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TMI Blog2022 (5) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... Land Development Fund and Charitable Trust Fund are non-refundable and refundable deposits hence cannot be treated as the income of the Assessee- Societies. In assessee`s appeal assessing officer treated contribution towards welfare Fund and Hospital Fund as income of the assessee and added to the total income of the assessee and then initiated penalty proceedings under section 271(1) (c ) of the Act. We note that these are non-refundable and refundable deposits hence cannot be treated as the income of the Assessee-Societies. Therefore, in both the assessee case there is neither the case of furnishing inaccurate particulars of income nor concealment of income, hence penalty under section 271(1) (c) of the Act should not be levied. - we delete the penalty of both the assessee - Decided in favour of assessee. - ITA No.1735 And 1740/AHD/2015 - - - Dated:- 17-5-2022 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Mehul K. Patel, AR For the Revenue : Shri Sita Ram Meena, Sr. DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned two appeals filed by different assessees, pertaining to Assessment Year (AY) 2008-09, are directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the scrutiny proceedings, the assessing officer treated the following items as assessee`s income: (1) Contribution towards Kalyan Fund of Rs.18,87,425/-. (2) Road Development Fund of Rs.12,58,283/-. (3) Land Development Fund of Rs.6,29,142/-. (4) Charitable Trust Fund of Rs.12,58,283/- The total amount credited to these above funds was Rs.50,33,133/-. The assessing officer treated Rs.50,33,133/- as income of the assessee and added to the total income of the assessee. The assessing officer also held that assessee has consciously and deliberately furnished inaccurate particulars of income of Rs.50,33,133/- therefore, the assessee has become liable for penalty u/s 271(1)(c) of the Income Tax Act, 1961, hence the assessing officer imposed penalty under section 271(1) (c ) of the Act, to the tune of Rs.15,37,079/-, on account of furnishing inaccurate particulars/concealment of income. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the penalty imposed by the Assessing Officer. Aggrieved by the order of the ld CIT(A), the assessee is in appeal before us. 7. Shri Mehul K. Patel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. On a consideration of the bye-laws as a whole, it is difficult to hold that either the assessee or the depositor exercises complete dominion over the deposited amounts. If so, it is not possible to countenance the plea that the title to the deposits will throughout remain in the hands of the Society and the depositor has no stake or interest therein, once it reaches the assessee's hands. 36. Viewed from the point of view of the primary purpose of deposit-a test which has been formulated by this Court in Bazpur Co-operative Sugar Factory Ltd.'s case (supra) though without much of discussion, we are of the view that the answer cannot be the same as in Bazpur Co-operative Sugar Factory Ltd.'s case (supra). In this connection the Tribunal recorded the finding that the purpose of collecting nonrefundable deposits was not only to repay term loans taken from financial institutions and to repay the Government share capital, but also to convert the so called deposits into shares . The Tribunal expressed the view that the whole idea was to increase the capital base of the assessee in a phased manner by retaining some portion of the money payable to cane-growers, while at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the learned counsel, all this indicated as to how the deposited amounts were being treated by the members apart from the assessees. We are not inclined to delve into these aspects which are being projected for the first time before us. Though this stand was taken before the Tribunal and a sample assessment order was filed, evidently the finding of the Tribunal was not invited on this aspect. 39. The learned counsel for the Revenue tried to invoke section 41(1) to fortify his argument that the impugned receipts constitute income in the hands of the assessee-society. No such question was considered by the High Court or even by the Tribunal specifically. In fact, the questions formulated in the reference cases indicate that the decision of the High Court was not invited on this point. Hence we do not propose to deal with it. 40. As regards refundable deposits, the relevant bye-law is 61-B which has been quoted supra. In the light of what we have said about non-refundable deposits, it does not require further elaboration to conclude that these deposits cannot in any sense be treated as income of the assessee-Society. Though deducted from the cane price, they are pure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs. Revenue's appeals Re: Other deductions made towards various Funds Leave granted in Special leave petition (Civil) Nos. 5407, 5338, 5882, 17143 of 2001, 523-527, 18548, 23892 of 2002, 2747 and 4871 of 2003. 42. Pursuant to the instructions issued and the guidelines evolved by the Director of Sugars, may be under the authority of the State Government, the deductions at the prescribed rate were made out of the cane price for being credited into (1) Chief Minister's Relief Fund, (2) Late Shri Y.B. Chavan Memorial Fund, (3) Hutment Fund, (4) Area Development Fund, (5) Cane Development Fund and (6) Members' Small Savings Fund. It is common ground that the identity of such deducted amounts was being preserved and separate accounts were being maintained in relation thereto. In regard to Area Development Fund, the Tribunal was of the view that the assessee had no control over these funds and they were collected on behalf of and as an agent of the State Government. In regard to other funds, the Tribunal held that the deducted amounts were only retained with the assessee in order to make them over to the Government which ultimately spent the same for ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced in the paper-book, is meant to enable the co-operative sugar factories to render socio-economic services in the area of operation. The area development programmes may cover agricultural extension, irrigation facilities, educational and medical services, development of animal husbandry and poultry, drought relief work and so on. By doing so, the sugar co-operatives will be supplementing the efforts of the Government in promoting the socio-economic development of the area. The Board of Directors of the co-operative society are required to pass a resolution specifying the details of expenditure proposed to be incurred from out of the Area Development Fund. They should obtain the sanction of the Directors of Sugar for incurring such expenditure. Such information is also required to be placed before the General Body of the society and the approval to be obtained from the General Body. On 21st June, 1988, the Agriculture and Co-operation Department of the Government of Maharashtra framed certain directive principles laying down the modalities of utilization of Area Development Funds. The said order was issued in exercise of the power under section 79A of the Maharashtra State Co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Bijlee Cotton Mills (P.) Ltd. [1979] 1 SCC 496, has been invoked to substantiate the argument. It is contended that the realizations towards Area Development Fund would more or less stand on the same footing as deposits. The controversy has not been approached in the light of the above arguments. We do not consider it appropriate to express our view for the first time, especially when the determination thereof may depend on the consideration of certain facts. We therefore leave this point open for fresh determination by the Tribunal. 48. As far as Sugar Cane Development Fund is concerned, the case of the Revenue seems to stand on a stronger footing. In the paper-book, we find a Circular dated 18th August, 1986 in which certain directive principles have been laid down to regulate the expenditure to be incurred out of Cane Development Fund. The items specified in the directive principles are (1) green manuring, (2) lift irrigation schemes, (3) distribution of cane seeds and (4) construction of new wells or deepening of old wells. The sugar factory is required to make sure that any project which they want to undertake out of the Cane Development Fund is technically and financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as the income of the assessees and any claim for deduction shall be entertained and decided by the Tribunal. As regards the Area Development Fund, the matters are remitted to the Income-tax Appellate Tribunal, Pune Bench for fresh determination subject to the observations made in this judgment. In respect of other items, the appeals shall stand dismissed. 50. In the ultimate analysis, the assessees' appeals are allowed and the Commissioner's appeals are partly allowed to the extent indicated above. 10. It is abundantly clear from the judgment of the Hon`ble Supreme in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd (supra) that if it is found that certain amounts were deducted by assessee society out of price payable to its members who supplied raw material, conclusion does not necessarily follow that all such realizations get impressed with character of revenue receipts, giving rise to taxable income in the hands of the assessee. Therefore, Contribution towards Kalyan Fund of Rs.18,87,425/-, Road Development Fund of Rs.12,58,283/-, Land Development Fund of Rs.6,29,142/- and Charitable Trust Fund of Rs.12,58,283/- are non-refundable and refundable deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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