INCOME TAX OFFICER (EXEMPTIONS), RAJAHMUNDRY vs. AGRICULTURAL MARKET COMMITTE, PENUGONDA

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. 315/VIZ/2018 (Asst. Year : 2003-04)

ITO (Exemptions), vs. M/s. Agricultural Market Rajahmundry. Committee, Sidhantam Road Market Yard, Penugonda, West Godavari District PAN No. AAALA 0388 F (Appellant) (Respondent)

C.O.No. 110/VIZ/2018 (Arising out of ITA No. 315/VIZ/2018) (Asst. Year : 2003-04)

M/s. Agricultural Market vs. ITO (Exemptions), Committee, Sidhantam Road Rajahmundry. Market Yard, Penugonda, West Godavari District PAN No. AAALA 0388 F (Appellant) (Respondent)

Assessee by : Shri G.V.N. Hari – Advocate. Department By : Smt. Suman Malik – Sr.DR

Date of hearing : 21/03/2019. Date of pronouncement : 27/03/2019.

2 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) 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 Income Tax (Appeals)-11, Hyderabad, dated 30/01/2018 for the Assessment Year 2003-04. 2. This appeal is barred by limitation by 09 days. The Revenue has filed an affidavit for condonation of delay in filing the appeal. We find that there is a sufficient cause for non-filing the appeal in time and is a fit case to condone the delay. Accordingly, delay is condoned. 3. Facts of the case, in brief, are that the assessee is a statutory body established under the Andhra Pradesh (Agricultural Produce and Live stocks) Markets Act, 1966. The ld.CIT, Rajahmundry granted registration u/s. 12AA to the assessee from 22.07.1997. For the Assessment Year 2003-04, assessee claimed exemption of its income under the provisions of sec. 11 & 12 of the Act. During the course of the de-novo assessment proceedings u/s. 143(3) r.w.s 254, consequent to the order of the ITAT, Vizag in ITA no. 105/VIZ/2009, the assessee filed a letter dt.25.01.2014, requesting exemption of its income

3 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) u/s. 11. As per the receipts and charges account, audited by the State Audit Department of the Govt. of A.P during the year, assessee’s gross income was Rs. 1,53,22,921/- and the amount applied for the assessee’s charitable activities was Rs.1,43,74,285/-. More than 85% of the income of the year was applied for charitable purposes and hence there was no accumulation of income and notice in Form No. 10 was not necessary. The assessment was completed denying exemption u/s. 11, rejecting Form no. 10 and audit report in Form 10B for the following reasons: 1. The purpose for which the amount is required to be set apart was no contained therein. 2. The period for which it is required to be accumulated was not contained therein. An amount of Rs.84,94,050/- was brought to tax, which was the total income assessed as per the original order u/s. 143(3) r.w.s 147, dt.18.12.2007 and as per the consequential order dt.19.07.2011. The amount of Rs.84,94,050/- was arrived by allowing depreciation from the profit as per the income and expenditure account of Rs.87,97,791/-.

4 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) 4. On being aggrieved, assessee carried the matter before the ld. CIT(A) and submitted a detailed reply, which is reproduced as under:- "The assessee is a trust which is governed by the A.P Agricultural (produce and live stock) markets Act, 1966, filed it return of income for the asst. year 2003-04 on 17.05.2006, declaring total income at Rs. Nil. The scrutiny assessment was completed in this case on 18.12.2007 determining the income at Rs.84,94,050/-. Subsequently, vide the consequential order passed on 19.07.2011 the income of the assessee is determined at Rs.84,94,050/-. Aggrieved by this order the assessee preferred an appeal with CIT(A) and subsequently with the Hon'ble ITAT, Visakhapatnam. The tribunal vide its order dt.08.11.2012 directed to carry out the assessment afresh de novo in accordance with law. Accordingly, notices are issued from time to time. In response to the notices issued, Sri D.V. Subba Rao appeared and furnished the required information called for. After verification of the information filed and discussion with the authorized representative, the assessment is completed accepting the income returned. During the course of proceedings the assessee was asked to produce the bills in support of its claim of depreciation. The assessee expressed its inability to produce the same. Hence, the depreciation of Rs.3,03,742/- is disallowed as done in order dt. 18.12.2007. Vide the above referred order the Hon'ble ITAT directed that the auditor report in form 10B which was statutorily required to be filed by the assessee along with the return of income be taken during the course of proceedings and the claim of the assessee be examined. Accordingly, the assessee was asked to file the same. The form no.10B was filed by the assessee. The same was examined. The relevant sections are reproduced for clarity sake. ((2) Where (eighty -five) per cent of the income referred to in clause (a) or clause (b) of sub-section(1) read with the explanation to that sub section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart

5 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) shall not be included in the total. income of the previous year of the person in receipt of the income, provided the following conditions are complied with namely); (a) such person specified by notice in writing given to the (Assessing officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; As per the Statute the report should contain at least the following important details. The first one being the purpose for which the amount is required to be set apart and the second one being is the period for which is required to be accumulated. In the absence of these two details the form filled by the assessee cannot be considered as complete and valid. In the present case the report filed by the assessee does not carry the details of the details of the period for which the amount proposed is to be accumulated. In view of this the defective audit report filed by the assessee is rejected and consequently the assessee failed the conditions prescribed for claiming the exemption u/s. 11 of the act. Hence, the assessment order passed earlier is restored and the excess income over expenditure is brought to tax." 5. The ld. CIT(A) by considering the detailed submission made by the assessee, he has observed that assessee-trust is registered under section 12AA of the Act. As the assessee’s application of income is more than 85%, the assessee is eligible for exemption under section 11 of the Act without any necessity of filing From No. 10B and directed to delete the addition made by the Assessing Officer. 6. On being aggrieved Revenue is in appeal before this Tribunal. 7. Ld. Departmental Representative has strongly supported the order passed by the Assessing Officer.

6 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) 8. On the other hand, ld. counsel for the assessee has supported the order passed by the ld. CIT(A). 9. The only issue for consideration before us is whether assessee has to file Form 10B or not. It is a fact that the assessee is having a registration under section 12AA and his application of income is more than 85%, therefore, assessee is eligible for exemption under section 11 of the Act and no necessity to file Form 10B. The ld. CIT(A) by considering all the facts and circumstances of the case directed the Assessing Officer to delete the addition. For the sake of convenience, the relevant portion of the order of the ld.CIT (A) is extracted as under:- “5. I have considered the assessment order, grounds of appeal. It is seen that Hon'ble ITAT order does not contain any direction w.r.t filing of form-10B or its examination. As it transpires, the total receipts of the appellant for the year are Rs. 1,53,22,921/- as against the above, the total expenditure is Rs. 1,43,74,285/-, which is spent for charitable purposes. The assessee trust is registered u/s.12AA as brought out in order of ITAT also. As the assessee's expenses/application of income is more than 80% of receipts for the year, the assessee is eligible for exemption u/s. 11 without any necessity of filing form-10B. In view of the above, it is held that the income of trust is exempt u/s.11 and the income assessed by the AO is to be deleted. It is directed accordingly.”

7 ITA No.315 /VIZ/2018 C.O.No. 110/VIZ/2018 (M/s. Agricultural Market Committee) 11. So far as Cross objection is concerned, it is only supportive to the order of the ld. CIT(A). In view of our decision above, this cross objection filed by the assessee is dismissed. 12. In the result, appeal filed by the Revenue as well as cross objection filed by the assessee is dismissed. Order Pronounced in open Court on this 27th day of March, 2019.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 27th March, 2019. vr/- Copy to: 1. The Assessee – M/s. Agricultural Market Committee, Sidhantam Road Market Yard, Penugonda, West Godavari District. 2. The Revenue-ITO (Exemptions), Rajahmundry. 3. The Pr.CIT, Rajahmundry. 4. The CIT(A)-11, Hyderabad. 5. The D.R., Visakhapatnam. 6. Guard file. By order

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