Agricultural Market Committee, Eluru V. ITO, WARD-2, Eluru

ITA 559/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2084 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 22-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D KOMALI KRISHNA
• Keywords: Capital asset; Depreciation; Charitable institution; Opportunity of being heard; Additional evidence; Benefit of exemption
• Section: 12A; 12AA; 147; 148; 12; 11

Judgement Text

ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.544/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO , WARD - 1 , ELURU VS. AGRICULTURAL MARKET COMMITTEE POLAVARAM [PAN: AAKFA9 125C ] ( / APPELLANT) ( / RESPONDENT) ./I.T.A.NO.545/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO , WARD - 2 , ELURU VS. AGRICULTURAL MAR KET COMMITTEE CHINTALAPUDI (W.G. DIST.) [PAN: AAALA0350M ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.546&547/VIZAG/2013 ( / ASSESSMENT YEAR: 2005-06) ITO , WARD - 2 , ELURU VS. AGRICULTURAL MARKET COMMITTEE ELURU [PAN: AAAAA5597K ] ( % / APPELLANT) ( &'% / RESPONDENT) ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 2 ./I.T.A.NO.548/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO , WARD - 2 , ELURU VS. AGRICULTURAL MARKET COMMITTEE DENDULURU [PAN: AACTA0409P ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.549/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO , WARD - 2 , ELURU VS. AGRICULTURAL MARKET COMMITTEE BHIMADOLE [PAN: AAALA0379G ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.550/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) AGRICULTURAL MARKET COMMITTEE POLAVARAM VS. ITO , WARD - 1 , ELURU ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.551/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) AGRICULTURAL MARKET COMMITTEE CHINTALAPUDI VS. ITO , WARD - 1 , ELURU ( % / APPELLANT) ( &'% / RESPONDENT) ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 3 ./I.T.A.NO.554/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) AGRICULTURAL MARKET COMMITTEE DENDULURU VS. ITO , WARD - 2 , ELURU ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.559&560/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09&2005-06) AGRICULTURAL MARKET COMMITTEE ELURU VS. ITO , WARD - 2 , ELURU ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SMT. D. KOMALI KRISHNA, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 05.02.2016 / DATE OF PRONOUNCEMENT : 11.02.2016 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE ASSESSEES AS WEL L AS REVENUE ARE DIRECTED AGAINST THE SEPARATE, BUT IDENTICAL ORDERS OF CIT(A), GUNTUR FOR THE ASSESSMENT YEAR 2005-06 AND 2008-09. SINCE, TH E FACTS ARE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 4 IDENTICAL AND ISSUES ARE COMMON, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA 5 44/VIZAG/2013 ARE THAT THE ASSESSEE IS A LOCAL AUTHORITY KNOWN AS AGR ICULTURAL MARKET COMMITTEE, REGISTERED U/S 12A OF THE INCOME TAX ACT , 1961 (HEREINAFTER CALLED AS 'THE ACT'). THE ASSESSEE HAS FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 14.10.2010 ADMITTING NIL TOTAL INCOME, AFTER CLAIMING EXEMPTION U/S 10(26AAB)/11 OF THE INCOME T AX ACT, 1961. THE ASSESSMENT WAS REOPENED UNDER SEC. 147 OF THE ACT, BY ISSUING NOTICE U/S 148 OF THE ACT DATED 16.11.2010. IN RESPONSE T O NOTICE U/S 148 OF THE ACT, THE ASSESSEE FILED A LETTER ON 28.12.2010 AND REQUESTED TO TREAT THE RETURN FILED ON 14.10.2010 AS RETURN FILED IN R ESPONSE TO NOTICE U/S 148 OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 5.7.2011 . IN RESPONSE TO NOTICE, THE AUTHORISED REPRESENTATIVE OF THE ASSESS EE APPEARED ON 3.8.2011 AND PRODUCED BOOKS OF ACCOUNTS, AUDIT REPO RT AND BILLS & VOUCHERS AND THE CASE WAS ADJOURNED TO 17.8.2011. T HE ASSESSEE NEITHER APPEARED NOR FURNISHED ANY DETAILS ON THE D ATE FIXED FOR HEARING. ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 5 THEREFORE, THE ASSESSMENT IN THIS CASE WAS FINALIZE D ON THE BASIS OF INFORMATION AVAILABLE ON RECORD. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SEC. 10(26AAB) OF THE ACT. THE A.O. FURTHER NOTICED THAT THE HONBLE A.P . HIGH COURT VIDE ITS ORDER IN ITA NO.126 OF 2011 DATED 21.4.2011 IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 HAD HELD THAT SECT ION 10(26AAB) OF THE ACT IS PROSPECTIVE IN NATURE AND ACCORDINGLY AP PLICABLE FROM ASSESSMENT YEAR 2009-10 ONWARDS. THEREFORE, ISSUE D A SHOW CAUSE NOTICE DATED 28.11.2011 AND ASKED TO EXPLAIN WHY TH E EXEMPTION CLAIMED U/S 10(26AAB) OF THE ACT SHOULD NOT BE DENI ED. THE ASSESSEE NEITHER APPEARED NOR FILED ANY EXPLANATIONS TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O. OBJECTING THE PROPOSED REJECTION OF EXEMPTION. THE A.O. FURTHER NOTICED THAT THERE WAS AN EXCESS OF IN COME OVER EXPENDITURE OF ` 45,03,292/- FOR THE YEAR UNDER CONSIDERATION. IT W AS FURTHER NOTICED THAT THE ASSESSEE HAS FILED FORM NO .10 ALONG WITH RETURN OF INCOME AND ACCUMULATED INCOME U/S 11(2) OF THE A CT. ON VERIFICATION OF THE FORM NO.10 FILED BY THE ASSESSEE, THE A.O. N OTICED THREE DEFECTS IN THE FORM, I.E. (1) THE ASSESSEE DID NOT SPECIFIED T HE AMOUNT OF INCOME ACCUMULATED OR SET APART U/S 11(2) OF THE ACT. (2) THE ASSESSEE HAS ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 6 FAILED TO MENTION THE PERIOD FOR WHICH THE INCOME W AS ACCUMULATED OR SET APART. (3) THE INCOME WAS SET APART OR ACCUMULA TED FOR THE PURPOSE OF DEVELOPMENT OF MARKETS FOR AGRICULTURAL COMMITTE ES, PROTECTION OF INTEREST OF FARMERS/SELLERS AND PROVIDING GODOWN FA CILITY TO FARMERS FOR STORAGE OF COMMODITIES WHICH IS GENERAL IN NATURE A ND NOT SPECIFIC. THEREFORE, FOR THESE REASONS, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE FORM NO.10 FILED BY THE ASSESSEE ALONG WIT H RETURN OF INCOME WAS DEFECTIVE IN NATURE AND NON-EST IN THE EYES OF LAW. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE INCOME WAS ACCUMU LATED FOR GENERAL PURPOSE WITHOUT SPECIFYING THE PURPOSE FOR WHICH IT WAS SET APART, THEREFORE, REJECTED THE FORM NO.10 FILED BY THE ASS ESSEE AND DENIED THE BENEFIT OF EXEMPTION U/S 11(2) OF THE ACT. WHILE DO ING SO, THE ASSESSING OFFICER PLACED HIS RELIANCE ON THE JUDGEMENTS OF HO NBLE SUPREME COURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIAT ION REPORTED IN 247 ITR 20 (SC) AND ALSO THE HONBLE KOLKATA HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. TRUSTEES OF SINGHANIA CHARITABLE TRUST REPORTED IN 199 ITR 819. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE DENIAL OF BENEFIT OF EXEMPTION U/S 11(2) OF THE ACT AND AL SO CHALLENGED THE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 7 DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSE E. AS FOR AS FIRST ISSUE OF REJECTION OF FORM NO. 10 AND DENIAL OF EXE MPTION UNDER SEC. 11, THE ASSESSEE SUBMITTED THAT THE FORM NO.10 FILED AL ONG WITH RETURN OF INCOME IS VALID AS THE ASSESSEE HAS MENTIONED SPECI FIC PURPOSE FOR WHICH THE INCOME WAS SET APART OR ACCUMULATED. THE ASSESSEE FURTHER SUBMITTED THAT EVEN IF, THE FORM IS DEFECTIVE, IT C AN BE RECTIFIED AT ANY TIME BEFORE COMPLETION OF ASSESSMENT PROCEEDINGS. S INCE, APPELLATE PROCEEDING IS EXTENSION OF ASSESSMENT PROCEEDINGS, THE FORM CAN BE FILED BEFORE APPELLATE AUTHORITY AND HENCE, PERMITT ED TO FILE REVISED FORM NO. 10. THE ASSESSEE FURTHER SUBMITTED THAT THE HON BLE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF AMC BHIMADOLE, I N ITA NO.247/VIZAG/2009 DATED 8.11.2012, UNDER SIMILAR FA CTS AND CIRCUMSTANCES ALLOWED THE ASSESSEE APPEAL AND HELD THAT FORM NO.10 FILED WITH ONE OR MORE OBJECTS OF THE ASSESSEE IS V ALID. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO CONSIDERING THE FACT THAT THE ASSESSEE IS ENJOYING REGISTRATION UNDER SEC. 12A OF THE ACT, ALLOWED TO FILE REVISED FORM NO. 10 RECTIFYING THE SAID DEFECTS AND ALLOW THE BENEFIT OF EXEMPTION U/S 11&12 OF THE ACT . THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSES SEE, HELD THAT THE FORM NO. 10 FILED BY THE ASSESSEE IS VALID AS THE A SSESSEE HAS CLEARLY MENTIONED THE PURPOSE FOR WHICH THE INCOME WAS ACCU MULATED. ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 8 HOWEVER, THE CIT(A) HELD THAT THE ASSESSEE HAS FAIL ED TO MENTION SPECIFIC PERIOD FOR WHICH THE AMOUNT IS ACCUMULATED AND AMOUNT OF INCOME WHICH WAS ACCUMULATED, WHICH IS A SERIOUS SH ORTCOMING IN THE FORM NO.10, WHICH IS THE EFFECT OF RENDERING IT INV ALID. THE CIT(A), FURTHER OBSERVED THAT SECTION 11(2) OF THE ACT, STI PULATES THAT THE INCOME SOUGHT TO BE ACCUMULATED AND THE PERIOD OF ACCUMULA TION SHOULD BE SPECIFIED. SINCE, THE SAME HAVE NOT BEEN DONE I HO LD THAT ACCUMULATION OF INCOME CANNOT BE PERMITTED AS SOUGHT BY THE APPE LLANT. 5. AS FAR AS THE ISSUE OF DEPRECIATION IS CONCERNED , THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE AL LOWED THE DEPRECIATION AS A DEDUCTION WHILE COMPUTING THE INC OME AVAILABLE FOR APPLICATION U/S 11&12 OF THE ACT. THE ASSESSEE FUR THER SUBMITTED THAT THE INCOME OF ANY TRUST, CLAIMING EXEMPTION U/S 11& 12 SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES. THEREFORE, DEPRE CIATION BEING AN ALLOWABLE DEDUCTION AND THE SAME SHOULD BE ALLOWED WHILE COMPUTING THE INCOME AVAILABLE FOR APPLICATION. IN SUPPORT O F ITS CONTENTIONS RELIED UPON JUDGEMENTS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE (1984) 146 ITR 28 AN D OTHER CASE LAWS. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS FURN ISHED BY THE ASSESSEE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 9 DIRECTED THE A.O. TO ALLOW THE DEPRECIATION. AGGRIE VED BY THE CIT(A) ORDER, THE ASSESSEE AS WELL AS REVENUE ARE IN APPEA L BEFORE US. 6. THE FIRST ISSUE CAME UP FOR OUR CONSIDERATION IS REJECTION OF REVISED FORM NO.10 AND DENIAL OF EXEMPTION U/S 11 OF THE AC T. DURING THE COURSE OF HEARING, THE LD. A.R. OF THE ASSESSEE SUB MITTED THAT THE ISSUES INVOLVED IN THESE APPEALS IS SQUARELY COVERED BY TH E DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF AMC GOPALAPURAM AND OTHER AMC CASES IN ITA NO.226/VIZAG/2009, DATED 11-12-2013. T HE ITAT, UNDER SIMILAR FACTS AND CIRCUMSTANCES HAS DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE. THE A.R. FURTHER ARGUED THAT THE FORM NO. 10 FILED ALONG WITH RETURN OF INCOME IS VALID, AS THE ASSESSEE HAS MENT IONED SPECIFIC PURPOSE FOR WHICH THE INCOME WAS SET APART OR ACCUM ULATED. THE ASSESSEE FURTHER SUBMITTED THAT EVEN IF THE FORM IS DEFECTIVE, WHICH CAN BE RECTIFIED AT ANY TIME BEFORE COMPLETION OF ASSES SMENT PROCEEDINGS. SINCE, APPELLATE PROCEEDING IS EXTENSION OF ASSESSM ENT PROCEEDINGS, THE FORM CAN BE FILED BEFORE APPELLATE AUTHORITY. THE C IT(A) ERRED IN DENYING THE REVISED FORM NO. 10. THE ASSESSEE HAS ALREADY F ILED FORM ALONG WITH RETURN OF INCOME. IN CASE ANY DEFECTS IN FORM NO. 1 0, WHICH IS PROCEDURAL DEFECT WHICH CAN BE RECTIFIED AT ANY TIM E. THE A.R. FURTHER SUBMITTED THAT THE FACT REMAIN UNCHANGED THAT THE A SSESSEE IS ENJOYING ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 10 BENEFIT OF EXEMPTION UNDER SEC. 11. IF EXEMPTION I S DENIED BECAUSE OF TECHNICAL DEFECTS, THE VERY PURPOSE OF STATUTE PROV IDING EXEMPTION TO ASSESSEES HAVING CHARITABLE OBJECTS WOULD BE DEFEA TED. 7. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TED THE ORDER OF CIT(A), AS FAR AS THE ISSUE OF REJECTION OF REVISED FORM NO. 10 AND DENIAL OF EXEMPTION U/S 11 OF THE ACT.. AS REGARDS THE DEP RECIATION IS CONCERNED, THE LD. D.R. SUBMITTED THAT DEPRECIATION IS NOT ALLOWABLE DEDUCTION IN THE CASE OF TRUSTS CLAIMING EXEMPTION U/S 11 & 12 OF THE ACT. THE LD. D.R., FURTHER SUBMITTED THAT ONCE THE WHOLE EXPENDITURE INCURRED TOWARDS ACQUISITION OF CAPITAL ASSET IS AL LOWED AS DEDUCTION AS APPLICATION OF INCOME, FURTHER DEDUCTION TOWARDS DE PRECIATION AMOUNTS TO DOUBLE DEDUCTIONS, THE SAME CANNOT BE ALLOWED IN COMPUTING THE INCOME AVAILABLE FOR APPLICATION U/S 11 OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSING OFFICER DENIED THE BENEFIT OF EXEMPTION U /S 11 OF THE ACT, FOR THE REASON THAT THE FORM NO.10 FILED BY THE ASSESSE E IS DEFECTIVE IN NATURE. THE ASSESSING OFFICER WAS OF THE OPINION T HAT THE ASSESSEE HAS FILED FORM 10 WITHOUT SPECIFYING THE PURPOSE FOR WH ICH THE INCOME WAS ACCUMULATED AND PURPOSE MENTIONED BY THE ASSESSEE W AS GENERAL IN ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 11 NATURE. THE ASSESSING OFFICER FURTHER WAS OF THE OP INION THAT THE ASSESSEE HAS NOT MENTIONED THE PERIOD FOR WHICH THE INCOME WAS ACCUMULATED AND ALSO THE AMOUNT OF INCOME ACCUMULAT ED WAS NOT QUANTIFIED IN THE FORM NO 10 FILED ALONG WITH RETUR N. THE ASSESSING OFFICER FURTHER OBSERVED THAT AS PER RULE 17 OF INC OME TAX RULES, 1962 WHEN ASSESSEE CLAIMS EXEMPTION U/S 11(2) OF THE ACT , IT HAS TO FILE FORM NO.10 SPECIFYING IN WRITING THE PURPOSE FOR WHICH T HE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH T HE INCOME IS TO BE SET APART AND ALSO THE AMOUNT OF INCOME ACCUMULATED OR SET APART AND THE MANNER IN WHICH THE INCOME ACCUMULATED WAS INVE STED U/S 11(5) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAS FIL ED FORM NO.10 WHICH IS DEFECTIVE AND NONE OF THE CONDITIONS MENTIONED IN R ULE 17 OF THE I.T. RULES WAS FULFILLED. THEREFORE, REJECTED FORM NO.1 0 AND DENIED THE BENEFIT OF EXEMPTION U/S 11(2) OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS FILED FORM NO.10 SPECIFYING TH E PURPOSE FOR WHICH THE INCOME WAS ACCUMULATED AND THE OTHER TWO DEFECT S I.E. PERIOD OF ACCUMULATION AND AMOUNT OF ACCUMULATION ARE TECHNIC AL IN NATURE, IT CAN BE CURED AT ANY TIME BEFORE THE COMPLETION OF ASSES SMENT. BUT, THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO RECTIFY THE FORM AT THE TIME OF ASSESSMENT PROCEEDINGS, THEREFORE, THE CIT(A) SHOULD HAVE ALLOWED TO FILE THE REVISED FORM NO.10 BEFORE THE A PPELLATE PROCEEDINGS. ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 12 9. THE LD. AUTHORIZED REPRESENTATIVE, AT THE TIME O F HARING SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN ITA NO.226/VIZAG/2009. WE HAV E GONE THROUGH THE CASE LAW REFERRED BY THE LD. A.R. IN THE LIGHT OF THE FACTS OF THE PRESENT CASE. WE FIND THAT THE COORDINATE BENCH OF T HIS TRIBUNAL, WHILE DEALING WITH SIMILAR ISSUE HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS REPRODUCED AS UNDER: 3. THE FIRST ISSUE TO BE CONSIDERED IS WITH REFERE NCE TO NON-GRANTING OF BENEFIT U/S 11(2) FOR DELAY IN FILING FORM NO.10 AND ACCUMU LATION FOR SEVERAL OBJECTS. WHILE CONSIDERING THE ISSUE OF EXEMPTION OF ASSESSEES IN COME U/S 11 OF THE ACT, THE ASSESSING OFFICER DID NOT AGREE ON THE CLAIM/ BENEF IT FOR ACCUMULATION OF INCOME AS THE RELEVANT FORM NO.10 WAS FILED BELATEDLY. THE L D. CIT(A) FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION 247 ITR 20(SC), WHEREIN IT WAS HELD THA T THE NOTICE FOR ACCUMULATION OF INCOME COULD BE GIVEN ANY TIME BEFORE THE CONCLUSIO N OF THE ASSESSMENT PROCEEDINGS, ALLOWED THE ASSESSEES CONTENTION WITH A DIRECTION TO ACCEPT THE FORM NO.10. HOWEVER, THE LD. CIT(A) UPHELD THE ASSESSIN G OFFICERS CONTENTION THAT THE NOTICE FOR ACCUMULATION HAS NOT SPECIFIED ANY SPECI FIC PURPOSE AND THE GENERAL PURPOSE WHICH WAS MENTIONED IN FORM NO.10 CANNOT BE TERMED AS SPECIFIC AND CONCRETE PURPOSE AND AS SUCH THERE EXISTS INCURABLE INFIRMITY WITH REGARD TO THE PURPOSE FOR WHICH THE ACCUMULATION OF ITS INCOME HA S BEEN SOUGHT. THEREFORE, DESPITE THE GRANT OF REGISTRATION U/S 12AA, THE ASS ESSING OFFICER AND CIT HELD THAT ASSESSEE FAILED IN COMPLYING WITH THE PROVISIONS OF SECTION 11(2) OF THE ACT IN SO FAR AS FAILING TO INDICATE SPECIFIC PURPOSE FOR ACCUMUL ATION OF ITS INCOME. 4. IT WAS FAIRLY ADMITTED THAT THIS ISSUE WAS COVERE D BY THE DECISION OF THE COORDINATE BENCH IN SIMILAR GROUP OF CASES, WHEREIN THE MATTER WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : 6. THE FIRST DEFECT POINTED OUT BY THE ASSESSING OF FICER IS WITH REGARD TO THE PURPOSE OF ACCUMULATION OF FUNDS. IN THE FORM NO. 1 0, THESE ASSESSEES HAVE STATED THE PURPOSE OF ACCUMULATION AS UNDER:- FOR BETTERMENT OF MARKET COMMITTEE INCLUDING CO NSTRUCTION OF STRUCTURES, SPILLOVER WORKS, NEW WORKS, TO CONTRIBUTE FUND TO A NY DEPARTMENT AS PER NEEDS' THE ASSESSING OFFICER CONSIDERED THE ABOVE SAID PUR POSE AS GENERAL IN NATURE AND BY TAKING SUPPORT FROM THE DECISION OF THE HON' BLE CALCUTTA HIGH COURT IN ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 13 THE CASE OF TRUSTEES OF SINGHANIA CHARITABLE TRUST, (SUPRA) HAS HELD THAT THESE ASSESSEES HAVE NOT STATED ANY SPECIFIC OR CONCRETE PURPOSE IN FORM NO. 10. HOWEVER, IN THE CASE OF SINGHANIA CHARITABLE TRUST, WE NOTICE THAT THE ASSESSEE THEREIN HAD LISTED ALL THE CHARITABLE OBJE CTS FOR WHICH IT WAS CREATED AS THE PURPOSE OF ACCUMULATION. DEFINITELY THAT IS NOT THE CASE IN THE INSTANT APPEALS. IT IS A SETTLED POSITION OF LAW THAT THE P URPOSE OF ACCUMULATION SHOULD BE PRECISE AND SPECIFIC AND FURTHER, THE PLURALITY OF PURPOSES IS ALSO NOT PROHIBITED. IN THIS VIEW OF THE MATTER, THIS IS SUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER, AS HE HAS CONSIDERED THE 'PURPOSE OF ACCUMULATION' AS STATED BY THESE ASSESS EES AS GENERAL IN NATURE BY FOLLOWING THE CALCUTTA DECISION REFERRED (SUPRA) WITHOUT NOTING THAT THERE IS NO PARITY OF FACTS. 5. DURING THE PRESENT PROCEEDINGS, IT WAS FURTHER S UBMITTED THAT THIS ISSUE IS ALSO CONSIDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARAT KALYAN PRATISTHAN VS. DIT (EXEMPTION) 299 ITR 406 (DEL), W HEREIN IT WAS HELD AS UNDER: HELD : THE ASSESSEE HAS ONLY THREE OBJECTS AS FAR AS ITS T RUST DEED IS CONCERNED. THE TRUST DEED REQUIRES THE TRUST TO UTI LIZE ITS FUNDS FOR CHARITABLE PURPOSES WHICH ARE MEDICAL RELIEF, EDUCA TION AND RELIEF TO THE POOR. IN THE APPLICATION SEEKING EXEMPTION, THE ASSESSEE HAS SPECIFIED THESE THREE OBJECTS. IT WAS NOT REQUIRED FOR THE ASSESSEE TO BE MORE SPECIFIC WITH REGARD TO THE UTILIZATION OF THE FUNDS. PLURALITY OF PURPOSES IS PERMITTED AND IF IT SO HAPPENS THAT AN ASSESSEE HAS ONLY THREE OBJECTS OR PURPOSES, IT MAY WELL UTILIZE THE FUNDS FOR ALL THE THREE OBJECTS AND PURPOSES.CIT VS. HOTEL & RES TAURANTS ASSOCIATION (2003) 182 CTR (DEL) 374 : (2003) 261 I TR 190 (DEL) AND DIRECTOR OF IT (EXEMPTION) VS. DAULAT RAM EDUCA TION SOCIETY (2005) 278 ITR 260 (DEL) FOLLOWED; CIT VS. M.CT. MU THAIAH CHETTIAR FAMILY TRUST &. ORS. (2000) 162 CTR (MAD) 63 AND DI RECTOR OF IT (EXEMPTION) VS. TRUSTEES OF SINGHANIA CHARITABLE TR UST (1993) 199 ITR 819 (CAL) DISSENTED FROM. CONCLUSION : WHILE SPECIFYING THE PURPOSES OF ACCUMULATION OF IN COME UNDER S.11(2), A CHARITABLE TRUST CAN MENTION ALL ITS OBJ ECTS WITHOUT BEING SPECIFIC. 6. FURTHER, HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARKET COMMITTEE 201 TAXMAN 235 ALSO CONSIDERED SIMILAR IS SUE AND HELD AS UNDER: WHERE IN THE APPLICATION FOR ACCUMULATION OF INCO ME, THE ASSESSEE HAD STATED THAT ACCUMULATION OF THE FUNDS HAS BEEN MADE FOR DEVELOPMENT OF WORKS AND TRIBUNAL CLEARLY FOUND THAT THE PURPOSE S TOOD SPECIFIED AND IT WAS STATUTORY PURPOSE FOR UTILIZING THE AMOUNT I.E. DEVELOPMENT AS PER S. 28 OF PUNJAB AGRICULTURE PRODUCE MARKETING ACT, NO SUBSTANTIAL QUESTION ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 14 OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL ALLOWIN G EXEMPTION UNDER S.11(2). 7. THE HONBLE HIGH COURT VIDE PARA 2 OF ITS JUDGEM ENT DISCUSSED THE ISSUE IN DETAIL AS UNDER:- 2. THE ASSESSEE IS A STATUTORY BODY UNDER THE PROV ISIONS OF PUNJAB AGRICULTURE PRODUCE MARKETING ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'PAPM ACT'). THE AO MADE ADDITION TO THE DECLARED INCOME ON ACCOUNT O F ACCUMULATION OF FUNDS WITHOUT COMPLIANCE OF CONDITIONS UNDER S. 11(2) OF T HE ACT. ON APPEAL THE SAID ADDITION WAS DELETED BY THE CIT(A) HOLDING THAT THE ACCUMULATION WAS AS PER THE STATUTORY PROVISIONS. THE SAID VIEW HAS BEEN UPHELD BY THE TRIBUNAL AS FOLLOWS : 'MERELY BECAUSE THE ASSESSEE HAS MENTIONED DEVELOPM ENT WORKS IN GENERAL MANNER, IN FORM NO. 10, IT CANNOT BE SAID THAT THE PRIMARY CONDITION OF S. 11(2) HAS NOT BEEN FULFILLED AS SO OBSERVED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF IT VS. MITSUI & CO. ENVIRON MENTAL TRUST (2007) 211 CTR (DEL) 352 : (2008) 167 TAXMAN 43 (DEL). WE, THE REFORE, UPHOLD THE ORDER OF LEARNED CIT (A) ON THIS ISSUE, WHICH HAS BEEN DECIDED BY THE LE ARNED CIT(A) BY SAYING THAT IN FORM NO. 10, THE ASSESSEE HAS MENTIONED THAT ACCUMULATION OF THE FUNDS HAS BEEN MADE FOR DEVELOP MENT OF WORKS AND THIS MENTIONING OF DEVELOPMENT OF WORKS IN FORM NO. 10 C ANNOT BE SAID TO CASUAL BECAUSE THE ASSESSEE COULD NOT UTILIZE THE FUND OTHER THAN THE PURPOSES MENTIONED IN S. 28 OF PUNJAB AGRICULTURE PRODUCE MA RKETING ACT, 1961. THE PURPOSES LISTED IN S. 28 OF PUNJAB AGRICULTURE PROD UCE MARKETING ACT, 1961 ARE UNDOUBTEDLY IN THE NATURE OF DEVELOPMENT WORKS. THE REFORE, THE ORDER OF LEARNED CIT(A) IN DIRECTING THE AO TO ALLOW THE EXE MPTION IN RESPECT OF THE FUND ACCUMULATED FOR DEVELOPMENT WORKS IS JUSTIFIED.' WE HAVE HEARD LEARNED COUNSEL FOR APPELLANT. 3. THE CONDITION FOR EXCLUDING ACCUMULATED INCOME O F A CHARITABLE INSTITUTION FROM TOTAL INCOME IS SPECIFICATION OF T HE PURPOSE FOR WHICH THE INCOME WAS ACCUMULATED AND DEPOSIT IN THE SPECIFIED MODE. EXEMPTION WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE FAILED T O SPECIFY THE PURPOSE OF ACCUMULATION. THE CIT(A) AS WELL AS THE TRIBUNAL HA VE CLEARLY HELD THAT THE PURPOSE STOOD SPECIFIED AND WAS STATUTORY PURPOSE F OR UTILIZING THE AMOUNT I.E. DEVELOPMENT AS PER S. 28 OF PAPM ACT. SEC. 11(2) OF THE ACT TO THE EXTENT RELEVANT IS AS UNDER: '11(2) WHERE EIGHTY FIVE PER CENT OF THE INCOME REF ERRED TO IN CL. (A) OR CL. (B) OF SUB-S. (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APP LIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED O R SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY : ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 15 (A) SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIV EN TO THE AO IN THE PRESCRIBED MANNER, THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS; (B) ** 8. RESPECTFULLY FOLLOWING PRINCIPLES LAID DOWN BY THE ABOVE, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF SECTION 11(2) AFRE SH IN THE LIGHT OF THE JUDGEMENTS ON THE ISSUE. THEREFORE, THE ISSUE OF ACCUMULATION OF INC OME AS PER PROVISIONS OF SECTION 11(2) IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE AND ALLOW THE CLAIM AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 10. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER AND THE CIT(A) W AS ERRED IN REJECTING THE REVISED FORM NO. 10 AND DENIED THE BENEFIT OF E XEMPTION U/S 11(2) OF THE ACT. ON PERUSAL OF FACTS, WE NOTICED THAT T HE ASSESSEE HAS FILED FORM NO.10 ALONG WITH RETURN OF INCOME SPECIFYING T HE PURPOSE FOR WHICH THE INCOME WAS ACCUMULATED. THE OTHER TWO DEFECTS P OINTED OUT BY THE A.O. ARE TECHNICAL IN NATURE, IT CAN BE CURED AT AN Y TIME BEFORE COMPLETION OF ASSESSMENT. IN THE PRESENT CASE ON HA ND, THE ASSESSMENT IS COMPLETED IN THE ABSENCE OF ASSESSEES PRESENCE. THE ASSESSEES HAVE NOT HAD AN OCCASION TO JUSTIFY HIS CASE BY FILING T HE REVISED FORM NO.10 BEFORE THE ASSESSING OFFICER. THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCATION (2001) 247 ITR 201 HELD THAT FORM NO. 10 CAN BE FILED ANY TIME BEFORE COMPLETION OF ASSESSMENT. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS MA YUR FOUNDATION (2005) 274 ITR 562, HELD THAT WHERE THE ASSESSMENT IS IN APPEAL, THE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 16 ASSESSMENT SHOULD BE TREATED AS PENDING, SO THAT IT COULD BE FILED EVEN AT THE APPELLATE STAGE BY WAY OF ADDITIONAL GROUND. IN THE PRESENT CASE ON HAND, FROM THE FACTS IT WAS CLEAR THAT THE ASSES SEE HAS FILED FOR NO 10 ALONG WITH RETURN. IT WAS NOT A CASE OF A.O. THAT T HERE WAS NO FORM AT ALL. IF AT ALL, ANY DEFECTS IN THE FORM, THEY ARE P ROCEDURAL DEFECTS AND WHICH CAN BE RECTIFIED. THERE IS NO SPECIFIC BAR PR OHIBITING THE ASSESSEE FROM MODIFYING THE FIGURES OF ACCUMULATION AS HELD BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. SI MLA CHANDIGARH DIOCESE SOCIETY (2009) 318 ITR 96. IN ANY CASE PERI OD OF ACCUMULATION CANNOT BE MORE THAN FIVE YEARS. IN THE ABSENCE OF S PECIFIC PERIOD, IT CAN BE ALWAYS PRESUMED THAT THE PERIOD OF ACCUMULATION IS FIVE YEARS. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) SH OULD HAVE ALLOWED THE ASSESSEE TO FILE THE REVISED FORM NO.10 RECTIFY ING THE DEFECTS POINTED OUT BY THE A.O., WHICH WAS NOT DONE. THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE A.O. AND DIRECT THE A.O. TO ALLOW THE ASSESSEE TO FILE REVISED FORM NO. 10 AND CONSIDER THE EXEMPTION CLAIMED U/S 11OF THE ACT. 11. THE NEXT ISSUE, CAME UP FOR OUR CONSIDERATION I S WHETHER THE CIT(A) WAS RIGHT IN ALLOWING THE DEPRECIATION CLAIM MADE BY THE ASSESSEE. THE LD. D.R. SUBMITTED THAT THE ASSESSEE IS NOT ELIGIBLE TO ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 17 CLAIM DEPRECIATION ON FIXED ASSET, AS THE COST OF A SSET WAS FULLY ALLOWED AS APPLICATION OF INCOME IN EARLIER YEARS. THEREFOR E, ALLOWING DEPRECIATION ON FIXED ASSETS AMOUNTS TO DOUBLE DEDU CTION AS HELD BY THE HONBLE SUPREME COURT IN ESCORTS LTD VS. UNION OF I NDIA 199 ITR 43. IT WAS THE CONTENTION OF ASSESSEE THAT INCOME OF TRUST CLAIMING EXEMPTION U/S 11 SHOULD BE COMPUTED BY APPLYING COMMERCIAL PR INCIPLES, THEREFORE, DEPRECIATION BEING A PERMISSIBLE DEDUCTION, WHILE C OMPUTING THE INCOME UNDER THE COMMERCIAL PRINCIPLES, THE SAME SHOULD BE ALLOWED AS DEDUCTION. THE ASSESSEE FURTHER CONTENDED THAT THE DECISION OF ESCORTS LIMITED (SUPRA) IS RENDERED UNDER DIFFERENT CONTEXT , WHICH CANNOT BE MADE APPLICABLE TO THE FACTS OF PRESENT CASE. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUSE D THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE CASE LAWS. THE LD. A.R. SUBMITTED THAT THE ISSUE OF DEPRECIATION IS SQUAREL Y COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM IN ITA NO.226/VIZAG /2009. THE A.R. DRAWN OUR ATTENTION TO THE HONBLE KARNATAKA HIGH C OURT DECISION IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE (198 4) 146 ITR 28. THE COORDINATE BENCH OF THIS TRIBUNAL, IN THE ABOVE CAS E, UNDER SIMILAR CIRCUMSTANCES ALLOWED THE CLAIM OF DEPRECIATION. TH E RELEVANT PORTION IS REPRODUCED HEREUNDER: ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 18 11. THE THIRD ISSUE AGITATED IS WITH REFERENCE TO T HE CLAIM OF DEPRECIATION NOT ALLOWED FOR WANT FOR DETAILS. THERE IS NO DISPUTE WITH REFEREN CE TO THE ISSUE THAT ASSESSEE IS ELIGIBLE FOR DEPRECIATION. VARIOUS JUDICIAL AUTHORITIES HAVE CO NSIDERED THE ISSUE OF CLAIM OF DEPRECIATION ON CAPITAL ASSETS FROM THE INCOME OF CHARITABLE TRU ST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUST I N TERMS OF SECTION 11 OF THE ACT. THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. MARKET COMMITTEE, PIPLI HAS CONSIDERED THE ISSUE RECENTLY AND IN THEIR JUDGEMEN T REPORTED IN 330 ITR 16, HELD AS UNDER:- DEPRECIATIONALLOWABILITYCHARITABLE TRUST DEPRECI ATION IS ALLOWABLE ON CAPITAL ASSETS FROM THE INCOME OF CHAR ITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HA VE TO BE APPLIED FOR THE PURPOSES OF THE TRUST IN TERMS OF S . 11IT CANNOT BE SAID THAT DOUBLE BENEFIT IS GIVEN IN ALLO WING DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF S . 11 CIT VS. SHETH MANILAL RANCHHODDAS VISHRARN BHAVAN TRUST (1992) 105 CTR (GUJ) 303 : (1992) 198 ITR 598 (GUJ), CIT VS. INSTI TUTE OF BANKING PERSONNEL SELECTION (2003) 185 CTR (BOM) 492 : (200 3) 131 TAXMAN 386 (BOM), CIT VS. RAO BAHADUR CALAVALA CUNNAN CHETTY C HARITIES (1982) 135 ITR 485 (MAD), CIT VS. SOCIETY OF THE SISTERS OF ST. AN NE (1984) 39 CTR (KAR) 9 : (1984) 146 ITR 28 (KAR) AND CIT VS. RAIPUR PALLOTTINE SOCIETY (1989) 80 CTR (MP) 127 : (1989) 180 ITR 579 (MP) CONCURRED WITH; ESCORTS LTD. VS. UNION OF INDIA (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC) DISTINGUISHED CONCLUSION: DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS FROM TH E INCOME OF CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE A PPLIED FOR THE PURPOSES OF THE TRUST IN TERMS OF S. 11. 12. SINCE THE ISSUE IS DECIDED IN FAVOUR OF THE ASS ESSEE, THE CLAIM PER SE IS ALLOWABLE TO THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEPRECIATION AFTER OBTAINING THE NECESSARY DETAILS FROM THE ASSESSEE. THIS ISSUE IS ALSO ACCORDINGLY CONSIDERED ALLOWED. 13. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION IN ITA NO.226/VIZAG/2009, WE ARE OF THE OPINION THAT DEPRECIATION ON ASSETS, THE COST OF WHICH WAS ALLOW ED HAS APPLICATION OF INCOME IN EARLIER YEAR IS TO BE ALLOWED WHILE COMPU TING THE INCOME AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSE. T HE CIT(A) RIGHTLY DIRECTED THE A.O. TO ALLOW THE DEPRECIATION. WE DO NOT SEE ANY ERROR OR ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 19 INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE , WE INCLINED TO UPHOLD THE ORDER PASSED BY THE CIT(A) AND REJECT TH E GROUND RAISED BY THE REVENUE. 14. THE NEXT ISSUE EMANATES FROM THE REVENUE APPEAL IN ITA NO.546/VIZAG/2013, IS WITH REGARD TO APPLICATION OF INCOME TOWARDS RELEASE OF FUNDS TO HORTICULTURE DEPARTMENT. THE AS SESSING OFFICER DISALLOWED THE AMOUNT PAID TO HORTICULTURE DEPARTME NT FOR THE REASON THAT THE ASSESSEE HAS PAID THE AMOUNT TO OTHER DEPARTMENTS/ORGANIZATIONS, WHICH ARE NOT CHARITABLE INSTITUTIONS REGISTERED U/S 12AA OF THE ACT. WHEN A DONOR TRUST/ INSTITUTION DONATES ITS INCOME TO ANOTHER TRUST HAVING SIMILAR OBJECTS, THE PROVISIONS OF SECTION 11(1)(A) OF THE ACT SAID TO HAVE BEEN MET B Y SUCH DONOR TRUST/INSTITUTION AND THE DONOR TRUST CAN BE SAID T O HAVE APPLIED ITS INCOME FOR CHARITABLE OBJECTS. BUT, IN THE PRESENT CASE, THE ASSESSEE DIVERTED ITS FUNDS TO OTHER DEPARTMENT/ORGANIZATION S WHICH ARE NOT CHARITABLE TRUST/INSTITUTION, THEREFORE, THE PAYMEN TS MADE TO OTHER DEPARTMENTS IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT IS PAID TO FARMERS ON THE DIRECTIONS OF THE HORTICULTURE DEPARTMENT, THEREFOR E, THE SAID AMOUNT IS ELIGIBLE FOR APPLICATION OF INCOME. THE ASSESSEE FU RTHER STATED THAT THE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 20 SAID AMOUNT WAS PAID AS PER THE DIRECTIONS OF THE S TATE GOVERNMENT AND ANY AMOUNT PAID AS PER THE ORDERS OF THE GOVERNMENT TO OTHER ORGANIZATIONS WOULD COME WITHIN THE PURVIEW OF SEC TION 15 OF THE ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKET ACT, 1966. THE ASSESSEE BEING A STATE GOVT. ORGANIZATION, CONS TITUTED UNDER SEC. 15 OF ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTO CK) MARKET ACT, 1966 IS AUTHORIZED TO SPEND FUNDS SPECIFIED BY THE GOVER NMENT THROUGH GENERAL OR SPECIAL ORDERS. THEREFORE, WHEN THE GOVE RNMENT IS DIRECTED TO SPEND AMOUNT FOR PARTICULAR PURPOSE AS PER THE S AID ACT, THE ASSESSEE IS BOUND TO FOLLOW THE INSTRUCTIONS OF THE GOVERNME NT. THE AMOUNT IS PAID TO FARMERS IN THE FORM OF HORTICULTURE SUBSIDY FOR ESTABLISHMENT OF COLD STORAGE FACILITY, WHICH IS COMING UNDER ONE OF THE OBJECTS OF THE ASSESSEE. THEREFORE, THE AMOUNT PAID THROUGH OTHER DEPARTMENTS AS PER THE DIRECTIONS OF THE GOVERNMENT SHOULD BE ALLOWED AS APPLICATION OF INCOME. THE CIT(A) AFTER CONSIDERING THE EXPLANATIO NS FURNISHED BY THE ASSESSEE DIRECTED THE A.O. TO ALLOW THE AMOUNTS SPE NT THROUGH OTHER DEPARTMENTS/ORGANIZATIONS. HOWEVER, SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR THE PURPOSE OF LIMITED VERIFICATION, W HETHER THE ASSESSEE HAS INCURRED THE AMOUNT FOR THE SAID PURPOSE OR NOT . ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 21 15. THE LD. D.R. ARGUED THAT THE AMOUNT PAID TO OTH ER DEPARTMENT/ORGANIZATION IS NOT AMOUNTS TO APPLICATI ON OF INCOME U/S 11 OF THE ACT. THE LD. D.R. FURTHER ARGUED THAT THE A SSESSEE HAS MADE THE PAYMENT WITHOUT ANY PURPOSE, THEREFORE, THE A.O. HA S RIGHTLY DISALLOWED THE AMOUNT AND HIS ORDER SHOULD BE UPHELD. ON THE O THER HAND, THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQ UARELY COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE O F ITA NO.226/VIZAG/2009. THE CIT(A) RIGHTLY DELETED THE A DDITION AND HIS ORDER SHOULD BE UPHELD. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE CASE LAW REFERRED BY THE LD. A.R. IN THE LIGHT OF T HE FACTS OF THE PRESENT CASE. THE COORDINATE BENCH OF THIS TRIBUNAL, IN ITA NO. 226/V/2009 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RE LEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER: 9. THE SECOND ISSUE FOR CONSIDERATION IS WITH REFE RENCE TO GRANT OF RELIEF OF VARIOUS PAYMENTS MADE CONSEQUENT TO THE DIRECTIONS OF DIRECTOR OF MARKETING WHICH ASSESSING OFFICER DID NOT ALLOW AND THE LD. C IT(A) SUSTAINED THE ADDITION ON THE REASON THAT THE DIRECTIONS OF THE DIRECTOR O F MARKETING WERE NOT FILED. IT WAS THE SUBMISSION OF THE ASSESSEE THAT AT THE RELE VANT POINT OF TIME THE DIRECTIONS COULD NOT BE LOCATED BUT THEY ARE FILED AS ADDITIONAL EVIDENCE BEFORE US. HOWEVER, ALLOWANCE OF THE EXPENDITURE CONSEQUE NT TO THE DIRECTIONS OF DIRECTOR OF MARKETING HAS ALREADY BEEN DECIDED IN A WAY BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AGRICULTURAL MARK ET COMMITTEE, GIDDALORE AND ORS. 336 ITR 641. THERE, WHILE EXAMINING THE ISSUE OF GRANTING OF REGISTRATION TO THE AGRICULTURAL MARKET COMMITTEE AS SUCH, THE HON BLE JURISDICTIONAL HIGH COURT EXAMINED THE PROVISIONS OF SECTION 15 OF ANDHRA PRA DESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKETS ACT, 1966 UNDER WHICH THE AG RICULTURAL MARKET COMMITTEES WERE CONSTITUTED. VIDE PARA 12 OF THE J UDGEMENT, THE ISSUE WAS CONSIDERED ELABORATELY AS UNDER: ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 22 17. THE DECISION OF THE SUPREME COURT IN SREENIVASA GEN ERAL TRADERS VS. STATE OF A.P., AIR 1983 SC 1246 : (1983 ) 4 SCC 353, CONTAINS AN OVERVIEW OF THE AMC ACT IN PARAS 11 TO 15. INSTE AD OF THIS COURT AGAIN GIVING AN OVERVIEW OF THE ANDHRA PRADESH AMC ACT, I T IS USEFUL TO EXTRACT THESE PARAS HEREUNDER : '11. THE OBJECT AND PURPOSE OF THE ANDHRA PRADESH ( AGRICULTURAL PRODUCE AND LIVESTOCK) MARKETS ACT, 1966 AS REFLECTED IN TH E LONG TITLE IS TO CONSOLIDATE AND AMEND THE LAW RELATING TO THE REGUL ATION OF PURCHASE AND SALE OF AGRICULTURAL PRODUCE, LIVESTOCK AND PRODUCT S OF LIVESTOCK AND THE ESTABLISHMENT OF MARKETS IN CONNECTION THEREWITH. T HE LEGISLATION IS DESIGNED TO ELIMINATE MIDDLEMEN IN NOTIFIED AGRICULTURAL PRO DUCE, LIVESTOCK AND PRODUCTS OF LIVESTOCK, TO PROTECT THE PRODUCERS OF SUCH AGRICULTURAL PRODUCE, LIVESTOCK AND PRODUCTS OF LIVESTOCK FROM EXPLOITATI ON AND TO ENSURE TO THEM A FAIR PRICE FOR THEIR PRODUCE. THE MATERIAL PROVISIO NS OF THE ACT MAY BE REFERRED TO. SEC. 2 IS THE DEFINITION CLAUSE AND DE FINES THE EXPRESSION 'AGRICULTURAL PRODUCE' IN CL. (I) TO MEAN ANYTHING PRODUCED FROM LAND IN THE COURSE OF AGRICULTURE OR HORTICULTURE AND INCLUDES FOREST PRODUCE OR ANY PRODUCE OF LIKE NATURE EITHER PROCESSED OR UNPROCES SED AND DECLARED BY THE GOVERNMENT BY NOTIFICATION TO BE AGRICULTURAL PRODU CE FOR THE PURPOSES OF THIS ACT. THE TERM 'MARKET' AS DEFINED IN S. 2(VI) MEANS A MARKET ESTABLISHED UNDER SUB-S. (3) OF S. 4 AND INCLUDES M ARKET YARD AND ANY BUILDING THEREIN. THE EXPRESSION 'NOTIFIED AREA' AS DEFINED IN S. 2(XI) MEANS ANY AREA NOTIFIED S. 3, AND 'NOTIFIED MARKET AREA' IN CL. (XII) MEANS ANY AREA DECLARED TO BE A MARKET AREA BY NOTIFICATION UNDER S. 4. UNDER S. 3 OF THE ACT, THE STATE GOVERNMENT IS EMPOWERED TO DECLARE THEIR INTENTION OF REGULATING THE PURCHASE AND SALE OF SUCH AGRICULTURAL PRODUCE, L IVESTOCK OR PRODUCTS OF LIVESTOCK IN SUCH AREA AS MAY BE SPECIFIED IN SUCH NOTIFICATIONS. AFTER CONSIDERING THE OBJECTIONS AND SUGGESTIONS, IF ANY, THE STATE GOVERNMENT IS AUTHORISED TO PUBLISH A FINAL NOTIFICATION UNDER SUB-S. (3) THEREOF DECLARING SUCH AREA TO BE A NOTIFIED AREA. BY SUB-S. (1) OF S . 4, THE STATE GOVERNMENT IS EMPOWERED TO CONSTITUTE A MARKET COMMITTEE FOR E VERY NOTIFIED AREA WHICH SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMM ON SEAL. THE DUTY OF ENFORCING THE PROVISIONS OF THE ACT AND THE RULES AND BYE- LAWS IS ENTRUSTED TO A MARKET COMMITTEE UNDER SUB-S . (2) THEREOF. SUB-S. (3) OF S. 4 EMPOWERS THE MARKET COMMITTEE TO ESTABL ISH SUCH NUMBER OF MARKETS AS THE STATE GOVERNMENT MAY, FROM TIME-TO-T IME, DIRECT FOR THE PURCHASE AND SALE OF ANY NOTIFIED AGRICULTURAL PRODUCE, LIVESTOCK OR PRODUCTS OF LIVESTOCK. SUB-S. (3) OF S. 4 PROVIDES SUCH FACILITIES IN THE MARKET AS MAY BE SPECIFIED BY THE GOVERNMENT FROM TIME TO TIME BY A GENERAL OR SPECIAL ORDER. SUB-S. (4) PROVIDES THAT THE STATE G OVERNMENT SHALL, AFTER THE ESTABLISHMENT OF A MARKET UNDER SUB-S. (3), DECLARE BY NOTIFICATION TH E MARKET AREA AND SUCH OTHER AREA ADJOINING THERETO A S MAY BE SPECIFIED IN THE NOTIFICATION, TO BE A NOTIFIED MARKET AREA FOR THE PURPOSES OF THE ACT. . . . . . . 12. UNDER THE SCHEME OF THE ACT, THE MARKET COMMITT EE IS ENJOINED BY SUB-S. (1) OF S. 14 TO PAY INTO A FUND CALLED THE 'MARKET COMMITTEE FUND' ALL MONEYS RECEIVED FROM THE TRADERS AS MARKET FEE ON TRANSACTIONS OF SALE OR PURCHASE OF AGRICULTURAL PRODUCE TAKING PLACE WITHI N THE NOTIFIED MARKET AREA AND THEY ARE TO BE CREDITED IN THE NEAREST GOV ERNMENT TREASURY OR IN A BANK, WITH THE PREVIOUS SANCTION OF THE STATE GOVER NMENT. ALL EXPENDITURE ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 23 INCURRED BY THE MARKET COMMITTEE UNDER AND FOR PURPOSES OF THE ACT HAVE TO BE DEFRAYED OUT OF THE SAID FUND AND ANY SURPLUS REMAINING AFTER SUCH EXPENDITURE, HAS TO BE INVESTED IN SUCH MANNER AS M AY BE PRESCRIBED. UNDER SUB-S. (2), EVERY MARKET COMMITTEE HAS TO PAY TO TH E STATE GOVERNMENT OUT OF ITS FUND THE COST OF ANY SPECIAL OR ADDITIONAL STAFF EMPLOYED BY THE GOVERNMENT WITH THEIR CONSULTATION. WHERE SUCH ADDI TIONAL STAFF IS EMPLOYED FOR THE PURPOSES OF ONE OR MORE MARKET COM MITTEES, THE STATE GOVERNMENT HAS TO APPORTION THE COST OF SUCH SPECIA L OR ADDITIONAL STAFF AMONG THE MARKET COMMITTEES CONCERNED IN SUCH MANNER AS THEY THINK F IT. UNDER SUB-S. (3), THE MARKET COMMITTEE MAY GRANT LOANS TO ANOTHER MARKET COMMITTEE OUT OF ITS SURPLUS FUNDS, WITH THE PREVIOUS SANCTION OF THE STATE GOVERNMENT, AT SUCH RATES OF INTEREST AS MAY BE PRESCRIBED. THE PURPOSES FOR WHICH THE MARKET COMMITTEE FUND MAY BE EXPENDED ARE SET OUT IN S. 15 WHICH READS : -, (I) THE ACQUISITION OF SITE FOR THE MARKET; (II) THE ESTABLISHMENT, MAINTENANCE AND IMPROVEMENT OF THE MARKET; (III) THE CONSTRUCTION AND MAINTENANCE OF BUILDINGS , NECESSARY FOR THE MARKET AND FOR THE HEALTH CONVENIENCE AND SAFETY OF THE PE RSONS USING THE MARKET AND MAINTENANCE OF BUILDINGS UNDER THE CONTROL OF THE MARKET COMMITTEE; (IV) THE PROVISION AND MAINTENANCE OF STANDARD WEIG HTS AND MEASURES; (V) THE PAY, PENSIONS, LEAVE ALLOWANCE, GRATUITIES, COMPASSIONATE ALLOWANCES AND CONTRIBUTION TOWARDS LEAVE ALLOWANCES, PENSIONS OR PROVIDENT FUND OF OFFICERS AND SERVANTS EMPLOYED BY THE MARKET COMMITTEE; (VI) THE PAYMENT OF INTEREST ON LOANS THAT MAY BE R AISED FOR PURPOSES OF THE MARKET AND THE PROVISIONS OF A SINKING FUND IN RESPECT OF SUCH LOANS; (VII) THE COLLECTION AND DISSEMINATION OF INFORMATI ON REGARDING ALL MATTERS RELATING TO CROP STATISTICS AND MARKETING IN RESPECT OF NOTIFIED AGRICULTURAL PRODUCE, LIVESTOCK AND PRODUCTS OF LIVESTOCK; (VIII) SCHEMES FOR THE EXTENSION OR CULTURAL IMPROV EMENT OF NOTIFIED AGRICULTURAL PRODUCE, LIVESTOCK AND PRODUCTS OF LIVESTOCK WITHIN THE NOTIFIED AREA, INCLUDING THE GRANT, SUBJECT TO THE APPROVAL OF THE GOVERNMENT, OF FINANCIAL AID TO THE SCHEMES FOR SUC H EXTENSION OR IMPROVEMENT WITHIN SUCH AREA, UNDERTAKEN BY OTHER BODIES OR INDIVIDUALS; (IX) PROPAGANDA FOR THE IMPROVEMENT OF AGRICULTURE, LIVESTOCK AND PRODUCTS OF LIVESTOCK AND THRIFT; (X) THE EXPENSES OF, AND INCIDENTAL TO, THE CONDUCT OF ELECTIONS; (XI) THE PROMOTION OF GRADING SERVICES; (XII) MEASURES FOR THE PRESERVATION OF FOOD GRAINS; ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 24 (XIII) SUCH OTHER PURPOSES AS MAY BE SPECIFIED BY T HE GOVERNMENT BY GENERAL OR SPECIAL ORDER; 13. SUB-S. (1) OF S. 16 OF THE ACT PROVIDES THAT TH ERE SHALL BE FORMED FOR THE WHOLE OF THE STATE A FUND TO BE CALLED THE 'CENTRAL MARKET FUND'. EVERY MARKET COMMITTEE IS REQUIRED TO CONTRIBUTE 10 PER CENT OF ITS ANNUAL INCOME TO THE CENTRAL MARKET FUND AND THE CONTRIBUTION SO PAID SHALL BE PLACED TO THE CREDIT OF THE SAID FUND. SUB-S. (2) OF S. 16 PROVID ES THAT THE CENTRAL MARKET FUND SHALL BE VESTED IN THE STATE GOVERNMENT AND DE POSITED IN THE GOVERNMENT TREASURY AT HYDERABAD. IT IS ADMINISTERE D AND APPLIED BY THE DIRECTOR OF MARKETING FOR ALL OR ANY OF THE PURPOSE S SET OUT THEREIN VIZ. ; 1(I) GRANT-IN-AID OF THE MARKET COMMITTEES FOR THE FIRST YEAR AFTER THEIR CONSTITUTION UNDER THIS ACT; (II) GRANT-IN-AID OF A DEFICIT MARKET COMMITTEE FOR A PERIOD NOT EXCEEDING THREE YEARS; (III) GRANT OF LOANS TO THE MARKET COMMITTEES AT SU CH RATES OF INTEREST AS ARE CHARGED ON LOANS GRANTED BY THE GOVERNMENT FOR DEVE LOPMENT PURPOSES; AND (IV) SUCH OTHER SIMILAR OR ALLIED PURPOSES AS MAY B E SPECIFIED BY THE GOVERNMENT BY GENERAL OR SPECIAL ORDER.' 14. IN EXERCISE OF THE POWERS CONFERRED BY S. 33 OF THE ACT, THE STATE GOVERNMENT OF ANDHRA PRADESH HAVE FRAMED THE ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKETS RULES, 1969. CHAPTER IV OF THE RULES DEALS WITH THE POWERS AND FUNCTIONS OF THE MA RKET COMMITTEES AND CHAPTER V DEALS WITH THE REGULATION OF TRADING. CHA PTER VI RELATES TO THE LEVY AND COLLECTION OF MARKET FEE, CHAPTER VII REGU LATES THE MANNER IN WHICH THE MARKET COMMITTEE FUND SHALL BE MAINTAINED AND CHAPTER VIII THE MANNER IN WHICH THE MARKET COMMITTEES SHALL FUN CTION. THE ACT AND THE RULES PROVIDE FOR A COMPLETE SCHEME FOR THE EST ABLISHMENT AND REGULATION OF MARKETS FOR THE PURCHASE AND SALE OF NOTIFIED AGRICULTURAL PRODUCE, LIVESTOCK AND PRODUCTS OF LIVESTOCK IN THE STATE OF ANDHRA PRADESH. WE ARE HERE CONCERNED WITH CHAPTER V 15. MARKETING LEGISLATION WHICH SEEKS TO ENABLE PRO DUCERS TO GET A FAIR PRICE FOR THE COMMODITIES BY ELIMINATING MIDDLEMEN AND PROVIDING A REGULATED MARKET, CANNOT BE SAID TO IMPOSE 'UNREASONABLE REST RICTION' ON THE CITIZENS RIGHT TO DO BUSINESS UNLESS IT IS CLEARLY ESTABLISH ED THAT THE PROVISIONS ARE TOO DRASTIC TO ACHIEVE THE OBJECT FOR WHICH IT WAS ENACTED. IN ORDER TO MAKE EFFECTIVE SUCH LEGISLATION FOR THE CONTROL OF A MARKET, IT WOULD B E REASONABLE FOR THE LEGISLATURE TO CONTROL TRANSACTIONS BETWEEN TRADERS AND ALSO THE SALE OF PRODUCE GROWN OUTSIDE THE MARKET AREA, IF SOLD I N THE MARKET AREA...,......' 18. SEC. 7 OF THE AMC ACT REQUIRES EVERY PERSON TO OBTA IN A LICENCE FROM THE MARKET COMMITTEE TO SET UP, ESTABLISH AND USE ANY PLACE IN THE NOTIFIED AREA FOR THE PURCHASE, SALE, STORAGE OR WEIGHMENT PROCESSING OR PRESSING OF ANY ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 25 NOTIFIED AGRICULTURAL PRODUCE. SEC. 12 EMPOWERS THE MARKET COMMITTEE TO LEVY FEES ON AGRICULTURAL PRODUCE, PURCHASE OR SALE IN THE NOTIFIED MARKET AREA. THESE MONIES FORM THE MARKET COMMITTEE FUND A ND SHALL HAVE TO BE SPENT IN ACCORDANCE WITH THE PROVISIONS OF S. 14 AND THE ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKETS RULES, 1969 (THE RULES, FOR BREVITY). 19. IT MAY, THEREFORE, BE TAKEN AS WELL ACCEPTED THAT TH E AMCS DISCHARGE AN IMPORTANT DUTY AND FUNCTION OF PROTECTING THE INTEREST OF A LARGE BODY OF PERSONS, NAMELY, AGRICULTURISTS, FARMERS AND GROWERS OF AGRICULTURAL PRODUCE AND LIVESTOCK. A MARKET COMMITTEE IS A PLAT FORM TO FACILITATE EQUAL BARGAINING POWER FOR THE SALE OR PURCHASE OF AGRICU LTURAL PRODUCE WITH THE MAIN OBJECT OF ENSURING FAIR AND REASONABLE PRICE FOR THE AGRICULTURAL PRODUCE AND LIVESTOCK BROUGHT BY THE A GRICULTURISTS AND FARMERS TO THE MARKET AREA/YARD. 20. THE MARKET COMMITTEE CONSTITUTED UNDER S. 4 OF THE AMC ACT SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL WITH POWER TO ACQUIRE, HOLD AND DISPOSE OF THE PROPERTY AND MAY BY ITS CORPORATE NAME SUE AND BE SUED. IT IS REQUIRED TO E STABLISH AS MANY NUMBER OF MARKETS AS THE GOVERNMENT MAY DIRECT FOR THE PURCHASE AND SALE OF NOTIFIED AGRICULTURAL PRODUCE AND SHALL PROVIDE SUCH FACILITIES AS MAY BE PRESCRIBED BY THE GOVERNMENT [S. 4(3)(A) OF THE AMC ACT]. THERE IS NO DISPUTE THAT ALL THE AMCS PROVIDE PLATFORMS, GODOWNS, NECESSARY INFRASTRUCTURAL FACILITIES LIKE ROADS, REST HOUSES, WATER FACILITIES IN THE MARKET AREAS AND CATER TO THE NEEDS OF THE SELLERS AND BUYERS OF THE AGRICULTURAL PRODUCE IN THE NOTIFIED MARKET AREA. C AN IT THEN BE SAID THAT THE AMC IS CONSTITUTED FOR A CHARITABLE PURPOSE I.E ., FOR THE ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY? 10. THE HONBLE HIGH COURT WENT ON TO DISCUSS THE I SSUE ELABORATELY. SUFFICE TO SAY IT WAS ADMITTED THAT GOVT HAS POWER TO GIVE DIRECTIONS AND SUCH PAYMENT AS PER PROVISIONS OF GOVERNING ACT HAS TO BE CONSI DERED FOR THE OBJECTS ONLY. THEREFORE, THE ISSUE IS NO LONGER RES INTEGRA AS TH E STATE GOVERNMENT HAS POWER TO GRANT/SANCTION AMOUNTS FOR ANY OTHER PURPOSE BY A GENERAL OR SPECIFIC ORDER. THESE FUNDS ARE TO BE UTILIZED FOR THE PURPOSE OF O BJECTS ONLY. ACCORDINGLY, THE AMOUNTS INVOLVED AND PAID AS PER THE ORDERS OF THE DIRECTOR, MARKETING ARE TO BE ALLOWED AS EXPENDITURE/APPLICATION FOR THE PURPOSE OF OBJECTS OF THE ASSESSEE. IN VIEW OF THIS, THE A.O. IS DIRECTED TO ALLOW SUCH CL AIMS, SUBJECT TO VERIFICATION OF THE DIRECTIONS OF THE DIRECTOR, MARKETING ISSUED IN THIS REGARD. THEREFORE, FOR THE PURPOSE OF VERIFICATION, THE ISSUE ON THIS IS SET A SIDE TO THE A.O. WITH A DIRECTION TO EXAMINE THE ISSUE AS DIRECTED AFTER GIVING DUE T O OPPORTUNITY TO ASSESSEE. 17. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N MENTIONED (SUPRA), WE ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIONS TOWARDS ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 26 AMOUNT SPENT TOWARDS WELFARE OF THE FARMERS AS PER THE DIRECTIONS OF THE STATE GOVERNMENT. THE ASSESSEE BEING A STATE GO VT. ORGANIZATION, CONSTITUTED UNDER SEC. 15 ANDHRA PRADESH (AGRICULTU RAL PRODUCE AND LIVESTOCK) MARKET ACT, 1966 IS AUTHORIZED TO SPEND FUNDS SPECIFIED BY THE GOVERNMENT THROUGH GENERAL OR SPECIAL ORDERS. T HEREFORE, WHEN THE GOVERNMENT IS DIRECTED TO SPEND AMOUNT FOR PARTICUL AR PURPOSE AS PER THE SAID ACT, THE ASSESSEE IS BOUND TO FOLLOW THE I NSTRUCTIONS OF THE GOVERNMENT. THE AMOUNT IS PAID TO FARMERS IN THE FO RM OF HORTICULTURE SUBSIDY FOR ESTABLISHMENT OF COLD STORAGE FACILITY, WHICH IS COMING UNDER ONE OF THE OBJECTS OF THE ASSESSEE. THEREFORE, WE A RE OF THE OPINION THAT THE AMOUNT SPENT FOR THE WELFARE OF FARMERS AND PAI D THROUGH HORTICULTURE DEPARTMENT AS DIRECTED BY THE GOVT. IS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION SUBJECT TO VERIFICATION BY THE A.O. WE DO NOT SEE A NY ERROR OR INFIRMITY IN THE ORDER PASSED BY CIT(A). HENCE, WE INCLINED TO U PHELD THE ORDER OF CIT(A) AND SET ASIDE THE ISSUE TO THE A.O. FOR THE LIMITED PURPOSE OF VERIFICATION AND DIRECT THE A.O. TO ALLOW THE CLAIM SUBJECT TO VERIFICATION OF DIRECTIONS OF THE DIRECTOR OF HORTICULTURE OR G OVT., AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. ITA NOS.543 TO 551 554 559 & 560 OF 2013 AMC POLAVARAM ETC. 27 18. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NOS.550, 551, 554, 559 & 560/VIZAG/2013 ARE ALLOWED FOR STAT ISTICAL PURPOSES AND THE APPEALS FILED BY THE REVENUE IN ITA NOS.544, 54 5, 546, 547, 548 & 549/VIZAG/2013 ARE PARTLY ALLOWED FOR STATISTICAL P URPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH FEB16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 11.2.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1(1), GUNTUR 2. / THE APPELLANT THE ITO WARD-1, ELURU 3. / THE APPELLANT THE ITO WARD-2, ELURU 4. / THE RESPONDENT M/S. AGRICULTURAL MARKET COMMIT TEE, POLAVARAM (HQ) 5. / THE RESPONDENT M/S. AGRICULTURAL MARKET COMMIT TEE, CHINTALAPUDI, W.G. DIST. 6. / THE RESPONDENT M/S. AGRICULTURAL MARKET COMMIT TEE, ELURU 7. / THE RESPONDENT M/S. AGRICULTURAL MARKET COMMIT TEE, DENDULURU 8. / THE RESPONDENT M/S. AGRICULTURAL MARKET COMMIT TEE, BHIMADOLE 9. + / THE CIT, GUNTUR 10. + / THE CIT, RAJAHMUNDRY 11. + ( ) / THE CIT (A), GUNTUR 12. # . , . , # / DR, ITAT, VISAKHAPATNAM 13 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM