TaxTMI 
TaxTMI 
2013 (2) TMI 737
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....e assessee is aggrieved by the order of the CIT(A) in confirming the disallowance of expenditure claimed by the assessee to the tune of ₹ 7,38,36,280/-. 3. The brief facts of the case are that the assessee is an Apex Cooperative bank. It filed its return of income and during the assessment proceeding u/s 143(3), the AO examined the assessee's claim of expenditure towards different funds created from the surplus profits/ appropriation of profits. He found that the assessee has claimed the following expenditure on payment basis : a) PACS/DCCB Development fund - Rs.6,13,74,622/- b) Co-operative Education fund - Rs.47,77,530/- c) Farmers Welfare Fund - Rs.56,29,564/- d) Rural Farmers Socio Economic Development Fund - Rs.20,54,564....
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.... other objectives which include the obligation of the bank towards DCC banks, other member banks and the farmer society as a whole. Therefore, he came to the conclusion that the banking business of the assessee is separate from the other objectives of the bank and, therefore, the main business of the assessee is only banking business and the expenditure towards other objectives cannot be said to be wholly and exclusively for the assessee's business of banking to be allowable u/s 37 of the Incometax Act. He further observed that as per the By-laws of the company, the reserves are to be created out of the net profit of the assessee which is to be computed after allowing the expenditure incurred by the assessee for the purpose of carrying on i....
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....to the education fund is diversion of profits at source on account of overriding liability and, therefore, is liable for deduction. 7. As regards the other contributions, he submitted that the assessee, being a Apex Bank for all the co-operative banks in Karnataka, is under an obligation to make the respective contributions under Bye-laws of the society and, therefore, these contributions also are covered by the statutory obligation and the issue is also covered by the decision of the Hon'ble High Court of Karnataka in the case of Pandavapura Sahakara Sakkare Karkhane Ltd. (cited Supra). Further, he submitted that the assessee being bank governed by the Cooperative Societies Act has to first compute its net profit and out of the same has t....
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....s not justified and the ground of appeal of the asseseee relating to this disallowance is allowed. 10. As far as the contributions of the assessee to the other funds are concerned, we find that that the objectives of the assessee bank are to assist the other co-operative banks under it, and for this purpose, have to make contributions out of its net profits. It is the contention of the assessee that net profit of the assessee is computed and taxes are paid thereon and, thereafter, the reserves are created out of the net profit which has already suffered the tax. The contention of the assessee is that only after the approval of the AGM, can the funds be transferred to the respective funds and, therefore, the contribution made out of the inc....