TaxTMI 
TaxTMI 
2016 (5) TMI 924
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....s objection by two days. 4.1 Firstly, we take up the grounds of appeal of the Revenue which is as under:- ''On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:- (i) deleting the disallowance of provision of Rs. 89,25,724/- on account of pay arrear payment (ii) deleting the disallowance of provision for audit fees at Rs. 5,59,294/- in the absence of details of payments upto date of filing of return (iii) deleting the disallowance of Rs. 2,05,000/- on account of provision for interest. (iv) deleting the disallowance of Rs. 16,34,209/- out of proposed commission in the absence of payments details. (v) deleting the addition of Rs. 8k73,729/- on account of unutilized subsidy which was treated as cessation of liability u/s 41. 5.1 Brief facts of the case are that the assessee company is a cooperative society engaged in procurement of milk from milk producers/ farmers and after processing the same, manufactures of different milk products and supplies the same in the market. The assessee company filed its return of income for the assessment year 2009-10 on 30-09-2009 declaring total income of Rs. 1,35,99,290/-.The return of the assessee was processed u/s....
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....12. Therefore, the provision made at Rs. 89,25,724/- was disallowed by the AO since the assessee had not made expenditure during the year under consideration. 6.2 Aggrieved, the assessee carried the matter before the ld. CIT(A) who deleted the amount of Rs. 89,25,724/- on account of arrear payment by observing at 4.12 of his order as under:- ''... the assessee has made the provision for arrears as per Sixth Pay Commission recommendation which was approved by Rajasthan Cooperative Dairy Federation vide letter dated 20-02-2009. Moreover, in my view any prudent businessman ha to account for anticipated expenses and provide for the same. Whereas in the present case the liability was a clear liability and provision of the same has to be made. In the case of salary, there is no provision of law to disallow the expenses, if the same is not paid. The Assessing Officer is therefore, directed to delete the addition of Rs. 89,25,724/- . 6.3 Now the Revenue is before us wherein the ld. DR relied on the order of the AO. 6.4 We have heard the ld. DR and perused the materials available on record. We find from the records that the notification was issued by the Finance Department, Govt.of R....
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....nse, as normally understood in the trading society since payments were made to the co-operative department of the State through the Registrar in exchange for the services of the auditors availed of by the assessee. Levy of audit charges are nothing but the price required or demanded for services rendered by the Government auditors. In other words, the expenses were nothing but payment made or charged or compensation for utilising services of the auditors, i.e., payment of money for professional services. Such payment, in our view, is beyond the mischief of section 43B. The fee contemplated or envisaged under section 43B is the payment of the nature referred to by the Supreme Court in the case of Amar Chandra Chakraborty, AIR 1972 SC 1863. It is an expenditure which the assessee has incurred wholly and exclusively for the purpose of business and is an allowable expenditure. The provisions of section 43B do not apply to the Government audit charges. Thus, disallowance of Rs. 1,63,925 on account of outstanding Government audit fees could not have been done by the Assessing Officer nor the same could have been affirmed by the Commissioner of Income-tax (Appeals). As such the Tribunal r....
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....ore, directed to delete the same.'' 9.3 Now the Revenue is before us wherein the ld. DR relied on the order of the AO. 9.4 We have heard the ld. DR and perused the materials available on record. It is observed from the record that the assessee society as per its constitution and guidelines have to pay 1.5% procurement overhead expenses (proposed commission) to its member cooperative societies and proposed cooperative societies and such expenses are debited to trading and profit and loss account and credited to individual cooperative societies / proposed cooperative societies account. This amount is paid to its member cooperative societies and proposed cooperative societies as and when required as per the bye laws of assessee society. We find that the ld. CIT(A) has rightly deleted the addition made by the AO as to overhead expenses which is paid to the respective societies on passing a Resolution. In view of these deliberations, the Ground No. 4 of the Revenue is dismissed. 10.1 In Ground No. 5, the Revenue is aggrieved that the ld. CIT(A) has erred in deleting the addition of Rs. 8,73,729/- on account of unutilized subsidy which was treated as cessation of liability u/s 41 of t....