I.T.O., Guna V. Krishi Upaj Mandi Samiti, Guna

ITA 273/AGR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6969 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 15-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2010
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV GOYAL
• Keywords: Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 12A; 12AA; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 271/AGRA/2010 ASSTT. YEAR : 2007-08 INCOME-TAX OFFICER, VS. KRISHI UPAJ MANDI SAMIT I, GUNA. MADHUSUDAN NAGAR, DISTT. GUNA. (PAN : AAALK 0304 R) ITA NO. 273/AGRA/2010 ASSTT. YEAR : 2007-08 INCOME-TAX OFFICER, VS. KRISHI UPAJ MANDI SAMIT I, GUNA. BINAGANJ, DISTT. GUNA. (PAN : AAALK 0264 C) ITA NO. 274/AGRA/2010 ASSTT. YEAR : 2007-08 INCOME-TAX OFFICER, VS. KRISHI UPAJ MANDI SAMIT I, GUNA. KUMBHRAJ, DISTT. GUNA. (PAN : AAALK 0215 D) ITA NO. 275/AGRA/2010 ASSTT. YEAR : 2007-08 INCOME-TAX OFFICER, VS. KRISHI UPAJ MANDI SAMIT I, GUNA. GUNA. (PAN : AAALK 0212E) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI WASIM ARSHAD, SR. D.R. FOR RESPONDENT : SHRI GAURAV GOYAL, C.A. ORDER PER P.K. BANSAL, A.M. : THESE FOUR APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS DATED 20.04.2010 RELATING TO DIFFERENT KRISHI UPAJ MANDI SAMITIS FOR THE ASSESSMENT YEAR 2007-08. COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS EXCEPT CHANGE IN THE FIGURE. THE FACTS INVOLVED IN ALL THE APPEALS 2 ARE ALSO COMMON. WE ARE TAKING THE BRIEF FACTS, AS ARE IN ITA NO. 271/AGRA/2010 RELATING TO KRISHI UPAJ MANDI SAMIT, MADHUSUDAN NAGAR, DISTRICT GUNA. 2. THE BRIEF FACTS ARE THAT THESE ASSESSEES WERE CR EATED UNDER THE MADHYA PRADESH MANDI ADHINIYAM. ITS FUNDS AND DUTIES ARE GOVERNED BY THE MANDI ADHINIYAM. ITS OBJECTS ARE TO HELP AGRICULTURISTS IN GETTING REMUNERATIVE PRICES FOR T HEIR PRODUCE AND TO SAVE THEM FROM THE EXPLOITATION OF THE MIDDLEMAN. THEY ARE EMPOWERED T O COLLECT MANDI SHULK ON THE SALE TRANSACTIONS OF AGRICULTURAL PRODUCE WITHIN ITS JUR ISDICTION AT A PRESCRIBED RATE WHICH IS REQUIRED TO BE DEPOSITED WITH THE STATE GOVERNMENT. THE ASSE SSEE RECEIVED MANDI FEE, LICENSE FEE, RENTAL INCOME OF SHOP/GODOWN, ENTRY FEE AND INTEREST INCOM E. EXCESS OF INCOME OVER EXPENDITURE HAS ACCORDINGLY BEEN DECLARED AT RS.27,55,266/- AND AFT ER CLAIMING THE AMOUNT AS APPLIED TO CHARITABLE PURPOSES IN INDIA AND OF DEPRECIATION AT RS.9,20,510/-, THE TAXABLE INCOME WAS DECLARED AT NIL. THE ASSESSING OFFICER TREATED THE ENTITY AS BEING ENGAGED IN THE BUSINESS INCOME. THE SAMITIS WERE GIVEN REGISTRATION U/S. 12A IN VIE W OF THE DIRECTIONS OF THE ITAT, AGRA BENCH. THE ASSESSING OFFICER TREATED THAT SAMITIS ARE ENGA GED IN THE BUSINESS ACTIVITIES AND THEREFORE, DID NOT EXAMINE THE CASE AS PER THE PROVISIONS OF S ECTION 11 OF THE ACT. THE SAMITI WAS COLLECTING MANDI SHULK AT THE RATE OF 2% ON BEHALF OF M.P. VIP ANAN BOARD & IN TURN THE 50% OF AMOUNT COLLECTED HAS BEEN PASSED ON TO M.P. VIPANAN BOARD AS SADAK NIDHI, ADHOSANRACHANA NIDHI AND GOSANVARDHAN NIDHI. THE ASSESSEE INCURRED EXPENDITU RE ON IMPROVEMENT OF INFRASTRUCTURE FACILITY IN THE CAMPUS OF MANDI. CONSTRUCTION OF GO DOWNS/SHOPS ETC. OUT OF ACCUMULATED FUND/LOAN FROM M.P. VIPANAN BOARD WAS CARRIED OUT. 3. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT( A), THE CIT(A) FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT DATED 08.01.2008 IN IT A NO. 12/2007 ASSESSEES OWN CASE WHEREIN IT 3 HAS BEEN HELD THAT THE RESPONDENT MARKETING COMMITT EE FULFILLED ALL THE REQUIREMENTS OF SECTION 11 TO GET EXEMPTION AND THEREFORE, ARE ENTITLED TO THE REGISTRATION U/S. 12, 12A AND 12AA OF THE I.T. ACT. THE DECISION OF THE M.P. HIGH COURT WAS C ONFIRMED BY THE SUPREME COURT. IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, 308 ITR 401, M .P. HIGH COURT WHILE GRANTING REGISTRATION U/S. 12A AND 12AA OF THE ACT HAS OBSERVED THAT KRISHI UPAJ MANDIS DOD NOT HAVE ANY COMMERCIAL ACTIVITY BUT ARE CONSTITUTED UNDER THE P ROVISIONS OF THE MANDHYA PRADESH KRISHI UPAJ MANDI ADHINIYAM, 1972, TO PROTECT THE INTEREST OF THE FARMERS AND ENSURE THAT THEY ARE NOT EXPLOITED. THE PREAMBLE TO THE ADHINIYAM, 1972 UNDE R WHICH THE KRISHI UPAJ MANDI IS ESTABLISHED REFERS TO PROVIDING FOR BETTER REGULATI ON OF BUYING AND SELLING OF AGRICULTURAL PRODUCE AND THE ESTABLISHMENT AND PROPER ADMINISTRATION OF MARKETS OF AGRICULTURAL PRODUCE IN THE STATE OF M.P. UNDER THE 1972 ADHINIYAM, THE MARKET COMMIT TEE CHARGES FEES FOR VARIOUS PURPOSES WHICH HAVE THE NECESSARY NEXUS WITH THE SERVICES RE NDERED AND THUS, QUID PRO QUO. MERELY BECAUSE THEY CHARGE FEES THAT DOES NOT MILITATE AGA INST THE ALTRUISTICE PURPOSE FOR WHICH THESE MANDIS ARE ESTABLISHED. AGAINST THE SAID ORDER THE SLP FILED BY THE DEPARTM ENT BEFORE THE SUPREME COURT WAS DISMISSED ON 10.11.2008 (SLP NO. 27701/2008). THE FINDING OF THE M.P. HIGH COURT ATTAINED FINALITY. SAME VIEW HAS BEEN TA KEN BY THE ALLAHABAD HIGH COURT IN CIT LUCKNOW VS. KRISHI UTPADAN MANDI SAMITI, 186 TAXMAN 460 (ALL.), DELHI HIGH COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE VS. CIT, 2 94 ITR 459 AND BOMBAY HIGH COURT IN THE CASE OF CIT VS. AGRICULTURAL PRODUCE & PLANET COMMI TTEE, 291 ITR 419. IN VIEW OF THESE DECISIONS, THE CIT(A) TOOK THE VIEW THAT THE MANDI SAMITIS WERE CARRYING ON CHARITABLE ACTIVITIES AND WERE NOT ENGAGED IN THE BUSINESS ACTIVITIES. TH E REVENUE HAS NOT COME IN APPEAL AGAINST THE ORDER OF THE CIT(A) TO THE EXTENT IT RELATE TO THE FINDING THAT THE SAMITI WAS NOT CARRYING ON THE BUSINESS ACTIVITIES AND IS ENTITLED FOR EXEMPTION U /S. 11. THE REVENUE HAS COME IN ALL THESE 4 APPEALS IN RESPECT OF THE DELETION OF THE DISALLOWA NCE ON ACCOUNT OF ARAKSHIT NIDHI AND ON ACCOUNT OF CAPITAL EXPENDITURE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. SO FAR AS THE GROUND NO. 1 WHICH RELATES TO DELETION OF ADDITION ON ACCOUNT OF ARAKSHIT NIDHI, WE NOTED, THIS ADDITION HAS BEEN DELETED BY THE CIT(A) BY OBSERVIN G AS UNDER : FROM THE PERUSAL OF AUDIT REPORT AND ACCOUNTS OF TH E APPELLANT, IT IS SEEN THAT THE APPELLANT HAS CREDITED AMOUNT OF RS.1,04,9 88/- TO AARAKSHIT NIDHI ACCOUNT AS PER MANDATORY STATUTORY PROVISIONS OF TH E MANDI ADHINIYAM AND ORDERS OF THE MANDI BOARD, BHOPAL. OUT OF THIS AARA KSHIT NIDHI ACCOUNT, 1/3 RD AMOUNT IS REMITTED TO THE MANDI BOARD WHEREAS 2/3 RD PORTION IS USED FOR ACTUAL PAYMENT OF PENSION AND GRATUITY TO THE RETIRED EMPL OYEES OF THE SAMITI. NO PROVISION HAS BEEN MADE BY THE APPELLANT AS REQUIRE D IN THE CASE OF AN APPROVED PENSION FUND. FURTHER, THE RELIANCE OF THE A.O. ON THE NOTICE OF ENHANCEMENT IN CASE OF KRISHI UPAJ MANDI SAMITI, PIPRAIGAON IS MIS PLACED, AS THE THEN CIT(APPEALS) HAS ONLY PROPOSED TO DISALLOW THE AMOU NT OF AARAKSHIT NIDHI AND THE MATTER IS STILL SUBJUDICED. IT IS ALSO SEEN THA T THE THEN CIT(A) HAS RELIED ON DECISION OF HONBLE ITAT, JABALPUR BENCH, JABALPUR IN CASE OF KRISHI UPAJ MANDI SAMITI, KATNI VS. ACIT, KATNI IN ITA NO. 244 AND 245 (JAB) OF 2006 WHILE ISSUING THE SAID NOTICE. HOWEER, ON PERUSAL OF THE SAID ORDER OF HONBLE ITAT, JABALPUR, IT IS SEEN THAT THE FACTS OF THE APPELLAN TS CASE UNDER THIS APPEAL ARE DISTINGUISHABLE. IN THE CASE OF KRISHI UPAJ MANDI S AMITI, KATNI, THE AMOUNT CREDITED TO STHAI NIDHI WAS NOT CONSIDERED AS AN AC CUMULATION OF SURPLUS U/S. 11 OF THE I.T. ACT BECAUSE NO CLAIM OF EXEMPTION U/S. 11 WAS MADE BY THE ASSESSEE BEFORE THE A.O. THE ITAT, THEREFORE, HELD THAT IF A NY DEDUCTION WHICH HAS NOT BEEN CLAIMED BEFORE THE A.O. AND IF CONSIDERED AND ALLOW ED NOW WOULD RESULT IN DETERMINING THE ASSESSED INCOME LOWER THAN THE INCO ME DECLARED IN THE VOLUNTARY RETURN FILED BY THE ASSESSEE ON WHICH SELF-ASSESSME NT TAX HAS ALSO BEEN PAID. IN THE CASE OF APPELLANT, CLAIM FOR EXEMPTION U/S. 11 HAS DULY BEEN MADE BEFORE THE A.O. WHILE FILING OF RETURN AND DURING THE COURSE O F ASSESSMENT PROCEEDINGS. THE ONLY RELEVANT FACT NOW TO BE SEEN IN THE CASE OF TH E APPELLANT IS TO EXAMINE WHETHER PRESCRIBED PERCENTAGE OF THE INCOME HAS BEE N APPLIED TOWARDS THE OBJECTS OF THE SAMITI AND WHETHER ANY VIOLATION OF PROVISIONS OF SECTION 11-13 OF THE I.T. ACT HAVE BEEN MADE BY THE APPELLANT. THE F ACT THAT THE SAID FUND IS NOT AN APPROVED PENSION FUND SHALL NOT DEBAR THE APPELLANT FROM CLAIMING EXEMPTION IF THE PRESCRIBED CONDITIONS, AS MENTIONED ABOVE HAVE BEEN FULFILLED. THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD NOR ANY ADVERSE FINDING BEEN GIVEN THAT THE APPELLANT HAS VIOLATED THE PRESCRIBED CONDITIONS DI SENTITLING IT FROM CLAIMING 5 EXEMPTION U/S. 11 OF THE I.T. ACT. THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF AARAKSHIT NIDHI. THE ADDITION OF RS.1 ,04,988/- IS DELETED. 5. SIMILAR FINDING HAS BEEN GIVEN WHILE DELETING TH E SAME ADDITION IN THE CASES OF OTHER SAMITIS BEFORE US. IN OUR OPINION NO INTERFERENCE I S CALLED FOR IN THE ORDER OF CIT(A). THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. THE ASSESSING OFF ICER MADE THE DISALLOWANCE IN RESPECT OF EXPENDITURE INCURRED ON ACCOUNT OF AARAKSHIT NIDHI WHILE HOLDING THAT THE ASSESSEE HAS CARRIED OUT THE BUSINESS DURING THE YEAR. THE FINDING OF TH E CIT(A) HAS BECOME FINAL THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS ACTIVITIES BUT THE ASS ESSEE IS ENTITLED FOR EXEMPTION U/S. 11. UNDER SECTION 11A, THE ASSESSEE IS ENTITLED FOR DEDUCTION IF THE INCOME HAS BEEN APPLIED BY THE ASSESSEE FOR THE CHARITABLE PURPOSE. THE ASSESSEE HAS INCURR ED THE EXPENDITURE ON AARAKSHIT NIDHI AS PER THE STATUTORY PROVISIONS OF THE MANDI ADHINIYAM AND ORDERS OF THE MANDI BOARD, BHOPAL. THIS IS NOT DENIED BY THE LD. DR AND NO CONTRARY EVIDENCE I N THIS REGARD WAS FILED BEFORE US. IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE DISALLO WANCE, AS THE SUM OF RS.1,04,988/- WILL BE TREATED AS APPLICATION OF THE INCOME U/S. 11 OF THE INCOME-TAX ACT. THUS, GROUND NO. 1 STANDS DISMISSED. 6. THE SECOND GROUND RELATES TO THE DELETION OF ADD ITION MADE ON ACCOUNT OF CAPITAL EXPENDITURE. THE ASSESSING OFFICER COMPUTED THE INC OME OF THE ASSESSEE, AS THE ASSESSEE CARRIED OUT THE BUSINESS AND ACCORDINGLY DISALLOWED THE CAP ITAL EXPENDITURE INCURRED BY EACH OF THE SAMITIS. 7. AFTER HEARING THE RIVAL SUBMISSIONS, WE NOTED TH AT THE FINDING OF THE CIT(A) THAT THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 11 HAS 6 BECOME FINAL, AS THE REVENUE HAS NOT COME IN APPEAL AGAINST THIS FINDING AND IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT, THE INCO ME OF A CHARITABLE INSTITUTION IS ENTITLED FOR DEDUCTION AS CONTEMPLATED U/S. 11(1)(A). UNDER SECT ION 11, ANY EXPENDITURE WHETHER REVENUE OR CAPITAL, INCURRED FOR THE OBJECTS OF THE CHARITABLE INSTITUTION AND THE SAME IS ALLOWABLE U/S. 11(1) OF THE ACT. IT IS NOT DENIED THAT THE CAPITAL EXPEN DITURE INCURRED BY THE ASSESSEE DOES NOT RELATE TO THE OBJECTS OF THE INSTITUTION. THIS ISSUE IS NO MO RE RES INTEGRA IN VIEW OF THE DECISION OF SRMMCTM TRIPUTI TRUST VS. CIT, 230 ITR 636 IN WHICH IT WAS HELD THAT THE CAPITAL EXPENDITURE SHOULD BE CONSIDERED AS APPLICATION PROVIDED THEY A RE TOWARDS THE OBJECTS OF THE ORGANIZATION. NO MATERIAL WAS BROUGHT TO OUR KNOWLEDGE TO PROVE CAPI TAL EXPENDITURE INCURRED BY THE SAMITI NOT RELATING TO THE FULFILLMENT OF THE OBJECTS OF THE S AMITI. UNDER THESE FACTS AND CIRCUMSTANCES, IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE O RDER OF THE CIT(A). WE, ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) IN ALL THESE APPEALS. 8. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH JUNE, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY