TMI Blog1995 (12) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... nstrued the provisions of sec. 10(29) which suggest that the fees and other charges levied by the appellant market-committee being an ' Authority ' constituted under the law do not constitute its income for purposes of levy of income-tax." 2. The brief facts relating to this ground are that the assessee is a Market Committee constituted under the Delhi Agricultural Produce Marketing (Regulation) Act, 1976. It is entrusted with certain duties u/s 25 of the said Act and the duties, inter alia, relates (a) to implement the provisions of the said Act and of the rules and bye-laws made thereunder for the market area ; (b) to provide such facilities for marketing of agricultural produce therein as the Delhi Agricultural Marketing Board constituted u/s 5 of that Act may, from time to time, direct ; (c) to do such other acts in relation to the superintendence, direction and control of markets or for regulating marketing of agricultural produce, in any place in the market area and for purposes connected therewith as may be required and for that purpose it may exercise such powers and perform such duties and discharge such functions as are provided by or under that Act. In addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. 2.2 While making the best judgment assessment u/s 144, the AO examined the provisions of section 10(20) and proceeded to enquire as to whether APMC, Azadpur was a local authority or not. He referred to the provisions of section 3 (31) of the General Clauses Act, 1897, wherein " local authority " has been defined to mean a Municipal Committee, District Board, Body of Port Commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund. He observed that APMC, Azadpur,Delhihad not been entrusted with any municipal fund and it levies and collects market fees from every purchaser of agricultural produce sold in the market. He f urther observed that the said fees were collected and used by APMC, Azadpur for acquisition of sites for the market, maintenance, development and improvement of the market and construction and repair to the buildings, etc., in the market. He also noted the claim of the assessee that the said fees constitute a local fund, for which the assessee relied on the decision of the Hon'ble Supreme Court in the case of Union of India v. R. C. Jain AIR 1981 SC 961 and the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO also computed the parking charges collected by APMC, Azadpur at Rs. 25,59,181.90, as income from other sources. He further computed the trip fees and maintenance charges collected by APMC, Azadpur at Rs. 18,79,403. He further computed the interest on fixed deposit receipts at Rs. 7,60,84,000, as assessable under the head " Income from other sources ". The total assessment was thus made at Rs. 13,70,68,660. He also made orders for charging interest u/ss 234A, 234B and 234C. 3. On appeal before the CIT(A), the learned counsel for the assessee first attacked the assessment made u/s 144 of the I.T. Act. He referred to the replies filed by the assessee to the effect that it was a local authority and its entire income was exempt u/s 10(20) of the I.T. Act and that the notices may be treated as withdrawn and the proceedings be closed and dropped. He further referred to the letter dated30-3-1994wherein the assessee contended that it had not received any notice for filing of returns from the department. The learned counsel further contended that the AO was not justified in passing orders u/s 144 without satisfying the statutory requirements laid down in section 139(2), 142(1) or 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious sections of the aforesaid Act and submitted that the assessee was only a regulatory body and a law implementing agency. He further observed that the assessee was required to generate funds known as " market fund " and was required to utilise the same only for better regulation of the purchase, sale, storage, etc., of agricultural produce in public interest. He further referred to the provisions of section 40 of the said Act, wherein specific purposes are outlined for which the market fund may be expanded. In view of the foregoing the learned counsel reiterated that the assessee was a local authority, He also invited attention of the learned CIT(A) to the observations made by the Hon'ble Supreme Court in the case of R. C Jain at page 951 : "An authority, in order to be a local authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that the AO has erroneously held that the assessee could not be regarded as local authority and the AO has attempted to draw support from section 3(31) of the General Clauses Act, 1897. He stated that in the opinion of the AO the authority conceived in section 3(31) of the said Act should be legally entitled to, or entrusted by the Govt. with, the control and management of municipal or local fund and as in the opinion of the AO the assessee had not been shown as entrusted with any municipal fund it could not be regarded as local authority. The learned counsel stressed that in the impugned asst. order the AO has not disputed that the assessee is constituted under an Act of Parliament and it levies and collects market fees from every purchaser of agricultural produce sold in the market, which fees are collected and used by the assessee for acquisition of sites for the market, maintenance, development and improvement of the market and construction and repair of the buildings, roads, sanitary work, medical facility to the market users, security and traffic regulation, etc., in the market and that the same constitute a local fund. He also submitted that the AO had erred in failing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority ' is defined as meaning a municipal committee, district board, body of port commissioners or other authority, legally entitled to, or entrusted by the Govt. with the control or management of a municipal or local fund. By virtue of section 10(2) of the Gujarat Agricultural Produce Markets Act, 1963, the market committee is a local authority within the meaning of the Bombay General Clauses Act, 1904, a body which is entrusted by Govt. with control or management, inter alia, of a local fund, there is no scope for the argument that the market committee constituted under the Gujarat Agricultural Markets Act, 1963, is not a local authority within the meaning of section 6 of the Land Acquisition Act. It is true that this decision of the Supreme Court rests on two conclusions. The first conclusion is that by virtue of section 10(2) of the Gujarat Agricultural Produce Markets Act, 1963, a Market Committee is a local authority within the meaning of the Bombay General Clauses Act. But it is also pointed out that if a body is entrusted by the Govt. with control over management of a local fund, there is no scope for the argument that the markets committee established is not a local au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing or otherwise. He also observed that there was no generic difference between a tax and a fee inasmuch as both are compulsory exactions of money by public authorities. in the light of these observations the learned CIT(A) proceeded to hold that APMC, Azadpur was not a unit of administration like Municipal Corpn. or Village Panchayat, that it was not a local authority in the true sense, that u/s 9 of the Delhi Agricultural Produce Marketing (Regulation) Act, 1976 certain members were to be elected by the agriculturists and certain members were to be nominated by the Administrator representing agriculturists from adjoining States, which made the APMC, Azadpur zonal authority/body rather than a local authority ; that APMC, Azadpur does not have a separate legal existence but it was under the direct control of the Administrator who was appointed by the President of India under Article 239 of the Constitution and thus the APMC was an agency of the Central Government, that it was not a democratic institution as the inhabitants of Delhi were poorly represented therein. He further observed that from August, 1978 there was no Market Committee constituted under the said Act and the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural produce in the Union Territory of Delhi and for matters connected therewith or incidental thereto. [Emphasis supplied] The learned counsel submitted that the APMC, Azadpur was functioning within the market area and maintaining roads and making arrangements for lighting thereof and was acting like Municipal Corpn. ofDelhiin such area. He further invited our attention to the provisions of section 4(3), which provide that on a declaration made under sub-section (1), no local authority, shall, notwithstanding anything contained in any other law for the time being in force, establish, or authorise, or allow to be established, or continue, or authorise the continuation of, anyplace in the market area for the marketing of agricultural produce specified in the declaration. The learned counsel stressed that no other local authority could perform functions within the market area notified under sec. 3(1) of the said Act. He further invited our attention to the provisions of sec. 5 of that Act ; whereunder the Delhi Agricultural Marketing Board is established by the Administrator and which has public representation as provided in that section. He further mentioned that u/s 5(3), the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security of any property vested in it and of any fees leviable by it under the Act. Section 29(2) further empowers the Market Committee to obtain loan from the Administrator for certain purposes specified therein. He further referred to the provisions of sections 34 and 35 whereunder the Market Committee is empowered to grant licences and to cancel or suspend licences. The learned counsel further referred to the provisions of section 38, which provide that all moneys received by the Board shall be credited into a fund to be called the " Market Development Fund ". Section 38(4)(vii) empowers the Board to give aid to financially weak Marketing Committees in the shape of loans or grants or both. He further referred to the provisions of section 39 which provide that all fees and other money (Emphasis supplied) received by a Market Committee (except the amount of such fee credited to the election fund u/s 12), all sums realised by way of penalty (otherwise than by way of fine in a criminal case), all loans raised by the Administrator to the Committee shall form part of a fund to be called " The Market Fund ". Section 39(3) further provides that every Market Committee, shall, out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on similar legislation in force in the State ofMaharashtra. In this connection he referred to the provisions of section 72 whereby the Bombay Agricultural Produce Markets Act, 1939, as in force inDelhi, was repealed. 4.2 The learned counsel further submitted that the tax authorities have treated the assessee as an Association of Persons, which was legally not correct. He submitted that an Association of Persons is formed when two or more individuals join in a common purpose or common action voluntarily for the purpose of earning profit. In support he relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Indira Balkrishna [1960] 39 ITR 546. He submitted that in the present case the Market Committee has been constituted under an Act of Parliament and is a creation of the statute and the basic element of constitution of an AOP is missing. Further the Market Committee has not been constituted for earning any profit and sharing it. He, therefore, stressed that the treatment of the assessee as an Association of Persons by the tax authorities is obviously incorrect in law. 4.3 The learned counsel then proceeded to demonstrate vis-a-vis the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jarat Agricultural Markets Act, 1963, is not a local authority within the meaning of section 6 of the Land Acquisition Act." In the said decision the Hon'ble Gujarat High Court also examined the decision of the Hon'ble Andhra Pradesh High Court in the case of Budha Veerinaidu wherein it was held that the Market Committee under the Andhra Pradesh Agricultural Produce Markets Act, 1966 was a local authority. It also noted that the said decision was followed by the Hon'ble Bombay High Court in the case of Krishi Utpanna Bazar Samiti v. ITO [1986] 158 ITR 742. In the said decision the Hon'ble Gujarat High Court further considered the provisions of section 10(20) and section 10(29) of the I.T. Act and after going into the history of the provisions of section 10(29), it held that the Market Committee constituted under the Agricultural Produce Markets Act was not constituted for marketing commodities and that the provisions of section 10(29) of the I.T. Act cannot be attracted and that the impugned notices issued on the said erroneous premises were illegal and deserved to be quashed. It further held that the conclusion is thus inescapable that the petitioner-Market Committee constituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, no tax could be imposed. In this connection, he submitted that the assessment in the present case has been made on APMC, Azadpur in the status of AOP which is non-existing and, therefore, no tax can be imposed in the case of the assessee. In this connection he further submitted that whereas in the case of an AOP income is generated for the advantage of the AOP, in the present case the fees collected by the APMC, Azadpur are credited to the Market Fund and are spent for public purpose of maintaining the market and providing other facilities to the market users. 4.7 In view of the foregoing submissions the learned counsel concluded that the assessee is a Market Committee constituted under an Act of Parliament and is a local authority within the meaning of section 3(31) of the General Clauses Act and is thus covered under the provisions of section 10(20) of the I.T. Act and its income is exempt. He, therefore, prayed that the asst. made in this case may be quashed. 5. The learned DR, Shri Abrar Ahmed relied heavily on the orders of the tax authorities and his submissions were reiteration of the arguments advanced by the tax authorities for not treating the assessee as local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and also have precedent value. He further submitted that the learned DR has not pointed out that the provisions of the Delhi Act are materially different or the provisions of this Act are so different as compared to the provisions of other Acts that a different view is warranted. He further submitted that the Market Committee was constituted in January 1977 and that there was a period of supersession for the Market Committee in the year under consideration. He further submitted that the accounts of the Market Committee were under audit but were not finalised. He also submitted that there were 6 other Committees inDelhiand only APMC, Azadpur has been taxed. With reference to the plea of the learned DR that the local fund must consist of funds provided by the Govt., the learned counsel mentioned that the Hon'ble Supreme Court in the basic decision in R.C. Jain's case had laid down certain tests/attributes of a local authority and observed that in addition to local funds the funds may also come from the Govt. He submitted that the local fund can be built-up of fees also and it is not necessary that only taxes should go into the fund. He again referred to the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing various amenities within the market area including development and maintenance of markets, its roads, lighting, etc., and is thus performing civic functions like a municipality within the market area, it has power to levy fee, within the ceiling of 1 1/2% of the value of the agricultural produce, from every purchaser of agricultural produce sold in the market area and is also administering the market fund which consists of fees received by the Market Committee, other moneys received by the Market Committee including sums realised by way of penalty a nd loans raised from the Administrator. In view of the foregoing provisions of the Delhi Act, the APMC, Azadpur cannot by any stretch of imagination be treated as an Association of Persons, as has been done by the tax authorities. We, therefore, hold that the assessee is not an Association of Persons. The next question to be decided is as to whether the assessee is a local authority and as to whether it is covered by the provisions of section 10(20) of the I.T. Act. We have carefully considered the provisions of Delhi Act, The Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963, The Punjab Agricultural Produce Markets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve no doubt that the assessee, APMC, Azadpur is a local authority within the meaning of section 3(31) of the General Clauses Act. In this connection reference may also be made to the decisions of the Hon'ble Supreme Court in the case of Surya Kant Roy v. Imamul Hak Khan [1975] 1 SCC 531, 532,533 and Patel Premji Jive at p. 816. We, therefore, feel that the absence of a provision in the Delhi Act on the lines of the provisions of sec. 12(2) of the Maharashtra Act and sec. 10(2) of the Gujarat Act is not fatal and the claim of the assessee, APMC, Azadpur for being treated as a local authority within the meaning of sec. 3(31) of the General Clauses Act, 1897 has to be accepted. 7.1 The further question to be considered is as to whether the assessee, the APMC, Azadpur is covered by the provisions of sec. 10(20) of the I.T. Act and its income is exempt from income-tax under that clause. In view of our decision in the above sub-para, which is also based on the decision of the Hon'ble Gujarat High Court in the case of APMC, Unjha v. J.K. Patel, ITO placed at pages 37-44 of the paper book, we hold that the assessee is covered by the provisions of sec. 10(20) and its income is exempt unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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