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TMI Blog2016 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the Hon’ble Supreme Court in the case of Sun Engineering (1992 (9) TMI 1 - SUPREME Court ) is squarely applicable to the facts of the case. Even assuming that it is only re-adjustment of claim already made, such re-adjustment is not possible in the proceedings of re-assessment. The assessee can have recourse to any other provisions of the Income-tax Act, 1961. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has claimed deduction from certain funds viz., Common Good Fund ₹ 25,00,000 Special Assistance Fund ₹ 1,00,00,000 PACS/DCCB Fund ₹ 50,00,000 Rural Farmers Social Economic Dev.Fund ₹ 1,35,00,000 The assessee is not entitled to claim the above deduction as these are the funds created out of distributed profit. Hence cannot be allowed as deduction as per the Income tax Act. I am, therefore, satisfied that income chargeable to tax has escaped assessment. Proceedings u/s 147 of the Income tax initiated. Issue notice u/s 148 of the Income tax Act." 4. The assessee-co-operative bank filed return of income in response to notice u/s 148 on 13/9/2012 declaring a total income of ₹ 36,19,77,100/-. After issuing notice u/s 143(2), the assessment was completed by the AO u/s 143(3) r.w.s. 147 vide order dated 30/3/2013 at a total income of ₹ 51,71,70,670/-. While doing so, the AO has disallowed expenditure claimed on account of the following funds holding that the amounts are expended only after appropriation of profits and therefore not allowable as deduction. a) Common Good Fund ₹ 25,00,000/- b) Special Assistance Fund Rs.5,00,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Supreme Court in the case of Sun Engineering Works (supra) is not applicable. 6.2 On the other hand, ld.CIT(DR) vehemently opposed the submissions of the learned AR of the assessee-co-operative bank and submitted that the issues in appeal are squarely covered by the decision of the Hyderabad bench of Tribunal in the case of A.P.Mahesh Co-operative Urban Bank Ltd. Vs. DCIT (55 Taxman.com 429). 7. We heard the rival submissions and perused the material on record. It is undisputed fact that the assessee-co-operative bank had spent amount on the following funds: a) Common Good Fund ₹ 25,00,000/- b) Special Assistance Fund Rs.5,00,00,000/- c) Payment to PACS/DCCB Fund Rs.5,27,50,000/- d) Rural Farmers Socio Economic Development Fund …. ₹ 33,93,782/- Rs.10,86,43,782/- It is not the case of the revenue that the above expenditure is capital in nature. The lower authorities had disallowed the above expenditure solely on the ground that it is only appropriation out of profits and not expenditure. The approach of the lower authorities cannot stand the test of law laid down by the Privy Council in the case of Indian Radio Cable Commu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than 25% of the net profit shall be carried to the Reserve Fund. 2) Out of the balance of the net profit, contribution to the Cooperative Education Fund and to the Sahakari Kalyana Nidhi be provided as laid down under the Act. 3) The balance of net profit may be utilised for all or any of the following purposes namely. a) dividend on share as fixed h the Board he paid to the members. b) Of the remaining balance a sum not less than 15% shall be contributed to the Agricultural Credit Stabilisation Fund. c) Of the remaining balance, a sum not less that 15% shall be contributed to the Bad and Doubtful Debt Reserve Fund. d) Of the remaining balance, a sum not less than 2% shall be contributed to the Bad and Doubtful Debt Reserve Fund. e) Of the remaining balance, a sum not less than 10% to the building fund. f) Of the remaining balance a sum not less than 15% to the Special Assistance Fund to the members of the Bank. g) Of the remaining balance a sum not less than 15% to the Primary Agricultural Credit Societies Development Fund. h) Of the remaining balance a sum not less than 2% to the Dividend Equalisation Fund. i) Of the remaining balance not less than 5% sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected with the business, Therefore, the question that requires consideration in this case is whether the contribution to the education fund under section 68 of the Maharashtra Co-operative Societies Act is an expenditure laid out wholly and exclusively for the purpose of the business of the assessee. 8.3 Under the above by-law, different rates of contribution have been prescribed for different kinds of funds, needless to mention that these bye-laws are framed pursuant to the Karnataka Co-operative Societies Act, 1959. Therefore, it is a statutory obligation of the assessee-co-operative bank to contribute to the above fund. For allowance of expenditure, it is settled proposition of law that the expenditure should result in profit. In this connection, reference may be made to the decision of the Hon'ble Apex Court in the case of CIT vs. Rajendra Prasad Moody (115 ITR 519). It may be further stated that one of the objects of the assessee-co-operative bank is to develop or assist and co-operative the member district central co-operative banks and other co-operative societies and therefore the contribution was only made in further pursuance of the objects of the bank for which it was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 10,86,43,782/- as deduction while computing income of the assessee-co-operative bank. 9. In the result, grounds of appeal Nos.2 to 4 are allowed. 10. As regards ground No.5 about allowance of additional claim on account of loss on sale of securities of ₹ 8,28,65,052/- it is undisputed fact that this claim was made only in the return of income filed in response to notice u/s 148. The issue is whether the assessee is entitled to agitate the issues which were concluded in the original assessment proceedings? This additional claim was obviously not made in the original assessment proceedings nor this issue is one of those issues which is sought to be reconsidered by the AO during the course of re-assessment proceedings. Therefore, concluded issue in the original assessment proceedings cannot be re-agitated during the course of re-assessment proceedings. The ratio laid down by the Hon'ble Supreme Court in the case of Sun Engineering (supra) is squarely applicable to the facts of the case. Even assuming that it is only re-adjustment of claim already made, such re-adjustment is not possible in the proceedings of re-assessment. The assessee can have recourse to any other provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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