ACIT, V. M/s Agriculturar Produce Market committee,

ITA 17/RAN/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60093 (ITAT-RANCHI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHWARDHAN SR S C
• Assessee Lawyers: SHIKESH JHA
• Keywords: Depreciation
• Section: 12A

Judgement Text

ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE: SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 17 / RANCHI / 20 11 ASSESSMENT YEAR : 2008 - 09 ACIT, CIRCLE - 1 DHANBAD VS. M /S. AGRICULTURAL PRODUCE MARKET COMMITTEE DHANBAD (APPELLANT) (RESPONDENT) PAN NO.AAAJA 1053H APPELLANT BY: SHRI HARSHWARDHAN, SR. S.C. RESPONDENT BY: SHRI SHIKESH JHA, AR DATE OF HEAR I NG: 1 4 .02.2012 DATE OF PRONOUNCEMENT: 17 .02.2012 ORDER PER SHRI B.R. MITTAL, JUDICIAL MEMBER:- THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSE SSMENT YEAR 2008-09 AGAINST THE ORDER OF THE LD. CIT(A) DATED 22.7.2011 ON FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A), DHANBAD IS ERRED IN EYE OF LAW ALLOWING THE ASSESSE E TO ENJOY THE BENEFIT OF REGISTRATION U/S 12AA(3), AS THE SAME WA S GRANTED BY THE LD. CIT, DHANBAD TO M/S. AGRICULTURAL PRODUCE MARKE T COMMITTEE CREATED UNDER BIHAR AGRICULTURAL PRODUCE MARKET ACT , 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) DHANBAD IS ERRED IN ALLOWING CONTRIBUTION OF RS.35, 00,000/- MADE BY THE ASSESSEE TO JHARKHAND STATE AGRICULTURAL PRODUC E MARKET BOARD IN VIOLATION OF SECTION 13(1)(C) OF THE I.T. ACT, 1961 . 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A), DHANBAD IS ERRED IN ALLOWING DEPRECIATION ALLOWANCE WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE CLAIM OF THE ASSESSEE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A), DHANBAD IS ERRED IN DELETING THE ADDITION OF RS.55, 02,252/- WITHOUT APPRECIATING THE FACT THAT THE DENIAL OF EXEMPTION U/S 11(2) WAS AS PER LAW, AS THE ASSESSEE HAS NOT BEEN PURSUING THE PRED OMINANT OBJECTIVES OF THE LOCAL AUTHORITY. ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 2 2. THE ASSESSING OFFICER HAS STATED THAT THE ASSESS EE IS A CREATURE OF JHARKHAND AGRICULTURAL PRODUCE MARKET ACT, 2000 AND NOT A CREATURE OF BIHAR AGRICULTURAL PRODUCE MARKET ACT, 1960. THE ASSESSE E WAS GRANTED REGISTRATION U/S 12A OF THE INCOME-TAX ACT BY CIT, DHANBAD UNDER THE BIHAR AGRICULTURAL MARKET PRODUCE ACT, 1960 AND NOT UNDER THE JHARKHAND AGRICULTURAL MARKET PRODUCE ACT, 2000. HENCE, THE ASSESSING OFFICER DID NOT ACCEPT THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE INCOME-TAX ACT. IN THE FIRST APPEAL, THE LD. CIT(A) HAS STATE D THAT THE ASSESSEE WAS CREATED ONLY ONCE UNDER THE BIHAR AGRICULTURAL PROD UCE MARKET ACT, 1960. PURSUANT TO BIHAR RECOGNITION ACT, 2000, AND CONSEQ UENT TO CHANGES EFFECTED IN THE BIHAR AGRICULTURAL PRODUCE MARKET ACT, 2000 BY CHANGING ITS NAME TO JHARKHAND AGRICULTURAL PRODUCE MARKET ACT, 2000 FOR OPERATION IN JHARKHAND, NO OTHER MATERIAL CHANGE HAS BEEN EFFECTED, AND REF ERRED THE NOTIFICATION ISSUED WITH REFERENCE TO THE JHARKHAND ACT, 2000 IN VIEW OF GENERAL CLAUSES ACT, 1897. THE LD. CIT(A) STATED THAT THE CONCLUSI ON DRAWN BY THE ASSESSING OFFICER THAT THE REGISTRATION GRANTED TO THE ASSESS EE U/S 12A CEASED IS UNTENABLE. THAT GRANT OF REGISTRATION U/S 12A IS T HE STATUTORY PREROGATIVE OF THE CIT. THE LD. CIT(A) ACCEPTED THE REGISTRATION TO THE ASSESSEE U/S 12A OF THE ACT AS VALID. HENCE, DEPARTMENT IS IN APPEAL B EFORE THE TRIBUNAL. 3. DURING THE COURSE OF HEARING, THE LD. D.R. RELIE D ON THE ORDER OF THE ASSESSING OFFICER AND WHEREAS THE LD. D.R. RELIED O N THE ORDER OF THE CIT(A). 4. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHO RITIES BELOW. WE ARE OF THE CONSIDERED VIEW THAT THE REGISTRATION GRANTE D TO THE ASSESSEE U/S 12A OF THE INCOME-TAX ACT BY CIT DHANBAD HAVING JURISDI CTION ON THE ASSESSEE IS VALID AND THE PLEA TAKEN BY THE ASSESSING OFFICER T O DENY THE REGISTRATION ON THE GROUND THAT THE ASSESSEE WAS CREATED UNDER THE BIHAR AGRICULTURAL MARKET PRODUCE ACT, 1960 AND NOT UNDER THE JHARKHAND AGRIC ULTURAL MARKET PRODUCE ACT, 2000 HAS NO SUBSTANCE BECAUSE THE ASSESSEE WAS CREATED ONLY ONCE AND THAT TOO BEFORE THE STATE OF JHARKHAND CAME INTO EX ISTENCE. THE CREATION OF THE ASSESSEE SOCIETY UNDER THE BIHAR AGRICULTURAL M ARKET PRODUCE ACT, 1960 AND CONSEQUENT TO CHANGES MADE BY BIFURCATING THE S TATE OF BIHAR AND ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 3 JHARKHAND, THE BENEFITS AND NOTIFICATION ISSUED TO THE ASSESSEE SOCIETY BEFORE THE STATE OF JHARKHAND CAME INTO EXISTENCE WILL NOT BE EFFECTED. IT WAS NOT NECESSARY FOR THE ASSESSEE TO RE-INCORPORATE ONCE J HARKHAND STATE WAS FORMED UNDER SEPARATE ACT AS APPLICABLE TO THE ASSE SSEE NAMELY `JHARKHAND AGRICULTURAL PRODUCE MARKET ACT, 2000. WE HOLD TH AT THE LD. CIT(A) HAS RIGHTLY HELD THAT THE NOTIFICATION ISSUED WITH REFE RENCE TO THE BIHAR ACT MUST BE READ AS REFERENCE TO THE JHARKHAND ACT, 2000 IN VIEW OF THE GENERAL CLAUSES ACT, 1897. HENCE, THE LD. CIT(A) HAS RIGHT LY HELD THAT GRANT OF REGISTRATION U/S 12A OF THE ACT IS IN FORCE. ACCOR DINGLY, GROUND NO.1 OF THE APPEAL TAKEN BY THE DEPARTMENT IS REJECTED. 5. IN RESPECT OF GROUND NO.2 OF THE APPEAL, IT WAS CONTENDED AT THE TIME OF HEARING THAT THE SIMILAR ISSUE HAS BEEN CONSIDER ED BY ITAT PATNA BENCH IN ITA NO.112/PAT/2008 DATED 25.6.2008 IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE MUZAFFARPUR VS. DCIT, WHEREIN IT W AS HELD THAT IF THE ASSESSEE MADE THE CONTRIBUTION OF THE AMOUNT TO THE STATE AGRICULTURAL PRODUCE MARKET BOARD AS PER SECTION 33C OF THE BIHA R AGRICULTURAL PRODUCE MARKET ACT, 1960 AND THE MARKETING BOARD APPLY THE AMOUNT SO RECEIVED AS PER PROVISIONS OF THE ACT TO MEET EXPENSES OF ITS E STABLISHMENT AND TO MEET THE OBJECTS OF THE ACT ALSO DEEM TO USE THE AMOUNT FOR THE MARKET COMMITTEES I.E. THE ASSESSEE. IT IS AN APPLICATION OF FUND FOR THE PURPOSES OF THE ASSESSEE AND ASSESSEE IS ENTITLED TO CLAIM EXEM PTION U/S 11 OF THE INCOME-TAX ACT. WE OBSERVE THAT THE LD. CIT(A) HAS ALSO FOLLOWED THE SAID ORDER OF THE TRIBUNAL WHILE DELETING THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER. IT IS ALSO RELEVANT TO STATE THAT A SIMIL AR ISSUE WAS ALSO CONSIDERED BY ITAT JABALPUR BENCH IN THE APPEAL FILED BY THE DEPA RTMENT IN ITA NO.236/JAB/2006 IN THE CASE OF DCIT VS. KRISH UPAJ MANDI SAMITI, KATNI AND THE ORDER OF THE LD. CIT(A) WAS CONFIRMED BY DISMIS SING THE APPEAL OF THE DEPARTMENT. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL ITAT PATNA BENCH (SUPRA), WE CONFIR M THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUND NO.2 OF THE APPEAL TAK EN BY THE DEPARTMENT. ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 4 6. IN RESPECT OF GROUND NO.3 OF THE APPEAL, THE ASS ESSING OFFICER MADE A DISALLOWANCE OF DEPRECIATION OF RS.8,12,083/-. IT IS RELEVANT TO STATE THAT THERE IS NO DISCUSSION IN THE ORDER. HOWEVER, LD. CIT(A) HAS DELETED THE SAID DISALLOWANCE VIDE PARA-9 OF THE IMPUGNED ORDER BY F OLLOWING THE DECISION OF ITAT PATNA BENCH (SUPRA). THE SAID PARA-9 OF THE O RDER OF THE CIT(A) READS AS UNDER: GROUND OF APPEAL NO.7 IS REGARDING DISALLOWANCE OF DEPRECIATION. THIS ISSUE IS ALSO COVERED BY THE ORDER OF MY PREDECESSO R IN A.Y. 2006-07 IN THE CASE OF THE APPELLANT IN WHICH RELIANCE WAS PLACED ON THE DECISION OF HONBLE ITAT, PATNA BENCH IN THE CASE OF APMC, MUZAFFARPUR VS. DCIT IN ITA NO.112/PAT/2008 DATED 25.06.2008. IN THIS ASSESSME NT YEAR ALSO, THE ISSUE IS THE SAME. DURING THE COURSE OF HEARING, IT HAS BEEN CLARIFIED BY THE A/R OF THE APPELLANT THAT SUCH DEPRECIATION HAS NOT BEEN C LAIMED ON ASSETS ACQUISITION OF WHICH HAS BEEN CLAIMED AS APPLICATIO N OF INCOME. THEREFORE, THERE IS NO DOUBLE DEDUCTION OR DOUBLE BENEFIT TO T HE APPELLANT. ACCORDINGLY, THE ACTION OF THE A.O. IS HELD AS NOT TENABLE ON TH IS ISSUE ALSO. HENCE, THE DEPARTMENT FILED THIS APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING, THE LD. D.R. COULD NOT P OINT OUT AS TO WHY THE A.O. HAS MADE THIS DISALLOWANCE. HOWEVER, THE LD. A.R. FILED A COPY OF EARLIER ORDER OF THE TRIBUNAL DATED 25.6.2008 (SUPR A) AND SUBMITTED THAT THE TRIBUNAL DELETED THE DISALLOWANCE OF DEPRECIATION B Y FOLLOWING THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. B HARUKA PUBLIC WELFARE TRUST 240 ITR 513, WHEREIN IT WAS OBSERVED THAT EVE N CAPITAL EXPENSES ARE CONSIDERED AS AN OUTGOING AND ON THE SAME PRINCIPLE , THE DEPRECIATION IS ALSO A PART OF COMMERCIAL OUTGOING FOR COMPUTATION OF IN COME. THE TRIBUNAL HELD THAT DEPRECIATION CLAIMED IN THE ACCOUNTS BY THE AS SESSEE TRUST WAS AN OUTGOING FOR THE PURPOSE OF DEPRECIATION OF INCOME IN TERMS OF SECTION 11(1) OF THE INCOME-TAX ACT. 8. IN VIEW OF THE ABOVE SUBMISSION OF LD. REPRESENT ATIVE OF THE PARTIES AND CONSIDERING THE FACT THAT CIT(A) HAS ALLOWED TH E DEPRECIATION BY REVERSING THE ORDER OF A.O. BY FOLLOWING THE DECISI ON OF ITAT (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). HENCE, GROUND NO.3 OF THE APPEAL TAKEN BY THE DEPARTMENT I S REJECTED. ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 5 9. IN RESPECT OF GROUND NO.4 OF THE APPEAL, RELEVAN T FACTS ARE THAT THE ASSESSEE IN THE DISCHARGE OF ITS OBLIGATION AS PER ITS ACT, SPENT A SUM OFRS.2,56,02,395/- FOR THE CONSTRUCTION, DEVELOPMEN T AND REPAIR OF LINK ROADS, CULVERT, BRIDGES, ETC. AND THE ASSESSEE PAID THE AM OUNT TO ENGINEERING CELL OF MARKETING BOARD THROUGH ACCOUNT PAYEE CHEQUES AND E NTRY OF THE SAME WAS MADE IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFIC ER DISALLOWED THE ENTIRE EXPENDITURE BEING OF CAPITAL NATURE ON THE GROUND T HAT THE UTILIZATION CERTIFICATE SUBMITTED FROM MARKETING BOARD CANNOT B E CONSTRUED AS UTILIZATION CERTIFICATE. IT IS RELEVANT TO STATE THAT THE ASSE SSEE HAD WRITTEN OFF FROM DEVELOPMENT EXPENSES ACCOUNT AN AMOUNT OF RS.55,02, 252/-. THE ASSESSING OFFICER STATED THAT HE WAS NOT SATISFIED THAT THIS AMOUNT HAD BEEN UTILIZED TOWARDS THE OBJECTIVE OF THE SOCIETY. IN THE FIRST APPEAL, THE LD. CIT(A) CONSIDERED THE FACT THAT THE UTILIZATION CERTIFICAT E ISSUED BY THE APEX BODY I.E. MARKET BOARD IS SUFFICIENT FOR APPLICATION OF INCOM E. HE FINDS NO JUSTIFICATION FOR TREATING THE DEVELOPMENT EXPENDITURE AS INADMIS SIBLE AND ACCORDINGLY DELETED THE SAME. HENCE, DEPARTMENT IS IN APPEAL B EFORE THE TRIBUNAL. 10. DURING THE COURSE OF HEARING, THE LD. D.R. SUPP ORTED THE ACTION OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. A.R. RELIED ON THE ORDER OF THE LD. CIT(A). WE HAVE CONSIDERED THE RELEVANT PROVIS IONS OF THE BIHAR AGRICULTURAL PRODUCE MARKET ACT, 1960 WHICH IS APPL ICABLE TO THE ASSESSEE. WE OBSERVE THAT AS PER SECTION 33C OF THE SAID ACT, EVERY MARKET COMMITTEE OUT OF ITS FUND HAS TO PAY TO THE MARKETING BOARD A S CONTRIBUTION, SUCH PERCENTAGE OF ITS INCOME DERIVED FROM LICENSE FEE A ND MARKET FEE AS MAY BE PRESCRIBED TO MEET EXPENSES OF THE ESTABLISHMENT OF THE BOARD AND ALSO THOSE INCURRED BY THE BOARD IN THE INTEREST OF THE MARKET COMMITTEE. WE FURTHER OBSERVE THAT AS PER SECTION 30 OF THE SAID ACT, THE SAID FUND HAS TO BE APPLIED FOR THE STATED OBJECTIVES. WE OBSERVE THAT THE MARKETING BOARD IS AN APEX BODY TO EXERCISE CONTROL OVER VARIOUS MARKET C OMMITTEES. IT IS THE STATUTORY DUTY OF THE MARKET COMMITTEES TO MAKE CON TRIBUTION TO THE MARKETING BOARD. THE FUNCTIONS OF MARKETING BOARD ARE COMPLEMENTARY TO THE FUNCTIONS OF THE MARKETING COMMITTEE. THE CONT RIBUTION MADE BY THE MARKETING COMMITTEE AS PER THE ACT TO THE APEX BODY I.E. MARKETING BOARD ITA NO17/RANCHI/2011 M/S. AGRICULTURAL PRODUCE MARK ET COMMITTEE, DHANBAD 6 AND THE UTILIZATION OF THE FUND BY THE MARKETING BO ARD FOR AND ON BEHALF OF THE MARKETING COMMITTEE HAS TO BE CONSIDERED AS THE UTILIZATION OF FUND BY THE MARKETING COMMITTEE. THERE IS NO DISPUTE TO TH E FACT THAT THE MARKET BOARD GAVE THE CERTIFICATE OF UTILIZATION OF THE FU ND FOR THE PURPOSES OF THE DEVELOPMENT AND THE OBJECTS OF ACT AND NOT TO TREAT THE SAID CERTIFICATE AS UTILIZATION OF THE AMOUNT FOR DEVELOPMENT EXPENDITU RE IS NOT JUSTIFIABLE. WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE DI SALLOWANCE OF RS.55,02,252/- MADE BY THE ASSESSING OFFICER BY TRE ATING THE SAID DEVELOPMENT EXPENDITURE AS INADMISSIBLE BY NOT ACCE PTING THE UTILIZATION CERTIFICATE ISSUED BY APEX BODY I.E. MARKET BOARD. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUND NO.4 OF THE APPEAL TAKEN BY THE DEPARTMENT. 11. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17.02.2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MIT TAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI, DATED 17 TH FEBRUARY, 2012 COPY TO 1 THE ACIT, CIRCLE - 1, DHANBAD 2 M/S. AGRICULTURAL PRODUCE MARKET COMMITTEE, DHANBAD MARKET COMMITTEE, DHANBAD-826 001. 3 CIT, DHANBAD (JHARKHAND) 4 THE CIT (A) , DHANBAD (JHARKHAND) 5 THE DR, ITAT, DHANBAD 6 GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL CAMP: RANCHI