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2007 (3) TMI 213 - HC - Income TaxGrant for registration u/s 12A/12AA - Constitution of Agricultural Market Committees - Charitable purposes or Not - Tribunal directed the CIT to grant registration u/s 12A/12AA - HELD THAT:- Applying the tests laid down by the apex court in the case of Director of Income-tax v. Bharat Diamond Bourse [2002 (12) TMI 8 - SUPREME COURT] to the facts of the present case, there can be no doubt that the object of the market committees (assessees) established under the 1963 Act is to regulate the entire marketing of agricultural 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 utility" contained in section 2(15) of the Act. It is contended by the Revenue that the assessees are established with profit motive because they are not rendering free services but they are charging cess/fees for their services and, therefore, the assessees are not established for charitable purposes. There is no merit in this contention. The cess/fees are charged by the assessees from the purchasers in the market area at the rate prescribed by the State Government for the purpose of carrying out the object of the Act. As held by the apex court in the cases of Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 and in the case of Bharat Diamond Bourse 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/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. Thus, it cannot be said that the assessees are established with profit motive so as to deny registration u/s 12A/12AA of the Act. 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 carried on by the trust/institution, so long as the dominant object is of general public utility, it cannot be said that the said trust/institution is not established for charitable purposes. There is no merit in this contention because the expression "property" used in section 11 of the Act is of wide amplitude and it includes the business undertaking itself. The word "property" in section 11 includes immovable and movable property like money, shares, securities etc. Therefore, where a trust/institution fulfils all the conditions set out in section 12A/12AA, registration cannot be denied on the ground that some conditions of sections 11 and 12 are not fulfilled. As stated, even after registration unless the conditions set out in sections 11 and 12 of the Act are complied with, no benefit would be available to the registered trust or institution. Therefore, in the facts of the present case the decision of the Tribunal that the assessees who fulfil all the conditions are entitled to registration cannot be faulted. The contention of the Revenue that the assessees are not registered as a trust and hence not entitled for registration is also without any merit, because, there is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust. In the result, the question of law raised herein is answered in the affirmative that is in favour of the assessees and against the Revenue. All these appeals are disposed of accordingly with no order as to costs.
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