M/S Cane Development Council, Faizabad vs Department Of Income Tax

Income Tax Officer-1, Vs. M/s Cane Development Council, Faizabad. Ganauli, Rauzagaon, Faizabad. PAN:AAATC8843R (Appellant) (Respondent)

I.T.A. No.352/Lkw/2014 Assessment year:2010-11

Income Tax Officer-I, Vs. M/s Cane Development Council, Faizabad. Moti Nagar, Masodha, Faizabad. PAN:AAALK0808Q (Appellant) (Respondent)

I.T.A. No.353/Lkw/2014 Assessment year:2010-11

Income Tax Officer-III, Vs. M/s Cane Development Council, Faizabad. Mijhaura, Akbarpur, Ambedkar Nagar. PAN:AABTM6606R (Appellant) (Respondent)

Appellant by Shri K. C. Meena, D.R. Respondent by None Date of hearing 17/03/2015 Date of pronouncement 05/06/2015 2

ORDER

PER A. K. GARODIA, A.M.

All these appeals are filed by the Revenue, which are directed against separate orders of learned CIT(A)-I, Lucknow all dated 18/02/2013 for assessment year 2009-10 and 2010-11 in respect of the assessee M/s Cane Development Council, Ganauli, Faizabad. There is one more appeal in respect of the same assessee for assessment year 2009-10 in course of penalty proceedings u/s 271(1)(c) of the Act. The remaining two appeals are for assessment year 2010-11 in respect of two different assessees i.e. M/s Cane Development Council, Mijhaura and M/s Cane Development Council, Moti Nagar. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.

2. In all the four quantum appeals, the issue is same and therefore, the grounds raised by the assessee in I.T.A. No.349/Lkw/2014 are reproduced as under:

"1. The Ld. CIT (A) has erred on facts and in law in holding that the commission and the interest received by the assessee do not come within the ambit of the definition of the term 'income' as defined u/s 2(24) of the IT Act without appreciating the fact that the definition of the term 'income' u/s 2(24) is inclusive definition.

2. The Ld. CIT (A) has erred on facts and in law in not appreciating the fact that the idea behind providing inclusive definition in section 2(24) is not to limit its meaning but to widen its net.

3. The Ld. CIT (A) has erred on facts and in law in not appreciating the fact that the society is not a co-operative society then how the benefit of section 80P(2)(a)(iii) can be given to it."

3. The grounds raised in the penalty appeal i.e. I.T.A. No.350/Lkw/2014 are as under:

3 "1. The Ld. CIT (A) has erred on facts and in law in holding that the commission and the interest received by the assessee do not come within the ambit of the definition of the term 'income' as defined u/s 2(24) of the IT Act without appreciating the fact that the definition of the term 'income1 u/s 2(24) is inclusive definition.

2. The Ld. CIT (A) has erred on facts and in law in not appreciating the fact that the idea behind providing inclusive definition in section 2(24) is not to limit its meaning but to widen its net.

3. The Ld. CIT (A) has erred on facts and in law in not appreciating the fact that the society is not a co-operative society then how the benefit of section 80P(2)(a)(iii) can be given to it.

4. The Ld. CIT (A) has erred on facts and in law in deleting the penalty without appreciating the fact that the quantum on the basis of which penalty was imposed is sub judice before the Hon'ble ITAT."

4. None appeared on behalf of the assessee on the appointed date of hearing in spite of notice and hence, we proceed to decide these appeals ex- parte qua the assessee.

5. Learned D.R. of the Revenue supported the assessment orders in respect of four quantum appeals and supported the penalty order in respect of penalty appeal u/s 271(1)(c) of the Act.

6. We have considered the submissions of Learned D.R. of the Revenue, perused the material available on record and gone through the orders of the authorities below. Regarding the quantum proceedings as per four appeals, we find that the issue in dispute has been decided by learned CIT(A) on the basis that the commission and interest income, which have been taxed by the Assessing Officer are meant for specific projects and have been spent for meeting the expenses of these projects and as a consequence, there is no surplus with the assessee and therefore, there is no question of taxing commission and interest income. For coming to this conclusion, CIT(A) has 4

referred to various judgments including a judgment of Hon'ble Allahabad High Court rendered in the case of CIT vs. U.P. Upbhokta Sahkari Sangh Ltd. 288 ITR 106. The relevant portion of this judgment has been reproduced on pages 8 & 9 of his order. In this case, it is noted by Hon'ble High Court that the State Government has appointed the assessee as the disbursing agency for a sum of Rs.2,75,000/- vide GO order dated 15/04/1981 and therefore, the assessee was only disbursing agency and the Income Tax Officer was not at all justified in holding that a sum of Rs.2,75,000/- has been income of the assessee. Hence, it is seen that in this case, the issue was regarding receipt of grant by the assessee from State Government and not interest or commission income.

6.1 Similarly, another judgment cited by CIT(A) is the judgment of Hon'ble Patna High Court rendered in the case of Bihar Agricultural Produce vs. CIT 205 Taxman 378. In this case also, it is noted by Hon'ble Patna High Court that the Board's fund received u/s 33C of the Local Act is not an income or profits and gains and is not dividend, voluntary contribution nor is it covered by any one of the remaining clauses of sub section (24) of Section 2 of the Act. After observing this, it was held by Hon'ble High Court that the Board's fund received and collected is not income. Hence, it is seen that the decisions quoted by CIT(A) are regarding Board's fund received by the assessee and not any interest and commission income as in the present case. Hence, these judgments quoted by CIT(A) are not applicable in the facts of the present case. Therefore, the order of CIT(A) on this issue is not sustainable in the facts of the present case because in the present case, the addition made by the Assessing Officer is in respect of commission income and interest income and not in respect of any grant from State Government. We, therefore, reverse the order of CIT(A) and restore that of the Assessing Officer in all the four quantum appeals.

5 7. Now we take up the penalty appeal i.e. I.T.A. No.350/Lkw/2014. We find that in this appeal, the penalty was deleted by CIT(A) on the basis that in quantum proceedings, addition has been deleted and therefore, penalty is not leviable. While deciding the quantum appeal for this year in the case of Cane Development Council, Ganauli in I.T.A. No.346/Lkw/20134, we have reversed the order of CIT(A) and restored that of the Assessing Officer. Therefore, the basis on which the penalty was deleted by CIT(A) is no more available. We feel that under these facts, the matter should go to CIT(A) for deciding on merit of the penalty and therefore, we set aside the order of CIT(A) and restore the matter back to his file for fresh decision after affording adequate opportunity of being heard to both the sides.

8. In the result, the penalty appeal of the Revenue stands allowed for statistical purposes.

9. In the combined result, all the four quantum appeals are allowed whereas remaining penalty appeal is allowed for statistical purposes.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:05 /06/2015 *C.L.Singh

Copy of the order forwarded to :

1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar