Agricultural Market Committee, Eluru v. Income Tax Officer, Eluru

NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.527/VIZAG/2010 ASSESSMENT YEAR: 2007 - 08 AGRICULTURAL MARKET COMMITTEE BHIMADOLE VS. ITO WARD-2 ELURU (APPELLANT) PAN NO:AAALA 0379 G (RESPONDENT) ITA NO.528/VIZAG/2010 ASSESSMENT YEAR: 2007-08 AGRICULTURAL MARKET COMMITTEE CHINTALAPUDI VS. ITO WARD-2 ELURU (APPELLANT) PAN NO:AAALA 0350 M (RESPONDENT) ITA NO.529/VIZAG/2010 ASSESSMENT YEAR: 2007-08 AGRICULTURAL MARKET COMMITTEE UNGUTURU VS. ITO WARD-2 ELURU (APPELLANT) PAN NO:AAALA 0357 N (RESPONDENT) ITA NO.531/VIZAG/2010 ASSESSMENT YEAR: 2007-08 AGRICULTURAL MARKET COMMITTEE ELURU VS. ITO WARD-2 ELURU (APPELLANT) PAN NO:AAALA 5597 K (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT (DR) ORDER PER BENCH: THESE APPEALS FILED AT THE INSTANCE OF THE ASSESSEE S ARE DIRECTED AGAINST THE ORDERS OF THE LEARNED CIT (A) RAJAHMUN DRY IN THE HANDS OF THE EACH OF THE ASSESSEES MENTIONED ABOVE AND THEY RELA TE TO THE ASSESSMENT YEAR 2007-08. NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 2 OF 6 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 SECTION 10(26AAB) IS NOT RETROACTIVE IN OPERATION A S HELD BY HON'BLE ITAT VISAKHAPATNAM. ACCORDINGLY THE OTHER GROUNDS OF APP EAL 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 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 NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 3 OF 6 TRIBUNAL HAS RENDERED THE DECISION BY OVERLOOKING T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF AGRICULTURAL PRODUCE M ARKET COMMITTEE NARELA VS. CIT (SUPRA). 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WE MAY CLARIFY HERE THAT THE ITAT VISAKHAPATNAM BENCH HAS NOT OVER LOOKED BUT HAS DULY CONSIDERED THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE NARELA C ITED (SUPRA) WHILE DECIDING THE ORDER DATED 28.11.2008 WHICH WAS RELI ED 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 A CT 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 TH E 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 28.11.2008 REFERRED (SUPRA) AND ACCORDINGLY REACHE D THE DECISION THAT THE SEC. 10(26AAB) IS RETRO ACTIVE IN ITS OPERATION. W ITH REGARD TO THE INTERPRETATION OF THE DECISIONS OF HON'BLE SUPREME COURT FOR THE SAKE OF NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 4 OF 6 CLARITY WE EXTRACT BELOW THE FOLLOWING OBSERVATION S MADE BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUN ENGINEERIN G WORKS PVT. LTD. (198 ITR 297).: IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TRE AT IT TO BE THE COMPLETE LAW DECLARED BY THIS COURT. THE JUD GMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM T HE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THE COURT. A DECISION OF THIS CO URT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN W HICH IT IS RENDERED AND WHILE APPLYING THE DECISION TO A LATE R CASE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRI NCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT DIVORCED FROM THE C ONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT TO SUPPORT THEIR REASONINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA [1971] 3 SCR 9; AIR 1971 SC 530 THIS COURT CAUTIONED (AT PAGE 578 OF AIR 1971 SC) IT IS NOT PROPER TO REGARD A WORD A CLAUSE OR A SENTENCE OCCUR-RING IN A JUDGMENT OF THE SUPREME COURT DIVORCED FROM ITS CONTEXT AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT. 7. COMING TO THE ISSUE ON HAND THIS TRIBUNAL HA S ALREADY TAKEN A VIEW ON THAT ISSUE AND WE EXTRACT BELOW THE RELEVANT OBSERV ATIONS 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 NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 5 OF 6 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. 8. 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 9. IN THE RESULT THE APPEALS FILED BY THE ASSES SEES ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 8 TH FEBRUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 08-02- 2011 NOS 527 TO 529 AND 531 AMC BHIMADOLE AND OTHERS PAGE 6 OF 6 COPY TO 1 AGRICULTURAL MARKET COMMITTEE BHIMADOLE 534 427 WEST GODAVARI 2 AGRICULTURAL MARKET COMMITTEE CHINTALAPUDI 534 4 60 WEST GODAVARI 3 4. AGRICULTURAL MARKET COMMITTEE UNGUTURU 534 406 AGRICULTURAL MARKET COMMITTEE NEAR EASTERN LOCKS ELURU 5 THE ITO WARD-2 ELURU 6 THE CIT (A) RAJAHMUNDRY 7 THE CIT RAJAHMUNDRY 8 THE DR ITAT VISAKHAPATNAM. 9 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM