Income-tax Officer, Ward-1(1), Aurangabad V. The Agriculture Produce Market Committee, Aurangabad

ITA 1208/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9964 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANN KAPTHUAMA
• Keywords: Depreciation; Charitable institution; Maximum Marginal Rate; Condonation of delay; Capital expenditure
• Section: 43B; 12AA; 12; 28; 144; 11

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1208 & 1209/PN/2011 (ASSTT. YEARS : 2003-04 & 2 004-05) THE INCOME-TAX OFFICER, WARD 1(1), APPELLANT JEEVAN SUMAN 2 ND FLOOR LIC BUILDING, N-5, CIDCO, AURANGABAD 431 003 V. THE AGRICULTURE PRODUCE MARKET COMMITTEE RESPONDENT VAIJAPUR, DIST. AURANGAABD PAN: AABTA8883E APPELLANT BY : NONE RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 26/9/12 DATE OF PRONOUNCEMENT : 28- 9-12 O R D E R PER R.S. PADVEKAR, JM BOTH THESE APPEALS ARE FILED BY THE REVENUE CHALLE NGING THE IMPUGNED ORDERS OF THE LD CIT(A), AURANGABAD, DATED 11.7.2011 FOR THE A.Y. 2003-04 AND A.Y. 2004-05. 2. THE REVENUE HAS TAKEN THE FOLLOWING TWO GROUNDS WHICH ARE COMMON IN BOTH THE APPEALS : 1) AS TO WHETHER PROVIDING OF SERVICES TO THE FARM ERS BY CHARGING MARKET FEE CONSTITUTE THE CHARITABLE ACTIVITY OR TH E ACTIVITY WHICH FALL WITHIN THE AMBIT OF GENERAL PUBLIC UTILITY. 2) AS TO WHETHER GRANTING OF REGISTRATION WITHOUT P ASSING CONDONATION OF DELAY UNDER SECTION 12AA OF THE IT ACT, 1961 CON FERS RIGHT TO THE ASSESSEE FOR OPERATION OF PROVISIONS OF SECTION 11, 12 AND 13 OF THE IT ACT, 1961. 3. BRIEFLY STATED, FACTS ARE AS UNDER. THE ASSESSE E IS KNOWN AS AN AGRICULTURAL PRODUCE MARKET COMMITTEE OF VAIJAPUR, TQ. VAIJAPUR, DIST. AURANGABAD, WHICH IS ESTABLISHED UNDER THE PROVISI ONS OF THE MAHARASHTRA AGRICULTURE MARKETING (REGULATION) ACT 1963. THE ASSESSEE 2 ITA NOS. 1208 & 1209/PN/2011 THE AGRICULTURE PRODUCE MARKET COMMITTEE, A.Y. 2003-04 & 2004-05 SOCIETY HAS GOT REGISTRATION U/S. 12AA(1)(B)(I) OF THE INCOME TAX ACT, 1961 W.E.F. A.Y. 2003-04 VIDE CERTIFICATE OF REGIST RATION DATED 24/09/2007. THE A.O ASSESSED THE INCOME OF THE ASS ESSEE SOCIETY AS UNDER : PARTICULARS A.Y. 2003-04 PROFIT FOR THE PERIOD 01/04/2001 TO 30/09/2002 AT 50% FOR 01/10/2001 TO 30/09/2002 RS. 5,885/- RS.5,885/- ADD : DISALLOWANCE ON ACCOUNT OF LOSS, DONATION, PLAN ESTIMATE BEING CAPITAL EXPENDITURE, NA TAX U/S 43B AND FOR WANT OF DETAILS RS.2,01,796/- LOSS: FOR THE PERIOD 01/10/2002 TO 31/03/2003 AT 50% FOR 01/10/2002 TO 30/09/2003 RS. 48,066/- (-)RS.24,033/- ADD: DISALLOWANCE ON ACCOUNT OF DONATION, BONUS, GRATUITY, MUNICIPAL TAX AND NA TAX U/S 43B, PLAN ESTIMATE BEING CAPITAL EXPENDITURE AND FOR WANT OF DETAILS RS.3,58,371/- INCOME ASSESSED BY THE A.O. RS.5,42,019/- PARTICULARS A.Y. 2004-05 LOSS FOR THE PERIOD 01/04/2003 TO 30/09/2003 AT 50% FOR 01/10/2002 TO 30/09/2003 (-) RS.48,066/- (-)RS.24,033/- ADD: DISALLOWANCE U/S 43B ON ACCOUNT OF DONATION, BONUS, GRATUITY, MUNICIPAL TAX AND NA TAX, PLAN ESTIMATE BEING CAPITAL EXPENDITURE AND FOR WANT OF DETAILS RS.3,58,371/- PROFIT FOR THE PERIOD 01/10/2003 TO 31/03/2004 RS.8 ,66,936/- ADD: DISALLOWANCE U/S. 43B ON ACCOUNT OF BONUS, NA TAX, MUNICIPAL TAX, PLAN ESTIMATE BEING CAPITAL EXPENDITURE, DONATION AND FOR WANT OF DETAILS RS.1,81,844/- INCOME ASSESSED BY THE A.O. RS.13,83,118/- 3 ITA NOS. 1208 & 1209/PN/2011 THE AGRICULTURE PRODUCE MARKET COMMITTEE, A.Y. 2003-04 & 2004-05 IT IS PERTINENT TO NOTE HERE THAT THE A.O COMPLETED THE ASSESSMENT OF THE ASSESSEE U/S. 144 R.W.S. 147 OF THE I.T. ACT DETER MINING THE TAXABLE INCOME AS STATED ABOVE. IT APPEARS THAT THE REGIST RATION CERTIFICATE WAS NOT GRANTED TO THE ASSESSEE WHEN THE ASSESSMENT ORD ERS WERE PASSED. HENCE, THE A.O. DECLINED TO GIVE THE BENEFIT OF SEC . 11 TO THE ASSESSEE SOCIETY. THE ASSESSEE CHALLENGED THE ASSESSMENTS M ADE BY THE A.O BEFORE THE LD CIT(A). BEFORE THE LD CIT(A), THE ASS ESSEE FILED THE COPY OF REGISTRATION CERTIFICATE U/S. 12AA(1)(B)(I) DATED 24.9.2007 GRANTED BY THE COMMISSIONER OF INCOME TAX, AURANGABAD. AS ASSESSE E FILED THE REGISTRATION CERTIFICATE U/S. 12AA, THE LD CIT(A) A CCEPTED THE PLEA OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED FOR THE BENE FIT OF SEC. 11 AND FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. AGRICULTURAL PRODUCE MARKET COMMITTEE, HING ANGHAT & OTHERS, 291 ITR 419 HELD THAT OBJECTS OF THE ASSESSEE COMP ANY ARE CHARITABLE IN NATURE. THE LD CIT(A) WORKED OUT THE NET INCOME OF THE ASSESSEE BY GIVING THE FOLLOWING REASONS : 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND REMAND REPORT OF THE A.O. AND SUBMISSION OF THE APPELLANT. IT IS UNDISPUTED FACT THAT THE APPELLANT IS AN AGRICULTUR AL PRODUCE MARKET COMMITTEE AND OBJECTS OF THE COMMITTEE ARE CHARITAB LE OBJECTS AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . AGRICULTURAL PRODUCE MARKET COMMITTEE, HINGANGHAT & ORS. (2007) 291 ITR 419 (BOM.). THE APPELLANT IS ALSO REGISTERED U/S 12AA OF THE INCOME TAX ACT, 1961. THEREFORE, THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 11(1)(A) AS CLAIMED BY THE APPELLANT. 8. 1 THE A.O. HAS DISALLOWED PART OF THE EXPENSES ON A DHOC BASIS AND MADE ADDITION OF RS.5,60,167/- AND RS. 5,40,215/- IN A.Y. 2003-04 & 2004-05 RESPECTIVELY. IT IS UNDISPUTED FACT THAT T HE APPELLANT IS AN INSTITUTION ESTABLISHED WITH THE OBJECT OF PUBLIC U TILITY. THE PROVISIONS OF SECTION 28 TO 44 APPLICABLE TO ARRIVE AT BUSINESS I NCOME ARE NOT APPLICABLE TO THE APPELLANT APMC. THEREFORE, THE DISALLOWANCE MADE BY THE A.O. IS NOT JUSTIFIED AS THE APPLICATION OF INCOME FOR THE OBJECTS OF THE APMC IS TO BE ALLOWED AS PER PROVISIONS OF SECTION 11 OF THE A CT. 8.2. THE A.O. HAS CALCULATED INCOME/SURPLUS FOR F.Y . 2002-03 AND 2003- 04 ON ESTIMATE BASIS BY CONSIDERING NET SURPLUS FO R THE YEARS ENDED ON 30/09/2002, 30/09/2003 AND 30/09/2004 WHEREAS THE A PPELLANT HAS WORKED OUT THE GROSS RECEIPTS, EXPENDITURE AND SURP LUS ON THE BASIS OF ACTUAL TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUN T FOR THE F.YS. 2002-03 & 2003-04. THE A.O. HAS ALSO ACCEPTED THE SURPLUS ARRIVED AT BY THE APPELLANT DURING THESE FINANCIAL YEARS IN THE REMAN D REPORT DATED 05/03/2008. THE APPELLANT HAS CLAIMED THAT THERE I S NO SURPLUS FOR ACCUMULATION IN A.Y.2003-04 [EVEN AT 15% U/S 11(1)( A)] AND HENCE THE INCOME SHOULD BE ASSESSED AT RS. NIL. THE INCOME O F THE APPELLANT FOR A.YS. 2003-04 & 2004-05 IS WORKED OUT AS UNDER 4 ITA NOS. 1208 & 1209/PN/2011 THE AGRICULTURE PRODUCE MARKET COMMITTEE, A.Y. 2003-04 & 2004-05 PARTICULARS A.Y.2003-04 A.Y.2004-05 GROSS INCOME AS PER INCOME & EXPENDITURE ACCOUNT RS.36,11,073/- RS.54,49,666/- LESS: APPLICATION OF FUND ON OBJECTS OF THE TRUST AS PER INCOME & EXPENDITURE ACCOUNT RS.30,80,425/- RS.39,77,856/- LESS: APPLICATION OF FUND TOWARDS OBJECT OF THE TRUST FOR ACQUISITION OF FIXED ASSETS RS.1,47,421/- RS.1,75,226/- LESS: DEPRECIATION RS.4,28,096/- RS.3,73,972/- NET INCOME (-)RS.44,869/- RS.9,22,612/- LESS: DEDUCTION U/S 11(1)(A) 15% RS. NIL RS.8,17,450/- TAXABLE INCOME RS. NIL RS.1,05,162 THE A.O. IS DIRECTED TO ASSESS THE INCOME OF THE AP PELLANT APMC AT RS. NIL AND RS.1,05,162/- FOR A.YS. 2003-04 & 2004- 05 RESPECTIVELY. IT HAS BEEN NOTICED THAT THE A.O. HAS INCORRECTLY TAXE D THE INCOME OF THE APPELLANT APMC AS AN AOP AT MAXIMUM MARGINAL RATE. THE A.O. IS, THEREFORE, DIRECTED TO TAX THE INCOME OF THE APMC A S A.O.P (A PUBLIC CHARITABLE TRUST) AT THE NORMAL RATES APPLICABLE TO THE INDIVIDUALS. 4. THE LD CIT(A) HAS CALLED FOR THE REMAND REPORT F ROM THE A.O AND IN THE REMAND REPORT, THE A.O HAS NOT GIVEN DEDUCTI ON IN RESPECT OF APPLICATION OF FUND TOWARDS OBJECT OF THE TRUST FOR ACQUISITION OF THE FIXED ASSET AND THE DEPRECIATION. THE A.O. ALSO DID NOT GIVE BENEFIT OF DEDUCTION U/S. 11(1)(A) AT 15%. THE LD CIT(A) FIN ALLY COMPUTED THE INCOME OF THE ASSESSEE SOCIETY AT RS. NIL FOR THE A .Y. 2003-04 AND RS. 1,05,162/- FOR THE A.Y. 2004-05. NOW THE REVENUE I S IN APPEAL BEFORE US. 5. WE HAVE HEARD THE LD. D.R. NONE WAS PRESENT FOR THE ASSESSEE. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW. ADMITTEDLY, IN THE PRESENT CASE, THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 12AA(1)(B)(I) OF THE ACT DATED 24.9.2007 FROM THE A .Y. 2003-04 WHICH IS BEFORE US. MOREOVER, WE FURTHER FIND THAT ON THE N ATURE OF THE OBJECTS, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF AGR ICULTURAL PRODUCE 5 ITA NOS. 1208 & 1209/PN/2011 THE AGRICULTURE PRODUCE MARKET COMMITTEE, A.Y. 2003-04 & 2004-05 MARKET COMMITTEE & OTHERS, HINGANGHAT (SUPRA) WHICH IS FOLLOWED BY THE LD CIT(A). 7. SO FAR AS WORKING OF THE INCOME OF THE SOCIETY I S CONCERNED, THE SAME IS AS PER PROVISIONS OF LAW AS THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF DEPRECIATION AS WELL AS AMOUNT SPENT ON THE OBJE CTS OF THE TRUST FOR THE ACQUISITION OF THE ASSET. THE DEDUCTION U/S 11 (1)(A) AT 15% GIVEN BY THE LD CIT(A) FOR THE A.Y. 2004-05 IS ALSO AS PER P ROVISIONS OF LAW AS THAT IS THE MINIMUM DEDUCTION AVAILABLE TO THE ASSESSEE . WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDI NGLY, THE SAME IS CONFIRMED IN BOTH THE A.YS. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 28TH SEPTEMBER, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-I, AURANGABAD 4. THE CIT(A), AURANGABAD 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE