TMI Blog2013 (1) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ied seeds to the farmers at a market price determined by them. The petitioner collects a fee for providing certification as the process of certification involves technical and scientific evaluation of the seeds although the fee collected by it would be enough to enable it to sustain its activities and may not result in much profit. The term "advancement of any other object of general public utility" used in Section 2 (15) includes all objects to promote the welfare of the public particularly when the object is to promote or protect the interest of a particular trade or industry. The activity of the petitioner which facilitates sale of certified seeds to farmers therefore falls within "advancement of any other object of general public utility" included in the definition of the term "charitable purpose" as defined in Section 2 (15) of the Act but in view of the fact that certification of seeds by the petitioner facilitates trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to the said section would come into operation. Thus the petitioner's activity assists the sale of certified seeds and is "in relation to any trade, commerce or busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rces. (e) to provide for the inspection of a seed fields, seed processing plants and seed lots in accordance with the procedures outlined by the Central Seed Certification Board. (f) to ensure that the seeds certified in the State conform to the Standards prescribed by the Central Seed Certification Board. (g) to grant certificates, certification tags and seals etc., designed as per specifications provided by the Central Seed Certification Board and as per procedure by the State Seed Certification Governing Board. (h) to carry out educational programmes designed to promote the use of certified seed including a publication listing co-operators in the seed certification programme and source of certified seed and provide such information to the Central Seed Certification Board and to publicise the same." 3. The petitioner is established to act as a certification agency under Section 8 of the Seeds Act, 1966 and it certifies seeds which meet the minimum seed certification standards as per the Indian Minimum Seeds Certification Standards, 1988. It is asserted by the petitioner that its basic duty is to see that quality seeds are supplied to agriculturists; that it is a non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-89, 1989-90 to 1991-92, 1992-93 to 1994-95 and 1995-96 to 1997-98; that the petitioner had suffered losses for the period 1998-99 to 2004-05 and therefore there was no need for claiming exemption for the said period and it did not file any application seeking approval/exemption for that period. It contended that with effect from 22-08-2003, it was granted registration under Section 12-AA of the Act vide proceedings of the Director of Income Tax (exemptions) dated 01-01-2004 for the purposes of Sections 11 and 12 of the Act; and that the action of the 1st respondent in rejecting the application of the petitioner for approval under Section 10 (23C) (iv) of the Act is arbitrary, illegal and violative of the provisions of the Act. 7. Petitioner contended that the 1st respondent erred in holding that the petitioner is not a public charitable institution; that the fact that the petitioner is not registered under Section 43 of the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987 cannot be a ground to deny exemption under Section 10 (23C) (iv) of the Act; that the 1st respondent ignored the fact that the petitioner was established by the State Government to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in not granting approval under Section 10 (23C) (iv) of the Act on the ground that the petitioner institutions therein were not registered under the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987. He also contended that the activities of the petitioner indicate that seed growers enter into a contract with some Society/Agent, who then approach the petitioner for certification and as such the direct beneficiaries of the activities of the petitioner are not the farmers but those who sell the certified seeds to the farmers at a market price determined by them; that the over all functioning of the petitioner is akin to a corporate profit earning service provider; that even the objects of the petitioner show that it is engaged in certifying the varieties of seeds grown by the clients who finally carry out trade or commerce in the certified seeds; that the objects of the petitioner either individually or in combination do not indicate that the petitioner provides services directly to the farmers or makes any direct sale of certified seeds to the farmers or exercises any control over the fixation of the price by the clients who get the certification and carry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, learned Standing Counsel for the Income Tax Department, supported the order of the 1st respondent and relied upon the decisions in State of UP v. Mahindra and Mahindra [2011] (42) VST 365 (SC), Info Parks, Kerala v. Deputy Commissioner of Income Tax and Another [2010] 329 ITR 404 (Kerala), Tata Iron and Steel Company v. State of Jharkhand [2005] 4 S.C.C. 272, State Level Committee v. Morgardshammar [1996] 1 S.C.C. 108, Controller of Estate Duty v. Kantilal [1976] 105 ITR 92 (SC) and Director of Inspection and Audit v. C.L. Subramaniam [1994] Supp (3) S.C.C. 615. He also relied upon the Memorandum explaining the provisions of the Finance Bill, 2008 and the budget speech of the Minister of Finance on 29-02-2008 while proposing amendment to the term "charitable purpose" defined in Section 2 (15) of the Income Tax Act which was subsequently passed by the Parliament vide the Finance (No.2) Act, 2009 (Act 33 of 2009) by Section 3 (a) (with retrospective effect from 01-04-2009. In the said speech, it was observed by the Minister of Finance that "charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Act, 2009 is as follows: "(15) "charitable purpose" includes relief of the poor, education, medical relief, (preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,) and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if 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 or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:" 16. A reading of the above provisions of the Income Tax Act show that income received by any person on behalf of an institution established for "charitable purpose" (as defined in Section 2 (15) of the Act) which may be approved by the prescribed authority alone would be excluded from the total income of a previous year of such person under Section 10 (23C) (iv) of the Act. While under the main part of Section 2 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner which facilitates sale of certified seeds to farmers therefore falls within "advancement of any other object of general public utility" included in the definition of the term "charitable purpose" as defined in Section 2 (15) of the Act but in view of the fact that certification of seeds by the petitioner facilitates trade, commerce or business in the certified seeds by the client of the petitioner, the proviso to the said section would come into operation. Thus the petitioner's activity assists the sale of certified seeds and is "in relation to any trade, commerce or business" and therefore its activity cannot be held to be a "charitable purpose". In this view of the matter, we hold that the 1st respondent rightly rejected the application of the petitioner for approval under Section 10 (23C) (iv) of the Act. 18. In the case of Agricultural Market Committee (2 supra), this Court held that an Agricultural Market Committee established under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 is an institution established for "charitable purpose" entitled to be registered under Section 12A and 12AA of the I.T.Act and their income from property is not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. In Mahindra and Mahindra's case (5 supra), the Supreme Court held that the High Court cannot substitute the language in a statute or subordinate legislation. 20. The Memorandum explaining the provisions in the Finance Bill, 2008 and the budget speech of the Minister of Finance for 2008-2009 delivered on 29-02-2008 extracted above clearly indicate that the first proviso to Section 2 (15) as extracted above was introduced by the Finance (Nos.2) Act, 2009 with effect from 01-04-2009 to exclude entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes from claiming to be engaged in activities for "charitable purpose". 21. The Kerala High Court in Info Parks Kerala's case (5 supra) took note of the above events and held as follows: "Yet another important aspect to be noted in this context is that, after the amendment by incorporating a proviso to Section 2(15), the fourth limb as to the advancement of "any other object of general public utility" will no lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classes by the said institute was not enough to deprive the institute of approval under Section 10 (23C) of the Act and the matter was remitted to the Income Tax Department to consider the matter whether the institute carried on business or not when its primary and dominant activity is to regulate the profession of chartered accountancy and to consider the application of the proviso of Section 2 (15) of the Act introduced with effect from 01-04-2009. Although there is discussion in this case and also the other case (4 supra) on the subject, there is no finality attached to the above issue as in both cases the matter was remitted to the department to consider the application of the said institute for approval under Section 10 (23C) (iv) of the Act. Therefore they are of no assistance to the petitioner. 24. We are also of the view that the decision of this Court in New Noble Education Society's case (1 supra) is not applicable as the said decision relates to educational institutions claiming exemption under Section 10 (23C) (vi) of the Act and the provisions of Section 2 (15) of the Act were only referred to incidentally to hold that Section 2 (15) is wider in terms than Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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