2013 (10) TMI 971 - AT - Income Tax

Tribunal orders Income-tax Exemption Director to grant registration under Section 12AA, considering delays reasonable.

The Tribunal directed the Director of Income-tax (Exemption) to grant registration to the assessees under Section 12AA, considering the delay in filing ... Allowability of registration u/s 12AA of the income tax act – Held that:- Relying upon the judgment of the Hon’ble High Court in the case of Agricultural Market Committee [2011 (3) TMI 1265 - Andhra Pradesh High Court], held that the assessees have to be granted registration – In the abovementioned case it was held that Agricultural Marketing Acts provide for establishment of notified market areas/yards for purchase and sale of agricultural produce and livestock and for better regulation of such markets. The purpose of marketing legislation is to enable purchasers to get a fair price for the commodities by eliminating middlemen and provide a regulating market with facilities for correct weighments, storage, accommodation and equal powers of bargain for reasonable price to the growers and the consumers. Agricultural marketing committees discharge an important duty and function of protecting the interest of a large body of persons, namely, agriculturists, farmers and growers of agricultural produce and livestock. Further, in the said judgment it was held that Agricultural marketing committees were entitled to seek exemption under section 10(20) read with section 10(29) till March 31,2003 but by reason of amendment to section 10(20) and deletion of section 10(29) with effect from April 1, 2003, they, for the purpose of the Act, ceased to be 'local authorities'. This itself would not disqualify them from claiming exemption under sections 11(1) and 12 provided they are considered as institutions established for advancement of objects of general public utility, because the Parliamentary benefit under section 10(20) is altogether different from the benefit granted By the tax machinery subject to statutory conditions contained in sections 11 to 13. An agricultural marketing committee is constituted under the State Act for the sole purpose of protecting the interest of agriculturists, farmers and growers. Secondly, the agricultural marketing committee is under legal obligation to provide all necessary infrastructure and market facilities within the market place/yard in a notified market area, including water, electricity, auction/trading platforms, facilities for receiving, paying and depositing money, and resolving disputes. Thirdly, the income of the agricultural marketing committee from different sources- licence fees, market fees, loans, etc., which is derived without any profit motive is to be used to meet the expenditure for providing market facilities. Fourthly, all the income has to be deposited in the market committee fund, out of which ten per cent. shall be, contributed to the Central Market Fund which shall vest in the Government, which exercises power of supervision and superintendence over the market committees. The Government administers and applies the Central Market Fund, inter alia, for providing grants to needy agricultural marketing committees. Fifthly, agricultural marketing committees serve an important aspect of rural economy, i.e., providing facilities for marketing agricultural produce and products of livestock. Section 14(1) of the Agricultural Marketing Committee Act read with rule 8 of the Rules mandate that 'all moneys received by an agricultural marketing committee shall be deposited in a single banking account with the nearest Government treasury, or with the sanction of the Government in a bank' out of which all the expenditure of the agricultural marketing committee shall be defrayed. Under section 11 (5)(iii), deposit of the moneys in a scheduled bank is substantial compliance with the law – Therefore, agricultural marketing committee is entitled to be registered under section 12A/12AA – Decided in favor of Assessee. Issues Involved:1. Delay in filing appeals for registration under Section 12AA of the Income Tax Act.2. Rejection of applications for registration under Section 12AA by the Director of Income-tax (Exemption).3. Determination of whether the activities of Agricultural Market Committees fall under 'charitable purposes.'Detailed Analysis:1. Delay in Filing Appeals:The appeals involved a delay of 24 days in filing four of them (ITA Nos. 939, 940, 941, and 943/Hyd/2013). The delay was attributed to heavy procurement operations during May 2013. The Tribunal condoned the delay considering it marginal and the reasons provided reasonable. It was noted that the delay in filing applications for registration was consistent with previous cases where the Tribunal had condoned similar delays, such as in the case of Agricultural Market Committee, Enumamula Warangal Dist. The Tribunal directed the Director of Income-tax (Exemption) to consider the applications on merits after condoning the delay.2. Rejection of Applications for Registration:The Director of Income-tax (Exemption) had rejected the applications for registration under Section 12AA, citing delays and not examining the merits. The Tribunal had previously directed the Director to reconsider the applications after giving the assessees an opportunity to explain the delay. However, the Director again rejected the applications without addressing the merits. The Tribunal found this approach inconsistent with its previous rulings, where similar delays were condoned, and applications were directed to be considered on merits. Consequently, the Tribunal directed the Director to grant registration to the assessees under Section 12AA after condoning the delays.3. Charitable Purposes and Registration Eligibility:In ITA Nos. 927-928/Hyd/2013, the issue was whether the activities of the Agricultural Market Committees qualified as 'charitable purposes.' The Director of Income-tax (Exemption) had refused registration, arguing that the activities did not fall within the ambit of charitable purposes. The Tribunal referred to its previous decisions and the judgment of the jurisdictional High Court in CIT vs. Agricultural Market Committee (336 ITR 641), which held that the objectives of Agricultural Market Committees aligned with 'charitable purposes' under Section 2(15) of the Act. The Tribunal noted that these committees provided essential services to agriculturists, farmers, and the general public, fulfilling the criteria for 'advancement of any other object of general public utility.' The Tribunal also referenced the Supreme Court's decision in Agricultural Produce Market Committee vs. CIT (301 ITR 1), supporting the view that these committees should be granted registration under Section 12AA.In conclusion, the Tribunal directed the Director of Income-tax (Exemption) to grant registration to the assessees under Section 12AA, consistent with the established legal precedents and the Tribunal's previous rulings. The appeals were allowed, with ITA Nos. 927-928/Hyd/2013 being allowed outright and the other twelve appeals being allowed for statistical purposes.Order Pronouncement:The order was pronounced in the court on 23.9.2013.