2009 (12) TMI 14 - HC - Income Tax

Allahabad High Court Affirms Tax Exemption for Charitable Entities

The Commissioner of Income Tax-II, Lucknow Versus M/s. Krishi Utpadan Mandi Samiti, Barabanki and others

The High Court of Allahabad upheld the status of entities created under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 as 'Charitable Institutions,' granting ... Deletion of additions - A.O. made the various additions, which were upheld by the first appellate authority. However, the Tribunal vide its impugned orders has observed that these entities were created under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 and they are subject to provision of the Act and control of the Government. Finally, Tribunal treated these assessees as 'Charitable Institutions' and deleted the addition made by the A.O. – held that - these institutions were accepted by this court as charitable institution for the assessment year 2003-04 and subsequent assessment years including the assessment years under consideration. Once, these assesses are declared 'Charitable Institutions', their income is exempted from Income Tax. When income is exempted then there is no justification to make additions and the same are likely to be deleted. Issues:- Appeals filed by the department under Section 260-A of the Income Tax Act against orders of the Income Tax Appellate Tribunal.- Whether entities created under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 are 'Charitable Institutions' exempt from Income Tax.- Validity of Tribunal's decision to treat the entities as 'Charitable Institutions' and delete additions made by the Assessing Officer.- Applicability of previous High Court decision granting 'Charitable Institution' status to similar entities.Analysis:The High Court of Allahabad heard appeals filed by the department under Section 260-A of the Income Tax Act against orders of the Income Tax Appellate Tribunal. The Tribunal had observed that entities created under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 were subject to the Act and control of the Government, treating them as 'Charitable Institutions' and deleting additions made by the Assessing Officer. These entities were granted the status of 'Charitable Institutions' by the Tribunal in previous cases. The High Court had upheld this decision in earlier orders. Once an entity is declared a 'Charitable Institution,' its income becomes exempt from Income Tax, justifying the deletion of additions made by the Assessing Officer. The High Court found no merit in the department's appeals, as the entities were already treated as 'Charitable Institutions' in previous decisions.The Court emphasized that no substantial question of law was involved in the present appeals and dismissed them in limine. The previous decision of the High Court upholding the status of the entities as 'Charitable Institutions' for assessment years 2003-04 and subsequent years, including the years under consideration, was cited as the basis for dismissing the current appeals. The judgment highlighted that once an entity is recognized as a 'Charitable Institution,' its income is exempt from Income Tax, leading to the deletion of additions made by the Assessing Officer. Therefore, the High Court concluded that there was no need for interference in the impugned orders based on the previous decisions affirming the entities' status as 'Charitable Institutions.' The appeals were deemed to have no merit and were dismissed accordingly.