TMI Blog2008 (6) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... which were created under the Punjab Agriculture Produce Marketing Act, 1961. All these marketing committees were enjoying exemption from income-tax under s. 10(20) of the IT Act, 1961 up to asst. yr. 2002-03. There was amendment by the Finance Act, 2002 w.e.f. 1st April, 2003 and after the amendment, these marketing committees do not come under the purview of s. 10(20) of the IT Act, 1961. The Market Committees had applied for registration under s. 12AA of the IT Act, 1961 to the CIT. Initially, the applications of the assessees for registration were rejected by the CIT. Then, these assessees preferred an appeal before the Tribunal and the Tribunal vide its consolidated order dt. 14th March, 2005 accepted the appeals of the assessees and directed the CIT to grant registration under s. 12AA to these Market Committees. Although, the Department had not accepted the findings of the Tribunal and has gone in appeal before Hon'ble Punjab Haryana High Court but the CIT, Hisar has granted registration under s. 12AA of the IT Act, 1961 to all these Market Committees. In the case of these three Market Committees, the case of which we have taken up at this moment, registration were grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution to board is paid by these Market Committees as per the statutory requirement as per the Punjab Agriculture Produce Marketing Act, 1961 and that this contribution is made not only to pay salary to class III employees of the assessee but also to defray expenses of the office establishment of the board and such other expenses incurred by it in the interest of the committees generally and also to defray other expenses for any special or additional staff employed by the State Government in consultation with the committee for giving effect to the provision of the Act. On this basis, learned CIT(A) came to the conclusion that the assessees are entitled to deduction for entire amount of 30 per cent contribution of the market fee paid by these assessees as contribution to the board. He deleted this disallowance in both these cases and now the Revenue is in appeal before us in both these cases. 6. In the third case, it is noted by the AO that the assessee has debited his account of ₹ 42,94,240 as contribution to board but in para No. 7 of the assessment order, it is noted by him that an amount of ₹ 63,86,305 was related to salary and other expenses of class III e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incurred on class III employees, he has restricted the deduction to the extent of expenditure on class III employees. We find that learned CIT(A) has reproduced the relevant sections of the Punjab Agriculture Produce Marketing Act, 1961 i.e. ss. 27 and 28 which are relevant for the issue in hand and for the sake of ready reference, we reproduce the same herein below: 27. Market Committee Fund'(1) All money received by a Committee shall be paid into a fund to be called the Market Committee Fund and all expenditure incurred by the Committee under or for the purpose of this Act shall be defrayed out of such fund, and any surplus remaining after such expenditure has been met shall be invested in such manner as may be prescribed. (2)(a) Every Committee shall, out of its fund pay to the Board as contribution such percentage of its income derived from licence fee, market fee and fines levied by the Courts as is specified below to defray expenses of the office establishment of the Board and such other expenses incurred by it in the interest of the Committees generally and also pay to the State Government the cost of any special or additional staff employed by the State Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xii) meeting any legal expenses incurred by the committee; (xiii) imparting education in marketing or agricultural; (xiv) payments of travelling and other allowances to the members and employees of the committee as prescribed; (xv) loans and advances to the employees; (xvi) expenses of and incidental to elections; and (xvii) with the previous sanction of the Board, any other purpose which is calculated to promote the general interests of the committee or the notified market area, (or with the previous sanction of the State Government, any purpose calculated to promote the national or public interest.) 9. From the above provisions of the Punjab Agriculture Produce Marketing Act, 1961, we find that contribution to the board by the assessee is to defray expenses of the office establishment of the Board and some other expenses and the same is not only to defray the expenditure incurred on class III employees but also to defray the expenses of the office establishment of the board and such other expenses incurred by it in the interest of the committees generally. In this situation, we find no basis as per which the AO has restricted the deduction on this account to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected by CIT, Hisar. Subsequently, these assessees filed second appeal before the Tribunal and vide a consolidated order dt. 14th March, 2005, the appeals of the assessees were allowed and it was held by the Tribunal that these assessees are entitled for registration under s. 12AA of the IT Act, 1961. The Tribunal directed to grant the registration to all the Market Committees of Haryana, Punjab and New Delhi. Consequent to that, registration under s. 12AA were granted in these cases on 28th Dec., 2005. Out of these seven cases, the impugned assessment orders were passed by the AO in December, 2005 in some cases and in January, 2006 in some other cases but although the AO has noted the Tribunal order dt. 14th March, 2005 as per which, the Tribunal has directed for granting registration under s. 12AA to these assessees but the AO has said in these assessment orders that the Department had not accepted the order of the Tribunal and has preferred the appeal under s. 260A to the Hon'ble Punjab Haryana High Court, Chandigarh on 24th Oct., 2005. It is also said by the AO that the decision of Hon'ble High Court is still pending and on this basis, the AO framed the assessments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittees are not trust but institution only and hence it has to be examined as to whether the income of these Market Committees can be exempted under s. 11 or not. It was submitted by him that the AO has not examined this aspect of the matter and learned CIT(A) has decided the issue on the basis of registration permitted by the Tribunal and consequent granting of registration by CIT, Hisar, without examining this aspect of the matter. It was submitted by him that under these facts, the entire matter should go back to the file of the AO for fresh decision after the considering these aspects. 16. As against this, learned Authorised Representative of the assessee supported the order of the CIT(A). Regarding expenses of road repairing etc., it was submitted that the same is not capital expenditure and should be allowed as revenue expenditure and in the alternative, the same should be treated as application of fund for charitable purpose and should be allowed accordingly. 17. We have considered the rival submissions, perused the materials on record and have gone through the orders of the authorities below and the Tribunal judgment dt. 14th March, 2005. We find that as per this ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot considered these aspects while framing the impugned assessments. Under these facts, we are of the opinion that this entire matter in all these cases should go back to the file of the AO for making a de novo assessment after considering the registration granted by the learned CIT, Hisar under s. 12AA. We have noted in the first three cases that the AO in these cases has allowed exemption under s. 11 when the assessment was completed after considering the registration granted by CIT under s. 12AA in these three cases. No difference in facts in the present seven cases could be pointed out but in the present seven cases, this aspect is not examined by the AO. We, therefore, set aside the order of CIT(A) in all these cases and restore the entire matter back to the file of AO in all these cases for making de novo assessment after considering the registration under s. 12AA granted by CIT, Hisar to all these assessees. He should decide the status of these assessees as is warranted by the facts of the case as directed by the Tribunal in order dt. 14th March, 2005. The issue regarding road repairing expenses should also be decided afresh as to whether it is capital expenditure or revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of depreciation and set off of brought forward losses and unabsorbed depreciation. The same was disallowed by the AO. Being aggrieved, these assessees carried the matter in appeal before learned CIT(A). Learned CIT(A) decided the issue regarding exemption under ss. 11 to 13 in favour of the assessee. Regarding expenses on road repairing and building repairing also, learned CIT(A) decided the issue in favour of the assessee. Regarding FD interest, it was held by the CIT(A) that the interest income has to be included in the present year on the accrual basis but the same should be considered as exempt under ss. 11 to 13 if the utilization for charitable purpose is sufficient. Regarding income from sale of shops, learned CIT(A) restored the matter back to the file of the AO to verify as to whether this income was considered in earlier year and if so, not to make any addition in the present year. Regarding depreciation and set off of brought forward losses/unabsorbed depreciation, learned CIT(A) decided the issue against the assessee. Now, the Revenue is in appeal against these orders of CIT(A) for relief granted by him and the assessee is in appeal in three cases, where learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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