TaxTMI 
TaxTMI 
2016 (3) TMI 546
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.... Act, 1961 (hereinafter called as 'the Act'). The assessee has filed its return of income for the assessment year 2008-09 on 14.10.2010 admitting nil total income, after claiming exemption u/s 10(26AAB)/11 of the Income Tax Act, 1961. The assessment was reopened under sec. 147 of the Act, by issuing notice u/s 148 of the Act dated 16.11.2010. In response to notice u/s 148 of the Act, the assessee filed a letter on 28.12.2010 and requested to treat the return filed on 14.10.2010 as return filed in response to notice u/s 148 of the Act. The case was selected for scrutiny and accordingly, notice u/s 143(2) of the Act was issued on 5.7.2011. In response to notice, the Authorised Representative of the assessee appeared on 3.8.2011 and produced books of accounts, audit report and bills & vouchers and the case was adjourned to 17.8.2011. The assessee neither appeared nor furnished any details on the date fixed for hearing. Therefore, the assessment in this case was finalized on the basis of information available on record. 3. During the course of assessment proceedings, the A.O. noticed that the assessee has claimed exemption under sec. 10(26AAB) of the Act. The A.O. further no....
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....s 11(2) of the Act and also challenged the disallowance of depreciation claimed by the assessee. As for as first issue of rejection of form no. 10 and denial of exemption under sec. 11, the assessee submitted that the form no.10 filed along with return of income is valid as the assessee has mentioned specific purpose for which the income was set apart or accumulated. The assessee further submitted that even if, the form is defective, it can be rectified at any time before completion of assessment proceedings. Since, appellate proceeding is extension of assessment proceedings, the form can be filed before appellate authority and hence, permitted to file revised form no. 10. The assessee further submitted that the Hon'ble ITAT, Visakhapatnam bench in the case of AMC Bhimadole, in ITA No.247/Vizag/2009 dated 8.11.2012, under similar facts and circumstances allowed the assessee appeal and held that form no.10 filed with one or more objects of the assessee is valid. Therefore, considering the facts and circumstances of the case and also considering the fact that the assessee is enjoying registration under sec. 12A of the Act, allowed to file revised form no. 10 rectifying the said defec....
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....see further submitted that even if the form is defective, which can be rectified at any time before completion of assessment proceedings. Since, appellate proceeding is extension of assessment proceedings, the form can be filed before appellate authority. The CIT(A) erred in denying the revised form no. 10. The assessee has already filed form along with return of income. In case any defects in form no. 10, which is procedural defect which can be rectified at any time. The A.R. further submitted that the fact remain unchanged that the assessee is enjoying benefit of exemption under sec. 11. If exemption is denied because of technical defects, the very purpose of statute providing exemption to assessee's having charitable objects would be defeated. 7. On the other hand, the Ld. D.R. strongly supported the order of CIT(A), as far as the issue of rejection of revised form no. 10 and denial of exemption u/s 11 of the Act.. As regards the depreciation is concerned, the Ld. D.R. submitted that depreciation is not allowable deduction in the case of trusts claiming exemption u/s 11 & 12 of the Act. The Ld. D.R., further submitted that once the whole expenditure incurred towards acquisiti....
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.... the Ld. A.R. in the light of the facts of the present case. We find that the coordinate bench of this Tribunal, while dealing with similar issue held the issue in favour of the assessee. The relevant portion is reproduced as under: "3. The first issue to be considered is with reference to non-granting of benefit u/s 11(2) for delay in filing form no.10 and accumulation for several objects. While considering the issue of exemption of assessee's income u/s 11 of the Act, the assessing officer did not agree on the claim/ benefit for accumulation of income as the relevant form no.10 was filed belatedly. The Ld. CIT(A) following the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Nagpur Hotel Owners Association 247 ITR 20(SC), wherein it was held that the notice for accumulation of income could be given any time before the conclusion of the assessment proceedings, allowed the assessee's contention with a direction to accept the form no.10. However, the Ld. CIT(A) upheld the assessing officer's contention that the notice for accumulation has not specified any specific purpose and the general purpose which was mentioned in form no.10 cannot be termed as ....
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....s the trust to utilize its funds for charitable purposes which are medical relief, education and relief to the poor. In the application seeking exemption, the assessee has specified these three objects. It was not required for the assessee to be more specific with regard to the utilization of the funds. Plurality of purposes is permitted and if it so happens that an assessee has only three objects or purposes, it may well utilize the funds for all the three objects and purposes.-CIT vs. Hotel & Restaurants Association (2003) 182 CTR (Del) 374 : (2003) 261 ITR 190 (Del) and Director of IT (Exemption) vs. Daulat Ram Education Society (2005) 278 ITR 260 (Del) followed; CIT vs. M.Ct. Muthaiah Chettiar Family Trust &. Ors. (2000) 162 CTR (Mad) 63 and Director of IT (Exemption) vs. Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) dissented from. Conclusion: While specifying the purposes of accumulation of income under s.11(2), a charitable trust can mention all its objects without being specific. 6. Further, Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Market Committee 201 Taxman 235 also considered similar issue and held as under: ....
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....d mode. Exemption was disallowed on the ground that the assessee failed to specify the purpose of accumulation. The CIT(A) as well as the Tribunal have clearly held that the purpose stood specified and was statutory purpose for utilizing the amount i.e. development as per s. 28 of PAPM Act. Sec. 11(2) of the Act to the extent relevant is as under: "11(2) Where eighty five per cent of the income referred to in cl. (a) or cl. (b) of sub-s. (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 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 specifies, by notice in writing given to the AO 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 excee....
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.... revised form no.10 rectifying the defects pointed out by the A.O., which was not done. Therefore, we deem it appropriate to remit the issue back to the file of the A.O. and direct the A.O. to allow the assessee to file revised form no.10 and consider the exemption claimed u/s 11of the Act. 11. The next issue, came up for our consideration is whether the CIT(A) was right in allowing the depreciation claim made by the assessee. The Ld. D.R. submitted that the assessee is not eligible to claim depreciation on fixed asset, as the cost of asset was fully allowed as application of income in earlier years. Therefore, allowing depreciation on fixed assets amounts to double deduction as held by the Hon'ble Supreme Court in Escorts Ltd vs. Union of India 199 ITR 43. It was the contention of assessee that income of trust claiming exemption u/s 11 should be computed by applying commercial principles, therefore, depreciation being a permissible deduction, while computing the income under the commercial principles, the same should be allowed as deduction. The assessee further contended that the decision of Escorts Limited (supra) is rendered under different context, which cannot be made appl....
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....he trust in terms of s. 11." 12. Since the issue is decided in favour of the assessee, the claim per se is allowable to the assessee. The assessing officer is directed to allow the depreciation after obtaining the necessary details from the assessee. This issue is also accordingly considered allowed. 13. In view of the above and respectfully following the coordinate bench decision in ITA No.226/Vizag/2009, we are of the opinion that depreciation on assets, the cost of which was allowed has application of income in earlier year is to be allowed while computing the income available for application for charitable purpose. The CIT(A) rightly directed the A.O. to allow the depreciation. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the order passed by the CIT(A) and reject the ground raised by the revenue. 14. The next issue emanates from the revenue appeal in ITA No.546/Vizag/2013, is with regard to application of income towards release of funds to Horticulture department. The Assessing Officer disallowed the amount paid to horticulture department for the reason that the assessee has paid the amount to other departme....
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.... the amount and his order should be upheld. On the other hand, the Ld. A.R. of the assessee submitted that the issue is squarely covered by the decision of ITAT, Visakhapatnam bench in the case of ITA No.226/Vizag/2009. The CIT(A) rightly deleted the addition and his order should be upheld. 16. We have considered the rival submissions and gone through the case law referred by the Ld. A.R. in the light of the facts of the present case. The coordinate bench of this Tribunal, in ITA No. 226/V/2009 has decided the issue in favour of the assessee. The relevant portion of the same is reproduced hereunder: "9. The second issue for consideration is with reference to grant of relief of various payments made consequent to the directions of Director of Marketing which assessing officer did not allow and the Ld. CIT(A) sustained the addition on the reason that the directions of the Director of Marketing were not filed. It was the submission of the assessee that at the relevant point of time the directions could not be located but they are filed as additional evidence before us. However, allowance of the expenditure consequent to the directions of Director of Marketing has already b....
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....d sale of such agricultural produce, livestock or products of livestock in such area as may be specified in such notifications. After considering the objections and suggestions, if any, the State Government is authorised to publish a final notification under sub-s. (3) thereof declaring such area to be a notified area. By sub-s. (1) of s. 4, the State Government is empowered to constitute a market committee for every notified area which shall be a body corporate having perpetual succession and a common seal. The duty of enforcing the provisions of the Act and the rules and byelaws is entrusted to a market committee under sub-s. (2) thereof. Sub-s. (3) of s. 4 empowers the market committee to establish such number of markets as the State Government may, from time-to-time, direct for the purchase and sale of any notified agricultural produce, livestock or products of livestock. Sub-s. (3) of s. 4 provides such facilities in the market as may be specified by the Government from time to time by a general or special order. Sub-s. (4) provides that the State Government shall, after the establishment of a market under sub-s. (3), declare by notification the market area and such other area....
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....n and dissemination of information regarding all matters relating to crop statistics and marketing in respect of notified agricultural produce, livestock and products of livestock; (viii) schemes for the extension or cultural improvement of notified agricultural produce, livestock and products of livestock within the notified area, including the grant, subject to the approval of the Government, of financial aid to the schemes for such extension or improvement within such area, undertaken by other bodies or individuals; (ix) propaganda for the improvement of agriculture, livestock and products of livestock and thrift; (x) the expenses of, and incidental to, the conduct of elections; (xi) the promotion of grading services; (xii) measures for the preservation of food grains; (xiii) such other purposes as may be specified by the Government by general or special order; 13. Sub-s. (1) of s. 16 of the Act provides that there shall be formed for the whole of the State a fund to be called the 'Central Market Fund'. Every market committee is required to contribute 10 per cent of its annual income to the Central Market Fun....
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.... to set up, establish and use any place in the notified area for the purchase, sale, storage or weighment processing or pressing of any notified agricultural produce. Sec. 12 empowers the market committee to levy fees on agricultural produce, purchase or sale in the notified market area. These monies form the market committee fund and shall have to be spent in accordance with the provisions of s. 14 and the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rules, 1969 (the Rules, for brevity). 19. It may, therefore, be taken as well accepted that the AMCs discharge an important duty and function of protecting the interest of a large body of persons, namely, agriculturists, farmers and growers of agricultural produce and livestock. A market committee is a platform to facilitate equal bargaining power for the sale or purchase of agricultural produce with the main object of ensuring fair and reasonable price for the agricultural produce and livestock brought by the agriculturists and farmers to the market area/yard. 20. The market committee constituted under s. 4 of the AMC Act shall be a body corporate having perpetual succession and a common seal with pow....