Income Tax Officer, Fatehabad V. Market Committee Jakhal, Fatehabad

ITA 1745/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3605 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 19-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C PANCHOLI
• Keywords: Charitable institution; Opportunity of being heard; Set aside
• Section: 12AA; 27; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI B.C. MEENA, AM I.T. A. NO.1744/DEL OF 2010 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, VS MARKET COMMITTEE, RATIA, WARD-1, FATEHABAD. FATEHABAD. I.T. A. NO.1745/DEL OF 2010 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, VS MARKET COMMITTEE, JAKHAL, WARD-1, FATEHABAD. FATEHABAD. I.T. A. NO.1746/DEL OF 2010 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, VS MARKET COMMITTEE, TOHANA, WARD-1, FATEHABAD. FATEHABAD. I.T. A. NO.1747/DEL OF 2010 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, VS MARKET COMMITTEE, FATEHABAD , WARD-1, FATEHABAD. FATEHABAD. APPELLANT RESPONDENT APPELLANT BY: SHR I P.C. PANCHOLI, SR. DR RESPONDENT BY: NONE ORDER 2 PER BENCH: ALL THESE FOUR APPEALS ARE FILED BY THE REVENUE AGA INST FOUR SEPARATE ORDERS ALL DATED 8.2.2010 PASSED BY THE LD. CIT(A) IN RESPECT OF FOUR DIFFERENT ASSESSEES PERTAINING TO THE ASSESSMENT YE AR 2007-08. 2. THE FIRST ISSUE INVOLVED, IN ALL THESE FOUR APPE ALS, IS COMMON AND IDENTICAL REGARDING THE CLAIM OF DEDUCTION ON ACCOU NT OF PAYMENT OF 30% MARKET FEES PAID TO HARYANA STATE AGRICULTURAL MARK ETING BOARD (IN SHORT HSAMB) BY TREATING THE SAME AS APPLICATION OF INC OME FOR CHARTABLE PURPOSES. THE FOLLOWING AMOUNTS PAID TO HSAMB, AS C ONTRIBUTION FROM MARKET FEE, HAS BEEN CLAIMED BY THE FOUR ASSESSEES BEFORE US: 1. MARKET COMMITTEE, RATIA RS.96,03,292/- 2. MARKET COMMITTEE, JAKHAL RS.79,47,035/- 3. MARKET COMMITTEE, TOHANA RS.1,41,62,401/- 4. MARKET COMMITTEE, FATEHABAD RS.82,50,000/- 3. ALL THESE MARKET COMMITTEES WERE GRANTED REGISTR ATION U/S 12AA IN PURSUANCE TO THE TRIBUNALS ORDER, WHICH HAS BEEN U PHELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT. WHILE GRANTING REGIST RATION, IT WAS OBSERVED THAT THE DEPARTMENT SHOULD INDEPENDENTLY DETERMINE OR DECIDE WHETHER THE ASSESSEE MARKET COMMITTEE HAS UTILIZED THE INCOME F OR THE CHARITABLE PURPOSE FOR WHICH REGISTRATION HAS BEEN GRANTED. 3 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PAID CERTAIN AMOUNT TO HSAMB. THE AO ASKED THE ASSESSEE TO SHOW AS TO WHY THE PAYMENT MADE TO HSAM B SHOULD BE TREATED TO BE AN APPLICATION OF INCOME WITHIN THE MEANING O F SECTION 11 OF THE ACT. THE ASSESSEE THEN SUBMITTED BEFORE THE AO THAT THE CONTRIBUTION MADE TO HSAMB IS AN APPLICATION OF FUND U/S 11 INASMUCH AS THE CONTRIBUTION BY ONE CHARITABLE INSTITUTION TO ANOTHER CHARITABLE IN STITUTION DULY REGISTERED U/S 12AA IS AMOUNTED TO APPLICATION OF ITS INCOME FOR C HARITABLE PURPOSES. RELIANCE WAS PLACED UPON THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS THANTHI TRUST (1999) . ITR 502 (SC) . IT WAS FURTHER POINTED OUT THAT 30% CONTRIBUTION OF MARKET FEES PA ID TO BOARD IS OTHERWISE AN EXPENDITURE OF THE ASSESSEE MARKET COMMITTEE AND THE SAME HAS BEEN CREDITED AS INCOME IN THE BOOKS OF HSAMB, AND HSAMB HAS INCLUDED IT FOR THE PURPOSE OF DETERMINING ITS TAXABLE INCOME. IT WAS ALSO POINTED OUT THAT CONTRIBUTION TO THE BOARD IS A STATUTORY REQUIREMEN T AS LAID DOWN IN SECTION 27 OF THE PUNJAB AGRICULTURAL MARKETING PRODUCE, 19 61. THE ASSESSEE ALSO POINTED OUT TO THE AO THAT IDENTICAL CLAIM HAS BEEN ALLOWED BY THE CIT(A) IN EARLIER YEARS. THE ASSESSEES EXPLANATION WAS CONS IDERED BY THE AO BUT HE DID NOT AGREE WITH THE ASSESSEES CONTENTION. THE AO OBSERVED THAT THOUGH THE ASSESSEE WAS UNDER STATUTORY OBLIGATION TO PAY CONTRIBUTION TO THE BOARD 4 AS PER SECTION 27/28 OF PUNJAB AGRICULTURAL PRODUCE MARKETING ACT, 1961 BUT THE SAME CANNOT BE CONSIDERED TO BE AN APPLICAT ION OF INCOME UNLESS THE SAME HAS BEEN FULLY PAID AS SALARY TO CLASS III EMP LOYEES, WHO WORK AT THE LOCATION OF RESPECTIVE MARKET COMMITTEE. THE AO HAS TAKEN A VIEW THAT AS FAR AS THE PAYMENT OF SALARY OF CLASS III EMPLOYEE IS CONCERNED, THE SAME WOULD BE TREATED AS APPLICATION, BUT ANY AMOUNT OVE R AND ABOVE THE SALARY, WOULD NOT BE CONSIDERED TO BE AN APPLICATION OF INC OME WITHIN THE MEANING OF SECTION 11 OF THE ACT. THE AO FURTHER STATED THA T ALTHOUGH THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE IT AT, NEW DELHI IN EARLIER YEARS BUT THE FINDINGS OF THE ITAT HAVE NOT BEEN AC CEPTED BY THE DEPARTMENT INASMUCH AS THE DEPARTMENT WAS CONTEMPLA TING FILING OF FURTHER APPEAL FOR THE ASSESSMENT YEAR 2006-07 BEFORE THE H ONBLE HIGH COURT. THE AO FURTHER STATED THAT THE ISSUE IS ALREADY IN APPEAL FOR EARLIER YEARS BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE AO, THEREFORE, STATED THAT THE BALANCE AMOUNT OF RS.82,50,000/- IN THE CA SE OF MARKET COMMITTEE, FATEHABAD, OUT OF THE TOTAL PAYMENT OF RS.1,34,75,0 37/- SHALL NOT BE TREATED TO BE THE APPLICATION OF INCOME. HE FURTHER STATED THAT THE PAYMENT OF SALARY TO THE EXTENT OF RS.52,25,037/- PAID TO CLASS III S TAFF IS ONLY BE CONSIDERED AS AN APPLICATION OF INCOME. THE AO, THEREFORE, DISAL LOWED THE SUM OF 5 RS.82,50,000/- WHILE COMPUTING THE ASSESSEES TOTAL INCOME. THE IDENTICAL VIEW HAS BEEN TAKEN BY THE AO IN ALL OTHER CASES. 5. ON AN APPEAL, CIT(A) IN ALL THE CASES HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE CIT(A)S ORDER FOR THE ASSTT. YEARS 2003-04 TO 2006-07 WHERE THE CONTRIBUTION MADE BY THE MARKE T COMMITTEE OF HSAMB WAS ALLOWED AS DEDUCTION, BEING APPLICATION O F ASSESSEES INCOME. 6. HENCE, THE DEPARTMENT IS IN APPEAL. 7. WE HAVE HEARD THE LEANED DR. NONE FOR THE ASSES SEE IS PRESENT BEFORE US. 8. FROM THE AOS ORDER, IT IS AN ADMITTED POSITION THAT IDENTICAL ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRI BUNAL. HOWEVER, THE AO HAS NOT FOLLOWED THE TRIBUNALS DECISION BY OBSERVI NG THAT DEPARTMENT HAS FILED FURTHER APPEAL BEFORE THE HONBLE PUNJAB & HA RYANA HIGH COURT AND THE MATTER IS SUB JUDICE. FROM THE DISCUSSION MAD E BY THE AO, IT IS, THUS, CLEAR THAT IN SO FAR AS THE POSITION AS IT STANDS T ODAY, THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. THE DR H AS NOT BEEN ABLE TO POINT OUT THAT THE DECISION OF TRIBUNAL HAS IN THE MEANTI ME EITHER MODIFIED OR SET ASIDE OR REVERSED BY THE HONBLE HIGH COURT. THERE FORE, MAINTAINING JUDICIAL DISCIPLINE, WE ARE INCLINED TO FOLLOW THE DECISION OF COORDINATE 6 BENCH OF THE TRIBUNAL PASSED IN EARLIER YEARS WHERE IDENTICAL CLAIM OF THE ASSESSEE WAS ALLOWED. IN THIS VIEW OF THE MATTER, THE ORDER OF CIT(A),ON THIS ISSUE, IS UPHELD. 9. THE NEXT GROUND IN THE CASE OF MARKET COMMITTEE, RATIA (ITA NO.1744/DEL/10) IS AGAINST CIT(A)S ORDER IN ALLOWI NG EXEMPTION U/S 11(2) OF THE ACT AMOUNTING TO RS.47,95,242/-. 10. WHILE FILING THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED AN EXEMPTION U/S 11(2) OF THE ACT AMOUNTING TO RS.47,9 5,242/- AND IN RESPECT OF WHICH A NOTICE IN FORM NO.10 WAS GIVEN TO THE AO WITHIN DUE TIME. IN THE FROM NO.10, THE ASSESSEE HAS STATED THAT THE FU ND HAS BEEN ACCUMULATED FOR DEVELOPMENT WORKS. HOWEVER, THE AO STATED THAT ASSESSEE HAS FAILED TO SPECIFY THE DEVELOPMENT WORK IN PARTICULAR IN FORM NO.10 FOR WHICH THE SAID ACCUMULATION OF FUND HAS BEEN MADE. THE AO, THEREFO RE, DISALLOWED THE ASSESSEES CLAIM U/S 11(2) OF THE ACT AS, IN HIS OP INION, ASSESSEE HAS NOT SPECIFIED THE OBJECT/OBJECTS FOR WHICH ACCUMULATION WAS MADE. 11. ON AN APPEAL, CIT(A) HAS ALLOWED THE ASSESSEES CLAIM BY OBSERVING AS UNDER: AS REGARDS THE DENIAL OF EXEMPTION U/S 11(2) OF THE IT ACT, THE SAME IS ALLOWED ON THE SAME LINES AS IN THE APPEAL ORDER FOR THE AY 2006-07. THE APPELLANT HAS ALSO DRAWN ATTENTION, RATHER SHOWN A 7 CERTIFICATE ISSUED BY EXECUTIVE ENGINEER, HSAMB, HISAR, WHICH CERTIFIED PARTICULAR WORKS TO HAVE BEEN EXECUTED. IT HAS BEEN SUBMITTED THAT ON THE AFORESAID LINES CERTIFICATES WERE PRODUCED BEFORE THE ASSESSING OFFICER IN RESPECT OF THE EXPENDITURE FOR WHICH WORKS HAVE BEEN EXECUTED. IN VIEW OF THE AFORESAID THE DISALLOWANCE MADE BY THE AO IS DELETED. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 13. IT IS NOT IN DISPUTE THAT THE ASSESSEE ACCUMULA TED THE SUM OF RS.47,95,242/-. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE FURNISHED REQUISITE FORM NO.10 WITHIN DUE DATE. IN FORM NO.10, THE ASS ESSEE HAS CLEARLY STATED THAT THE FUND HAS BEEN ACCUMULATED FOR DEVELOPMENT WORKS. THE AO HAS REJECTED THE ASSESSEES CLAIM THAT NO DEVELOPMENT W ORK IN PARTICULAR HAS BEEN SPECIFIED. HOWEVER, THE LEARNED CIT(A), FOLLO WING HIS ORDER FOR ASSTT. YEAR 2006-07, HAS ALLOWED THE ASSESSEES CLAIM ON T HE BASIS OF A CERTIFICATE ISSUED BY EXECUTIVE ENGINEER, HSAMB WHERE PARTICULA R WORKS TO BE EXECUTED WAS SPECIFIED. IT IS NOW WELL SETTLED THA T IN FORM NO.10B, THE ASSESSEE HAS TO GIVE A DECLARATION THAT THE AMOUNT SHALL BE UTILIZED FOR THE OBJECTS FOR WHICH THE ASSESSEE TRUST OR SOCIETY WAS CREATED. IT IS NOT NECESSARY TO SPECIFY THE OBJECT IN PARTICULAR IN FO RM NO.10B. MOREOVER, THE ASSESSEE HAS FURNISHED CERTIFICATE ISSUED BY EXECUT IVE ENGINEER, HSAMB SPECIFYING THE PARTICULAR WORK TO BE EXECUTED. THE REFORE, ON THIS TECHNICAL 8 GROUND, THE CLAIM OF THE ASSESSEE CANNOT BE REJECTE D. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 14. THE IDENTICAL ISSUE WITH REGARD TO THE ASSESSEE S CLAIM OF EXEMPTION U/S 11(2) IN THE BACKGROUND OF THE FACT WHETHER A P ARTICULAR OBJECT IS TO BE SPECIFIED IN FORM NO.10 IS ALSO INVOLVED IN THE CAS E OF MARKET COMMITTEE, JAKHAL (ITA NO.1745/DEL/2010), AND MARKET COMMITTEE , FATEHABAD (ITA NO.1747/DEL/10). IN THE LIGHT OF OUR VIEW TAKEN AB OVE, THIS GROUND RAISED BY THE REVENUE IN BOTH THESE CASES IS ALSO REJECTED. 15. GROUND NO.3 IN THE CASE OF MARKET COMMITTEE, JA KHAL (ITA NO.1745/DEL/10) IS DIRECTED AGAINST CIT(A) ORDER IN ALLOWING PAYMENT OF INCOME-TAX AMOUNTING TO RS.3 LACS AS APPLICATION OF FUNDS. IN THE ASSESSMENT ORDER, AO HAS MENTIONED THAT ASSESSEE HA S RECEIVED INCOME-TAX REFUND OF RS.3 LACS EXCLUDING INTEREST. THIS AMOUN T HAS BEEN INCLUDED IN THE INCOME OF THE ASSESSEE BY REFERRING CERTAIN DECISIO NS OF CIT(A)N AS WELL AS OF THE TRIBUNAL. HOWEVER, THE LEARNED CIT(A) HAS D ELETED THIS ADDITION ON THE GROUND THAT WHEN INCOME-TAX WAS PAID, IT WAS NO T CLAIMED AS DEDUCTION, AND, THEREFORE, THE SAME CANNOT BE TREATED AS AN IN COME DERIVED FROM PROPERTY HELD UNDER TRUST. 16. WE HAVE HEARD THE LEARNED DR AND PERUSED THE OR DERS OF THE AUTHORITIES BELOW. THIS ISSUE IS RESTORED BACK TO T HE FILE OF AO FOR 9 VERIFICATION AS TO WHETHER THE PRINCIPAL AMOUNT OF INCOME TAX RECEIVED AS REFUND BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION WAS CLAIMED AS DEDUCTION IN THE YEAR IN WHICH IT WAS PAID. THE PA YMENT OF INCOME-TAX WAS ALLOWED AS DEDUCTION BY THE TRIBUNAL IN NUMBER OF C ASES BUT AT THE SAME TIME THE TRIBUNAL OBSERVED THAT ON SIMILAR ANALOGY, WHEN ANY REFUND OF INCOME-TAX IS RECEIVED, IT WILL BE AMOUNTED TO BE I NCOME OF THE ASSESSEE. THE AO, THEREFORE, SHALL DECIDE THE ISSUE AFTER VER IFYING THE FACTS OF THE PRESENT CASE, AND IN THE LIGHT OF THE DECISION OF T HE TRIBUNAL REFERRED TO BY THE AO IN HIS ORDER. THE AO SHALL PROVIDE REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 17. IN THE CASE OF MARKET COMMITTEE, TOHANA (ITA NO .1746/DEL/10), THE SECOND GROUND RAISED BY THE REVENUE IS DIRECTED AGA INST CIT(A) IN DELETING THE ADDITION OF RS.26,94,000/-, AND IN THE CASE OF MARKET COMMITTEE, FATEHABAD (ITA NO.1747/DEL/10) GROUND NO.3 IS DIREC TED AGAINST CIT(A) IN DELETING THE ADDITION OF RS.96,459/-, ON ACCOUNT O F TMC. IN THE CASE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO TH AT CERTAIN AMOUNT RECEIVED ON ACCOUNT OF TMC HAS NOT BEEN INCLUDED IN INCOME AND EXPENDITURE ACCOUNT THOUGH IT HAS BEEN MADE A PART OF RECEIPT AND PAYMENT ACCOUNT. ON THIS POINT, THE ASSESSEE EXPLAINED THA T AMOUNT WAS RECEIVED AS GRANT SUBSIDY FOR DEVELOPING MANDIES/YARDS/PLATFORM FOR COTTON AND AS AND 10 WHEN THE AMOUNT WILL BE UTILIZED FOR THE PURPOSE, I T WILL BE ADJUSTED AGAINST THE EXPENSES. HOWEVER, AO HAS TREATED IT TO BE AS INCOME OF THE ASSESSEE. 18. ON AN APPEAL, CIT(A) HAS DELETED THE ADDITION B Y OBSERVING AS UNDER: THE AO HAS DISALLOWED SUBSIDY OF RS.96,549/- IN THE ASSESSMENT ORDER PARA 5. THE AO IS OF THE VIEW THAT THE APPELLANT IS TAKING DOUBLE BENEFIT IN THE SENSE THAT IT HAD CLAIMED APPLICATION OF INCOME, BUT THE SUBSIDY AMOUNT HAS NOT BEEN SHOWN IN THE INCOME. THE AO, AS PER THE APPELLANT HAS NOT APPRECIATED THE FACTS INVOLVING THE SUBSIDY. ACTUALLY SUBSIDY IS THE AMOUNT PROVIDED BY THE GOVT. TO THE APPELLANT AFTER CONSTRUCTION OF COTTON YARDS; THIS IS FOR THE PURPOSE OF REDUCING THE COST TO THE APPELLANT AND FOR GIVING INCENTIVE AND ENCOURAGEMENT FOR CARRYING OUT THE WORK AND FURTHER WORK ON THE SAME LINES. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED; THIS SUBSIDY IS NOT A RECEIPT IN THE NATURE OF THE RECEIPTS IN THE CASE OF A TRUST . IT HAS NO RELATION WHATSOEVER WITH THE PRODUCTION OR COMMENCEMENT OF BUSINESS. THEREFORE, IT IS NOT TAXABLE. THE ADDITION MADE BY THE AO IS DELETED. THE GROUND OF APPEAL PERTAINING TO THIS ITEM IS ALLOWED. 19. WE HAVE HEARD THE LEARNED DR. AFTER CONSIDERIN G THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF EXPENSES AGAINST WHICH THE SUBSIDY WAS RECEIVED BY THE ASSESSEE. IT IS ALSO NOT CLEAR WHETHER THE SUBSIDY RECEIVED BY THE ASSESSEE HAS BEEN ADJUSTED AGAINST THE EXPENSES. IT IS ALSO NOT CLEAR IN WHAT MANNER, AND AT WHAT STAGE, THE AS SESSEE IS ENTITLED TO USE 11 AND UTILIZE THIS MONEY. ALL THE GUIDELINES OF GRANT ING SUBSIDY HAD NOT BEEN LOOKED INTO BY THE LEARNED CIT(A) WHILE DELETING TH E ADDITION. ALL THESE PAPERS ARE NOT AVAILABLE BEFORE US. WE, THEREFORE, RESTORE THE MATTER BACK TO THE FILE OF THE AO, FOR HIS FRESH ADJUDICATION AFTE R PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE A O SHALL DECIDE THE MATTER AFTER EXAMINING ALL THE FACTS AND CIRCUMSTANCES AND RELEVANT DETAILS, WHICH SHALL BE PRODUCED BY THE ASSESSEE BEFORE HIM. THE A O SHALL CONSIDER THE MATTER AS PER LAW. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN THE CASE OF MARKET COMMITTEE, RATIA IS DISMISSED, AND APPEALS IN THE C ASE OF MARKET COMMITTEE, JAKHAL, MARKET COMMITTEE, TOHANA AND MAR KET COMMITTEE, FATEHABAD ARE PARTLY ALLOWED FOR STATISTICAL PURPOS ES. 21. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2010 IMMEDIATELY AFTER THE HEARING IS OVER. (B.C. MEENA) (C.L. SET HI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH JUNE, 2010 VIJAY 12 COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A), ROHTAK 5. DR ASSISTANT REGISTRAR