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2016 (1) TMI 661 - ITAT PUNE

2016 (1) TMI 661 - ITAT PUNE - TMI - Grant of registration u/s. 12A rejected - Held that:- The assessee has been established under the provisions of section 11 of The Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963. Thus, it is a creation of statute, the assessee derives its power to levy fee/cess from section 31 of the Act of 1963. The assessee levy and collect fees/penalty in the prescribed manner at the rates within the rate band fixed by the State Government .....

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s regulatory functions to perform. The assessee has law enforcing powers to conduct its duties and to accomplish the objects for which it has been established. Charging of nominal fee/cess in course of performance of its duties would not make the assessee a commercial/business establishment. The activities of the assessee are undoubtedly charitable in nature falling in last limb of section 2(15) i.e. ‘advancement of any object of general public utility’ and at the same time is not adversely hit .....

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e for grant of registration u/s. 12A of the Act has been rejected. 2. The brief facts of the case are: The assessee was formed by a Government notification, Department Co-operative Societies published in the Government of Maharashtra Gazette dated 10-05-2012. The assessee - Market Committee was formed consequent to bifurcation of the erstwhile Pune Zilla Agricultural Market Committee (i.e. Pune Zilla Krishi Utappan Bazar Samiti, Pune). The earlier entity was registered u/s. 12A of the Income Tax .....

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n, Provide security and amenities like drinking water, street light etc. e) Provide Ancillary facilities like banking services, canteen, post office, parking place for supporting activities to Agricultural Marketing. f) Help Market intervention scheme when price of Agri. Produce collapse. g) Encourage the grading & parking of Agri. produce. h) Give incentives to export of Agri. produce. i) Try to eliminate Middleman as far as possible. j) Try to give best price to farmers & market availa .....

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ion 2(15) of the Act and rejected the application of the assessee. Aggrieved by the order rejecting the application of the assessee for grant of registration, the assessee is in appeal before the Tribunal. 4. Shri C.H. Naniwadekar appearing on behalf of the assessee submitted, that the application of the assessee has been rejected by the Commissioner of Income Tax primarily on two grounds - (i) The assessee is already availing the advantage of exemption u/s. 10(26AAB) of the Act, no purpose woul .....

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12AA of the Act. (ii) The activities of the assessee are in nature of / in relation to trade, commerce or business. Therefore, it is hit by proviso to section 2(15). The assessee is engaged in serving small and marginal farmers, therefore, the activities of the assessee are charitable in nature. The assessee is an extended arm of the State Government in providing various facilities to the farmers by regulating the sale of agricultural produce, marketing of agricultural produce, providing common .....

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aid Act gives power to assessee to order production, entry, inspection, search and seizure. Thus, the assessee also acts as a regulatory body. The ld. AR contended that the Commissioner of Income Tax has erred in holding that the assessee is carrying out commercial/business activity and is not eligible for registration u/s. 12A of the Act. In support of his submissions, the ld. AR placed reliance on the following decisions: i. CIT Vs. Agricultural Produce and Market Committee, Hinganghat & O .....

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representing the Department vehemently supported the order of Commissioner of Income Tax in rejecting the application of the assessee for grant of registration u/s. 12A of the Act. The ld. DR submitted that the charitable activities carried on by the assessee are of general public utility. The activities of the assessee include development of Market Yards facilitating disposal of agricultural produce, regulating the Market, etc. by charging various counts of fees and penalties. Thus, the activi .....

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3. It is equally undisputed that the assessee has been formed consequent on the bifurcation of the erstwhile Pune Zilla Agricultural Market Committee (i.e. Pune Zilla Krishi Utappan Bazar Samiti, Pune) which is enjoying the benefits of registration u/s. 12A of the Act, since 2003. 7. The Commissioner of Income Tax in his impugned order has observed that exemption u/s. 10(26AAB) is already available to the assessee, therefore, the application for registration u/s. 12A deserves to be considered as .....

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esh High Court in the case of CIT Vs. Agricultural Market Committee, Giddalur & Ors. (supra), wherein the High Court has observed as under: 38. It is not the case of AMCs that they were not institutions of charity prior to the amendment of section 10(20) by the Finance Act, 2002. As we have analysed earlier, all those statutory, non-statutory entities, concerns and institutions, specified in section 10-subject to the prescribed conditionalities and legal requirements-are automatically exempt .....

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the amendments by the Finance Act, 2002, when they were denied the exemption by reason of losing the status of "local authority" for the purpose of the Income-tax Act, so as to claim exemption it was necessary for AMCs to apply for registration under section 12A/12AA. Even though the object of adding the Explanation to section 10(20) was to restrict the benefit under section 10(20), it was never the intention of Parliament to deny the benefit to a juridical person which was otherwise e .....

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ns 11 and 12, the court observed as under (page 577) : "The exemptions from liability of tax under sections 10, 11 and 12 of the Income-tax Act are independent of one another, as well as, other provisions of the Income-tax Act, under which an assessee can claim tax exemption. It is submitted that merely because an assessee is not entitled to claim exemption under one (or even two) of the aforesaid provisions, cannot ipso facto lead to the conclusion that the claim of the assessee cannot be .....

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ovisions of the Income-tax Act. It must necessarily further be concluded that although market committees are not entitled to (or eligible for) tax exemption under section 10(20) of the Income-tax Act, yet a claim of exemption is still open to consideration under an alternate provision, if made out." 39. The absence of any corresponding amendments to sections 11 to 13- although section 10(29) was deleted and section 10(20) was amended, itself is sufficient indication to belie the submission .....

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t to section 10(20) and deletion of section 10(29) with effect from April 1, 2003, they, for the purpose of the Income-tax Act, ceased to be "local authorities". This itself would not disqualify them from claiming exemption under sections 11(1) and 12 of the Income-tax Act provided they are considered as institutions established for advancement of objects of general public utility, because the Parliamentary benefit under section 10(20) is altogether different from the benefit granted b .....

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t issue is whether the assessee is entitled for registration u/s. 12A as charitable institution. The Hon'ble Bombay High Court, Nagpur Bench while dealing with similar controversy has held that from the scheme of The Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963, it is evident that the assessees are established to regulate the marketing of agricultural and other produce with the object of protecting the interests of the producers and the activities carried .....

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ho are the ultimate consumers. The object of establishing the market committees is to secure fair price to the agricultural and some other producers and also to make the same available to the ultimate consumer freely, regularly and at fair prices. In other words, the object of the Act is to ensure welfare of the agriculturists as a whole and welfare of the general public at large who are the ultimate consumers of the agricultural produce, which is absolutely essential for the orderly growth of t .....

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SC) and Director of Income Tax Vs. Bharat Diamond Bourse, 259 ITR 280 (SC) held: 20. Applying the tests laid down by the apex court in the aforesaid cases 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 .....

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ribed 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 [2003] 259 ITR 280 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 ca .....

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t be said that the assessees are established with profit motive so as to deny registration under Section 12A/12AA of the Act. 22. 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 .....

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or registration u/s. 12/12AA of the Act. 10. Similar view has been taken by the Co-ordinate benches of the Tribunal in the cases of Market Committee, Sullar Gharat & Ors Vs. Commissioner of Income Tax (supra), Agricultural Produce & Market Committee, Telhara & Ors. Vs. Commissioner of Income Tax (supra) and Rajasthan State Agricultural Marketing Board Vs. Commissioner of Income Tax (supra). 11. The assessee has been established under the provisions of section 11 of The Maharashtra Ag .....

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see can ask any person carrying business in the market area to produce the accounts and other documents and to furnish information relating to the stock of such agricultural produce and also relating to the payment of market fee and payment to the seller. The assessee has power to authorize any officer to enter and search any place, building, warehouse, godown, vehicle etc. were it has reasons to suspect that such person has kept or keeps any such books of account, documents, articles, registers .....

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an Bureau Act, 1963 was denied exemption u/s. 10(23C) has held: 16. What survives to be determined is whether any of BIS s activities fall within the latter and larger category of "involved in the carrying on of any activity of rendering any service in relation to any trade, commerce or business". The expressions "any activity,"" "rendering any service" and "in relation to any trade, commerce or business"" imply that the intention of the legislat .....

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trade, commerce or business by granting cert fication/quality marks in return of license fee. Apparently, Parliament intended to clarify that not all activities of State agencies (some of which might be set up to carry on trading and commercial activities) can be considered charitable. This can be gathered from the Notes on clauses attached to the Finance Bill, 2008: "Government feels that claim of status of 'charitable o ganisation' by the organisations carrying out activities on .....

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ture 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. In these circumstances, "rendering any service in relation to trade, commerce or business " cannot, in the opinion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up u .....

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