Income Tax Appellate Tribunal - Jaipur
Krishi Upaj Mandi Samiti, Jhalawar vs Department Of Income Tax on 10 November, 2014
IN THE INCOMETAX APPELLATE TRIBUNAL
JAIPUR BENCH: JAIPUR
(BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA)
I.T.A. No. 429/JP/2011
Asstt. Year- 2004-05
PAN No. AAALK 0403 D
The I.T.O. M/s Krishi Upaj Mandi Samiti,
Jhalawar. Vrs. Bhawanimandi, Rajasthan.
(Appellant) (Respondent)
Department by :- Shri Rajesh Ojha
Assessee by :- Shri Raghav Kumar Bajaj.
Date of hearing : 10/09/2014
Date of pronouncement : 10/11/2014
ORDER
PER: T.R. MEENA, A.M. This is an appeal filed by the Revenue against the order dated 10/03/2011 of the learned C.I.T.(A), Kota for the A.Y. 2004-05. The sole ground of appeal is against deleting the depreciation on assets of Rs. 23,88,052/- when the same was already allowed as application of income with grant of registration U/s 12AA(1) of the Income Tax Act, 1961 (hereinafter referred as the Act).
2. The assessee filed return for A.Y. 2004-05 on 27/3/2006, which was scrutinized U/s 143(3) of the Act on 11/12/2006 on the total income of Rs. 1,13,92,710/-. The assessee preferred appeal before the learned 2 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti CIT(A), Kota and the learned CIT(A), Kota partly allowed the appeal vide order dated 26/2/2007. The department as well as the assessee was aggrieved with the order of the learned CIT(A) and filed further appeal before the Hon'ble ITAT, Jaipur Bench, Jaipur. The Hon'ble ITAT, Jaipur decided both the appeals of department and assessee vide order dated 31/3/2008 with direction to make the assessment for the period under consideration afresh after affording adequate opportunity of being heard to the assessee under the registration U/s 12AA of the Act. The learned Assessing Officer gave reasonable opportunity of being heard to make compliance of Hon'ble ITAT. Krishi Upaj Mandi Samiti, Bhawanimandi derived income from mandi fee, rental income and interest of bank deposits. During the year under consideration, the assessee samiti had shown surplus of Rs. 5,57,900/- over the expenditure. The assessee samiti had claimed exemption U/s 10(20)/12A of the Act in computation of income. The assessee samiti had filed its return assuming its status as AOP-Trust but the registration U/s 12AA granted in compliance to Hon'ble ITAT, Jaipur Bench, Jaipur order, which has not been accepted by the department and filed appeal before the Hon'ble Rajasthan High Court, Jaipur. Therefore, he treated assessee's status as Artificial Juridical Person. The assessee submitted before the Assessing Officer that as per Section 17 of the Rajasthan Agricultural 3 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti produce Market Board Act, 1961, it empowers the market committee to collect market fees from the licensee in the prescribed manner on agricultural produce brought or sold by them in the market area at such rate as may be specified in the official gazette. Although, the fees is not a tax it is a fee correlated to the services rendered by the market committee in the market area. The source of the applicant is fees collected on the transaction made in mandi area. Krishi Upaj Mandi Samiti, Bhawanimandi has been granted registration U/s 12AA w.e.f. 01/4/2003 i.e. date of establishment of the samiti. The learned Assessing Officer reproduced the submission made by the applicant on page Nos. 4 to 8 of the assessment order. After considering the assessee's reply, it has been held that burden of proof is on the revenue to show that the income is liable to tax under the statute but the onus of showing a particular class of income is exempt from taxation is on the assessee. The learned CIT, Kota has given a categorical finding that the activities of the samiti are not charitable and not within the four corners of Section 11 read with Section 2(15) of the Act. Therefore, the learned CIT has rightly denied registration U/s 12A of the Act. The learned Assessing Officer has commented on the order of the ITAT on page 10 paragraph-c that the Hon'ble ITAT's order is erroneous for the reasons that the samiti has been established for the purpose of stopping 4 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti exploitation of the farmers. He finally analysed all the aims and objects of the Krishi Upaj Mandi Samiti, Bhawanimandi in his assessment order as well as order of the ITAT and relied upon the various case laws. He also found the activities of the samiti charitable, gave the finding on statutory contribution and expenditure towards construction/repair of the link road. He disallowed the depreciation claimed by the samiti at Rs. 23,83,052/- and assessed the samiti's income at Rs. 1,13,92,710/-.
3. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter to the learned CIT(A), who had allowed the appeal by considering the Hon'ble Jurisdictional High Court decision in the case of K.U.M.S., Jaisalmer 216 CTR 277, KUMS, Morena 308 ITR 380 (MP), KUMS Gongalai 218 CTR 512 (MP), Section 10 (26AAB), KUMS, Srimadhopur I.T. Appeal No. 167/2010 order dated 18/8/2010 (Rajasthan High Court) and held as under:
"4.0 In view of this legal position and respectfully following decisions of Hon'ble Jurisdictional High Court in the cases of KUMS, Jaisalmer and KUMS Gajsinghpur and KUMS, Srimadhopur, I hold that, appellant is eligible for registration U/s 12A, being existing for 'any other object of general public utility'. A.O. is not justified to deny status of charitable institution to the appellant. A.O. is also not justified in completing the assessment without granting 5 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti exemption U/s 11 and 12 of the I.T. Act to the appellant. Ground No. 1 of appeal, is thus allowed.
4.1 Since, I have held that appellant is a charitable institution U/s 12A of the I.T. Act, the entire income of the appellant is exempt. A.O. is, therefore, not justified in completing the assessment at total income of Rs. 1,13,92,710/-. The A.O. is therefore, directed to accept the return filed by the appellant in the status of charitable institution. In view of this decision, ground Nos. 2 to 8 have become infructuous. For statistical purpose, ground Nos. 2 to 8 are thus allowed."
4. Now the Revenue is in appeal before us. The learned Sr. D.R. argued that the assessee has claimed depreciation at Rs. 23,88,052/- that all cost of assets were claimed in the year of acquisition itself, which is not permitted under the law.
5. At the outset, the learned AR for the assessee submitted that the assessee samiti is entitled to claim depreciation even assets written off on account of application for fund on commercial principle. There is no double deduction, the assessee reduced depreciation from the total income. He relied for the purpose the following case laws:
(i) CIT Vs. Tiny Tots Education Society (2011) 330 ITR 21 (P&H).
(ii) CIT Vs. Market Committee, Pipli (2011) 330 ITR 16.
(iii) CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhawan Trust
6 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti (1992) 105 CTR (Guj) 303.
(iv) CIT Vs. Devi Sakuntala Tharal Charitable Foundation, Bhopal Campion School Society, Shri Satya Sai Trust and Shrinivas Education Society MANU/MP/2234/2013.
(v) Director of Income Tax Vs. Vishwa Jagriti Mission (2013) 262 CTR (Del) 558.
(vi) CIT Vs. Raipur Pallottine Society (1989) 80 CTR (MP) 127.
(vii) Eighth Income Tax Officer Vs. Trustees of Marathi Mission (1982) 1 ITD (Bom) 539.
(viii) CIT Vs. Desh Bhagat Memorial Education Trust (2012) 54 SOT 141 (Delhi).
The Hon'ble Supreme Court recently has admitted the reference filed against the decision of Hon'ble Kerala High Court in the case of Lissie Medical Institutions Vs. CIT vide order dated 02/7/2013 on this issue. Therefore, he prayed to allow the depreciation claimed by the assessee.
6. We have heard the rival contentions of both the parties and perused the material available on the record. The decisions of various courts referred by the assessee on this issue has held that depreciation is to be reduced from the income for determining the percentage of fund which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee. The income of the assessee should be computed on commercial principle and depreciation on fixed assets utilized for the charitable purpose should be allowed. Therefore, 7 ITA 429/JP/2011 ITO Vs. M/s Krishi Upaj Mandi Samiti we direct the Assessing Officer to reconsider this issue after providing a reasonable opportunity of being heard to the assessee.
7. In the result, appeal of the Revenue is allowed for statistical purposes only.
Order pronounced in the open court on 10/11/2014.
Sd/- Sd/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, Dated : 10th November, 2014 * Ranjan Copy forwarded to :- 1. The ITO, Jhalawar.
2. M/s Krishi Upaj Mandi Samiti, Bhawanimandi .
3. The CIT (A)
4. The CIT
5. The D/R Guard file (I.T.A. No. 429/JP/2011) By Order, AR ITAT Jaipur.