ITO, NEW DELHI vs. M/S. AGRICULTURAL PRODUCE MARKETING COMMITTEE, NEW DELHI

Date of Hearing : 18-01-2016 Date of Order : 10-02-2016

ORDER

PER H.S. SIDHU : JM

in the Revenue’s Appeal read as under:- On the facts and circumstances of the case and in law CIT(A) has erred in –

1. Deleting the addition of Rs. 1,31,40,831/- made on account of treating whole of the surplus as income after disallowing the status of Charitable Institution.

2. The appellant craves right the right to add, alter or amend any ground of appeal

3. The brief facts of the case are that the assessee furnished a return claiming the status of Local Authority and declared income of Rs. 1,57,15,900/- after depositing Rs. 24,59,500/- as self assessment tax. The case was selected for scrutiny and notice u/s. 143(2) dated 23.9.2008 was issued and served upon the assessee. The file was transferred to the ACIT, Circle 25(1) and accordingly, a fresh notice u/s. 143(2) dated 23.7.2009 was issued and served. The assessee claimed income exempted. The status of Local Authority was denied. The High Court confirmed the ITO’s order and held that they are not entitled to exemption. The Assessee has preferred an SLP which has been dismissed and accordingly, the status is not allowed as a Local Authority, the status was taken as Body of Individual. The entire surplus is taxable and accordingly the income is treated as taxable income. The assessee has applied for grant of exemption u/s. 11 and filed application u/s. 12A for registration as a Charitable Institution on 31.5.2006. The Director of Income Tax (Exemption) granted the registration as a Charitable Institution with certain condition. The expenditure debited in the P&L account are neither charitable nor allowing benefit of the common man. Accordingly, the entire receipts of marketing fees is taxed as income from business and not entitled to any exemption. The income of the assessee was assessed at Rs. 1,31,40,831/- vide order dated 31.12.2009 passed u/s. 143(3) of the I.T. Act, 1961.

4. Aggrieved with the aforesaid order of the AO, the assessee filed appeal before the Ld. CIT(A), who vide impugned order 26.12.2013 has deleted the addition of Rs. 1,31,40,831/-.

5. Against the order of the learned CIT(A) the Revenue is in appeal before the Tribunal.

and stated that the addition of Rs. 1,31,40,831/- made on account of treating whole of the surplus as income after disallowing the status of Charitable Institution was wrongly deleted by the Ld. CIT(A).

7. On the contrary, the Ld. Counsel of the Assessee contended that the action of the AO was not justified. He relied upon the order of the Ld. CIT(A) and requested the Bench to uphold the order of the Ld. CIT(A).

8. We have heard both the parties and perused the records, especially the orders of the revenue authorities. We find that Ld. CIT(A) has elaborately discussed the issue in dispute. For the sake of convenience, we are reproducing the finding of the Ld. CIT(A) from para 5 to 6 at pages 5 & 6 of the impugned order.

“I have considered all the documents on record. I shall now take up the various grounds of appeal.

5. Ground No.1, 2, 5 & 6 are in respect of the fact that the AO did not allow the status of a charitable institution to the appellant when the appellant was accorded registration u/s 12A of the I. T. Act, 1961. The AO taxed the entire receipts of marketing fees as income from business and stated that the appellant was not entitled to any exemption.

5.1. The AO has clearly stated in the order that the Director of Income Tax Exemption granted registration as a charitable institution to the appellant. However, the AO has stated that the exemption was granted with certain conditions but the conditions were not brought to his notice. I am indeed surprised by this observation of the AO. The first thing the AO should have done was to have called for a copy of the registration granted and seen the conditions. I have perused the order and the conditions are clearly specified in the order.

5.2. The AO has further in the order stated that the expenditures debited to the P & L A/c are neither charitable nor allowing benefit to the common man. The AO has not spelt out what items of expenditure was not charitable or not beneficial to the common man. In facts the AO has not stated what items of expenditure were debited to the P & L A/c and out of these what were the expenditure not beneficial to the common man.

5.3. The appellant on the other hand has stated that the committee is engaged in facilities & services of public utility. I have perused the decisions quoted by the appellant and seen the documents submitted. The appellant has been granted registration u/s 12A. It is engaged in providing services of public utility The AO has not given any reasons or justification for treating the entire receipts of marketing fees as business income. The addition of Rs.1,31,40,831/- is therefore deleted. The ground of appeal is ruled in favour of the appellant.

6. Ground No.4 is in respect of the AO treating the appellant as body of individuals. In the order I have not been able to decipher why the AO has done this. The status of the appellant is therefore taken as local authority as returned by the appellant. The ground of appeal is ruled in favour of the appellant.”

9. In the background of the aforesaid findings, we are of the view that Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part, hence, we uphold the same. Accordingly, the appeal of the Revenue is dismissed.