Pradeshik Krishi Utpanna Bazar Samiti, Pune V. Commissioner of Income-tax -1,

ITA 1776/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0952 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2015
• Assessment Year: 2013-2014
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHVARDHINI BUTY
• Keywords: Search and seizure; Charitable institution
• Section: 12A; 12AA; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1776/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2013-14 PRADESHIK KRISHI UTPANNA BAZAR SAMITI, MARKET YARD, GULTEKDI, PUNE 411037 PAN : AACAP2386D ....... / APPELLANT ' / V/S. COMMISSIONER OF INCOME TAX-I, PUNE / RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SMT. HARSHVARDHINI BUTY / DATE OF HEARING : 31-08-2015 / DATE OF PRONOUNCEMENT : 29-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX-I, PUNE DATED 31-07-2013, WHE REBY THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S. 1 2A OF THE ACT HAS BEEN REJECTED. 2. THE BRIEF FACTS OF THE CASE ARE: THE ASSESSEE WAS FO RMED BY A GOVERNMENT NOTIFICATION, DEPARTMENT CO-OPERATIVE SOCIETIES PUBLISHED IN THE GOVERNMENT OF MAHARASHTRA GAZETTE DATED 10-05- 2012. THE 2 ITA NO. 1776/PN/2013, A.Y. 2013-14 ASSESSEE - MARKET COMMITTEE WAS FORMED CONSEQUENT TO BIFURCATION OF THE ERSTWHILE PUNE ZILLA AGRICULTURAL MARKET COMMITTEE (I.E. PUN E ZILLA KRISHI UTAPPAN BAZAR SAMITI, PUNE). THE EARLIER ENTITY WAS R EGISTERED U/S. 12A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 14-10-2003 IN THE NAME OF KRISHI UTAPPAN BAZAR SAMITI, PUNE. THE PRIMARY OBJECTS OF THE ASSESSEE ARE: A) DEVELOPMENT OF MARKET YARD FOR MARKETING OF AGRI. PRODUCE. B) REGULATION OF MARKETING OF AGRI. PRODUCE & SAFE GUARD TO AGRICULTURIST FORM THE BAD PRACTICES IN MARKET. C) ISSUE LICENSES TO ALL FUNCTIONARIES I.E. ADTYA (COMMISSION AGEN TS) TRADERS, MATHADI (HAMAL, WEIGHTMAN ) WARE HOUSE, COLD STORAGES. D) KEEP MARKET YARD CLEAN, PROVIDE SECURITY AND AMENITIES LIKE DRINKING WATER, STREET LIGHT ETC. E) PROVIDE ANCILLARY FACILITIES LIKE BANKING SERVICES, CANTEEN, POST OFFICE, PARKING PLACE FOR SUPPORTING ACTIVITIES TO AGRICULTURAL MARKETING. F) HELP MARKET INTERVENTION SCHEME WHEN PRICE OF AGRI. PRODU CE COLLAPSE. G) ENCOURAGE THE GRADING & PARKING OF AGRI. PRODUCE. H) GIVE INCENTIVES TO EXPORT OF AGRI. PRODUCE. I) TRY TO ELIMINATE MIDDLEMAN AS FAR AS POSSIBLE. J) TRY TO GIVE BEST PRICE TO FARMERS & MARKET AVAILABLE AGRIC ULTURAL PRODUCE AT REASONABLE RATES TO CONSUMERS. 3. THE ASSESSEE FILED AN APPLICATION IN THE PRESCRIBED FORM BEFORE THE COMMISSIONER OF INCOME TAX, PUNE FOR GRANT OF REGISTRA TION U/S. 12A OF THE ACT. THE COMMISSIONER OF INCOME TAX VIDE IMPU GNED ORDER HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE COMMERCIAL IN NATURE, THEREFORE, IT IS HIT BY THE FIRST PROVISO TO SECTION 2(15) OF THE ACT. THE 3 ITA NO. 1776/PN/2013, A.Y. 2013-14 ACTIVITIES CARRIED OUT BY THE ASSESSEE CANNOT BE TREATE D AS CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT AND REJECTED THE APPLICATION OF THE ASSESSEE. AGGRIEVED BY THE ORDER REJECTING THE APPLICATION OF THE A SSESSEE FOR GRANT OF REGISTRATION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 4. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED, THAT THE APPLICATION OF THE ASSESSEE HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME TAX PRIMARILY ON TWO GROUNDS (I) THE ASSESSEE IS ALREADY AVAILING THE ADVANTAGE OF EXEMPTION U/ S. 10(26AAB) OF THE ACT, NO PURPOSE WOULD BE SERVED BY GRANTING REGIS TRATION U/S. 12A OF THE ACT. THE LD. AR CONTENDED THAT EVEN IF INCOME OF THE ASSESSEE IS EXEMPT U/S. 10(26AB) OF THE ACT, THERE IS NO BAR SEEKING REGISTRATION U/S. 12A OF THE ACT. THE LD. AR SUBMITTED THA T VIDE NOTIFICATION NO. 25 OF 2012 - SERVICE TAX DATED 20-06-2012 , MINISTRY OF FINANCE, GOVERNMENT OF INDIA HAS GRANTED EXEMPTION TO TH E ENTITIES REGISTERED U/S. 12AA OF THE ACT. THE ASSESSEE WANTS TO SEEK IMMUNITY FROM THE PAYMENT OF SERVICE TAX BY REGISTERING U/S. 12AA OF THE ACT. (II) THE ACTIVITIES OF THE ASSESSEE ARE IN NATURE OF / IN RELAT ION TO TRADE, COMMERCE OR BUSINESS. THEREFORE, IT IS HIT BY PROVISO TO S ECTION 2(15). THE ASSESSEE IS ENGAGED IN SERVING SMALL AND MARGINAL FAR MERS, THEREFORE, THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATURE. THE ASSESSEE IS AN EXTENDED ARM OF THE STATE GOVERNMENT IN PROVIDING VARIOUS FACILITIES TO THE FARMERS BY REGULATING THE SALE OF A GRICULTURAL PRODUCE, MARKETING OF AGRICULTURAL PRODUCE, PROVIDING COMMON PLACE FOR SALE OF AGRICULTURAL PRODUCE, ETC. THE LD. AR SUBMITTED T HAT THE ASSESSEE HAS BEEN FORMED U/S. 11 OF THE MAHARASHTRA AG RICULTURAL PRODUCE MARKETING (DEVELOPMENT AND REGULATION) ACT, 1963 (HEREINA FTER REFERRED TO AS THE ACT OF 1963). THE ASSESSEE IS CO NFERRED WITH POWERS 4 ITA NO. 1776/PN/2013, A.Y. 2013-14 AND DUTIES IN SECTION 29 OF THE ACT OF 1963. SECTION 31 GIVES THE POWER TO LEVY FEE AND FIX RATES OF COMMISSION (ADAT) WITHIN THE MI NIMUM AND MAXIMUM RATE LIMITS PRESCRIBED BY THE STATE GOVERNMENT. SECTION 32A OF THE SAID ACT GIVES POWER TO ASSESSEE TO ORDER PRODU CTION, ENTRY, INSPECTION, SEARCH AND SEIZURE. THUS, THE ASSESSEE ALSO A CTS AS A REGULATORY BODY. THE LD. AR CONTENDED THAT THE COMMISSIO NER OF INCOME TAX HAS ERRED IN HOLDING THAT THE ASSESSEE IS CA RRYING OUT COMMERCIAL/BUSINESS ACTIVITY AND IS NOT ELIGIBLE FOR REGISTRATIO N U/S. 12A OF THE ACT. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. CIT VS. AGRICULTURAL PRODUCE AND MARKET COMMITTEE, HINGANG HAT & ORS., 291 ITR 419 (BOM); II. CIT VS. AGRICULTURAL MARKET COMMITTEE, GIDDALUR & ORS., 336 I TR 641 (AP); III. BUREAU OF INDIAN STANDARDS VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS), 358 ITR 78 (DELHI); IV. MARKET COMMITTEE, SULLAR GHARAT & ORS. VS. CIT, 94 TTJ (DEL) 692; V. AGRICULTURAL PRODUCE & MARKET COMMITTEE, TELHARA & ORS. VS . CIT, 97 TTJ (NAG) 165; AND VI. RAJASTHAN STATE AGRICULTURAL MARKETING BOARD VS. CIT, 106 TTJ (JP) 1109. 5. ON THE OTHER HAND SMT. HARSHVARDHINI BUTY REPRESENT ING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISS IONER OF INCOME TAX IN REJECTING THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT. THE LD. DR SUBMITTED THA T THE CHARITABLE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE OF GE NERAL PUBLIC UTILITY. THE ACTIVITIES OF THE ASSESSEE INCLUDE DEVELOPMENT OF MARKET 5 ITA NO. 1776/PN/2013, A.Y. 2013-14 YARDS FACILITATING DISPOSAL OF AGRICULTURAL PRODUCE, REGULATING T HE MARKET, ETC. BY CHARGING VARIOUS COUNTS OF FEES AND PENALT IES. THUS, THE ACTIVITIES OF THE ASSESSEE HAVE INGREDIENTS OF BUSINES S AND ARE COMMERCIAL IN NATURE. THE LD. DR PRAYED FOR DISMISSING THE A PPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE IMPUGNED ORDER. WE HAV E ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR HAS PLACED RE LIANCE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS BEEN FORMED U NDER THE PROVISIONS OF THE MAHARASHTRA AGRICULTURAL PRODUCE MARKET ING (DEVELOPMENT AND REGULATION) ACT, 1963. IT IS EQUALLY UNDISP UTED THAT THE ASSESSEE HAS BEEN FORMED CONSEQUENT ON THE BIFURCA TION OF THE ERSTWHILE PUNE ZILLA AGRICULTURAL MARKET COMMITTEE (I.E. PUNE ZILLA KRISHI UTAPPAN BAZAR SAMITI, PUNE) WHICH IS ENJOYING THE BEN EFITS OF REGISTRATION U/S. 12A OF THE ACT, SINCE 2003. 7. THE COMMISSIONER OF INCOME TAX IN HIS IMPUGNED ORDER H AS OBSERVED THAT EXEMPTION U/S. 10(26AAB) IS ALREADY AVAILABLE TO THE ASSESSEE, THEREFORE, THE APPLICATION FOR REGISTRATION U/S. 12 A DESERVES TO BE CONSIDERED AS INFRUCTUOUS. THE ASSESSEE, SO FAR HAS B EEN TAKING BENEFIT UNDER THE PROVISIONS OF SECTION 10(26AAB) OF THE ACT . THERE IS NO BAR THAT IF THE ASSESSEE IS ENJOYING THE BENEFIT OF EX EMPTION UNDER THE PROVISIONS OF SECTION 10, IT CANNOT BE REGISTERED UNDE R THE PROVISIONS OF SECTION 12A OF THE ACT, IF IT SATISFIES THE OTHE R CONDITIONS LAID DOWN UNDER THE SAID SECTION. BOTH THESE BENEVOLENT PROVISIONS OPERATE IN DIFFERENT SPHERES. OUR THIS VIEW FIND SUPPORT FRO M THE DECISION OF HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. 6 ITA NO. 1776/PN/2013, A.Y. 2013-14 AGRICULTURAL MARKET COMMITTEE, GIDDALUR & ORS. (SUPRA), WHERE IN THE HIGH COURT HAS OBSERVED AS UNDER: 38. IT IS NOT THE CASE OF AMCS THAT THEY WERE NOT INSTITUTIONS OF CHARITY PRIOR TO THE AMENDMENT OF SECTION 10(20) BY THE FIN ANCE ACT, 2002. AS WE HAVE ANALYSED EARLIER, ALL THOSE STATUTORY, NON-STA TUTORY ENTITIES, CONCERNS AND INSTITUTIONS, SPECIFIED IN SECTION 10 SUBJECT TO THE PRESCRIBED CONDITIONALITIES AND LEGAL REQUIREMENTS ARE AUTOMATICALLY EXEMPTED FROM PAYMENT OF TAX AND THOSE WHO WERE NOT INCLUDED THEREIN WERE ONLY REQUIRED TO OBTAIN REGISTRATION UNDER SEC TION 12A SO AS TO CLAIM THE BENEFIT UNDER SECTION 11(1) OF THE INCOME-TAX A CT. THE FACT OF BEING COVERED UNDER ANY OF THE CLAUSES OF SECTION 10 DOES NOT MEAN THAT A PERSON IS DISQUALIFIED TO SEEK REGISTRATION UNDER S ECTION 12A. IT IS NOBODY'S CASE BEFORE US. WHEN THE STATUTE CONFERS T HE BENEFIT, THERE WAS NO NECESSITY FOR AMCS TO SEEK REGISTRATION UNDER SE CTION 12A. BY REASON OF THE AMENDMENTS BY THE FINANCE ACT, 2002, WHEN TH EY WERE DENIED THE EXEMPTION BY REASON OF LOSING THE STATUS OF 'LOCAL AUTHORITY' FOR THE PURPOSE OF THE INCOME-TAX ACT, SO AS TO CLAIM EXEMP TION IT WAS NECESSARY FOR AMCS TO APPLY FOR REGISTRATION UNDER SECTION 12 A/12AA. EVEN THOUGH THE OBJECT OF ADDING THE EXPLANATION TO SECTION 10( 20) WAS TO RESTRICT THE BENEFIT UNDER SECTION 10(20), IT WAS NEVER THE INTE NTION OF PARLIAMENT TO DENY THE BENEFIT TO A JURIDICAL PERSON WHICH WAS OT HERWISE ENTITLED TO SEEK EXEMPTION FROM PAYMENT OF TAX DE HORS SECTION 10(20). THE PUNJAB AND HARYANA HIGH COURT, IN MARKET COMMITTEE [2007] 294 ITR 563 (P&H), CONSIDERED THE QUESTION AS TO WHETHER AN AMC CAN CLAIM EXEMPTION UNDER SECTIONS 11 AND 12 EVEN AFTER THE B ENEFIT UNDER SECTION 10(20) WAS WITHDRAWN BY THE FINANCE ACT, 2002. WHIL E REJECTING THE CONTENTION OF THE REVENUE THAT, BY BEING REMOVED FR OM THE AMBIT OF BEING LOCAL AUTHORITY, THE AMC BECAME INELIGIBLE FOR CLAI MING EXEMPTION UNDER SECTIONS 11 AND 12, THE COURT OBSERVED AS UNDER (PA GE 577) : 'THE EXEMPTIONS FROM LIABILITY OF TAX UNDER SECTION S 10, 11 AND 12 OF THE INCOME-TAX ACT ARE INDEPENDENT OF ONE ANOTHE R, AS WELL AS, OTHER PROVISIONS OF THE INCOME-TAX ACT, UNDER WHICH AN ASSESSEE CAN CLAIM TAX EXEMPTION. IT IS SUBMITTED THAT MEREL Y BECAUSE AN ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION UNDER O NE (OR EVEN TWO) OF THE AFORESAID PROVISIONS, CANNOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE CLAIM OF THE ASSESSEE CANNOT BE CONSIDERED FOR GRANT OF TAX EXEMPTION UNDER SOME OTHER PROVISIONS OF THE INCOME- TAX ACT. IN VIEW OF THE DECISION RENDERED BY THE AP EX COURT IN KERALA STATE CO-OPERATIVE MARKETING FEDERATION LTD. V. CIT [1998] 231 ITR 814 (SC), IT IS NOT POSSIBLE FOR US TO ACCE PT THAT SECTION 10(20) OF THE INCOME-TAX ACT; AFTER THE SAME CAME T O BE AMENDED, SO AS TO EXCLUDE 'LOCAL AUTHORITY' (S) FROM THE BEN EFIT OF TAX EXEMPTION, WOULD RENDER THE MARKET COMMITTEES INELI GIBLE FOR TAX EXEMPTION UNDER OTHER PROVISIONS OF THE INCOME-TAX ACT. IT MUST NECESSARILY FURTHER BE CONCLUDED THAT ALTHOUGH MARK ET COMMITTEES ARE NOT ENTITLED TO (OR ELIGIBLE FOR) TAX EXEMPTION UNDER SECTION 10(20) OF THE INCOME-TAX ACT, YET A CLAIM OF EXEMPT ION IS STILL OPEN TO CONSIDERATION UNDER AN ALTERNATE PROVISION, IF M ADE OUT.' 39. THE ABSENCE OF ANY CORRESPONDING AMENDMENTS TO SECTIONS 11 TO 13 ALTHOUGH SECTION 10(29) WAS DELETED AND SECTION 10(20) WAS 7 ITA NO. 1776/PN/2013, A.Y. 2013-14 AMENDED, ITSELF IS SUFFICIENT INDICATION TO BELIE T HE SUBMISSION MADE BY THE SENIOR COUNSEL. 40. IN GUJARAT MARITIME BOARD [2007] 295 ITR 561 (S C), THE SUPREME COURT HELD THAT 'SECTION 10(20) AND SECTION 11 OF T HE INCOME-TAX ACT OPERATE IN TOTALLY DIFFERENT SPHERES, THAT EVEN IF THE BOARD HAS CEASED TO BE 'LOCAL AUTHORITY', IT IS NOT PRECLUDED FROM CLAI MING EXEMPTION UNDER SECTION 11(1)'. WE ACCORDINGLY HOLD THAT AN AMC IS ENTITLED TO SEEK EXEMPTION UNDER SECTION 10(20) READ WITH SECTION 10 (29) TILL MARCH 31, 2003. BY REASON OF THE AMENDMENT TO SECTION 10(20) AND DELETION OF SECTION 10(29) WITH EFFECT FROM APRIL 1, 2003, THEY , FOR THE PURPOSE OF THE INCOME-TAX ACT, CEASED TO BE 'LOCAL AUTHORITIES'. T HIS ITSELF WOULD NOT DISQUALIFY THEM FROM CLAIMING EXEMPTION UNDER SECTI ONS 11(1) AND 12 OF THE INCOME-TAX ACT PROVIDED THEY ARE CONSIDERED AS INSTITUTIONS ESTABLISHED FOR ADVANCEMENT OF OBJECTS OF GENERAL P UBLIC UTILITY, BECAUSE THE PARLIAMENTARY BENEFIT UNDER SECTION 10(20) IS A LTOGETHER DIFFERENT FROM THE BENEFIT GRANTED BY THE TAX MACHINERY SUBJE CT TO STATUTORY CONDITIONALITIES CONTAINED IN SECTIONS 11 TO 13 OF THE INCOME-TAX ACT. THUS, IN THE LIGHT OF THE JUDGMENT OF HON'BLE ANDHRA PRADE SH HIGH COURT, THE OBSERVATIONS OF THE COMMISSIONER OF INCOME TAX THAT THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U /S. 12A DESERVES TO BE CONSIDERED AS INFRUCTUOUS IN VIEW OF ASSES SEE AVAILING EXEMPTION UNDER THE PROVISIONS OF SECTION 10(26AAB) ARE N OT JUSTIFIED AND ARE THUS, LIABLE TO BE SET ASIDE. 8. THE NEXT ISSUE IS WHETHER THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S. 12A AS CHARITABLE INSTITUTION. THE HON'BLE BOMBAY HIGH COURT, NAGPUR BENCH WHILE DEALING WITH SIMILAR CONTROVERSY HAS HELD THAT FROM THE SCHEME OF THE MAHARASHTRA AGRICULTURAL PRODUCE MARKETING (DEVELOPMENT AND REGULATION) ACT, 1963, IT IS EVIDENT THAT TH E ASSESSEES ARE ESTABLISHED TO REGULATE THE MARKETING OF A GRICULTURAL AND OTHER PRODUCE WITH THE OBJECT OF PROTECTING THE INTERES TS OF THE PRODUCERS AND THE ACTIVITIES CARRIED ON BY THE ASSESSEE S ARE CHARITABLE IN NATURE, SQUARELY COVERED WITHIN THE MEANING OF THE EXP RESSION ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. THE HON 'BLE HIGH COURT IN PARA 16 OF THE JUDGMENT HAS OBSERVED AS UNDER: 8 ITA NO. 1776/PN/2013, A.Y. 2013-14 16. FROM THE SCHEME OF THE 1963 ACT, IT IS EVIDEN T THAT THE ASSESSEES ARE ESTABLISHED TO REGULATE THE MARKETING OF AGRICU LTURAL AND CERTAIN OTHER PRODUCE WITH THE OBJECT OF PROTECTING THE INT ERESTS OF THE AGRICULTURAL AND SOME OTHER PRODUCERS AND ALSO THE GENERAL PUBLI C WHO ARE THE ULTIMATE CONSUMERS. THE OBJECT OF ESTABLISHING THE MARKET COMMITTEES IS TO SECURE FAIR PRICE TO THE AGRICULTURAL AND SOME O THER PRODUCERS AND ALSO TO MAKE THE SAME AVAILABLE TO THE ULTIMATE CONSUMER FREELY, REGULARLY AND AT FAIR PRICES. IN OTHER WORDS, THE OBJECT OF T HE ACT IS TO ENSURE WELFARE OF THE AGRICULTURISTS AS A WHOLE AND WELFAR E OF THE GENERAL PUBLIC AT LARGE WHO ARE THE ULTIMATE CONSUMERS OF THE AGRI CULTURAL PRODUCE, WHICH IS ABSOLUTELY ESSENTIAL FOR THE ORDERLY GROWT H OF THE SOCIETY. IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION IN HOLDI NG THAT THE ASSESSEES ARE CONSTITUTED FOR CHARITABLE PURPOSES, NAMELY, AD VANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND, THEREFORE, EN TITLED TO REGISTRATION UNDER SECTION 12A/12AA OF THE ACT. 9. THE HON'BLE HIGH COURT FURTHER AFTER ANALYZING THE DEC ISIONS OF THE HON'BLE SUPREME COURT OF INDIA RENDERED IN THE CASE S OF ADDITIONAL COMMISSIONER OF INCOME TAX VS. SURAT ART SILK CLOTH MANUFAC TURERS ASSOCIATION, 121 ITR 1 (SC) AND DIRECTOR OF INCOME TAX VS. BHARAT DIAMOND BOURSE, 259 ITR 280 (SC) HELD: 20. APPLYING THE TESTS LAID DOWN BY THE APEX COURT IN THE AFORESAID CASES TO THE FACTS OF THE PRESENT CASE, THERE CAN B E NO DOUBT THAT THE OBJECT OF THE MARKET COMMITTEES (ASSESSEES) ESTABLIS HED UNDER THE 1963 ACT IS TO REGULATE THE ENTIRE MARKETING OF AGRICULT URAL AND SOME OTHER PRODUCE FROM THE STAGE OF PROCURING TILL IT REACHES THE ULTIMATE CONSUMER, WHICH IS SQUARELY COVERED WITHIN THE MEANING OF THE EXPRESSION 'ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILIT Y' CONTAINED IN SECTION 2(15) OF THE ACT. 21. IT IS CONTENDED BY THE REVENUE THAT THE ASSESSE ES ARE ESTABLISHED WITH PROFIT MOTIVE BECAUSE THEY ARE NOT RENDERING F REE SERVICES BUT THEY ARE CHARGING CESS/FEES FOR THEIR SERVICES AND, THER EFORE, THE ASSESSEES ARE NOT ESTABLISHED FOR CHARITABLE PURPOSES. THERE IS NO MERIT IN THIS CONTENTION. THE CESS/FEES ARE CHARGED BY THE ASSESS EES FROM THE PURCHASERS IN THE MARKET AREA AT THE RATE PRESCRIBE D BY THE STATE GOVERNMENT FOR THE PURPOSE OF CARRYING OUT THE OBJE CT OF THE ACT. AS HELD BY THE APEX COURT IN THE CASES OF SURAT ART SILK CL OTH MANUFACTURERS ASSOCIATION [1980] 121 ITR 1 AND IN THE CASE OF BHA RAT DIAMOND BOURSE [2003] 259 ITR 280 WHERE THE DOMINANT PURPOSE OF A TRUST/INSTITUTION IS CHARITABLE, INCIDENTALLY IF SOME PROFIT IS MADE AND THE SAID PROFIT IS USED FOR CHARITABLE PURPOSES, THE SAID TRUST/ INSTITUTIO N DOES NOT CEASE TO BE ESTABLISHED FOR CHARITABLE PURPOSES. IN THE CASE OF THE ASSESSEES, THE DOMINANT OBJECT IS TO REGULATE PROCUREMENT AND SUPP LY OF AGRICULTURAL AND SOME OTHER PRODUCE AND TO MEET THE EXPENSES REQ UIRED TO BE MET WITH IN ACHIEVING THE SAID OBJECT, THE LEGISLATURE HAS EMPOWERED THE ASSESSEES TO LEVY CESS/FEES. MOREOVER, SURPLUS REMA INING 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 9 ITA NO. 1776/PN/2013, A.Y. 2013-14 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. 22. IT IS PERTINENT TO NOTE THAT PRIOR TO APRIL 1,1 984, THE WORDS USED IN SECTION 2(15) OF THE ACT WERE 'ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING O N OF ANY ACTIVITY FOR PROFIT'. BY THE FINANCE ACT, 1983 WITH EFFECT FROM APRIL 1, 1984, LEGISLATURE HAS OMITTED THE WORDS 'NOT INVOLVING TH E 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 CARRIED ON BY THE TRUST/INSTITUTION, SO LONG AS THE DOMINANT OBJECT I S OF GENERAL PUBLIC UTILITY, IT CANNOT BE SAID THAT THE SAID TRUST/INST ITUTION IS NOT ESTABLISHED FOR CHARITABLE PURPOSES. THE HON'BLE JURISDICTIONAL HIGH COURT IN AN UNAMBIGUOUS WOR DS HAS HELD THAT EVEN IF THE ASSESSEE IS CHARGING FEE ITS ACT IVITIES ARE CHARITABLE IN NATURE AND THE ASSESSEE IS ELIGIBLE FOR REGIST RATION U/S. 12/12AA OF THE ACT. 10. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH ES OF THE TRIBUNAL IN THE CASES OF MARKET COMMITTEE, SULLAR GHARAT & ORS VS. COMMISSIONER OF INCOME TAX (SUPRA), AGRICULTURAL PRODUCE & M ARKET COMMITTEE, TELHARA & ORS. VS. COMMISSIONER OF INCOME TAX (SUPRA) AND RAJASTHAN STATE AGRICULTURAL MARKETING BOARD VS. COM MISSIONER OF INCOME TAX (SUPRA). 11. THE ASSESSEE HAS BEEN ESTABLISHED UNDER THE PROVIS IONS OF SECTION 11 OF THE MAHARASHTRA AGRICULTURAL PRODUCE MARKE TING (DEVELOPMENT AND REGULATION) ACT, 1963. THUS, IT IS A CREATIO N OF STATUTE, THE ASSESSEE DERIVES ITS POWER TO LEVY FEE/CESS FROM SECTION 31 OF THE ACT OF 1963. THE ASSESSEE LEVY AND COLLECT FEES/PE NALTY IN THE PRESCRIBED MANNER AT THE RATES WITHIN THE RATE BAND FIX ED BY THE STATE GOVERNMENT. THUS, THE ASSESSEE DOES NOT HAVE UNFETTER ED POWER TO CHARGE FEE/CESS. FURTHER, THE ASSESSEE HAS POWER OF EN TRY, INSPECTION, SEARCH AND SEIZURE U/S. 32A OF THE ACT, 1963. THE ASSE SSEE CAN ASK 10 ITA NO. 1776/PN/2013, A.Y. 2013-14 ANY PERSON CARRYING BUSINESS IN THE MARKET AREA TO PRO DUCE THE ACCOUNTS AND OTHER DOCUMENTS AND TO FURNISH INFORMATION RELATING TO THE STOCK OF SUCH AGRICULTURAL PRODUCE AND ALSO RELATING T O THE PAYMENT OF MARKET FEE AND PAYMENT TO THE SELLER. THE ASSESSEE HAS POWER TO AUTHORIZE ANY OFFICER TO ENTER AND SEARCH ANY PLACE, BUILDIN G, WAREHOUSE, GODOWN, VEHICLE ETC. WERE IT HAS REASONS TO SU SPECT THAT SUCH PERSON HAS KEPT OR KEEPS ANY SUCH BOOKS OF ACCO UNT, DOCUMENTS, ARTICLES, REGISTERS ETC. THUS, FROM THE POWERS CONFERRED O N THE ASSESSEE BY THE ACT OF 1963 IT IS EVIDENT THAT THE ASSESSEE IS A REGULATORY BODY AND AN EXTENDED LIMB OF THE STATE GOVERNMENT TO FACILITATE THE SALE OF AGRICULTURAL PRODUCE AND TO PROTECT THE INTEREST OF FARMERS. 12. THE HON'BLE DELHI HIGH COURT IN THE CASE OF BUREAU OF INDIAN STANDARDS VS. DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS) (SUPRA) WHILE DEALING WITH THE ISSUE, WHERE BUREAU OF INDIAN STANDAR DS, A STATUTORY BODY ESTABLISHED UNDER THE INDIAN BUREAU ACT , 1963 WAS DENIED EXEMPTION U/S. 10(23C) HAS HELD: 16. WHAT SURVIVES TO BE DETERMINED IS WHETHER ANY OF BISS ACTIVITIES FALL WITHIN THE LATTER AND LARGER CATEGORY OF 'INVO LVED IN THE CARRYING ON OF ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS'. THE EXPRESSIONS 'ANY ACTIVITY,'' 'REN DERING ANY SERVICE' AND 'IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS'' I MPLY THAT THE INTENTION OF THE LEGISLATURE WAS TO MAKE THE LATTER PART OF T HE EXCEPTION BROAD AND INCLUSIVE. IT SEEMS THAT THE EXCEPTION (THE FIRST P ROVISO) IS INTENDED TO CATCH WITH ITS AMBIT ANY AND ALL COMMERCIAL ACTIVIT Y, EXCEPT WHAT FALLS WITHIN THE SECOND PROVISO (WHICH BARS APPLICATION O F THE EXCEPTION IN CASES WHERE THE AGGREGATE VALUE OF THE RECEIPTS FRO M THE ACTIVITIES MENTIONED THEREIN IS LESS THAN TEN LAKH RUPEES IN T HE RELEVANT PREVIOUS YEAR). THE BUREAU, IT WOULD APPEAR AT THE FIRST BLU SH, RENDERS SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS BY GRANTING CERT FICATION/QUALITY MARKS IN RETURN OF LICENSE FEE. APPARENTLY, PARLIAM ENT INTENDED TO CLARIFY THAT NOT ALL ACTIVITIES OF STATE AGENCIES (SOME OF WHICH MIGHT BE SET UP TO CARRY ON TRADING AND COMMERCIAL ACTIVITIES) CAN BE CONSIDERED CHARITABLE. THIS CAN BE GATHERED FROM THE NOTES ON CLAUSES ATTA CHED TO THE FINANCE BILL, 2008: 'GOVERNMENT FEELS THAT CLAIM OF STATUS OF 'CHARITAB LE O GANISATION' BY THE ORGANISATIONS CARRYING OUT ACTIVITIES ON COM MERCIAL LINES IS CONTRARY TO LEGISLATIVE INTENTION. 11 ITA NO. 1776/PN/2013, A.Y. 2013-14 FINANCE BILL, 2008 SEEKS TO AMEND SECTION 2(15) W.E .F. APRIL 1,2009, BY SUBSTITUTING EXISTING DEFINITION WITH FO LLOWING DEFINITION: 'CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, ED UCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE O R ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. IN THESE CIRCUMSTANCES, 'RENDERING ANY SERVICE IN R ELATION TO TRADE, COMMERCE OR BUSINESS ' CANNOT, IN THE OPINION OF TH E COURT, RECEIVE SUCH A WIDE CONSTRUCTION AS TO ENFOLD REGULATORY AND SOVER EIGN AUTHORITIES, SET UP UNDER STATUTORY ENACTMENTS, AND TASKED TO ACT AS AGENCIES OF THE STATE IN PUBLIC DUTIES WHICH CANNOT BE DISCHARGED B Y PRIVATE BODIES. OVEN, APART FROM THE CONTROLLING OR PARENT STATUTES , LIKE THE BIS ACT, THESE STATUTORY BODIES (INCLUDING BIS) ARE EMPOWERED TO F RAME RULES OR REGULATIONS, EXERCISE CO-ERCIVE POWERS, INCLUDING I NSPECTION, RAIDS; THEY POSSESS SEARCH AND SEIZURE POWERS AND ARE INVARIABL Y SUBJECTED TO PARLIAMENTARY OR LEGISLATIVE OVERSIGHT. THE PRIMARY OBJECT FOR SETTING UP SUCH REGULATORY BODIES WOULD BE TO ENSURE GENERAL P UBLIC UTILITY. THE PRESCRIBING OF STANDARDS, AND ENFORCING THOSE STAND ARDS, THROUGH ACCREDITATION AND CONTINUING SUPERVISION THROUGH IN SPECTION ETC, CANNOT BE CONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTI VITY, MERELY BECAUSE THE TESTING PROCEDURES, OR ACCREDITATION INVOLVES C HARGING OF SUCH FEES. IT CANNOT BE SAID THAT THE PUBLIC UTILITY ACTIVITY OF EVOLVING, PRESCRIBING AND ENFORCING STANDARDS, 'INVOLVES ' THE CARRYING ON OF TRADE OR COMMERCIAL ACTIVITY. 17. IN VIEW OF THE ABOVE DISCUSSION, THE COURT IS O F OPINION THAT THE IMPUGNED ORDER OF THE DIRECTOR OF INCOME TAX DATED 24.2.2012 IS CONTRARY TO LAW. IT IS HEREBY QUASHED. THE RESPONDE NTS ARE DIRECTED TO PROCESS THE CASE OF BIS AND ISSUE THE EXEMPTION HIT HERTO ENJOYED BY IT, UNDER SECTION 10 (23) OF THE ACT, WITHIN 10 WEEKS F ROM TODAY. THE PETITION IS ALLOWED IN THE ABOVE TERMS; NO COSTS. IN THE PRESENT CASE AS WELL, WE FIND THAT THE ASSESSEE D RAWS ITS POWER FROM THE STATUTE AND HAS REGULATORY FUNCTIONS TO PERFORM. THE ASSESSEE HAS LAW ENFORCING POWERS TO CONDUCT ITS DUTIES AND TO ACCOMPLISH THE OBJECTS FOR WHICH IT HAS BEEN ESTABLISHED. CHARGING OF NOMINAL FEE/CESS IN COURSE OF PERFORMANCE OF ITS DUTIES WOUL D NOT MAKE THE ASSESSEE A COMMERCIAL/BUSINESS ESTABLISHMENT. THE AC TIVITIES OF THE ASSESSEE ARE UNDOUBTEDLY CHARITABLE IN NATURE FALLING IN LAST LIMB OF 12 ITA NO. 1776/PN/2013, A.Y. 2013-14 SECTION 2(15) I.E. ADVANCEMENT OF ANY OBJECT OF GENERAL PU BLIC UTILITY AND AT THE SAME TIME IS NOT ADVERSELY HIT BY PROVISO T O SECTION 2(15) OF THE ACT. 13. IN VIEW OF THE FACTS OF THE CASE AND THE JUDGMENTS D ISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FO R REGISTRATION U/S. 12A OF THE ACT. 14. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 29 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH OCTOBER, 2015 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT-I, PUNE 4. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 5. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE