M/s Agricultural Market Committee, Guntur, Visakhapatnam V. The DCIT, Circle-4(1), Guntur

ITA 463/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2702 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 20-09-2010
• 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 462 TO 464 OF 10 AMCS 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.462/VIZAG/2010 ASSESSMENT YEAR: 2008-09 M/S. AGRICULTURAL MARKET COMMITTEE PARACHOOR VS. DCIT CIRCLE-1(1) GUNTUR (APPELLANT) PAN NO: AAALA 0789 N (RESPONDENT) ITA NO.463/VIZAG/2010 ASSESSMENT YEAR: 2008-09 M/S. AGRICULTURAL MARKET COMMITTEE GUNTUR VS. DCIT CIRCLE-1(1) GUNTUR (APPELLANT) PAN NO: AAALA 0414 G (RESPONDENT) ITA NO.464/VIZAG/2010 ASSESSMENT YEAR: 2008-09 M/S. AGRICULTURAL MARKET COMMITTEE CHIRALA VS. DCIT CIRCLE-1(1) GUNTUR (APPELLANT) PAN NO: AAFKA 0393 A (RESPONDENT) APPELLANT BY: SHRI Y. SURYACHANDRA RAO, CA RESPONDENT BY: SHRI J.L. PETER, CIT(DR) ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER: THESE APPEALS FILED AT THE INSTANCE OF THE ASSESSEE S ARE DIRECTED AGAINST THE ORDERS OF THE LD CIT (A), GUNTUR IN THE HANDS OF THE EACH OF THE ASSESSEES MENTIONED ABOVE AND THEY RELATE TO THE AS SESSMENT YEAR 2008- 09. ITA 462 TO 464 OF 10 AMCS PAGE 2 OF 5 2. THOUGH THE ASSESSEES HAVE RAISED SEVERAL GROUNDS , THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT (A) IS R IGHT IN HOLDING THAT THE SECTION 10(26AAB) IS NOT RETROACTIVE IN OPERATION A S HELD BY HON'BLE ITAT, VISAKHAPATNAM. ACCORDINGLY THE OTHER GROUNDS OF AP PEAL ARE NOT CONSIDERED. 3. THESE ASSESSEES CLAIM FOR EXEMPTION OF THEI R RESPECTIVE INCOME UNDER SECTION 10(26AAB) OF THE ACT FOR THE YEAR UND ER CONSIDERATION WAS REJECTED BY LEARNED CIT(A) AND HENCE THEY ARE IN AP PEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THIS BENCH DATED 28.11.2008 IN A BATCH OF APPEALS, I.E., IN I.T.A.NO.90/VIZAG/2007 AND BATCH, I.T.A.T., WHEREIN I T WAS HELD THAT THE SECTION 10(26AAB) OF THE ACT IS RETROACTIVE IN OPER ATION AND SHALL APPLY EVEN TO THE PRIOR YEARS ALSO. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE CAS E OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA VS. CIT (2008)(305 ITR 1) HAS HELD THAT THE PROVISIONS OF SECTION 10(26AAB) HAS COME TO EFF ECT FROM 1.4.2009. BY FOLLOWING THE SAID DECISION OF THE HON'BLE APEX COU RT, THE HYDERABAD BENCH OF ITAT HAS HELD THAT 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: THE ELEMENTARY PRINCIPLES OF JUDICIAL DISCIPLINE W ARRANT THAT SUPERIOR WISDOM OF THE TIER BELOW HAS TO GIVE WAY T O 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 CITED ABOVE AND HAS HELD T HAT SECTION 10(26AAB) COMES INTO FORCE FROM APRIL 1, 2009 AND HENCE THE I NCOME OF THE ASSESSEES ITA 462 TO 464 OF 10 AMCS PAGE 3 OF 5 FOR THE YEAR UNDER CONSIDERATION, I.E. ASSESSMENT Y EAR 2008-09 IS TAXABLE. THE LEARNED D.R FURTHER POINTED OUT THAT THE VISAKH APATNAM BENCH OF THE TRIBUNAL HAS NOT RENDERED ITS DECISION ON MERITS. 6. WE HAVE HEARD THE PARTIES AND 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 O F AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, CITED (SUPRA) WHILE DECID ING 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 QUESTION POSED TO IT. WHETHER THE AMC(S) IS LEGALLY ENTITLED TO THE CONT ROL OF THE LOCAL FUND, NAMELY MARKET FUND, UNDER THE SAID 1988 ACT. ONLY IN THE CONTEXT OF SUPPORTING ITS DECISION TO D ECLINE TO ANSWER THE QUESTION CITED ABOVE, THE HON'BLE APEX COURT HAS OB SERVED AS UNDER: THERE IS ONE MORE REASON WHY WE DO NOT WISH TO EXP RESS 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. THEREFORE, WE DO NOT WISH TO EXPRESS ANY OPINION ON THE QUESTION AS TO WHETHER AMC(S) IS LEGALLY ENTITLED T O THE CONTROL OF THE LOCAL FUND. WE MAY STATE HERE THAT THE PRESENT ACCOUNTANT MEMBE R OF THIS BENCH WAS THE CO-AUTHOR OF THE ORDER WHICH WAS RELIED UPON TH E ASSESSEE AND IT IS CLARIFIED THAT THE THEN VISAKHAPATNAM BENCH WAS VER Y MUCH CONSCIOUS OF THE OBSERVATIONS OF THE HON'BLE SUPREME COURT IN TH E CASE CITED ABOVE AND ALSO AWARE OF THE PRINCIPLES OF INTERPRETATION, WHI LE DRAFTING ITS ORDER DATED ITA 462 TO 464 OF 10 AMCS PAGE 4 OF 5 28.11.2008, REFERRED (SUPRA) AND ACCORDINGLY REACHE D THE DECISION THAT THE SEC. 10(26AAB) IS RETRO ACTIVE IN ITS OPERATION. F OR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE RELEVANT OBSERVATIONS OF ITAT, VISAKHAPATNAM IN ITS ORDER DATED 28.11.2008: WE ARE LEFT FOR CONSIDERATION 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-EX ISTING STATUTE AND HENCE IT IS RETROSPECTIVE IN OPERATION; AND (II) WHETHER THE IMPUGNED EXPENDITURE IN THE FORM OF CONTRIBUTION TO NEERU MEERU ETC.,: AND THE MANDAT ORY PAYMENT TO THE CENTRAL MARKET FUND UNDER SEC. 16/26 OF THE MARKET COMMITTEE ACT CAN BE CONSIDERED AS AMOUN TS 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 O N THE PRINCIPLE AND DIVERSION OF INCOME BY OVERRIDING TIT LE. SINCE WE ARE OF THE VIEW THAT THE PROVISIONS OF S ECTION 10(26AAB) OF THE INCOME TAX ACT, 1961 ARE INTENDED T O BE RETROACTIVE IN OPERATION, HAVING BEEN INSERTED I N 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 REPLY ING TO THE DEBATE IN THE LOK SABHA, THAT THERE IS NO INTEN TION TO TAX AMCS, THE ENTIRE FEE/INCOME COLLECTED/RECEIVED HAS TO BE CONSIDERED AS EXEMPT FROM THE LEVY OF TAX IN WHI CH EVEN THE DECISION ON THE ANCILLARY ISSUE IS OF ACAD EMIC IMPORTANCE AND THUS 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 (26A AB) TO SECTION 10 OF THE INCOME TAX ACT IS ESSENTIALLY INT ENDED TO DECLARE THE INTENTION OF THE LEGISLATURE OF NOT TAX ING THE INCOME OF AMCS CONSTITUTED UNDER ANY LAW FOR THE TI ME BEING IN FORCE FOR THE PURPOSES OF REGULATING THE M ARKETING OF AGRICULTURAL PRODUCE AND HENCE IT HAS TO BE TREA TED AS RETROACTIVE IN OPERATION AND APPLICABLE EVEN FOR TH E PRIOR YEARS, WE ORDER ACCORDINGLY. ITA 462 TO 464 OF 10 AMCS PAGE 5 OF 5 7. CONSISTENT WITH THE VIEW TAKEN IN THE CASES CITED ABOVE, WE HOLD THAT SEC. 10(26AAB) IS TO BE TREATED AS RETROACTIVE IN O PERATION AND APPLICABLE EVEN FOR THE PRIOR YEARS. ACCORDINGLY THE INCOME O F THESE ASSESSEES REFERRED TO IN SECTION 10(26AAB) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS ALSO EXEMPT UNDER THAT SECTION 8. IN THE RESULT, THE APPEALS FILED BY THE ASSES SEES ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 19-11-2010 COPY TO 1 SRI Y. SURYA CHANDRA RAO, CHARTERED ACCOUNTANT, 4 9-27-4/1, 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