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2021 (9) TMI 438 - AT - Income TaxRevision u/s 263 - profit and loss account on account of PAC Development Fund under the head Other expenses which is not an actual expenditure towards business activities - HELD THAT - Where two views are possible and where the AO has followed the later decision while allowing the claim of the assessee the view so taken by the AO cannot be held to be erroneous in nature. Also interesting to note that just prior to issuance of show-cause u/s. 263 by the ld. PCIT the ld. CIT(A) in assessee s own case for A.Y 2013-14 and A.Y 2016-17 has allowed the claim of the assessee towards such contribution towards PAC development fund following the decision of the Hon ble Rajasthan High Court 2017 (11) TMI 453 - RAJASTHAN HIGH COURT These orders so passed by the ld. CIT(A) thus form part of the records and therefore where the matter is consistently decided in favour of the assessee earlier by the Hon ble Rajasthan High Court which is subsequently followed by the ld. CIT(A) and where the AO decide to follow the same binding decisions and follow the rule of consistency and the settled position in the earlier years the order passed by the AO cannot be held as erroneous in nature - the order so passed by the ld. Pr. CIT is hereby set-aside and the order of the AO is sustained. - Decided in favour of assessee. .
Issues:
- Challenge to order passed by ld. Pr. CIT u/s. 263 of the Act for A.Y 2014-15 regarding debiting a sum in profit and loss account. - Interpretation of PAC Development Fund Rules 2003 and its utilization by co-operative bank. - Legal validity of contribution to PAC development fund as business expenditure under section 37(1) of Income Tax Act, 1961. - Comparison of decisions by Rajasthan High Court and Supreme Court on similar cases. - Relevance of previous judgments and consistency in decision-making by authorities. Analysis: 1. Challenge to Order under Section 263: The appeal was filed against the order of ld. Pr. CIT, Ajmer, challenging the correctness of debiting a sum in the profit and loss account. The ld. Pr. CIT found the order prejudicial to the interest of the Revenue and set it aside for fresh assessment. The assessee contended that the contribution to the PAC Development Fund was a business expenditure based on business expediency and legal decisions. 2. Interpretation of PAC Development Fund Rules: The assessee argued that the PAC Development Fund Rules 2003 mandated contributions by the bank to government agencies for specific purposes. The fund's administration and utilization were governed by a committee, and the assessee had no control over it. The fund was considered a business expenditure as it was for the benefit of primary agricultural credit co-operative societies. 3. Legal Validity of Contribution as Business Expenditure: The main contention was whether the contribution to the PAC Development Fund qualified as a business expenditure under section 37(1) of the Income Tax Act, 1961. The assessee argued that it was a business expenditure based on business expediency and previous legal decisions. The ld. Pr. CIT, however, found the contribution not to be an actual expense for the benefit of the assessee co-operative bank. 4. Comparison of Court Decisions: The assessee relied on decisions by the Rajasthan High Court and the Supreme Court dismissing appeals related to similar cases involving the PAC Development Fund. The argument was that the decisions supported the claim that the contribution was a valid business expenditure. The inconsistency between the decisions and the actions of the ld. Pr. CIT were highlighted. 5. Relevance of Previous Judgments and Consistency: The assessee emphasized the consistency in decisions by authorities in previous years, where similar claims were allowed in favor of the assessee. The orders passed by the ld. CIT(A) for other assessment years were cited as supporting evidence for the validity of the contribution to the PAC Development Fund as a business expenditure. In conclusion, the ITAT Jodhpur allowed the appeal, setting aside the order of the ld. Pr. CIT and upholding the decision of the Assessing Officer based on the legal validity of the contribution to the PAC Development Fund as a business expenditure supported by relevant court decisions and consistency in decision-making.
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