2017 (11) TMI 453

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....addition of Rs. 10021000/- holding that the PACs Manager Salary is not contingent liability but a statutory liability whereas as per the provisions it is in nature of contingent/disputed liability as no disbursementn out of the said liabilities was made and no commercial expediency has been establish?" In DB ITA No. 233/2012 Whether in the facts and circumstances of the case the ITAT was justified in deleting the addition of Rs. 1,13,38,000/- holding that the PACs Manager salary is not contingent liability but a statutory liability whereas as per the provision it is in nature of disbursement out of the said liabilities was made and no commercial expediency has been established.? In DB ITA No. 290/2016 i) Whether in the facts and circumstances of the case the ITAT was justified in deleting the addition of Rs. 50,240,76/- made by the Assessing Officer by disallowing the contribution to Primary Agricultural Credit Cooperative Society Development Fund being non business expenditure? ii) Whether in the facts and circumstances of the case, the Tribunal was justified in deleting addition of Rs. 5373914/- made on account of depositing the PF/ESI payment beyond the prescribed....

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....ch directly connected or related to carrying on assessee's business or which results in benefit to the assessee's business has to be regarded as deduction allowable u/s 37 of the Act. The decision of Hon'ble Apex Court in the case of Associated Power Co. Ltd. vs. CIT, (supra) is not applicable. The Hon'ble Apex Court held that application of the doctrine of diversion of income by reason of overriding title is not applicable in that case as the reserve is out of the revenues of the undertaking and reach the electricity company and is not diverted away from it. However, in the instant case, the amount is to be contributed to a fund and the fund is not being managed by the assessee. The assessee may be trustee of that fund but it cannot apply the fund as per his own will. The interest, if any earned on this fund is also to be credited to that fund. It is therefore, clear that funds stand diverted at the source and therefore, this cannot be considered as an appropriation of income but it is an expenditure. Thus the ld. CIT(A) was justified in deleting the addition." 6. It seems that totally diverted points as stated hereinabove have been taken into consideration and the authority ha....

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....ment, has been regulated by the approval of the Registrar but there is no absolute prohibition against user of the entire reserve fund for the purposes of the society without there being necessity to reimburse and refurnishing existing reserve fund. 19. In the present case, it may be noticed that neither the reserve fund goes to any party other than the assessee itself, nor there is any obligation to provide for such reserve before it becomes the part of net income earned by the society. 25. Coming to the facts of the present case, apparently the obligation to carry a part of net profit to a reserve fund does not envisage diversion of any part of profits in person other than society itself. There is no overriding title vesting in a third party other than the assessee to lay claim to the reserve fund independent of co-operative society. While unravelling the essential character of the reserve fund, we have noticed that reserve fund remains part of the assessee-society's corpus and is to be applied for assessee's business only, albeit its application is being regulated by the Registrar under the provisions of the Act but the statue does not give any power ev....

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....h fund can be used have also been spelt out as noticed by us that, apart from meeting unforeseen losses in the society, it can also be used to meet such other purposes, viz., to pay off its debts and to use the same during the financial stringencies in the society by declaring that it shall belong to the society and has intended to meet unforeseen losses. That is to say, not to meet any existing liabilities or obligations. Unforeseen losses and other purpose for which the reserve fund is to be applied, also forms part of the need of the society and none else. The fund is always available for the society and forms the part of its assets for paying off its dues and to pay off the share capital on its dissolution. Therefore, there is no overriding title vesting in any other person or obligation to which such profit is diverted before it reaches the society. The requirement of surplus, if any, on dissolution of the society after application of assets to discharge its liabilities towards creditors and shareholders to be used for an object of public utility is also an obligation of the net surplus of the society and not merely of the remainder of reserve fund, if any, towards object of p....

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....een equated with the reserve fund created under the Cooperative Societies Act and Rules framed thereunder, which never went out of the societies' capital asset block. It always remains the assets of the society to be used for its own purpose, albeit under the regulatory power of the Registrar. As noticed by the apex Court, there existed a clear distinction between a reserve fund created for the benefit of the consumers which was to be returned to the consumes by way of rebate and the reserve fund created under the statute for meeting out of contingent liability in future. Undoubtedly, in the latter case, it always remained capital of the company and notwithstanding its use could only be with the approval of the State Government, it did not make any difference so far as the nature of the contingency reserve fund is concerned. Apparently, the M.P. High Court has not noticed this distinction and has not adverted to the provisions of the M.P. Co-operative Societies Act which concerned creation of reserve fund, its object and the Government Rules about obligation to apply the reserve fund for the purposes of the society. Had the same been brought to the notice of the Court, perhaps ....

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....lready subject matter of decision before the Supreme Court. 10. The Tribunal while considering the issue has gone into detail and taking into consideration that these are all mandatory statutory requirements and if it is not done, the Society registration and the office bearer of the Society will incur disqualification. 11. In that view of the matter the provisions of Section 37 of Income Tax Act reads as under:- "37. (1)Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession"." 12. It is contended that the above expenses are mandatory and statutory therefore, the deduction is required to be allowed. 13. He has also taken us to the expenses of liability which are kept as reserved. It is contended that the same is absolutely prerogative and in the books of accounts if he change the entry, at that time it will be open for the assessee or the department to....

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....à¤°à¤•à¥à¤·à¤¾ कोष गठित किया जावेगा। वेतन सुरक्षा कोष बैंक स्तर पर संधारित किया जावेगा, जिसमें केन्द्रीय सहकारी बैंक द्वारा विगत वर्ष के दौरान समितियों को दिये गये औसत ऋण बकाया का 0.50 प्रतिशत तथा शीर्ष बैंक द्वारा बैंक को विगत वर्ष के दà....

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.... व्यवस्थापक के संयुक्त हस्ताक्षर से होगा, किन्तु वेतन का आहरण करने से पूर्व व्यवस्थापक को निम्न दस्तावेज / रिपोर्ट बैंक में आवश्यक रूप से जमा करानी होगी तथा इनके जमा होने का प्रमाण पत्र प्रस्तुत होने पर ही इस हेतु संधारित खाते à¤....

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....दि समिति की सकल आय का 75 प्रतिशत समिति के व्यवस्थापक के वेतन एवं भत्तों के भुगतान हेतु कम पड़ता हो तो प्राथमिक वेतन कोष में इस कमी की पूर्ति हेतु बैंक से इस हेतु हुए एक समझौता पत्र के आधार पर वेतन सुरक्षा कोष से अधिकतम 3 वर्ष तक 4 प्रतà¤....