M/s Market Commitee Nawanshahar, Nawanshahr V. The Dy. Commissioner of Income-tax, Jalandhar

ITA 241/ASR/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1456 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GHANSHAM SHARMA
• Assessee Lawyers: G S GROVER
• Keywords: Charitable institution; Rule of consistency
• Section: 12AA; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.241(ASR)/2015 ASSESSMENT YEAR:2010-11 PAN: AABTM0282H MARKET COMMITTEE, VS. DY. COMMR. OF INCOME TAX, NAWANSHAHAR. RANGE-II, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. G.S. GROVER, ADVOCATE RESPONDENT BY:SH. GHANSHAM SHARMA, DR DATE OF HEARING: 15/12/2015 DATE OF PRONOUNCEMENT: 17/12/2015 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2010-11, AGAINST THE ORDER DATED 16.04.2015, PASSED BY THE L D. CIT(A), JALANDHAR. THE ASSESSEE HAS TAKEN THE FOLLOWING AMENDED GROUND S OF APPEAL: 1. THAT THE ORDER PASSED BY THE LD. CIT(A) CONFIRM ING THE ADDITION OF RS.9,86,557/- IS UNJUST ARBITRARY AND I LLEGAL. 2. THAT THE ORDER PASSED BY THE LD. CIT(A) CONFIRMI NG THE DISALLOWANCE OF EXEMPTION U/S 10(26AAB) OF THE I.T. ACT, 1961 IN RESPECT OF RENTAL INCOME RECEIVED BY THE AP PELLANT. 3. THAT THE ORDER PASSED BY THE LD. CIT(A) HAS FAIL ED TO APPRECIATE THAT THE LANGUAGE OF SECTION 10(26AAB) I S AMPLY CLEAR AND UNAMBIGUOUS TO EXTEND BENEFIT OF EXEMPT ION TO ALL INCOMES. 4. THAT THE ORDER PASSED BY THE LD. CIT(A) HAS NOT EVEN ALLOWED HIS OWN DECISION IN THE CASE OF MARKET COMMITTEE, D HILWAN ORDER DATED 11/10/2013 IN APPEAL NO.188/11- 12/CIT(A)/JAL. THEREBY RULE OF CONSISTENCY HAS NOT BEEN FOLLOWED. AND THE DEPARTMENT DID NOT FILE ANY APPEA L AGAINST THE SAID ORDER. ITA NO.241(ASR)/2015 ASSTT. YEAR 2010-11 2 5. THAT IN THE INTEREST OF EQUITY AND JUSTICE BENEF IT OF SECTION 10(26AAB) BE ALLOWED IN RESPECT OF ALL INCOME INCLU DING RENTAL INCOME. 6. THAT THE APPELLANT IS ALSO REGISTERED U/S 12AA A ND ALSO ENTITLED TO EXEMPTION UNDER SECTIONS 11 TO 13 OF TH E ACT. 7. THAT THE ORDER PASSED BY THE LD. CIT(A) HAS OBSE RVED THAT THE ASSESSEE HAS NOT MADE ANY CLAIM U/S 11 OF THE ACT WHILE FILING THE INCOME TAX RETURN OR DURING THE AS SESSMENT PROCEEDINGS. THIS OBSERVATION IS ALTOGETHER INCORR ECT AND DESERVES TO BE EXPUNGED IN VIEW OF THE LETTER DATED 19/10/2012 FILED BEFORE THE AO. 2. THE ASSESSEE SOCIETY IS ENGAGED IN THE MARKETING OF AGRICULTURAL PRODUCE ON BEHALF OF ITS MEMBERS. FOR THE YEAR, IT DECLARED NIL INCOME AFTER CLAIMING THE ENTIRE SURPLUS OVER EXPENDITURE AS EXEMPT U/S 10(26AAB) OF THE I.T.ACT, 1961. THE AO NOTICED THAT THE ASSESSEE SOCIETY HAD RECEIVED RENT OF RS.9,86,557/- FROM THE OFFICE OF THE SSP, NAWANSHAHAR, FOR THE USE OF ITS PREMISES AND HAD CL AIMED IT AS EXEMPT U/S 10(26AAB) OF THE ACT. OBSERVING THAT THE RENTAL INCOME DID NOT QUALIFY FOR EXEMPTION U/S 10(26AAB) OF THE ACT, IN VIEW OF THE FACT THAT THE RENTAL INCOME HAD NOT BEEN EARNED BY THE ASSES SEE SOCIETY BY WAY OF REGULATING THE MARKETING OF AGRICULTURE PRODUCE, TH E AO DISALLOWED EXEMPTION CLAIMED. 3. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY OBS ERVING AS FOLLOWS: I HAVE CONSIDERED THE OBSERVATIONS OF THE AO AS MAD E BY HIM IN THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE SOCIETY VIDE LETTER DATED 25.03.2015. I HA VE ALSO CONSIDERED MY OWN ORDER DATED 11.10.2013 IN APPEAL NO.188/11- 12/CIT(A)/JAL. IN THE CASE OF MARKET COMMITTEE, DHI LWAN. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTION, I AM OF THE OPINION THAT THE RENTAL INCOME EARNED BY THE ASSESSEE SOCIETY IS NOT FROM ITS MAIN ACTIVITY WITH REGARD TO MARKETING OF AGRICULTU RE PRODUCE. I AM ALSO OF THE OPINION THAT THE FACTS OF THE CASE OF M /S. MARKET COMMITTEE, DHILWAN WERE ENTIRELY DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSESSEE SOCIETY AS IN THAT CASE THE EXEMPTI ON WAS CLAIMED ON INTEREST INCOME AND MISCELLANEOUS INCOME WHICH W AS EARNED BY THE COMMITTEE IN ITS NORMAL COURSE OF BUSINESS. HOW EVER, IN THE CASE OF THE ASSESSEE SOCIETY IT IS NOT SO AS GIVING ITS PREMISES ON RENT IS ITA NO.241(ASR)/2015 ASSTT. YEAR 2010-11 3 NOT THE REGULAR ACTIVITY OF THE ASSESSEE SOCIETY NO R IT IS INCIDENTAL TO ITS MAIN BUSINESS. MOREOVER, THAT INCOME OF THE ASS ESSEE SOCIETY IS EXEMPT WHICH HAS BEEN EARNED BY IT FROM ITS ACTIVIT Y OF MARKETING OF AGRICULTURE PRODUCE. I, THEREFORE, DO NOT FIND ANY FORCE IN ANY OF THE ARGUMENT OF THE LD. AR OF THE ASSESSEE SOCIETY. IT IS, THEREFORE, HELD THAT THE AO HAS RIGHTLY DENIED EXEMPTION TO THE ASS ESSEE SOCIETY ON RENTAL INCOME. IN THE RESULT, THE GROUNDS NO. 1 AND 2 OF APPEAL TAKEN BY THE ASSESSEE SOCIETY ARE DISMISSED. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE PROVISIONS OF SECTION 10(26AAB) OF THE ACT ARE VERY CLEAR AND ALL INCOMES OF THE MARKET COMMITTEE ARE EXEMPT THEREUNDER. RELI ANCE IN THIS REGARD HAS BEEN PLACED ON THE EXTRACT OF THE FMS SPEECH ON THE FINANCE BILL 2008 IN THE LOK SABHA. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON CIT & ORS VS. AGRICULTURAL MARKET COMMIT TEE, TANUKU & ORS 337 ITR 299 (AP). 5. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 6. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF THE MATERIAL PLACED ON RECORD, I FIND THE GRIEVANCE OF THE ASSE SSEE TO BE JUSTIFIED. SECTION 10(26AAB) OF THE ACT RUNS AS FOLLOWS: SECTION 10(26AAB): ANY INCOME OF AN AGRICULTURAL PRODUCE MARKET COMMITTEE OR BOARD CONSTITUTED UNDER ANY LAW FOR TH E TIME BEING IN FORCE FOR THE PURPOSE OF REGULATING THE MA RKETING OF AGRICULTURAL PRODUCE. 7. THUS, THERE IS NO AMBIGUITY IN THE PROVISIONS OF THE SECTION, IN AS MUCH AS IT MAKES NO DISTINCTION AS MADE BY THE AUTH ORITIES BELOW. IT TALKS OF ANY INCOME OF AN AGRICULTURAL PRODUCE MAR KET COMMITTEE AS BEING EXEMPT THERE UNDER, FOR THE PURPOSE OF REGULA TING THE MARKETING OF AGRICULTURAL PRODUCE. THE TAXING AUTHORITIES HAVE G ONE WRONG IN OBSERVING THAT SINCE THE RENT IN QUESTION WAS NOT F ROM THE ASSESSEES MAIN ACTIVITIES WITH REGARD TO THE MARKETING OF AGR ICULTURAL PRODUCE, IT ITA NO.241(ASR)/2015 ASSTT. YEAR 2010-11 4 WAS NOT EXEMPT UNDER THE SECTION. THERE IS NO LEGAL FORCE BEHIND THIS OBSERVATION AND THE CONSEQUENTIAL DISALLOWANCE MADE . 8. THE HONBLE FINANCE MINISTER WAS CATEGORICAL IN HIS SPEECH (SUPRA) ON THE FINANCE BILL, 2008 MADE IN THE LOK SABHA, PR OPOSING TO INSERT SECTION 10(26AAB) IN THE ACT. CLAUSE 3 OF THE FINANCE BILL, 2008 SEEKS TO AMEND THE DEFINITION OF CHARITABLE PURPOSE SO AS TO EXCLUDE ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OR USE OF APPLICATION, OR RETENTION OF THE INCOME FROM SUC H ACTIVITY. THE INTENTION IS TO LIMIT THE BENEFIT TO ENTITIES WHICH ARE ENGAGED IN ACTIVITIES SUCH AS RELIEF OF THE POOR, EDUCATION, M EDICAL RELIEF AND ANY OTHER GENUINE CHARITABLE PURPOSE, AND TO DENY I T TO PURELY COMMERCIAL AND BUSINESS ENTITIES WHICH WEAR THE MAS K OF A CHARITY. A NUMBER OF HONBLE MEMBERS HAVE WRITTEN T O ME EXPRESSING THEIR CONCERN ON THE POSSIBLE IMPACT OF THE PROPOSAL ON AGRICULTURAL PRODUCE MARKET COMMITTEE (APMC) OR STA TE AGRICULTURAL MARKETING BOARDS (SAMB). SINCE THERE I S NO INTENTION TO TAX SUCH COMMITTEES OR BOARDS, AND IN ORDER TO R EMOVE ANY DOUBTS, I PROPOSE TO INSERT A NEW CLAUSE (26AAB) IN SECTION 10 OF THE INCOME TAX ACT TO PROVIDE EXEMPTION TO ANY INCO ME OF AN APMC OR SAMB CONSTITUTED UNDER ANY LAW FOR THE TIME BEIN G IN FORCE FOR THE PURPOSE OF REGULATING THE MARKETING OF AGRICULT URAL PRODUCED. I ONCE AGAIN ASSURE THE HOUSE THAT GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. THE CBDT WILL, FOL LOWING THE USUAL PRACTICE, ISSUE EXPLANATORY CIRCULAR CONTAINING GUI DELINES FOR DETERMINING WHETHER AN ENTITY IS CARRYING ON ANY AC TIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVI TY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS. WHETHER THE PURPOSE IS A CHARITABLE PURPOSE WILL DE PEND ON THE TOTALITY OF THE FACTS OF THE CASE. ORDINARILY, CHAM BERS OF COMMERCE AND SIMILAR ORGANIZATIONS RENDERING SERVICES TO THE IR MEMBERS WOULD NOT BE AFFECTED BY THE AMENDMENT AND THEIR AC TIVITIES WOULD CONTINUE TO BE REGARDED AS ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY. 9. FURTHER, IN AGRICULTURAL MARKET COMMITTEE, TANU KU & ORS. (SUPRA), THE HONBLE ANDHRA PRADESH HIGH COURT HAS OBSERVED THAT A PLAIN READING OF SECTION 10(26AAB) OF THE ACT, SHO WS THAT FROM THE DATE ITA NO.241(ASR)/2015 ASSTT. YEAR 2010-11 5 OF COMING INTO FORCE OF SECTION 10(26AAB), THE INCO ME OF AN AGRICULTURAL MARKET COMMITTEE SHALL NOT BE INCLUDED IN THE COMPU TATION OF INCOME OF A PREVIOUS YEAR FOR THE PURPOSE OF THE ACT, THAT I S TO, SO TO SAY THE ENTIRE INCOME BY AN AGRICULTURAL MARKET COMMITTEE STANDS E XEMPTED FROM CHARGE TO INCOME-TAX. 10. NO DECISION CONTRARY TO AGRICULURAL MARKET COM MITTEE, TANUKU & ORS. (SUPRA), HAS BEEN PLACED BEFORE ME BY THE DEP ARTMENT. 11. IN VIEW OF THE ABOVE DISCUSSION, GROUND NOS. 1 TO 5 RAISED BY THE ASSESSEE ARE ANSWERED IN FAVOUR OF THE ASSESSEE. TH AT BEING SO, GROUND NOS. 6 & 7 DO NOT REQUIRE ANY ADJUDICATION. THE SAM E WERE ALSO NOT ARGUED BEFORE ME. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH DE CEMBER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 17/12/2015 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: MARKET COMMITTEE, NAWANSHAHAR. 2. THE DCIT, RANGE-II, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.