SATISH CHANDRA,J. - (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:- "Whether in the facts and circumstances of the case and in law the Income Tax Appellate Tribunal was correct in admitted and adjudicating a ground of appeal regarding an observation of the Commissioner of Income Tax (Appeals) that pertained to the Uttar Pradesh Krishi Utpadan Mandi Parishad (hereinafter Parishad) which was not a party to the appeal"
(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. The assessee preferred an appeal. The appeal amongst others was in respect of the two amounts transferred to the Mandi Parishad, firstly as an 'administrative expense' and secondly as 'vikas cess'. The CIT (A) found that the ground taken by the Assessing Officer was erroneous and held that both the amounts could not be assessed in the hands of the assessee, but in the hands of the Parishad for reasons set out in his order and also relied on the order of ITAT dated 21.4.2009 in the case of Krishi Utpadan Mandi Samitis, Barabanki and others. After having so held that these amounts transferred by the Mandi Samiti to Mandi Parishad must be accounted for by the Mandi Parishad as its business receipts, the CIT (A) observed that he was informed that the vikas cess collected by the Samitis and transferred to Mandi Parishad is not credited by the Mandi Parishad to its Income and Expenditure Account, but directly credited to 'Cess Fund' (Central Mandi Fund). The rest of the receipts from the Mandi Samitis were also treated by the Parishad as liabilities and directly credited in the Balance Sheet under 'Mandi Vikas Nidhi'. The CIT (A) held that the treatment of receipts by Mandi Parishad is not consistent with the Accounting Principles and payments treated as expenditure or application by Mandi Samitis shall be treated as business receipt by Mandi Parishad and that the Mandi Parishad cannot treat it as liability, as these receipts are firstly, non-voluntary contribution by Samitis, and secondly, non-refundable. Accordingly, CIT (A) directed the AO to make a reference to the Assessing Officer of Mandi Parishad to take remedial measures, if necessary, in the relevant assessment years to tax the relevant receipts in the hands of Mandi Parishad.
(3.) AGGRIEVED by these observations, the assessee approached ITAT, Lucknow Bench on various grounds including on the following observations:- "......This treatment of receipts by Mandi Parishad is not in consistency with the Accounting Principles. Payments treated as expenditure or application by Mandi Samitis have to be treated as business receipt by Mandi Parishad. The Parishad cannot treat it as liability, as these receipts are firstly, non-voluntary contribution by Samitis, and secondly, non-refundable." and in respect of the direction issued to the AO, which reads as under:- "In view of this, the AO is directed to make a reference to the Assessing Officer of Mandi Parishad to take remedial measures, if necessary, in the relevant assessment years to tax the relevant receipts in the hands of Mandi Parishad." ;