M/S. AGRICULTURAL PRODUCE MARKETING COMMITTEE,CHITRADURGA vs. INCOME TAX OFFICER, WARD-1, CHITRADURGA

The facts relating to the case are discussed in brief. The assessee is engaged in marketing activities of agricultural produce. It obtained registration u/s 12AA of the Act with effect from 1.4.2002. Accordingly,

The first issue relates to assessment of maturity amount of fixed deposit as income of the assessee. The assessee has submitted “Receipts and Payments Account” before the AO, wherein the assessee has shown receipt of maturity proceeds of Fixed deposit kept with a bank amounting to Rs.50.00 lakhs. The AO observed that the provisions of sec.11 use the expression “income” and not “total income”. The expression “total income” has been defined u/s 2(45) of the Act as “the total amount of income as computed in the manner laid down in this Act”. Accordingly he took the view that it would be incorrect to assign the meaning of the word “total income” to the word “income”. Accordingly, the AO took the view that the “Gross receipts excluding corpus donation” shall constitute income of trust or institution. Accordingly, he assessed the maturity proceeds of Fixed deposits amounting to Rs.50.00 lakhs as income of the assessee. The Ld CIT(A) also confirmed the same.

We heard the parties and perused the record. We have noticed that the AO has taken the view that the “Gross receipts excluding corpus donation” shall constitute the income of trust or institution. We notice that the assessing officer has considered only the “Income and Expenditure account” furnished by the assessee to assess the income of

However, a careful reading of provisions of sec.11 would show that this section prescribes exemption, i.e., what types of income is exempted u/s 11 of the Act. This section states that “subject to the provisions of sec. 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income:- (a) income derived from property held under the trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India....

As stated earlier, sec.11 of the Act prescribes exemption from taxation of income of the charitable trust to the extent provided in that section, meaning thereby, all income of charitable trust is taxable except to the extent provided in sec.11. In view of the above, the concept of “income” has to be understood in terms of sec.2(24) and other provisions of the Act. Hence, the view expressed by the AO that the “Gross receipts excluding corpus donation” shall constitute the income of trust or institution is contrary to the provisions of Income tax Act. The “total income” has to be computed in the hands of a charitable trust in accordance with the provisions of sec.11 to 13 of the Act and the same also satisfies the definition of “total income” given u/s 2(45) of the Act.

We have noticed that the assessing officer has assessed maturity proceeds of Fixed deposit as income of the assessee. There should not be any dispute that the maturity proceed of a fixed deposit is “capital receipt” in the hands of the recipient. A capital receipt cannot be subjected to tax except under the authority of law. In any case, what was received by the assessee on maturity of fixed deposit is the maturity proceeds of the amount deposited by it earlier. The interest earned on the said fixed deposit shall constitute income in the hands of the assessee. Accordingly, maturity proceeds of fixed deposit cannot constitute income in the hands of assessee under any count. Hence the Ld CIT(A) was not justified in confirming assessment of the maturity proceeds of fixed deposit as income of the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.50.00 lakhs relating to maturity proceeds of fixed deposit.

The next issue relates to the claim of certain fixed assets as application of income. The AO noticed that the assessee has acquired certain fixed assets, which were shown in the Balance Sheet. Accordingly, the AO allowed an aggregate amount of investment in fixed

We heard the parties on this issue and perused the record. We do not find any infirmity in the decision rendered by Ld CIT(A) on this issue. The assessee has claimed the expenditure of Rs.7,29,227/- referred above in the Income and Expenditure account. Hence it cannot again be allowed as application of income. With regard to remaining three items, the assessee has not furnished any detail before us also and further the assessee has not proved that they are in the nature of capital expenditure resulting in acquisition of any asset. Accordingly we confirm the order passed by Ld CIT(A) on this issue.

The last issue relates to rejection of Form no.10 filed by the assessee for accumulation of income u/s 11(2) of the Act. The Ld A.R submitted that the assessee did not furnish Form No.10 for accumulation of income before the assessing officer within the due date prescribed for filing return of income u/s 139(1) of the Act. However, before the conclusion of assessment proceedings, the assessee filed the Form No.10 dated 08-01-2007 before Ld CIT along with the petition

The Ld A.R submitted that the present assessment order has been passed by the AO in second round of proceedings, since all the issues were set aside by ITAT to his file. A comparison of original assessment order and the present assessment order would show that the AO has copied verbatim the original assessment order. The assessee might not have filed Form No.10 before the AO during original assessment proceedings, since the same was belated. The assessee was advised to get the delay condoned by Ld CIT and hence the assessee filed Form no.10 before Ld CIT during the course of original assessment proceedings along with a petition to condone the delay. In the second round, the assessee has furnished copy of order passed by Ld CIT along with Form no.10 before the AO. He further submitted that the Hon’ble jurisdictional High Court has held in the case of Gokula Education Foundation (394 ITR 236) has held that the Form no.10 could be filed before the appellate authorities also.

The Ld D.R, on the contrary, placed his reliance on the order passed by the AO on this issue. He further submitted that the matter of condonation of delay was subject matter was writ filed by the assessee before Hon’ble High Court of Karnataka and the High Court has rejected the writ petition.

We heard rival contentions and perused the record. A perusal of the order passed by Hon’ble High Court of Karnataka on the writ filed by the assessee would show that the Hon’ble High Court did not express any view on the prayer of the assessee and simply rejected the writ. Be that as it may, as pointed out by Ld A.R, the impugned assessment order has been passed by the AO in consequence to the order passed by ITAT. During the original assessment proceedings, it may be the case that the assessee has not filed Form no.10 before the AO. However, it cannot be said that the same situation/position prevailed during second round of proceedings also. We noticed that the assessee has applied for condonation of delay before Ld CIT and the same was rejected by Ld CIT. The said fact has been noticed by the AO in the original assessment order also. Hence the copy of petition filed by the assessee along with Form no.10 is very much available with the AO during second round.

With regard to the delay in filing form no.10, we notice that the co-ordinate bench has expressed following view in the case of Ursuline Franciscan Congregation Generalate (ITA No. 1039/Bang/2017 dated 23.08.2021:- “11. We heard Ld D.R on this issue and perused the record. We notice that the Hon’ble Supreme Court has observed as under in the case of Nagpur Hotel Owners Association (supra):- “It is abundantly clear from the wordings of sub-section (2) of Section 11 that it is mandatory for the person claiming the benefit of Section 11 to intimate to the assessing authority the particulars required, under Rule 17 in Form No.10 of the Act. If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter

The year under consideration in this appeal is AY 2005-06, i.e, prior to AY 2016-17. Accordingly, we are of the view that the Form No.10 already filed by the assessee should have been considered by the AO for the detailed reasons discussed above. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to consider Form No.10 filed by the assessee and examine the claim made u/s 11(2) in accordance with law.

In the result, the appeal of the assessee is treated as partly allowed.

Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore.