9911796707
TMI Blog2016 (1) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee. Interest under section 80P(2)(d) was not allowable - Held that:- The entire issue of the petitioner's claim of deduction of interest of ₹ 2.29 crores under section 80P(2)(d) of the Act was examined by the Assessing Officer threadbare during the original assessment proceedings. It was in response to the queries raised by the Assessing Officer that the petitioner made a detailed representation and pointed out that the petitioner had earned interest income of ₹ 2.29 crores which was earned out of investment of amount received on sale of milk, milk products from GCMMFL. It was pointed out that since the interest was received from the cooperative society and earned out of investment made from its own fund, the assessee was entitled to full deduction under section 80P(2)(d) of the Act. It was further clarified that such interest was earned on short term deposits with the cooperative banks or from Cooperative societies. It was stated that no expenditure in the form of interest was incurred for earning such interest. The assessee also submitted that the expenditure of interest has no nexus with the income of the interest earned during the year. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer who passed the assessment order under section 143(3) of the Income Tax Act, 1961 ( the Act for short) on 31.1.2013. 3. To reopen such assessment, the Assessing Officer issued impugned noticed. Upon the request of the petitioner, he also supplied the reasons recorded by him for issuing notice for reopening. Such reasons read as under : 3.1 As per clause 11(a) of the 3CD Report, the assessee is following mercantile system of accounting. On perusal of notes on account of assessee in the audit report for financial year 200910 (Asst. Year 201011) read as provision of ₹ 76 crore for milk purchase/ sale account for milk pool price receivable from Gujarat Cooperative Milk Marketing Federation Ltd has been made by union and the same has been credited to respective primary cooperative societies. To this extent, trading, profit and loss account and balance sheet show provisional figures. It was noticed, that no such provision existed in the Balance Sheet. As assessee was following mercantile system of accounting, milk pool price receivable from Gujarat Cooperative Milk Marketing Federation Ltd should be passed through P L account and it should be sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. the assessee was not eligible for deduction of any amount u/s.80P(2)(d) of the Act of ₹ 2,29,17,577/ 5.1 On further perusal of Tax Audit Report in Form No.3CD, note forming part of income furnished by assessee and computation of income, it was noticed that though the assessee in the note forming part of income tax return has stated that an amount of ₹ 14,68,985/( net) expenditure under the head Prior period income/expenses is debited to Profit Loss a/c . It was however noticed from the 3CD report that Chartered Accountant has reported prior period income (net) of ₹ 21,34,590/against clause 22(b) of the Tax Audit Report. It was further noticed that while computing total taxable income, prior period expenditure of ₹ 14,68,985/- as reported by assessee itself. 5.2 As per section 37(1) of the act, any expenditure not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . As per clause 22(b) of the 3cd report, the ca has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the income chargeable to tax had escaped assessment was invalid. 2) Regarding second ground it was contended that the entire issue of deduction of interest income under section 80P(2)(d) of the Act was examined by the Assessing Officer during the original assessment for which written queries were raised and replies were given by the assessee. Any reexamination of such issue would only be on the basis of change of opinion not permissible even within period of four years from the end of relevant assessment year. 3) Regarding the ground no.3, counsel contended that sum of ₹ 14.68 lacs did not represent the assessee's prior period expenditure. It was in fact, income which was offered to tax by reducing the expenditure for the period under consideration and thereby increasing the income chargeable to tax. The Assessing Officer thus proceeded on entirely erroneous footing on this count. 7. On the other hand, learned counsel Shri K.M. Parikh for the Revenue opposed the petition contending that the impugned notice has been issued within a period of four years from the end of relevant assessment year. The additional requirement under proviso to section 147 that income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account and balance sheet show provisional figures. This note, in fact, clarified that said sum of ₹ 76 crores was a provisional figure for milk purchases and sales account receivable from GCMMFL. In fact, it clarifies that such sum has been reflected in the trading, profit and loss account and balance sheet on the basis of provisional figures. The Assessing Officer's assertion therefore, that the said sum was not reflected under the profit and loss account is not correct. This ground for reopening therefore, must fail. 11. Coming to the ground no.2 for reopening, we may recall that it pertained to the claim of deduction of interest of ₹ 2.29 crores under section 80P(2)(d) of the Act. In this context, the Assessing Officer during the assessment proceedings had raised the following queries in writing : 9. Please furnish detailed interest account(s) for all sorts of interest paid/payable and received/receivable. 29. Justify your claim of deduction u/s.80G, 80P(2)(d) and 80(P)(2)(e) with cogent and sufficient evidences. 12. To these queries, the petitioner had replied as under : 5. Point No.9: Details of interest paid or payable and details of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L. It was pointed out that since the interest was received from the cooperative society and earned out of investment made from its own fund, the assessee was entitled to full deduction under section 80P(2)(d) of the Act. It was further clarified that such interest was earned on short term deposits with the cooperative banks or from Cooperative societies. It was stated that no expenditure in the form of interest was incurred for earning such interest. The assessee also submitted that the expenditure of interest has no nexus with the income of the interest earned during the year. The assessee relied on decisions in its own case for earlier years pointing out that on this very ground, the assessee has succeeded before the appellate Tribunal. 14. It can thus be safely concluded that the Assessing Officer had examined this issue during the original assessment proceedings. Being satisfied that the claim of the assessee was justified, no disallowance was made. If the Assessing Officer had any doubt, it was always open to raise further queries or to squeeze the assessee further on this issue. However, having accepted the detail explanation of the assessee on the question of deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed part of total of ₹ 21.34 lacs prior period income. It was therefore, that the assessee in addition to crediting a sum of ₹ 7.14 lacs, by way of prior period income further added a sum of ₹ 14.69 lacs by giving negative effect to the expenditure. In other words, the income of the assessee was increased by said sum of ₹ 14.68 lacs. 17. We find that at pages 24 and 25 of the compilation of this petition which forms part of the trading, profit and loss account, the assessee had deducted a sum of ₹ 14.69 lacs from the expense side and further showed a sum of ₹ 7.14 lacs towards the income of prior period. Thus a total sum of ₹ 21.34 lacs was reflected in the income side. Though somewhat curiously and rather awkwardly, the assessee reduced the expenditure by ₹ 14.69 lacs and thereby indirectly increasing the income. The Assessing Officer was therefore, wrong in recording that said sum of ₹ 14.68 lacs represented prior period expenditure of the assessee. There was no material to support this assertion and consequently his conclusion that such expenditure though not allowable was claimed benefit of and income to that extent es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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