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TMI Blog2015 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of the said machines. The amount collected by the assessee do not constitute the income of the assessee as the said collection has been made for the specific purpose of purchasing the milk testing machines and milking machines at village centre level. Accordingly, we hold that the amount reflected in the Process, Project and Research Fund is not the income of the assessee and there is no merit in holding the same as income of the assessee. Accordingly, we direct the AO to delete the addition of ₹ 40,71,516/-. - Decided in favour of assessee. Treatment of the subsidy received from the Central Government - whether the said amount is a capital receipt in the hands of the assessee? - Held that:- In the facts of present case, the subsidy received by the assessee is capital subsidy. In the totality of the above said facts and circumstances, we direct the Assessing Officer to allow the depreciation on the bulk coolers purchased by the assessee without reducing the amount of subsidy from the cost of the asset for computing the depreciation under section 32(1) of the Act - Decided in favour of assessee. Deduction under section 80P(2)(d) - Gross amount of interest received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the same to the amount of interest paid on the secured bank loan. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice. 3. The issue in ground of appeal No.1 is against the disallowance made under section 40(a)(ia) of the Act. 4. The brief facts of the case are that the assessee society for the year under consideration had furnished return of income on 17-10- 2008 declaring total income at NIL, after claiming deduction under section 80P of the Income Tax Act. The assessee was engaged in the sale/purchase of processing of milk and also manufacturing of mineral water. The assessee was carrying on the said milk business as a federal milk society, i.e. it was collecting milk from primary cooperative milk societies and supplying it to the Government and Mahananda Dairy. The milk was sold under the brand name Rajhans in pouches of one litre and half litre and the same were also sold through dealers in various cities. 5. The assessee was carrying on the business of manufacturing and sale of milk products and also aqua water under the name Rajhans . The case of the assessee on this aspect was scrutiniz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of ITO Vs. M/s. Gaurimal Mahajan Sons vide ITA No.1852/PN/2012 relating to assessment year 2008-09 order dated 06-01-2014. 9. The learned Departmental Representative for the revenue on the other hand placed reliance on the ratio laid down by the Hon ble Gujarat High Court in the case of CIT Vs.Sikanderkhan N. Tunwar (Supra) and in the case of CIT Vs. Crescent Export Syndicate (Supra). 10. We have heard the rival contentions and perused the record. The issue arising in ground of appeal No.1 is in relation to the invoking of provisions of section 40(a)(ia) of the Act. The assessee during the year under consideration had incurred advertisement expenditure by way of payments to the different advertisers which exceeded the sum of ₹ 20,000/-. Under the provisions of section 194C of the Act where the payments made to advertiser is ₹ 20,000/- or above, then, the payer is required to deduct tax at source out of such payments either at the time of payment or the credit of the amount, whichever is earlier. In case of failure to deduct tax at source under section 194C of the Act, the said expenditure is not to be allowed as an expense in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant observation of the Hon ble High Court read as under : We requested Mr. Khaitan, learned Senior Advocate to assist the Court in resolving the issue. The matter was directed to be listed for further hearing on 1st April, 2013. Dictated on 3rd April 2013 Mr. Khaitan, learned Senior Counsel, submitted that the views expressed by the Accountant Member are preferable to the views expressed by the Judicial Members. The Accountant Member in the case of Merilyn Shipping Transports had expressed the following views : 12.2. The question for consideration is as to why the words 'credited' or 'paid' contemplated in the Bill were dropped while incorporating Section 40(a)(ia). All the amounts whether 'credited' or 'paid' come within the ambit of term 'payable' and, therefore, the two terms, viz. 'credited' or 'paid' were only superfluous and, therefore, were dropped in the Section 40(a)(ia) inserted in the Act. In the provisions relating to TDS, the relevance of these terms was with reference to timing of deduction but while making disallowance under Section 40(a)(ia), these terms had no relevance and, therefore, leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of Section 139; or (B) in any other case, on or before the last day of the previous year:] [Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted - (A) during the last month of the previous year but paid after the said due date; or (B) during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Explanation:-For the purposes of this sub-clause,- (i) commission or brokerage shall have the same meaning as in clause (i) of the Explanation to section 194 H; (ii) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (I) of section 9; (iii) professional services shall have the same meaning as in clause (a)of the Explanation to section 194J; (iv) work shall have the same meaning as in Explanation III to section194C; [(v) rent shall have the same meaning a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor and - ** ** ** shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent in case of advertising, (ii) in any other case two per cent, of such as income-tax on income comprised therein. Commission or brokerage: 194-H: Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in Section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of (ten) per cent: ** ** ** Rent. 194-I. Any person not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that identical considerations permeate through all the aforementioned Sections which are as under:- (i) any person responsible for paying any sum to any resident in respect of aforementioned items; (ii) shall; (iii) at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier; (iv) Deduct income tax thereon at the prescribed rate; The term 'shall' used in all these sections make it clear that these are mandatory provisions and applicable to the entire sum contemplated under the respective sections. These sections do not give any leverage to the assessee to make the payment without making TDS. On the contrary, the intention of the legislature is evident from the fact that timing of deduction of tax is earliest possible opportunity to recover tax, either at the time of credit in the account of payee or at the time of payment to payee, whichever is earlier. When we examine Section 40(a)(ia) in the backdrop of these sections, we find that it refers to the amount 'payable' 'on which tax was deductible at source under Chapter X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious decisions and in the case of Jaipur Vidyut Vitaran Nigam Limited (supra), the Tribunal had relied on the definition of Section 43(2) but the import of phrase 'incurred in accordance with the method of accounting followed' was not considered. Therefore, the finding that by implication the word 'payable' does not include 'paid' cannot be accepted. 17. The next argument of ld. Counsel for the assessee is based on Rule 30, which contemplates time and mode of payment to Government account of tax deducted at source. In our opinion, this Rule merely contemplates the procedure of depositing the TDS amount and merely because different time limits are prescribed, it would not follow that different considerations would apply while considering the term 'payable' under Section 40(a)(ia) of the Act. Ld. Counsel has also referred to Section 234B dealing with levy of interest to demonstrate that actual payment and payable amount are to be separately dealt with. However, these procedural sections cannot override the substantive provision of the Act. Tribunal in the case of Jaipur Vidyut Vitaran Nigam Limited (supra) has also observed that Section 40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome contentions, which have direct bearing on the present issue:- At para 5 of judgment: Mr. C. Natarajan, learned senior counsel appearing for the petitioners in Writ Petn. Nos. 10750 and 10751 of 2009 contended that while contractors business has no nexus to the determination of profits and gains of the business of the petitioner, s. 40(a)(ia) mutates itself to tax the petitioners at a disproportionate rate and quantum while purporting to address s. 194C and the contractors. According to him the effect of s. 40(a) (ia) is so grossly unreasonable that it imposes tax liability on the business of the petitioners even if the contractor himself paid the tax in his returns in the absence of TDS effected by the petitioners. At para 14 of judgment: According to the learned senior counsel, the implication of s. 40(a)(ia) is irrespective of the circumstances in which the deduction failed to be made and therefore it is arbitrary. By relying upon the decisions of the Hon ble Supreme Court in the case of Coca cola and Eli Lily, the learned senior counsel contended that when the Hon ble Supreme court has held that the liability of an assessee under s. 201 on failure to deduct or pay tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saran v. CST [1985] 155 ITR 144 (SC); (v) Godhira Electricity Co. Ltd. v. CIT [1997] 139 (JR 564/ [1997] 225 ITR 746 (SC) in support of his submissions. At para 33 of judgment: It was then contended that an expenditure is not an income and consequently the collection of tax as envisaged under Art. 265 is not permissible. It was also contended that s. 40(a)(ia) conflicts with S. 145 of the Act since the method of accounting is disturbed. At para 41 of judgment: As against the submissions of the petitioners that the provision is illusory, the learned counsel contended that though the words used in the proviso are deduct and pay, there is no prohibition for the assessee to make the payment without any deduction. In that context, the learned counsel relied upon s. 195A and stated that such a situation is envisaged therein. The learned standing counsel also relied upon Addl CIT v. Farasol Ltd. [1987] 163 ITR 364 (Raj.) where in the context of s.40(a) it was held by the Rajasthan High Court that even where the amount is paid out of the assessee s pocket but not deducted, he would be eligible for the deduction. At para 46 of judgment : Mr.K. Subramaniam, learned standing couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sertion of clause (ia) in clause (a) to section 40 of the Act was with a view to augment compliance of TDS provisions. (iv) When the provisions and procedures relating to TDS are scrupulously applied, first and foremost it ensures the identification of the payees and thereby network of assessees gets confirmed. When once such identity of assessees, who are in receipt of the income can be ascertained, it will enable tax collection machinery to bring within its fold all such persons who are liable to come within the network of taxpayers. Thus, if it is held that the provisions of section 40(a)(ia) are not applicable in respect of those payments which have been paid without making TDS and at the end of the year no amount is outstanding then the very object of identification of payees will get frustrated. (v) The legislative intent of the introduction of section 40(a)(ia) is in the larger perspective of augmenting the very TDS provisions themselves. It is not merely related to the collection of TDS only. (vi) The intention of the legislature is not to tax the payer for its failure to deduct the tax at source. The object of introduction of section 40(a)(i) as well as section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minority views expressed in the aforesaid case. The main thrust of the majority view is based on the fact that the Legislature has replaced the expression amounts credited or paid with the expression payable in the final enactment. Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achieved by an amendment. This is precisely what was done by the Apex Court in the case of CIT Vs. Kelvinator reported in 2010(2) SCC 723. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted law. It is the finally enacted law which is the will of the legislature. The Learned Tribunal fell into an error in not realizing this aspect of the matter. The Learned Tribunal held that where language is clear the intention of the legislature is to be gathered from the language used . Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, this would be a clear pointer to the legislative intent that the legislature being conscious of the fact and being armed with all the Committee reports and also being armed with the factual data, deliberately avoided those words. What the appellants are asking was to read in that definition, these precise words, which were consciously and deliberately omitted from the definition. That would amount to supplying the casus omissus and we do not think that it is possible, particularly, in this case. The law of supplying the casus omissus by the courts is extremely clear and settled that though this Court may supply the casus omissus, it would be in the rarest of the rare case and thus supplying of this casus omissus would be extremely necessary due to the inadvertent omission on the part of the legislature. But, that is certainly not the case here . We shall now endeavour to show that no other interpretation is possible. The key words used in Section 40(a)(ia), according to us, are on which tax is deductible at source under Chapter XVII -B . If the question is which expenses are sought to be disallowed? The answer is bound to be those expenses on which tax is deductible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted. The appeal is, thus, allowed in favour of the revenue. 8.2 We find the Hon ble Gujarat High Court in the case of CIT Vs. Sikandarkhan N. Tunvar in the order dated 02-05-2013 reported in 2013-TIOL-389-HC-AHM has held as under : 5. In all these appeals the Tribunal has followed the decision of the Special Bench in the case of M/s. Merilyn Shipping Transports vs. ACIT (supra) and deleted the disallowance on this limited ground. As in the present case, other grounds of controversy between the parties with respect to allowability or otherwise of such expenditure was not examined by the Tribunal. For the purpose of these appeals, therefore, we frame following substantial questions of law:- 1. Whether disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 could be made only in respect of such amounts which are payable as on 31st March of the year under consideration? 2. Whether decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping Transports vs. ACIT (supra) lays down correct law? 6. Counsel for the Revenue contended that the Tribunal has committed serious error in holding that provision of Section 40(a)(ia) of the Act wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of M/s. Merilyn Shipping Transports vs. ACIT(supra). Even on the premise of literal construction, the view adopted by the Tribunal should be rejected. 9. On the other hand, counsel appearing for the assessees supported the view of the Tribunal. They contended that in taxing statute there is no room for intendment. The provisions must be construed strictly on the basis of plain language used by the legislature. According to them only meaning that can be ascribed to Section 40(a)(ia) of the Act is that the disallowance can be made in respect of amounts, which are payable but not yet paid till 31st March of the year under consideration and no other. 10. It was contended that the provision in question is exproprietary since it disallows entire expenditure for not deducting a small portion of tax at source. It is thus in a nature of penalty. It was contended that in any case, Section 40(a)(ia) creates deeming fiction where the sum . though not an income of the assessee is taxed as such. It was, therefore, contended that such provision should be interpreted strictly and narrowly. Even if the intention of the legislature may not have been to limit such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laining the concept of taxability of income, when it accrues, arises or is received, it was observed that the receipt is not the only test of chargeability to tax and if income accrues or arises, it may become liable to tax. In this context, it was observed that Working of company from day to day would certainly not indicate any profit or loss, even working of the company from month to month could not be taken as a reliable guide for this purpose. If the profit or loss has to be ascertained by comparison of the assets at two stated points, the most businesslike way would be to do so at stated intervals of one year and that would be a reasonable period to be adopted for the purpose. On the basis of such observations it was canvassed that the payability of the sum as referred to in Section 40(a)(ia) of the Act must be judged as on 31st March of the particular year. 14. Counsel have also referred to various judgments in support of the contention that in the present case, strict interpretation is called for. It is not necessary to refer to such decisions. 15. Chapter XVII-A of the Act pertains to collection and recovery of the tax. Part-A thereof is general. Part-B of Chapter X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government. Section 40(a) (ia) relevant for our purpose reads as under:- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in subsection (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section(l) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 17. In plain terms Section 40(a)(ia) provides that in case of any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or subcontractor for carrying out any work o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the draft of the amendment in Section 40 and the ultimate amendment which actually was passed by the Parliament. It was observed that from the comparison between the proposed and the enacted provision it can be seen that the legislature has replaced the words amounts credited or paid with the word payable in the enactment. On such basis, it was held that this is a case of conscious omission and when the language was clear the intention of the legislature had to be gathered from language used. In their opinion the provision would apply only to amounts which are payable at the end of the year. Having said so, curiously, it was observed that the proviso to Section 40(a)(ia) of the Act lays down that earlier year's provision can be allowed in subsequent years only if IDS is deducted and deposited and, therefore, Revenue's fear is unfounded as the provision of Section 40(a)(ia) of the Act covers the situation. 21. In the present case, we have no hesitation in accepting the contention that the provision must be construed strictly. This being a provision which creates an artificial charge on an amount which is otherwise not an income of the assessee, cannot be liberally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to due . 23. Despite this narrow interpretation of section 40(a)(ia), the question still survives if the Tribunal in case of M/s. Merilyn Shipping Transports vs. ACIT (supra) was accurate in its opinion. In this context, we would like to examine two aspects. Firstly, what would be the correct interpretation of the said provision. Secondly, whether our such understanding of the language used by the legislature should waver on the premise that as propounded by the Tribunal, this was a case of conscious omission on part of the Parliament. Both these aspects we would address one after another. If one looks closely to the provision, in question, adverse consequences of not being able to claim deduction on certain payments irrespective of the provisions contained in Sections 30 to 38 of the Act would flow if the following requirements are satisfied:- (a) There is interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to resident or amounts payable to a contractor or subcontractor being resident for carrying out any work. (b) These amounts are such on which tax is deductible at source under Chapter XVII-B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such an interpretation. We only highlight that we would not readily accept that the legislature desired to bring about an incongruous and seemingly irreconcilable consequences. The decision of the Supreme Court in the case of Commissioner of Income-Tax, Gujarat vs. Ashokbhai Chimanbhai (supra), would not alter this situation. The said decision, of course, recognizes the concept of ascertaining the profit and loss from the business or profession with reference to a certain period i.e. the accounting year. In this context, last date of such accounting period would assume considerable significance. However, this decision nowhere indicates that the events which take place during the accounting period should be ignored and the ascertainment of fulfilling a certain condition provided under the statute must be judged with reference to last date of the accounting period. Particularly, in the context of requirements of Section 40(a)(ia) of the Act, we see no warrant in the said decision of the Supreme Court to apply the test of payability only as on 31st March of the year under consideration. Merely because, accounts are closed on that date and the computation of profit and loss is to be j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the Legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid sought to be resorted to by the parties in the case must be excluded from consideration in ascertaining the true object and intention of the Legislature. 29. In yet another Constitution Bench judgment in the case of A.K.Gopalan vs. State of Madras reported in AIR 1950 SC 27, it was observed as under: - 17.....The result appears to be that while it is not proper to take into consideration the individual opinions of members of Parliament or Convention to construe the meaning of the particular clause, when a question is raised whether a certain phrase or expression was up for consideration at all or not, a reference to the debates may be permitted. 30. In the case of Express Newspaper (Private) Ltd. and another vs. The Union of India and others reported in AIR 1958 SC 578, N.H.Bhagwati, J., observed as under:- 173. We do not propose to ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular meaning to the statutory provision. 32. It is, of course, true that the Courts in India have been applying the principle of deliberate or conscious omission. Such principle is applied mainly when an existing provision is amended and a change is brought about. While interpreting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, we notice from various decisions of the Supreme Court, has been when the language of the legislature is compared with some other analogous statute or other provisions of the same statute or with expression which could apparently or obviously been used if the legislature had different intention in mind, while framing the provision. We may refer to some of such decisions presently. In the case of Bhuwalka Steel Industries Ltd. vs. Bombay Iron and Steel Labour Board reported in AIR 2010 (Suppl.) 122, the Apex Court observed as under:- The omission of the words as proposed earlier from the final definition is a deliberate and conscious act on the part of the legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king company' defined in the Banking Regulation Act, 1949, observed as under:- 59. The RDB Act was passed in 1993 when Parliament had before it the provisions of the BR Act as amended by Act No.23 of 1965 by addition of some more clauses in Section 56 of the Act. The Parliament was fully aware that the provisions of the BR Act apply to co-operative societies as they apply to banking companies. The Parliament was also aware that the definition of 'banking company' in Section 5(c) had not been altered by Act No.23 of 1965 and it was kept intact, and in fact additional definitions were added by Section 56(c). Co-operative bank was separately defined by the newly inserted clause (cci) and primary co-operative bank was similarly separately defined by clause (ccv). The Parliament was simply assigning a meaning to words; it was not incorporating or even referring to the 'substantive provisions of the BR Act. The meaning of 'banking company' must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act, It would have been the easiest thing for Parliament to say that 'banking company' shall mean 'banking company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether in the context of the relevant provisions contained in West Bengal Land Reforms and Limitation Act, 1963 applied or not, observed as under:- 8....Prior to 15-2-1971, an application under Section 8 was required to be made to the Revenue Officer specifically empowered by the State Government in this behalf. This phrase was substituted by the phrase Munsif having territorial jurisdiction by the aforementioned amendment. Even after this amendment when an application is required to be made to Section 8 of the Act either to apply Section 5 of the Limitation act or its principles so as to enable a party to make an application after the expiry of the period of limitation prescribed on showing sufficient cause for not making an application within time. The Act is of 1955 and for all these years, no provision is made under Section 8 of the Act providing for condonation of delay. Thus, when Section 5 of the Limitation Act is not made applicable to the proceedings under Section 8 of the Act unlike to the other proceedings under the Act, as already stated above, it is appropriate to construe that the period of limitation prescribed under Section 8 of the Act specifically and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Calcutta High Court and Gujarat High Court cited (Supra) had allowed the appeal filed by the revenue wherein the CIT(A) had held that provisions of section 40(a)(ia) would apply when the amount is payable and where the expenditure is paid. The argument of the Ld.counsel for the assessee that when two views are possible the view favourable to the assessee has to be followed in view of the decision of the Hon ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd.(Supra) is not applicable to the facts and circumstances of the present case. In this view of the matter, we uphold the order of the CIT(A) and the grounds raised by the assessee are dismissed. 9. In the result, the appeal filed by the assessee is dismissed. 11. Following the same party of reasoning, we are in conformity with the order of the CIT(A) in disallowing the advertisement expenses for non-deduction of tax at source under the provisions of section 194C of the Act. Consequently, expenditure is not allowable in the hands of the assessee for the instant assessment year in view of the provisions of section 40(a)(ia) of the Act. The ground of appeal No.1 raised by assessee is thus dismissed. 12. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view, this amount would constitute income of the Society. For this conclusion, I derive support from the decisions in the case of Siddeshwar Sahkari Sakharkarkhana Limited vs CIT(2009) 270ITR 1 (SC). In this case, the Supreme Court held that, contributed by members for Cane development fund constitute income of the assessee. Accordingly, I confirm the addition of ₹ 40,71,516/- . 15. The learned Authorised Representative for the assessee pointed out that the amount was collected from the identified primary cooperative societies, which in turn was authorized by the resolution passed by the Board of Directors in the General Body meeting. The total accumulated amount in the said funds as on 31- 03-2007 was ₹ 3,22,24,184/- and the amount collected during the year was ₹ 44,93,125/-, out of which sum of ₹ 4,21,809/- was attributed to the appropriation of profit. The learned Authorised Representative for the assessee fairly pointed out that it was not against the said appropriation. The source of the balance expenditure was identified and the credit worthiness of the parties stood established since the amount was collected from the milk payments. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the creation of the said fund was that in view of the total number of primary cooperative societies, which were members of the assessee society, the estimated expenditure of the milk testing machines and milking machines could be collected by 31-03-2012. During the year under consideration, the assessee had collected a sum of ₹ 44,93,125/- and addition to the extent of ₹ 40,71,516/- was made in the hands of the assessee on the surmises that the assessee was unable to explain the source of addition of the above fund. 18. We find no merit in the order of the AO and the CIT(A) in this regard. The assessee had given the bifurcation of the amounts collected member-wise in the list which is available on record. In view thereof, the source of the said amount stands established and further the credit worthiness of the said persons, who had advanced the amount also stood established since the amount was collected by way of deduction from the milk purchased, i.e. from the amount due to the said parties, from whom the assessee had purchased the milk in the process of carrying on its business. The resolution passed by the Board of Directors in its meeting held on 21-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res as grant from Central Government. The Assessing Officer noted that the assessee had purchased bulk coolers of ₹ 2,48,11,010/- after September 2006 on which the assessee claimed depreciation @7.5%. The case of the Assessing Officer was that the cost of bulk coolers should have been reduced by the subsidy of ₹ 1.35 crores received from Central Government and the depreciation on the balance value should be allowed in the hands of the assessee. The Assessing Officer thus disallowed the excess claim of depreciation at ₹ 10,12,500/- as per the recomputation of depreciation worked out under para 10 of page 6 of the assessment order. 22. The CIT(A) was of the view that in view of the provisions of Explanation 10 to section 43(1) of the Act it was clear that the amount of subsidy received of ₹ 1.35 crores was part of the total subsidy of ₹ 3.36 crores and the same was directly relatable to the purchase of bulk coolers. In view thereof the order of the Assessing Officer was upheld by the CIT(A). 23. The learned Authorised Representative for the assessee took us through the scheme of Government of India which is placed on pages 39 to 43 of the paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the assessee. The perusal of the terms of scheme reflects that the same was proposed for Strengthening Infrastructure for Quality and Clean Milk Production in Sangamner Taluka in Ahmednagar District of Maharashtra State, which in turn was to be implemented by the assessee society and another society known as Prakriya Sangh Ltd., Sangamner. Under the scheme, the District covered was Sangamner Tauka in Ahmednagar District, wherein total number of farmers were to be trained over a period of 3 years, i.e. 1250 farmers at a total cost of ₹ 3,12,000/-. Further, under the said scheme bulk milk cooling facilities with accessories had to be purchased and installed, i.e. 49 Nos. of 20001 Leap @6.00 lakh/unit and 51 Nos. of 400 Leap @2.00 lakh/unit installed at a total cost of ₹ 2,97,00,000/-. The other purposes for which the said scheme was meant and intended to be implemented were as under : i. Detergents, antiseptic solution, muslin cloth etc. ii. Utensils and accessories iii. Strengthening of existing 180 DCS lab and dairy lab iv. Planning and monitoring 27. The total cost of the project ₹ 453.82 lakhs out of which the share of the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets. A careful perusal of Target 2000' scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1). In the light of the above discussion, for the purpose of computing deprecition allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset . 30. In the facts of present case, the subsidy received by the assessee is capital subsidy. In the totality of the above said facts and circumstances, we direct the Assessing Officer to allow the depreciation on the bulk coolers purchased b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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