ITO, SRIGANGANAGAR V. Krishi Upaj Mandi Samittee, SRIKARANPUR

ITA 98/JODH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59578 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Non-deduction of tax
• Section: 12A; 194C; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL JODHPUR BENCH , JODHPUR BEFORE S/SHRI R.K. GUPTA, JM AND SANJAY ARORA, AM I.T.A NO. 98/JU/2010 ASSESSMENT YEAR: 2007-08 THE INCOME TAX OFFICER, WARD- 2, SRIGANGANAGAR. VS KRISHI UPAJ MANDI SAMITI, SRI KARANPUR. [PAN: AABTK 0299A] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI SUNIL MATHUR, CIT- DR ASSESSEE BY NONE, WRITTEN SUBMISSIONS DATE OF HEARING 21/03/2012 DATE OF PRONOUNCEMENT 23/03/2012 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BIKANER (CIT(A) FOR SHORT) DATED 11-12-2009, PARTLY ALLOWING THE ASSESSEE'S APPEAL AGITATING ITS ASSESSMENT U/S. 14 3 (3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 17-08-2009 FOR THE ASSESSMENT YE AR (A.Y.) 2007-08. 2. NONE APPEARED FOR OR ON BEHALF OF THE ASSESS EE WHEN THIS APPEAL WAS CALLED OUT FOR HEARING; THE ASSESSEE HAVING CHOSEN TO RELY ON ITS WRITTEN S UBMISSION, PLACED ON RECORD, FOR THE PURPOSE. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL O N RECORD. THE APPEAL RAISES TWO GROUNDS, WHICH WE SHALL TAKE UP IN SERIATIM. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE U /S. 40(A)(IA) OF THE ACT IN THE SUM OF RS. 74.50 LACS IN RESPECT OF THE AMOUNT INCURRED FOR CONSTRUC TION/REPAIR WORK UNDERTAKEN DURING THE YEAR THROUGH PAYMENT TO RAJASTHAN STATE AGRICULTURE MARK ETING BOARD (RSAMB FOR SHORT), WHICH 2 IS ALSO A DEPARTMENT, AS IS THE ASSESSEE, UNDER THE DIRECTORATE OF AGRICULTURE MARKETING BOARD, AN INSTITUTION ESTABLISHED UNDER THE RAJASTHAN AGRI CULTURE PRODUCE ACT, 1961. THE SAME WAS ADDED AS NO TAX AT SOURCE U/S. 194C OF THE ACT IN R ESPECT OF THIS SUM HAD ADMITTEDLY BEEN DEDUCTED BY THE ASSESSEE. SEVERAL ARGUMENTS WERE RA ISED IN APPEAL. FIRSTLY, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE AS THE ASSESSEE IS A PUBLIC CHARITABLE TRUST REGISTERED U/S. 12A OF THE ACT, SO THAT ITS INCOME IS EXEMPT ON APPLICA TION FOR CHARITABLE PURPOSES U/SS. 11 AND 12 THEREOF. SECONDLY, THERE WAS NO CONTRACTOR-CONTRACT EE RELATIONSHIP BETWEEN THE ASSESSEE AND RSAMB; THE LATTER BEING AN EXECUTING AGENCY FOR CON STRUCTION WORKS OF THE ASSESSEE, A SISTER DEPARTMENT. THERE WAS ONLY TRANSFER OF FUNDS TO RSA MB, WHICH EXECUTED THE WORK BY ENTERING INTO CONTRACT/S WITH OTHER PARTIES. THE DECISION BY THE TRIBUNAL (JODHPUR BENCH) IN THE CASE OF KRISHI UPAJ MANDI SAMITI, DEGANA (IN ITA NO. 382/JU/2009) WAS ALSO REFERRED IN THIS REGARD, WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF SEC . 40(A)(IA) WOULD APPLY ONLY WHERE INCOME IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEECONT RACTOR. THE LD. CIT(A) ALLOWED THE ASSESSEES CLAIM ON THIS BASIS. 4.1 WE FIRSTLY OBSERVE THAT THE TWO ARGUMENTS, AS AFORE-STATED, ADVANCED BY THE ASSESSEE BEFORE HIM, AND WHICH FOUND FAVOUR WITH THE LD. CIT (A), ARE MUTUALLY EXCLUSIVE, SO THAT THEY WOULD APPLY IN ALTERNATIVE TO EACH OTHER. SECTION 1 94C WOULD APPLY ONLY WHERE THERE IS A CONTACTEE-CONTRACTOR RELATIONSHIP, I.E., BETWEEN TH E ASSESSEE AND RSAMB, AND IN WHICH CASE THE NON-DEDUCTION OF TAX AT SOURCE HAS BEEN HELD AS NOT LEADING TO ANY DISALLOWANCE U/S. 40(A)( IA) OF THE ACT IN VIEW OF THE CONTRACTEES INCOME BEING EX EMPT FROM TAX. ON THE OTHER HAND, IF THERE IS NO CONTRACTOR-CONTRACTEE RELATIONSHIP, THERE IS NO QUESTION OF AN OBLIGATION FOR TAX DEDUCTION U/S. 194C, FOR S. 40(A)(IA) TO APPLY. NO CASE FOR DISALL OWANCE U/S. 40(A)(IA) IS THUS MADE OUT IN EITHER CASE. WE MAY EXAMINE THE ASSESSEES CASE ON FACTS. THE LD. CIT(A) HAS STATED THAT THE ASSESSEE IS ONLY PROVIDING FUNDS TO RSAMB, WHICH IS NOT EXEC UTING THE CONSTRUCTION/ REPAIR WORK ITSELF. WE ARE UNABLE TO APPRECIATE THE SAID FINDINGS AS A CONTRACTEE WOULD ONLY PROVIDE FUNDS TO THE CONTRACTOR, WHO IS SUPPOSED TO EXECUTE THE WORK. TH E SAID FINDING IS, THUS, OF NO MOMENT. BESIDES, IT IS ALSO DE HORS ANY MATERIAL ON RECORD, SO THAT IT IS NOT CLEAR IF THE RSAMB IS EXECUTING THE CONTRACT WORK ITSELF, IN WHICH CASE I T IS ONLY A CONTRACTOR, AND EVEN WHERE IT ENGAGES THIRD PARTIES FOR THE PURPOSE, WHO WOULD BE SUB-CONTRACTORS, OR ACTING ONLY AS A 3 CHANNELIZING AGENCY THROUGH WHOM THE FUNDS ARE BEIN G ROUTED, IN WHICH CASE ITS FUNCTIONS AND RESPONSIBILITIES, AND THUS THE EXACT BUSINESS RELAT IONSHIP WITH THE ASSESSEE, WOULD NEED TO BE ASCERTAINED, SO AS TO BE ABLE TO ISSUE ANY DEFINITE FINDING/S OF FACT. THAT IS, IS FACTUALLY INDETERMINATE, ONLY AFTER WHICH DETERMINATION IT WO ULD BE POSSIBLE TO CONCLUDE THE ISSUE ARISING OUT OF THE ARGUMENT RAISED. THE SECOND ARGUMENT WOU LD, HOWEVER, HOLD. THAT IS, THAT A DISALLOWANCE U/S. 40(A)(IA) FOR NON-DEDUCTION OF TA X AT SOURCE WOULD ARISE ONLY IN THE CASE OF COMPUTATION OF BUSINESS INCOME CHARGEABLE TO TAX, S O THAT THERE IS NO QUESTION OF THE SAME WHERE THE PERSON COMMITTING THE SAID DEFAULT IS ONE HAVING NO INCOME CHARGEABLE TO TAX UNDER CHAPTER IV-D, BEING ONE WHOSE INCOME IS EXEMPT FROM TAX. A DISALLOWANCE COULD ARISE ONLY WHERE DEDUCTION FOR THE RELEVANT PAYMENT AS BUSINES S EXPENDITURE IS BEING SOUGHT. IT IS ONLY WHERE THE EXPENDITURE IS BEING CLAIMED IN THE COMPU TATION OF THE TOTAL INCOME LIABLE TO TAX THAT THIS DISALLOWANCE WOULD HAVE RELEVANCE. THE ASSESSE E IS REGISTERED U/S. 12A OF THE ACT AS A CHARITABLE TRUST, VIDE THE ORDER DATED 17-10-2005 B Y THE CIT, BIKANER. THAT BEING THE CASE, WE ARE IN AGREEMENT WITH THE FINDING OF THE FIRST APPE LLATE AUTHORITY ON THIS ASPECT OF THE MATTER, SO THAT THE IMPUGNED DISALLOWANCE STANDS VALIDLY DELET ED BY THE LD. CIT(A). WE DECIDE ACCORDINGLY. 4.2 THE SECOND GROUND IS IN RESPECT OF ASSESS MENT OF INCOME TO THE EXTENT OF RS. 5,60,650/- BY THE AO ON THE GROUND OF NON-APPLICATION OF INCOM E BY THE ASSESSEE FOR CHARITABLE PURPOSES TO THAT EXTENT. THE SAID AMOUNT IS STATED TO HAVE BEEN RETAINED BY THE INCOME TAX DEPARTMENT BY ATTACHMENT OF THE ASSESSEE'S BANK ACCOUNT, SO THAT IT WAS THUS NOT AVAILABLE WITH IT FOR APPLICATION, AND HENCE COULD NOT BE APPLIED. ON THE BASIS OF A HOST OF CASE LAW CITED BY THE ASSESSEE BEFORE HIM, THE LD. CIT(A) HELD THAT THE P REPONDERANT JUDICIAL THINKING IN THE MATTER IS THAT THE PAYMENT OF INCOME-TAX IS TO BE CONSIDERED AS AN APPLICATION OF INCOME FOR CHARITABLE PURPOSES BECAUSE SUCH PAYMENT IS MADE TO PRESERVE T HE CORPUS OF THE TRUST, AND IT IS IMMATERIAL WHETHER THE TAX LIABILITY PERTAINS TO THE CURRENT Y EAR OR EARLIER YEARS. THE ASSESSEE HAS RELIED ON THE DECISION IN THE CASE OF ITO, SURATGARH VS KRISHI UPAJ MANDI SAMITI (IN ITA NO. 248/JU/2010 DATED 16-12-2011), CLAIMING THE MATTER TO BE COVERED IN ITS FAVOUR BY THE SAID DECISION. THOUGH THE SAID DECISION IS NOT ON RECORD , WE YET FIND MUCH MERIT IN THE ASSESSEE'S CLAIM. THIS IS AS IF THE AMOUNT APPROPRIATED BY THE REVENUE IS AGAINST TAXABLE INCOME, AS WOULD 4 IN ALL PROBABILITY BE THE REVENUES CLAIM, THERE IS NO QUESTION OF THE ASSESSEE BEING OBLIGED TO APPLY THE CORRESPONDING INCOME, OR AT LEAST THE AMO UNT OF TAX THEREON, FOR CHARITABLE PURPOSE. IF, ON THE OTHER HAND, THE SAME STAND WRONGLY RETAINED BY THE REVENUE, AS CONTENDED BY THE ASSESSEE, IT IS CONSTRAINED NOT TO APPLY THE SAME, BEING NOT AVAILABLE WITH IT. THE SAME, THUS, CAN ONLY BE CONSIDERED AS PAYMENT FOR THE PRESERVATION OF THE CORPUS OF THE ASSESSEE-TRUST, AS HAS BEEN HELD BY THE HIGHER COURTS OF LAW, SO THAT THE SAME IS TO BE CONSIDERED AS AN APPLICATION OF FUNDS FOR CHARITABLE PURPOSE. NEEDLESS TO ADD, IF A T ANY TIME IN FUTURE THE AMOUNT IS REFUNDED BY THE REVENUE, WITH OR WITHOUT INTEREST, THE ENTIRE R ECEIPT, SAVE TO THE EXTENT, IF ANY, FORMING PART OF THE ASSESSEE'S CORPUS, WOULD BE ALLOWABLE ON BEI NG APPLIED BY IT FOR CHARITABLE PURPOSES, I.E., SUBJECT TO THE SATISFACTION OF THE CONDITIONS OF SE CTIONS 11 AND 12 OF THE ACT. THE IMPUGNED ORDER, THUS, STANDS TO BE CONFIRMED ON THIS ISSUE A S WELL, AND WE HOLD SO, DECIDING ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . SD/- SD/- (R.K. GUPTA) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: JODHPUR DATED: MARCH 23 , 2012 *MISHRA COPY TO: 1. THE INCOME TAX OFFICER, WARD-2, SRIGANGANAGAR 2. M/S.KRISHI UPAJ MANDI SAMITI, SRI KARANPUR 3. THE CIT(A), BIKANER 4. THE CIT CONCERNED. 5. THE D.R., I.T.A.T. 6. GUARD FILE (ITA NO.98/JU/2010). BY ORDER (ASSISTANT REGIST RAR) ITAT, JODHP UR BENCH