Income Tax Appellate Tribunal - Pune
Agricultural Produce Market ... vs Income-Tax Officer, Ward - 1,, ... on 28 November, 2018
आयकर अपील�य अ�धकरण, पुणे �यायपीठ "एक-सद�य मामला" पुणे म�
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
�ी डी. क�णाकरा राव, लेखा सद�य के सम�
BEFORE SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं. / ITA Nos.2771 & 2772/PUN/2017
�नधा�रण वष� / Assessment Years : 2013-14 & 2014-15
M/s Agricultural Produce Market Committee,
1st Floor, Kisan Kranti Building,
Market Yard, Station Road,
Ahmednagar.
PAN : AAALA0304R .... अपीलाथ�/Appellant
Vs.
ACIT, Ahmednagar Circle,
Ahmednagar.
.... ��यथ� / Respondent
अपीलाथ� क� ओर से / Appellant by : Smt. Kishore Phadke
��यथ� क� ओर से / Respondent by : Shri Rajesh Gawli
सुनवाई क� तार�ख / घोषणा क� तार�ख /
Date of Hearing : 30.10.2018 Date of Pronouncement: 28.11.2018
आदे श / ORDER
PER D. KARUNAKARA RAO, AM :
There are two appeals under consideration relating to assessment years 2013-14 and 2014-15.
2. The appeal for assessment year 2013-14 is filed with the delay of 289 days. At the outset, Ld. AR brought my attention to the preliminary issue relating to the issue of condonation of said delay and prayed for condoning the same in view of the reasons mentioned in the Affidavit. Further, Ld. AR requested for the adjudication of the issue on merits. Otherwise, the appeal for assessment year 2014-15 is filed in time. -2-
ITA Nos.2771 & 2772/PUN/2017 Condonation of delay :
3. I perused the preliminary issue i.e. condonation of delay of 289 days for the assessment year 2013-14 and find that the affidavit contains the reasons for the said delay in filing of the appeal by the assessee. In this regard, the reasons as mentioned in Affidavit filed by the assessee are perused. For the sake of completeness, the relevant paragraphs of the said Affidavit are extracted hereunder :-
"I am the Secretary in M/s Agricultural Produce Market Committee since the year 2010, which is a local authority situated in Ahmednagar, established by marketing Board for the purpose of regulating marketing activities. I stay in Ahmednagar. I have been handling all the Income Tax related proceedings along with our council for the past many years. The CIT(A), Pune order of A.Y. 2013-14 was received on 13/12/2016. The last date of filing of the said appeal was 10/02/2017. During the said period, I was tried up in new loan related formalities and some other pressing work. Due to work pressure the said order was left unattended for a long time. As such, unfortunately and without any intention, I lost the track of filing of appeal before the Hon'ble ITAT within stipulated period of 60 days from the date of receipt of order of CIT(A).
It is only in mid of November 2017, while preparing the Form 36 for A.Y. 2014-15 and while reviewing the status of appeals for earlier assessment years; it was realized that the appeals for the A.Y. 2013-14 have remained to be filed before the Hon'ble ITAT, Pune. It was realized that the same was due to excessive work load which existed at my end.
On further consultation with counsel, it was advised that there is a merit in filing appeal. Thereafter, we sought for the services of counsel and now filing these appeals before the Honourable ITAT.
In the mean time, precious time to prefer appeal was lost. In all this process, delay of about 282 days has crept into the matter unfortunately. The said delay was non-intentional.
The company has requested for condonation of the delay by making a separate delay condonation petition."
4. The highlighted (Bold) portions of the Affidavit extracted above are self-explanatory. I find the omissions described above are absolutely humane. Considering the above, I am of the opinion that this is a fit case for condoning the delay and, therefore, I proceeded to adjudicate the issue on merits.
Adjudication on the issue on merits
5. Regarding the issue on merits, the brief facts include that the assessee filed the return of income on 26.09.2013 declaring loss of Rs.2,10,93,677/-. The Assessing Officer completed the assessment u/s -3- ITA Nos.2771 & 2772/PUN/2017 143(3) of the Act on 08.01.2016 and assessed the income of Rs.16,44,428/- as taxable income. The income earned by way of rentals was considered as income and not covered by the provisions of section 10(26AAB) of the Act.
6. Aggrieved with the above said action of the Assessing Officer, the assessee is in appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. However, he confirmed the impugned addition of Rs.16,44,428/- as not exempt u/s 10(26AAB) of the Act. He, however, mentioned the said income needs to be taxed as "income from house property" with eligible deduction u/s 24 of the Act.
7. On these facts, ld. Counsel for the assessee filed the present appeals before the Tribunal in both the assessment years 2013-14 and 2014-15 and raising the common grounds in both the appeals, which extracted as under :-
"1. The learned CIT(A)-2, Pune as well as learned AO, Ahmednagar erred in law and on facts in denying exemption u/s 10(26AAB) of ITA, 1961 on rental income earned by the appellant on letting out of premises to non- members amounting to Rs. 16,44,428/-.
2. The learned CIT(A)-2, Pune as well as learned AO, Ahmednagar erred in law and on facts in holding that the exemption u/s 10(26AAB) is allowed only to such income which is derived from activities which are for promoting the agriculture marketing activities. The learned CIT(A) ought to have appreciated that section 10(26AAB) provides exemption to any income earned by an assessee for the purposes of regulating the marketing of agricultural produce.
3. The learned CIT(A)-2, Pune as well as learned AO, Ahmednagar erred in law and on facts in not appreciating that activities for which said shops are let out, are only for benefit & facilitation to the members of APMC and the revenue arising from the same is utilized for the purposes for which appellant is formed.
4. Without prejudice to above grounds, the appellant claim of set off losses claimed u/s 10(26AAB) of ITA, 1961 of Rs. 2,10,93,677/- against income from house property of the appellant as assessed by learned AO. It shall be appreciated the fact that Sec 10(26AAB) of ITA, 1961 excludes in express terms only "any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce". It does not exclude the operations of agricultural produce market committee from the act. Therefore, the losses suffered by the appellant ought to have admissible deductions in computing its total income.
5. The appellant craves leave to add / modify / delete / amend all / any of the grounds of appeal."-4-
ITA Nos.2771 & 2772/PUN/2017
8. Bringing my attention to the above grounds, ld. Counsel for the assessee submitted that the only issue for adjudication relates to taxability of the rental/lease income earned from the let out establishments located in APMC area. Mentioning that the issue is covered one, the ld. Counsel for the assessee filed a copy of the order of the Tribunal in assessee's own case for the assessment year 2012-13 vide ITA No.2219/PUN/2016, dated 26.02.2018 read out the relevant grounds extracted in para 2 of the said order of the Tribunal (supra). Bringing my attention to the contents of para 16 of the order of the Tribunal (supra), ld. Counsel for the assessee submitted that the appeal of the assessee stands allowed in favour of the assessee. Therefore, considering the commonality of the facts in the present appeal under consideration, the same should also be allowed.
9. On the other hand, ld. DR heavily relied on the orders of the Assessing Officer/CIT(A).
10. On hearing both sides and perused the order of the Tribunal in assessee's own case for assessment year 2012-13, I find the issue stands covered in favour of the assessee in both the appeals. I proceeded to extract the relevant paragraphs from 4 onwards of the said order of the Tribunal (supra) :-
"4. Briefly, in the facts of the case, the assessee is a local authority which was providing facilities for marketing of agricultural produce. The profit arising from such activities was exempt in the hands of assessee. During the course of assessment proceedings, the Assessing Officer noted that the assessee had shown rent receipts from parties other than the members / farmers. The assessee was asked to provide the details of such rental income. In response, the assessee provided details of premises given on rent, from whom the assessee had received aggregated rent of ₹ 17,29,598/-. The Assessing Officer noted that the premises of Agricultural Produce Market Committee (in short 'APMC') was given on rent to various parties which were not doing business related to agricultural activities i.e. electronic show rooms, medical shop, building material & hardware shop, Excise Office, etc. The assessee was thus, show caused as to why the said rent should not be treated as income other than the activity of APMC and be not taxed in its hands. The assessee in reply, relying on the provisions of section 10(26AAB) of the Act emphasized that the word 'any income' in the section covers activities undertaken by the assessee. However, the Assessing Officer did not accept the contention of assessee since the intention of Legislature was to allow exemption to APMC for promoting marketing of agricultural produce and not for other activities. He further observed that the rental income received from farmers and -5- ITA Nos.2771 & 2772/PUN/2017 members of APMC as well as other incidental activities were already considered as incidental income of assessee and exemption under section 10(26AAB) of the Act was allowed. However, the rental income received from other persons whic h were not related to even agricultural activities could not be considered as incidental income of the assessee. Hence, the assessee was held to be not eligible for exemption under section 10(26AAB) of the Act on rental income of ₹ 17,29,598/- and the same was added as income of the assessee.
5. The CIT(A) observed that as per section 10(26AAB) of the Act, any income of APMC would be treated as exempt which was constituted for the purpose of regulating the marketing of agricultural produce. Upholding the order of Assessing Officer, the CIT(A) held the assessee not eligible for exemption relating to such rental income on shops / premises which had been let out to outside parties, where the activities of parties were not at all related to promotion of agricultural activities. However, the CIT(A) allowed the alternate plea of assessee that once the rental income had been treated as income from house property, then appropriate deduction under section 24 of the Act should be allowed to the assessee.
6. The assessee is in appeal against the order of CIT(A) on the first issue of claim of exemption under section 10(26AAB) of the Act. The alternate plea of the assessee is that rental income should be assessed as business income and not as income from house property.
7. The learned Authorized Representative for the assessee pointed out that the wording of section 10(26AAB) of the Act provides 'any income' which is for the purpose of regulating marketing of agricultural produce means the 'activities carried on by a concern which is regulating the marketing of agricultural produce'. In this regard, reliance was placed on the decision of Amritsar Bench of Tribunal in Market Committee Vs. DCIT in ITA No.241(Asr)/2015, relating to assessment year 2010-11, order dated 17. 12.2015. He further relied on the ratio laid down by the Hon'ble Bombay High Court in Trustees of Vanita Vishram Vs. CIT (2005) 148 TAXMAN 546 (Bom) and pointed out that the proposition laid down was what is the meaning of term of 'any income'. He thereafter, drew attention to the latest Circular No.18/2017 issued by CBDT dated 29.05.2017, copy of which is placed on record.
8. The learned Departmental Representative for the Revenue on the other hand, pointed out that the assessee had let out the shop for activities which were much different from the marketing of agricultural produce. He referred to the order of CIT(A) with emphasis on his observations in para 4.2.1 and pointed out that where the activities of rented premises were not related to agricultur al produce, then the income is to be assessed in the hands of assessee.
9. The learned Authorized Representative for the assessee in rejoinder stressed on the definition provided in section 10(26AAB) of the Act.
10. On perusal of record and after hearing rival contentions, the issue which arises in the present appeal is in relation to the claim of exemption under section 10(26AAB) of the Act. Section 10(26AAB) of the Act provides as under:-
"Section 10(26AAB): "Any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce."
11. The expression used in the said section is 'any income' of Agricultural Produce Market Committee or Board constituted under any law for the purpose of regulating marketing of agricultural produce. In other words, exemption is to be provided to APMC or Board constituted for the purpose of regulating marketing of agricultural produce in respect of any income of such APMC or Board. The term 'for the purpose of regulating the marketing of agricultural produce' is connected to the body constituted for the purpose i.e. APMC or Board and it is provided that 'any income' arising to such body is exempt from tax. Narrow interpretation of Revenue authorities that the income arising to APMC should be for the purpose of regulating marketing of agricultural produce is incorrect.
12. The Amritsar Bench of Tribunal in Market Committee Vs. DCIT (supra) had held as under:-
"6. Having considered the rival contentions in the light of the material placed on record, I find the grievance of the assessee to be justified. Section 10(26AAB) of the Act runs as follows:
"Section 10(26AAB): "Any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce."-6-
ITA Nos.2771 & 2772/PUN/2017
7. Thus, there is no ambiguity in the provisions of the section, in as much as it makes no distinction as made by the Authorities below. It talks of any income of an agricultural produce Market committee as being exempt there under, for the purpose of regulating the marketing of agricultural produce. The Taxing Authorities have gone wrong in observing that since the rent in question was not from the assessee's main activities with regard to the Marketing of agricultural produce, it was not exempt under the section. There is no legal force behind this observation and the consequential disallowance made.
8. The Hon'ble Finance Minister was categorical in his speech (supra) on the Finance Bill, 2008 made in the Lok Sabha, proposing to insert section 10(26AAB) in the Act.
"Clause 3 of the Finance Bill, 2008 seeks to amend the definition of 'charitable purpose' so as to exclude any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature or use of application, or retention of the income from such activity. The intention is to limit the benefit to entities which are engaged in activities such as relief of the poor, education, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear the mask of a charity. A number of Hon'ble Members have written to me expressing their concern on the possible impact of the proposal on Agricultural Produce Market Committee (APMC) or State Agricultural Marketing Boards (SAMB). Since there is no intention to tax such committees or boards, and in order to remove any doubts, I propose to insert a new clause (26AAB) in section 10 of the Income tax Act to provide exemption to any income of an APMC or SAMB constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produced. I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue explanatory circular containing guidelines for determining whether an entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility."
9. Further, in "Agricultural Market Committee, Tanuku & Ors." (supra), the Hon'ble Andhra Pradesh High Court has observed that a plain reading of section 10(26AAB) of the Act, shows that from the date of coming into force of section 10(26AAB), the income of an Agricultural Market Committee shall not be included in the computation of income of a previous year for the purpose of the Act, that is to, so to say the entire income by an Agricultural Market Committee stands exempted from charge to income-tax.
10. No decision contrary to "Agricultural Market Committee, Tanuku & Ors." (supra), has been placed before me by the Department."
13. Further, the CBDT has vide Circular No.18/2017, da ted 29.05.2017 while issuing the Circular on requirement of tax deduction at source in case of entities whose income is exempt under section 10 of the Act vide para 4 noted as under:-
"4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Boards or bodies, by whatever name called, referred to in section 10 of the Income-tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source, since their income is anyway exempt under the Income-tax Act -
(i)....
(ii)....
......
-7-
ITA Nos.2771 & 2772/PUN/2017
(xiii) Agricultural Produce Marketing Committee referred to in clause (26AAB); ......."
14. The CBDT has thus, clarified that in the case of APMC referred to in section 10(26AAB) of the Act, income is unconditionally exempt under that section.
15. The Hon'ble Bombay High Court in Trustees of Vanita Vishram Vs. CIT (supra) while deciding the case of an educational institution, dealt with the issue of taxability of interest derived by the trust from and out of investment, of its surplus income / funds and whether the same is exempt under section 10(22) of the Act. Reference was made to provisions of section 10(22) of the Act, wherein the expression 'any income' of university or other educational institutions, was used. The Hon'ble High Court held that In our opinion, both words "any" and "of" carry a definite meaning. It is not income from the educational institution that is exempt but any income of the educational institution. If the word had been "from", the position would have been that the income should have been derived from the actual running of the school itself. What appears to be relevant is that the income should reach the school to be utilized by it for educational purposes and; not for the purposes of profit. The Hon'ble High Court further held as under:-
"24. It is, thus, obvious that granting exemption to the income of the educational institutions is to enable such institutions to utilize the moneys available with them for the purpose of running the educational institutions. The source from which the moneys are received is of no consequence, what is relevant is the application of income. So long as the income of the institution, which solely exists for educational purpose and not for earning profit, as applied for the educational purpose, such income of the institution is exempted under section 10(22) of the Act."
16. Applying the said ratio to the facts of the present case, where it is not case of Department that the rental income earned by APMC i.e. assessee has not been used for the promotion of its activities and merely on the ground that rental income was earned from entities which were not engaged in carrying out marketing of agricultural activities, cannot stand. Accordingly, the Assessing Officer is directed to treat the aforesaid rental income as income of APMC, which in turn, is eligible for exemption under section 10(26AAB) of the Act. The ground of appeal raised by the assessee is thus, allowed and the issue raised on without prejudice basis thus, becomes academic.
17. In the result, appeal of assessee is allowed."
11. From the above, it is evident that the Pune Bench of the Tribunal in assessee's own case considered all the details of the assessee on merits, legal proposition performed by the Amritsar Bench of the Tribunal in the case of Market Committee vs. DCIT in ITA No.241(Asr)/2015 dated 17.12.2015 and the decision of the Hon'ble Bombay High Court in the case of Trustees of Vanita Vishram vs. CIT, (2005) 148 Taxman 546 (Bom.) and allowed the appeal for assessment year 2012-13. The Tribunal considered the Board Circular of the CBDT vide Circular No.18/2017 dated 29.05.2017 too. Considering the detailed order passed by the Tribunal in the case of the assessee for the earlier assessment year, I am of the opinion that the issue raised in the grounds of both the appeals stand covered. No other contrary decision/material brought to my notice on the similar facts -8- ITA Nos.2771 & 2772/PUN/2017 and similar issue by the Revenue. Accordingly, the grounds raised by the assessee are allowed in both the appeals.
12. In the result, both the appeals of the assessee are allowed.
Order pronounced on this 28th day of November, 2018.
Sd/-
(D. KARUNAKARA RAO) लेखा सद�य / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 28th November, 2018.
Sujeet आदे श क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to :
1. अपीलाथ� / The Appellant;
2. ��यथ� / The Respondent;
3. The CIT(A)-2, Pune;
4. The Pr. CCIT, Pune;
5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, पुणे "एक-सद�य मामला" / DR 'SMC', ITAT, Pune;
6. गाड� फाईल / Guard file.
// True Copy // आदे शानुसार/ BY ORDER,स स�या�पत ��त //True Copy// Senior Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune