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TMI Blog2012 (11) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... any actual amount on this hand under the year appeal because on provision basis this year, the assessee might have made claim in earlier year for which, the amount could have been spent by the assessee - issue requires reconsideration at the level of the AO – matter remanded to AO Disallowance on statutory payments paid under the Mandi Act - assessee claimed the above amount as deduction in the income and expenditure account in the form of board fees – alleged that it was a transfer of fund to the mother concern – Held that:- Assessee paid the election amount as per the requirements of the Act as noted above as well as per the directions of the Board, therefore, it was a statutory payment made by the assessee for the purpose of running of the activity of the assessee - assessee has debited Rs.10 lacs under the head election expenses which is also mentioned in the income and expenditure account. Therefore, the authorities below were not justified in disallowing the aforesaid expenditure which his paid by the assessee out of the market committee funds. Since the amount is incurred for the purpose of running the activity of the assessee, therefore, it was allowable deduction - Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the superannuation fund u/s 10(25) of the IT Act. It was submitted by the assessee that fund was not a superannuation fund. The AO examined the provisions of sec. 10(25) and held that provisions of sec. 10(25) are not applicable in this case because neither it is related to PF nor the fund was approved superannuation or gratuity fund. The same was therefore, added as interest earned to the income of the assessee. Similar claim was made before ld. CIT(A) however, this ground was rejected on the reasons that the interest in such reserve fund were not exempt since the fund created was not registered u/s 10(25) of the IT Act. As regards Aarakshit Nidhi of Rs.19,25,785/-, the assessee submitted that the contribution was made in view of the provisions of relevant Act and Rules framed therein. It was noted by the ld. CIT(A) that the contribution made to the Aarakshit Nidhi was actually a contribution to a reserve for meeting out the future liabilities of provision, gratuity etc. hence, cannot be allowed as expenditure u/s 36(1)(xii). It was further noted that assessee was following cash system of accounting therefore, on mere provision made in the books, deduction cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 ITR 738 in which, Madras High Court held that the amount set apart by the assessee towards molasses reserve fund and required by molasses control order, should be excluded from its income. This decision is confirmed by Supreme Court in 269 ITR 397. Similar view is taken by Madras High Court in the case of CIT vs. Salem Cooperative Sugar Mill, 229 ITR 285. ii. CIT vs. Bhopal Sugar Industries, 221 ITR 449 in which MP High Court held that the amount credited to create reserve fund govt. order assessee had no control over the amount credited amount not includable in the total income of the assessee. iii. Motilal Chhadamlal vs. CIT, 190 ITR 329 in which, Hon'ble Supreme Court held execution of deed stating that expenses of the trust will be made from income of certain properties and he will have no right in income it is a diversion of income and not taxable in the hands of HUF. iv. Sidheshwar Sahakari Shakkar Kharkhana vs. CIT, 270 ITR 1 in which, Hon'ble Supreme Court referred to other decisions in which, it was observed that the amount was retained by the assessee and utilized according to guidelines issued by the govt. It was a specific legal obligation for spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of assessee and that the reserve fund could be used for the purpose of payment of pension to the members of state board of service, family pension, exgratia, gratuity grant, loan and advances as per procedure prescribed by the Board. It would therefore, prove that the reserve funds remained in control, possession and in the name of the assessee and was to be used for the purposes of providing pension, exgratia, loan and advances etc. The procedure is to be provided by the Board only for loan and advances. The above amount shall be spent for the persons connected with the assessee and even loan and advance shall be given to the members of the service posted in market committee. Admittedly, the assessee received interest on the funds deposited with the bank in this regard. Since the reserve funds remained with the assessee therefore, interest earned on such funds shall be income of the assessee. The decisions relied upon by ld. Counsel for assessee are therefore, not applicable to advance the case of the assessee. Ground no.2 of the appeal of the assessee is accordingly dismissed. As regards part of ground no.9 with regard to Aarakshit Nidhi, it is stated to be contribution ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re concerned, we note that the facts circumstances of these issues in the present appeals are identical to the facts and circumstances of the case of Krishi Upaj Mandi Samiti, Burhanpur (supra). We find that the findings recorded in the order dated 24.10.2008 (supra) are applicable to these issues. The relevant portion of the same is reproduced hereunder: 13. On ground no.5, assessee challenged the disallowance of Rs.1,73,97,154/- being statutory payments paid under the Mandi Act and was allowable u/s 36(1)(xii) r.w.s. 37 of the IT Act. The assessee claimed the above amount as deduction in the income and expenditure account in the form of board fees. The AO noted that it was a transfer of fund to the mother concern and cannot be allowed. It was submitted by the assessee that board fees is paid as per the Act which is statutory payment. The ld. CIT(A) rejected the claim of the assessee because for claiming the deduction the amount should have been an expenditure but in the case of the assessee, it was not a expenditure but was a contribution therefore, ld. CIT(A) rejected the claim of the assessee and disallowance was confirmed. 14. Ld. Counsel for assessee reiterated the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is paid as per sec. 43 of MP Krishi Upaj Mandi Adhiniyam which is statutory liability of the assessee to pay in order to achieve its objectives. It is therefore, allowable deduction as was spent wholly and exclusively for the purpose of business of the assessee. As per sec. 36(1)(xii), any expenditure incurred by the corporation or body corporate by whatever name called constituted or established by Central, State or Provincial Act for the objects and purposes authorized by the Act for which, it was established shall be allowed as deduction. The ld. CIT(A) misunderstood this issue by treating the board fees to be the transfer of funds. In the aforesaid sec. 36(1)(xii), it is specifically mentioned that the expenditure incurred could have any name whatsoever therefore, the ld. CIT(A) should have considered the issue in the broad perspective considering the nature and functioning of the assessee institution under the special Act. In view of the above, the orders of the authorities below are set aside and entire addition is deleted. This ground of appeal of the assessee is allowed. We find that the case of the present assessees on the issues of Kisan Sadak Nidhi, Goshala Anudhan, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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