TaxTMI 
TaxTMI 
TaxTMI 
2009 (12) TMI 13
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....rovides for the constitution of the committee. The committee was authorized to charge the fee as 'Mandi Shulk' and also other charges for providing the warehousing facilities Under Section 12(2), each committee was declared as a 'local authority'. By virtue of Section 10(20) of the Income Tax Act, these committees were exempted from the clutches of the Income Tax Act. However, the said provision was amended w.e.f. 1.4.2003 and these assessees were brought under the purview of the Income Tax Act. So these committees claim to be charitable institutions. 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. 3. Not being satisfied, the department has filed the present appeals under Section 260-A of the Income Tax Act. 4. On 21.4.2008 and 15.5.2008, this Court has admitted these appeals on the following substantial questions of law:- I.Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in condoning the delay in filing the application for registration without ma....
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....easons;" 7. According to him, the first condition is that an application in the prescribed form and in the prescribed manner is to be submitted before the expiry of a period of one year from the date of creation of trust or the establishment of the institution. It is further provided that where the application is made after the period aforesaid, the provisions of section 11 and 12 shall be applicable from the date of the creation of the trust or the establishment of the institution if the Commissioner is satisfied that the person was prevented from making the application before the expiry of period aforesaid for sufficient reasons. Where the Commissioner is not so satisfied, it shall be applicable from the first day of the financial year in which the application is to be made, which was 1.4.2005 in the case of the assessees. 8. Regarding the delay after 1.4.2002, it was submitted that the income of the assessees was exempt under the then Section 10(29), which was omitted w.e.f. 1.4.2002. Since the applicant had itself submitted that it was aware of the fact that section 10(29) was omitted and since it wanted exemption u/s 11 of the Act, it should have filed the application for re....
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....th the parties at length and gone through the material available on record. 11. Section 12(2) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 states that the Committee shall be deemed to be a "local authority". 12. Therefore, it is evident that prior to 1.4.2003 (Assessment Year 2003-04), assessees being the ''local authorities' income from house property and other income enumerated under Sections 10 (20) and 10 (29) were not to be included in computing the total income. These provisions read as follows:- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - (1) x x x (20) the income of a local authority which is chargeable under the head "Income from house property", "Capital gains", or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service [(not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area]; x x x (29) in the case of an authority constituted under any law for the time being in fore for the ma....
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....20) as well as Section 10(29) of the Act before its deletion. After the amendment in Section 10(20) brought by the Finance Act, 2002, the assessees were required to get registration u/s 12A w.e.f 1.4.2003. Almost in all the cases, for this purpose, after getting necessary permission, applications were filed in the month of March, 2006. So, the assessees were eligible to get registration in normal course w.e.f. 1st March, 2006 (Assessment Year 2006-07) by virtue of Proviso (ii) of Section 12A (1) (a) of the Act (supra). Hence, before us the issue for condoning the delay is pertaining to 1.4.2003 to 31.3.2005 i.e. Assessment Years 2003-04, 2004-05 and 2005-06 (total three years). For condoning the delay for these three years, it may be mentioned that in Ananda Marga Pracharak Sangha v. CIT, (1996) 218 ITR 254, (Calcutta), it was observed that the condonation of delay may relate back to the very date of creation of the trust or institution. However, it has been now made clear by the proviso w.e.f. 1st October, 1991, that it is possible to grant the registration with effect from the date of creation. Where delay is not condoned, it can be effective from the year of application. 16. In....
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....with the order of the Tribunal who has rightly condoned the delay for the above mentioned three assessment years. 21. This question of law is answered in affirmative in favour of the assesses and against the department. 22. As substantial questions of law nos. 2 and 3 are interconnected, we deem it expedient to consider them together. Substantial Questions of Law Nos. 2 and 3- 23. Learned counsel for the appellant submits that the assessees are not fulfilling the condition of the registration mentioned in Section 12-A of the Act and their activities are not charitable. He further submits that the assessees have diverted their fund to the Mandi Parishad after deducting about 10% of the office expenses. For this purpose, he has relied on the ratio laid down in the case of CIT v. Surat Art Silk Clothes, 121 ITR, 1 SC where it was observed that the Trust or the institution would not be liable to be regarded as charitable and no part of its income would be exempted from tax if the primary or dominant purpose is not charitable and, accordingly, no part of its income would be exempted from tax. Learned counsel also relied on the ratio laid down in the case of Yogiraj Charity Trust v. ....
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.... C.I.T.(s) to the similar Mandi Samitis of other areas in the State of U.P. have granted registration u/s. 12AA of the Act considering that the activities of these Mandi Samitis are charitable in nature. 25. To support his submissions, the learned counsel for the assessees also relied on the ratio laid down in the following cases- CIT v. Krishi Upaj Mandi Samiti (2008), 218 CTR 512 M.P. CIT v. K.U.M.S. Jaisalmer (2008) 261 CTR 277 Rajasthan Commissioner of Income Tax v. Market Committee, (2007) 294 ITR 563 (P& H) CIT v. Agricultural Produce Market Committee, (2007) 291 ITR 419 (Bombay) CIT v. Red Rose School (2007) 212 CTR 394 (Allahabad) 26. He also submitted that in all the above mentioned cases, the activities of Mandi Samiti were accepted as a charitable activity and registration was granted under Section 12-A of the Income Tax Act. Lastly, he made a request that the registration granted by the Tribunal may kindly be upheld. 27. We have heard the learned counsel for the parties and gone through the material available on record. 28. It is an admitted fact that the assessees were created under the Krishi Utpadan Mandi Adhiniyam, 1964. Section 12 of the said Act provides ....
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....ed agricultural produce; (IV)check and verify weights, measures, weighing and measuring instruments used in the Market Area, and report infringement of the provisions of the U.P. Weights and Measures (Enforcement) Act, 1959, to the authorities concerned; (V)collect and disseminate all such informations as may be of advantage to the producers and other persons engaged in the sale or purchase of specified agricultural produce and in particular keep itself informed of the prevailing prices of such agricultural produce at places where it can be profitably exported and from where it can be economically imported in the Market Area; (VI)standardize and regulate trade charges, market practices and customary methods of sale and purchase of specified agricultural produce; (VII)provide suitable amenities in the Principal Market Yard and Sub-Market Yards to the producers and persons engaged in transactions of sale or purchase therein, and in particular to construct, repair and maintain roads, pathways, market lanes and bye-lanes, shops, shelters, parking places, accommodation for storage, and such other amenities and facilities as may be prescribed in this behalf; (vii-a) provide suitable....
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....icultural marketing in the Market Area including the construction, maintenance and repair of link roads, culverts, bridges and other such purposes;] (x)travelling and other allowances to the members of the Market Committee; (xi)loans and advances to the employees of the Market committee; and (xi-a) financial assistance to charitable institutions approved by the Board or recognized educational institutions, subject to a maximum of two per cent of total receipt (excluding money raised under clause (v) of Section 17 and grants made by Government) in the previous financial year;] (xii) such other expenses as may be prescribed: [Provided that the annual expenditure in respect of matters specified in clause (ii) shall not exceed ten per cent of the total annual receipts of the Committee, excluding loans raised by it and advances or grants made to it except with the prior approval of the [Board) [Provided further that all moneys realized as additional market fee under the Uttar Pradesh Krishi Utpadan Mandi (Amendment) Ordinance, 1983 (U.P. Ordinance No.40 of 1983), shall be utilized in the Market Area only for the purposes specified in clause (ix) (5)Every Committee shall, out of i....
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.... and staff of the market committees in the State; (xi)technical assistance to the market committees in the preparation of site plans and estimates of construction and in the preparation of project reports of master plants for development of principal market yards and sub-market yards and market areas; (xii)internal audit of the Board and the market committees; (xiii)matters specified in Sections 16, 19 and 19-B not covered by the preceding clauses; (xiv)any other purpose, to give effect to the provisions of this Act or generally to regulate marketing of specified agricultural produce. "[26-PPP. Central Mandi Fund.-(1) There shall be established a Fund to be called the 'Central Mandi Fund' to which the following amount shall be credited, namely: (a) all moneys paid to the Board under sub-section (6) of Section 19; (b) such other amount as the State Government or the Board may direct. (2)The Central Mandi Fund shall be utilized by the Board for the following purposes namely: (a) assistance to financially weak and underdeveloped Committees in the form of loans or grants (b) construction, maintenance and repairs of market yards, links roads, culverts and other development wor....
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....the assessees were non-charitable institutions, established for personal or private gains. Therefore, we do not find any objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 and 13 of I.T.Act but registration alone cannot be treated as conclusive. It is always open to Revenue authorities, while processing return of income of these asesseess, to examine the claim of the assessees under Sections 11 and 13 of the I.T.Act and given such treatment to these institutions as is warranted by the facts of the case. Revenue authorities are always at liberty to cancel the registration u/s 12AA(3) of the Act which reads as under:- 12AA(3)- " Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution." 36. Moreover, it may be mentioned that the bene....
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....s of the case, the Income Tax Department has filed an appeal in the case of CIT v. Krishi Upaj Mandi Samiti (2009) 308 ITR 401 MP and the said appeal was dismissed by Madhya Pradesh High Court by observing that the assessee is entitled for registration under Section 12A and 12AA of the Act. Madhya Pradesh Higher has observed that- "Krishi upaj mandis do not have any commercial activity but are constituted under the provisions of the Madhya Pradesh Krishi Upaj Mandi Adhiniyam, 1972, to protect the interest of the farmers and ensure that they are not exploited. The preamble to the Adhiniyam, 1972, under which the Krishi upaj mandi is established refers to providing for better regulation of buying and selling of agricultural produce and the establishment and proper administration of markets of agricultural produce in the State of M.P. Under the 1972 Adhiniyam, the market committee charges fees for various purposes which have the necessary nexus with the services rendered and thus, quid pro quo. Merely because they charge fees that does not militate against the altruistic purpose for these mandis are established. 39. Against the said order, the department has filed SLP before the Hon....