ITO,Wd.-1(3), Jalna V. M/s. Krushi Utpanna Bazar Samiti, Jalna

ITA 706/PUN/2011

• Counselvise Citation: 70624514 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Business income; Charitable institution; Revenue expenditure; Capital expenditure
• Section: 10B; 12; 28; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SAILENDER KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 706 & 707/PN/2011 (ASSTT.YEARS : 2004-05, 2005-06) ITO WARD-1(3), JALNA .. APPELLANT VS. KRUSHI UTPANNA BAZAR SAMITI, SILLOD ROAD, BHOKADAN, JALNA. .. RESPONDENT PAN NO. AAAJK 0605P ASSESSEE BY : MS. ANN KAPTHUAMA RESPONDENT BY : SRI NILESH KHANDELWAL DATE OF HEARING : 19-06-2012 DATE OF PRONOUNCEMENT : 20 -06-2012 ORDER PER R.K. PANDA, AM THE ABOVE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 28-02-2011 OF THE CIT(A)-AURANGABAD RE LATING TO ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN BOTH THESE APPEALS, THEREFORE, THESE WER E HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 706/PN/2011 (ASSESSMENT YEAR 2004-05 ) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN AGRICULTURAL PRODUCE MARKET COMMITTEE ESTABLISHED U/S.39A OF MAHARASTRA AGRICULTURAL MARKETING REGULATION ACT, 1963. THE ASSESSEE SOCIETY GOT REGI STRATION U/S.12AA(1)(B)(I) OF THE INCOME TAX ACT, 1961 W.E.F.01-04-2003. THE ASS ESSEE FILED RETURN OF INCOME ON 01-11-2004 DECLARING TAXABLE INCOME AT RS. NIL. THE AO CONSIDERED THE SURPLUS AS PER INCOME & EXPENDITURE ACCOUNT OF THE ASSESSEE SOCIETY AT RS. 17,32,155/- AND DISALLOWED EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT TO THE 2 EXTENT OF RS. 5,86,256/- U/S.37 OF THE ACT TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE. WHILE DOING SO THE AO OBSERVED THAT T HOUGH THE CIT, AURANGABAD HAS GRANTED REGISTRATION TO THE ASSESSEE COMMITTEE U/S.12AA OF THE ACT W.E.F. 01- 04-2003, I.E., A.Y. 2003-04, THE OBJECT OF THE COMM ITTEE IS NOT THAT OF PUBLIC UTILITY AND HENCE THE TRUST IS NOT HAVING CHARITABLE OBJECT . ACCORDING TO THE AO, THE TRUST DOES NOT AUTOMATICALLY BECOME ENTITLED TO BENEFITS U/S.11, 12 & 13 OR OTHER PROVISIONS OF THE ACT. THE AO ALSO HELD THAT THE A SSESSEE HAS NOT PROVED THAT THE EXPENSES INCURRED WERE FOR CHARITABLE PURPOSE. HE ACCORDINGLY DETERMINED THE TOTAL INCOME AT RS. 23,18,411/-. 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAS PRODUCED BOOKS OF ACCOUNTS BEFORE THE AO AND THAT THE INCOME ASSESSED BY THE AO IS NOT AS PER THE PROVISIONS OF INCOME TAX ACT AND THE ADDITIONS MADE BY HIM AND INCOME ASSESSED BY HIM ARE NOT JUSTIFIED. IT WAS SUBMITTED THAT TH E ASSESSEE FILED AUDIT REPORT IN FORM NO.10B. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LEARNED CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, AUDITED FINAL STATEMENTS OF THE ACCOUNTS OF THE APMC, ASSESSMENT ORDER AND SUBMISSION OF THE ASSESSEE. AT THE OUTSET IT IS WORTH MENTION ED HERE THAT THE OBJECT OF THE APMCS IS THAT OF PROVIDING PROPER MARKETING FACILIT IES TO THE FARMERS FOR MARKETING OF THEIR AGRICULTURAL PRODUCE. THIS ACTI VITY IS CERTAINLY THE ACTIVITY OF GENERAL PUBLIC UTILITY AND HENCE THE SA ME IS CHARITABLE ACTIVITY. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AGRICULTURAL PRODUCE M ARKET COMMITTEE, HINGANGHAT & ORS. (2007) 291 ITR, 419 (BOM.). THER EFORE, THE PROVISIONS OF SECTION 28 TO 44DB RELATED TO BUSINESS INCOME AR E NOT APPLICABLE TO THE ASSESSEE COMMITTEE. THE PROVISIONS OF SECTION 11 T O 13 ARE, THEREFORE, APPLICABLE TO THE ASSESSEE COMMITTEE. THE AO IS, TH EREFORE, NOT JUSTIFIED IN MAKING ADDITIONS BY APPLYING PROVISIONS APPLICABLE TO BUSINESS INCOME TO THE CASE OF THE ASSESSEE. 5.1 ON PERUSAL OF AUDITED FINAL STATEMENTS OF ACCOU NT OF THE ASSESSEE COMMITTEE FOR THE YEAR UNDER APPEAL, IT IS NOTICED THAT THE ASSESSEE COMMITTEE HAS EARNED GROSS INCOME OF RS. 63,16,838/ -. AS PER AUDIT REPORT U/S.12A(B) IN FORM NO. 10B IT HAS BEEN CERTIFIED BY A CHARTERED ACCOUNTANT THAT DURING THE YEAR THE APPELLANT HAS APPLIED RS. 38,81,338/- TOWARDS 3 REVENUE EXPENDITURE AND RS. 43,88,948/- TOWARDS CAP ITAL EXPENDITURE. THEREFORE, AS AGAINST THE GROSS INCOME OF RS. 63,16 ,838/-, THE ASSESSEE COMMITTEE HAS APPLIED THE FUNDS TO THE EXTENT OF RS . 82,70,286/- FOR THE OBJECTS OF THE TRUST. FURTHER, THE ASSESSEE COMMIT TEE IS ALSO ENTITLED FOR ACCUMULATION OF 15% OF ITS GROSS INCOME AS PER PROV ISIONS OF SECTION 11(1)(A) OF THE ACT TO THE EXTENT OF RS. 9,47,526/- AS CERTIFIED BY A CHARTERED ACCOUNTANT IN FORM NO.10B. IN VIEW OF THE ABOVE FA CTS, THE AO IS NOT JUSTIFIED IN ASSESSING THE INCOME OF THE ASSESSEE C OMMITTEE AT RS. 23,18,411/- AS AGAINST RS. NIL AS RETURNED BY THE ASSESSEE. TH E ADDITION TO INCOME RETURNED IS, THEREFORE, DELETED. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) WAS CORRECT IN UPHOLDING THAT INCOME OF ASSESSEE MARKET COMMITTEE IS ELIGIBLE FOR EXEMPTION U/S.11 OF THE INCOME TAX ACT. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF AP MC, NARELA, DELHI VS. CIT & ANR. ARISING OUT OF SLP(C) NO.6757 OF 2007, INCOME OF ASSESSEE SAMITI IS EXEMPT U/S.11 OF THE INCOME TAX ACT. 6. THE LEARNED D.R. HEAVILY RELIED ON THE ORDER OF THE AO. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA VS. CIT AND ANOTHER REPORTED IN 3 05 ITR 1 SHE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT AGRICULTURAL PRODUCE MARKET COMMITTEES ARE NOT ENTITLED TO EXEMPTION U/S .10(20) OF THE I.T. ACT AFTER INSERTION OF THE EXPLANATION VIDE FINANCE ACT, 2002 W.E.F. 01-04-2003. 7. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ISSUE IS NOT EXEMPTION U/S.10(20) BUT THE APPLICABILITY OF PROVISIONS OF SECTION 11 TO 13 . REFERRING TO THE CERTIFICATE OF REGISTRATION GRANTED U/S.12AA(1)(B)(I) OF THE I.T. ACT, 1961 HE SUBMITTED THAT SUCH REGISTRATION GRANTED TO THE ASSESSEE SOCIETY IS STI LL IN FORCE AND THE SAME HAS NOT BEEN WITHDRAWN. SINCE THE ASSESSEE FULFILS ALL THE CONDITIONS FOR GETTING EXEMPTION U/S. 11 TO 13 OF THE I.T. ACT AND SINCE LEARNED CIT (A) AFTER CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AGRICULTURAL PRODUCE 4 MARKET COMMITTEE, HINGANGHAT & ORS. 291 ITR, 419 (BOM.) HAS DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE, THEREFORE, THE SAME SHOU LD BE UPHELD. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THE LEARNED CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE HAS HELD THAT THE PROVISIONS OF SECTIONS 11 TO 13 ARE APPLICABLE TO T HE ASSESSEE AND THEREFORE HE HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITIONS B Y APPLYING PROVISIONS APPLICABLE TO BUSINESS INCOME TO THE CASE OF THE AS SESSEE. WHILE DOING SO HE HAS FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH CO URT CITED SUPRA. FURTHER, THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE REGISTRATION GRANTED U/S.12AA IS STILL IN FORCE AND THE SAME HAS NOT BEE N WITHDRAWN COULD NOT BE CONTROVERTED BY THE LEARNED D.R. 9. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA (SUPRA) AS ARGUED BY THE LEARNED D.R. RELATES TO DENIAL OF EXEMPTION U/S.10(20) WHEREAS THE CASE OF THE ASSESSEE RELATES TO APPLICABILITY OF THE PROVISIONS OF SECTION 11 TO 13 . THEREFORE, THE DECISION RELIED ON BY THE REVENUE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AT ALL. THIS BEING SO AND IN ABSENCE OF ANY CONTRARY MATERIAL B ROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE LEARNED CIT(A) WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE SAME IS UPHELD. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO. 707/PN/2011 (ASSESSMENT YEAR 2005-06) : 10. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT(A) WAS CORRECT IN UPHOLDING THAT INCOME OF ASSESSEE MARKET COMMITTEE IS ELIGIBLE FOR EXEMPTION U/S.11 OF THE INCOME TAX ACT. 5 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT IN THE CASE APMC, NARELA, DELHI VS. CIT & ANR. ARISING OUT OF SLP (C) NO.6757 OF 2007, INCOME OF ASSESSEE SAMITI IS EXEMPT U/S.11 OF THE INCOME TAX ACT. 11. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS RAISED BY THE REVENUE IN THE GROUNDS APPEAL ARE IDENTICAL TO THE GROUNDS RAI SED BY THE REVENUE IN ITA NO. 706/PN/2011. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RA TIO, THE ABOVE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE 2012. SD/- SD/- (SHAILENDER KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED THE 20 TH JUNE 2012 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. DEPARTMENT 3. THE CIT(A), AURANGABAD 4 THE CIT CONCERNED 6. D.R. A BENCH, PUNE 7. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, P UNE