INCOME TAX OFFICER (EXEMPTIONS), RAJAHMUNDRY vs. AGRICULTURAL MARKET COMMITTEE, UNDI

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 610/VIZ/2018 (Asst. Year : 2006-07) ITO (Exemptions), vs. M/s. Agricultural Market Rajahmundry. Committee, Undi, West Godavari District. PAN No. AAALA 0675 M (Appellant) (Respondent)

C.O.No. 45/VIZ/2019 (Arising out of ITA No. 610/VIZ/2018) (Asst. Year : 2006-07) M/s. Agricultural Market vs. ITO (Exemptions), Committee, Undi, Rajahmundry. West Godavari District. PAN No. AAALA 0675 M (Appellant) (Respondent)

Assessee by : Shri G.V.N. Hari – Advocate. Department By : Shri V. Appalra Raju– Sr.DR

Date of hearing : 13/08/2019. Date of pronouncement : 23/08/2019. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the Revenue and the cross objection by the assessee are directed against the order of Commissioner of

2 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) Income Tax (Appeals), Rajamahendravaram, dated 24/08/2018 for the Assessment Years 2006-07. 2. Facts of the case, in brief, are that the assessee is governed under the Andhra Pradesh Agricultural (Produce & Live Stock) Markets Act, 1966, filed its return of income declaring NIL income after claiming the profit as exempt from tax. The Assessing Officer after issuing notice u/sec. 148, assessment was completed u/sec. 143(3) r.w.s. 147 of the Act on 24/12/2008 by denying the exemption claimed u/sec. 11 of the Act and thereby determining total income at Rs. 65,75,140/- with a tax demand of Rs.32,78,779/-. On appeal by the assessee against the said order, the ld. CIT(A) dismissed the appeal of the assessee. The assessee preferred further appeal before the ITAT. The ITAT, Visakhapatnam Bench vide its order in ITA No. 269/VIZ/2009, dated 11/12/2013 set aside the order of the ld. CIT(A) and restored the matter to the file of the Assessing Officer with a direction to carry out the assessment afresh after examining the issue of purpose of accumulation of income u/sec. 11(2) de novo in accordance with law. The Assessing Officer passed the assessment u/sec. 143 r.w.s. 254 dated 30/03/2015 wherein he observed that the assessee failed to produce the audit report in Form No.10/10B which is statutorily required to be filed along with

3 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) the return of income in support of its claim of accumulation of income. After verification of Form No.10B, the Assessing Officer noted that as per the statute, the report should contain the important details like the purpose for which the amount is required to be set apart and the period for which it is required to be accumulated. In absence of these details, the Assessing Officer held that Form No. 10/10B filed by the assessee cannot be considered and rejected the exemption claimed by the assessee. 3. On appeal before the ld. CIT(A), it was submitted that Form No.10 has been filed before the Assessing Officer and by relying on the judgment of the Hon'ble Gujarat High Court in the case of CIT Vs. Mayur Foundation [(2005) 274 ITR 562 (Guj.)] submitted that the assessee is entitled for exemption u/sec. 11(2) of the Act. The ld. CIT(A) by considering the same gave a categorical finding that the assessee has filed Form No.10/10B before the Assessing Officer during the course of assessment proceedings, therefore direct the Assessing Officer to allow the exemption claimed by the assessee u/sec. 11(2) of the Act. 4. On being aggrieved, Revenue carried the matter in appeal before the Tribunal. 5. Ld.DR relied on the order passed by the Assessing Officer.

4 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) 6. Ld. counsel for the assessee has submitted that the Assessing Officer without following the directions of the ITAT in assessee’s own case in ITA No. 269/VIZ/2009, dated 11/12/2013 denied the exemption claimed by the assessee u/sec. 11(2) of the Act, therefore prayed for dismissal of Revenue’s appeal. 7. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. 8. The only issue involved in this appeal is with regard to accumulation of income of the assessee for the year under consideration. The Assessing Officer has denied the accumulation initially on the ground that in Form No.10, the assessee has not mentioned specific purpose of accumulation. On appeal, ld.CIT(A) confirmed the order of the Assessing Officer. When the matter reached to the ITAT, the ITAT in its order in ITA No. 269/VIZ/2009, dated 11/12/2013 by following the judgment of the Hon'ble Delhi High Court in the case of Bharat Kalyan Pratisthan Vs. DIT (Exemption) reported in 299 ITR 406 (Del) has held that accumulation need not be specific purpose, it can be on whole objects of the assessee and by considering the same, directed the Assessing Officer to allow the accumulation as per law. The Assessing Officer without following the directions of the

5 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) ITAT, considered the judgment of the Hon'ble Calcutta High Court in the case of DIT (Exemptions) Vs. Trustees of Singhania Charitable Trust (199 ITR 819) denied the claim of the assessee, which is contrary to the direction given by the ITAT. Therefore, in our opinion, the Assessing Officer is not correct in not following the direction of the ITAT and also denial of exemption u/sec. 11(2) of the Act. On appeal, ld. CIT(A) by considering the decision of the Hon'ble Gujarat High Court in the case of Mayur Foundation (supra) directed the Assessing Officer to allow the exemption claimed by the assessee u/sec. 11(2) of the Act. For the sake of convenience, the relevant portion of the order of the ld.CIT (A) is extracted as under:- “6. I have considered the submissions filed, in detail. It is pertinent to note that the assessee has been granted registration U/s.12AA by the CIT, Rajahmundry from the date of its inception. For the A.Y: 2006-07, the return of income was filed by declaring income at Rs.NIL, after claiming exemption U/s.11 & 12 for the year under consideration. It is seen that during the assessment proceedings, the appellant is filed the Form No.10 for accumulation of income, before the Assessing Officer. The Hon'ble Supreme Court in the case of Nagpur Hotel Owner's Association case held that the Form No.10 must be filed before the AG before completion of assessment. The Hon'ble Gujarat High Court in the case of Mayur Foundation took the view that the Form No.10 could he filed even during the appellate proceedings as appeal is only continuation of assessment proceedings. The jurisdictional ITAT has followed the principle laid down by the Hon'ble Gujarat High Court in Mayur Foundation. The AO has relied on the decision of the Hon'ble Kerala High Court in the case of Kerala Rural Employment & Welfare

6 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) Society Vs. ACIT 312 ITR 51, wherein it was held that Rule 17 has prescribed the time limit that Form 10 has to be filed before expiry of time allowed u/s 139(1) and such time limit cannot be extended and, therefore, rejected the assessee's contention. However, it is seen that the Hon'ble Kerala High Court in the said case has held that where the delay could be explained satisfactorily the same has to be condoned. The Hon'ble High Court taking into consideration the conditions stipulated in the Circular No.273 dated 3rd June, 1980 allowed relief to the assessee. Therefore, it can be said that the conditions specified in the CBDT Circular No.273 dt.03.06.1980 are relevant factors to be considered.Thus, taking into account the fact that the assessee is a committee constituted under a statute, whose genuineness is not in doubt, and where the excess income to be set apart for accumulation are already kept with SBI treasury account, and other facts of the case more specifically that the registration U/s.12A was granted from retrospective effect; and the views pronounced by the jurisdictional Tribunal on the issue, I consider it appropriate to direct the AO to take into consideration the Form No.10 filed by the assessee during the assessment proceedings and allow accumulation for the amount claimed subject to fulfillment of other conditions. The A.O erred to perceive that the purposes for accumulation of income mentioned in Form No.10 and the period for accumulations are set apart while computing the income. Since it is evident from the Form No. 10/10B filed by the appellant that 'the purpose for which the amount accumulated & the period (A.Y:2006- 07) for which it is required and the Form No.10 has been properly filled.' The grounds raised are, therefore, allowed in favour of the appellant. And the last ground is general in nature which does not require separate adjudication in this regard.” 9. By considering the facts and circumstances of the case, we find no infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed. 10. So far as cross objection filed by the assessee is concerned, it is only supportive to the order of the ld. CIT(A). As no

7 ITA No.610/VIZ/2018 C.O.No. 45/VIZ/2019 (M/s. Agricultural Market Committee) grievance against the ld. CIT(A)’s order, this cross objection filed by the assessee has become infructuous and is dismissed accordingly. 11. In the result, appeal filed by the Revenue and the cross objection filed by the assessee are dismissed. Order Pronounced in open Court on this 23rd day of August, 2019.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 23rd August, 2019. vr/- Copy to: 1. The Assessee – M/s. Agricultural Market Committee, Undi, West Godavari District. 2. The Revenue – ITO (Exemptions), Rajahmundry. 3. The Pr.CIT (Exemptions), Hyderabad. 4. The CIT(A), Rajamahendravaram. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.