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2012 (10) TMI 26 - SC - Income TaxTrust - application of income for charitable purposes - assessee, a Market Committee incorporated and registered under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 - assessee collects fees etc and transfer to Mandi Parishad for utilisation of same for charitable purposes and purposes as guided by State Government or the Board - Revenue contended that amounts transferred by the assessee to Mandi Parishad cannot constitute application of income for charitable purposes within the meaning of Section 11(1)(a) in view of the fact that the assessee [Mandi Samiti] is only a conduit which collects Mandi shulk [fees] whereas utilization of the said Mandi shulk is not by the assessee but is made by another entity, whose accounts are not verifiable Held that:- Even after the amendment of Section 10(20) and Section 10(29), the assessee continues to enjoy the registration u/s 12AA of 1961 Act for the reason that the assessee is a Market Committee statutorily established under Section 12 of 1964 Adhiniyam for the advancement of the object of general public utility in terms of Section 2(15). Moreover, it is always open to the Department to verify and find out whether the Mandi Parishad has utilized the amounts for the purposes of 1964 Act. Under Section 19(2) of 1964 Adhiniyam, all expenditure incurred by the assessee in carrying out the purposes of 1964 Adhiniyam has to be defrayed out of the Market Committee Fund and the surplus, if any, has to be invested in such manner as may be prescribed. This is one circumstance in the 1964 Act to indicate application of income. Similarly under other provisions of 1964 Adhiniyam, assessee is statutorily obliged to utilize the amounts lying to the credit in the Market Development Fund for extending facilities to the agriculturists, producers and payers of market fees. Keeping in mind the statutory scheme of 1964 Adhiniyam, whose object falls u/s 2(15) of 1961 Act, there is no doubt that the assessee satisfies the conditions of Section 11(1)(a) of 1961 Act. Therefore, income has been applied for charitable purposes. Also, Assessing Officer had erred in invoking Section 12(1) since question of “control” may be relevant in the context of Section 11(1)(d) or u/s 12(1). However, in the present case, the question framed deals with application of income u/s 11(1)(a) - Decided against Revenue.
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