I.T.O., Guna v. Krishi Upaj Mandi Samiti, Ashok Nagar

ITA 272/AGR/2010 | 2007-2008
Pronouncement Date: 15-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 27220314 RSA 2010
Assessee PAN AAABK0322P
Bench Agra
Appeal Number ITA 272/AGR/2010
Duration Of Justice 1 year(s) 1 month(s) 3 day(s)
Appellant I.T.O., Guna
Respondent Krishi Upaj Mandi Samiti, Ashok Nagar
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 15-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2007-2008
Appeal Filed On 11-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO. 272/AGRA/2010 ASSTT. YEAR : 2007-08 INCOME-TAX OFFICER VS. KRISHI UPAJ MANDI SAMIT I GUNA. ASHOKNAGAR (M.P.) (PAN : AAABK 0322 P) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI VINOD KUMAR JR. D.R. FOR RESPONDENT : SHRI GAURAV GOYAL C.A. ORDER PER P.K. BANSAL A.M. : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDERS DATED 20.04.2010 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.5 95 138/- ON ACCOUNT OF AARAKSHIT NIDHI. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.77 93 681/- ON ACCOUNT OF CAPITAL EXPENDITURE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.23 51 517/- ON ACCOUNT OF U/S. 11(1)(A). 2. AS FAR AS GROUND NO.1 RELATING TO DELETION OF ADDITION OF RS.5 95 138/- ON ACCOUNT OF AARAKSHIT NIDHI IS CONCERNED WE NOTED THAT THI S BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE WHILE DECIDING THE SIMILAR A PPEALS IN THE CASES OF VARIOUS KRISHI UPAJ MANDI SAMITIS VIDE ORDER DATED 30.06.2011. THE RELEVANT PORTION OF THE ORDER OF TRIBUNAL IS REPRODUCED AS UNDER : 2 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. SO FAR AS THE GROUND NO. 1 WHICH RELATES TO DELETIO N OF ADDITION ON ACCOUNT OF ARAKSHIT NIDHI WE NOTED THIS ADDITION HAS BEEN DE LETED BY THE CIT(A) BY OBSERVING AS UNDER : FROM THE PERUSAL OF AUDIT REPORT AND ACCOUNTS OF TH E APPELLANT IT IS SEEN THAT THE APPELLANT HAS CREDIT ED AMOUNT OF RS.1 04 988/- TO AARAKSHIT NIDHI ACCOUNT AS PER MAN DATORY STATUTORY PROVISIONS OF THE MANDI ADHINIYAM AND ORD ERS OF THE MANDI BOARD BHOPAL. OUT OF THIS AARAKSHIT NIDHI AC COUNT 1/3 RD AMOUNT IS REMITTED TO THE MANDI BOARD WHEREAS 2/3 RD PORTION IS USED FOR ACTUAL PAYMENT OF PENSION AND GRATUITY TO THE RETIRED EMPLOYEES OF THE SAMITI. NO PROVISION HAS BEEN MADE BY THE APPELLANT AS REQUIRED IN THE CASE OF AN APPROVED PE NSION FUND. FURTHER THE RELIANCE OF THE A.O. ON THE NOTICE OF ENHANCEMENT IN CASE OF KRISHI UPAJ MANDI SAMITI PIPRAIGAON IS MIS PLACED AS THE THEN CIT(APPEALS) HAS ONLY PROPOSED TO DISALLOW THE AMOUNT OF AARAKSHIT NIDHI AND THE MATTER IS STILL SUBJUDICED. IT IS ALSO SEEN THAT THE THEN CIT(A) HAS RELIED ON DECISION OF HON BLE ITAT JABALPUR BENCH JABALPUR IN CASE OF KRISHI UPAJ MAN DI SAMITI KATNI VS. ACIT KATNI IN ITA NO. 244 AND 245 (JAB) OF 2006 WHILE ISSUING THE SAID NOTICE. HOWEER ON PERUSAL OF THE SAID ORDER OF HONBLE ITAT JABALPUR IT IS SEEN THAT THE FACTS O F THE APPELLANTS CASE UNDER THIS APPEAL ARE DISTINGUISHABLE. IN THE CASE OF KRISHI UPAJ MANDI SAMITI KATNI THE AMOUNT CREDITED TO ST HAI NIDHI WAS NOT CONSIDERED AS AN ACCUMULATION OF SURPLUS U/S. 1 1 OF THE I.T. ACT BECAUSE NO CLAIM OF EXEMPTION U/S. 11 WAS MADE BY T HE ASSESSEE BEFORE THE A.O. THE ITAT THEREFORE HELD THAT IF A NY DEDUCTION WHICH HAS NOT BEEN CLAIMED BEFORE THE A.O. AND IF C ONSIDERED AND ALLOWED NOW WOULD RESULT IN DETERMINING THE ASSESSE D INCOME LOWER THAN THE INCOME DECLARED IN THE VOLUNTARY RET URN FILED BY THE ASSESSEE ON WHICH SELF-ASSESSMENT TAX HAS ALSO BEEN PAID. IN THE CASE OF APPELLANT CLAIM FOR EXEMPTION U/S. 11 HAS DULY BEEN MADE BEFORE THE A.O. WHILE FILING OF RETURN AND DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE ONLY RELEVANT FACT NOW TO BE SEEN IN THE CASE OF THE APPELLANT IS TO EXAMINE WHETHER PRE SCRIBED PERCENTAGE OF THE INCOME HAS BEEN APPLIED TOWARDS T HE OBJECTS OF THE SAMITI AND WHETHER ANY VIOLATION OF PROVISIONS OF SECTION 11-13 OF THE I.T. ACT HAVE BEEN MADE BY THE APPELLANT. TH E FACT THAT THE SAID FUND IS NOT AN APPROVED PENSION FUND SHALL NOT DEBAR THE APPELLANT FROM CLAIMING EXEMPTION IF THE PRESCRIBED CONDITIONS AS MENTIONED ABOVE HAVE BEEN FULFILLED. THE A.O. HAS N OT BROUGHT ANY MATERIAL ON RECORD NOR ANY ADVERSE FINDING BEEN GIV EN THAT THE APPELLANT HAS VIOLATED THE PRESCRIBED CONDITIONS DI SENTITLING IT FROM CLAIMING EXEMPTION U/S. 11 OF THE I.T. ACT. THE A.O . WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF AARA KSHIT NIDHI. THE ADDITION OF RS.1 04 988/- IS DELETED. 3 5. SIMILAR FINDING HAS BEEN GIVEN WHILE DELETING TH E SAME ADDITION IN THE CASES OF OTHER SAMITIS BEFORE US. IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. THE ASSESSING OFFICER MADE THE DISALLOWANCE IN RESPECT OF EXPENDI TURE INCURRED ON ACCOUNT OF AARAKSHIT NIDHI WHILE HOLDING THAT THE ASSESSEE HAS CARRIED OUT THE BUSINESS DURING THE YEAR. THE FINDING OF THE CIT(A) HAS BECO ME FINAL THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS ACTIVITIES BUT THE ASSESSE E IS ENTITLED FOR EXEMPTION U/S. 11. UNDER SECTION 11A THE ASSESSEE IS ENTITLED FOR DEDUCTION IF THE INCOME HAS BEEN APPLIED BY THE ASSESSEE FOR THE CHARITABLE PUR POSE. THE ASSESSEE HAS INCURRED THE EXPENDITURE ON AARAKSHIT NIDHI AS PER THE STATUTORY PROVISIONS OF THE MANDI ADHINIYAM AND ORDERS OF THE MANDI BOARD BHOP AL. THIS IS NOT DENIED BY THE LD. DR AND NO CONTRARY EVIDENCE IN THIS REGARD WAS FILED BEFORE US. IN OUR OPINION THE CIT(A) HAS RIGHTLY DELETED THE DISALLO WANCE AS THE SUM OF RS.1 04 988/- WILL BE TREATED AS APPLICATION OF THE INCOME U/S. 11 OF THE INCOME- TAX ACT. THUS GROUND NO. 1 STANDS DISMISSED. 3. RESPECTFULLY FOLLOWING THE DECISION OF THIS BENC H OF TRIBUNAL GROUND NO.1 OF THE REVENUE IS DISMISSED. 4. THE SECOND GROUND RELATES TO THE DELETION OF AD DITION MADE ON ACCOUNT OF CAPITAL EXPENDITURE. THE ASSESSING OFFICER COMPUTED THE INC OME OF THE ASSESSEE AS THE ASSESSEE CARRIED OUT THE BUSINESS AND ACCORDINGLY DISALLOWED THE CAPITAL EXPENDITURE INCURRED BY EACH OF THE SAMITIS. THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS BENCH OF TRIBUNAL DATED 30.06.2011 (SUPRA) AS UNDER : 7. AFTER HEARING THE RIVAL SUBMISSIONS WE NOTED T HAT THE FINDING OF THE CIT(A) THAT THE INCOME OF THE ASSESSEE HAS TO BE CO MPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 HAS BECOME FINAL AS THE R EVENUE HAS NOT COME IN APPEAL AGAINST THIS FINDING AND IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT THE INCOME OF A CHARITABLE INSTITUTION IS ENTITLED FOR DEDUCTION AS CONTEMPLATED U/S. 11(1)(A). UNDER SECTION 11 ANY EXPENDITURE WH ETHER REVENUE OR CAPITAL INCURRED FOR THE OBJECTS OF THE CHARITABLE INSTITUT ION AND THE SAME IS ALLOWABLE U/S. 11(1) OF THE ACT. IT IS NOT DENIED THAT THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE DOES NOT RELATE TO THE OBJECTS OF THE INST ITUTION. THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF SRMMCTM TRIPUTI TRUST VS. CIT 230 ITR 636 IN WHICH IT WAS HELD THAT THE CAPITAL EXPENDITURE S HOULD BE CONSIDERED AS 4 APPLICATION PROVIDED THEY ARE TOWARDS THE OBJECTS O F THE ORGANIZATION. NO MATERIAL WAS BROUGHT TO OUR KNOWLEDGE TO PROVE CAPI TAL EXPENDITURE INCURRED BY THE SAMITI NOT RELATING TO THE FULFILLMENT OF THE O BJECTS OF THE SAMITI. UNDER THESE FACTS AND CIRCUMSTANCES IN OUR OPINION NO INTERFE RENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) IN ALL THESE APPEALS. 5. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINA TE BENCH GROUND NO.2 RAISED BY REVENUE ALSO STANDS DISMISSED. 6. GROUND NO. 3 RELATES TO THE DELETION OF THE ADDI TION OF RS.23 51 517/- WHICH WAS CLAIMED BY ASSESSEE AS DEDUCTION U/S. 11(1)(A) OF T HE INCOME-TAX ACT. THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE WHILE COMPUTING HIS TOTAL INCOME AS CHARITABLE TRUST CLAIMED DEDUCTION U/S. 11(1)(A) A S INCOME ACCUMULATED OR SET APART RS.23 51 517/- IN THE FOLLOWING MANNER : COMPUTATION OF INCOME INCOME RECEIVED DURING THE YEAR 49602073.00 LESS: AMOUNT APPLIED TO CHARITABLE OR RELIGIOUS PUR POSES IN INDIA DURING THE PREVIOUS YEAR 3662 5630.00 12976443.00 ADD: AMOUNT INADMISSIBLE U/S. 4)(A) 6100 0.00 13037443.00 LESS: AMOUNT APPLIED TO CHARITABLE OR RELIGIOUS PUR POSES IN INDIA DURING THE PREVIOUS YEAR 7793681 .00 (AS PER ANNEXURE A (PART 2) LESS: DEPRECIATION 2892245.00 10685926.00 (AS PER SCHEDULE A) 2351517.00 LESS: INCOME ACCUMULATED OR SET APART/FINALLY SET A PART FOR APPLICATION TO CHARITABLE OR RELIGIOUS PURPOSE 7440311 2351517.00 (MAX. 15% OF THE INCOME OF INSTITUTION AS P ER SEC.11(1)(A) __________ NIL TAXABLE INCOME __________ ADVANCE INCOME TAX PAID 1250000.00 AMOUNT REFUNDABLE 1250000.00 5 THE ASSESSING OFFICER SINCE TREATED THE GROSS RECEI PTS OF THE ASSESSEE TO BE THE BUSINESS INCOME DISALLOWED THE WHOLE OF THE DEDUCTION U/S. 11(1)(A). WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT(A) WITHOUT LOOKING INTO THE CONDITIONS OF SECTION 11(1)(A) DELETED THE ADDITION OF RS.23 51 517/-. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. THE ASSESSEE WAS ALLOWED REGISTRATION U/S. 12A. THEREFO RE IN OUR VIEW THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 11(1)(A). SECTION 11(1)(A) READS AS UNDER :- 11(1). SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63 THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INC OME IS APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOME IS AC CUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 8. FROM THE READING OF THIS SECTION IT IS APPARENT THAT THE REFERENCE UNDER SUB-SECTION (A) IS TO INCOME AND NOT TO TOTAL INCOME. THE W ORD TOTAL INCOME HAS BEEN DEFINED IN SUB-SEC.(2) OF SECTION 45. THIS MEANING CANNOT B E GIVEN TO THE WORD INCOME USED IN SECTION 11(1)(A). MADRAS HIGH COURT IN THE CASE OF CIT VS. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD.) HELD TH AT TAKING INTO ACCOUNT THE PURPOSE FOR WHICH THE CONDITION OF SECTION 11(1)(A) ARE IMP OSED IT IS CLEAR THAT ONE HAS TO CONSIDER THE INCOME IN THE CONTEXT WHAT IS AVAILABL E IN THE HANDS OF THE ASSESSEE SUBJECT OF COURSE TO ANY ADJUSTMENT OF THE EXPENSES EXTRAN EOUS TO THE TRUST. THE INCOME HAS TO BE UNDERSTOOD IN POPULAR OR IN GENERAL SENSE AND NOT I N THE SENSE IN WHICH THE INCOME IS ARRIVED FOR THE PURPOSE OF INCOME-TAX ASSESSMENT BY APPLYING CERTAIN ARTIFICIAL PROVISIONS 6 OR GIVING OR DENYING DEDUCTION. THUS THE ASSESSING OFFICER WHILE COMPUTING THE INCOME FOR THE PURPOSE OF SECTION 11(1)(A) OUT OF THE REC EIPTS OF THE CHARITABLE INSTITUTION THE EXPENDITURE INCURRED FOR EARNING OF SUCH RECEIPTS S HOULD BE DEDUCTED. THE NET AMOUNT WHATEVER REMAINS WOULD BE AVAILABLE FOR APPLICATIO N FOR CHARITABLE PURPOSES. IN APPLYING THE INCOME ALWAYS EVEN THE CAPITAL EXPENDITURE IS A LSO TREATED TO BE AN APPLICATION FOR CHARITABLE PURPOSE. SINCE WHILE ARRIVING INCOME TH E EXPENDITURES ARE ALWAYS DEDUCTED OUT OF THE GROSS RECEIPTS THEREFORE THE CHARITABL E INSTITUTION IS ALSO ENTITLED FOR THE DEPRECIATION. WE NOTED IN THE COMPUTATION STATEMENT ITSELF THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AMOUNTING TO RS.2892245/- WHICH WAS AL LOWED TO HIM. WE ALSO NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 11(1)(A) TO THE EXTENT OF RS.2351517/- ARGUING THAT IT COMES TO 4.74% OF THE GROSS INCOME. IN OUR OPINION THE ASSESSEE IS NOT CORRECT IN LAW TREATING THE GROSS RECEIPTS TO BE THE INCOME FO R THE PURPOSE OF SECTION 11(1)(A). THE INCOME FOR THE PURPOSE OF SECTION 11(1)(A) WILL BE TAKEN GROSS RECEIPTS I.E. 49602073/- MINUS THE EXPENDITURE INCURRED BY THE ASSESSEE AS G IVEN IN PART 1 OF ANNEXURE A AMOUNTING TO RS.36625630/-. THIS EXPENDITURE IN OUR OPINION DOES NOT REPRESENT APPLICATION OF INCOME TO WHICH THE LEARNED AR ALSO AGREED AT THE TIME OF HEARING. THE DEPRECIATION IS ALSO AN EXPENDITURE WHICH HAS ALSO TO BE DEDUCTED FOR COMPUTING THE INCOME FOR THE PURPOSE OF SECTION 11(1)(A) AND WHAT EVER THE NET AMOUNT COMES BY DEDUCTING THE SUM OF RS.36625630/- AND DEPRECIATION AMOUNTING TO RS.2 89 2245/- OUT OF RS.49602073/- THE AMOUNT SO ARRIVED WILL IN OUR O PINION REPRESENT THE INCOME FOR THE PURPOSE OF SECTION 11(1)(A) AND THE ASSESSEE CAN CL AIM DEDUCTION FOR ACCUMULATION OR SET APART UPTO 15% OF SUCH AMOUNT. WE NOTED THE DEDUCT ION CLAIMED BY THE ASSESSEE AMOUNTING TO RS.2351517/- IS MUCH MORE THAN 15%. TH E CIT(A) HAS NOT LOOKED INTO THIS 7 ASPECT AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF THE SAID AMOUNT. OUR SAID VIEW IS SUPPORTED BY THE FOLLOWING DECISIONS : (I). CIT VS. ESTATE OF V.L. ETHIRAJ 136 ITR 12(MAD .) (II). CIT VS. TRUSTEES OF HEH NIZAMS SUPPLEMENTAL R ELIGIOUS ENDOWMENT TRUST 127 ITR 378 (AP) (III). CIT VS. ST. GEORGE FORANA CHURCH 170 ITR 62 (IV). CIT VS. PROGRAM FOR COMMUNITY ORGANISATION 2 28 ITR 620 (KER) (V). CIT VS. GANGA CHARITY TRUST 162 ITR 612 (GUJ) . (VI). CIT VS. JAI SHREE CHARITY TRUST 159 ITR 280 (CAL.) (VII). CIT VS. BIRLA JANHIT TRUST 208 ITR 372 (CAL .). WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION TO THE ASSESSEE U/S. 11(1)(A) LIMITIN G TO 15% OF THE INCOME WHICH MAY BE COMPUTED IN THE MANNER AS HAS BEEN DISCUSSED BY US IN THE PRECEDING PARAGRAPH I.E. GROSS RECEIPTS MINUS EXPENDITURE MINUS DEPRECIATION . THUS THIS GROUND IS PARTLY ALLOWED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.07.11 . SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH JULY 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT CONCERNED 5. DR ITAT AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY