ACIT, Kota V. KRISHI UPAJ MANDI SAMITI,

ITA 435/JPR/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7535 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 09-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Depreciation; Charitable institution; Competent authority; Benefit of exemption
• Section: 143(3); 12A; 32; 144; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI SANJAY ARORA) ITA NO. 435/ JP/2011 ASSESSMENT YEAR: 2003-04 THE ACIT VS. M/S. KRISHI UPAJ MANDI SAMITI CIRCLE- 2, KOTA ITAWA (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SUBHASH CHANDRA, CIT, DR ASSESSEE BY: SHRI SANJAY JHANWAR, ADVOCATE DATE OF HEARING: 06-02-2012 DATE OF PRONOUNCEMENT: 10-02-2012 ORDER PER SANJAY ARORA, AM:- THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER 250 OF THE INCOME TAX ACT, 1961 (`THE ACT HEREINAFTER) BY THE COMMISSIONER OF INCO ME-TAX (APPEALS), KOTA (`CIT (A) FOR SHORT) DATED 28-02-2011 FOR THE ASSESSMENT YEAR (AY) 2003-04. THE APPEAL RAISES TWO ISSUES. VIDE ITS GD. # 1, THE REVENUE AGITATES THE DELETION BY THE FIRST APPELLATE AUTHORITY OF THE DISALLOWANCE OF DEPRECIATION, CLAIMED AT RS. 20,30,408/-, IN COMPUTING THE ASSESSEE'S INCOME SUBJECT TO TAX FOR THE YEAR; THE COST OF THE RELEVANT ASSETS HAVING ALREADY BEEN ALLOWED BY WAY OF APPLICATION OF INCOME. PER ITS ADDITIONAL GROUNDS, THE REVENUE CONTESTS THE DIRECTION BY THE LD. CIT(A) FOR ALLOWI NG THE ASSESSEE THE BENEFIT OF REGISTRATION U/S. 12A OF THE ACT AS BEING OUTSIDE T HE SCOPE OF HIS JURISDICTION. 2. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND F ACTS OF THE CASE. THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL. IN THE FIRST ROUND, THE TRIBUNAL (VIDE ITS ORDER DATED 30-03- 2 2007) SET ASIDE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER (AO) FOR ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE; THE ASSESSM ENT HAVING BEEN COMPLETED EX-PARTE AT AN INCOME OF RS. 94.51 LACS (VIDE ORDER U/S. 144 OF THE ACT DATED 16-02-2004). IN THE PROCEEDINGS INITIATED THUS, THE AO REJECTED THE ASS ESSEE'S CLAIM OF BEING A CHARITABLE INSTITUTION ELIGIBLE FOR EXEMPTION U/S. 11 ON ITS I NCOME. THE ASSESSEE'S CLAIM OF HAVING BEEN GRANTED REGISTRATION U/S. 12A OF THE ACT BY TH E COMMISSIONER OF INCOME-TAX, KOTA (`CIT FOR SHORT), WAS ALSO NEGATED BY HIM ON THE G ROUND THAT REGISTRATION STOOD GRANTED ONLY FROM 01-04-2003, I.E., FROM ASSESSMENT YEAR 20 04-05 ONWARDS. ACCORDINGLY, THE ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 254 OF THE ACT ON 28-11-2008 AT AN INCOME OF RS. 94,51,410/-, I.E., AS ORIGINALLY ASSESSED. IN A PPEAL, THE ASSESSEE RAISED AS MANY AS TEN GROUNDS, LISTED VERBATIM AT PAGES 1 AND 2 OF THE IM PUGNED ORDER. THE LD. CIT(A), RELYING ON THE DECISIONS IN THE MATTER IN THE CASE OF OTHER SIMILAR MARKET COMMITTEES BY THE HON'BLE JURISDICTIONAL HIGH COURT (VIZ. CIT VS. KRISHI UPAJ MANDI SAMITI, GAJSINGHPUR , 21 DTR 64; CIT VS. K.U.M.S., JAISALMER , 216 CTR 277), AS WELL AS BY THE HON'BLE. HIGH COURT OF M.P., AS IN THE CASE OF CIT VS. KUMS, GONGALAI AND OTHERS , 11 DTR 265; CIT VS. KUMS, MOREENA , 308 ITR 380), HELD THAT THE ASSESSEE, BEING A KRI SHI UPAJ MANDI SAMITI (`KUMS FOR SHORT) CONSTITUTED UNDER THE RAJ ASTHAN AGRICULTURAL PRODUCE MARKETS ACT, 1961 AND THE RULES FRAMED THERE-UNDER, WAS ENT ITLED TO REGISTRATION U/S. 12A OF THE ACT; ITS OBJECT BEING CHARITABLE INASMUCH AS THE S AME ARE ONLY TOWARD AND IN ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY. HAVING DECIDED THE ASSESSEE'S GROUND NO. 1 BEFORE HIM, AGITATING THE DENIAL OF BE NEFIT OF REGISTRATION U/S. 12A, THUS, THE OTHER GROUNDS, I.E., GROUND NOS. 2 TO 10 OF THE ASSESSEE'S APPEAL, WERE HELD BY THE LD. 3 CIT(A) AS INFRUCTUOUS; THE ASSESSEE'S ENTIRE INCOME QUALIFYING FOR BEING EXEMPT. AGGRIEVED, THE REVENUE IS IN APPEAL, RAISING THE SO LE ISSUE AS AFORESAID VIDE ITS GROUND NO. 1. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATTE R ON RECORD. 3.1 WE FIRSTLY OBSERVE THAT THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME FOR THE YEAR AND, THEREFORE, THE LD. CIT(A) HAS CORRECTLY SPECIFIED T HE IMPUGNED ASSESSMENT AS FRAMED U/S. 144 R/W S. 254 OF THE ACT, I.E., AS AGAINST U/S. 14 3(3)/254 OF THE ACT, AS STATED IN THE ASSESSMENT ORDER, EVEN AS THE ASSESSEE HAS NOT CHAL LENGED THIS ASPECT OF ITS ASSESSMENT. OUR SECOND OBSERVATION IS THAT THE DENIAL OF BENEFI T OF REGISTRATION U/S. 12A FOR THE RELEVANT YEAR BY THE AO CANNOT BE AGITATED IN APPEL LATE PROCEEDINGS DISPUTING THE ASSESSMENT OF INCOME UNDER CHAPTER XIV OF THE ACT. THE AO CAN NEITHER GRANT REGISTRATION NOR REFUSE TO GIVE EFFECT THERETO, WHE RE GRANTED BY THE COMPETENT AUTHORITY, WHOSE DECISION IN THE MATTER CAN ONLY BE CONTESTED BY THE APPLICANT-ASSESSEE IN APPEAL BEFORE THE TRIBUNAL, AND NOT IN ANY COLLATERAL PROC EEDINGS AS THE PRESENT ONE. THE AO IN THE INSTANT CASE HAS IN FACT DONE NEITHER. THE LD. CIT HAVING ADMITTEDLY THIS FACT BEING NEITHER DENIED NOR DISPUTED BY THE ASSESSEE ALLOW ED REGISTRATION (VIDE ORDER DATED 07- 05-2008) ONLY W.E.F. 01-04-2003, RELEVANT TO ASSESS MENT YEAR 2004-05, ALL THAT THE AO IN EFFECT DOES IS TO GIVE EFFECT THERETO. THIS IS AS Q UITE APART FROM HIS OTHER OBJECTIONS ( WHICH ARE IN FACT RENDERED OF NO CONSEQUENCE IN VIE W OF THE DECISIONS, INTER ALIA , BY THE HONBLE HIGH COURTS AS WELL AS BY THE TRIBUNAL AS C ITED IN THE IMPUGNED ORDER), IN THE ABSENCE OF REGISTRATION U/S. 12A FOR THE RELEVANT Y EAR, BENEFIT OF EXEMPTION U/S. 11 COULD NOT BE VALIDLY ALLOWED BY THE ASSESSING AUTHORITY E VEN IF THE CONDITIONS OF THE SAID SECTION 4 ARE MET, SO THAT THE AOS ACTION ON THIS SCORE CANN OT BE FAULTED WITH. HERE IT MAY BE PERTINENT TO ADD, THOUGH, THAT THE RESTRICTION PLAC ED ON THE AMBIT OF `CHARITABLE PURPOSE PER THE PROVISO TO SEC. 2(15) IN RELATION TO THE RESIDUARY OBJECT OF `ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, WHERE IT I NVOLVES COMMERCE OR TRADE, IS OPERATIVE ONLY W.E.F. 01/4/2009, I.E., A.Y. 2009-10 ONWARDS. COMING BACK TO OUR DISCUSSION, THE FIRST APPELLATE AUTHORITY HAS THEREFORE NO AUTHORIT Y TO IN APPEAL EITHER ALLOW REGISTRATION U/S. 12A OR MODIFY, PARTLY OR FULLY, THE TERMS OF I TS ALLOWANCE BY THE REGISTERING AUTHORITY, BEING THE CIT. SO HOWEVER, AS IT TRANSPIRES, THE AS SESSEE HAD IN FACT CARRIED THE MATTER QUA ITS REGISTRATION U/S. 12A BEFORE THE TRIBUNAL, AND WHICH HAS VIDE ITS ORDER IN ITA NO.368/JP/2006 DATED 15-02-2007, AS MODIFIED PER IT S ORDER U/S. 254(2) DATED 31-12-2007 (IN M.A. NO. 64/JP/2007 / COPY ON RECORD), CLARIFIE D THAT THE ASSESSEE IS ENTITLED TO REGISTRATION U/S. 12A FROM THE DATE OF ITS ESTABLIS HMENT/SET UP. THOUGH IT IS NOT UNDERSTOOD AS TO HOW THE APPEAL BY THE ASSESSEE CAME TO BE FIL ED BEFORE THE TRIBUNAL IN 2006; THE ORDER OF THE LD. CIT DISPOSING ITS REGISTRATION APP LICATION ITSELF HAVING BEEN PASSED ONLY ON 07-05-2008, YET IT IS NOT DENIED OR DISPUTED THA T REGISTRATION STANDS ALLOWED TO THE ASSESSEE AT THE INSTANCE OF THE TRIBUNAL, AND W.E.F . THE DATE OF ITS INCEPTION. THIS MATTER, THEREFORE, SHOULD BE CONSIDERED AS SETTLED. THE REV ENUES ADDITIONAL GROUNDS, THOUGH RAISING VALID LEGAL ARGUMENTS, ARE, THEREFORE, OF N O MOMENT, AND ACCORDINGLY ARE DISMISSED IN RESULT. 3.2 THE LD. CIT(A) HAS HELD THE ASSESSEE'S GROUND N OS. 2 THRO 10 BEFORE HIM AS INFRUCTUOUS IN VIEW OF HIS HAVING ALLOWED THE ASSES SEE'S GROUND NO.1, WHICH WE HAVE 5 HEREBY CONFIRMED, THOUGH FOR DIFFERENT REASON/S AND ON A DIFFERENT BASIS. WE ARE, HOWEVER, NOT IN AGREEMENT WITH THIS FINDING BY THE LD. CIT(A), I.E., AS TO THE SAID GROUNDS HAVING BEEN THUS RENDERED INFRUCTUOUS. THIS IS FOR THE SIMPLE REASON THAT EXEMPTION U/S. 11 DOES NOT OPERATE TO EXEMPT THE INCOME FROM THE P URVIEW OF TAXATION PER SE , BUT ONLY ON IT BEING APPLIED TOWARD CHARITABLE PURPOSE/S AND , THEREFORE, TO THE EXTENT IT IS SO FOR THE RELEVANT YEAR. THE SAME NECESSARILY ENTAILS TWO STE PS: (A) DETERMINATION OF INCOME; AND (B) A FINDING AS TO THE EXTENT OF ITS APPLICATION O R DEEMED APPLICATION U/S. 11 OF THE ACT. THE FINDING AS TO THE ASSESSEE'S GROUND NOS. 2 TO 1 0 HAVING BECOME INFRUCTUOUS IS, THEREFORE, VACATED. 3.3 THE REVENUES GROUND NO. 1 BEFORE US ARISE S OUT OF ONE OF THE ASSESSEES GROUNDS AFORESAID, I.E., GROUND NO. 7 BEFORE HIM, WHICH REA DS AS UNDER:- ` 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. ASSESSING OFFICER HAS GROSSLY ERRED IN DISALLOWING THE DEPREC IATION AMOUNTING RS. 2030408/- ON ASSETS UNDER THE CIRCUMSTANCES OF THE CASE . SURPRISINGLY, NEITHER THE REVENUE NOR THE ASSESSEE REFERRED TO THIS GROUND DURING HEARING. THE SAME DEFINES THE REVENUES GRIEVANCE A ND ITS CAUSE OF ACTION IN PREFERRING THE INSTANT APPEAL. THERE IS NO SPECIFIC FINDING IN THIS RESPECT EITHER IN THE ASSESSMENT ORDER OR IN THE IMPUGNED APPELLATE ORDER. IN FACT, THE ASSESSEE'S GRIEVANCE IS ITSELF QUIZZICAL. THIS IS AS, AS FAR AS WE UNDERSTAND, THE SAME BRINGS INTO QUESTION THE ISSUE OF ALLOWANCE OF DEPRECIATION ON ASSETS, THE COST OF WH ICH STANDS ALREADY ALLOWED AS DEDUCTION IN COMPUTING THE INCOME SUBJECT TO TAX BY WAY OF ITS APPLICATION U/S. 11 OF THE ACT. NOW, WHEN THE AO HAS DENIED ANY BENEFIT U/S. 1 1, WHERE IS THE QUESTION OF NOT 6 ALLOWING DEDUCTION IN RESPECT OF DEPRECIATION, WHIC H BECOMES OBJECTIONABLE ONLY ON THE BASIS AND IN VIEW OF ITS ALLOWANCE AS RESULTING IN A DOUBLE DEDUCTION, SO THAT THE SAME WOULD ARISE ONLY WHERE EXEMPTION U/S. 11 STANDS ALL OWED. SO HOWEVER, THE ASSESSEE HAS RAISED THIS GROUND, SO THAT WE MUST CONSIDER IT AS VALIDLY SO, I.E., AS ARISING OUT OF THE ASSESSMENT ORDER. SECONDLY, THE SAID OBJECTION (BY THE AO) AND, CONSEQUENTLY, THE ASSESSEE'S GRIEVANCE THEREWITH, WOULD SURVIVE THE F INDING BY THE LD. CIT(A) OF THE ASSESSEE BEING ENTITLED TO THE BENEFIT OF REGISTRAT ION U/S. 12A FOR THE CURRENT YEAR (WHICH WE HAVE IN FACT UPHELD), AS WE HAVE IN FACT FOUND F OR THE OTHER GROUNDS RAISED BY THE ASSESSEE BEFORE HIM AS WELL, THOUGH THE SAME HAVE N OT BEEN AGITATED BY THE REVENUE BEFORE US. THAT IS, THE REVENUES GROUND UNDER REF ERENCE ARISES ONLY OUT OF THE DEEMED ALLOWANCE OF THE ASSESSEES GROUND NO. 7 BEFORE HIM BY THE LD. CIT(A), AND WHICH WE HAVE FOUND AS ARISING VALIDLY FOR ADJUDICATION BY H IM. THERE BEING NO ADJUDICATION THEREOF ON MERITS BY THE LD. CIT(A), WE, THEREFORE, RESTORE THE ASSESSEE'S GROUND NO. 7 (SUPRA) BACK TO HIS FILE FOR THE PURPOSE. THE LD. C IT(A) SHALL DECIDE THE SAME BY ISSUING SPECIFIC FINDING/S OF FACTS AND OF LAW, INCLUDING A S TO WHETHER THE DEPRECIATION ALLOWABLE, I.E., IF SO HELD, WOULD BE WITH REFERENCE THAT EXIG IBLE U/S. 32 OF THE ACT OR ON THE BASIS OF THE ACCOUNTING DEPRECIATION (I.E., AS WARRANTED ON THE PRINCIPLES OF COMMERCIAL ACCOUNTING), AND AFTER ALLOWING REASONABLE OPPORTUN ITY OF HEARING TO BOTH THE SIDES. WE DECIDE ACCORDINGLY. 7 4. IN THE RESULT, THE APPEAL BY THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON FEBRUARY 1 0, 2012. SD/- SD/- (R.K. GUPTA) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED 10 /02/2012 *MISHRA COPY FORWARDED TO:- 1. THE ACIT, CIRCLE- 2, KOTA 2. M/S. KRISHI UPAJ MANDI SAMITI, ITAWA 3. THE LD. CIT (A) 4. THE LD. CIT 5. THE LD.DR 6. THE GUARD FILE (ITA NO. 435/JP /2011) BY ORDER A.R, ITAT, JAIPUR 8 9