TaxTMI 
TaxTMI 
2006 (12) TMI 182
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....amiti works through a committee constituted under s. 7 of the Markets Act, which consists of 15 members elected directly or indirectly by the inhabitants of the area, i.e., 7 by agriculturists, 2 by traders, 2 by co-operative societies or the agencies and remaining are the representatives of the Panchayat or Municipal Council or Municipal Board or the State Government. Alternatively, the State Government can appoint the administrator under s. 27A. The secretary is also a whole-time employee of the Government. Being a State organ, the income or surplus, if any, of the applicant was immuned from Union taxation in view of the Art. 289 of the Constitution of India. Since the date of coming into existence of it, i.e., 1965, neither it was called for to file return of income-tax, nor any income-tax was levied on it by the IT authorities till the asst. yr. 2002-03. In asst. yr. 2003-04, the IT authorities called the assessee to file return of income on the basis that in view of insertion of an Explanation to s. 10(20) of the IT Act, 1961, by the Finance Act, 2002, w.e.f. 1st April, 2003 defining the expression "local authority", exemption under cl. (20) of s. 10 of the IT Act is, therefor....
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....horised Representative submitted that earlier, the assessee-samiti was considere1 to be a 'local authority' within the meaning of s. 10(20) of the Act entitling exemption from the payment of income-tax and consequently, the Revenue never called the assessee for filing of the return of income since the date of its establishment. But, after insertion of the Explanation to s. 10(20) by the Finance Act, 2002, w.e.f. 1st April, 2003, the assessee was called for to file the same for the first time for the asst. yr. 2003-04. Ultimately, the assessment was made, which was subjected to the appeal No. 355/2004-05 pending for disposal before the learned CIT(A). The first appeal was decided while giving part relief of Rs. 19,20,000 to the assessee. A second appeal has been preferred against this order, which is pending before the Tribunal. The officials of the assessee-samiti were in utter pressurizing situations in facing the recovery proceedings of the Revenue and the matter was being discussed at high level, i.e., at the marketing board level. Ultimately, the decision of the board to claim the charitable exemption by filing the above referred application under s. 12A of the Act was received....
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....audit report in Form No. 3CA/3CD were also filed duly certified by the chartered accountant for the asst. yr. 2005-06. The applicant also filed the copies of the audit reports under s. 12A(b) in prescribed Form No. 10B for asst. yrs. 2003-04, 2004-05 and 2005,.06 duly certified evidencing the application of income for charitable purposes. 1.7 The learned Departmental Representative, on the other hand, opposed the arguments advanced by the learned Authorised Representative in support of the application for condonation of delay. He submitted that there was no reasonable cause for condonation of delay as the applicant had failed to explain the delay and the reason shown. that they were not aware of the law is no excuse. The unawareness of law is not sufficient reason for the delay. 1.8 After considering the above arguments advanced by the parties and the decision relied upon by the learned Authorised Representative, we are of the view that there was reasonable cause for delay in filing the application under s. 12A of the Act as earlier the applicant was entitled for exemption from the payment of income-tax being considered to be a 'local authority' Within the meaning of s. 10(20....
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....ant object behind establishment of the assessee-samiti has been provided specifically in its constitution. Le., in the Agricultural Produce Markets Act, 1961 in terms of preamble as follows: "An Act to provide for the better regulation of buying and selling of agricultural produce and the establishment of markets for agricultural produce in the State of Rajasthan." For the attainment of the said objects, the Mandi committees including assessee-samiti have been constituted in the State of Rajasthan. Regarding accumulation of income in the last three years, the learned Authorised Representative submitted that the applicant-samiti is not maintaining any reserve fund for the purposes of accumulation. The figures of the closing cash and bank balances, income and its application in last three years are as under: ------------------------------------------------------ F.Y. Cash Bank IMP Total ------------------------------------------------------ 2001-02 36,733.00 4,39,423.71 200.00 ....
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....he Act of 1961. 2.2 On the allegation of running of business activities, the learned Authorised Representative submitted that the applicant-samiti is not engaged in business activities as it is not marketing the notified goods but just regulating and controlling the market affairs so as to achieve its predominant object. The activities of the assessee-samiti do not fall under the definition 'business' as it has no profit motive. It applied its receipts for charitable purposes as the same is evident from the chart furnished hereinabove and income and expenditure accounts and the note regarding activities filed earlier. Even, the activities of the assessee-samiti cannot be said to be business activities merely on the basis that some profits arise out from its activities. In alternative, he submitted that the activities of the assessee-samiti in regularizing the agricultural market in its defined area and realizing of Mandi fee are incidental to the attainment of its predominant objectives, hence the same is entitled to the exemption under s. 11 of the Act in view of s. 11(4) and 11(4A) of the IT Act. He places reliance on the decision of Hon'ble jurisdictional High Court in the ca....
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....unts are not audited it indicates lapses on the part of the assessee. Registration in IT Act is entirely different from the registration under Societies Registration Act, since in the case of income-tax the assessee is going to enjoy exemption from taxpayers pocket. The audited account is pre-requirement for application for registration. In Art. 245 (a) to (i) of the Constitution of India, there is drastic change w.e.f. 1st June, 1993, leading certain definition about local body, which required amendment in s. 10(20) of the IT Act. The assessee was thus out from the definition of local body w.e.f. 1st June, 1993 and the only option left with the assessee was to apply for registration under s. 12A for exemption under ss. 11 and 12 of the IT Act. The learned Departmental Representative referred the objects of the samiti shown in ss. 3, 17 and 18 of the Rajasthan Krishi Upaj Mandi Act, 1961, with the submission that assessee is acting like a share broker to purchase produce on charging fee, which has no nexus or correlation with any charitable purpose. The words in statute are to be strictly construed as per the established position of law, submitted the learned Departmental Represent....
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....on to matters connected with regulated marketing of agricultural produce in the State; (vi) Meeting of legal expenses; (vii) Provision of technical and administrative assistance to market committees including maintenance of staff for rendering assistance to market committees for such purposes as- (a) Engineering; (b) Auditing of accounts of market committees; (viii) Training of officers and staff of the market committees and organization of camps, workshop, seminars and conferences; (ix) Grading and standardization of agricultural produce; (x) Construction of market roads and approach roads to the markets; (xi) Construction of market yards and sub-yards and leading or transferring these to the market committees; (xii) Sanction of loans and advances to its employees in the manner prescribed; (xiii) Establishment and maintenance of the office of the Board; (xiv) Expenditure on audit of the accounts of the Board; and (xv) With the prior approval of the Government, any other purpose connected with agricultural marketing. 2.6 The applicant-samiti works through a committee constituted under s. 7 of the Markets Act which consists of 15 members electe....
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.... hosiery manufacturing units held charitable and entitled for exemption under the IT Act. 2.7 So far as the objection of the learned CIT(A) that with application under s. 12A audit report was not filed, we find that in the Board Instruction No, 1/1148 reproduced at page No. 35 of the paper book, it has been made clear that though under s. 12A(b) filing of audit report along with return of income is mandatory but in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the exemption as available to such trust under ss. 11 and 12 may not be denied merely on account of delay in furnishing the auditor's report and the ITO should record reasons for accepting a belated audit report, The Hon'ble Madhya Pradesh High Court in the case of CIT vs. Devradhan Madhavlal Genda Trust was pleased to hold that the requirement is directory and the Tribunal was justified in holding that filing of the audit report in Form No. 10B with the return of income was not mandatory and it was sufficient compliance with s. 12A(b), if the same was filed during the course of assessment proceedings. The Hon'ble Punjab and Haryana High Court in the case of C....
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....l issues in ITA No. 641/Jp/2006. In addition to those arguments, the learned Authorised Representative submitted that under s. 2(15) of the IT Act, 'charity' has not been defined but 'charitable purpose' has been defined under which the assessee falls under the category of 'advancement of any other object of general public utility'. In support, he referred ss. 11, 19 and 22J of the Rajasthan Agricultural Produce Markets Act, 1961. He submitted further that the assessee cannot go beyond the Act, wherein objects, and purposes have been mentioned. Almost 73 per cent of the population of the country is farmers for whose benefit the applicant was set up. The assessee had complied with the requirements of s. 12AA of the IT Act and provisions under this section are independent of those of s. 12A. Besides other decisions furnished by him in the written submission, he also placed reliance on the decision in the case of Keshavji Ravji & Co. vs. CIT (1990) 82 CTR (SC) 123 : (1990) 183 ITR 1 (SC). 4.4 The learned Departmental Representative, on the other hand, argued further that as per Art. 243 of the Constitution of India, the definition of 'local body' has now been restricted to panchaya....