M/s Agricultural Market Committee, Draksharama V. The ITO, Ward-1, Kakinada

ITA 330/VIZ/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1687 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Maximum Marginal Rate; Diversion of income; Set aside

Judgement Text

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM B EFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER SL. NO. CASE NO. ASST. YEAR P.A.N.NO. APPELLANTS RESPONDENTS 1 ITA NO. 326 / VIZ/2009 2006 - 07 AALFA 0905 D AMC, PITHAPURAM ITO WARD - 2, KAKINADA 2 ITA NO.327/VIZAG/09 2006 - 07 AAALA 0770 H AMC, PEDDAPURAM ITO, WARD - 1, KAKINADA . 3 ITA NO.328/VIZAG/09 2005 - 06 AAALA 0386 M AMC, TUNI ITO, TUNI 4 ITA NO.329/VIZAG/09 2006 - 07 AAALA 0386 M AMC, TUNI ITO, TUNI 5 ITA NO.330/VIZAG/09 2005 - 06 AAALA 0778 R AMC, R A MCHANDRAPURAM ITO, WARD - 1, KAKINADA 6 ITA NO.331/VIZAG/09 2006 - 07 AAALA 0778 R AMC, R A MCHANDRAPURAM ITO, WARD - 1, KAKINADA 7 ITA NO. 332 /VIZ AG /09 2004 - 05 AAALA 0909 N AMC, JAGGAMPETA I TO WARD - 1, KAKINADA 8 ITA NO.333/VIZAG/09 2005 - 06 AAALA 0909 N AMC, JAGGAMPETA ITO WARD - 1, KAKINADA 9 ITA NO.334/VIZAG/09 2006 - 07 AAALA 0909 N AMC, JAGGAMPETA ITO WARD - 1, KAKINADA 10 ITA NO.335/VIZAG/09 2003 - 04 AAALA 0917 A AMC, ALAMURU ITO, WARD - KAKIN ADA 11 ITA NO. 336/VIZAG/09 2006 - 07 AAALA 0917 A AMC, ALAMURU ITO, WARD - KAKINADA 12 ITA NO.337/VIZAG/09 2004 - 05 AAAAA 9604 F AMC, PRATHIPADU ITO TUNI 13 ITA NO.338/VIZAG/09 2006 - 07 AAALA 0908 P AMC, SAMPARA ITO, WARD - 1, KAKINADA 14 ITA NO.339/VIZAG/09 2003 - 04 AAALA 0684 J AMC, ANAPARTHY ITO, WARD - KAKINADA 15 ITA NO.340/VIZAG/09 2005 - 06 AAALA 0684 J AMC, ANAPARTHY ITO, WARD - KAKINADA 16 ITA NO.341/VIZAG/09 2006 - 07 AAALA 0684 J AMC, ANAPARTHY ITO, WARD - KAKINADA ASSESSEE BY : SHRI D.L. NARASIMHA RAO, ADVOCATE REVENUE BY : SHRI SUBRATA SARKAR, CIT-DR ORDER PER BENCH: - THESE APPEALS, FILED AT THE INSTANCE OF THE ASSESSE ES ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS), RAJAHMUNDRY AND THEY RELATE TO THE ASSESSMENT YEARS 2004-05 OR 2005-06 OR 2006-07 AS THE CASE MAY BE AS MENTIONED AGAINST THE IR RESPECTIVE ITA NUMBERS LISTED ABOVE. SINCE THE ISSUES URGED IN ALL THESE APPEALS ARE COMMON IN NATURE, WE FIND IT CONVENIENT TO DISPOSE ALL OF THEM BY THI S COMMON ORDER. 2. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GR OUNDS RAISED BY THE ASSESSEE; AGRICULTURAL MARKET COMMITTEE, PITHAPURAM IN ITA NO .326/V/09 RELATING TO THE ASSESSMENT YEAR 2006-07: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), RAJAHMUNDRY PASSED IN ITA NO.171/W2, KKD/CIT(A)/RJY /08-09, DATED 24.03.2009, IN SO FAR AS IT IS APPLICABLE TO THE ASSESSMENT YEAR PAGE 2 OF 6 UNDER REVIEW VIZ., A.Y. 2006-07 IS ERRONEOUS BOTH I N LAW AND ON FACTS OF THE CASE; 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTICED THAT IN VIEW OF THE SPECIFIC FINDINGS OF TH E JURISDICTIONAL TRIBUNAL IN SIMILAR CASES VIDE CONSOLIDATED ORDER IN ITA NOS.83 TO 369/VIZG/2007, DATED 28.11.2008 (VIZ., AGRICULTURAL MARKET COMMITTEE, GUNTUR ETC., VS. C.I.T.), THE EXEMPTION PROVIDED BY SUB CLAUSE (26AAB) APPENDED TO SECTION 10 OF THE ACT I S LIABLE TO BE EXTENDED TO THE APPELLANT-COMMITTEE FOR THE ASSTT.Y EAR UNDER REVIEW, CONSIDERING THE FACT THAT THE AFORESAID ORDER OF TH E HONBLE INCOME TAX APPELLATE TRIBUNAL IS NOT COVERED BY ANY STAY G RANTED BY ANY HIGHER JUDICIAL FORUM; 3. THAT EVEN OTHERWISE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTICED THAT AS UPHELD BY T HE HONBLE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD- B BENCH AN D VISKHAPATNAM TIED UP RECEIPTS/ GRANTS, WHICH ARE M EANT TO BE UTILIZED FOR A SPECIFIC PURPOSE MAY NOT FORM PART O F THE TAXABLE INCOME AND FURTHER, AS THE FUNDS ARE ALLOWED TO BE UTILIZED ONLY AT THE SPECIFIC AUTHORIZATION TO BE GRANTED BY THE GOV ERNMENT/OTHER AUTHORITIES AS CONTAINED IN SECTIONS 14 TO 16 OF TH E RELEVANT ENACTMENT, VIZ., THE ANDHRA PRADESH (AGRICULTURAL P RODUCE AND LIVESTOCK) MARKET COMMITTEE ACT, 1966, THE CASE IS COVERED ONLY BY THE CONCEPT OF DIVERSION OF INCOME; BUT NOT APPLIC ATION OF INCOME AND GOING BY THIS LEGAL BACKGROUND, HE OU GHT TO HAVE HELD THAT THE APPELLANTS LEFT-OVER FUNDS ARE LIABL E TO BE EXEMPT FROM TAX, AS PER THE WELL SETTLED LAW; 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE ALTERNATIVELY NOTICED THAT AS THE APPELLANT NOTIFIE D ITS INTENTION FOR ACCUMULATION OF UNSPENT INCOME TOWARDS SPECIFIC P URPOSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY FILING FORM NO.10 AS PROVIDED BY SECTION 1(2) READ WITH RULE 17 OF THE IN COME TAX RULES, 1962 AND AS UPHELD BY THE JUDICIARY, HE OUGHT TO HA VE HELD THAT THOSE UNSPENT BALANCES ARE NOT LIABLE TO TAX; 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) SHOULD HAVE NOTICED ALTERNATIVELY THAT IN TERMS OF THE WEL L SETTLED LAW PROPOUNDED BY THE JUDICIARY, A CHARITABLE TRUST I S ENTITLED TO CLAIM SET-OFF OF THE AMOUNT OF EXCESS APPLICATION OF INCO ME OF EARLIER YEAR(S) AGAINST ANY DEFICIENCY OF THE CURRENT OR S UBSEQUENT YEARS AND GOING BY THE SAME ANALOGY, HE OUGHT TO HAVE ORD ERED THAT THE APPELLANT COMMITTEE IS ENTITLED FOR THE BENEFIT OF SET-OFF TO THE EXTENT CLAIMED BY IT; 6. FOR THESE REASONS AND OTHER REASONS WHICH MAY BE ADVANCED DURING THE COURSE OF HEARING OF THE APPEAL, IT IS E ARNESTLY PRAYED THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE AND TO BE IN CONFORMITY WITH THE PROVISIONS OF LAW. PAGE 3 OF 6 HOWEVER IN THE APPEALS NUMBERED AS ITA NO.332,333,3 35,338 & 339, THE RESPECTIVE ASSESSEES HAVE NOT RAISED THE GROUND NO. 5, SUPRA, RELATING TO THE CLAIM OF SET OFF OF THE EXCESS APPLICATION OF MONEY MADE IN EARLIER YEARS. IN THE CASE OF APPEALS NUMBERED AS ITA NO.328, 329 AND 337 , THE RESPECTIVE ASSESSEES HAVE RAISED TWO MORE GROUNDS, WHICH WE ARE DEALING WITH SEPARATELY, INFRA. 3. THE GROUND NUMBERS 1 AND 6 ARE GENERAL IN N ATURE AND HENCE THEY REQUIRE NO ADJUDICATION. UNDER GROUND NUMBER 3, THESE ASSE SSEES CONTEND THAT SINCE THEIR FUNDS ARE ALLOWED TO BE UTILIZED ONLY AT THE SPECIFIC AUTHORIZATION OF THE GOVERNMENT/GOVERNMENT AUTHORITIES AS PER THE PROVIS IONS OF THE ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVE STOCK) MARKET COMMIT TEE ACT, 1966, THE RECEIPTS ARE TO BE TREATED AS TIED UP GRANTS AND HENCE THEIR RECEIPTS SHOULD BE TREATED AS EXEMPT AS THEY ARE DIVERTED AT SOURCE. HOWEVER, LD CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS:- NO DOUBT SECTION 15 OF THE APMA, AMONG OTHER PROVI SIONS, SPECIFY THE MANNER IN WHICH THE FUNDS OF A AMC ARE TO BE UT ILIZED, BEING UTILIZATION OF FUNDS AS PER THE DIRECTIONS OF THE S TATE GOVERNMENT. BUT, THEN, IT HAS BEEN OBSERVED IN THE CASES OF MAN Y OTHER AMCS THAT THE DIRECTIONS FROM THE DIRECTOR OF MARKETING, GOVERNMENT OF ANDHRA PRADESH TO UTILIZE THE FUNDS FOR VARIOUS PUR POSES ARE WITH REFERENCE TO THE SAVINGS OF A AMC, WHICH CONNOTES THAT IT IS UPON THE DETERMINATION OF THE NET INCOME, AFTER DEDUCTIO N OF THE ADMINISTRATIVE AND ESTABLISHMENT EXPENSES AND APPLI CATION OF FUNDS TOWARDS OBJECTS OF TRUST, THAT ANY UTILIZATION AS P ER SUCH DIRECTION COULD BE MADE WITH REFERENCE TO SUCH NET INCOME, BU T NOT AS AN EXPENDITURE FROM THE GROSS RECEIPTS . NO CASE BY THE APPELLANT HAS BEEN MADE OUT THAT ITS SAVINGS (NET INCOME) DURIN G THE RELEVANT ASSESSMENT YEARS HAVE BEEN UTILIZED AS PER THE DIRE CTIONS OF THE DIRECTOR OF MARKETING, EXCEPT STATING IN A BLAND MA NNER THAT THE UTILIZATION OF ITS FUNDS AS PER THE DIRECTIONS OF T HE STATE GOVERNMENT HAVE TO BE CONSTRUED AS DIVERSION OF INCOME. HENCE, THIS PLEA OF THE APPELLANT CAN BE SAID TO BE BASELESS AND FRIVOLOUS AND, ACCORDINGLY, THE GROUND COVERING THIS ISSUE IS HEREBY, DISMISSED BEFORE US, THESE ASSESSEES HAVE FAILED TO ADDUCE AN Y MATERIAL TO CONTROVERT THE FINDINGS OF LD CIT(A). IN VIEW OF THE ABOVE, WE UPH OLD THE DECISION OF LD CIT(A) ON THIS ISSUE. PAGE 4 OF 6 4. VIDE GROUND NO.4, THESE ASSESSEES CLAIM THAT THEY HAVE FILED FORM NO.10 AS PROVIDED U/S 11(2) READ WITH RULE 17 OF THE INCOME TAX RULES, FOR ACCUMULATION OF UNSPENT AMOUNT AND THE AO SHOULD HAVE ALLOWED THE DEDUCTION OF THE AMOUNT SO ACCUMULATED. AS AGAINST THE ABOVE SAID CLAIM OF THE ASSESSEE, WE NOTICE FROM THE ORDER OF LD CIT(A) THAT LD CIT (A) HAS GIVEN A FINDING TO THE EFFECT THAT THESE ASSESSEES DID NOT FILE FORM NO.10 FOR ACCUMULATION OF INCOME BEFORE THE FINALIZATION OF ASSESSMENT PROCEEDINGS. THESE ASSE SSEES DID NOT CONTROVERT THIS FINDING OF LD CIT(A). WE FURTHER NOTICE THAT THE L D CIT(A) FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V NAGPU R HOTEL OWNERS ASSOCIATION (247 ITR 201) IN HOLDING THAT THE FORM NO.10 SHOULD BE FILED BEFORE THE COMPLETION OF THE ASSESSMENT. THESE ASSESSES HAVE NOT SHOWN TO US THAT THE SAID DECISION OF HONBLE APEX COURT DO NOT APPLY TO THEM. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) ON THIS ISSUE. 5. VIDE GROUND NO.5, THESE ASSESSEES CONTEND TH AT THE AO SHOULD HAVE ALLOWED THE SET OFF OF THE EXCESS APPLICATION OF IN COME OF EARLIER YEARS. THESE ASSESSEES PLACED THEIR RELIANCE IN THIS CONNECTION ON THE DECISION OF HONBLE GUJARAT IN THE CASE OF CIT V SHRI PLOT SWETAMBAR MU RTI PUJAK JAIN MAINDAL (211 ITR 293). LD CIT(A), HOWEVER, DISMISSED THE SAID CLAIM FOR THE REASON THAT THESE ASSESSEES MADE THEIR CLAIM BEFORE THE AO AT THE FAG END OF ASSESSMENT THAT TOO WITHOUT FURNISHING THE RELEVANT DETAILS. HENCE IN THE INTEREST OF NATURAL JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR F RESH CONSIDERATION IN ACCORDANCE WITH THE LAW. THESE ASSESSEES SHOULD BE GIVEN NECE SSARY OPPORTUNITY OF BEING HEARD. 6. THE ONLY COMMON ISSUE NOW WE ARE LEFT WITH IS WI TH REGARD TO THE CLAIM OF EXEMPTION UNDER SECTION 10(26AAB) OF THE ACT. BY P LACING RELIANCE ON THE ORDER OF THE BENCH IN A BATCH OF APPEALS IN ITA NOS. 83.. 369/VIZAG/2007, IT WAS SUBMITTED THAT THE AMENDMENT TO SECTION 10(26AAB) I S CLARIFICATORY IN NATURE AND THEREFORE RETROACTIVE IN OPERATION IN THE LIGHT OF THE REPLIES GIVEN BY THE FINANCE MINISTER DURING THE COURSE OF DEBATE IN PARLIAMENT WHILE MOVING THE BILL AND HENCE BY APPLICATION OF SECTION 10(26AAB) OF THE AC T, THE INCOME OF THE AGRICULTURAL MARKET COMMITTEE, WHICH WAS ORIGINALLY CLAIMED TO BE EXEMPT UNDER PAGE 5 OF 6 SECTION 10(20) OF THE ACT IS OTHERWISE DESERVE TO B E TREATED AS NOT TAXABLE BY VIRTUE OF SECTION 10(26AAB) OF THE ACT. 7. IN A BATCH OF APPEALS, I.E., IN I.T.A.NO.90/VI ZAG/2007 AND BATCH, I.T.A.T., VISAKHAPATNAM BENCH, VIDE ORDER DT.28.11.2008, HELD THAT THE INCOME OF THE AGRICULTURAL MARKET COMMITTEES IS EXEMPT UNDER SECT ION 10(26AAB) OF THE ACT. THE DECISION RENDERED IN THAT CASE IS EXTRACTED BEL OW: HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE FIRM VIEW THAT THE INSERTION OF SUB-CLAUSE (26AAB) TO SECTION 10 OF THE INCOME TAX ACT IS ESSENTIALLY INTENDED TO DECLARE THE INTENTION OF THE LEGISLATURE OF NOT TAXING THE INCO ME OF AMCS CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FOR CE FOR THE PURPOSES OF REGULATING THE MARKETING OF AGRICULTURA L PRODUCE AND HENCE IT HAS TO BE TREATED AS RETROACTIVE IN OP ERATION AND APPLICABLE EVEN FOR THE PRIOR YEARS,. WE ORDER ACCO RDINGLY. IN VIEW OF THE FACT THAT THE SAID ISSUE STANDS SQUAR ELY COVERED BY THE AFORE-SAID DECISION, WE REVERSE THE ORDERS PASSED BY THE TAX A UTHORITIES AND HOLD THAT THE INCOME OF THE ASSESSEES HEREIN IS EXEMPT FROM LEVY OF TAX BY VIRTUE OF RETROACTIVE OPERATION OF SECTION 10(26AAB) OF THE ACT AND DIREC T THE ASSESSING OFFICER ACCORDINGLY. 8. NOW LET US TAKE UP SPECIFIC ISSUES RAISED IN APPEAL NOS. ITA NO.328, 329 AND 337. THESE GROUNDS READ AS UNDER: 6. THAT THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNER COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE H ELD THAT THE APPELLANTS INCOME, IF ANY, IS NOT LIABLE TO BE TAX ED AT THE MAXIMUM MARGINAL RATE AS PER THE SPECIFIC PROVISIONS CONTA INED IN THE LAW; 7. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS), OUGHT NOT TO HAVE OMITTED TO ADJUDICATE THE CLAIM MADE BY THE ASSESSEE TO THE EFFECT THAT, THE RECEIPTS PERTAINING TO SECURITY DE POSITS TO THE TUNE OF RS.6,894/-, RECOVERY OF SHORT TERM ADVANCES TO FARM ERS (RYTHU BANDHU PADHAKAM) TO THE TUNE OF RS.16,11,500/-, REC OVERY OF ADVANCES (VIZ.,HOUSE BUILDING ADVANCE, MOTOR CYCLE ADVANCE, FESTIVAL ADVANCE, MARRIAGE ADVANCE, EDUCATIONAL ADVANCE) FRO M STAFF TO THE TUNE OF RS.2,75,655/- SHOULD NOT FORM PART OF TOTAL INCOME FOR THE ASSESSMENT YEAR UNDER REVIEW. PAGE 6 OF 6 IN OUR OPINION, THESE TWO GROUNDS REQUIRE FRESH EXAM INATION AND HENCE WE SET ASIDE THESE TWO ISSUES TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. NEEDLES TO MENTION, THESE ASSESSES SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEALS FILED BY THESE AS SESSEES ARE PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 10-11 . 2009 SD/- SD/- (SUNIL KUMAR YADAV) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 10 TH NOVEMBER, 2009 COPY TO 1. AGRICULTURAL MARKET COMMITTEE, PITHAPURAM 2. AGRICULTURAL MARKET COMMITTEE, PEDDAPURAM 3. AGRICULTURAL MARKET COMMITTEE, TUNI,. 4. AGRICULTURAL MARKET COMMITTEE, RAMACHANDRPURAM 5. AGRICULTURAL MARKET COMMITTEE, JAGGAMPETA 6. AGRICULTURAL MARKET COMMITTEE, ALAMURU 7. AGRICULTURAL MARKET COMMITTEE, PRATHIPADU 8. AGRICULTURAL MARKET COMMITTEE, SAMPARA 9. AGRICULTURAL MARKET COMMITTEE,ANAPARTHY 10. THE ITO, WARD-2, KAKINADA 11. THE ITO, WARD-1, KAKINADA. 12. THE COMMISSIONER OF INCOME TAX (APPEALS)-I, RAJ AHMUNDRY 13. THE COMMISSIONER OF INCOME TAX, RAJAHMUNDRY 14.THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., VISAK HAPATNAM 15. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM