COMMISSIONER OF INCOME-TAX AAYAKAR BHAWAN FAIZABAD Vs. KRISHI UTPADAN MANDI SAMITI BANSI SIDDHARTH NAGAR

JUDGEMENT

(1.) THIS is an appeal by the Revenue. Though several questions are raised, the appeal is admitted on the following substantial question of law, which covers the other questions:-

(2.) THE respondent was the appellant before the ITAT. An assessment order was passed in respect of respondent by the Assessing Officer dated 11.11.2008. The assessee has claimed status as a charitable Institution on being registered under Section 12AA of the Income Tax Act (hereinafter referred to as 'the Act'). The assessee had transferred some amounts to Mandi Parishad, which is another assessee. The Assessing Officer in respect of certain amounts transferred by the assessee to the Mandi Parishad raised a query as to why the development cess should not be treated as a non-charitable purpose, since Mandi Samiti has no control over its expenditure. One of the amounts transferred was vikas cess, which was collected and transferred to the Parishad by the assessee-respondent. The Assessing Officer held that the assessee has no authority to check utilization of this development fund in the hands of the Mandi Parishad, and as such added the amount to the total income of the assessee. Similarly, another amount transferred to the Mandi Parishad was disallowed and added to the income of the assessee.

(3.) AGGRIEVED by these observations, the assessee approached ITAT, Lucknow Bench on various grounds including on the following observations:-