Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Assistant commissioner of Income Tax, Circle-2, Ajmer
[Citation -2016-LL-1018-96]

Citation 2016-LL-1018-96
Appellant Name Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd.
Respondent Name Assistant commissioner of Income Tax, Circle-2, Ajmer
Court ITAT-Jaipur
Relevant Act Income-tax
Date of Order 18/10/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags public financial institution • validity of notice • share capital • time barred
Bot Summary: The assessee mentioned that the milk plant was separated from the assessee concern and transferred to RCDF in 1979 and it was again merged with the assessee concern on 01.09.1991. The assessee himself has also mentioned that after obtaining the approval from the State Government, the amount of Rs. 23,61,083/- has been credited as income in FY 2008-09 and further sum of Rs. 71,00,000/- has been credited as income in FY 2010-11 and assessee has submitted the copy of balance sheet/profit and loss account in respect of above amounts in support of this claim. From the above description, it is apparent that assessee has not been able to justify the creation of the liability which has been shown by the assessee as unpaid interest noted by the AO in the assessment order of Rs. 23,61,083/- and Rs. 1,71,51,752/-. This itself shows that assessee has not been able to justify the exact nature of dispute between the RCDF and assessee company has pointed by the AO. So the existence of the liability itself has not been proved by the assessee by any confirmation from the corresponding party and assessee has merely pointed out to the dispute between RCDF and assessee concern. 5 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. Further the assessee s claim that RCDF dues are for share capital amount has not been confirmed by any shares issued by the assessee against it or specific amount given to it by RCDF. So this claim is also unsubstantiated. The assessee has shown the above amount as unpaid interest of Rs. 23,61,083/- and Rs. 1,71,51,752/- towards RCDF. The RCDF is a undertaking controlled by Government o Rajasthan as mentioned by the assessee. The AO has pointed out that the above interest liability remains unpaid liability of the assessee about which assessee has merely claimed that this amount represents the contribution towards share capital which is not supported by evidence.


IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM ITA No. 820/JP/2014 Assessment Year : 2008-09. Ajmer Zila Dugdh Utpadak Sahkari cuke Assistant commissioner of Income Sangh Ltd., Opp. HMT, Beawar Road, Vs. Tax, Circle-2, Ajmer. Ajmer. PAN No. AABAA 0141 Q Appellant Respondent Assessee by : Shri Mahendra Gargieya (Advocate) Revenue by: Shri O.P. Bhateja (Addl.CIT) Date of Hearing : 27.09.2016. Date of Pronouncement : 18/10/2016. ORDER PER SHRI KUL BHARAT, JM. This appeal by Assessee pertaining to assessment year 2008-09 is directed against order of ld. CIT (A), Ajmer dated 23.09.2014. assessee has raised following grounds of appeal :- Under facts & circumstances of case ld. CIT (A), Ajmer has erred in confirming issue of :- (1) Validity of notice issued u/sec. 148 and initiating proceedings of Income Tax Act, 1961. (2) Challenging order TIME BARRED since assessment order has been dispatched on or after 31.03.2013. (3) Rs. 1,95,12,835.00 for unpaid interest to M/s. RCDF Ltd. further non granting set off of Rs. 94,61,083.73 (Rs. 23,61,083.73 + Rs.71,00,000.00) being unpaid interest write off to income in succeeding years as per details. 2 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. 2. At time of hearing, ld. Counsel for assessee stated that he does not wish to press ground nos. 1 & 2. ld. D/R has no objection. Therefore, Ground nos. 1 & 2 are dismissed as not pressed. 3. only ground no. 3 as mentioned above remains to be adjudicated. 4. Briefly stated facts are that case of assessee was reopened and assessment under section 143(3) read with section 147 of Income Tax Act, 1961 (hereinafter referred to as Act) was framed vide order dated 25.03.2013 thereby AO made addition of Rs. 1,95,12,835/- on account of unpaid interest. AO while disallowing unpaid interest observed that unpaid interest of Rs. 23,61,083/- and Rs. 1,71,51,752/- (unpaid RCDF) was outstanding and same was not paid in accordance with provisions of section 43B. Being aggrieved, assessee preferred appeal before ld. CIT (A), who after considering submissions dismissed appeal. 5. Now assessee is in appeal before this Tribunal. 6. ld. Counsel for assessee has reiterated submissions as made in written submissions. ld. Counsel submitted that AO has invoked provisions of section 43B. As per this section, AO was required to establish that : (i) assessee has taken loan/ borrowing; (ii) From any public financial institution etc; (iii) Some interest of relevant year remains payable; and (iv) In accordance with terms and conditions of related agreement. ld. Counsel for assessee submitted that AO has not at all discussed as to on which amount subjected interest was outstanding. He submitted that 3 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. background and reason behind subjected liability was that all in July, 1979 Milk Plant owned by assessee was separated and milk processing plant, building, assets & liabilities including share capital relating to assessee were transferred to RCDF. Accordingly, said RCDF was to receive and pass and make necessary accounting entries at their end. He submitted that it was not case of Public Financial Institution etc as prescribed u/s 43B. entire amount including interest of Rs. 23,61,083/- was not interest on any loan and advance as contemplated by law. Also there was no agreement as such granting interest bearing loan to assessee. He submitted that it is pertinent to note that amount of unpaid interest of Rs. 23,61,083/- has already been credited back and transferred to income as on 31.03.2009 as is evident from audited accounts. Similarly, Rs. 71,00,000/- was also transferred to Income for A.Y. 2010-11, which is also evident from audited accounts. Such amounts have been credited back and shown under head Misc receipts which are supported by detailed ledger account. Thus, out of total Rs. 1,95,12,835/-, amount to extent of Rs. 95,25,656/- (Rs. 24,25,656 + Rs. 71,00,000) has already been transferred by assessee in later years and at least could not have been taxed in this year. 6.1. On contrary, ld. D/R has supported orders of authorities below. 6.2. We have heard rival contentions, perused material available on record and gone through orders of authorities below. AO made disallowance by observing as under :- 4 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. submissions of assessee is perused and same is not acceptable for reasons that it has failed to make payment o Rs. 1,95,12,835/- (23,61,083 + 1,71,51,752). assessee has not furnished any evidence in support of dispute between both parties and also failed to submit copy of Profit & Loss Account proving that income of Rs. 23,61,083/- was offered in A.Y. 2009-10. Further no document in respect of unpaid interest of Rs. 1,71,51,752/- was furnished regarding settlement of interest. Therefore unpaid interest of Rs. 1,95,12,835/- is disallowed and added to total income. ld. CIT (A) confirmed above finding in para 6.3 of his order as under :- 6.3. I have considered contentions of appellant as well as assessment order. It is seen that assessee has given brief details regarding dispute between Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. (AZDUSS Ltd.) and Rajasthan Cooperative Dairy Federation (RCDF). assessee mentioned that milk plant was separated from assessee concern and transferred to RCDF in 1979 and it was again merged with assessee concern on 01.09.1991. difference in assets and liabilities could not be settled in time and assessee had no choice or right to transfer or adjust any amount without approval from State Government. funds were initially received at RCDF from NBDB. Further, assessee also claimed that amount of credit lying in name of RCDF dues is share capital amount. assessee himself has also mentioned that after obtaining approval from State Government, amount of Rs. 23,61,083/- has been credited as income in FY 2008-09 and further sum of Rs. 71,00,000/- has been credited as income in FY 2010-11 and assessee has submitted copy of balance sheet/profit and loss account in respect of above amounts in support of this claim. From above description, it is apparent that assessee has not been able to justify creation of liability which has been shown by assessee as unpaid interest noted by AO in assessment order of Rs. 23,61,083/- and Rs. 1,71,51,752/-. Further, assessee himself has offered sum of Rs. 23,61,083/- and Rs. 71,00,000/- out of above amount as income in profit and loss account in later years. This itself shows that assessee has not been able to justify exact nature of dispute between RCDF and assessee company has pointed by AO. So existence of liability itself has not been proved by assessee by any confirmation from corresponding party and assessee has merely pointed out to dispute between RCDF and assessee concern. 5 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. Further assessee s claim that RCDF dues are for share capital amount has not been confirmed by any shares issued by assessee against it or specific amount given to it by RCDF. So this claim is also unsubstantiated. assessee has shown above amount as unpaid interest of Rs. 23,61,083/- and Rs. 1,71,51,752/- towards RCDF. RCDF is undertaking controlled by Government o Rajasthan as mentioned by assessee. It has not been shown that above interest liability is not covered by provisions of Sec. 43B(d) and (e) of I.T. Act. AO has pointed out that above interest liability remains unpaid liability of assessee about which assessee has merely claimed that this amount represents contribution towards share capital which is not supported by evidence. In view of above discussion and findings of AO, addition made by AO is confirmed and this ground of appeal is dismissed. ld. Counsel for assessee has drawn our attention to letter dated 25.08.2003 to demonstrate that amount of Rs. 87 lacs was due to Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd., Ajmer. contention of assessee is that provisions of section 43B has been wrongly applied by authorities below as these provisions would be applicable only when AO establishes that assessee has taken loan/borrowing from any public financial institution etc, some interest of relevant year is payable and in accordance with terms and conditions of related agreement. As per section 43B(d), first requirement is that any sum is payable by assessee as interest on any loan or borrowing from any public financial institution or state financial corporation or state industrial investment corporation in accordance with terms and conditions of agreement governing such loan or borrowing. In present case, AO was required to demonstrate that assessee has obtained any loan or made any borrowing from any public financial institution as defined in Explanation-4 to section 43B. As per this explanation, 6 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. public financial institution shall have meaning assigned to it in section 4A of Companies Act, 1956. In our considered view RCDF does not fall within definition of public financial institution. Therefore, we find force in contention of ld. Counsel that AO was not justified in invoking provisions of section 43B of Act. touch stone for invoking provisions of section 43B is that any sum is payable by assessee as interest on any loan or borrowing from any public financial institution or state financial corporation or state industrial investment corporation. Now first question would arise is whether RCDF is public financial institution within definition of Explanation-4 to section 43B. said explanation has adopted same definition as given in section 4A of Companies Act, 1956. Section 4A of Companies Act, 1956 does not include RCDF in category of public financial institution. Therefore, in our considered view, AO as well as ld. CIT (A) were not justified in making addition. Thus, we direct AO to delete addition. 7. In result, appeal of assessee is allowed. Order pronounced in open court on 18/10/2016. Sd/- Sd/- (VIKRAM SINGH YADAV) ( KUL BHARAT ) Accountant Member Judicial Member Jaipur Dated:- 18/10/2016. Das/ 7 ITA No. 820/JP/2014 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. Copy of order forwarded to: s 1. Appellant- Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd., Ajmer. 2. Respondent- ACIT Circle-2, Ajmer. 3. CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 820/JP/2014) By order, Assistant. Registrar Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. v. Assistant commissioner of Income Tax, Circle-2, Ajmer
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