DY. C.I.T., RANGE-6, LUCKNOW V. U.P STATE FOOD & ESSENTIAL COMMODITIES LTD., LUCKNOW

ITA 190/LKW/2019

AI Insights

The case involves the Deputy Commissioner of Income Tax, Range-6, Lucknow as the appellant and M/s U.P. Food & Essential Commodities Corp. Ltd. as the respondent. The core issue revolves around the eligibility of the assessee corporation, a state-owned entity, to claim exemption under section 10(26AAB) of the Income Tax Act, 1961 for the assessment year 2013-14. The Assessing Officer initially disallowed the exemption, citing that the assessee did not meet the criteria as it was not an Agricultural Produce Marketing Committee or Board. The CIT(A) later allowed the exemption for most incomes except those from specific non-agricultural activities. The Revenue appealed against this decision, leading to the current proceedings where the ITAT decided to remand the matter for a thorough examination of the assessee's status and activities in relation to the exemption criteria.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788704 (ITAT-LUCKNOW)
• Duration Of Justice: 6 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 14-03-2019
• Other Referred Cases: Krishi Utpadan Mandi Samiti, Allahabad vs. Baidyanath Ayurved Bhawan Private Limited, Heinz India Limited vs. State of U.P. & Another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: NEERAJ KUMAR
• Keywords: Earning of tax free income
• Section: 143(3); 12

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.190/LKW/2019 A.Y. 2013-14 Dy. Commissioner of Income Tax, Range-6, Lucknow vs. M/s U.P. Food & Essential Commodities Corp. Ltd., 17, Gokhley Marg, Lucknow- 01 PAN: AAACU3257G (Appellant) (Respondent) Assessee by: None Revenue by: Sh. Neeraj Kumar, CIT DR Date of hearing: 02.09.2025 Date of pronouncement: 24.11.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: [ This is an appeal filed by the Revenue against the orders of the ld. CIT (A)- 2, Lucknow wherein the ld. CIT(A), Lucknow has allowed the appeal of the assessee against the orders of the ld. Assessing Officer passed under section 143(3) of the Income Tax Act for the A.Y. 2013-14 on 30.03.2016. The grounds of appeal are as under:- “1. The Commissioner of Income Tax (Appeal)-2, Lucknow has erred in law and on facts in deleting the disallowance made on account of claim of exemption u/s 10(26AAB) of the I.T. Act, 1961 without appreciating the facts that the assessee does not fulfill the criteria to claim exemption u/s 10(26AAB) of the I.T. Act, 1961. 2. The appellant craves leave to add or amend any one or more of the grounds of appeals, as stated above, as and when need to do so arises with the prior permission of the Court.” 2. The facts of the case are that the assessee company is a U.P. Government Enterprise, claiming exemption under section 10(26AAB) of the Income Tax Act, 1961. The ld. AO was not convinced that the assessee corporation was entitled to claim the exemption under section 10(26AAB) of the I.T. Act, 1961 and therefore, Printed from counselvise.com ITA No.190/LKW/2019 U.P. State Food & Essential Commodities Ltd. A.Y. 2013-14 2 she issued a show cause notice to the assessee asking it why the said exemption should not be disallowed. In response, it was submitted that any income of an agricultural produce marketing committee or board constituted for the purposes of regulating the marketing of agricultural produce was entitled to the said exemption. The assessee corporation was a 100% State Government owned corporation that had been incorporated with the object of providing essential commodities to the constituent of the State at prices which were determined by the State Government. In pursuance of its objects, the assessee corporation procured rice, wheat and palm oil and sold it as per price fixed by the Government. It was submitted that the minimum support price was fixed by the Central Government for foods procured under the price support scheme every year and the assessee corporation was purchasing the agricultural produce and marketing it under the policy of the State Government of Uttar Pradesh. It was further submitted that the assessee’s claim of exemption under section 10(26AAB) had been allowed by the CIT(A)-2, Lucknow, vide order dated 8.10.2012 for the A.Y. 2009-10 and in assessment year 2010-11, the assessment order had been stayed by the Hon’ble High Court on 19.05.2013. The ld. AO considered the submissions of the assessee and held that as per the provisions of section 10(26AAB), the said exemption was available only to the following entities created by the State under specific statute; a. Agricultural produce Marketing Committee b. Agricultural produce Marketing Board Mandi Samiti. Thus, it was clear that no other agency could qualify for the exemption under section 10(26AAB). Since the assessee corporation was not Agricultural produce marketing Committee or Board which had been constituted under any law for the purpose of marketing of agricultural produce and since it was also involved in selling of LPG gas, which did not come under agricultural produce, the ld. AO held that the assesseee was not eligible for the exemption that it had claimed. She accordingly, by relying on the subsequent order of the ld. CIT(A)-4, Lucknow dated 26.02.2015 disallowed the exemption to the assessee corporation and added back a sum of Rs. 23,70,82,707/-. Printed from counselvise.com ITA No.190/LKW/2019 U.P. State Food & Essential Commodities Ltd. A.Y. 2013-14 3 3. Aggrieved with the decision of the ld. AO, the assessee went in appeal before the ld. CIT(A). The ld. CIT(A) followed the orders of the ld. CIT(A)-2, Lucknow for the assessment year 2009-10 and allowed the exemption to the assessee under section 10(26AAB) on all incomes other than the income from LPG distribution, coal commission, accrued interest on advance to U.P. Employees State Welfare Corporation and interest from bank deposits and FDRs, if they had been shown as exempt income during the year under consideration. The ld. AO was directed to examine the exempt income and allow exemption for all income other than the income under the aforesaid four heads, which could not be said to be derived from regulating the marketing agricultural produce. 4. The Revenue is aggrieved against this order and has accordingly come before us in appeal. On the appointed date of hearing, no one was present on behalf of the assessee. Sh. Neeraj Kumar, CIT DR (hereinafter referred to as the ld. DR) assisted the Bench in the matter. The ld. CIT DR pointed out that the assessee did not fulfil the criteria to claim exemption under section 10(26AAB) in view of the fact that the CBDT Circular No.1/2009 dated 27.03.2009 had clarified that section 10(26AAB) had been inserted to provide for tax exemption with respect to the income of an Agricultural produce Marketing Committee or Board which had been constituted under law for the purpose of regulating the marketing of agricultural produce. Therefore, the decision of the ld. CIT(A)-2, was not acceptable because the assessee was not regulating the marketing of agricultural produce, but was an agency for distribution of essential commodities at Government prices. He pointed out that the assessee company had been established under the Companies Act, 1956 on 22nd October, 1974 and not under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964. It was a wholly owned undertaking of the U.P. Government under the Department of Food and Civil Supplies of the U.P. Government. The assessee corporation was also selling LPG Gas and the marketing of LPG Gas did not come under agricultural produce. The agency created for regulation of agricultural market produce in the State of U.P. was only the, ‘Krishi Utpadan Mandi Samiti’ Printed from counselvise.com ITA No.190/LKW/2019 U.P. State Food & Essential Commodities Ltd. A.Y. 2013-14 4 under section 12 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964. This had been affirmed by the Hon’ble Supreme Court in the matters of Krishi Utpadan Mandi Samiti, Allahabad vs. Baidyanath Ayurved Bhawan Private Limited, Civil Appeal No. 8963/2003 and in Heinz India Limited vs. State of U.P. & Another (Civil Appeal No.1496/2006. It was pointed out that in fact the assessee corporation was also paying mandi shulk to the Krishi Utpadan Mandi Samiti which itself indicated that it was not eligible for the exemption under section 10(26AAB). A copy of the arguments of the DCIT, Range-6, Lucknow in which these points had been highlighted was submitted. However, the ld. CIT DR, very fairly also pointed out to us that the identical issue had earlier been heard by the ITAT Lucknow Bench in ITA No. 175/LKW/2019 for the A.Y. 2009-10 and C.O. No.06/LKW/2021 arising out of the same. In the aforesaid matter, the ITAT had dealt with the issue of exemption under section 10(26AAB) and after considering the rival arguments, it had remanded the matter back to the file of the ld. AO for the purposes of examining the status of the assessee for considering its claim of deduction made under section 10(26AAB) of the Act. The assessee was directed to produce all the details and documents to substantiate its claim for establishing its status as an Agricultural produce marketing committee or board in terms of section 10(26AAB) of the Act. The ld. CIT DR informed us that similar issues were involved in ITA No. 194/LKW/2019 for the A.Y. 2012-13 and the C.O. No.7/LKW/2021 and the observations and findings given by the Bench in ITA No. 175/LKW/2019 and its C.O. No.06/LKW/2021 was applied mutatis mutandis to these orders also. 5. We have duly considered the facts and circumstances of the case. In view of the fact that the question of whether the assessee is entitled to the exemption under section 10(26AAB) depends primarily upon the status of the assessee and whether it can be called an Agricultural produce Marketing Committee or Board in terms of section 10(26AAB) of the Act, considering that the appeals for the assessment years 2009-10 and 2012-13 have been restored to the file of the AO and the assessee has been given necessary opportunity to produce the relevant Printed from counselvise.com ITA No.190/LKW/2019 U.P. State Food & Essential Commodities Ltd. A.Y. 2013-14 5 documents before the ld. AO to establish its claims viz a viz its status, we deem it appropriate in the instant case to also remand the said matter back to the file of the ld. AO for a decision on the subject after considering the documents and submissions made by the assessee before him in the proceedings for A.Ys. 2009-10, 2012-13 and the current year. Accordingly, the issue is restored to the file of the ld. AO for de novo assessment as above. 6. In the result, the appeal is allowed for statistical purposes. Order pronounced on 24.11.2025 in open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24/11/2025 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CITDR, ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. Printed from counselvise.com "