The ACIT, 1(1), Bhopal V. M/s M.P.State Agriculture Marketing Board, Bhopal

ITA 334/IND/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66737 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Keywords: Competent authority
• Section: 143(3); 12A; 12AA; 12; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.334/IND/2012 A.Y.2007-08 ASSTT. COMMISSIONER OF INCOME TAX 1(1) BHOPAL :: APPELLANT VS M/S M.P. STATE AGRICULTURAL MARKETING BOARD BHOPAL PAN AAAJM 0765E ::RESPONDENT APPELLANT BY SHRI DARSHAN SINGH RESPONDENT BY SHRI SUMIT NEMA AND SHRI AMIT JAIN DATE OF HEARING 29.10.2012 DATE OF PRONOUNCEMENT 31.10.2012 O R D E R PER SHRI R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 14.3.2012 FOR THE A.Y. 2007-08 IN THE MATTER OF ORDER PASSED BY THE AO U/S 2 143(3) OF THE ACT. FOLLOWING GROUND HAS BEEN TAKEN BY THE REVENUE :- 1. N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (APPEAL) HAS ERRED IN : HOLDING THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 12 OF THE IT ACT, 1961 WHICH IS NOT ALLOWABLE FOR THE REASONS MENTIONED IN THE ASSESSMENT ORDER. 2. DELETING THE ADDITION OF RS. 9,83,000/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF UNSUPPORTED EXPENSES. 3. DELETING THE ADDITION OF RS.20,87,245/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF FOREIGN EXPENSES. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LOCAL AUTHORITY AND FILED ITS RETURN OF INCOME FOR THE A.Y. 2007-08 DECLARING INCOME AT RS. NIL. THE ASSESSEE IS A LEGAL ENTITY CONSTITUTED UN DER M.P. KRISHI UPAJ MANDI ADHINIYAM TO REGULATE MARKET COMMODITIES IN THE STATE OF MADHYA PRADESH. THE ASSESSEE IS ALSO REGISTERED U/S 12AA OF THE ACT 3 AND THE INCOME WAS CLAIMED AS EXEMPT IN VIEW OF REGISTRATION U/S 12AA OF THE ACT. 3. IN THE COURSE OF ASSESSMENT, THE AO HAS OBSERVED THAT THE ASSESSEE SOCIETY INCURRED EXPENDITURE ON FOREIGN TOUR & TRAVEL AMOUNTING TO RS. 20,87,245/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT SUCH EXPENDITURE WAS INCURRED TO DISCUSS THE POTENTIAL F OR COLLABORATION AND TECHNOLOGY TRANSFER AND TO VISIT RESEARCH AND DEVELOPMENT CENTRES OF EXCELLENCE OF AGRICULTURAL TECHNOLOGY. THE ASSESSEE EXPLAINED THA T THE FOREIGN TOUR WAS IN CONNECTION WITH DEVELOPMENT AND MARKETING OF AGRICULTURE PRODUCE IN THE STATE B Y WAY OF INFRASTRUCTURE AND INTRODUCING REFORMS IN TH E RULES AND REGULATIONS AND PROCESS BASED ON DISCUSSION IN VARIOUS WORKSHOPS. THE AO OBSERVED THAT THE DELEGATION WHO VISITED VARIOUS COUNTRIES A ND 4 ON WHICH TRAVEL EXPENSES OF RS. 20,87,245/- WERE INCURRED CONSISTED OF FOLLOWING PERSONS :- S.NO NAME 1. SH. SHIVRAJ SINGH CHOUHAN, CHIEF MINISTER MP 2. SH. CHANDRABHAN SINGH CHOUDHARY,AGRI.MINISTER 3 SH.PRAVESH SHARMA, IAS 4 SH. M.A. KHAN, IAS 5 SH. S.P.S. PARIHAR, IAS 6 SH. S.S. TOMAR, DIRECTOR OF AGRI. 7 SH.J.N. KASORIYA, MNG.DIRECTOR,ECO IND 8 SH. MANOJ SHRIVASTAVA,ADDL.DIRECTOR MANDI BOARD 9 SH. V.P. MALI, ASSTT.DIRECTOR MANDI BOARD 10 SH.SOUYAL, DY.PRESIDENT PLANNING BOARD 11 SH. MUNSI LAL, DIRECTOR, MD ECRO IND 12 SH.RAJENDRA PAHAK, DIRECTOR KISAN SANG 13 SH. PRABHAKAR N.KELKAR,REPRESENTATIVE KISAN SANG 14 SH.BHAGWAT SINGH, REPRESENTAIVE KISAN SANG 15 SH. GURU PRASAD, REPRESENTATIVE KISAN SANG THE AO OBSERVED THAT THERE WAS NO DIRECT NEXUS OF THE EXPENDITURE INCURRED WITH REFERENCE TO OBJECTS AND ACTIVITIES OF THE BOARD. THE AO FURTHER OBSERV ED THAT MANY PERSONS WHO WERE IN THE DELEGATION OF FOREIGN COUNTRIES WERE NOT RELATED TO AGRICULTURAL MARKETING. THE AO HAS ALSO NARRATED DATEWISE PROGRAMME/SCHEDULE OF THE DELEGATION IN VARIOUS 5 CITIES FOR FOREIGN COUNTRIES AND OBSERVED THAT THE DAY TO DAY DETAIL SHOW THAT THERE WAS NO DIRECT NEXUS WITH VISIT AND THE ACTIVITY OF THE SOCIETY. THE AO ACCORDINGLY HELD THAT THE ASSESSEE SOCIETY HAS GIVE N BENEFIT TO ITS MEMBERS BY INCURRING EXPENDITURE ON FOREIGN TOUR AND IN VIEW OF SECTION 13(2)(C)) OF TH E IT ACT AND PERSONS MENTIONED IN SECTION 13(3) HAVE BEEN BENEFITTED. IT WAS ACCORDINGLY HELD THAT PROVISIONS OF SECTION 13(1) ARE APPLICABLE AND SECTIONS 11 & 12 WILL NOT OPERATE IN THIS CASE. THE AO ACCORDINGLY ADDED RS. 20,87,245/- IN THE INCOME OF THE ASSESSEE AND SIMULTANEOUSLY ALSO HELD THAT EXCESS OF INCOME OVER EXPENDITURE AS PER AUDITED ACCOUNTS SHALL BE INCREASED BY THE EXPENDITURE INCURRED ON FOREIGN EXPENSES . 6 4. THE AO ALSO ADDED THE SURPLUS OF INCOME OVER EXPENDITURE BY DISREGARDING REGISTRATION GRANTED U/ S 12A OF THE ACT. 5. BY THE IMPUGNED ORDER, THE LEARNED CIT(A) DELETED THE DISALLOWANCE OF EXPENDITURE MADE BY THE AO AND ALSO HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/SS 11 & 12 OF THE ACT AFTER MAKING THE FOLLOWING OBSERVATIONS :- 6.5 I HAVE CAREFULLY CONSIDERED THE FINDING OF THE A.O. AS ALSO THE SUBMISSION OF THE ASSESSEE. FIRST OF ALL, THE ISSUE OF DISALLOWANCE OF RS. 20,87,245/- WILL BE EXAMINED. THE AOS CASE IS THAT SUCH EXPENDITURE WAS NOT RELATED TO THE OBJECTIVES AND PURPOSES OF THE APPELLANT SOCIETY AND THAT BY INCURRING SUCH EXPENDITURE PERSONS MENTIONED IN SECTION 13(3) WERE BENEFITED. THE AO FURTHER HELD THAT AS PERSONS MENTIONED IN 7 SECTION 13(3) WERE BENEFITTED THEREFORE PROVISIONS OF SECTION 13(1) SHALL APPLY AND PROVISIONS OF SECTIONS 11 & 12 WILL NOT APPLY. ON CAREFUL CONSIDERATION OF FACTS AND CIRCUMSTANCES IT IS NOTICED THAT THE FINDING OF THE AO THAT EXPENDITURE WAS NOT RELATED TO STATED OBJECTIVES OF THE SOCIETY CANNOT BE ACCEPTED IN AS MUCH AS, NOT ONLY THE TOUR WAS APPROVED BY GOVT. OF MP BUT ALSO THE APPELLANT HAS ELABORATELY EXPLAINED THE PURPOSES AND OBJECTIVES OF SUCH FOREIGN TOUR. IN FACT, DURING ASSESSMENT PROCEEDINGS THE APPELLANT HAS FILED DATEWISE DETAIL PROGRAMME OF SUCH DELEGATION AS ALSO THE DETAIL AS HOW SUCH TOUR WAS BENEFICIAL FOR THE OBJECTIVES OF THE SOCIETY. THEREFORE, SUCH FINDING OF THE AO THAT THE EXPENDITURE WAS NOT FOR THE OBJECTIVES OF THE SOCIETY CANNOT BE ACCEPTED AND ADDITION OF RS.20,87,245/- CANNOT BE SUSTAINED. THE SAME IS DELETED. 8 AS REGARDS THE OTHER OBJECTION OF THE AO THAT PERSONS MENTIONED IN SECTION 13(3) OF IT ACT WERE BENEFITED, IT MAY BE SEEN THAT THE OBSERVATION OF THE AO IS FACTUALLY INCORRECT. IN AS MUCH AS NO PERSON IN THE DELEGATION ON WHICH EXPENDITURE WAS INCURRED WERE COVERED IN THE CATEGORY OF THE PERSON MENTIONED IN SECTION 13(3) OF THE IT ACT. FURTHER AS NO VIOLATION OF SECTION 13(2)/13(3) IS PROVED THEREFORE THE PROVISIONS OF SECTION 13(1) WILL NOT APPLY AND AS THE APPELLANT HAS BEEN GRANTED REGISTRATION U/S 12AA OF IT ACT, THEREFORE, PROVISIONS OF SECTION 11 & 12 WILL BE APPLICABLE IN THE CASE OF THE APPELLANT. 6.6 DURING THE APPELLATE PROCEEDINGS THE APPELLANT ALSO SUBMITTED THAT FORM NO. 10 AS PRESCRIBED IN SECTION 11(2) OF IT ACT FOR ACCUMULATION OF FUNDS/SETTING APART OF INCOME TO BE APPLIED FOR SPECIFIED PURPOSES WAS FILED ALONG 9 WITH THE RETURN. IT WAS ACCORDINGLY CLAIMED THAT IN SUCH CIRCUMSTANCES PROVISIONS OF SECTION11 & 12 WILL OPERATE AND THE AO WRONGLY DISALLOWED THE ENTIRE CLAIM. THE AO HAS NOT DISCUSSED THIS ISSUE IN THE ASSESSMENT ORDER THEREFORE VIDE THIS OFFICE LETTER DATED 05.01.2012 THE AO WAS REQUESTED TO EXAMINE WHETHER FROM NO. 10 HAS BEEN FILED IN TIME, WHETHER SUCH FORM WAS SIGNED BY THE COMPETENT AUTHORITY AND WHETHER THE ACCUMULATION OF FUND WAS FOR THE PURPOSES MENTIONED IN THE OBJECTS OF THE APPELLANT. THE AO WAS REQUESTED TO SUBMIT REPORT AFTER MAKING NECESSARY EXAMINATION AND VERIFICATION. THE AO SUBMITTED REPORT VIDE LETTER DATED 28.02.2012 STATING THEREIN THAT THE FORM NO. 10 HAS BEEN FILED ALONG WITH THE RETURN ON 31.10.2007 WITHIN 10 THE STIPULATED TIME AND THAT THE ACCUMULATION OF FUNDS WAS ALSO FOR THE PURPOSES MENTIONED IN THE OBJECT OF THE ASSESSEE. HOWEVER, AS REGARDING THE SIGNATORY OF FORM NO. 10 THE AO STATED THAT THE FORM NO. 10 SHOULD BE SIGNED BY TRUSTEE OR PRINCIPAL OFFICER. AS PER AO THE PRINCIPAL OFFICER IS DEFINED IN SECTION 2(35) WHICH MEANS SECRETARY, TREASURER, MANGER OR AGENT. IT IS FURTHER STATED THAT FORM NO. 10 WAS SIGNED BY THE ADDL. DIRECTOR WHO CANNOT BE SAID TO BE PRINCIPAL OFFICER. THE AO ACCORDINGLY HELD THAT FORM NO. 10 WAS NOT SIGNED BY THE COMPETENT AUTHORITY. 6.7 THE REPORT OF THE AO WAS MADE AVAILABLE TO THE APPELLANT WHO FILED WRITTEN SUBMISSION DATED 12.03.2012 STATING THEREIN THAT THE FORM NO. 10 WAS SUBMITTED IN TIME AND ACCUMULATION OF INCOME IS ALSO AS PER THE OBJECTS OF THE APPELLANT. 11 AS REGARDS THE OBJECTION OF THE AO THAT THE FORM WAS NOT SIGNED BY THE COMPETENT AUTHORITY, IT WAS SUBMITTED THAT AS PER DEFINITION OF PRINCIPAL OFFICER WITH REFERENCE TO LOCAL AUTHORITY OR A COMPANY OR ANY PUBLIC BODY OR ANY ASSOCIATION OF PERSONS OR ANYBODY OF INDIVIDUALS MEANS PRINCIPAL OFFICER, THE SECRETARY TREASURER, MANAGER OR AGENT OF THE AUTHORITY COMPANY ASSOCIATION OR BODY. IT IS CONTENDED THAT IN THE ASSESSEES CASE THERE IS NO SECRETARY OR TREASURER MANGER AND THE ADDL. DIRECTOR (FINANCE) IS THE PERSON WHO0 IS WORKING IN THAT CAPACITY AND AS SUCH HE IS COMPETENT AUTHORITY TO SIGN THE FORM. IT WAS ACCORDINGLY CLAIMED THAT FORM NO. 10 IS LEGALLY IN ORDER AND HENCE THE CLAIM IS ALLOWABLE. 12 I HAVE CAREFULLY CONSIDERED THE AOS OBJECTION AS ALSO SUBMISSION OF THE APPELLANT. IT IS NOTICED THAT THE PRINCIPAL OFFICER HAS BEEN DEFINED WITH REFERENCE TO A LOCAL AUTHORITY OR COMPANY ETC. IN SECTION 2(35) OF IT ACT AND IN THE DEFINITION OF PRINCIPAL OFFICER, THE SECRETARY, TREASURER OR MANGER OR AGENT OF THE AUTHORITY ARE INCLUDED. IT MAY BE NOTED THAT EVEN IF IT IS BELIEVED THAT FORM SHOULD BE SIGNED BY PRINCIPAL OFFICER, THE ADDL. DIRECTOR WHO HAS SIGNED THE FORM IS IN THE NATURE OF MANGER OR AGENT OF THE AUTHORITY IN AS MUCH AS HE HAS BEEN AUTHORISED TO SIGN ON BEHALF OF THE APPELLANT SOCIETY. IT MAY ALSO BE MENTIONED THAT THE APPELLANT SOCIETY BEING CONTROLLED BY GOVT. OF MADHYA PRADESH AND THE ADDL. DIRECTOR OR ANY OTHER SUCH AUTHORITY ARE POSTED BY THE GOVERNMENT AND THEY ARE AUTHORITY FOR SUCH 13 WORK. THEREFORE, THE OBJECTION OF THE AO CANNOT BE SUSTAINED. IN THIS BACKGROUND THE ULTIMATE FACTS EMERGED THAT FORM NO. 10 WAS SUBMITTED IN TIME ALONG WITH THE RETURN SIGNED BY THE COMPETENT AUTHORITY AND ACCUMULATION OF THE INCOME WAS ALSO FOR THE OBJECTS MENTIONED IN THE OBJECTS OF THE SOCIETY. 6. THE LEARNED CIT(A) ALSO DELETED THE ADDITION MADE BY THE AO IN RESPECT OF SURPLUS OF INCOME OVER EXPENDITURE BY OBSERVING AS UNDER :- 6.9 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IT MAY BE NOTICED THAT THE APPELLANT IS REGISTERED UNDER SECTION 12AA OF IT ACT. THE AO POINTED OUT VIOLATIONS IN TERMS OF SECTION 13(2)(C) READ WITH SECTION 13(3) OF IT ACT AND ACCORDINGLY HELD THAT IN VIEW OF INFRINGEMENT OF SECTION 13(2), 13(3), THE PROVISIONS OF SECTION 14 13(1) WILL APPLY AND PROVISIONS OF SECTION 11&12 WILL NOT APPLY. HOWEVER, THIS ISSUE HAS ALREADY BEEN DISCUSSED AND IT HAS BEEN HELD THAT THERE WAS NO VIOLATION IN TERMS OF SECTION 13(2) AND 13(3) OF IT ACT. IT HAS ALSO BEEN HELD THAT PROVISIONS OF SECTION 11&12 WILL APPLY. IN VIEW OF APPLICATION OF SECTION 11 &12 THE EXCESS OF INCOME OVER EXPENDITURE CANNOT BE TAXED. IN THIS BACKGROUND, THE GROUND NOS. 2 & 3 ARE MORE OF ACADEMIC NATURE. MOREOVER, FOR SURPLUS FUNDS THE APPELLANT HAS FILED FORM NO. 10 AND AS DISCUSSED ABOVE THE FORM NO. 10 WAS FOUND TO BE IN ORDER. THEREFORE, FOR STATISTICAL PURPOSES GROUND NO. 2 & 3 ARE ALSO TREATED TO BE ALLOWED. WITH THE RESULT, THE GROUND NOS. 2,3,4 & 5 ARE ALLOWED. 7. AGAINST THE ABOVE ORDER OF THE LEARNED CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 15 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FIND FROM RECORD THAT THE ASSESSEE BOARD IS CONSTITUTED BY GOVERNMENT OF MP UNDER MP KRISHI UPAJ MANDI ADHINIYAM. ASSESSEE SOCIETY WAS HAVING REGISTRATION U/S 12AA OF INCOME TAX ACT. WE ALSO FIND THAT THE ASSESSEE HAS ALSO DULY SUBMITTED FORM NO. 10 AS PRESCRIBED IN SECTION 11(2) FOR ACCUMULATION OF INCOME ALONG WITH THE RETURN. THE AO DISALLOWED THE ENTIRE CLAIM OF EXPENDITURE U/S 1 1 AND 12 BY HOLDING THAT THE FOREIGN TOUR UNDERTAKEN BY THE ASSESSEE SOCIETY HAS LED TO THE BENEFIT OF PERSONS MENTIONED IN SECTION 13(3) AND THAT PROVISIONS OF SECTION 13(1) ARE APPLICABLE. 9. AS PER THE FINDINGS RECORDED BY THE LEARNED CIT(A) AND WHICH IS ALSO AS PER THE MATERIAL ON RECORD, WE FIND THAT THE EXPENDITURE INCURRED BY TH E 16 ASSESSEE FOR THE PURPOSE OF FOREIGN TRAVEL WAS NOT IN RESPECT OF THE PERSONS MENTIONED U/S 13(3) OF THE ACT. THE FOREIGN TOUR WAS APPROVED BY THE GOVT. OF MADHYA PRADESH AND THE ASSESSEE HAS ELABORATELY EXPLAINED THE PURPOSE AND THE OBJECTIVE OF SUCH FOREIGN TOUR. BEFORE THE AO, THE ASSESSEE HAS DULY FILED DATEWISE DETAILS AND PROGRAMME OF SUCH DELEGATION AND ALSO DETAILS AS TO HOW SUCH TOUR WAS BENEFICIAL TO THE OBJECTIVES OF THE ASSESSEE. THE PERSONS ALLEGED BY THE AO AS HAVING TAKEN BENEFIT OUT OF SUCH TRAVEL DO NOT FALL UNDER THE CATEGORY O F PERSONS MENTIONED U/S 13(3) OF THE ACT. WE ALSO FIN D THAT FOREIGN TOUR WAS UNDERTAKEN TO MEET THE OBJECT S OF THE ASSESSEE SOCIETY. SINCE THERE IS NO VIOLATIO N OF SECTION 13(2)/13(3), THE PROVISIONS OF SECTION 13(1 ) WILL NOT APPLY. SINCE THE ASSESSEE HAS BEEN GRANTE D REGISTRATION U/S 12AA OF THE ACT, THE PROVISIONS OF 17 SECTIONS 11 AND 12 OF THE ACT WILL BE APPLICABLE WI TH DUE FORCE, ACCORDINGLY THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF SURPLUS MADE BY THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS , THE LEARNED CIT(A) HAS ALSO CALLED FOR A REMAND REPORT FROM THE AO WHEREIN IT WAS MENTIONED THAT ACCUMULATION OF INCOME BY THE ASSESSEE WAS AS PER ITS OBJECTS. THE LEARNED CIT(A) ALSO FOUND THAT FO RM NO. 10 WAS CORRECTLY SIGNED BY THE COMPETENT AUTHORITY OF THE ASSESSEE BOARD. AS PER THE DEFINIT ION PROVIDED U/S 2(35), THE PRINCIPAL OFFICER, SECRETAR Y, TREASURER OR MANAGER ARE INCLUDED IN THE PRINCIPAL OFFICER OF THE ASSESSEE BOARD. FORM NO. 10 WAS SIGNED BY THE ADDITIONAL DIRECTOR AS AN AGENT OF TH E AUTHORITY WHO WAS AUTHORISED TO SIGN ON BEHALF OF THE ASSESSEE SOCIETY WHICH IS CONTROLLED BY THE GOVERNMENT OF MADHYA PRADESH. THE ADDITIONAL DIRECTOR OR ANY OTHER SUCH AUTHORITY WAS POSTED BY THE GOVERNMENT AND THEY WERE DULY AUTHORISED FOR 18 SUCH WORK. BY RECORDING THIS FINDING, THE LEARNED CIT(A) HAS DULY MET WITH THE OBJECTION RAISED BY TH E AO. THE DETAILED FINDINGS RECORDED BY THE LEARNED CIT(A) IN PARAS 6.5 AND 6.9 HAVE NOT BEEN CONTROVERTED BY THE LEARNED SENIOR DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD AND THE SAME HAVE BEEN REPRODUCED ELABORATELY IN THE ABOVE PARAS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LEARNED CIT(A). 10. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST OCTOBER, 2012 SD SD (JOGINDER SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 31 ST OCTOBER, 2012 COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR DN/- 19