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Asstt. Director of Income Tax (Exemption) -III, Hyderabad Versus Telangana Foods (formerly known as Andhra Pradesh Foods)

2017 (2) TMI 496 - ITAT HYDERABAD

Entitlement for exemption u/s 11 - Held that:- The price of the goods is not fixed by the assessee at the time of its supply but it is fixed by the Govt. of A.P. depending on the expenditure incurred by the assessee and also its overhead which is also evident from the fact that the assessee suffered losses in certain years while it has excess of income over expenditure in certain other years. The excess of income over expenditure alone cannot be a determining factor as to the nature of the asses .....

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becomes irrelevant while granting exemption u/s 11 of the Act. Further, the CIT (A) had also called for a remand report from the AO about the application of income and has observed that it has complied with the provisions of section 11(4a) of the Act. Therefore, we see no reason to interfere with the order of the CIT (A) for all the A.Ys. - Decided against revenue - ITA Nos.1637 to 1640/Hyd/2013 - Dated:- 8-2-2017 - Smt. P. Madhavi Devi, Judicial Member AND Shri B. Ramakotaiah, Accountant Member .....

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ollowing grounds of appeal for A.Y 2005-06 which are similar to grounds raised in the other appeals: 1. The order of the Ld.CIT (Appeals) is erroneous both on facts and in law. 2. On the facts and in circumstances of the case, the Ld. CIT(Appeals) erred in holding that the assessee is entitled for exemption u/s 11 of the I.T Act, 1961. 3. On the facts and in circumstances of the case and when in the statement of computation of total income signed by its Managing Director filed with the return of .....

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filed u/s.44AB of the IT Act, 1961, the activity of the assessee, under that circumstances, does not come under the purview of Section 2(15) of the I.T Act, 1961, and hence, it is not entitled for exemption u/s 11 of the I.T Act, 1961. 5. On the facts and in circumstances of the case and when the assessee is engaged in production and sale of food products, as observed by the ld. CIT(Appeals) in Para 7.8 of the appellate order, CIT(Appeals) erred ill holding that the objects of the assessee are .....

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e assessee falls under the purview of 'relief of poor'. 8. On the facts and in circumstances of the case and when the assessee is paying all other applicable taxes including Sales Tax, Service Tax, VAT etc., on its turnover, which shows its nature as a commercial organization, the Ld. CIT(Appeals) erred in holding that the assessee's activity remains 'relief of poor'. 9. On the facts and in circumstances of the case and when in the return of income the assessee has admitted a .....

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hearing . 3. Brief facts leading to the above disputes are as under:- The assessee is a society registered u/s 12AA of the I.T. Act. The assessee society is directed by the Department of Women & Child Welfare of the Govt. of A.P for supply of nutritious food to undernourished children, pregnant women and lactating mothers of below poverty line. The assessee was granted registration u/s 12AA of the Act w.e.f. 23.3.1989 and has been filing the return of income claiming exemption u/s 11 of the .....

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ax the income over expenditure. Similarly, exemption u/s 11 was denied in all the later A.Ys also. Aggrieved, the assessee preferred appeals before the CIT (A) for each of the A.Ys and the CIT (A) has allowed the same. Aggrieved by the order of the CIT (A), the Revenue is in appeal before us for all the A.Ys. 5. The learned DR supported the orders of the AO, while the learned Counsel for the assessee supported the orders of the CIT (A). Respective representatives also filed written submissions i .....

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ries of beneficiaries as the Government may from time to time decide within the general frame work of the Government's Social Welfare Programme with a view to improving the nutritional status of vulnerable sections of the lower income groups and to establish and manage food or other factories for the purpose; ii. to create raw material pre-processing and food processing capacity with assistance from the Govt. of India, State Government and International Agencies like CARE and UNICEF and also .....

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experimental measures the assistance to prosecution, development and coordination of research generally or specifically in connection with study of the causes, mode of spread and prevention of diseases due to mal-nutrition; vi. to exchange information knowledge and personnel with other institutions, associations and societies either in India or elsewhere interested in the same subjects; vii. to prepare and publish any papers or periodicals in furtherance of the objects of the council and contri .....

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te, coordinate, regulate and develop the working of Food and Nutrition Projects in Andhra Pradesh; x. to coordinate with the Government of Andhra Pradesh, Government of India, International Agencies such as UNICEF, CARE and voluntary agencies to ensure regular supply of nutritious foods to school going children, preschool children pregnant women, nursing mothers and other vulnerable groups; xi. to issue appeals and applications for money and funds and furtherance of the said objects and to accep .....

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gs or works necessary or convenient for the purpose of the council; xv. to undertake and accept the management of any endowment or trust fund or donations the undertaking whereof may seem desirable from the point of Implementation of Nutrition Programmes; xvi. to offer prizes and to grant scholarships, in furtherance of the objects of the council; xvii. to undertake, organize and facilitate study courses, conferences, lectures, seminars, summer institutes and the like; xviii. to undertake and pr .....

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objects and to depute its member(s) to serve on the committees of those institutions as its representative( s); xxi. to make rules for the conduct of the affairs of the council to add to, amend, vary or annual them from time to time; xxii. to doing of all such other lawful things as are incidental or conducive to the attainment of the above objects ; 7. From a reading of the above objects, it is clear that the assessee s objective is to serve the poor, mainly children and women, particularly pre .....

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d therefore it should also pay the income tax. For coming to this conclusion, the AO has also relied upon the decision of the Hon'ble Supreme Court in the case of Indian Chamber of Commerce vs. CIT reported in 101 ITR 796. The CIT (A), on the other hand, has considered the objectives of the assessee and has held that the assessee is not carrying on the activities for the benefit of any general public entity but is carrying on relief for the poor and therefore it falls under the first limb of .....

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the registration u/s 12AA of the Act by observing that the assessee cannot be referred to as the Contractor to the Govt. of A.P as it is involved in manufacture and supply of food to the beneficiaries and only the supervisory activities are carried on by the Govt. of A.P. in bringing out schemes for the benefit of the beneficiaries and fixing a suitable price to meet the cost of manufacturing and other overheads. Further, the Hon'ble Tribunal has also held that there is no prohibition in th .....

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ing the registration to the assessee. 9. The decision of the Hon'ble Supreme Court in the case of Indian Chamber of Commerce (cited Supra) was with regard to the meaning of the term advancement of any object of general public utility not involving the carrying on the activity for profit. The assessee therein was primarily engaged in activities which was primarily promotion of products and trade interests and other allied service operations and the bone of contention before the Hon'ble Su .....

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the definition of charitable purpose and in particular clause 4 thereof and has held that section 2(15) excludes from exemption carrying on activities for profit even if they are linked with the objectives of general public utility . It is further held that to bring himself within section 2(15), the onus is on the assessee to show that his objects are of general public utility and thus the advancement of these objects there is no involvement of activities for profit. In the case before us, the .....

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