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2014 (9) TMI 828 - HC - Income TaxAllowability of Dairy Co-operative Society Development charges Held that - The Tribunal as well as CIT(A) have arrived at a finding of fact that the genuineness of the expenses is not doubted by the revenue and thus, when genuineness of the expenses has not been doubted, then it is a finding of fact the assessee is an apex body responsible for development of dairy activities in cooperative sector in the State of Rajasthan and the primary duty of the assessee is to take into consideration the amount incurred towards the primary level societies from which it is engaged in procurement of milk the expenses are directly related to the business of the assessee and incurred for commercial expediency - assessee has also charged Cess @1% of the sale value from milk unions for which receipts have been offered as income by the assessee and when income has been offered by the assessee, then the expenditure is certainly allowable as business expenditure thus, the order of the Tribunal is upheld Decided against revenue.
Issues involved:
1. Allowability of Dairy Co-operative Society (DCS) Development Expenses as business expenditure under section 37(1) of the Income Tax Act. 2. Disallowance of expenses by the Assessing Officer and appeal before the Commissioner of Income Tax (Appeal) (CIT(A)). 3. Appeal by the appellant-revenue before the Income Tax Appellate Tribunal (ITAT) challenging the deletion of expenses. 4. Question of law regarding the genuineness and commercial expediency of the expenses incurred by the respondent-assessee. Detailed analysis: 1. The judgment dealt with the question of whether the Dairy Co-operative Society (DCS) Development Expenses incurred by the respondent-assessee were allowable as business expenditure under section 37(1) of the Income Tax Act. The respondent-assessee claimed expenses related to the development of dairy business, including registration of new DCS, membership contributions, and purchase of equipment. The Assessing Officer initially disallowed the expenses, questioning their business expediency. However, both the CIT(A) and ITAT found the expenses to be directly related to the business activities of the respondent-assessee and allowed them as deductible expenses under section 37(1). 2. The Assessing Officer's disallowance of the expenses led to an appeal before the Commissioner of Income Tax (Appeal) (CIT(A)) by the respondent-assessee. The respondent-assessee provided a detailed explanation, emphasizing the necessity of the expenses for maintaining good relations with dairy cooperative societies and promoting dairy activities. The CIT(A) analyzed the evidence and concluded that the expenses were genuine and incurred for commercial expediency, citing relevant judgments to support the decision. 3. The appellant-revenue, dissatisfied with the deletion of expenses by the lower authorities, appealed before the Income Tax Appellate Tribunal (ITAT). The ITAT upheld the decision, stating that the expenses were incurred wholly and exclusively for the purpose of business. The appellant-revenue challenged this decision before the High Court, arguing that the expenses were not justified and should have been adjusted against grants received from the National Dairy Development Board (NDDB). 4. The High Court, after considering the submissions and orders of the lower authorities, affirmed the findings that the expenses were genuine and incurred for business purposes. The Court highlighted the respondent-assessee's fundamental objectives related to dairy industry promotion and protection of dairy farmers, indicating the commercial expediency of the expenses. The Court also noted that the respondent-assessee had already offered related income for taxation, making the expenses allowable as business expenditure. Additionally, the Court distinguished a judgment cited by the appellant-revenue, emphasizing the unique circumstances of the case. Ultimately, the Court dismissed all three appeals, finding no substantial question of law arising from the concurrent findings of fact by the lower authorities regarding the genuineness and commercial expediency of the expenses.
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