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TMI Blog2011 (5) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... eport and allow the same as per law. The contentions raised by the Revenue stand rejected. Indirect expenses related to PSS operations - Held that:- It is not the case of the Revenue that the expenses had not been incurred by the assessee for the purpose of business or that they are not genuine - CIT(A) and the Tribunal rightly recorded the gross impropriety committed by the AO in assuming indirect expenses on proportionate basis to the total sale of the assessee - It has been seen from the tenor of the scheme of PSS that the assessee was only entitled to reimbursement of the direct expenses as prescribed by GOI and this arrangement/scheme is not challenged either by the Revenue or by the Special Auditor - Decided in favour of assesee. X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2296/D/88 dated 12.8.1991. Faced with this situation, learned counsel for the Revenue did not press this ground. In view of this, nothing survives for us to dwell on this issue. 5. With regard to the second issue that arises for consideration in ITA No.839/2009 regarding the direction of the Tribunal to the Assessing Officer to allow deductions under Section 80P(2)(d) of the Act to the assessee, it may be noted that the assessee had claimed deductions under this Section in respect of the dividend received from other co-operative societies as per details as mentioned in Annexure 9 of the Tax Audit Report. The rectification order under Section 154 dated 7th February, 2007 was passed by the Assessing Officer in this regard. The Assessing Officer disallowed the deduction vide the said order and held the same to be not falling within the scope of Section 154 of the Act being not an error apparent on the record. The CIT(A) in appeal while allowing the claim referred the matter back to the Assessing Officer to verify the amount of claim. The order in this regard came to be passed by the CIT(A) in the following manner: "10.5 … It is noted that similar issue has been decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses regarding the claim of indirect expenses relating to PSS operations of the assessee, we may state that the order of the Tribunal dated 14th May, 2009 was passed for the assessment year 2003-2004 (related to ITA No.1037/2010) relying upon the order of the Tribunal dated 07.11.2008 passed for the assessment year 2004-05 (related to ITA No.839/2009). Therefore, we will confine to the facts as borne out from ITA NO.839/2009 for considering this question. 9. During the assessment year 2004-05, assessee filed return declaring loss of Rs.2,96,87,782/-. During the assessment proceedings, AO noticed that the assessee had not allocated any direct expenses to PSS operations while it was acting as nodal agency to the Government of India (GOI) according to which profits of PSS were to be given to GOI and losses were to be recovered from GOI. In the absence of any details, the assessee allocated indirect expenses on proportionate basis in the ratio of turnover of PSS operations to turn over of other activities, which came to Rs.20,34,42,180/-. The Assessing Officer did not allow deduction on this account of indirect expenses stating that it had not furnished any computation as regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtionate disallowance of the administrative overheads being attributed by the AO to PSS operations in appeal related to A.Y. 2003-04). It has been also held that the expenditure in question has been incurred on account of business expediency which is ultimately designed to further the object and purpose of the appellant‟s business and any incidental benefit to a third party should not come in the way of allowing such expenditure as business expenditure. In view of the similar facts involved, following the earlier appellate decision for A.Y. 2003-04 discussed (supra), the addition on this account is deleted." 13. In the appeal preferred by the Revenue against the order of CIT(A) on this account, the Tribunal confirmed the order of the CIT(A). In arriving at this the Tribunal gave the reasoning as under: "It is noticed that assessee is deriving a service charge at 1.5% for non-perishable commodities and 2.5% for perishable commodities on the procurement cost under the PSS scheme. It is also noticed that the profits and losses on account of the PSS scheme is on account of the Government. Thus, what becomes evident here when the assessee is acting as an agent of the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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