2019 (1) TMI 1607 - AT - Income Tax

Disallowance of payment to Education Fund - this amount is estimated provision towards fund created as per section 69 of Gujarat Co-Operative Societies Act and it has not been spent during the year under consideration - HELD THAT - As decided in SURAT NATIONAL CO-OP BANK LTD. VERSUS THE A.C.I.T. CIRCLE-2 SURAT 2013 (8) TMI 1116 - ITAT AHMEDABAD wherein as relied on the decisions rendered by the Hon ble Gujarat High Court in the case of (i) Mahesana District Co-operative Milk Producers Union Ltd. Vs CIT 1999 (12) TMI 4 - GUJARAT HIGH COURT and CIT VS Kaira District Co-operative Milk Producers Union Ltd. 1993 (9) TMI 59 - GUJARAT HIGH COURT wherein the Hon ble High Court on similar facts decided the identical issues in favour of the assessee and against the Revenue and pleaded that the claim of the assessee may be allowed. Disallowance of payment made to members of welfare fund - HELD THAT - As decided in SURAT NATIONAL CO-OP BANK LTD. VERSUS THE A.C.I.T. CIRCLE-2 SURAT 2013 (8) TMI 1116 - ITAT AHMEDABAD Tribunal has allowed the expenditure by holding that the assessee had to maintain good relations with the members and thus the expenditure incurred is towards the welfare of the members and same is supported by the decision of Hon ble Gujarat High Court in the case of Karjan Co-operative Cotton Sales Ginning Pressing Society vs. CIT 1992 (1) TMI 39 - GUJARAT HIGH COURT . In view of this matter respectfully following the decision of Co-ordinate Bench as mentioned above this ground of appeal of the Revenue is dismissed. Disallowance of Special Long Term Finance Fund u/s 36(1)(viii) - HELD THAT - Both parties have agreed that this issue is covered against that Revenue by the order of Tribunal for assessment year 2009-10 in the case of The Surat National Co-operative Bank Ltd 2013 (8) TMI 925 - ITAT AHMEDABAD wherein held expenditure incurred for purchase of articles for presentation only to its members for keeping alive good image among members and for generating goodwill and ensuring continuity of business with member societies was geld to be expenditure incurred wholly and exclusively for the purpose of business. - delete the above disallowance and allow this ground of appeal. Disallowance of investment depreciation - assessee has failed to provide any separate working for investment of depreciation nor provided any supporting evidence - HELD THAT - We find that as per Schedule 17 to Accounts for the year ended 31.03.2013 shown in return of income the bank wrote back Rs. 2, 86, 27, 844/- as excess provision for investment depreciation which included ad-hoc amount of depreciation of Rs. 2, 50, 00, 000/- for provision for investment depreciation. As per the working filed the assessee way back in A.Y. 2012-13 had claimed investment depreciation loss of Rs. 1, 21, 88, 023/- (shown in schedule 17 of provisions contingencies). This market to make loss was reduced to Rs. 19, 93, 840/- in A.Y. 2013-14 and after reducing the outstanding loss of Rs. 19, 93, 840/- from investment depreciation of Rs. 1, 21, 88, 023/- claimed in earlier year the assessee was required to pay tax on Rs. 1, 01, 94, 183/- i.e. 1, 21, 88, 023 - 19, 93, 840 only being eligible profit for taxation and therefore the assessee has rightly claimed the amount of Rs. 1, 48, 05, 817/- as investment depreciation loss instead of the entire amount of Rs. 2, 50, 00, 000/-. Thus we find that the ld. CIT (A) has verified the working submitted by the assessee before him during appellate proceeding and after analyzing the same has allowed the claim. - Decided against revenue.

Summary

Issues Involved:
1. Disallowance of payment to Education Fund.
2. Disallowance of claim of payment made to members of Welfare Fund.
3. Disallowance of Special Long Term Finance Fund.
4. Disallowance of investment depreciation.

Issue-wise Detailed Analysis:

1. Disallowance of Payment to Education Fund:
The AO disallowed Rs. 3,00,000 on the grounds that it was an estimated provision towards the Education Fund under section 69 of the Gujarat Co-Operative Societies Act and had not been spent during the year. The CIT(A) deleted this disallowance by following the decision of the Ahmedabad Tribunal in the case of Surat National Co-Operative Bank Ltd. for A.Y. 2007-08, which in turn followed the Hon’ble Gujarat High Court decision in Mehsana District Co-Operative Milk Producers Union Ltd. 258 ITR 780 (Gujarat). The Tribunal found that the issue was covered against the Revenue by the Tribunal's earlier decision and thus dismissed the Revenue's appeal on this ground.

2. Disallowance of Claim of Payment Made to Members of Welfare Fund:
The AO disallowed Rs. 6,57,614 claimed under the head of members' welfare fund, viewing it as an ad-hoc estimated appropriation for the benefit of members, not allowable as business expenditure under section 37(1) of the Income Tax Act. The CIT(A) deleted this disallowance, referencing the ITAT Ahmedabad Tribunal's decision in the case of Surat National Co-Operative Bank Ltd. for A.Y. 2007-08 and the Hon’ble Gujarat High Court's decision in Karjan Co-operative Cotton Sales Ginning & Pressing Society vs. CIT 199 ITR 17 [1993] 69 taxmann.com 0304 (Guj). The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

3. Disallowance of Special Long Term Finance Fund:
The AO disallowed Rs. 57,51,930 claimed under section 36(1)(viii) for the provision of special long-term finance fund, arguing it was not spent. The CIT(A) allowed the appeal, noting that similar additions were deleted in previous years' assessments and confirmed by the ITAT Ahmedabad. The Tribunal found the issue was covered against the Revenue by its earlier decisions in the assessee's own case and dismissed the Revenue's appeal on this ground.

4. Disallowance of Investment Depreciation:
The AO disallowed Rs. 1,48,05,817 claimed under "investment depreciation," citing lack of separate working and supporting evidence. The CIT(A) deleted this disallowance after the assessee provided detailed working and supporting documents, showing the correct amount to be offered for tax. The Tribunal upheld the CIT(A)'s decision, noting that the detailed working was verified and remained uncontroverted by the Revenue. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s deletions of the disallowances made by the AO. The order was pronounced in the open Court on 08.01.2019.