ACIT, Faizabad V. M/S Krishi Utpadan Mandi Samiti, Jaunpur

ITA 426/LKW/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54796 (ITAT-LUCKNOW)
• Duration Of Justice: 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 13-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: PRADEEP KUMAR KAPOOR
• Keywords: Charitable institution; Benefit of exemption
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, LUCKNOW BENCH 'B', LUCKNOW. BEFORE SHRI H. L. KARWA, HON'BLE VICE PRESIDENT AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO.426/LKW/11 ASSESSMENT YEAR: 06-07 A. C. I. T., VS. M/S KRISHI UTPADAN MANDI SAMITI, CIRCLE FAIZABAD. SHAHGANJ, JAUNPUR. PAN:AABTK0240J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. K. BAJAJ, SR. D. R. RESPONDENT BY: SHRI PRADEEP KUMAR KAPOOR, C. A. O R D E R PER BENCH: THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 06/04/2011 OF CIT(A)-I, LUCKNOW FOR THE ASSESSMENT YEAR 2006- 2007. IN THIS APPEAL THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. WHETHER THE LD.CIT(A)-I WAS RIGHT IN TREATING THE AMOUNT OF `26,11,456 /- OF VIKAS CESS AS APPLIED FOR CHARITABLE PURPOSES WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES THAT THE ASSESSEE COULD NOT ESTABLISH THE CASE FOR TREATING ITS INCOME EXEMPT AS PER SECTION 11 TO 13 OF INCOME TAX ACT, 1961. 2. WHETHER LD.CIT(A)-I WAS CORRECT IN TREATING AMOUNTS TRANSFERRED TO KRISHI UTPADAN MANDI PARISHAD AS AN 2 'APPLICATION OF INCOME' WHEREAS IT HAS NOT BEEN ESTABLISHED AS TO HOW SUCH TRANSFER OF FUNDS AMOUNTED TO APPLICATION FOR CHARITABLE PURPOSES. 3. THE FACTS RELATED TO THIS CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 31/10/2007 DECLARING NIL INCOME. THE ASSESSEE CLAIMED STATUS AS 'CHARITABLE INSTITUTION' AND WAS GRANTED REGISTRATION U/S 12AA OF THE I.T. ACT, 1961 (IN SHORT, THE ACT). THE ASSESSEE IS CONSTITUTED UNDER U.P. KRISHI UTPADAN MANDI ADHINIYAM,1964 AND CHARGES MANDI SHULK FROM BUYERS, THEIR AGENTS AND NOT FROM FORMERS. THE ASSESSEE ALSO CHARGES VIKAS CESS (DEVELOPMENT CESS) ON SALE / PURCHASE OF AGRICULTURAL PRODUCE AND TRANSFERS THE SAME IN TOTO TO MANDI PARISAD. OUT OF MANDI SHULK RECEIVED, APPROXIMATELY 80% OF THE AMOUNT IS TRANSFERRED TO MANDI PARISHAD, LUCKNOW WHICH IN TURN IS SUPPOSED TO UTILIZE SUCH MONEY FOR DEVELOPMENT WORK SUCH AS CONSTRUCTION OF RING ROADS, MANDI STHAL ETC. THE ASSESSING OFFICER DISALLOWED THE VIKAS CESS AMOUNTING TO `26 ,11,456/- COLLECTED BY THE ASSESSEE AND PAID TO MANDI PARISHAD. ACCORDINGLY ADDITION OF `2 6,11,456/- WAS MADE. 4. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) WHO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY STATING THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE I.T.A.T. AS WELL AS 3 THE HON'BLE JURISDICTIONAL HIGH COURT OF ALLAHABAD. NOW THE DEPARTMENT IS IN APPEAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, STATED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF I.T.A.T., LUCKNOW BENCH, LATEST BEING AN ORDER DATED 28/06/2011 PASSED IN I.T.A. NO.280 TO 284/LKW/11 AS WELL AS THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN I.T. APPEAL NO. 58 OF 2010, ORDER DATED 02/12/2010, COPY OF THE SAID ORDERS WERE FURNISHED. 6. THE LEARNED D. R. ALTHOUGH SUPPORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE, HAVING SIMILAR FACTS, HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL, HAVING SAME CONSTITUTION IN I.T.A. NO. 280 284/LKW/11 WHEREIN VIDE PARA 6 TO 6.2 OF THE ORDER DATED 28/06/2011, THE RELEVANT FINDINGS GIVEN THEREIN READ AS UNDER: 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT SIMILAR ISSUE HAVING IDENTICAL FACTS HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE ITAT IN I.T.A. NO.553/LUC/09 AND OTHERS IN THE CASE OF M/S KRISHI UTPADAN MANDI SAMITI, PURWA, UNNAO AND OTHERS VS. INCOME TAX OFFICER, UNNAO FOR THE ASSESSMENT YEAR 2006-07. IN THE IDENTICAL ISSUE, THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 4 TO 7.1 OF THE ORDER DATED 15/12/2009 WHICH READ AS UNDER: 4. DURING THE COURSE OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, STATED THAT THE SIMILAR ISSUES HAD ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE ITAT VIDE ORDER DATED 01/12/2009 IN ITA NOS. 576 TO 587/LUC/09 IN THE CASE OF KRISHI UTPADAN MANDI SAMITI, NAUBASTA, KANPUR AND OTHERS VS. DCIT, KANPUR. HE ALSO POINTED OUT THAT THE VIEW TAKEN BY THE ITAT HAD BEEN AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT. 5. THE LEARNED CIT, DR ALTHOUGH FURNISHED WRITTEN SUBMISSIONS BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT AN IDENTICAL ISSUES, HAVING SIMILAR FACTS, HAD ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL VIDE AFORESAID ORDER DATED 01/12/2009. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON THE RECORD. IN THE WRITTEN SUBMISSIONS, THE MAIN CONTENTION OF THE LEARNED CIT, DR IS THE SAME WHICH WAS IN THE AFORESAID CASE DECIDED BY THE TRIBUNAL VIDE ORDER DATED 01/12/2009. WE THINK IT APPROPRIATE TO REPRODUCE THE SUBMISSIONS OF THE LEARNED CIT, DR IN PARA 11 OF THE WRITTEN SUBMISSIONS WHICH READ AS UNDER: 5 11. THE ASSESSEE MAY ARGUE THAT THE ISSUE IS SETTLED BY THE HON'BLE ITAT IN EARLIER DECISIONS. IT IS A SETTLED PRINCIPLE OF LAW THAT IF THE PREVIOUS DECISION IS PLAINLY ERRONEOUS, THERE IS A DUTY OF THE COURT TO REVIEW IT AND NOT PERPETUATE THE MISTAKE I.E. A VITAL POINT WAS NOT CONSIDERED OR WHEN AN EARLIER RELEVANT STATUTORY PROVISION HAD NOT BEEN BROUGHT TO THE NOTICE OF COURT - UNION OF INDIA & ANR. VS RAGHUBIR SINGH 178 ITR 548 (SC), SRI AGASTHYAR TRUST VS CIT 236 ITR 23 (SC) AND SRIRAM TRANSPORT FINANCE CO. LTD. VS ACIT 70 ITD 406 (ITA T, MAD). TRIBUNAL IS FINAL FACT- FINDING AUTHORITY AND IS UNDER A LEGAL OBLIGATION TO RECORD CORRECT FINDING OF FACT. IF THERE IS DIFFICULTY IN RECORDING CORRECT FINDING OF FACT ON ACCOUNT OF CONTRADICTIONS IN FACTUAL POSITION, TRIBUNAL HAS POWER TO REMAND MATTER TO LOWER AUTHORITY TO STATE CORRECT FACTS AS HELD IN CIT VS MANOHAR GLASS WORKS 232 ITR 302 (ALL) AND KAPURCHAND SHRIMAL V S CIT 131 ITR 451 (SC). THE POWER OF THE TRIBUNAL TO REMAND THE CASE TO THE ASSESSING OFFICER HAS BEEN UPHELD IN BHAVNA CHEMICALS LTD. VS CIT 231 ITR 507 (SC) AS WELL. 7. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES, PARTICULARLY THIS SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE THAT THE VIEW TAKEN BY THE TRIBUNAL, ON THIS ISSUE, HAD BEEN AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT AND THE SAID SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS NOT CONTROVERTED BY THE LEARNED CIT, DR, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT VIDE ORDER DATED 01/12/2009 IN ITA NO.576 TO 578/LUC/09 IN THE CASE OF KRISHI UTPADAN MANDI SAMITI, NAUBASTA, KANPUR AND OTHERS VS. DCIT, KANPUR (SUPRA). THE RELEVANT FINDING GIVEN THEREIN VIDE PARA 5 AND 5.1 READ AS UNDER: 6 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON THE RECORD. IT IS NOTICED THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF INCOME TAX OFFICER, WARD-6(2) LUCKNOW VS. M/S KRISHI UTPADAN MANDI SAMITI, KONCH, JALAUN AND OTHERS (SUPRA). THE ONLY DISTINGUISHABLE FEATURE AS POINTED OUT BY THE LEARNED CIT(A) AND THE LEARNED CIT, DR IS THAT THE DECISION OF M/S NACHIMUTHU INDUSTRIAL ASSOCIATION VS. CIT (SUPRA) HAD NOT BEEN CONSIDERED IN THE EARLIER DECISION OF THE TRIBUNAL. IT IS NOTICED THAT IN THE AFORESAID CASE OF M/S NACHIMUTHU INDUSTRIAL ASSOCIATION VS. CIT, THE HON'BLE MADRAS HIGH COURT HELD THAT: THE WORD APPLIED OCCURRING IN SECTION 11 IMPLIES SPENDING OR UTILIZATION OF THE INCOME. MERELY MAKING AN ENTRY IN THE ACCOUNTS CANNOT BE TAKEN AS ANY APPLICATION OF THE INCOME FOR ANY CHARITABLE PURPOSE. SUCH ENTRIES COULD HAVE BEEN REVERSED IF AND WHEN THE TRUST CHOOSE TO DO SO. HOWEVER, IN THE PRESENT CASE THERE WAS NO CHANCE WITH THE ASSESSEES TO REVERSE THE ENTRIES AND NOTHING WAS BROUGHT ON RECORD THAT THESE WERE MERELY ENTRY IN THE ACCOUNTS AND THAT THE CONTRIBUTION/REMITTANCES MADE BY THE ASSESSEES TO THE MANDI PARISHAD WERE NOT UTILIZED FOR THE CHARITABLE PURPOSES, THEREFORE, THE CASE RELIED BY THE LEARNED DR IS DISTINGUISHABLE. IN OUR OPINION, THE ISSUE IS SQUARELY COVERED BY THE AFORESAID REFERRED TO EARLIER ORDER OF THE TRIBUNAL DATED 12 TH OCTOBER 2009 WHEREIN, AFTER ELABORATELY DISCUSSING THE CONTENTIONS OF BOTH THE PARTIES AND VARIOUS CASE LAWS RELIED IN RIVAL SUBMISSIONS AND FOLLOWING THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, GAJSINGHPUR & OTHERS HAVING THE SIMILAR FACTS AND RELATING TO THE KRISHI UPAJ MANDI SAMITI I.E. THE 7 SAME STATUS WHICH THE ASSESSEE IS ENJOYING, IT HAS BEEN HELD THAT THE REMITTANCES ON ACCOUNT OF ANSDAN AND MARKET CESS WERE ELIGIBLE TO BE CONSIDERED FOR EXEMPTION U/S 11(1)(A) OF THE ACT. THE RELEVANT FINDINGS HAS BEEN GIVEN IN PARA 6 TO 8 OF THE AFORESAID ORDER DATED 12 TH OCTOBER 2009 IN THE CASE INCOME TAX OFFICER, WARD-6(2) LUCKNOW VS. M/S KRISHI UTPADAN MANDI SAMITI, KONCH, JALAUN AND OTHERS FOR THE ASSESSMENT YEARS 2004-2005 TO 2006-2007. THE SAID OBSERVATIONS OF THE TRIBUNAL READ AS UNDER: 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT A SIMILAR ISSUE HAD BEEN ADJUDICATED BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, GAJSINGHPUR & OTHERS (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER : HELD: THE AMOUNT IS GIVEN BY THE ASSESSEE TO THE BOARD FOR SPECIFIC PURPOSE ON THE APPROVAL OF THE PROJECT BY THE STATE GOVERNMENT. THE TRIBUNAL HAS RIGHTLY OBSERVED THAT THE AMOUNT GIVEN IS NOT A VOLUNTARY CONTRIBUTION BY THE ASSESSEE BUT TOWARDS THE ACHIEVEMENT OF THE OBJECT SET OUT IN THE ACT FOR WHICH THE ASSESSEE CAME INTO EXISTENCE. IT IS NOT EVEN THE CASE OF THE REVENUE THAT THE ASSESSEE CAN CLAIM THE REFUND OF THE AMOUNT ONCE GIVEN TO THE BOARD SO AS TO EXECUTE AND CARRY OUT THE CONSTRUCTION WORK. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL HAS RIGHTLY HELD THAT THE AMOUNT WHICH REMAINED UNUTILISED CANNOT BE TREATED AS 'ADVANCE' WHICH PRESUPPOSES EXISTENCE OF AN ELEMENT OF GETTING THE AMOUNT BACK IN CASE THE TERMS OF THE AGREEMENT ARE NOT COMPLIED WITH. SINCE THE AMOUNT ONCE GIVEN FOR A SPECIFIC CHARITABLE PURPOSE BY THE MARKET - COMMITTEE TO THE BOARD IS NOT REFUNDABLE AND THE ASSESSEE IS NOT IN A POSITION TO ENSURE THAT THE AMOUNT IS SPENT WITHIN THE SAME YEAR AND ALSO CANNOT CALL BACK THE UNSPENT AMOUNT THEREFORE, SO FAR AS THE ASSESSEE IS CONCERNED, THE MAKING OF THE PAYMENT TO THE BOARD BY ITSELF HAS TO 8 BE TREATED AS 'APPLICATION'. THE CREDITING OF THE AMOUNT IN THE ACCOUNT OF THE BOARD IS ENOUGH AND THE REVENUE CANNOT INSIST THAT THE AMOUNT SO GIVEN BY THE ASSESSEE MUST BE SPENT WITHIN A RELEVANT YEAR ONLY. THE MARKET COMMITTEE HAVING PUT ITS INCOME TO USE IN CONFORMITY WITH THE PROVISIONS OF THE ACT OF 1961 FOR CHARITABLE PURPOSE, IT HAS TO BE TREATED AS THE APPLICATION OF THE INCOME FOR THE CHARITABLE PURPOSE IN THE RELEVANT YEAR. (PARA 17) FROM BARE PERUSAL OF THE PROVISIONS OF S. 11 (L)(A) IT IS MANIFESTLY CLEAR THAT IT DOES NOT CONTAIN ANY SUCH INHIBITION THAT THE APPLICATION OF THE INCOME FOR CHARITABLE PURPOSES SHOULD BE RESTRICTED TO A PARTICULAR PLACE OR THE SPECIFIED AREA. THE WORDS 'TO SUCH PURPOSES IN INDIA' USED IN SAID PROVISION SHOW THAT THE APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES ANYWHERE IN INDIA SHALL BE ENTITLED FOR EXEMPTION IN TERMS OF S.11(1)(A). THE APPLICATION OF THE INCOME FOR THE PURPOSES SET OUT IN THE MARKET ACT OF 1961 BY THE MARKET COMMITTEE OR THE BOARD ON ITS BEHALF MAY BE IN VIOLATION OF THE PROVISIONS OF THE MARKET ACT OF 1961 WHICH REGULATES THE UTILISATION OF THE MARKET COMMITTEE FUND AND MARKET DEVELOPMENT FUND BUT, FOR THE PURPOSES OF EXEMPTION UNDER S.11(L)(A), IT IS WHOLLY IRRELEVANT INASMUCH AS, UNDER THE SAID PROVISION, THE ONLY RELEVANT CONSIDERATION IS THAT THE INCOME SHOULD BE APPLIED FOR CHARITABLE PURPOSES IN INDIA. MOREOVER, AS NOTICED BY THE TRIBUNAL, AS PER THE PROVISIONS OF S. 34A OF THE MARKET ACT OF 1961, THE STATE GOVERNMENT IS EMPOWERED TO GIVE THE BOARD OR THE MARKET COMMITTEES GENERAL INSTRUCTIONS TO BE FOLLOWED FOR CARRYING OUT THE PURPOSES OF THE ACT WHICH INCLUDES THE DIRECTIONS RELATING TO PURPOSES FOR WHICH AND MANNER IN WHICH THE MARKET COMMITTEE FUND OR THE MARKET COMMITTEE DEVELOPMENT FUND SHALL BE SPENT AND THE MANNER IN WHICH THE SURPLUSES WITH THE BOARD OR THE MARKET COMMITTEE SHALL BE KEPT. THUS, IT IS NOT WITHIN THE DOMAIN OF THE CONCERNED MARKET COMMITTEE TO RESTRICT THE UTILISATION OF THE AMOUNT CONTRIBUTED TOWARDS ANY 9 CHARITABLE ACTIVITY WITHIN ITS LOCAL JURISDICTION. THE TRIBUNAL HAS RIGHTLY HELD THAT SO LONG AS ACTIVITY REMAINS CHARITABLE IN CONFORMITY WITH THE PURPOSES DEFINED IN THE MARKET ACT OF 1961, NO FETTERS CAN BE PLACED ON THE MARKET COMMITTEE FOR NOT SPENDING THE AMOUNT OUTSIDE LOCAL JURISDICTION. IN THIS VIEW OF THE MATTER, THE CONTRIBUTIONS MADE BY THE ASSESSEE TOWARDS CHARITABLE ACTIVITIES EXTENDING BEYOND ITS LOCALJL1RISDICTION BUT WITHIN INDIA SHALL BE ENTITLED FOR BENEFIT OF EXEMPTION UNDER S. 11(L)(A).-KRISHI UPAJ MANDI SAMITI, ANOOGARH & ORS. VS. ITO (2008) 119 ITJ (JD) 369 : (2008) DTR (JD)(TRIB) 166 APPROVED. (PARA 19) 7. ON SIMILAR ISSUE THE I.T.A.T.,LUCKNOW BENCH B VIDE ORDER DATED 21.4.2009 IN THE CASE OF KRISHI UPAJ MANDI SAMITI, BARABANKI AND OTHERS VS. CIT, I.T.A.NOS.100(LUC.)/2009, 101(LUC.)/2009 ETC. HAS HELD AS UNDER : 5. NOW THE DEPARTMENT IS IN APPEAL. THE LEARNED CIT, DR STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 28/12/2007. HE FURTHER SUBMITTED THAT THE LEARNED CIT(A), WHILE DELETING THE ADDITION, HAD NOT CONSIDERED THE PROVISIONS CONTAINED IN SECTION 13(1)(C) READ WITH SECTION 13(2)(G) AND 13(3) OF THE I.T. ACT, 1961. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, STATED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE I.T.A.T. JODHPUR BENCH REPORTED AT [2008] 12 DTR (JD) (TRIB) 166 IN I.T.A. NOS. 199 TO 217 AND 298 TO 304/JD/2007. COPY OF THE SAID ORDER WAS FURNISHED DURING THE COURSE OF HEARING. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD INCLUDING THE IMPUGNED ORDER, 10 PASSED IN DETAIL, BY THE LEARNED CIT(A) WHEREIN THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE ASSESSEE AS WELL AS BY THE ASSESSING OFFICER IN HIS REMAND REPORTS, HAS BEEN DISCUSSED AND CONSIDERED, IN OUR OPINION, THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF KRISHI UPAJ MANDI SAMITI, ANOOPGARH & ORS. VS. INCOME TAX OFFICER (SUPRA), WHEREIN THE I.T.A.T. JODHPUR BENCH HAS HELD AS UNDER: THE ASSESSEE HAD GIVEN THE SUM TO ANOTHER WING OF THE GOVERNMENT, BEING THE BOARD FOR THE CHARITABLE OBJECTS, WHICH FACT HAS NOT BEEN DENIED BY THE REVENUE EITHER IN ASSESSMENT OR IN THE IMPUGNED ORDER. NOWHERE, IT HAS BEEN HELD THAT THE CONSTRUCTION/ REPAIR WORK DOES NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE PURPOSES. THUS, THE AMOUNT WAS GIVEN TOWARDS A SPECIFIC PURPOSE ON THE APPROVAL OF THE PROJECT BY THE STATE GOVERNMENT. IT IS NOT A VOLUNTARY CONTRIBUTION BY THE ASSESSEE BUT TOWARDS THE ACHIEVEMENT OF THE OBJECTS SET OUT IN THE ACT FOR WHICH THE ASSESSEE CAME INTO EXISTENCE. IT IS FURTHER AN UNDISPUTED FACT THAT THE AMOUNT ONCE GIVEN IS IRRETRIEVABLE AND IN NO CIRCUMSTANCES CAN BE CALLED BACK BY THE ASSESSEE OR REFUNDED BY THE BOARD. ONCE A PARTICULAR SUM IS GIVEN TO THE BOARD IN COMPLIANCE WITH THE DIRECTIONS ISSUED FOR MAKING OF PAYMENT FOR CONSTRUCTION ACTIVITY, THE ASSESSEE CEASES CONTROL OVER SUCH AMOUNT. THE CASE OF THE DEPARTMENT IS THAT THE AMOUNT GIVEN BY THE ASSESSEE, WHICH HAS REMAINED UNUTILIZED SHOULD BE TREATED AS ADVANCE IS CLEARLY NOT CAPABLE OF ACCEPTANCE FOR THE REASON THAT NO CHARACTERISTICS OF ADVANCE APPEAR IN THE CONTRIBUTION MADE BY THE ASSESSEE TOWARDS CONSTRUCTION ACTIVITY. AN ADVANCE ALWAYS CONTAINS THE ELEMENT OF GETTING THE AMOUNT BACK IN CASE THE TERMS OF THE AGREEMENT ARE NOT COMPLIED WITH. IT IS NOT AT ALL THE CASE UNDER WHICH THE AMOUNT GIVEN BY THE ASSESSEE FOR CONSTRUCTION ACTIVITY COULD BE REGARDED AS ADVANCE. THE AMOUNT IS GIVEN CEARLY FOR A SPECIFIED OBJECT OF CHARITABLE NATURE AND IS 11 NOT REFUNDABLE. INSOFAR AS THE ASSESSEE IS CONCERNED, THE VERY FACT OF ITS MAKING PAYMENT TO THE BOARD BECOMES 'APPLICATION'. THE FACT WHETHER THE BOARD HAS SPENT THE ENTIRE AMOUNT BEFORE THE CLOSE OF THE YEAR OR NOT, IS WHOLLY IRRELEVANT. THE SITUATION WOULD HAVE BEEN OTHERWISE IF THE ASSESSEE HAD BEEN IN A POSITION TO CALL BACK THE UNSPENT AMOUNT FROM THE BOARD AT THE END OF THE YEAR, WHICH OBVIOUSLY IS NOT SO. IF THE CASE OF THE REVENUE IS ACCEPTED, IT WOULD RENDER ABSURD RESULTS.- CIT VS. THANTHI TRUST (1999) 156 CTR (SC) 605 : (1999) 239 ITR 502 (SC) FOLLOWED; CIT VS. TRUSTEES OF H.E.H. THE NIZAM'S CHARITABLE TRUST (1981) 131 ITR 497 (AP) RELIED ON. THE APPLICATION OF INCOME UNDER S. 11(1)(A) FOR CHARITABLE OR RELIGIOUS PURPOSES IS NOT RESTRICTED TO ANY PARTICULAR PLACE, BUT 'TO SUCH PURPOSES IN INDIA'. FROM THE LANGUAGE OF S. 34A OF THE RAJASTHAN AGRICULTURE PRODUCE MARKETS ACT, 1961, THERE REMAINS NO DOUBT THAT THE STATE GOVERNMENT HAS BEEN EMPOWERED TO GIVE INSTRUCTIONS TO THE BOARD OR COMMITTEE AND SUCH INSTRUCTIONS MAY INCLUDE DIRECTIONS RELATING TO THE PURPOSES FOR WHICH THE MARKET COMMITTEE FUND OR MARKETING DEVELOPMENT FUND SHALL BE SPENT. THE CASE IS OF THE COMMITTEE CONSTITUTED UNDER THE ACT OF 1961 BY THE STATE GOVERNMENT AND WHICH IS SUBJECT TO SUPERVISION AND CONTROL OF THE STATE GOVERNMENT. THE AMOUNT CONTRIBUTED TO THE BOARD TOWARDS THE CONSTRUCTION ACTIVITY OUTSIDE THE LOCAL LIMITS OF THE COMMITTEE DOES NOT LIE WITHIN ITS DISCRETION. IT HAS TO ACT AS PER THE INSTRUCTIONS OF THE STATE GOVERNMENT. IN CASE IT IS DIRECTED TO CONTRIBUTE TOWARDS ANY CHARITABLE ACTIVITY EXTENDING BEYOND ITS LOCAL JURISDICTION, THE ASSESSEE CANNOT SAY NO AND HAS TO COMPLY WITH THE ORDER. SO LONG AS THE ACTIVITY REMAINS CHARITABLE AND IS AS THE PURPOSES DEFINED IN THE ACT, NO FETTERS CAN BE PLACED ON THE COMMITTEE FOR NOT SPENDING THE AMOUNT OUTSIDE ITS LOCAL JURISDICTION. THE CASE WOULD HAVE BEEN DIFFERENT IF THE ASSESSEE HAD VOLUNTARILY SPENT SOME AMOUNT 12 TOWARDS THE OBJECT, NOT DEFINED IN THE ACT. IN THAT CASE THE CONTENTION OF THE REVENUE COULD HAVE BEEN ACCEPTED. TO SUM UP, THIS GROUND OF THE ASSESSEE'S APPEAL IS ALLOWED AND IT IS DIRECTED THAT THE ENTIRE AMOUNT GIVEN TO THE BOARD HAS TO BE TREATED AS 'APPLICATION OF INCOME' IRRESPECTIVE OF THE FACT WHETHER THE BOARD HAS SPENT IN THIS YEAR OR NOT AND FURTHER NOTWITHSTANDING THE FACT THAT CONSTRUCTION ACTIVITY HAS BEEN DONE IN OR OUTSIDE ITS LOCAL JURISDICTION. 8. SINCE NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE, SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO DECISION OF I.T.A.T. JODHPUR BENCH, WE DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPARTMENT. 8. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASES SO RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL AND KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE RAJASTHAN HIGH COURT, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 5.1 WE, THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL DATED 12/10/09 IN I.T. A. NO. 438 TO 440/LUC/09 AND OTHERS IN THE CASES OF I.T.O., WARD-6(2), LUCKNOW VS. M/S KRISHI UTPADAN MANDI SAMITI, KONCH, JALAUN AND OTHERS (SUPRA) SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7.1 SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 01/12/2009 OF THE ITAT, LUCKNOW BENCH A, LUCKNOW, WE DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPARTMENT. ACCORDINGLY, THE SAME ARE DISMISSED. 6.1 THE VIEW TAKEN BY THE TRIBUNAL IN THE AFORESAID REFERRED TO CASE HAS BEEN AFFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 21/02/2010 IN I.T. APPEAL NO. 58 OF 2010 AND OTHERS IN 13 THE CASE OF CIT VS. KRISHI UTPADAN MANDI SAMITI FOR THE ASSESSMENT YEAR 2003-2004 AND 2006-2007 WHEREIN WHILE DECIDING A BUNCH OF 26 APPEALS, IT HAS BEEN DECIDED AS UNDER: 7. THE AGRICULTURAL PRODUCERS WERE NOT ABLE TO GET THE REASONABLE AMOUNT FOR THEIR AGRICULTURAL PRODUCE. THE MAIN REASON WAS THE CHAOTIC STATE OF AFFAIRS IN AGRICULTURAL PRODUCE MARKETS. THE MANDI ACT WAS ENACTED TO SET IT RIGHT AND TO SEE THAT THE AGRICULTURAL PRODUCERS GOT THEIR DUE. 8. THE MANDI ACT ENVISAGES MARKET AREAS IN THE STATE AND THE SAMITIS TO GOVERN IT. THE SAMITIES ARE A BODY ESTABLISHED AND INCORPORATED UNDER SECTION 12 OF THE MANDI ACT. 9. THE MANDI ACT ALSO ENVISAGES ESTABLISHMENT OF THE BOARD. AMONG OTHER POWERS AND FUNCTIONS OF THE BOARD, ONE IS TO SUPERVISE AND CONTROL THE SAMIITIS. 10. A QUESTION AROSE WHETHER THE SAMITI ARE ENTITLED TO REGISTRATION UNDER SECTION 12AA OF THE IT ACT OR NOT. A DIVISION BENCH OF THIS COURT AT LUCKNOW OPINED THAT THE SAMITIS WERE SO ENTITLED. THIS WAS IN A BUNCH OF THE CASES OF WHICH THE LEADING CASE WAS ITA NO. 80 OF 2007 DECIDED ON 2.12.2009. 11. UNDER THE MANDI ACT, THE SAMITIS COLLECTS MANDL SHULK AS WELL AS 'DEVELOPMENT CESS 1 . THEY ARE REQUIRED TO SEND 50% OF THE MANDI SHULK AND THE ENTIRE DEVELOPMENT CESS TO THE BOARD UNDER SUB SECTIONS (5) AND (6) OF SECTION 19 OF THE MANDI ACT. 12. THE ONLY QUESTION IS, WHETHER THE AFORESAID AMOUNT IS THE MONEY SPENT OR NOT SO AS ENTITLE THE SAMITIS TO CLAIM ALLOWANCE. 14 13. IT IS NOT DISPUTED THAT THE MONEY IS SENT BY THE SAMITIS TO THE BOARD UNDER THE STATUTORY DUTY. IT CANNOT BE RETURNED BACK TO THEM. IT IS ULTIMATELY APPLIED FOR THE DEVELOPMENT OF MARKET YARDS, SAMITEES, AND TO IMPROVE MANAGEMENT AS WELL AS TO ENSURE BETTER DEAL TO THE AGRICULTURAL PRODUCERS. 14. UNDER THE MANDI ACT, THE BOARD HAS OVERRIDING TITLE. THE AMOUNT SENT TO THE BOARD IS UTILISATION AND APPLICATION THE MONEY RECEIVED BY SAMITIS. THEY ARE ENTITLED TO CLAIM EXEMPTION / ALLOWANCES OF THE SAME. 15. IN RAJASTHAN, THERE IS SIMILAR STATUTE TITLED AS THE KRISHI UPAJ MANDI SAMIT OF THE RAJASTHAN AGRICULTURAL PRODUCES MARKET LTD, 1961 (THE RAJASTHAN ACT). ITS PROVISIONS ARE SIMILAR TO THE PROVISIONS OF OURS MANDI ACT IT HAS SIMILAR PROVISIONS AND SIMILAR QUESTION AROSE THERE. 16. A DIVISION BENCH OF THE RAJASTHAN HIGH COURT IN INCOME TAX APPEAL NOS. 4 TO 12 OF 2009; COMMISSIONER OF INCOME TAX VS. KRISHI UPAJ MANDI SAMIT GAJSINGHPUR AND OTHERS (2009) 21 DTR (RAJ) 64 (THE RAJASTHAN- SAMITI CASE TOOK SIMILAR VIEW. 17. IN OUR OPINION, THE AMOUNT SENT BY THE SAMITIS TO THE BOARD UNDER THE ACT (NAMELY 50% OF THE MANDI SHULK AS WELL AS DEVELOPMENT CESS) TO THE BOARD IS UTILISATION OF THE AMOUNT COLLECTED BY THE SAMITEES AND IT IS PROPER APPLICATION OF THE MONEY; THERE IS NO ILLEGALITY IN THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL AND COMMISSIONER (APPEALS). 15 6.2 FROM THE ABOVE DISCUSSION IT IS CRYSTAL CLEAR THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID REFERRED TO ORDER. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENT. 7.1 SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 28/06/2011 (SUPRA), WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 10/08/2011) SD/. SD/. (H. L. KARWA) (N. K. SAINI) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 10/08/2011 *SINGH 0908 COPY FORWARDED TO THE: - 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR