DCIT, Panchkula V. M/s Haryana State Agricultural Marketing Board, Panchkula

ITA 135/CHANDI/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1272 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: HARISH NAYYAR
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Benefit of exemption
• Section: 143(3); 12A; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.135/CHD/2011 ASSESSMENT YEAR: 2007-08 THE DCIT, VS. HARYANA STATE AGRICULTURAL MARKETING BOARD, CIRCLE, SECTOR 6, PANCHKULA PANCHKULA PAN AAALH0016R (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.JAISHREE SHARMA RESPONDENT BY: SHRI HARISH NAYYAR ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 29.11.2010 RELATING TO ASSESSMENT Y EAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AS STIPULATED AND THUS THE ASSESSEE HAS NOT SATISFIED THE REQUIRED CONDITIONS FOR EXEMPTIONS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DEPRECIATION OF RS . 79,92,933/- BY WAY OF DISALLOWANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER. 2 3. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED VIDE GROUND NO.1, IN THE PRESENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN EARLIER YE ARS. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 4. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE SPECT OF ELIGIBILITY OF THE ASSESSEE FOR CLAIMING EXEMPTION U/S 11 OF THE A CT. WE FIND THAT SIMILAR ISSUE AROSE IN ASSESSEES OWN CASE RELATING TO SEVERAL YEARS. THE TRIBUNAL IN ITA NO. 538/CHD/2010 VIDE ORDER DATED 7 .6.2010 & ITA NO. 1014/CHD/2009 VIDE ORDER DATED 31.12.2009 IN TURN R ELIED ON THE DECISION OF THE TRIBUNAL IN ITA NO. 1017/CHD/2008 ORDER DATE D 30.1.2009 AND ITA NO. 577/CHD/2008 DATED 19.8.2009, WHEREIN ON IDENTI CAL FACTS, IT WAS HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON FILE. BRIEF FACTS ARE THAT THE ASSE SSEE IS A STATUTORY BODY, SET UP UNDER HARYANA STATE AGRICULT URAL MARKET BOARD, FOR THE WELFARE OF ETH FARMING COMMUN ITY AT LARGE AND IS A CHARITABLE ORGANIZATION CARRYING ON THE CHARITABLE ACTIVITIES AS DEFINED IN SEC 2(15) OF TH E ACT. AS FAR AS, REGISTRATION IS CONCERNED, THE ISSUE WAS SE TTLED AND THE ASSESSEE WAS GRANTED REGISTRATION. WHILE COMPL ETING THE ASSESSMENT THE LD. ASSESSING OFFICER DENIED THE BENEFIT OF EXEMPTION U/S 11 & 12 ON THE GROUND THAT ACCOUNT S OF THE ASSESSEE ARE NOT CORRECT AND NO SEPARATE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED AS REQUIRED UNDER THE ACT, CONSEQUENTLY THE ASSESSMENT ;WAS COMPLETED AS AOP A ND NOT IN THE STATUS OF CHARITABLE INSTITUTION. THERE FORE, EXEMPTION CLAIMED BY THE ASSESSEE U/S 11(1) WAS NOT ALLOWED. THE MATTER EVEN TRAVELED TO THE TRIBUNAL AND IT WAS SET ASIDE TO THE LD. ASSESSING OFFICER. IN THE SET ASIDE PROCEEDINGS AND PURSUANCE TO COMPLIANCE OF TH E ORDER OF THE TRIBUNAL, THE LD. ASSESSING OFFICER C OMPLETED THE ASSESSMENT. DURING FIRST APPELLATE STAGE, LD. CIT(A) AGAIN SOUGHT THE REMAND REPORT FROM THE LD. ASSESSI NG OFFICER AND THE SAME WAS DULY CONSIDERED. THE REMA ND REPORT DATED 24 TH DECEMBER 2007 IS IN THE PAPER BOOK AVAILABLE ON THE FILE. THE LD. CIT(A) HAS ALSO CON SIDERED THE SUBMISSIONS OF THE ASSESSEE WHICH ARE AVAILABL E AT PAGE 4 ONWARDS. EVEN WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WERE FORWARDED TO THE LD. ASSESSING OFFICE R FOR 3 EXAMINATION AND COMMENTS. THERE IS FINDING IN THE IMPUGNED ORDER THAT THE LD. ASSESSING OFFICER INSTE AD OF EXAMINING THE BOOKS OF ACCOUNT, SIMPLY REITERATED H IS OBSERVATIONS AS MADE IN THE EARLIER ASSESSMENT ORDE R. IN ITS WRITTEN SUBMISSIONS, THE ASSESSEE HAS CLAIMED T HAT BOOKS OF ACCOUNT WERE REGULARLY MAINTAINED, THEREFO RE, THE LD. ASSESSING OFFICER WAS ASKED TO EXAMINE THE MAT TER VIDE LETTER DATED 23.7.2007 ALONG WITH CERTAIN DIRE CTIONS. EVEN WHILE GRANTING REGISTRATION U/S 12A OF THE ACT , THE ASSESSEE WAS FOUND TO BE MAINTAINING ACCOUNTS WHICH ARE DULY AUDITED. THE ASSESSEE WAS ALSO FOUND HAVING COMPLIED WITH THE REQUIREMENT OF LAW IN GETTING ITS ACCOUNTS AUDITED. AT PAGE 16 OF THE IMPUGNED ORDER , THERE IS A FINDING THAT THE AUDITORS HAVE CERTIFIED IN TH E AUDIT REPORT THAT THEY HAVE EXAMINED THE BOOKS OF ACCOUNT AND TRIAL BALANCE OF VARIOUS OFFICES. THIS FACTUAL MAT RIX WAS NOT CONTROVERTED BY THE REVENUE. EVEN OTHERWISE, THE ASSESSEE IS A STATUTORY BODY AND CANNOT FUNCTION BE YOND THE STATUTORY PROVISIONS UNDER WHICH IT WAS CREATED . IN VIEW OF THIS FINDING, WE HAVE NOT FOUND ANY INFIRMI TY IN THE IMPUGNED ORDER OF LD. CIT(A), CONSEQUENTLY THE SAM E IS UPHELD. 5. IT IS NOT DISPUTED THAT THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS IN THE EARLIER YEARS. RESPECTFULLY, FOLL OWING THE RATIO LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF CIT(A) IN ALLOWING EXEMPTION U/S 11 OF THE ACT. THE GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS DISMISSED 6. THE ISSUE RAISED IN GROUND NO.2 IS IN CONNECTION WITH THE ALLOWANCE OF DEPRECIATION ON FIXED ASSETS, VALUE OF WHICH HAS BEEN CONSIDERED AS APPLICATION OF INCOME OF THE ASSESSEE, WHILE COMPUT ING THE EXEMPTION U/S 11 OF THE ACT. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF MARKET COMMITTEE, KALANVALI & OTHER MARKET COMMITTEES VS. ITO (ITA NOS. 326 TO 328/CHD/2010) ORDER DATED 26.5.201 0 AND THE TRIBUNAL IN TURN RELIED ON THE RATIO LAID DOWN BY THE TRIBUN AL IN MARKET COMMITTEES, MUSTAFABAD & SAUDHASRA VS. DCIT, YAMUNA NAGAR IN ITA NOS. 1037/CHD/2009 & 1067/CHD/2009 (ORDER DATED 18. 3.2010). 4 7. THE TRIBUNAL IN THE CASE OF MARKET COMMITTEE, M USTAFABAD & SAUDHARA VS. DCIT, YAMUNANAGAR (ITA NOS. 1037 & 106 7/CHD/2010) VIDE ORDER DATED 18.3.2010 HELD AS UNDER:-. 8. THE ISSUE IN GROUND NO.3 IS AGAINST THE DISALLO WANCE OF DEPRECIATION ON ASSETS, COST OF WHICH WAS CLAIMED A ND ALLOWED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSES, IN THE YEAR OF ACQUISITION OF THE SAID ASSET. THE TRIBUNAL VIDE ORDER DATED 31.12.2009, ON SIMILAR ISSUE VIDE PARAS 11 & 12 HAS HELD AS UNDER:- 11. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TR IBUNAL IN ITA NO. 1055/CHD/2009 RELATING TO ASSESSMENT YEA R 2006-07 WHEREBY VIDE ORDER DATED 30.11.2009, IT WAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE BEFORE US IS A LOCAL AUTHORITY WHICH IS CLAIMING ITS INCOME TO BE EXEMPT U/S 11 OF THE I.T. ACT. WHILE COMPUTING THE INCOME FOR THE YEAR AS PER INCOME AND EXPENDITURE ACCOUNT, THE ASSESSEE HAD DEBITED DEPRECIATION OF RS. 8,92,957/- ON THE FIXED ASSETS. ADMITTEDLY THE ENTIRE COST OF THE ASSETS WAS CLAIMED AND ALLOWED AS APPLICATION OF INCOME TOWARDS CHARITABLE PURPOSE IN THE YEAR OF ACQUISITION OF THE SAID ASSETS. THE ASSETS WERE EITHER ACQUIRED IN THE EARLIER YEARS OR DURING THE YEAR UNDER CONSIDERATION. THE QUESTION BEFORE US IS LIMITED TO THE CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION WHILE COMPUTING THE INCOME FOR THE PURPOSE OF SECTION 11 OF THE ACT. SIMILAR ISSUE AROSE IN CIT VS RAIPUR PALLOTTINE SOCIETY [180 ITR 579 (M.P.)] WHEREIN WHILE COMPUTING THE INCOME OF A RELIGIOUS AND CHARITABLE INSTITUTION, BEING ASSESSED IN THE STATUS OF AOP, IT WAS HELD THAT DEPRECIATION IS TO BE ALLOWED, WHILE COMPUTING THE BUSINESS INCOME U/S 28 OF THE I.T. ACT. 6. THE HON'BLE BOMBAY HIGH COURT IN CIT VS INSTITUTE OF BANKING [264 ITR 111 (BOM.)], HAD HELD THAT DEPRECIATION IS TO BE ALLOWED ON THE ASSETS, THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS. IT HAD FURTHER HELD THAT DEPRECIATION ON ASSETS RECEIVED ON TRANSFER, WHERE THE ASSESSEE HAD NOT INCURRED THE COST OF ACQUIRING THE ASSET, IS ALSO TO BE ALLOWED. 5 7. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN VARIOUS CASES OF MARKET COMMITTEES OF HARYANA AND THE CLAIM OF DEPRECIATION HAS BEEN ALLOWED BY THE TRIBUNAL IN VARIOUS APPEALS FILED BY THE ASSESSEE, COPIES OF WHICH HAVE BEEN FILED ON RECORD. 12. RESPECTFULLY, FOLLOWING THE RATIO LAID DOWN BY THE M.P. HIGH COURT (SUPRA) AND BOMBAY HIGH COURT (SUPR A) IN THE ABOVE MENTIONED CASES AND FOLLOWING THE DECI SION OF THE COORDINATE BENCHES OF TRIBUNAL IN THE CASE O F MARKET COMMITTEE OF HARYANA, WE HOLD THAT THE CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION IS TO BE ALLOW ED, WHILE COMPUTING THE INCOME U/S 11 OF THE ACT. HOWE VER, WE FIND THAT FACTUAL ASPECTS OF THE ISSUE OF ADDIT ION TO THE FIXED ASSETS AND THE DEPRECIATION ALLOWABLE ON THE SAME IS NOT CLEAR FROM THE PERUSAL OF RECORDS. WE, THEREFO RE, RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEAR AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSEQUE NTLY WORK OUT THE DEPRECIATION ALLOWABLE TO THE ASSESSEE DURING THE YEAR UNDER APPEAL. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, GROUND NO.3 RAISED BY THE ASSESSEE IN BOTH TH E APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 9. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN T HE CASE OF MARKET COMMITTEES (SUPRA) VIDE ORDER DATED 31.12.20 09 WE ALLOW THE CLAIM OF THE ASSESSEE. HOWEVER, THE ISSUE IS RESTORE BACK TO THE FILE OF ASSESSING OFFICER FOR LIMITED PURPOSES OF VERIFYING THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEA R AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSE QUENTLY WORK OUT THE DEPRECIATION ALLOWABLE TO THE ASSESSEE DURI NG THE YEAR UNDER APPEAL. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROU ND NO.3 RAISED BY THE ASSESSEE IN BOTH THE APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSES SEE VIDE PARA 11.2 HAD OBSERVED THAT THE HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF MARKET COMMITTEE, PIPLI (45 DTR 381 (P&H) HAD HE LD THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS FROM TH E INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUN DS, WHICH HAD TO BE APPLIED FOR THE PURPOSE OF THE TRUST IN TERMS OF SE CTION 11 OF THE ACT. THE 6 ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWI NG THE DEPRECIATION ON ASSETS WAS DELETED BY CIT(A). FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF MARKET COMMITTEES (ORDERS D ATED 18.3.2010 AND 26.5.2010), WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) THAT DEPRECIATION ON THE AFORESAID ASSETS IS TO BE ALLOW ED AS A DEDUCTION FROM THE INCOME OF THE CHARITABLE TRUST. HOWEVER, WE M ODIFY THE ORDER OF CIT(A) ON THE EXTENT THAT THE ASSESSING OFFICER SHA LL VERIFY THE ADDITIONS MADE TO THE FIXED ASSETS FROM YEAR TO YEAR AND THE RATE OF DEPRECIATION TO BE ALLOWED ON THE SAME AND CONSEQUENTLY WORK OUT TH E DEPRECIATION ALLOWABLE TO THE ASSESSEE DURING THE YEAR UNDER CON SIDERATION. A REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE. THUS THE GROUND OF APPEAL RAISED BY THE REVENUE IN ALL T HE APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. THE GROUND NO.2 RAISED BY THE REVENUE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF MARCH, 2010. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 30 TH MARCH, 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR