2009 (12) TMI 13 - HC - Income Tax

Court Upholds Tribunal's Decision on Registration Application under Income Tax Act

Commissioner of Income Tax-I, Lucknow Versus Krishi Utpadan Mandi Samiti, Purva, Unnao

The court upheld the Tribunal's decision to condone the delay in filing the application for registration under Section 12-A of the Income Tax Act. It ... Scope of the term property u/s 11 - 'Krishi Utpadan Mandi Samiti' – w.e.f. 1.4.2003 change in the scope status of local authority withdrawn - For this purpose, necessary applications were made under Section 12-A which were rejected by the Commissioner of the Income Tax department but the said registration was granted by the Tribunal vide its impugned order – held that - 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 - 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 fulfills all the conditions mentioned in Section 12A/12AA, registration cannot be denied on the ground that some conditions of Section 11 and 12 are not fulfilled. Issues Involved:1. Condonation of delay in filing the application for registration under Section 12-A of the Income Tax Act.2. Justification of granting registration under Section 12AA despite alleged violations of Sections 11 and 12 of the Income Tax Act.3. Validity of waiving or relaxing statutory conditions under Sections 11 and 12 for granting registration under Section 12AA.Issue-Wise Detailed Analysis:Substantial Question of Law No. 1: Condonation of Delay1. Arguments by the Appellant-Department:- The Tribunal condoned the delay in a casual manner without proper adjudication.- Section 12A(1) requires the application for registration to be submitted within a specified period, which the assessees failed to meet.- The Commissioner of Income-tax refused to condone the delay due to lack of sufficient reasons provided by the assessees.2. Arguments by the Respondent-Assessees:- Prior to 1.4.2003, assessees were exempt under Section 10(20) and 10(29) and did not need to file returns or seek registration.- Applications for registration were filed after obtaining necessary permissions, and the delay was due to a bona fide belief that registration was not required.- Tribunal relied on various decisions to justify condonation of delay.3. Court's Analysis:- Section 12A(1)(i) allows condonation of delay if the Commissioner is satisfied with the reasons provided.- Prior to 1.4.2003, assessees enjoyed exemptions and were not required to seek registration.- The delay was due to a bona fide belief and procedural requirements for obtaining permissions.- The Tribunal rightly condoned the delay considering the totality of the circumstances.4. Conclusion:- The court found no reason to interfere with the Tribunal's decision to condone the delay.- The question of law was answered in favor of the assessees and against the department.Substantial Questions of Law Nos. 2 and 3: Granting Registration under Section 12AA1. Arguments by the Appellant-Department:- Assessees did not fulfill conditions for registration under Section 12-A and their activities were not charitable.- Funds were diverted to Mandi Parishad, and activities resembled business operations.- Cited cases where non-charitable objects led to denial of exemptions.2. Arguments by the Respondent-Assessees:- Activities of the Mandi Samitis are charitable as they provide services to farmers, ensuring fair prices without middlemen.- Cited various judicial precedents where similar institutions were granted registration under Section 12-A.3. Court's Analysis:- Mandi Samitis were established under the Krishi Utpadan Mandi Adhiniyam, 1964, and were considered 'local authorities' prior to 1.4.2003.- The primary objective of Mandi Samitis is to regulate agricultural marketing, which is a charitable purpose under Section 2(15) of the I.T. Act.- The dominant object of the Samitis is public utility, and any incidental profit does not negate their charitable status.- The court emphasized that registration under Section 12A is mandatory for claiming exemptions, but compliance with Sections 11 and 13 is also necessary.- Revenue authorities can cancel registration if activities are not genuine or not in accordance with the objects of the institution.4. Conclusion:- The court upheld the Tribunal's decision to grant registration under Section 12AA.- The questions of law were answered in favor of the assessees and against the Revenue.Final Judgment:- All appeals were dismissed, and the Tribunal's orders were upheld.- No order as to costs.