Punjab-Haryana High Court
Market Committee Gohana vs Asstt. Commissioner Of Income Tax on 18 January, 2024
Author: G.S.Sandhawalia
Bench: G.S.Sandhawalia
Neutral Citation No:=2024:PHHC:004741-DB
ITA No.244 of 2011 and ITA No.512 of 2017 1
2024:PHHC:004741-DB
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
204 2024:PHHC:004741-DB
ITA No.244 of 2011 and
ITA No.512 of 2017
Date of Decision: 18.01.2024
Market Committee, Gohana .....Appellant(s)
Versus
Assistant Commissioner of Income Tax, Sonipat Circle, Sonipat
...Respondent(s)
CORAM: HON'BLE MR. JUSTICE G.S.SANDHAWALIA
HON'BLE MS. JUSTICE LAPITA BANERJI
Present: Mr. Rajesh Garg, Sr. Advocate,
with Ms. Neha Matharoo, Advocate,
and Mr. Mandeep Singh, Advocate,
for the appellant (in ITA-244-2011).
Ms. Gauri Neo Rampal Opal, Sr. Standing Counsel,
for the appellant (in ITA-512-2014),
for the respondent-Department (in ITA-244-2011).
Mr. S.K. Mahajan, Advocate,
for the respondent-M.C., Gohana (in ITA-512-2017).
G.S.SANDHAWALIA, J.
1. The present judgment shall dispose of two appeals i.e. ITA No.
244 of 2011 and ITA No. 512 of 2017.
2. ITA No.244 of 2011 has been filed under Section 260A of the
Income Tax Act, 1961 (in short 'the Act') against the order passed by the
Income Tax Appellate Tribunal, Delhi Bench in ITA No.1831/Del/2010 dated
31.08.2010 (Annexure A/3) wherein the Tribunal has allowed the appeal of
the Revenue and set aside the order of the Commissioner, Income Tax
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wherein the deletion of Rs.2,81,33,700/- was made for the assessment year
2007-08 and restored the order of the Assessing Officer dated 30.11.2009
(Annexure A-I) for the assessment year 2007-08.
3. The reasoning which prevailed with the Tribunal was that it was
a payment of loan taken from the Haryana State Agricultural Marketing
Board (in short 'the Board') and had been used for spending on repair work of
Mandi construction and repairs of various rural roads and development of
Mandis and, therefore, the expenses incurred were not out of the own funds
but out of borrowed funds. Resultantly, the Tribunal was of the opinion that
making repayment of such borrowed funds and claiming deduction as
application of income was claiming double deduction for the same
expenditure and, therefore, the appellant (Committee herein) was not eligible
for double deduction on account of the same expenditure incurred based on
the construction of rural roads and development of Mandis.
4.. The appeal was admitted on 07.05.2012 on the following
substantial question of law:-
"(i) Whether the learned Income Tax Tribunal
has gravely erred in law in maintaining the
disallowance of Rs.2,81,33,700/- on the ground that it is
a repayment of loan to Haryana Mandi Board whereas
from the record it is lucid that the payment was made
for achievement of objects prescribed under the Act."
5. A perusal of the paper book would go on to show that return of
income under the Act was filed on 29.10.2007 claiming exemption under
Section 11 of the Act which was duly processed under Section 143 on
27.02.2008. The case was selected for compulsory scrutiny under the
CBDT's Instructions. Notice dated 19.03.2008 under Section 143(2) of the
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Act and under Section 142(1) dated 21.05.2009 were issued and served and
the authorized representatives accordingly attended the proceedings and
produced the books of accounts. The assessment was then framed under
Section 143(3) of the Act on 30.11.2009 and the assessee claimed the
repayment of liabilities of Rs.2,81,33,700/- as application of income which
was construed as repayment of loan taken from the Marketing Board for
construction of rural roads and development of Mandis. The Assessing
Officer came to the conclusion that the assessee had not shown increase in the
amount of loan taken from the Board while calculating its income in relevant
years and, therefore, discharge of liability of loan was not allowable for
application of fund to the assessee. Reliance was placed upon the judgment
of the Apex Court in Escorts Ltd. and another vs. UOI and others, 199 ITR
43 that double deduction for an item should not be inferred and, therefore, the
payment of liability of old loan was not allowed as application of income and
penalty proceedings under Section 271(1)(c) of the Act were also initiated for
claiming inaccurate expenditure and concealment of income of
Rs.2,81,33,700/-.
6. ITA No. 512 of 2017 has been filed by the Revenue which arises
out of the order of the Tribunal dated 28.03.2017 (Annexure A-IV) wherein,
it was held that it does not amount to filing of inaccurate particulars and the
same were present before the Assessing Officer during the assessment
proceedings and it was not a valid reason for passing the penalty order when
the same was properly disallowed by the Assessing Officer and after
verifying the relevant records. Thus, a finding was recorded that the assessee
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had not furnished any inaccurate particulars and the Assessing Officer as well
as the Commissioner of Income Tax were incorrect in holding to that effect
and resultantly, the appeal of the assessee had been allowed and the penalty
of Rs.1,19,26,437/- was deleted which had been imposed vide order dated
28.03.2011 (Annexure A-II) and upheld by the Commissioner on 31.10.2011
(Annexure A-III). The Revenue is, thus, in appeal against the said reasoning
of the Tribunal which had been ordered to be heard with the appeal filed by
the Market Committee.
Our Findings
7. The Commissioner had come to the conclusion vide order dated
05.02.2010 (Annexure A/2 in ITA No. 244 of 2011) that the sources of
income of the Market Committee were specified and the items on which the
income is to be applied are also mentioned in the Act. The amount had been
paid to the Board for the expenditure which the Board had incurred on behalf
of the Market Committee and the same was allowable as application of
income and, therefore, the addition made by the Assessing Officer had been
deleted. The same was done by accepting the argument that the source of
income of the Committee is from license fee, market fees and sale of plots
and the expenditure is made on the items mentioned under Section 28 of the
Punjab Agricultural Produce Markets Act, 1961 (in short 'the Markets Act').
The Board was carrying on the activity in the notified area of the Market
Committee and had incurred an expenditure which otherwise the Market
Committee would have incurred and the same is shown as liability in the
accounts of the Market Committee and when the amount is returned to the
Board by the Market Committee, the liability is reduced to that extent in the
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books. The money had been spent to achieve the objects of the Act and the
action of the Assessing Officer was, thus, not held to be in order which has
been apparently wrongly as such set aside by the Tribunal.
8. It is not disputed that the assessee-Market Committee is applying
its funds as per the statutory provisions provided under the Markets Act.
Section 28 of the said Act reads thus:-
"28. Purposes for which the market committee
funds may be expended.- Subject to the provisions
of Section 27, the Market Committee funds shall be
expended for the following purposes:
(i) acquisition of sites for the market;
(ii) maintenance and improvement of the market;
(iii) construction and repair of buildings which are
necessary for the purposes of the market and for the
health, convenience and safety of the persons using it;
(iv) provision and maintenance of Standard weights and
measures ;
(v) pay, leave allowances, gratuities, compassionate
allowances and contributions towards leave allowances,
compensation for injuries and death resulting from
accidents while on duty, medical aid, pension or
provident fund of the persons employed by the
committee ;
(vi) payment of interest on loans that may be raised for
purposes of the market and the provisions of a sinking
fund in respect of such loans ;
(vii) collection and dissemination of information
regarding all matters relating to crop statistics and
marketing in respect of the agricultural produce
concerned ;
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(viii) providing comforts and facilities, such as shelter,
shade, parking accommodation and water for the
persons, drought cattle, vehicles and pack animals
coming or being brought to the market or on
construction and repair of link roads, approach roads,
culverts, bridges and other such purposes ;
(ix) expenses incurred in the maintenance of the offices
and in auditing the accounts of the committees ;
(x) propaganda in favour of agricultural improvements
and thrift ;
(xi) production and betterment of agricultural produce ;
(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
interest 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. A perusal of the above said provision would go on to show that
the purposes for which the funds are available are for the maintenance and
improvement of the Market Committees which are necessary for the purposes
of the existing market and for the health, convenience and safety of the
persons using it. The Market Committee is vested with the responsibility of
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effecting improvements besides ensuring that there is repair and maintenance
of the existing infrastructure and the whole purpose as such is to provide
better facilities in the rural areas and for the safety, health and convenience of
persons who visit the market area for the sale of agricultural produce and for
the general interest of the persons associated with the activities connected
therewith. Section 26 of the Markets Act further provides the purpose for
which the market development fund may be expended by the Marketing
Board whereas Section 27 provides that part of the funds earned by a Market
Committee has to pay to Marketing Board as contribution and the same can
be utilized by the Marketing Board for the purposes enumerated in the
Statute. The said Sections reads thus:-
"26. Purpose for which the market development
fund may be expended.The marketing development fund
shall be utilised out of following purposes:
(i) better marketing of agricultural produce ;
(ii) marketing of agricultural produce on co-operative
lines ;
(iii) collection and dissemination of market rates and
news ;
(iv) grading and standardisation of agricultural
produce;
(v) general improvements in the markets or their
respective notified market areas;
(vi) maintenance of the office of the Board and
construction and repair of its office buildings, rest-
house and staff quarters ;
(vii) giving aid to financially weak committees in the
shape of loans and grants ;
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(viia) repayment of loans and payment of interest
thereon.
(viii) payment of salary, leave allowance, gratuity,
compassionate allowance, compensation for injuries or
death resulting trom accidents while on duty, medical
aid, pension or provident fund to the persons employed
by the Board and leave and pension contribution to
Government servants on deputation ;
(ix) travelling and other allowances to the employees of
the Board, its members and members of advisory
committees ;
(x) propaganda, demonstration and publicity in favour
of agricultural improvements;
(xi) production and betterment of agricultural produce;
(xii) meeting any legal expenses incurred by the Board;
(xiii) imparting education in marketing or agriculture
directly by the Board or through Punjab Agricultural
University, Ludhiana or other body as may be specified
by the State Government by notification.
(xiv) construction of godowns and construction or
repair of link roads, approach roads, culverts, bridges
and other such purposes,
(xv) loans and advances to the employees;
(xvi) expenses incurred in auditing the accounts of the
Board;
(xvii) with the previous sanction of the State
Government, any other purposes which is calculated to
promote the general interests of the Board and the
committee or the national or public interest:
Provided that if the Board decides to give aid of more
than five thousands rupees to a financially weak
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committees under Clause (vii), the prior approval of the
State Government to such payment shall be obtained.
27. Market Committee Fund
(1) All moneys 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 purposes 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 funds 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 Government in consultation with
the Committee for giving effect to the provisions of this
Act.
1 [(i) if the annual income of a Twenty per centum
Committee does not exceed
Rs. 20,00,000;
(ii) if the annual income of a Committee exceeds Rs.
20,00,000;
(a) on the first of Rs. 20,00,000/- Twenty per centum
(b) on the next Rs. 20,00,000/- Forty per centum and
( c) on the remaining income Fifty per centum].
(b) The State Government shall determine the cost
of such special or additional staff and shall, where the
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staff is employed for the purposes of more Committees
than one, apportion such cost among the Committees
concerned in such manner as it thinks fit. The decision
of the State Government determining the amount
payable by any committee shall be final."
10. Thus, the role as such of the Market Committee is to utilize its
funds for allied purposes and it is inter linked with the Marketing Board as
such as well and the responsibility of the Marketing Board is also to collect
information in connection with agricultural activities besides the function of
educating agriculturists so that they can get better yields and higher returns
and, therefore, market development fund is also to be used for construction
of link roads, approach roads, culverts and bridges, which is part of the
welfare activities which is done by the two agencies. The appellant, in order
to show that the said action was erroneously taken as a repayment of loan
amount, has given the details of the progressive payments given to the
Haryana State Agricultural Marketing Board from the year 2006 onwards till
the year 2009. The said table reads thus:-
YEAR WISE PROGRESSIVE PAYMENT DETAIL TO H.S.A.M.B.
2006-07
Opening Balance 4,27,78,421
Payments 4,00,00,000 Add payments 4,00,00,000
8,27,78,421
Less Expenditure 2,49,03,967 Less Expenditure 2,49,03,967
Excess payments 1,50,96,033 Excess payments 5,78,74,454
2007-08
Opening Balance 5,78,74,454
Payments 4,50,00,000 Add payments 4,50,00,000
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10,28,74,454
Less Expenditure 1,68,66,300 Less Expenditure 1,68,66,300
Excess payments 2,81,33,700 Excess payments 8,60,08,154
2008-09
Opening balance 8,60,08,154
Payments 6,59,00,000 Add payments 6,59,00,000
15,19,08,154
Less Expenditure 1,19,63,478 Less Expenditure 1,19,63,478
Excess payments 5,39,36,522 Excess payments 13,99,44,676
11. It is the case of the assessee that it had a opening balance of
Rs.5,78,74,454/- which had been carried forward and a payment of
Rs.4,50,00,000/- had been made to the Apex Body on account of
development works. The necessary receipts showing the payments made
have also been appended as Annexures A-5 to A-8 wherein, the sum of the
above said amount was disbursed in four installments on account of
development works and the receipts have been issued by the Haryana State
Agricultural Marketing Board which are dated 21.06.2006, 22.09.2006,
08.03.2007 and 22.08.2006. The said receipts would go on to show that the
said amounts were deposited for development works. It was accordingly
pointed out that as per the table, the Board had incurred expenditure of
Rs.1,68,66,300/- on development works on account of the assessee. For the
assessment year in question, an excess payment of Rs.2,81,33,700/- had been
made and, thus, it was the case of the assessee that the excess payment had
been made of the said amount leaving a balance of Rs.8,60,08,154/- towards
development works which was carried forward to the next financial year
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2008-09. The balance sheet was also appended in support of the said case
which had been appended with the return of income duly attested by the
Chartered Accountant wherein, the sum of Rs.8,60,08,154/- was shown as
capital works.
12. Thus, it is apparent that the findings recorded by the
Commissioner of Income Tax (Appeals) were correct to the extent that the
payment was made by the assessee to the Marketing Board towards the
statutory functions of application of money for the objects provided in the
Statute and it was not for repayment of any loan and, therefore, both the
Assessing Authority and the Tribunal wrongly came to the said conclusion
regarding this aspect. It is in such circumstances we are of the considered
opinion that the Tribunal has wrongly reversed the well reasoned order
passed by the Commissioner of Income Tax and the record as such would go
on to show that the payment which was made was for the achievement of the
objects prescribed under the Act and, therefore, the disallowance could not
have been done on the ground that it was a loan to the Marketing Board.
Rather, it was the expense as such for the purpose given in the objects of the
Act as such and, therefore, the Assessing Officer was wrong in holding that it
was a payment of liability of old loan.
Conclusion
13. Resultantly, we allow ITA No. 244 of 201 filed by the Assessee
and restore the order of the Commissioner dated 05.02.2010 (Annexure A/2
in ITA No. 244 of 2011) by answering the substantial question of law in its
favour on the basis of the material placed on record that the disallowance
made was on a wrong reasoning. Accordingly, as a consequential effect, the
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appeal filed by the Revenue i.e. ITA No. 512 of 2017 whereby penalty
proceedings were initiated is liable to be dismissed and is accordingly ordered
as such.
(G.S. SANDHAWALIA)
JUDGE
18.01.2024 (LAPITA BANERJI)
shivani JUDGE
Whether reasoned/speaking Yes
Whether reportable Yes
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