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TMI Blog2023 (3) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned herein , passed by the Ld. Commissioner of Income tax (Appeals)- 10, New Delhi, (in short Ld. Commissioner ) u/s 250(6) of the Income Tax Act, 1961 (in short the Act ), pertaining to the assessment year 2013-14. 2. The Assessee being Cooperative Society is engaged in the trading/marketing of various types of fertilizer, manufactured by IFFCO at various places in India. As per annexure I to form 3CD, the nature of business of the society has been defined as under: i. Society is registered as Multi State Cooperative Society and is engaged in the development of Farm Forestry and other Social Welfare Projects and carrying on the business of development of Farm Forestry and other social welfare activities. ii. Trading of fertilizer through various societies/agencies. 3. The Assessing Officer from the Profit Loss account submitted by the Assessee, noted that the Assessee has claimed expenses to the tune of Rs. 6,28,66,118/- under the head expenses on Social Rural Development Programme , which the Assessee was claiming under the head Project Development in earlier years. Therefore, vide note sheet dated 9.12.2016, the Assessee was asked to explain social ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of business. In the earlier years i.e. A.Y. 2008-09, 2009-10 and 2010-11, this issue was examined in details and after detailed discussion in both A.Y.s, the claim of assessee in respect of project expenses was not treated as revenue expenditure and same was disallowed u/s 37(1) of the Income Tax Act, 1961. The Ld. CIT Appeal has deleted the addition made on account of treating project expenses as capital expenses in A.Y.2008-09 2009-10. The department has already filed appeal before the Hon ble ITAT in both the A.Y.S, and decision on the appeals filed are still pending. In view of the above facts and circumstances, I hold that, the project expenses of Rs.6,28,66,118/- does not fulfill the condition of section 37(1) and cannot be treated as Revenue Expenditure. The expenses should be claimed by assessee below the lone and should not be charged to P L A/c. Accordingly, the expenses of Rs.6,28,66,118/- is disallowed and will be added in the income of assessee U/s 37(1) of the Income-tax Act, 1961. 5. The Assessee being aggrieved, also challenged this addition before learned Commissioner. 6. The learned Commissioner by relying upon various orders passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but has incurred only revenue expenses - it has been clarified in the Annexure - 4 to Form 3CD that No capital expenditure / receipts has been debited / credited to the Profit and Loss Account'. Again, the appellant s contention that Expenses reimbursed have been deducted from project expenditure to the extent the same have been actually reimbursed by the sponsors of the projects. is borne out from available records. 5.2c From the copies of the following orders relied upon by the appellant - - IT AT Delhi s order in AY 2008-09 (ITA No.1700/Del/2012) and in AY 2009-10 (ITA No.4796/Del/2012) dated 26/07/2016 - CIT (A) s order for AY 2008-09 (Appeal No. 152/10-11) dated 22/12/2011 - CIT (A) s order for AY 2012-13 (Appeal No. 67/15-16) dated 28/10/2016 it is observed that the disallowance made on this issue in the relevant AYs has been deleted. Further, it is observed that the facts of the case therein are similar to those of the present case. In fact, the ITAT has upheld the order of the CIT(A) for AY 2008-09 on two grounds - no capital expenses where claimed as deduction by the appellant and such expenditures were accepted in earlier years. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yanarayana Rice Mill Contractors Co. {supra) had held that contributions made by the assessee to public welfare fund could be allowed as allowable expenditure under Section 37 of the Act where they were directly connected or related to the business of the assessee or had resulted in benefit to the business. It would not matter whether the said expenditure is in the nature of donation, charity, for public cause or results in public benefit, for this would not be good reason to deny the assessee deduction under section 37 of the Act when the payment is for the purpose of the assessee's business. 13. In the facts of the present case, the object and purpose of the respondent assessee is to engage and work for social and economic upliftment of the rural poor, construct water reservoirs etc. It is established for this purpose and receives grants and donations from third parties with the said objective and purpose. M/s. Indian Farmers Fertilizer Co-operative Ltd. had sold and supplied fertilizer that was marketed/sold by the respondent- assessee to earn profit/income, because the respondent-assessee was engaged in social and economic development activities. Association and busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not capital assets in the hands of the respondentassessee. The respondent-assessee had contributed, developed, financed and created assets which belonged to third persons. The expenditure incurred therefore would not be 'capital' in nature in the hands of the respondent assessee. 8. We further observe that Hon ble Tribunal in the Assessee s own case for A.Ys. 2010-11, 2011-12 2012-13 in ITA nos. 6831/Del/2014, 573/Del/2016 112/Del/2017 also came across with the identical issue and dismissed the appeals of the Revenue/Department, wherein also the Department challenged the learned CIT(A) s orders, whereby the learned CIT(A) held the similar expenditure as revenue in nature . 9. On the aforesaid facts and circumstances, we observe that no distinguishable facts or features are neither available on record nor brought to our knowledge by the Revenue Department, to contradict the findings of the authorities who have passed the orders in favour of the Assessee by holding the said expenditure as revenue in nature. Hence we are inclined not to interfere in the order passed by the learned Commissioner, as the same does not suffer from any perversity or impropriety ..... X X X X Extracts X X X X X X X X Extracts X X X X
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