CIT vs Krishi Upaj Mandi Samiti

Shri Sanjay Lal, Advocate for the appellant-revenue.

Shri G.N. Purohit, learned Senior Advocate with Mrs. Uma Parashar, Advocate for the respondent-assessee.

This appeal was admitted on 16-12-2009 on the following two substantial questions of law:-

''(I) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not upholding the addition of Rs. 17,94,021 being the disallowance of depreciation on fixed assets even when entire expenditure incurred towards purchase of fixed assets has already been claimed in entirety either in the current year or in earlier year and if depreciation is allowed on such assets it would amount to double deduction?

(II) Whether on the facts and circumstances of the case the ITAT was justified in law in not upholding the disallowances of Rs. 8,70,614 on account of payment towards pension fund when no liability of revenue nature was determined?

This appeal is directed against an order dated 24-4-2009 by the Income Tax Appellate Tribunal, Indore Bench, Indore in I.T.A. No. 42/Ind/2009.

Learned counsel appearing for the revenue submitted that the Tribunal has erred in disallowing the addition of Rs. 17,94,021 in respect of depreciation on fixed assets of which expenditure was already exempted, so it was a dual benefit of deduction to the assessee. It is also submitted by him that the contribution towards the pension fund by the assessee has been wrongly allowed by the Income Tax Appellate Tribunal, while it ought to have been disallowed as it does not fall within the ambit of the expenses.

Shri Purohit, learned Senior Counsel appearing for the assessee supported the order. It was submitted by him that so far as depreciation is concerned, it has been rightly allowed by the Tribunal in view of specific provision as contained in Explanation 5 to sub-section (1) of section 32 of the Income Tax Act which specifically provides that the depreciation shall be allowed to the assessee in spite of the fact that the assessee had claimed deduction in respect of the depreciation in computing his total income, or not. It is submitted that the aforesaid amendment as Explanation 5 to sub-section (1) of Section 32 has been inserted by the Parliament by the Finance Act, 2001 w.e.f. 01-4-2002 and is applicable in the present case.

So far as the contribution by the respondent towards the payment of pension fund is concerned, it is submitted that the aforesaid liability is statutory in nature and the aforesaid payment towards the pension fund has been rightly allowed by the Income Tax Appellate Tribunal. So far as the interest accrued thereon is concerned, it is submitted by the learned counsel for the respondent that it was taxable and has rightly been held so by the Tribunal.

It is submitted that in the light of the judgment passed by the Tribunal in Krishi Upaj Mandi Samiti, Burhanpur 12 ITJ 12, the Tribunal has rightly decided the matter. The aforesaid judgment of the Tribunal is binding on the Tribunal and has been rightly relied on by the Tribunal.

To appreciate the aforesaid contentions, we have gone through the order passed by the Tribunal. The Tribunal in paragraphs 11 and 12 of the order have considered the ground in respect of contribution to the pension fund and relying on the judgment of Krishi Upaj Mandi Samiti, Burhanpur case (supra), the aforesaid contribution has been rightly allowed. Apart from this, under Rule 10 of the Madhya Pradesh Krishi Upaj Mandi (State Marketing Development Fund) Rules, 2000, the Krishi Upaj Mandi has to create a Reserve Fund, which is a statutory liability and the aforesaid fund is to be created for the payment of pension to the members of the Board. For ready reference, we quote Rule 10 of the aforesaid Rules, which reads thus:-

''10. Reserved Fund.- (1) Leaving aside Farmers Road Fund and Agricultural Research and infrastructural development Fund, at the rate of five per cent of remaining aggregate receipts Chief Accounts Officer will deposit in separate Bank account every three months in the form of Reserve Fund. Use of Reserve Fund shall be made for the payment of pension to the members of State Board Service, family pension, ex-gratia, gratuity grant, loan and advance as per procedure prescribed by Board.

(2) Each member of service of the Board shall be entitled to receive pension on retirement, gratuity and other benefits as per rules applicable to the Government servants.

(3) In the event of death during service of any member, his legal successor shall be entitled to receive gratuity family pension.

(4) Separate account of Reserve Fund shall be kept in Bank for the members of service of the Board, posted in Market Committee. One-third amount of Reserve Fund maintained by Market Committees and amount shall be sent in this fund on the 10th of every month to Chief Accounts Officer by ''Account Payee'' cheque. The provisions of sub-rule (2) and (3) shall be applicable to the members of such service.

(5) Loan and advance shall be given to members of the service posted in Market Committee from this fund with the sanction of Chief Accounts Officer.''

In view of the statutory liability of the Krishi Upaj Mandi, if the Income Tax Appellate Tribunal has allowed the deduction of aforesaid contribution, no fault is found.

So far as the depreciation part is concerned, Explanation 5 to sub-section (1) of Section 32 of the Income Tax Act provides thus:-

''Explanation 5.--For the removal of doubts, it is hereby declared that the provisions of this subsection shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income.''

The aforesaid provision specifically provides that the assessee shall be entitled for depreciation in spite of the fact that the assessee had claimed the deduction in respect of depreciation in computing his total income or not. In view of the specific provision, as contained in Explanation 5 to sub-section (1) of section 32, the Tribunal has rightly allowed the depreciation in respect of the assets of the respondent.

In view of the aforesaid, we find that both the questions as framed on 16.12.2009 deserve to be answered in favour of the assessee and against the revenue. Accordingly, this appeal is found without merit and is dismissed.