M/s Agricultural Market Committee, Repalle, Visakhapatnam V. The DCIT, Circle-1(1), Guntur

ITA 455/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2663 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J L PETER
• Assessee Lawyers: Y SURYACHANDRA RAO
• Keywords: Diversion of income

Judgement Text

ITA NOS.455 TO 459 /VIZAG/20 1 0 - VIZAG PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 455 /VIZAG/20 10 ASSESSMENT YEAR: 2008 - 09 M/S. AGRICULTURAL MA RKET COMMITTEE REPALLE DCIT CIRCLE - 1(1) GUNTUR (APPELLANT) PAN NO: AAALA0446Q VS. (RESPONDENT) ITA NO.456/VIZAG/2010 ASSESSMENT YEAR: 2008 - 09 M/S. AGRICULTURAL MARKET COMMITTEE PIDUGURALLA DCIT CIRCLE - 1(1) GUNTUR (APPELLANT) PAN NO: AAALA0307N VS. (RESPONDENT) ITA NO.457/VIZAG/2010 ASSESSMENT YEAR: 2008 - 09 M/S. AGRICULTURAL MARKET COMMITTEE TENALI DCIT CIRCLE - 1(1) GUNTUR (APPELLANT) PAN NO: AAFKA7492G VS. (RESPONDENT) ITA NO.458/VIZAG/2010 ASSESSMENT YEAR: 2008 - 09 M/S. AGRICULTURAL MAR KET COMMITTEE BAPATLA DCIT CIRCLE - 1(1) GUNTUR (APPELLANT) PAN NO: AAALA0410C VS. (RESPONDENT) ITA NO.459/VIZAG/2010 ASSESSMENT YEAR: 2008 - 09 M/S. AGRICULTURAL MARKET COMMITTEE PONNUR DCIT CIRCLE - 1(1) GUNTUR (APPELLANT) PAN NO: AAALA0411D VS. (RES PONDENT) APPELLANT BY: SHRI Y. SURYACHANDRA RAO, CA RESPONDENT BY: SHRI J.L. PETER , CIT(DR) ITA NOS.455 TO 459 /VIZAG/20 1 0 - VIZAG PAGE 2 OF 5 ORDER PER BENCH : THESE APPEALS FILED AT THE INSTANCE OF THE ASSESSEES ARE DIRECTED AGAINST THE ORDER S OF THE LD CIT (A), GUNTUR IN THE HANDS OF THE EACH OF TH E ASSESSEES MENTIONED ABOVE AND THEY RELATE TO THE ASSESSMENT YEAR 2008 - 09. 2. T H OUGH TH E ASSESSEES HAVE RAISED SEVERAL GROUNDS, THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT (A) IS RIGHT IN HOLDING THAT THE SECTION 10(26AAB) IS NOT RETROA CTIVE IN OPERATION AS HELD BY HON'BLE ITAT, VISAKHAPATNAM. ACCORDINGLY THE OTHER GROUNDS OF APPEAL ARE NOT CONSIDERED. 3. THESE ASSESSEES CLAIM FOR EXEMPTION OF T HEIR RESPECTIVE INCOME UNDER SECTION 10(26AAB) OF THE ACT FOR THE YEAR UNDER CONSIDERAT ION WAS REJECTED BY LEARNED CIT(A) AND HENCE THEY ARE IN APPEAL BEFORE US. 4 . T HE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THIS BENCH DATED 28.11.2008 I N A BATCH OF APPEALS, I.E., IN I.T.A.NO.90/VIZAG/2007 AND BATCH, I.T. A.T., WHEREIN IT WAS HELD THAT THE SECTION 10(26AAB) OF THE ACT IS RETROACTIVE IN OPERATION AND SHALL APPLY EVEN TO THE PRIOR YEARS ALSO . 5 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE , NARELA VS. C IT (2008)(305 ITR 1) HAS HELD THAT THE PROVISIONS OF SECTION 10(26AAB) HAS COME TO EFFECT FROM 1.4.2009. BY FOLLOWING THE SAID DECISION OF THE HON'BLE APEX COURT, THE HYDERABAD BENCH OF ITAT HAS HELD T HAT SECTION 10(26AAB) SHALL COME INTO FORCE ONLY WITH EFFECT FROM 1.4.2009. HE INVITED OUR ATTENTION TO THE FOLLOWING OBSERVATIONS OF THE HYDERABAD BENCH: ITA NOS.455 TO 459 /VIZAG/20 1 0 - VIZAG PAGE 3 OF 5 THE ELEMENTARY PRINCIPLES OF JUDICIAL DISCIPLINE WARRANT THAT SUPERIOR WISDOM OF THE TIER BELOW HAS TO GIVE WAY TO HIGHER WISDOM OF THE TIER OF THE ABOVE. THE LEARNED D.R STATED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF HON'BLE SUPREME COURT CI TED ABOVE AND HAS HELD THAT SECTION 10(26AAB) COMES INTO FORCE FROM APRIL 1, 2009 AND HENCE THE INCOME OF THE ASSESSES FOR THE YEAR UNDER CONSIDERATION, I.E. ASSESSMENT YEAR 2008 - 09 IS TAXABLE . THE LEARNED D.R FURTHER POINTED OUT THAT THE VISAKHAPATNAM BENCH OF THE TRIBUNAL HAS NOT RENDERED ITS DECISION ON MERITS. 6 . WE HAVE HEARD THE PARTIES AN D CAREFULLY PERUSED THE RECORD. WE MAY CLARIFY HERE THAT THE ITAT, VISAKHAPATNAM BENCH HAS DULY CONSIDERED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, CITED (SUPRA) WHILE DECIDING THE ORDER DATED 28. 11.2008, WHICH WAS RELIED UPON BY LEARNED A.R. THE ISSUE BEFORE THE HON'BLE SUPREME COURT IN THAT CASE WAS WHETHER THE AGRICULTURAL MARKET COMMITTEES WILL FALL UNDER THE DEFINITION OF LOCAL AUTHORITY AS DEFINED UNDER SECTION 10(20) OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2008. THE APEX COURT HELD THAT THE AMC(S) IS NEITHER A MUNICIPAL COMMITTEE NOR A DISTRICT BOARD UNDER EXPLANATION TO SECTION 10(20) AND IN VIEW OF THE SAID DECISION, THE APEX COURT DECLINED TO ANSWER THE FOLLOWING QUESTI ON POSED TO IT. WHETHER THE AMC(S) IS LEGALLY ENTITLED TO THE CONTROL OF THE LOCAL FUND, NAMELY MARKET FUND, UNDER THE SAID 1988 ACT. ONLY IN THE CONTEXT OF SUPPORTING ITS DECISION TO DECLINE TO ANSWER THE QUESTION CITED ABOVE, THE HON'BLE APEX COURT HA S OBSERVED AS UNDER: THERE IS ONE MORE REASON WHY WE DO NOT WISH TO EXPRESS ANY OPINION ON THE SAID QUESTION. VIDE FINANCE ACT, 2008, INCOME OF AMC(S) IS EXEMPT. SUB - SECTION (26AAB) OF SECTION 10 COMES INTO FORCE WITH EFFECT FROM APRIL 1, 2009. THEREFO RE, WE DO NOT WISH TO EXPRESS ANY OPINION ON THE QUESTION AS TO WHETHER AMC(S) IS LEGALLY ENTITLED TO THE CONTROL OF THE LOCAL FUND. WE MAY STATE HERE THAT THE PRESENT ACCOUNTANT MEMBER OF THIS BENCH WAS THE CO - AUTHOR OF THE ORDER WHICH WAS RELIED UPON TH E ASSESSEE AND IT IS ITA NOS.455 TO 459 /VIZAG/20 1 0 - VIZAG PAGE 4 OF 5 CLARIFIED THAT THE THEN VISAKHAPATNAM BENCH WAS VERY MUCH CONSCIOUS OF THE OBSERVATIONS OF THE HON'BLE SUPREME COURT IN THE CASE CITED ABOVE AND ALSO AWARE OF THE P RINCIPLES OF INTERPRETATION , WHILE DRAFTING ITS ORDER DATED 28.11.2008, REFERRED (SUPRA) AND HAS REACHED THE DECISION THAT THE SEC. 10(26AAB) IS RETRO ACTIVE IN ITS OPERATION. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE RELEVANT OBSERVATIONS OF ITAT, VISAKHAPATNAM IN ITS ORDER DATED 28.11.2008: WE ARE LEFT FOR CONSIDE RATION WITH ONLY TWO ISSUES (I) WHETHER INSERTION OF SUB - CLAUSE (26AAB) OF SECTION 10 OF THE INCOME TAX ACT WAS A DECLARATORY ACT TO REMOVE DOUBTS EXISTING WITH REGARD TO THE EFFECT OF PRE - EXISTING STATUTE AND HENCE IT IS RETROSPECTIVE IN OPERATION; AND (I I) WHETHER THE IMPUGNED EXPENDITURE IN THE FORM OF CONTRIBUTION TO NEERU MEERU ETC.,: AND THE MANDATORY PAYMENT TO THE CENTRAL MARKET FUND UNDER SEC. 16/26 OF THE MARKET COMMITTEE ACT CAN BE CONSIDERED AS AMOUNTS INCURRED FOR THE OBJECT OF THE AMCS UNDER SEC. 36 (1) (XII) OF THE INCOME TAX ACT OR WHETHER THE INCOME AS SUCH CAN BE TREATED AS FALLING OUTSIDE THE KEN OF TAXATION ON THE PRINCIPLE AND DIVERSION OF INCOME BY OVERRIDING TITLE. SINCE WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 10(26AAB) OF THE INCOME TAX ACT, 1961 ARE INTENDED TO BE RETROACTIVE IN OPERATION, HAVING BEEN INSERTED IN THE STATUTE BOOK WITH A VIEW TO CLARIFY THE POSITION OF AMCS EVEN UNDER THE PRE - EXISTING STATUTE AND THE FINANCE MINISTER HAVING SPECIFICALLY MENTIONED, WHILE REPLYING TO THE DEBATE IN THE LOK SABHA, THAT THERE IS NO INTENTION TO TAX AMCS, THE ENTIRE FEE/INCOME COLLECTED/RECEIVED HAS TO BE CONSIDERED AS EXEMPT FROM THE LEVY OF TAX IN WHICH EVEN THE DECISION ON THE ANCILLARY ISSUE IS OF ACADEMIC IMPORTANCE AND TH US NEED NOT BE GONE INTO. 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 TAX ING THE INCOME OF AMCS CONSTITUTED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR THE PURPOSES OF REGULATING THE MARKETING OF AGRICULTURAL PRODUCE AND HENCE IT HAS TO BE TREATED AS ITA NOS.455 TO 459 /VIZAG/20 1 0 - VIZAG PAGE 5 OF 5 RETROACTIVE IN OPERATION AND APPLICABLE EVEN FOR THE PRIOR YEARS, WE ORDER A CCORDINGLY. 7 . CONSISTENT WITH THE VIEW TAKEN IN THE CASES CITED ABOVE, WE HOLD THAT SEC. 10(26AAB) IS TO BE TREATED AS RETROACTIVE IN OPERATION AND APPLICABLE EVEN FOR THE PRIOR YEARS . ACCORDINGLY THE INCOME OF THESE ASSESSEES REFERRED TO IN SECTIO N 10(26AAB) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS ALSO EXEMPT UNDER THAT SECTION 8 . IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEES ARE PARTLY ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 11.11.2010. SD/ - SD/ - ( SU NIL KUMAR YADAV ) ( B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM, DATE: 11 TH NOVEMBER, 2010 COPY TO 1 SRI Y. SURYA CHANDRA RAO, CHARTERED ACCOUNTANT, 49 - 27 - 4/1, 2 ND FLOOR, MADHURA NAGAR, VISAKHAPATNAM - 530 016 2 DY.COMMISSIONER OF INCOME TAX CIRCLE - 1(1), GUNTUR 3 4 THE CIT GUNTUR THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM