2018 (3) TMI 1164 - HC - Income Tax

Deduction towards Area Development Fund - Held that - The Commissioner and the Tribunal have not given any finding that the fund collected under the Area Development is not utilised for the purpose, for which it was collected. The Tribunal and the Commissioner were required to consider threadbare the relevant aspects of the matter as observed by the Apex Court in case of Siddheshwar S.S.K.Ltd. Vs. Commissioner 2004 (9) TMI 6 - SUPREME Court Thus impugned orders of the Commissioner of Income Tax (appeals) and the Income Tax Appellate Tribunal are set aside. The parties are relegated before the Commissioner (appeals) who shall decide the appeals afresh expeditiously.

Summary

Issues:
Deduction towards Area Development Fund

Analysis:
The High Court of Bombay heard arguments from both parties regarding the deduction towards the Area Development Fund. The court referred to a previous judgment by the Apex Court, which highlighted the purpose of the fund in enabling cooperative sugar factories to provide socio-economic services in their operational areas. The fund covers various activities such as agricultural extension, irrigation facilities, educational and medical services, animal husbandry, and drought relief. The court emphasized that the fund is managed by the cooperative society's Board of Directors, with approval required from the General Body for expenditure. The court noted that the fund is not equivalent to other categories of funds like the Chief Minister's Relief Fund, as the money collected is retained and utilized by the sugar factory itself based on government guidelines. The court criticized the Tribunal's and High Court's approach, stating that there was no diversion of income to a third party before reaching the assessee. The court left open the question of whether the fund receipts should be treated as income, indicating that further examination by the Tribunal was necessary.

The Commissioner and the Tribunal did not find any evidence that the fund collected under the Area Development Fund was not used for its intended purpose. The court emphasized that a thorough examination of relevant aspects, as highlighted in the Apex Court's judgment, was necessary. Consequently, the High Court set aside the orders of the Commissioner of Income Tax (appeals) and the Income Tax Appellate Tribunal. The parties were directed to appear before the Income Tax Commissioner (appeals) for a fresh decision, considering the case of Siddheshwar S.S.K. Ltd. The court instructed the Commissioner to expedite the process, scheduling a hearing for the parties. Finally, the appeals were disposed of without any costs imposed on either party.