TaxTMI 
TaxTMI 
2005 (6) TMI 259
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....n all these appeals are common which read as under: "1. On the facts and circumstances of the case, the ld. CIT erred in rejecting assessee's application under section 12AA of the Income-tax Act, 1961. 2. The ld. CIT failed to see that the objects of assessee market committee are advancement of General Public utility as contemplated under section 2(15) of the Income-tax Act, 1961. 3. The ld. CIT erred in observing that the assessee did not submit any document in support of the aims and objects of general public utility as claimed by it. He failed to appreciate that the documents submitted on record did not reveal that the aims and objects of assessee committee are of general public utility. 4. The ld. CIT erred in not appreciating that the market committee was formed with the objects to see that the agriculturist get fair price or their produce, they are not exploited, goods are properly graded and weighed and they are not cheated, make proper arrangement for sellers and purchasers in market price and allied matter and that all these objects constituted the objects of general public utility, coupled with the fact that the assessee committee i....
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....as per its constitution as specified in section 1.3 of the Act. The object of the Market Committee find place in the form of Powers and duties as enumerated in section 29(1) and (2) of the Act. All moneys received by the Market Committee by way of cess, licence fee, loans raised by Committee and all grants, loans and contribution made by the State Government constitute the Market Fund as specified in section 36 of the Act. It is to be kept invested in such manner as may be prescribed and the Market Fund is to be expended for the purposes specified in section 37 of the Act. In case of suspension of Market Committee all properties vesting in the Market Committee shall, subject to all its liabilities vest in the State Government. There is no provision for contribution of any share capital by the members elected or otherwise nor is there any provision for distribution of surplus or capital amongst its members. It is run and managed by Market Fund and the said market fund is to be expended only for the purposes mentioned in the Act. 3.2 It is pertinent to note here that the income of Agricultural Produce Market committee was exempt under section 10(20) of the Income-tax Act, 1961 pri....
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.... their registration under section 12A/12AA as Charitable Institution. For the sake of convenience I am referring to the appeal papers of the first appellant above named i.e., APMC, Chamorshi in ITA No. 301/Nag./04. The APMC Chamorshi applied for registration as Charitable Institution under section 12A of Income-tax Act, 1961 on 17-3-2004 vide application dated 4-3-2004 before the Commissioner of Income-tax-IV, Nagpur. It was submitted by the assessee that its object were advancement of general public utility as defined in section 2(15) of the Act and hence, the assessee was entitled to registration under section 12A/12AA of the Act. It appeared to the Commissioner that the activity of the assessee was purely commercial in nature and it had nothing to do with the work of charity. Hence he by his letter dated 15-6-2004 called upon the assessee to show cause as to why his application for registration under section 12A should not be rejected. The assessee filed reply dated 28-6-2004 which is placed on page 29 of the Paper Book of the assessee. It was contended that the APMC is established by Government of Maharashtra vide notification dated 4-2-1999. The object of the APMC is to regula....
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....(XXVIII), and all the powers and duties are purely commercial in nature. The Hon'ble Bombay High Court in the case of President, APMC Tumsar v. Murari [1986] MLJ 258 (SB) held that the Marketing Committee was a commercial establishment. The Court observed that the perusal of the duties specified in section 29 of the MAMP (Regulation) Act would show that all the activities carried on by the Market Committee were in relation to the marketing or allied activities carried on by the traders. Within the jurisdiction of the Marketing Committee. The assessee did not furnish any document in support of the claim that it was doing the job of "General Public Utility". From the facts discussed above, it is clear that the aim, object and the activity of the assessee is purely commercial in nature. In extends marketing facilities to the farmers for facilitating commercial transactions and charges cess for that. Helping a person or a class of persons in a commercial activity for cess cannot be a charitable purpose. The income and expenditure accounts furnished by the assessee also show that the activity of the assessee is commercial in nature. It is also seen that it is not q....
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....fined in section 2(15) of the Income-tax Act, 1961. Reliance was placed by the learned counsel on the following decision: 1. CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) 2. Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC) 3. DIT v. Bharat Diamond Brouse [2003] 259 ITR 280 (SC) 4. CAIT v. Rubber Board [1997] 226 ITR 722 (Ker.) 5. DIT (Exemption) v. Agri-Horticulture Society [2005] 273 ITR 198 (Mad.) 6. U.P. Forest Corpn. v. Dy. CIT [2003] 129 Taxman 527 (All.) 7. ITO v. Manav Hitkari Trust [1987] 20 ITD 42 (Delhi) (SMC). 5. It was next submitted by the counsel for the assessees that Commissioner of Income-tax, Pune under identical facts and circumstances had granted registration under section 12A/12AA of Income-tax Act, 1961 to the Agricultural Produce Market Committee, Pune. Thus, it was not open to the Department acting through other Commissioner to refuse registration to the appellant APMCs especially when the facts and circumstances in respect of APMC, Pune and appellant APMCs are identical. For this purpose the ld. Counsel for the assessees relied on the decision of Nagpur Ben....
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.... 12A/12AA of Income-tax Act, 1961. 9. On the other hand, Shri R.K. Singh, the learned Departmental Representative has placed on record the written submission dated 26-4-2005. He submitted that the application is not accompanied by certificate of registration with Charity Commissioner as required vide rule 17 of the Income-tax Rules. He also made the submissions to the following effect: (i) Applicant submitted that the powers and object were clearly specified in section 29 of MAPM (Regulation) Act, 1963. However section 29 enumerates powers and duties of the APMC which is not inclusive of all the objects of the Committee. The applicant has made attempt to equate the powers and duties with the objects which is not correct. Further the objects are not charitable within the meaning of section 2(15) of the Income-tax Act, 1961. (ii) Market Committee does not render services free of cost but it is on payment of cess/fees which shows profit motive. Bombay H.C. in President of APMC, Tumsar v. Murari [1986] MLJ 258 has held that Market Committee was commercial Establishment. (iii) The applicant has referred to the letter of the Union Finance Minister. However i....
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....an be treated as charitable object and that any activity for profit or personal enjoyment or for avoiding tax is not regarded as a charitable purpose. 15. At the end, it was submitted by Departmental Representative that in view of the above facts and circumstances and legal position, the Commissioners were right in refusing registration to the assessees under section as charitable institutions under section 12A/12AA of the Income-tax Act, 1961 and he urged that the impugned orders of the CIT may be upheld. 16. I have heard both the parties and perused the record available q before me. I have also gone through the paper book filed by the assessee which contains various documents on which the ld. Counsel for the assessee has placed his reliance. I have also gone through the written submissions filed by the Departmental Representative. I have also considered the various decisions cited by both the parties. I have also carefully gone through the relevant provisions of Agricultural Produce Marketing (Regulation) Act, 1963. The only issue involved before me is whether the assessee is entitled for registration as charitable institution under section 12A/12AA of the Income-tax Act, 1....
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....h accountant and setting forth such particulars as may be prescribed." Section 12AA of the Income-tax Act, 1961 provides for procedure for registration. This section reads as under "12AA(1) The Commissioner on receipt of an application for registration of a trust or institution made under clause (a) of section 12A shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activity of the trust or institution and may also make such inquiries as he may deem necessary in this behalf and (b) after satisfying himself about the objects of the trust or institution and genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied pass an order in writing refusing to register the trust or institution. And a copy of such order shall be sent to the applicant. Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Chie....
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....he Supreme Court in various cases. It is, therefore, necessary to consider some of the important cases of the Supreme Court and then see whether the objects of the assessee-institution viz., various APMCs fits into the term 'advancement of the objects of general public utility'. In the case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), the primary object of the chamber were to promote and protect trade and commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries and to watch over and protect the general commercial interest of India or any part thereof. The income and property of the chamber of commerce had to be applied for promotion of its objects. It was held by the Supreme Court that the advancement or promotion of trade, commerce and industry leading to economic prosperity enured for the benefit of entire community. That prosperity would be shared also by those who were engaged in trade, commerce and industry, but on the account the purpose was not rendered any less an object of general public utility. It was also held that the Legislature had used language of great amplitude in defining "Charitable purpo....
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....uld be satisfied if profit making is not the real object. (v) The nature of charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and all surrounding circumstance may clearly indicate that the activity is not propelled by dominant profit motive." 18. In the case of DIT v. Bharat Diamond Brouse [2003] 259 ITR 280 (SC) the objects of the assessee, a non-profit service organization registered under the Companies Act, 1956 were broadly as under:- "(i) to establish common facilities required to promote export of diamonds. (ii) To establish and promote effective liaison between the diamond trade and Industry in India and abroad. (iii) To promote, advance, protect and develop Trade, Commerce and Industry in India relating to export and import of diamonds (iv) To develop India as a modern and sophisticated diamond market by establishing and maintaining an international trade centre." Assessing Officer held that the objects of the assessee were not charitable within the meaning of section 2(15) of Income-tax Act, 1961. Tribunal and High Court held that the objects of the assessee were ....
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.... Authority disputed the status of the Assessee-society as of charitable nature and denied exemption claimed by the assessee. Tribunal held that assessee was entitled to exemption. Department went in appeal. The High Court dismissed dept.'s appeal. The Hon'ble High Court held that the fact that the assessee developed various kinds of plants that restored environmental balance and also helped in conservation of various plants was not in dispute. Similarly the fact that the assessee-society was growing plants which were sold in pots and also developed seeds, garden implements, manure etc. by engaging 54 employees was also not in dispute. If that be so the assessee had to receive minimum sale consideration for giving payment to employees and such act of the society by itself, could not be construed as commercial in nature. Definition of section 2(15) was inclusive and had a wide connotation. Its meaning could not be restricted. Therefore, even assuming that it had charged for shooting movies and television serials etc. it only amounted to corpus donation, but would not change the charitable object and purpose of the assessee. Assessee was entitled to exemption under section 11.....
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.... information relating to crop statistics, to give fitness certificate, to provide settling of disputes arising out of marketing of agricultural produce, to keep a set of standard weights and measures, to provide storage and warehousing facilities in the market area and take any other activity conducive to the promotion and regulation of agricultural marketing. The Bombay High Court in the case of Solapur Bakar Khatik Association v. Solapur APMC [1978] 16 Mh. LJ 837 after referring to the preamble of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 and various sections of the Act including that of section 29 held that "indeed the very object of the Act is to protect sellers of agricultural produce who are in our country mostly rural people and who are unorganized in their selling activities". It is further observed by the Hon'ble High Court as under: "... the purpose of the Act was for the regulation of buying and selling of commercial crops by providing suitable and regulated market by eliminating middlemen and bringing face to face the purchaser and buyer so that they meet on equal terms...." 23. Thus, referring to the tests laid down by the Su....
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.... that the Agricultural Produce Market Committees are commercial establishment as held by the Bombay High Court in the case of President of APMC, Tumsar v. Murari [1986] Mh. LJ 258 and since it is a commercial establishment it cannot be said to be charitable. Referring to the said decision it will be seen that in that case Shri Murari, the respondent had filed an application under section 33C(2) of the Industrial Disputes Act, 1947 on the ground that he was entitled to minimum wages fixed for the employees in Shops and Commercial Establishment covered under entry 17 of the Schedule to Minimum Wages Act, 1948 and the expression "Shops and Commercial Establishment" have the meaning assigned to them in Bombay Shop and Establishment Act, 1948. Referring to the said definition of "Commercial Establishment" as given in section 2(4) of the said Act the Hon'ble High Court held that the expression "Commercial Establishment" means not only establishment which itself carries on any business, trade or profession but also means an establishment which carries on any work in connection with or incidental to or ancillary to any business, trade or profession. Thus even though the establishment o....
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.... of the Bombay Shop and Establishment Act, 1948 but on that count the charitable Hospital does not cease to be a charitable trust. Thus in my view the reliance placed by the respondent on the said decision of the Bombay High Court in President of APMC, Tumsar v. Murari [1986] Mah. LJ. 258 is unfounded. 27. With regard to the letter of Finance Minister dated 18-11-2002 the submission of the ld. Departmental Representative is that the said letter refers to certain conditions required to be fulfilled by the applicant and there is no blanket approval. It is nobody's case that the said letter gives a blanket approval. However, it states that if the Agricultural Produce Marketing Committee are working for advancement of an object of general public utility and there is no profit motive they can still claim exemption from Income-tax as charitable institution fulfilling certain conditions prescribed under section 11 of the Income-tax Act. Thus the letter merely states the legal position. However on analysing the various aspects I have held that the objects of the APMC are of general public utility and that there is no profit motive. 28. It is further submitted by the ld. DR that t....
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....fits the community or a section of the community. A trust would not be charitable, if it only conferred private benefits. In the present case of APMC the benefit is to the entire class of sellers of agricultural produce and not to particular specified individuals. Thus the said case has no relevance nor is it in any way applicable to the facts of the present case. 31. One more grievance was made by the revenue in written submission that the application is not accompanied by certificate of registration with Charity Commissioner as required by rule 17 of Income-tax Rules. Reference to rule 17 appears to be erroneous. The relevant rule relating to application for registration of charitable or religious trust etc. is rule 17A and not rule 17. It says that the application shall be accompanied by following document, namely - where the trust is created or institution is established under an instrument, the instrument in original together with one copy and where the trust or institution is established otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution. In this case the APMCs have been established by the State Gov....