9911796707
TMI Blog2014 (10) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... ,45,000/- made by the Assessing Officer U/s 14A of the Income tax Act, 1961 by wrongly applying Rule 80 of the I.T. Rules, 1962. 4. That on the facts and in the circumstances of the case, the learned CIT (A) has erred in law by wrongly observing that in view of the judgment of Hon'ble Bombay High Court in the Case of Godrej and Boyce Rule 80 is applicable from FY 2006-07 onwards. 5. That on the facts and in the circumstances of the case, the learned CIT (A) has erred in law by holding that application of Rule 80 per se amounts to adoption of reasonable basis for computing disallowance (Pre-Rule 80 Period) contemplated under Sub Section (1) of Section 14 of the Incometax Act, 1961 ignoring the fact that Rule 80 is applicable only from AY 2008-09. 6. That on the facts and in the circumstances of the case, the CIT (A) erred in upholding the disallowances made by AO under Section 14A without refuting the assessee's submissions that no expenditure has been incurred for earning the exempted income. 7. That on the facts and in the circumstances of the case, the learned CIT(A) failed to appreciate that a finding in respect of incurring of actual expenditure for earning the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of DTAA with Oman. 15.That on the facts and in the circumstances of the case, the learned CIT (A) also erred in deciding the issue without adjudicating on ground No. 6 of assessee's appeal. 16.That the appellant craves leave to reserve to itself the right to add, alter and/or vary any ground(s) at or before the time of hearing." 2. The Ld. AR inviting attention to the grounds raised in assessee's appeal submitted that the ground which he would be relying upon is Ground No-3 and the other grounds may be treated as arguments in support of the said ground. In the facts of the present case it was a common stand of the parties that the issue has to go back to the AO as his satisfaction in terms of the decision of the Jurisdictional High Court in the case of Maxopp Investment. Vs CIT [2012] 347 ITR 272 (Del) has not been recorded. The Ld. AR submitted that in the circumstances, Ground Nos.-13 & 14 raised would become infructuous. 3. We have heard the rival submissions and perused the material available on record. The issue it is seen has been discussed by the AO in page 11-15 of his order and the CIT(A) relying upon the past history of the assessee considered the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet & P/L Account, the net profit in accordance to Multi-State Cooperative Societies Act, 2002 has been shown at Rs. 174.57 crores. In the P&L Appropriation account, the assessee has debited an amount of Rs. 1.75 crore on account of contribution payable to Co-operative Education Fund. 6.1. Considering the explanation of the assessee the AO was of the view that the claim of the assessee could not be allowed as it was not wholly and exclusively incurred for the purpose of business. He further held that it was an application of income and rejected the assessee's contention that it was allowable u/s 43B on the basis of payment which is applicable only to deductible expenditure. The AO further held that it is neither cess nor tax and relying on CIT vs Jodhpur Co-op. Marketing Society [2004] 275 ITR 372 (Raj.) disallowed the same u/s 37(1). 7. The CIT(A) relying upon the orders of the ITAT for 2005-06 & 2006-07 assessment years dated 31.05.2011 following the same deleted the addition made. 8. Aggrieved by this, the Revenue is in appeal before the Tribunal. The Ld. CIT DR places reliance upon the assessment order. 9. The AR of the assessee relying upon the submissions advanced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it would be appropriate to remit the matter to the tribunal to dispose of the same in accordance with law and to return a finding as to whether section 43B would be applicable or not." 11. As per the direction of Hon'ble Delhi High Court, the matter was set aside to the file of the AO with the direction to examine the nature of contribution to Coop. Education Fund whether it was in nature of tax, duty cess or fee. If the payment to Coop. Education Fund was found to be in nature of tax, duty cess or fee, the provisions of section 43B of the Act will be applicable. If, on the other hand, it was found that the nature of payment was not a tax, duty, cess or fees, the same will be allowable as deduction u/s 37 of the Act. The AO vide his order dated 24.12.09 for assessment year 2004-05 has allowed the claim of the assessee in view of direction contained in ITAT order dated 16.1.2009. 12. In the instant case for the first time, the Revenue has taken plea that contribution to Coop. Education Fund is appropriation of income and not expended wholly and exclusively for the purpose of business. The assessee had made provision of 1 % of its net profits under Rule 25 of Multi State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t either on fact or law to suggest a contrary finding has been advanced by the Revenue. In view of the above following the precedent the departmental ground is dismissed. 12. The facts relatable to the second issue agitated by the Revenue are found discussed at page 12 of the assessment order. A perusal which would show that the AO required the assessee to explain the allowability of its claim of prior period expenses amounting to Rs. 3,33,53,083/-. The AO except for the amount of Rs. 6,00,000/- accepted the explanation of the assessee and made the addition. The CIT(A) considering the explanation deleted the addition. 13. Aggrieved by this the Revenue is in appeal before the Tribunal. 14. Ld. CIT DR relies upon the assessment order. The Ld.AR reiterated at length the submissions advanced before the authorities. It was his argument that the finding that the amount crystallized in the year under consideration has not been assailed by the Revenue. It was also emphasized by him that even income pertaining to the earlier period which was crystallized in the year under consideration was offered to tax which has been accepted. Relying upon the decision of the Jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be said that the liability was determined and crystallized in the year in question. If such liability has been actually claimed and paid in the later previous years, it cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis. The Hon'ble Court also opined that when there was no change in the rate of tax between the two years, it is immaterial whether the deduction is allowed in one year or the other. In the present case, the liability of prior period expenses for consumption of raw material has been stated to have arisen in the earlier year, but got crystallized on a later date. The expenditure and the liability have been certified by the tax auditors, and there appears to be no dispute that the appellant had 'actually incurred the expenditure. With due reliance on the judgement of the Jurisdictional High Court, it is held that the appellant is entitled to the deduction of prior period expenses of Rs. 6,00,000/-, as the same have materialized in the year under consideration. Hence, the appellant succeeds at Ground of appeal No. 4." 15.1. On a careful consideration of the above considering the position of law on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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