Income Tax Appellate Tribunal - Lucknow
Krishi Utpadan Mandi Samiti, Kanpur vs Department Of Income Tax on 11 March, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL,
B - BENCH, LUCKNOW.
Before Shri H.L.Karwa, Hon'ble Vice President and
Shri B.R.Kaushik, Accountant Member
I.T.A.Nos.343, 345 & 346(Luc.)/2010
A.Ys.: 2003-04, 2005-06 & 2006-07
The Dy. CIT-I, vs. M/s. Krishi Utpadan Mandi Smaiti,
Kanpur. Baripal,Ghatampur,
Kanpur Dehat.
PAN AABTK 1171F
(Appellant) (Respondent)
I.T.A.Nos.347, 348 & 349(Luc.)/2010
A.Ys.: 2004-05, 2005-06 & 2006-07
The Dy. CIT-I, vs. M/s. Krishi Utpadan Mandi Smaiti,
Kanpur. Rura,Ghatampur,
Kanpur Dehat.
PAN AAAAK5660K
(Appellant) (Respondent)
Appellant by : Shri Alok Mitra, D.R.
Respondents by : Shri Amit Shukla, Advocate
O R D E R
PER BENCH These six appeals involving common issues were heard together and are being disposed of by this common order for the sake of convenience.
2. In each appeal, the Revenue has raised four grounds, which are common except the difference in amounts. In I.T.A.No.343(Luc.)/2010, the Revenue has raised the following grounds :
2"1. The Learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition on account of Anshdan and Vikas Cess paid by the assessee Samiti to the Mandi Parishad, holding that the payment made by the applicant on such account should be treated as application of assessee's income eligible for deduction u/s 11 of the Income Tax Act, 1961.
2. The Ld. Commissioner of Income Tax (Appeals)-II, Kanpur has failed to appreciate the fact that the order of Hon'ble ITAT/High Court for granting registration under section 12A to the Assessee has not been accepted by the Department and a proposal for filing of SLP has been sent to the Board on this issue.
3. The Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in holding that the conclusion of the Assessing Officer is incorrect. As such his order is bad in law. Therefore, the order of the Ld. CIT (A)-II, Kanpur dated 11.03.2010 needs to be quashed and the order passed by the Assessing Officer dated 24.12.2007 to be restored.
4. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so."
3. The facts relating to this issue, in brief, are that the assessee is a market committee duly notified under section 6 of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 to provide for regulation of sale and purchase of agricultural produce and for establishing, superintendence and control of market area in U.P. The activities carried on by the assessee were covered by section 16 of U.P. Krishi Utpadan Mandi Adhiniyam, 1964. The assessee remitted funds to Mandi Parishad under the head "Vikas Cess" and "Anshdan". The Assessing Officer was of the view that Anshdan and Vikas 3 Cess paid by the assessee to the Mandi Parishad was not application of its income eligible for deduction u/s 11 of the Act. Against the said action of the Assessing Officer, the assessee preferred an appeal to the learned CIT(A), who allowed the claim by stating that the issue is covered in favour of the assessee by the decision of the ITAT affirmed by the Hon'ble Allahabad High Court. Now, the department is in appeal.
4. After hearing the ld.representatives of both the parties and perusing the materials available on record, it is noticed that the similar issue had already been adjudicated by the I.T.A.T., A-Bench, Lucknow in I.T.A.Nos.576 to 587(Luc.)/2009 in the case of Krishi Utpadan Mandi Samiti, Naubasta, Kanpur and others vs. Dy.CIT for the assessment years 2003-04 and 2004-05 vide order dated 1.12.2009. The Tribunal vide its order dated 1.12.2009 held as under :
"5. We have considered the rival submissions and carefully gone through the materials available on the record. It is noticed that the facts of the present case are similar to the facts involved in the case of Income Tax Officer, Ward-6(2) Lucknow vs. M/s Krishi Utpadan Mandi Samiti, Konch, Jalaun and Others (supra). The only distinguishable feature as pointed out by the Learned CIT(A) and the Learned CIT, DR is that the decision of M/s Nachimuthu Industrial Association vs. CIT (supra) had not been considered in the earlier decision of the Tribunal. It is noticed that in the aforesaid case of M/s Nachimuthu Industrial Association vs. CIT, the Hon'ble Madras High Court held that:
"The 'word 'applied' occurring in section 11 implies spending or utilization of the income. Merely making an entry in the accounts cannot be taken as any application of the income for any charitable purpose. Such entries could have been reversed if and when the trust choose to do so."4
However, In the present case there was no chance with the assessees to reverse the entries and nothing was brought on record that these were merely entry in the accounts and that the contribution/remittances made by the assessees to the Mandi Parishad were not utilized for the charitable purposes, therefore, the case relied by the Learned DR is distinguishable. In our opinion, the issue is squarely covered by the aforesaid referred to earlier order of the Tribunal dated 12th October 2009 wherein, after elaborately discussing the contentions of both the parties and various case laws relied in rival submissions and following the judgment of Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Upaj Mandi Samiti, Gajsinghpur & Others having the similar facts and relating to the Krishi Upaj Mandi Samiti i.e. the same status which the assessee is enjoying, it has been held that the remittances on account of Ansdan and Market Cess were eligible to be considered for exemption u/s 11(1)(a) of the Act. The relevant findings has been given in para 6 to 8 of the aforesaid order dated 12th October 2009 in the case Income Tax Officer, Ward- 6(2) Lucknow vs. M/s Krishi Utpadan Mandi Samiti, Konch, Jalaun and Others for the assessment years 2004-2005 to 2006- 2007. The said observations of the Tribunal read as under:
"6. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that a similar issue had been adjudicated by the Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Upaj Mandi Samiti, Gajsinghpur & others (supra) wherein it has been held as under :
"Held: The amount is given by the assessee to the Board for specific purpose on the approval of the project by the State Government. The Tribunal has rightly observed that the amount given is not a voluntary contribution by the assessee but towards the achievement of the object set out in the Act for which the assessee came into existence. It is not even the case of the Revenue that the assessee can claim the refund of the amount once given to the Board so as to execute and carry out the construction work. On the facts and in the circumstances of the case, the Tribunal has rightly held that the amount which remained unutilised cannot be treated as "advance"5
which presupposes existence of an element of getting the amount back in case the terms of the agreement are not complied with. Since the amount once given for a specific charitable purpose by the market - committee to the Board is not refundable and the assessee is not in a position to ensure that the amount is spent within the same year and also cannot call back the unspent amount therefore, so far as the assessee is concerned, the making of the payment to the Board by itself has to be treated as "application". The crediting of the amount in the account of the Board is enough and the Revenue cannot insist that the amount so given by the assessee must be spent within a relevant year only. The market committee having put its income to use in conformity with the provisions of the Act of 1961 for charitable purpose, it has to be treated as the application of the income for the charitable purpose in the relevant year.
(Para 17) From bare perusal of the provisions of s. 11 (l)(a) it is manifestly clear that it does not contain any such inhibition that the application of the income for charitable purposes should be restricted to a particular place or the specified area. The words "to such purposes in India" used in said provision show that the application of the income for charitable or religious purposes anywhere in India shall be entitled for exemption in terms of s.11(1)(a). The application of the income for the purposes set out in the Market Act of 1961 by the market committee or the Board on its behalf may be in violation of the provisions of the Market Act of 1961 which regulates the utilisation of the market committee fund and market development fund but, for the purposes of exemption under s.11(l)(a), it is wholly irrelevant inasmuch as, under the said provision, the only relevant consideration is that the income should be applied for charitable purposes in India. Moreover, as noticed by the Tribunal, as per the provisions of s. 34A of the Market Act of 1961, the State Government is empowered to give the Board or the market committees general instructions 6 to be followed for carrying out the purposes of the Act which includes the directions relating to purposes for which and manner in which the market committee fund or the market committee development fund shall be spent and the manner in which the surpluses with the Board or the market committee shall be kept. Thus, it is not within the domain of the concerned market committee to restrict the utilisation of the amount contributed towards any charitable activity within its local jurisdiction. The Tribunal has rightly held that so long as activity remains charitable in conformity with the purposes defined in the Market Act of 1961, no fetters can be placed on the market committee for not spending the amount outside local jurisdiction. In this view of the matter, the contributions made by the assessee towards charitable activities extending beyond its localJl1risdiction but within India shall be entitled for benefit of exemption under s. 11(l)(a).-Krishi Upaj Mandi Samiti, Anoogarh & Ors. vs. ITO (2008) 119 ITJ (Jd) 369 : (2008) DTR (Jd)(Trib) 166 approved. "
(Para 19)
7. On similar issue the I.T.A.T.,Lucknow Bench B vide order dated 21.4.2009 in the case of Krishi Upaj Mandi Samiti, Barabanki and others vs. CIT, I.T.A.Nos.100(Luc.)/2009, 101(Luc.)/2009 etc. has held as under :
"5. Now the department is in appeal. The learned CIT, DR strongly supported the order of the Assessing Officer and reiterated the observations made by the Assessing Officer in the assessment order dated 28/12/2007. He further submitted that the learned CIT(A), while deleting the addition, had not considered the provisions contained in Section 13(1)(c) read with section 13(2)(g) and 13(3) of the I.T. Act, 1961.
6. The learned counsel for the assessee, at the very outset, stated that the issue is squarely covered by the decision of the I.T.A.T. Jodhpur Bench reported at 7 [2008] 12 DTR (Jd) (Trib) 166 in I.T.A. Nos. 199 to 217 and 298 to 304/Jd/2007. Copy of the said order was furnished during the course of hearing.
7. We have considered the submissions of both the parties and carefully gone through the materials available on record including the impugned order, passed in detail, by the learned CIT(A) wherein the observations of the Assessing Officer in the assessment order, the submissions of the assessee as well as by the Assessing Officer in his remand reports, has been discussed and considered, in our opinion, the facts of the present case are similar to the facts involved in the case of Krishi Upaj Mandi Samiti, Anoopgarh & Ors. Vs. Income Tax Officer (supra), wherein the I.T.A.T. Jodhpur Bench has held as under:
"The assessee had given the sum to another wing of the Government, being the Board for the charitable objects, which fact has not been denied by the Revenue either in assessment or in the impugned order. Nowhere, it has been held that the construction/ repair work does not amount to application of income for charitable purposes. Thus, the amount was given towards a specific purpose on the approval of the project by the State Government. It is not a voluntary contribution by the assessee but towards the achievement of the objects set out in the Act for which the assessee came into existence. It is further an undisputed fact that the amount once given is irretrievable and in no circumstances can be called back by the assessee or refunded by the Board. Once a particular sum is given to the Board in compliance with the directions issued for making of payment for construction activity, the assessee ceases control over such amount. The case of the Department is that the amount given by the assessee, which has remained unutilized should be treated as advance is clearly not capable of acceptance for the reason that no characteristics of 'advance' appear in the contribution made by the assessee towards construction activity. An 8 advance always contains the element of getting the amount back in case the terms of the agreement are not complied with. It is not at all the case under which the amount given by the assessee for construction activity could be regarded as advance. The amount is given clearly for a specified object of charitable nature and is not refundable. Insofar as the assessee is concerned, the very fact of its making payment to the Board becomes 'application'. The fact whether the Board has spent the entire amount before the close of the year or not, is wholly irrelevant. The situation would have been otherwise if the assessee had been in a position to call back the unspent amount from the Board at the end of the year, which obviously is not so. If the case of the Revenue is accepted, it would render absurd results.- CIT vs. Thanthi Trust (1999) 156 CTR (SC) 605 : (1999) 239 ITR 502 (SC) followed; CIT vs. Trustees of H.E.H. The Nizam's Charitable Trust (1981) 131 ITR 497 (AP) relied on.
The application of income under s. 11(1)(a) for charitable or religious purposes is not restricted to any particular place, but "to such purposes in India". From the language of s. 34A of the Rajasthan Agriculture Produce Markets Act, 1961, there remains no doubt that the State Government has been empowered to give instructions to the Board or Committee and such instructions may include directions relating to the purposes for which the market committee fund or marketing development fund shall be spent. The case is of the committee constituted under the Act of 1961 by the State Government and which is subject to supervision and control of the State Government. The amount contributed to the Board towards the construction activity outside the local limits of the committee does not lie within its discretion. It has to act as per the instructions of the State Government. In case it is directed to contribute towards any charitable activity extending beyond its local jurisdiction, the assessee cannot say no and has to comply with the order. So long 9 as the activity remains charitable and is as the purposes defined in the Act, no fetters can be placed on the committee for not spending the amount outside its local Jurisdiction. The case would have been different if the assessee had voluntarily spent some amount towards the object, not defined in the Act. In that case the contention of the Revenue could have been accepted. To sum up, this ground of the assessee's appeal is allowed and it is directed that the entire amount given to the Board has to be treated as 'application of income' irrespective of the fact whether the Board has spent in this year or not and further notwithstanding the fact that construction activity has been done in or outside its local jurisdiction."
8. Since no contrary decision was brought to our notice, so respectfully following the aforesaid referred to decision of I.T.A.T. Jodhpur Bench, we do not see any merit in these appeals of the department."
8. Since the facts of the present case are identical to the facts involved in the aforesaid referred to cases so respectfully following the earlier order of the Tribunal and keeping in view the ratio laid down by the Hon'ble Rajasthan High Court, we do not see any merit in this appeal of the department."
5.1 We, therefore, respectfully following the earlier order of the Tribunal dated 12/10/09 in I.T. A. No. 438 to 440/Luc/09 and others in the cases of I.T.O., Ward-6(2), Lucknow vs. M/s Krishi Utpadan Mandi Samiti, Konch, Jalaun and Others (supra) set aside the order of the Learned CIT(A) on this issue and the grounds raised by the assessee are allowed."
5. The facts are similar and therefore, respectfully following the earlier order of the Tribunal dated 1/12/2009 passed in I.T.A. Nos. 576 to 587/Luc/09 in the case of Krishi Utpadan Mandi Samiti, Naubasta, Kanpur 10 and Others vs. Dy. CIT for the assessment years 2003-04 and 2004-05, do not see any merit in this appeal of the department. Accordingly, we dismiss the appeal.
6. The findings given in I.T.A.No.343(Luc.)/2010 shall apply with equal force to the grounds raised in ITA No.345(Luc.)/2010, ITA No.346(Luc.)/2010, ITA No.347 (Luc.)2010, ITA No.348(Luc.)/2010 and ITA No.349(Luc.)/2010.
7. In the result, all the appeals of the Revenue are dismissed.
The order pronounced in the open Court on 21.9.2010.
Sd. Sd.
(B.R.Kaushik) (H.L.Karwa)
ACCOUNTANT MEMBER VICE PRESIDENT
September 21,2010.
Copy to the :
1. Appellant 2. Respondent 3. CIT(A) (4) CIT 5.DR.
A.R.,ITAT, Lucknow.
Srivastava.