details, affirming that the assessee had assisted TARRA in the implementation. The Tribunal concluded that the CIT (Appeals) was justified in allowing the deduction of Rs. 65 lakhs.2. Allowance of contribution towards molasses storage fund reserve:The assessing officer had added Rs. 3,49,519 to the assessee's total income, treating the transfer to the molasses storage fund as an appropriation of profits. The CIT (Appeals), following the Tribunal's order in a similar case, directed the assessing officer to allow the deduction.The Tribunal upheld the CIT (Appeals) decision, referencing their earlier order in the assessee's own case for the assessment year 1982-83, which concluded in favor of the assessee.Conclusion:The appeal was dismissed, affirming the CIT (Appeals) decisions on both issues.