Income Tax Appellate Tribunal - Pune
Agricultural Produce Market ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri G.S. Pannu Accountant Member
and Shri R.S. Padvekar Judicial Member
ITA Nos. 682 & 683/PN/2011
(Asstt. Years : 2003-04 & 2004-05)
The Income Tax Officer, Ward 1(1), ... Appellant
"Jeevan Suman",
LIC Bldg., 2nd floor, Cannought Place,
N-5, CIDCO, Aurangabad
v.
Agriculture Produce Market Committee, ... Respondent
Paithan, Tq. Paithan,
Dist. Aurangabad
Appellant by : Shri Alok Mishra
Respondent by : None
Date of Hearing : 19/06/12
Date of Pronouncement : -6-12
ORDER
Per R.S. Padvekar, JM
These two appeals are filed by the revenue challenging the respective impugned orders of the Ld CIT(A), Aurangabad, dated 28/02/2011 for the A.Y. 2003-04 & 2004-05.
2. The revenue has taken the following grounds which are common in both the appeals :
"i) As to whether providing of services to the farms by charging market fee constitutes the charitable activity or the activity which fall within the ambit of general public utility.
ii) As to whether granting of registration without passing condonation of delay u/s. 12AA of the I.T. Act, 1961 confers right to the assessee for operation of provisions of section 11, 12 and 13 of the I.T. Act, 1961."
3. Briefly stated facts are as under. The assessee is a Agricultural Produce Market Committee (APMC) established u/s 39A of Maharashtra Agricultural Marketing (Regulation) Act, 1963. The assessee was enjoying the benefit of exemption u/s. 10(20) of the I.T. Act till 31.3.2003. Due to the 2 ITA . Nos. 682 & 683//PN/2011 Agricultural Produce Market Committee, A.Ys. 2003-04 & 2004-05 Page of 5 amendment by Finance Act (2002) w,e,f, 1.4.2003, the exemption enjoyed by the assessee was withdrawn. Thereafter, assessee filed application for registration u/s. 12A of the Act to the Ld CIT, Aurangabad. The A.O framed the assessment of assessee by denying the benefit of Section 11 on the reason that the assessee is not having registration u/s. 12AA. Being aggrieved, the assessee challenged the assessment orders in both the assessment years before the Ld CIT(A). The Ld CIT(A) has observed that the assessee Society has been granted registration u/s. 12AA(1)(b)(i) of the I.T. Act w.e.f. 1.4.2003. The Ld CIT(A) held that the objects of the assessee body is of the charitable nature. The Ld CIT(A) followed the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Agricultural Produce Market Committee, Hinganghat & Ors., 297 ITR 419 (Bom.) and held that the assessee is entitled for the benefit of Sec.11. The Ld CIT(A) further held that assessee has complied in respect of the application of funds for the object of the Trust. The operative part of the order of the Ld. CIT(A) is as under :
"5. I have carefully considered the facts of the case, audited final statements of the accounts of the APMC, assessment order and submission of the appellant. At the outset it is worth mentioning here that the object of the APMCs is that of providing proper marketing facilities to the farmers for marketing of their agricultural produce. This activity is certainly the activity of general public utility and hence the same is charitable activity. This proposition is supported by the decision of Hon'ble Bombay High Court in the case of CIT Vs. Agricultural Produce Market Committee, Hinganghat & Ors. (2007) 291 ITR 419 (Bom.). Therefore, the provisions of section 28 to 44DB related to business income are not applicable to the appellant committee. The provisions of section 11 to 13 are, therefore, applicable to the appellant committee. The A.O. is, therefore, not justified in making additions by applying provisions applicable to business income to the case of the appellant.
5.1. On perusal of audited final statements of account of the appellant committee for the year under appeal, it is noticed that the appellant committee has earned gross income of Rs.41,11,115.72 and has 3 ITA . Nos. 682 & 683//PN/2011 Agricultural Produce Market Committee, A.Ys. 2003-04 & 2004-05 Page of 5 incurred expenditure of Rs.33,16,335.55. Further, on perusal of balance sheet it has been noticed that the APMC has incurred capital expenditure of Rs.35,00,393.76. Therefore, as against the gross income of Rs.41,11,115.72, the appellant committee has applied the funds to the extent of Rs.68,16,729.31 for the objects of the trust. Further, the appellant committee is also entitled for accumulation of 15% of its gross income as per provisions of section 11(1)(a) of the Act. In view of the above facts, the A.O. is not justified in assessing the income of the appellant committee at Rs. 21,75,414/- as against Rs.Nil as returned by the appellant. The addition to income returned is, therefore, deleted.
6. In the result, the appeal is allowed."
4. We have heard the Ld. D.R. None was present for the assessee. The Ld. D.R. supported the order of the A.O. The identical issue had come for consideration in the case of Agricultural Produce and Market Committee, Hinganghat & Ors. (Supra). In the said case, the Market Committee was constituted under the Agricultural Produce Marketing (Regulation) Act 1963. The respondent-assessee in the said case applied for getting the registration u/s. 12A/12AA of the Act which was rejected by the CIT, Nagpur, on the ground that the assessee is commercial establishment and the services rendered by them are not free of cost but are on payment of cess/fees which entails profit motives. The CIT further held that the said assessee-respondent was not registered as Trust and even if they are institutions referred to Sec. in 12A, still they are not entitled for registration u/s. 12A. Assessee challenged the order of CIT before the Tribunal and the Tribunal reversed the order of CIT and directed to grant the registration. The revenue challenged the order of the Tribunal by way of appeal u/s. 260A before Hon'ble High Court but without success. Operative part of the decision of the Hon'ble High Courtis as under :
"22. Applying the tests laid down by the apex court in the aforesaid cases to the facts of the present case, there can be no doubt that the object of the market committees (assessees) established under the 1963 Act is to regulate the entire marketing of agricultural and some other produce from the stage of procuring till it reaches the ultimate consumer, which is squarely covered 4 ITA . Nos. 682 & 683//PN/2011 Agricultural Produce Market Committee, A.Ys. 2003-04 & 2004-05 Page of 5 within the meaning of the expression "advancement of any object of general public utility" contained in section 2(15) of the Act.
23. It is contended by the Revenue that the assessees are established with profit motive because they are not rendering free services but they are charging cess/fees for their services and, therefore, the assessees are not established for charitable purposes. There is no merit in this contention. The cess/fees are charged by the assessees from the purchasers in the market area at the rate prescribed by the State Government for the purpose of carrying out the object of the Act. As held by the apex court in the cases of Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 and in the case of Bharat Diamond Bourse [2003] 259 ITR 280 where the dominant purpose of a trust/institution is charitable, incidentally if some profit is made and the said profit is used for charitable purposes, the said trust/ institution does not cease to be established for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required to be met with in achieving the said object, the Legislature has empowered the assessees to levy cess/fees. Moreover, surplus remaining in the market fund are ploughed back for carrying out the object of the 1963 Act. Thus, the surplus remaining in the market fund is neither distributed not accumulated as profits. In these circumstances, it cannot be said that the assessee are established with profit motive so as to deny registration under section 12A/12AA of the Act.
24. It is pertinent to note that prior to April 1, 1984, the words used in section 2(15) of the Act were "advancement of any other object of general public utility not involving the carrying on of any activity for profit". By the Finance Act, 1983 with effect from April 1, 1984, Legislature has omitted the words "not involving the carrying on of any activity for profit" from section 2(15) of the Act. Thus, after April 1, 1984, even if there is some profit in the activity carried on by the trust/institution, so long as the dominant object is of general public utility, it cannot be said that the said trust/institution is not established for charitable purposes.
25. It is contended by the Revenue that even if the assessees are covered under section 12A of the Act, they would still not be entitled to exemption because their income is neither derived from the property held under trust nor their income is from voluntary contributions made to the institution. There is no merit in this contention because the expression "property" used in section 11 of the Act is of wide amplitude and it includes the business undertaking itself. The word "property" in section 11 includes immovable and movable property like money, shares, securities etc. Therefore, where a trust/institution fulfils all the conditions set out in section 12A/12AA, registration cannot be denied on the ground that some conditions of sections 11 and 12 are not fulfilled.
26. As stated earlier, even after registration unless the conditions set out in sections 11 and 12 of the Act are complied with, no benefit would be available to the registered trust or institution. Therefore, in the facts of the present case the decision of the Tribunal that the assessee who fulfils all the 5 ITA . Nos. 682 & 683//PN/2011 Agricultural Produce Market Committee, A.Ys. 2003-04 & 2004-05 Page of 5 conditions are entitled to registration cannot be faulted. The contention of the Revenue that the assesses are not registered as a trust and hence, not entitled for registration is also without any merit, because there is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust."
5. The assessee's case is directly covered by the decision of the jurisdictional High Court cited (Supra). Sub-sec. (15) of Sec. 2 has undergone amendment by the Finance Act (2008) w.e.f. 1.4.2009 and the proviso is added but the said amendment is applicable w.e.f. A.Y. 2009-10, hence, we do not discuss the effect of proviso as the Asst Years before us are A.Ys. 2003-04 and 2004-05. We, therefore, concur with the decision of the Ld CIT(A) and confirm the same in both the Asst Years. Accordingly, both the grounds are dismissed.
5. In result, both the appeals are dismissed.
Order pronounced in the open Court on 25th June, 2012.
Sd/- Sd/-
(G.S. PANNU) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 25th June, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT, Aurangabad
4. The CIT(A)-, Aurangabad
4. The D.R. "B" Bench, Pune
5. Guard File
-True Copy-/ By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune