Panaskhla Anchalika Water Users Association, Nayagarh V. ITO, Khurda

ITA 32/CTK/2012

• Counselvise Citation: 3222114 RSA 2012
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 10-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 09-01-2012
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: B C SUBUDHI
• Keywords: Charitable institution; Capital expenditure
• Section: 147; 148; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, (SMC) BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. / I.T.A.NO. 032/CTK/2012 ( / AS SESSMENT YEAR 2006 - 07) PANASKHALA ANCHALIKA WATER U SERS ASSOCIATION, AT/P.O. PAHADAJHOLA, DIST. NAYAGARH 752082, ORISSA. PAN: AAATP 5692 F - - - VERSUS - INCOME - TAX OFFICER, KHURDA. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI B.C.SUBUDHI, AR / FOR THE RESPONDENT: / SHRI . A.BHATTACHARJEE, DR / DATE OF HEARING: 10.08.2012 / DATE OF PRONOUNCEMENT: 14.08.2012 / ORDER . . , , SHR I K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE RAISING THE FOLLOWING GROUNDS. 1 . THAT THE LEARNED CITA HAS ERRED IN DISMISSING THE APPEAL OF THE ASSESSEE AN D CONFIRMING THE ORDER OF THE AO WHICH WAS ILLEGAL AND NO T BASED ON THE FACTS PLACED BEFORE HIM AND THE SAME SHOULD BE REJECTED AND THE APPEAL OF THE ASSESSEE BE ALLOWED IN DELETING THE ADDITION MADE BY THE AO OF 4,58,328 TO THE` TOTAL INCOME OF THE ASSESSEE ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CAS E. 2. THAT THE ASSESSEE IS A NON - GOVERNMENT ORGANIZATION HAVING LAND LABOURERS AND MARGINAL LAND OWNERS AS THE MEMBERS OF THE SOCIETY DEPENDING UPON THE MINOR IRRIGATION FOR IRRIGATING THE FARM LAND. ANY TAX LEVIED ON THE SOCIETY IS HARSH AND SHOULD NOT B E ALLOWED SO AND THE SAME SHOULD BE DELETED. THEREFORE, THE ASSESSEE PRAYS FOR RELIEF IN DELETION OF THE ADDITION MADE IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08. I.T.A.NO. 032/CTK/2012 2 2. THE BRIEF FACTS ARE THAT THE ASSESSEE IS AN ASSOCIATION IN NAYAGARH REGISTERED UN DER SOCIETIES REGISTRATION ACT AND HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 ON 21.10.2007 SHOWING TAXABLE INCOME AS NIL. THE ASSESSING OFFICER ISSUED NOTICE U/S 148 TO ASSESS THE ASSESSEE U/S 147 FOR ESCAPED INCOME OF 4,58,328, WHIC H WAS ERRONEOUSLY SHOWN IN THE ACCOUNTS AS EXCESS OF INCOME OVER EXPENDITURE. THE ASSESSEE IS AN ASSOCIATION OF WATER USERS IN KHURDA DISTRICT CONSTITUTED AS PER THE DIRECTIVE OF THE STATE GOVT. TO COLLECT WATER TAX FROM THE WATER USERS AS PER THE STATE GO VT. GAZETTE NOTIFICATION NO. 48049 - MI. MISC .8/99.W.R. THE ASSESSING OFFICER DID NOT APPRECIATE THE FACTS AND FIGURES FURNISHED IN COURSE OF THE HEARING OF THE CASE AND COMPLETED THE PROCEEDINGS U/S 147/143(3) CHARGING TAX ON THE SURPLUS CONSIDERED TO BE IN COM E. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY AGITATING THE ASSESSING OFFICERS TREA T ING THE SURPLUS OF 4,58,328 AS INCOME OF THE YEAR IN VIEW OF THE FACT THAT THE ASSESSEE WAS NOT REGISTERED U/S.12A AND IT WAS NOT ELIGIBLE TO CLAIM EXEMPTION U/S.11 OF THE I.T.ACT,1961. THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT THE ASSESSEE IS A REGISTERED SOCIETY REGISTERED UNDER THE SOCI ETIES REGISTRATION ACT, 1860 BEARING REGN. NO. 1015/165 OF 1999 - 2000 DATED 2 ND JUNE 1999. THE SOCIETY WAS CONSTITUTED BY THE USERS OF WATER FROM PANASKHAL MINOR IRRIGATION PROJECT IN BAHADAJHOLA IN DISTRICT NAYAGARH. THE SOCIETY WAS CONSTITUTED TO MONITOR THE EQUITABLE DISTRIBUTION OF WATER FROM THE MI PROJECT TO ALL T HE USERS OF WATER AND A SELF - HELP SOCIETY WAS CONSTITUTED AMONG THE USERS OF WATER OF THE PANSAKHAL MI PROJECT IN BAHADJHOL IN NAYAGARH DISTRICT. 10 SUCH SOCIETIES WERE FORMED IN THE DISTRIC T I.T.A.NO. 032/CTK/2012 3 OF NAYAGARH AS PER THE GAZETTE NOTIFICATION OF THE GOVT. OF ORISSA IN 1999. A RESOLUTION OF THE GOVT. OF ORISSA WAS PUBLISHED IN THE GAZETTE ABOUT THE FUNCTIONING OF THE WATER USERS OF THE MI PROJECTS AND GUIDANCE TO MAINTAIN THE WATER BODIES F OR ITS PRE SERVATION AND UTILIZATION OF THE WATER EQUITABLY. THESE PROJECTS WERE NO MORE UNDER THE IRRIGATION DEPARTMENT OF THE GOVT. FOR ITS MAINTENANCE AND DISTRIBUTION OF WATER TO THE FARMERS AND IT WAS HANDED OVER TO THE SOCIETIES CONSTITUTED FOR THIS PURPOSE. EM POWERED BY THE GOVT. DIRECTION, WATER USERS ASSOCIATIONS WERE FORMED AND THE ASSESSEE IS ONE SUCH SOCIETY REGISTERED AND FUNCTIONING IN BAHADJHOL WHERE THE ML PROJECT SITUATES. AN AGREEMENT WAS ENTERED BETWEEN THE GOVT. OF ORISSA AND PANASKHAL ANCHALIKA WA TER USERS ASSOCIATION FOR EXECUTION OF THE PROJECT AND DETAILED WORKING OF THE SOCIETY HAS BEEN ENUMERATED THEREIN. THE ASSOCIATION WAS ENTRUSTED WITH THE MAINTENANCE PRESERVATION, PROTECTION OF THE WATER BODY AND TO EQUITABLY DISTRIBUTE THE WATER TO THE U SERS WITHOUT CAUSING ANY HARDSHIP TO PEOPLE DEPENDING UPON THE SAME. THIS WAS IN A VIEW TO RELEASE THE GOVT. CONTROL OVER THE WATER BODY AND AT THE SAME TIME ALLOWING PEOPLE PARTICIPATION IN MANAGEMENT OF THE WATER BODY FOR ULTIMATE BENEFIT TO THE FARMERS, AGRICULTURIST AND OTHER USERS OF WATER FROM THE PROJECT. THE MANAGEMENT OF THE SOCIETY WAS VESTED WITH AN ELECTED EXECUTIVE BODY CONSTITUTED AMONG THE USERS AND THE EXECUTIVE BODY WITH PRESIDENT, VICE - PRESIDENT, SECRETARY AND OTHER MEMBERS WERE ENGAGED IN THE DAY TO DAY ADMINISTRATIVE AFFAIRS OF THE SOCIETY. THE EXECUTIVE BODY IS VESTED WITH THE AUTHORITY TO MAINTAIN THE PROJECT, REGULATE THE DISTRIBUTION OF WATER AND ALL NECESSARY ACTIVITIES OF THE SOCIETY. TO RUN AND MAINTAIN THE WATER BODY, THE SOCIETY RAISED CONTRIBUTION FROM ITS MEMBERS AND OTHER DONORS TO CREATE A CORPUS AND TO MEET THE EXPENDITURE OUT OF THE SAME. THE I.T.A.NO. 032/CTK/2012 4 BYE - LAW OF THE SOCIETY MANDATED THE SOCIETY TO RAISE CONTRIBUTION FROM THE MEMBERS AND ACCORDINGLY CONTRIBUTIONS ARE COLLECTED FROM TH E MEMBERS ON A REGULAR BASIS. APART FROM THE REGULAR CONTRIBUTION FROM ITS MEMBERS, THE SOCIETY RECEIVED A ONE - TIME CAPITAL GRANT OF 4,60,500 THROUGH ITS FEDERATION TO MEET THE REPAIR AND MAINTENANCE OF THE WATER BODY. THE CONTRIBUTION SAID TO HAVE BEEN RECEIVED FROM THE EUROPEAN COMMISSION THROUGH THE GOV T. OF ORISSA FOR MAINTENANCE OF ML PROJECTS IN THE STATE AND TO IMPROVE IRRIGATIO N FACILITIES. THE AMOUNT WAS RECEIVED IN THE FINANCIAL YEAR 2005 - 06 AND DEPOSITED IN INDIAN OVERSEAS BANK, B HUBANESWAR AS FIXED DEPOSIT TO BE UT I LIZED AT THE TIME OF ANY URGENT NEED TO INCUR CAPITAL EXPENDITURE. THE SOCIETY IS EARNING INTEREST FROM SUCH DE POSIT WHICH IS BEING UTILIZED FOR THE REGULAR MAINTENANCE COST OF THE PROJECT. THE INTEREST SO EARNED BY THE SOCIETY ATTRACTED TDS BY THE BANK AND ACCORDINGLY THE BANK DEDUCTED TDS FROM THE INTEREST CREDITED TO THE ACCOUNT OF THE SOCIETY. THOUGH THE SOCIET Y WAS NOT REGISTERED U/S.12AA OF THE INCOME TAX ACT, THE REQUEST FOR NON - DEDUCTION OF TDS WAS NOT ACCEPTED BY THE BANK AND BANK DEDUCTED TAX ON SUCH INTEREST INCOME. THE SOCIETY GOT ITS ACCOUNTS AUDITED REGULARLY AS PER THE STATUTORY REQUIREMENT OF THE SOC IETIES REGISTRATION ACT AND AS STATED IN THE BYE - LAW OF THE SOCIETY. THOUGH THE SOCIETY HAS NOT GOT THE EXEMPTION OF INCOME UNDER SECTION 11 SINCE IT WAS NOT REGISTERED YET UNDER SECTION 1 2AA OF THE ACT, IT HAS GOT ITS ACCOUNTS AUDITED AND AUDIT REPORT WA S ISSUED IN FORM 10 B OF THE INCOME TAX ACT AND THE AUDIT REPORT WAS ANNEXED WITH BALANCE SHEET, RECEIPT AND PAYMENT ACCOUNT AND INCOME AND EXPENDITURE ACCOUNT. THE SOCIETY FILED ITS RETURN OF INCOME FOR THE YEAR 2005 - 06 CORRESPONDING TO THE ASSESSMENT YEAR 2006 - 07 DISCLOSING A RETURNED INCOME OF NIL, CONSIDERING THE SOCIETY IS EXEMPT FROM TAX. HOWEVER, THE LD AO, I.T.A.NO. 032/CTK/2012 5 KHURDA INITIATED THE ASSESSMENT PROCEEDINGS U/S . 147 OF THE ACT CONSIDERING THE EXCESS OF INCOME OVER EXPENDITURE SHOWN IN THE INCOME AND EXPENDITU RE ACCOUNT OF THE SOCIETY OF 4,58,328 AS INCOME. THE ASSESSING OFFICER HAS TAKEN THE EXCESS AMOUNT AS INCOME AND ACCORDINGLY PROCEEDED TO COMPLETE THE ASSESSMENT AT AN INCOME OF 4,58.330. THE SOCIETY REPRESENTATIVES ATTENDING THE ASSESSMENT PROCEEDINGS V EHEMENTLY OPPOSED THE ACTION OF THE AO AND BROUGHT THE FACTS BEFORE THE AO TO EXHIBIT THE FACT THAT THE SOCIETY RECEIVED A CAPITAL GRANT OF 4,60,500 TOWARDS THE PERMANENT MAINTENANCE OF THE WATER BODY AND THE ENTIRE AMOUNT WAS KEPT ASIDE AS A FIXED DEPOS IT TO MEET THE EXIGENCY. THE CAPITAL GRANT WAS INADVERTENTLY SHOWN AS INCOME IN THE INCOME AND EXPENDITURE STATEMENT FOR THE YEAR 2005 - 06 AND THE AO CHARGED THE SAME TO TAX AND COMPLETED THE ASSESSMENT. ACCORDINGLY THE TAX AND INTEREST WAS COMPUTED AND CHA RGED TO THE SOCIETY. THE ASSESSEE APPELLANT FILED APPEAL BEFORE THE CIT(A). BEFORE HIM, THE ASSESSEE PLACED ALL THE FACTS AND RECORDS AND APPEALED FOR DELETION OF THE ADDITION MADE BY THE AO. BUT THE LEARNED CITA DID NOT CONSIDER THE SAME AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. ON THE ABOVE BASIS, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED FOR DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A). 5. THE LEARNED DR SU PPORTED THE ORDERS OF THE AUTHORITI ES BELOW BY INDICATING THAT THE ASSESSEE HIMSELF HAD RENDERED THE PURPORTED FIXED DEPOSITS AS EXEMPT U/S.11 WHICH COULD ONLY BE CLAIMED IF THE SOCIETY WAS REGISTERED U/S.12A. THE LEARNED COUNSEL FOR THE ASSESSEES SUBMISSION THAT THESE FIXED DEPOSITS CONTI NUED TO BE HELD AS FIXED DEPOSIT AS CORPUS OF THE ASSESSEE REQUIRES VERIFICATION BY THE ASSESSING OFFICER FOR WHICH PURPOSE THE ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. I.T.A.NO. 032/CTK/2012 6 6. HAVING HEARD THE RIVAL CONTENTIONS AND ON PERUSAL OF T HE IMPUGNED OR DERS OF THE AUTHORITIES BELOW AND HAVING PERUSED THE PAPER BOOK SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT IS UNDISPUTEDLY WAS NOT THE CASE OF CHANGE OF STANCE BY THE ASSESSEE INSOFAR AS THE ASSESSEE WAS AWARE THAT REGISTRATION HAD NOT BEEN GRAN TED UNDER THE PROVISIONS OF SECTION 12A. THE ASSESSEE WAS AWARE THAT THE GOVERNMENT NOTIFICATION BY THE GAZETTE HAD SANCTIONED THESE DEPOSITS TO BE HELD WITH THE ASSESSEE FOR THE PURPOSE OF CARRYING OUT THE OBJECT S OF THE ASSESSEE BEING NON - CHARITABLE IN N ATURE FOR WHICH IT CANNOT BE SAID THAT THE AMOUNT HAS BEEN SPENT FOR THE CHARITABLE ACTIVITIES WAS UTILIZE D BY THE ASSESSEE WRONGLY AS CERTIFIED BY THE CHARTERED ACCOUNTANT AS EXCESS OF INCOME OVER EXPENDITURE . THE ASSESSEE HAD RIGHTLY SHOWN THAT THE CORP US HAS TO BE ROUTED THROUGH RECEIPTS AND PAYMENT ACCOUNT AND IT WAS NOT THE CASE OF REDUCING THE FIXED DEPOSITS FROM THE CORPUS FOR HAVING INCURRED FOR THE CHARITABLE PURPOSE AS CERTIFIED BY THE CHARTERED ACCOUNTANT. THE LEARNED DRS PRAYER FOR RESTORATION OF THE SAME TO THE FILE OF THE ASSESSING OFFICER WOULD NOT RESULT IN A FINDING OTHERWISE. THE AMOUNT IS HELD BY THE ASSESSEE IN THE FORM OF FIXED DEPOSITS INSOFAR AS THE REGISTRATION HAS BEEN GRANTED W.E.F. 1.4.2010 TILL WHICH TIME, THE FIXED DEPOSITS IS HELD BY THE ASSESSEE AS CORPUS BEING THE CAPITAL FUND OF THE ASSESSEE. IN OTHER WORDS, THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAVE BASED THEIR DISALLOWANCE AND TAXATION OF THIS AMOUNT ON THE PREMI SE THAT THE AMOUNT RECEIVED THROUGH THE GOVERNMENT AEGIS HAS NOT BEEN UTILIZED FOR THE PURPOSE IT WAS SANCTIONED W AS NOT THE PREROGATIVE OF THE ASSESSING AUTHORITIES TO TAX THE SAME AS INCOME WOULD BE AN UNILATERAL DECISION WHEN THE AMOUNT HAS BEEN DISBURSED FOR THE PURPOSE OF CHARITY AS PER THE GAZETTE NOTIFICATION. IN THIS VIEW OF THE MAT T ER, THE AMOUNT OF CORPUS CANNOT BE I.T.A.NO. 032/CTK/2012 7 BRO UGHT TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THE ORDER OF THE LEARNED CIT(A) IS, THEREFORE, SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE IMPUGNED ADDITION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. SD/ ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 14.08.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : PANASKHALA ANCHALIKA WATER USERS ASSOCIATION, AT/P.O. PAHADAJHOLA, DIST. NAYAGARH 752082, ORISSA. PAN: AAATP 5692 F 2 / THE RESPONDENT: INCOME - TAX OFFICER, KHURDA. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 10.08.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.08 .2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 14.08.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATU RE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.