2021 (3) TMI 528

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....de order dated 30.10.2015 on the following substantial question of law: "Whether the Tribunal is justified in law in holding that the monetary incentive in a total sum of Rs. 4,45,00,000/- provided to various District Central Co-operative Banks (DCCB's) and Primary Agricultural Co-operative Societies (PACS) is not expenditure laid out wholly and exclusively for the purpose of business contrary to material on record and passed a perverse order on the facts and circumstances of the case?". 2. Facts leading to filing of this appeal briefly stated are that the assessee is a Co-operative Apex Bank registered under the provisions of Karnataka Co operative Societies Act, 1959 (hereinafter referred to as 'the Act' for short). A licen....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ral Co-operative Societies. In the aforesaid factual background, the assessee has filed this appeal. 4. Learned Senior counsel for the assessee submitted that the incentive payments are not in the nature of appropriation of net profits as held by the Assessing Officer and confirmed by the tribunal. It is further submitted that in a Co-Operative Society, net profits can be appropriated in an Annual General Meeting of the Co-Operative Society as per Section 27 of the Act. It is further submitted that the payment of incentives to District Central Co-Operative Banks and Primary Agricultural Co-operative Societies was duly authorized by Board of Directors in its meeting held on 19.03.2009. It is also submitted that the payment cannot be held as....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ORE KIRLOSKAR LTD. VS. CIT[', (1987) 166 ITR 836 (KARNATAKA), 'T.T.D. CO-OPERTIVE STORES LTD, (1998) 232 ITR 109 (AP), 'CIT VS. PANDAVAPURA SHAKARA SAKKARE KARKHANE LTD', (1988) 14 ITR 457 (KARNATAKA), 'SASSOON J. DAVID AND CO.P.LTD VS. CIT', (1979) 118 ITR 261, 'CIT VS. INFOSYS TECHNOLOGIES LTD', (2012) 349 ITR 582, 'KARJAN CO-OPERATIVE COTTON SALES GINNING ANDPRESSING SOCIETY VS. CIT (1993) 199 ITR 17 (GUJARAT), 'CIT VS MALAYALAM PLANTATIONS LTD.,', (1964) 53 ITR 40 (SC), 'CIT VS. DELHI SAFE DEPOSIT CO. LTD', (1982) 133 ITR 756 (SC), 'S.A.BUILDERS VS. CIT (A)', (2007) 288 ITR 1 (SC) and KANHAIYALAL DUDHERIA VS. JCIT', (2020) 113 TAXMANN.COM 217 (KAR.). 6. On the other hand, ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....penditure. In MALAYALAM PLANTATIONS LTD. Supra, the Supreme Court has held that the expression for the purpose of business used in Section 37(1) of the Act is wider in scope than the expression for the purposes of earning profits and it may improve measures for preservation of the business and for protection of its assets and property from expropriation. In DELHI SAFE DEPOSIT CO. LTD supra the Supreme Court has held that income tax authorities must put themselves in the shoes of the income tax authority and see how the prudent business man would act and should not look at the matter from their own perspective. 8. In the instant case, the assessee had claimed deduction of the aforesaid amount which was paid by way of incentives to member ba....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....lready allowed the incentive paid to member bank by the assessee for the Assessment Year 2008-09 as revenue expenditure. The Commissioner of Income Tax (Appeals) has also while placing reliance on the circular issued by the Central Board of Direct Taxes (CBDT) has held that the Assessing Officer has misunderstood the term 'net profit' used in Act, which differs from the expression 'net profit' as used in the context of provisions of Income Tax Act, 1961. It has further been held that the aforesaid circular allows payment which are made in the nature of incentives and since, the payment in question has been made by the assessee to its member banks as incentives, the aforesaid amount is allowable as expenditure. The assessee h....