TMI Blog2011 (9) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. Harshwardhan Prasad and Ms. Archana Sinha for the Respondent. JUDGMENT Sudhir Kumar Katriar, J. This appeal under section 260A of the Income Tax Act 1961 (hereinafter referred to as 'the Act'), is directed against the order dated 13.6.20008, passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in ITA No.575/Pat/2007, whereby the appeal preferred by the assessee has been dismissed, and the order passed by the learned Commissioner of Appeals has been upheld. The learned Commissioner had, in its turn, upheld the order of the learned Assessing Officer. It is with respect to the Assessment Year 2004-05. 2. A brief statement of facts essential for the disposal of this appeal may be indicated. The appellant assessee had submitted its returns for the period in question on 1.11.2004. It was a statutory body created in terms of the Bihar Agricultural Produce Markets Act 1960 (hereinafter referred to as the 'local Act'). It is an institution for charitable purposes within the meaning of section 2(14) of the Act. The local Act was repealed by the Bihar Agricultural Produce Market (Repeal) Act 2006 (Bihar Act 23 of 2006), with effect from 12.9.2006. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned authorities under the Act have erred in disallowing the claim of exemption in terms of section 11(2) (a) of the Act to the extent of 85%. He submits that the information in terms of section 139, read with section 17, read with Form 10, should have been allowed to be filed. He relies on a Division Bench judgment of the Gujarat High Court in CIT v. Mayur Foundantion [2005] 274 ITR 562 (Guj.). The expression 'in the manner' occurring in section 11(2) (a) of the Act excludes the compulsion element of time. He relies on the judgment of the Supreme Court in Sales Tax Officer v. K.I. Abraham, AIR 1967 S.C. 1823 (paragraph 6). He further submits that the Revenue should not take advantage of ignorance of the assessee. He relies on the judgment of a Division Bench of the Allahabad High Court in CIT v. Lucknow Public Educational Society [2009] 318 ITR 223/183 Taxman 62 (All). 3.1 Learned counsel for the appellant has advanced elaborate submissions in reply to the contentions of the learned senior Standing Counsel. 4. The learned Senior Standing Counsel has supported the impugned order. Relying on the provisions of the Repeal Act, he submits that the successor body contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol over Market Committees, and for exercising such other powers and performing such functions as are conferred or entrusted under this Act, the State Government shall, by notification in the official Gazette, establish a Board called the Bihar Agricultural marketing Board. (2) The Chairman of the Board shall be the person nominated by the State Government. The number of the members of the Board shall not exceed fifteen. These members shall be appointed by the State Government. (3) The members of the board shall be appointed by the State Government by notification in the official Gazette, from amongst the following categories of persons, namely: (a) an officer of Finance Department of the State Government ; (b) two officers of the Agriculture Department of the State Government; (c) an officer of the Revenue Department of the Government; (d) Chief Engineer of the Rural Engineering organisation of the State Government, ex-officio; (e) The Chief Town Planner of the State Government, ex-officio; (f) an officer of the Ministry of Agriculture of the Government of India to be nominated by that ministry; (g) Managing Director of the State Bank of India or hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Creation of market area and markets with a view to ensuring fair trade transactions in agricultural and allied commodities. (2) Appointment of Market Committees fully representative of growers, traders, local authorities and Government to supervise the working of regulated markets. (3) Regulation of market charges and prohibition of realization of excess charges. (4) Regulation of Market practices. (5) Licensing of market functionaries. (6) Arrangement for conciliation of disputes regarding quality, weighment, deductions etc. (7) Sale by open auction. (8) Arrangement for the display of reliable and up to date market information in the market yard. (9) Improving generally the conditions of agricultural marketing." The preamble of the Act reads as follows: "An Act to provide for the better regulation of buying and selling of Agricultural Produce and the Establishment of Markets for Agricultural Produce in the State of Bihar and for matters connected therewith". 9. Section 27 of the Act empowers the market committees to levy and collect market fee from the licensees which can be used for the purposes mentioned in Section 30 of the Act. The Act contempl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to children of the deprived sections of the society in an effort to fulfill the constitutional mandate of spread of education. The assessee claimed exemption from payment of taxes on the amount of subsidy received and receivable from the State Government which was concurrently rejected by the three authorities under the Act. The assessee, therefore, preferred appeal in this Court under Section 260A of the Act which was allowed. It is relevant to state that the learned Tribunal had, in that case relied on the judgment of the Supreme Court in Sahney Steel Press Works Ltd. v. CIT [1997] 228 ITR 253/94 Taxman 368. On a close perusal of the judgment of the Supreme Court and various other relevant authorities, this Court concluded that the subsidy received by the Corporation from the Bihar Government was entitled to the benefit of exemption from taxation. The relevant portions of the judgment are reproduced hereinbelow: 10. We must consider the judgment of the Supreme Court in Sahney Steel Press Works Ltd. (supra), on which the learned appellate authority as well as the learned Tribunal have placed full reliance. We are of the view that the judgment is inapplicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on approved expenditure met out of loans. In other words, the House of Lords observed that if a subsidy from public funds given for a particular purpose and objective to take care of the problem of unemployment, in that case financial assistance will not be treated to be operational or trade receipt and, therefore, exempt from taxation. Such a subsidy does not form part of trade activities of the company and, therefore, the House of Lords reached that conclusion. It had nothing to do with the trade of the company. Another test to determine this is whether or not such a subsidy is meant to achieve a certain objective, or the beneficiary is free to spend it for any item of its trade or business as was the case in Sahney Steel Press Works Ltd. In other words, if the recipient is bound to use the subsidy from public funds for a particular purpose, as was the case in Seaham Harbour Dock Company, or Lincolnshire Sugar Co. Ltd. v. Smart [1937] 20 TC 643 (HL), it would not be operational or trade receipts, and would therefore not be taxed. 11.2 We would next like to notice the facts and circumstances of Lincolnshire Sugar Co. Ltd. (supra). In that case, it was found that the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral public, and cannot be used for any other purpose. The subsidy from the Government would be taxable if it can be used for any purpose the assessee likes including its trade and business, would then be in the nature of trade receipts and taxable. In other words, the basic question to be determined is whether a subsidy from payment from public funds is in the nature of capital or revenue. In the case of the former, it is not taxable, and is taxable in case of the latter. 11. Applying the ratio of the judgment to the present situation, it appears to us that the Board's fund was meant for specific purposes, namely, to meet the expenses for establishment of the Board, and those incurred in the interest of the Market committee. The aims and objects of the Market committee, and the purpose for which the committee itself could use the funds, are laid down in section 30 of the local Act. In such a situation, it is a statutory, compulsory contribution by the market committee to the Board's fund, meant for specified statutory purposes, which cannot be used for any purpose that the Board desires, and surely cannot be used for commercial activities, or trade and business. It does not perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
