BIHAR AGRICULTURAL PRODUCE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This appeal under section 260A of the Income Tax Act 1961 (hereinafter referred to as 'the Act'), is directed against the order dated 13.6.20008, passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in ITA No. 575/Pat/2007, whereby the appeal preferred by the assessee has been dismissed, and the order passed by the learned Commissioner of Appeals has been upheld. The learned Commissioner had, in its turn, upheld the order of the learned Assessing Officer. It is with respect to the Assessment Year 2004-05. A brief statement of facts essential for the disposal of this appeal may be indicated. The appellant assessee had submitted its returns for the period in question on 1.11.2004. It was a statutory body created in terms of the Bihar Agricultural Produce Markets Act 1960 (hereinafter referred to as the 'local Act'). It is an institution for charitable purposes within the meaning of section 2(14) of the Act. The local Act was repealed by the Bihar Agricultural Produce Market (Repeal) Act 2006 (Bihar Act 23 of 2006), with effect from 12.9.2006. The learned assessing officer passed order of assessment on 19.12.2006 (Annexure-1), whereby the assessee was assessed to tax. Its claim for exemption beyond 15% of its receipts under the provisions of section 12 of the Act was rejected under the provisions of section 11 of the Act. Aggrieved by the order, the assessee preferred appeal which was dismissed by order dated 5.7.2007, passed by the learned Commissioner of Income Tax (Appeals), Patna, and the order of assessment was upheld. The assessee challenged the same by preferring appeal before the Tribunal which has been rejected by the impugned order. Hence this appeal at the instance of the assessee.

(2.) While assailing the validity of the proceedings, learned counsel for the appellant submits that the Act was repealed with effect from 1.9.2006, and the assessment order was passed on 19.12.2006. The same will be deemed to have been passed against a dead person because no steps were taken for substitution in terms of the Repeal Act. He relies on the provisions of section 159, 171, and 189 of the Act. He submits in the same vein that the appellant Board is not covered by sub-section (31) of section 2 of the Act which defines 'Person'. He relies on the judgment of the Supreme Court in CIT v. Amarchand N. Shroff, 1963 48 ITR 59. He next submits that the Board's fund collected under the provisions of section 33-C of the local Act is statutory contribution for specific purpose, and the assessee was not free to use it in any manner it liked. It could be used only for the specified purpose. He submits in the same vein that, supposing for the sake of argument that the substitution in terms of Repeal Act was complete, yet it was not liable to taxation. He relies on the judgment dated 1.4.2011, passed by a Division Bench of this Court to which one of us (S.K. Katriar, J.) was a party in Misc. Appeal No. 425 of 2010 (Bihar State Text Book Publishing Corpn. v. CIT, 2011 199 Taxman 196. He next submits that, in view of the scheme, the aims and objects of the local Act, the Board's fund cannot be treated to be 'income' within the meaning of sub-section (24) of section 2 of the Act. He next submits that the assessee is an organisation for charitable purposes and, therefore, it is entitled to the benefit of exemption in terms of section 11(2)(a), and the cognate provisions of the Act. The learned authorities under the Act have erred in disallowing the claim of exemption in terms of section 11(2)(a) of the Act to the extent of 85%. He submits that the information in terms of section 139, read with section 17, read with Form 10, should have been allowed to be filed. He relies on a Division Bench judgment of the Gujarat High Court in CIT v. Mayur Foundantion, 2005 274 ITR 562. The expression 'in the manner' occurring in section 11(2)(a) of the Act excludes the compulsion element of time. He relies on the judgment of the Supreme Court in Sales Tax Officer v. K.I. Abraham, 1967 AIR(SC) 1823 (paragraph 6). He further submits that the Revenue should not take advantage of ignorance of the assessee. He relies on the judgment of a Division Bench of the Allahabad High Court in CIT v. Lucknow Public Educational Society, 2009 318 ITR 223.

(3.) The learned Senior Standing Counsel has supported the impugned order. Relying on the provisions of the Repeal Act, he submits that the successor body contemplated under the Repeal Act is the State Government itself whose senior functionary has always remained the Managing Director of the Board. The assessee has contested the matter at all stages and, therefore, the quondam Board was throughout effectively represented by the Board's Managing Director, a senior member of the Indian Administrative service. He further relies on the provisions of section 170 of the Act. He next submits that the information as to non-utilisation of 85% of the receipts has to be given in Form 10 within the time prescribed by the Explanation -2 to section 139(1)(b) of the Act. He relies on the judgment of the Supreme Court in CIT v. Nagpur Hotel Owners Association, 2001 247 ITR 201 and further states that the judgment in the case of Mayur Foundation stood on a different footing.