TaxTMI 
TaxTMI 
2007 (3) TMI 213
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....cate for the appellants and Mr.Thakkar, advocate, for the respondents. Rule. Rule made returnable forthwith. 3. All these appeals are admitted on the above question of law and by consent of both the parties all these appeals are taken up for final hearing. since the question of law raised is common, all these appeals are disposed of by a common judgment. 4. Under the Income-tax Act, 1961 ("the Act" for short) prior to April 1, 2003, income of all the local authorities was exempt under section 10(20) of the Act. The market committees ("the assessees" for short) constituted under the Agricultural Produce Marketing (Regulation) Act, 1963 ("the 1963 Act" for short) being local authorities were covered under section 10(20) of the Act and their income was exempt. However, by the Finance Act, 2002, with effect from April 1, 2003, an Explanation has been added to section 10(20) of the Act whereby the words "local authority" have been defined to mean the local authorities specifically set out therein. Since the assessees are not included in the said Explanation, exemption under section 10(20) of the Act became not available to the assessees with effect from April 1, 2003. 5. The th....
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....according to the Commissioner of Income-tax, Nagpur the activities carried on by the market committees do not constitute charitable purposes. This court in the case of Tax Practitioners Benevolent Fund v. CIT [2004] 266 ITR 561 (Writ Petition No. 922 of 2003 decided on September 29, 2003) dealing with grant of exemption under section 80G of the Act held that different officers under the Income-tax Act authorised to consider the application for grant of exemption under section 80G of the Act have to apply the same norms, yardsticks and parameters while considering the applications under section 80G and the similar persons cannot be treated differently merely because the officers happened to be different having different territorial jurisdiction. The Tribunal relying upon the aforesaid decision held that when the decision of the Commissioner of Income-tax, Pune has been accepted by the Income-tax Department, it was not open to the Commissioner of Incometax, Nagpur to take a contrary view and deny registration to the assessees. No fault can be found with the decision of the Tribunal on that ground. 9. Apart from the above, even on the merits the Tribunal held that the assessees are....
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.... committees to be constituted in connection with or acting for purposes connected with such markets ; to establish market fund for purposes of the market committees and to provide for purposes connected with the matters aforesaid." 14. "Agricultural produce" is defined under the 1963 Act to mean all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture, fisheries and forest specified in the Schedule annexed to the 1963 Act. 15. Powers and duties of the market committees (assessees) are set out in section 29 of the 1963 Act. Section 29 of the 1963 Act, to the extent relevant herein, reads thus : "29. Powers and duties of market committee.-(1) It shall be the duty of a market committee to implement the provisions of this Act, the rules and bye-laws made thereunder in the market area ; to provide such facilities for marketing of agriculture produce therein as the director (the State Marketing Board or the State Government, as the case may be,) may, from time to time, direct ; do such other acts as may be required in relating to the superintendence, direction and control of market or for regulating marketing of agricu....
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....ble or immovable property for the purpose of efficiently carrying out its duties ; . . . (xvii) levy, take, recover and receive charges, fees, rates and other sums or money to which the market committee is entitled ; (xviii) subject to approval of the director, obtain loans subsidies, subventions from the State and Central Government or any financing agency, for providing warehousing and marketing facilities in the market ; (xix) subject to the approval of the State Marketing Board, prepare budgets, supplementary budgets, make reappropriations in the budget and incur expenditure accordingly ; (xx) keep a set of standard weights and measures in the market against which weighment and measurement may be checked ; (xxi) inspect and verify scales, weight and measures in use in a market areas and also the books of account and other documents maintained by the licensees in such manner as may be prescribed ; (xxii) employ the necessary number of officers and servants for the efficient implementation of the provisions of this Act, rules and bye-laws of the market committee ; (xxiii) pay, salaries and other emoluments, pension, l....
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....large who are the ultimate consumers of the agricultural produce, which is absolutely essential for the orderly growth of the society. In these circumstances, we have no hesitation in holding that the assessees are constituted for charitable purposes, namely, advancement of an object of general public utility and, therefore, entitled to registration under section 12A/12AA of the Act. 18. Relying upon a decision of this court in the case of President, APMC v. Murari K. Yadav reported in [1986] Mah. L. J. 258 it is contended by the Revenue that the assessees are commercial establishments with a profit motive and, therefore, the assessees cannot be said to have been established for charitable purposes. The said decision has no bearing on the facts of the present case, because firstly, in that case, the issue was whether a market committee established under the 1963 Act is a commercial establishment under section 2(4) of the Bombay Shops and Establishment Act, 1948. Secondly, the definition of "commercial establishment" under section 2(4) of the Bombay Shops and Establishment Act includes charitable Trust. Therefore, the fact that the assessees are commercial establishments under th....
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....ut, if it is the latter, the charitable character of the purpose would not be lost. If we apply this test in the present case, it is clear that the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn, which was carried on by the assessee, was not an activity for profit. The predominant object of this activity was promotion of commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth, which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. It is significant to note that the assessee was a company recognised by the Central Government under section 25 of the Companies Act, 1956, and under its memorandum of association, the profit arising from any activity carried on by the assessee was liable to be applied solely and exclusively for the promotion of trade and commerce in various commodities which we have mentioned above and no part of such profit could be distributed amongst the members in any form or under any guise. The profit of the assessee could be utilised only f....
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....said trust/ institution does not cease to be established for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required to be met with in achieving the said object, the Legislature has empowered the assessees to levy cess/fees. Moreover, surplus remaining in the market fund are ploughed back for carrying out the object of the 1963 Act. Thus, the surplus remaining in the market fund is neither distributed nor accumulated as profits. In these circumstances, it cannot be said that the assessees are established with profit motive so as to deny registration under section 12A/12AA of the Act. 24. It is pertinent to note that prior to April 1, 1984, the words used in section 2(15) of the Act were "advancement of any other object of general public utility not involving the carrying on of any activity for profit". By the Finance Act, 1983 with effect from April 1, 1984, Legislature has omitted the words "not involving the carrying on of any activity for profit" from section 2(15) of the Act. Thus, after April 1, 1984, even if there is some profit in the activity carr....