IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "H" NEW DELHI
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT
AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER
ITA No: 6157/Del/2012
AY : - 2007-08
ACIT vs. The Baghpat Co-operative Sugar
Circle-2, Mills Ltd.
Meerut Baghpat
Meerut
(PAN AAAT0568P)
(Appellant) (Respondent)
Appellant by : Shri J.P. Chandrekar, Sr. DR
Respondent by :Shri P.S. Kashyap, CA
Date of Hearing :29.7.2015
Date of pronouncement :7.8.2015
ORDER
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the revenue directed against the order of the CIT(A)
Meerut dated 4.9.2012 for the asstt. year 2007-08. The assesee is a co-operative
society and it filed its return of income for the assessment year 2007-08 on
18.10.2007 declaring total loss at Rs. 18,48,23,232/-. The AO completed the loss of
Rs. 1,66,35,600/- disallowing the following :-
1. Subscription to Federation Rs. 16,29,918/-
2. Interest to federation Rs. 1,65,29,427/-
3. Payment of penal interest Rs. 3,07,922/-
ITA No.6157/Del/2012
ACIT vs. The Baghpat Co-operative Sugar Mills Ltd.
2. Aggrieved the assessee carried the matter in appeal. The first appellate
authority allowed the appeal of the assessee. Aggrieved the revenue is in appeal
on the following grounds :-
1. "Whether in the facts and circumstances of the case the Ld.
Commissioner of Income Tax (Appeals) has erred in law in deleting the
disallowance of Rs. 16,29,918/- towards subscription of UP, Co-operative
Sugar Factories Federation Ltd. ignoring the fact that the assesee failed
to prove the services provided by the federation for business purposes
and the deduction was admissible under section 37 to the IT Act,1961.
2. Whether in the facts and circumstances of the case the Ld. Commissioner
of Income Tax (Appeals) has erred in law in deleting the disallowance of
additional interest of Rs. 3,07,922/- paid to the Sugar Development Fund
(Govt. Of India) 1991 ignoring the fact that the same was in the nature
of penalty.
3. Whether in the facts and circumstances of the case the Ld. Commissioner
of Income Tax (Appeals) has erred in law in deleting the disallowances of
additional interest of Rs. 1,65,29,427/- due to be paid to Shakkar Vishesh
Nidhi (SVN) and U.P. Co-operative Sugar Factories Federation ignoring
the fact that the same was not paid before the filing of the return of
income and that the disallowance was covered u/s 43B (d) of the I.T.
Act, 1961."
3. We have heard Shri J.P. Chandrekar, Sr. DR on behalf of the revenue and Shri
P.S. Kashyap, Ld. Counsel on behalf of the assessee.
4. On a careful consideration of the facts and circumstances of the case and
perusal of the findings on record and the orders of the authorities below we hold as
follows.
5. Ground No. 1 of the revenue has to be dismissed by upholding para 5.3 of the
order of the Ld. CIT (A) wherein he followed his order for the assessment year
2003-04 and allowed the claim of the assessee. In fact the AO in his order
disallowed the amount by merely following his order for the assessment year 2003-
04. The department accepted the order of the first appellate authority for the
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ITA No.6157/Del/2012
ACIT vs. The Baghpat Co-operative Sugar Mills Ltd.
assessment year 2003--04. Under these circumstances we see reason to interfere in
the order of the first appellate authority, specifically as the subscription is allowable
u/s 37 (1) of the Act. The amount paid as subscription to federation is necessary
business expenditure. The necessity / requirement of incurring this expenditure is
explained. Hence this ground is dismissed.
6. The second issue is disallowance of interest paid to federation. The AO
disallowed the amount on the ground that the payment of interest is outside the
purview of business of the assessee. Ld. CIT(A) gave a finding that the assessee
has taken loan from Govt. of India and UP Government, for the purpose of business,
and that this is evident from the sanctioned letters and hence the interest in
question is allowable u/s 36(1). We have seen reason to interfere in this finding of
the first appellate authority . The revenue has raised a legal argument that, the
interest in question cannot be allowed, as it is hit by the provisions of section 43B(d)
of the Act.
7. Section 43B(d) of the Act reads as follows :-
d) "any sum payable by the assessee as interest on any loan or borrowing
from any public financial institution (or a State financial corporation or
a State industrial investment corporation), in accordance with the term
and conditions of the agreement governing such loan or borrowing "
As the interest in question is payable to Govt. Of India and the statement of
UP Government, section 43(B)(d) does not apply. Hence we dismiss this ground.
8. Ground 3 is against the deletion of disallowance of additional income on the
ground that it is in the nature of penalty. In our view the first appellate authority has
rightly held that the expenditure in question i.e additional interest, is a contractual
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ITA No.6157/Del/2012
ACIT vs. The Baghpat Co-operative Sugar Mills Ltd.
obligation and hence allowable as expenses. He followed his predecessor's order on
the same issue for the assessment year 2002-03 and revenue has accepted this
order. Thus we dismiss this ground of the revenue.
In the result appeal of the revenue is dismissed.
Order pronounced in the open court on 7th August, 2015.
sd/- sd/-
(G.C. GUPTA) (J. SUDHAKAR REDDY)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: the 7. 8. 2015
`veena'
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File By order
Dy. Registrar
Sl. Description Date
No.
1. Date of dictation by the Author 4.8.2015
2. Draft placed before the Dictating Member 5.8.2015
3. Draft placed before the Second Member
4. Draft approved by the Second Member
5. Date of approved order comes to the Sr. PS
6. Date of pronouncement of order
7. Date of file sent to the Bench Clerk
8. Date on which file goes to the Head Clerk
9. Date of dispatch of order
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