2014 (4) TMI 1019 - AT - Income Tax

Agricultural Market Committee wins tax exemption battle

The case involved an Agricultural Market Committee seeking exemption under section 10(20) of the Income Tax Act as a local authority despite changes ... Grant of registration u/s 12A of the Act - Agricultural Market Committees - Claim of exemption - Income from local authority – Held that:- Following Commissioner of Income-tax Versus Agricultural Market Committee [2011 (3) TMI 1265 - Andhra Pradesh High Court] - Agricultural Market Committees are entitled for registration u/s 12A/12AA and directed the DIT(E) to grant registration - the orders of ITAT on the issue of granting registration are yet to be implemented by the DIT(E) – thus, the matter is required to be remitted back to the AO to allow exemption u/s 11, after the DIT(E) grants registration u/s 12A – Decided in favour of Assessee. Issues:1. Exemption under section 10(20) of the Income Tax Act for Agricultural Market Committee.2. Applicability of Explanation below section 10(20) inserted by Finance Act, 2002.3. Entitlement for exemption under section 11 in absence of registration under section 12A.4. Granting of registration under section 12A to Agricultural Market Committees.Analysis:1. The case involved the assessee, an Agricultural Market Committee, claiming exemption under section 10(20) of the Income Tax Act as a local authority. The issue arose after the insertion of an Explanation below section 10(20) by the Finance Act, 2002, which impacted the exemption eligibility of certain entities. The contention was that despite the insertion of an exhaustive list of local authorities eligible for exemption, the Agricultural Market Committee argued that its income should still be exempt under section 10(20) due to the statutory obligations imposed on it by relevant Acts and Rules. The Assessing Officer (A.O.) disallowed a specific amount and added it back to the taxable income based on the interpretation of the Explanation.2. The assessee appealed to the Commissioner of Income Tax (CIT-A), citing relevant case law and jurisdictional High Court decisions. The CIT(A) relied on a decision where it was held that assessees were entitled to exemption but noted that a specific provision inserted by the Finance Act, 2008, could not be applied retrospectively. The issue of registration under section 12A was also raised, with the assessee claiming that despite a rejected application, the ITAT had directed the Directorate of Income Tax (Exemptions) to grant registration. The CIT(A) dismissed the assessee's contentions based on the facts available at that time.3. The counsel for the assessee highlighted previous ITAT orders directing the grant of registration under section 12A to Agricultural Market Committees. Citing a jurisdictional High Court decision supporting the registration of such committees, the ITAT set aside the assessment orders and restored the issue to the Assessing Officer for reconsideration once registration under section 12A was granted. The grounds were considered allowed for statistical purposes, and the appeals of the assessee were ultimately allowed.In conclusion, the judgment addressed the issues of exemption under section 10(20) for Agricultural Market Committees, the impact of legislative amendments on exemption eligibility, the requirement of registration under section 12A for claiming exemption under section 11, and the directive for granting registration to Agricultural Market Committees based on legal precedents and ITAT orders.