Payments made by the Market Committee for statutory purposes under the Income Tax Act are not loan repayments and should not be disallowed as double deductions.

JUDGMENT

G.S. Sandhawalia, J.

The present judgment shall dispose of two appeals i.e. ITA No. 244 of 2011 and ITA No. 512 of 2017.

Facts of ITA No.244 of 2011

2. ITA No.244 of 2011 has been filed under section 260A of the Income Tax Act, 1961 (in short 'the Act') against the order passed by the Income Tax Appellate Tribunal, Delhi Bench in ITA No.1831/Del/2010 dated 31.08.2010 (Annexure A/3) wherein the Tribunal has allowed the appeal of the Revenue and set aside the order of the Commissioner, Income Tax wherein the deletion of Rs.2,81,33,700/- was made for the assessment year 2007-08 and restored the order of the Assessing Officer dated 30.11.2009 (Annexure A-I) for the assessment year 2007-08.

3. The reasoning which prevailed with the Tribunal was that it was a payment of loan taken from the Haryana State Agricultural Marketing Board (in short 'the Board') and had been used for spending on repair work of Mandi construction and repairs of various rural roads and development of Mandis and, therefore, the expenses incurred were not out of the own funds but out of borrowed funds. Resultantly, the Tribunal was of the opinion that making repayment of such borrowed funds and claiming deduction as application of income was claiming double deduction for the same expenditure and, therefore, the appellant (Committee herein) was not eligible for double deduction on account of the same expenditure incurred based on the construction of rural roads and development of Mandis.

4.. The appeal was admitted on 07.05.2012 on the following substantial question of law:-

"(i) Whether the learned Income Tax Tribunal has gravely erred in law in maintaining the disallowance of Rs.2,81,33,700/- on the ground that it is a repayment of loan to Haryana Mandi Board whereas from the record it is lucid that the payment was made for achievement of objects prescribed under the Act."

5. A perusal of the paper book would go on to show that return of income under the Act was filed on 29.10.2007 claiming exemption under Section 11 of the Act which was duly processed under Section 143 on 27.02.2008. The case was selected for compulsory scrutiny under the CBDT's Instructions. Notice dated 19.03.2008 under Section 143(2) of the Act and under Section 142(1) dated 21.05.2009 were issued and served and the authorized representatives accordingly attended the proceedings and produced the books of accounts. The assessment was then framed under Section 143(3) of the Act on 30.11.2009 and the assessee claimed the repayment of liabilities of Rs.2,81,33,700/- as application of income which was construed as repayment of loan taken from the Marketing Board for construction of rural roads and development of Mandis. The Assessing Officer came to the conclusion that the assessee had not shown increase in the amount of loan taken from the Board while calculating its income in relevant years and, therefore, discharge of liability of loan was not allowable for application of fund to the assessee. Reliance was placed upon the judgment of the Apex Court in Escorts Ltd. and another v. UOI and others, 199 ITR 43 that double deduction for an item should not be inferred and, therefore, the payment of liability of old loan was not allowed as application of income and penalty proceedings under Section 271(1)(c) of the Act were also initiated for claiming inaccurate expenditure and concealment of income of Rs.2,81,33,700/-.

Facts of ITA No.512 of 2017

6. ITA No. 512 of 2017 has been filed by the Revenue which arises out of the order of the Tribunal dated 28.03.2017 (Annexure A-IV) wherein, it was held that it does not amount to filing of inaccurate particulars and the same were present before the Assessing Officer during the assessment proceedings and it was not a valid reason for passing the penalty order when the same was properly disallowed by the Assessing Officer and after verifying the relevant records. Thus, a finding was recorded that the assessee had not furnished any inaccurate particulars