TMI Blog2007 (3) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... down in section 13 of the Markets Act, which is being reproduced hereunder: "13. Duties and power of comrnittee.—( 1) It shall be the duty of a committee,— (a) to enforce the provisions of this Act and the rules and the bye- laws made thereunder in the notified market area and, when so required by the Board, to establish a market therein providing such facilities for persons visiting it in connection with the purchase, sale, storage, weighment and processing of agricultural produce concerned as the Board may from time to time direct; (b) to control and regulate the admission to the market, to determine the conditions for the use of the market and to prosecute or confiscate the agricultural produce belonging to person trading with out a valid licence (c) to bring, prosecute or defend or aid in bringing, prosecuting or defending any suit, action, proceeding, application or arbitration, on behalf of the committee or otherwise when directed by Board. (2) Every person licensed under section 10 or section 13 and every person exempted under section 6 from taking out licence, shall on demand by the committee or any person authorised by it in this behalf furnish such information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lting from accidents while on duty, medical aid, pension or provident fund of the persons employed by the committee; (vi) payment of interest on loans that may be raised for purposes of the market and the provisions of a sinking fund in respect of such loans (vii) collection and dissemination of information regarding all matters relating to crop statistics and marketing in respect of the agricultural produce concerned; (viii) providing comforts and facilities, such as shelter, shade, parking accommodation and water for the persons, drought cattle, vehicles and pack animals coming or being brought to the market or on construction and repair of link roads, approach roads, culverts, bridges and other such purposes; (ix) expenses incurred in the maintenance of the offices and in auditing the accounts of the committees; (x) propaganda in favour of agricultural improvements and thrift; (xi) production and betterment of agricultural produce; (xii) meeting any legal expenses incurred by the Committee; (xiii) imparting education in marketing or agricultural; (xiv) payments of travelling and other allowances to the members and employees of the committee, as prescribed (xv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the office establishment of the Board and such other expenses incurred by it in the interest of the committees generally and also pay to the State Government the cost of any special or additional staff employed by the State Government in consultation with the committee for giving effect to the provisions of this Act. (i) if the annual income of a committee does not exceed Rs. 20,00,000 Twenty per centum (ii) if the annual income of a committee exceeds Rs. 20,00,000; (a) on the first of Rs. 20,00,000 Twenty per centum (b) on the next Rs. 20,00,000 Forty per centum and (c) on the remaining income Fifty per centum (b) The State Government shall determine the cost of such special or additional staff and shall, where the staff is employed for the purposes of more committees than one apportion such cost among the committees concerned in such manner as it thinks fit. The decision of the State Government determining the amount payable by any committee shall be final." 8 All the funds contributed by the market committees to the Market Board, constitute the market development fund. The market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained." 9 A perusal of section 26 of the Markets Act reveals that the funds contributed by market committees to the market development fund, are also used, for allied purposes, as the market committee fund. Illustratively, the market development fund is to be used for activities leading to production and betterment of agricultural produce, as well as, the marketing thereof. These activities include the encouragement of such activities on co-operative lines, with an over all emphasis on betterment in agricultural and its related activities, and facilities at the market area. The market development fund is also used for specified and unspecified welfare measures, like giving loans to financially weak communities, as well as helping agriculturists and other financially weak, communities in the repayment of such loans and interest thereon. For the aid and assistance of agriculturists, one of the foremost activities and responsibilities of the Market Board is to collect information in connection with agricultural activities and to bring it to the notice of agriculturists, besides the function of educating agriculturists so that they can obtain more yields and get higher returns f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the agriculturists and traders, dealing in agricultural products. 12 While considering the aforesaid application, the Commissioner of Income-tax-II, Amritsar (hereinafter referred to as the Commissioner of Income-tax (Amritsar) arrived, inter alia, at the conclusion, that the employees of the market committee are public servants within the meaning of section 21 of the Indian Penal Code. He also arrived at the conclusion that the market committee is a semi-government agency, and as such, cannot be treated as an institution or a trust. The Commissioner of Income-tax, Amritsar, was also of the view, that the market committee in question, was working for the economic benefit of a particular section of the society engaged in a particular economic activity, namely, "agriculturists" and "agriculture", respectively, and as such, its activities could not be deemed to be the activities of art institution/trust set up for charitable purposes. In this behalf, the Commissioner of Income-tax, Amritsar, concluded that the benefits and facilities arising out of the market committee, are purely incidental to promote agriculture and its allied activities, and that they do not aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence, were not desirous of exempting income of market committees from the liability of tax. Accordingly, the Commissioner of Income-tax, Amritsar, also held that the withdrawal of the exemption under section 10(20) of the Income-tax Act was by itself sufficient to conclude that the income of the market committees is no longer exemptible from the liability of tax. 15 On the basis of the aforesaid conclusions, the Commissioner of Income tax, Amritsar, vide an order passed under section 12AA(b)(ii) of the Income-tax Act, dated November 25/27, 2003, rejected the claim of the petitioner for registration under section 12AA of the Income-tax Act. 16 Dissatisfied with the order passed by the Commissioner of Income-tax, Amritsar, dated November 25/27, 2003, the petitioner preferred an appeal before the Income-tax Appellate Tribunal, Delhi Bench (hereinafter referred to as the Income-tax Appellate Tribunal, Delhi Bench). The appeal preferred by the petitioner was accepted on March 14, 2005, wherein, the appellate authority arrived at the conclusion that the market committee under reference, was entitled to registration under section 12AA of the Income-tax Act. 17 Through the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income-tax under section 10(20) of the Income-tax Act. In this behalf, learned counsel for the petitioner invited our attention to the decision rendered in CIT v. Agricultural Marketing Produce Committee [2001] 250 ITR 369, wherein a Division Bench of the Delhi High Court, relying on the decision rendered by the Supreme Court in Union of India v. R. C. Jain, AIR 1981 SC 951, as well as, some other subsequent decisions, culled out the following tests to determine whether a market committee is a "local authority" (page 374) "(i) The authorities must have separate legal existence as corporate bodies and autonomous status. (ii) Must function in a defined area and must ordinarily, wholly or partly, directly or indirectly elected by the inhabitants of the area. (iii) It performs governmental functions such as running a market, providing civic amenities, etc. (iv) They must have power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes/fees, this may be in addition to money provided by Government. Control and management of the fund must vest with the authority." 20 Thereafter, after examining statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as a municipal committee for it is neither known as a municipal committee under the enactment under which it is created nor recognised by fiction of law as such by the Income-tax Act or by any other enactment for that matter. That being so, the court cannot by a process of interpretation include an entity like the appellant into the provisions of the Explanation by drawing a comparison between the nature and functions, which a municipal committee is expected to discharge with those discharged by the appellant. Any such process would imply that the court interprets the provision by reference to what in its opinion was intended by Parliament and not by what is specifically stated in the provision. It would also amount to reading something into the provision which is not obvious but which the court may on an interpretation attribute or discover. That approach in matters of interpretation has been eschewed by courts in fiscal statutes unlike beneficial legislations where the court has adopted the principle of liberal interpretation." 22 It is the vehement contention of learned counsel for the petitioner, on the strength of the amended provision of section 10(20) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption. If it fell within any one head of exemption, it would be tin free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax the under that head of exemption. . . 24 Having examined the first contention of the learned counsel for the petitioner, we are of the view, that there is merit in the submission advanced Tax by learned counsel for the respondents. 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 considered for grant of tax exemption under on some other provisions of the Income-tax Act. In view of the decision rendered by the apex court in Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231. ITR 814, it is not possible for us to accept that section 10(20) of the Income-tax Act; after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, for the grant of exemption from the payment of income-tax, even according to the statement of the Union Finance Minister, the market committees would have to establish eligibility under section 11 of the Income-tax Act. It would extend the parameters of statutory interpretation, to unreasonable limits, if such like opinions, are taken into consideration, as suggested by learned counsel for the petitioner. In our considered view, the response of the Union Finance Minister is inconsequential, unless the same is supported by a positive statutory interpretation of the provisions of the Income-tax Act. We, therefore hereby conclude by holding, that the response of the Union Finance Minister cannot be taken into consideration for granting any tax benefit, to the respondent-market committee, unless the market committee can substantiate its claim, independently of the aforesaid response, on the basis of an express provision under the Income-tax Act, entitling it to tax exemption. Stated in other words, the market committee under reference, cannot succeed in claiming exemption from the liability of tax, on the basis of the statement of the Union Finance Minister, unless it can bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant or descendant of the individual; (v) any lineal ascendant or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v) (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual." 29 On the basis of the aforesaid Explanation, it is the vehement contention of learned counsel for the respondents, that a market committee incorporated under the provisions of the Markets Act, is obliged to discharge legal obligations. Conjunctively, learned counsel for the respondent, has invited our attention to section 13 of the Markets Act (already extracted herein above), and on the basis thereof, it is submitted, that by a fiction of law, under the mandate of Explanation 1 to section 13(7) of the Income-tax Act, a market committee, must be deemed to be a trust. 30 It is also sought to be submitted, that the market committee under reference must, in addition to being treated as a trust, be further accepted as having charitable objectives. In other words, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, that a market committee, cannot be considered to be a charitable institution, on account of the fact, that it does not render service to the general public at large, but its activities are limited to facilitating the sale and purchase of agricultural produce for the sole benefit of agriculturists. In order to substantiate his aforesaid contention, learned counsel for the petitioner has also placed reliance on section 2(15) of the Income-tax Act, which defines charitable purpose (already extracted hereinabove). Learned counsel for the petitioner, relying on the definition of the term "charitable purpose" expressed in the Income-tax Act, in the course of his third submission, also contended, that the activities of the market committee are not relatable to any of the categories expressed thereunder, namely, relief for the poor, education or medical relief. On the instant proposition, learned counsel also placed reliance on the decision rendered by a Division Bench of the Karnataka High Court in CIT v. BEL Employees Death Relief Fund and Service Benefit Fund Association [1997] 225 ITR 270. In the case cited, the respondent-association was formed with the object of rendering pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an kind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. This court in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722, overruled the view of Beaumont C.J. in CIT v. Grain Merchants Association of Bombay [1938] 6 ITR 427 (Bom) on the point. It was, however, observed that the section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public or impersonal nature. Where there was no common quality uniting the potential beneficiaries into a class the trust might not be regarded as valid." 34 Having given our thoughtful consideration to the assertions at the hands of the rival parties, to the third contention, we are of the view, that the Explanation under section 13(7) of the Income-tax Act leaves no ambiguity in the matter, that an assessee discharging legal obligations, has to be treated as a "trust" for the purposes of sections 11, 12 and 12A of the Income-tax Act. The only issue, before such a finding can be recorded for the purpose of the present controversy is, whether a mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the removal of doubts, it is hereby declared that a notification published in the Official Gazette under this section or section 5 shall have full force and effect notwithstanding any omission to publish, or any irregularity or defect in the publication of a notification under this section or under section 5, as the case may be." 36 A perusal of section 6 of the Markets Act reveals that a market committee is the creation of law. The law which creates a market committee, consequent upon the issuance of a notification in terms of section 6(l) of the Markets Act, enjoins upon it (the market committee) the statutory obligation of regulating the purchase, sale, storage and processing of agricultural produce. Section 6(3) of the Markets Act, in fact, prohibits anyone from carrying on the aforesaid activities (of purchase, sale, storage and processing of agricultural produce) within the market area, unless, he/she is exempted by rules or is licenced to do so by the market committee. In other words, all these activities are regulated by authority vested in the market committee under the Markets Act. 37 In addition to the statutory obligations vested in a market committee under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plinths, etc. A market committee is also obliged to provide conveniences for persons visiting a market area, like providing for shelter, shade and parking facilities. A market committee is also obliged to look after the safety, health and convenience of persons visiting the market area. A market committee is also obliged to construct and repair link roads, approach roads, culverts, and bridges, etc. One of the many specified activities of a market committee is to extend loans to financially weak communities as well as in the repayment of such loans and the interest thereon. The market committee under reference, in the discharge of its obligations, besides carrying out all the aforesaid activities, is stated to have spent a huge sum of money for the construction, development and repair of link roads, culverts, bridges, etc. this fact has been noticed in the order passed by the petitioner, i.e., the Commissioner of Income-tax, Amritsar, dated November 27, 2003), and has not been disputed in the pleadings of this case, or during the course of arguments. Added to the aforesaid is, a very important and uncontroverted factual position, namely, that the activities of a market committee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant issue again. The issue projected is accordingly disposed of in terms of the third contention dealt with hereinabove. 41 Besides reiterating the other submissions advanced by Shri N. L. Sharda, learned counsel for the petitioner, who had assisted this court in the first instance, one additional contention was advanced by Shri Sanjiv Bansal, i.e., that the respondents could not be given the benefit of registration, even if, for the sake of arguments, it is conceded in favour of the market committee, under reference, that it is a charitable trust/institution. In this behalf, it is the vehement contention of learned counsel for the petitioner, relying on section 12 of the Income-tax Act, that for the benefit of registration under section 12AA of the Income-tax Act, it is imperative, that the trust/institution receives voluntary contributions. According to learned counsel for the petitioner, no part of the income of the market committee, is in the nature of a voluntary contribution, and as such, there is no question of the applicability of section 12A or 12AA of the Income-tax Act. Section 12 of the Income-tax Act is being extracted hereunder "Section 12.(1) Any voluntary contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 10 and 23 of the Markets Act are being extracted hereunder "10. Applications for licences, fees to be paid and cancellation or suspension of licences. —(1) Any person may apply to the authority specified in section 9 for a licence which may be granted for such period, in such form, on such conditions and on payment of such fees not exceeding three hundred rupees as may be prescribed Provided that if any person carrying on any business of the nature specified in sub-section (3) of section 6 in a notified market area on the date of issue of notification under sub-section (1) of that section, fails to apply for a licence on or before the date specified therein for obtaining licence, the prescribed authority may, before a licence is issued, impose on him such penalty not exceeding two hundred rupees as may be prescribed. (2) The secretary of the Board may, on being satisfied that there has been a breach of any of the conditions specified in a licence, by an order in writing, cancel or suspend such licence and may also direct that such licence shall not be renewed for such period not exceeding five months for the first breach and not exceeding nine months for the second breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA of the Income-tax Act. 44 Learned counsel for the respondent-market committee, in clear and unequivocal terms contended, that the registration sought by the market committee, under reference, under section 12A of the Income-tax Act for tax exemption, has been claimed under section 11 of the Income-tax Act, and not under section 12 thereof. It is, therefore, the contention of learned counsel for the respondents, that it is not necessary for them to respond to the submission advanced by learned counsel for the petitioner, as the submission noticed in the foregoing paragraph, is wholly misconceived, as the me is not relevant to tax exemption sought by the market committee in question, under section 11 of the Income-tax Act. 45 In view of the clear stance adopted at the hands of the respondents, that the registration sought by the market committee is for tax exemption under section 11 of the Income-tax Act and not under section 12 of the Income-tax Act, we are of the view, that there is no merit in the fourth contention advanced on behalf of the petitioner. 46 It also needs to be noticed that learned counsel for the petitioner, in the nature of his fifth submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for reasons of delay and laches. Now, that the Income-tax Appellate Tribunal, Delhi Bench, has recorded a finding in favour of the Market Committee, Dhariwal, for the grant of registration, sought by it through an application preferred under section 12A of the Income-tax Act. And the aforesaid finding has been approved by this order/judgment, we are of the view, that if the respondent-market committee, Dhariwal, shall be granted registration, in terms of section 12AA of the Income-tax Act, without any further delay. The market committee, if it is so advised, shall thereafter, submit audit reports to claim exemption from the liability of tax. 48 No other contention, besides those dealt with hereinabove, was advanced by learned counsel representing the petitioner. 49 For the reasons recorded hereinabove, we are of the view, that there is no merit in the claim of the petitioner. In view of the finding recorded by us on the third contention of learned counsel for the petitioner, namely, that the respondent-market committee is a charitable trust within the meaning of section 11 of the Income-tax Act, we are satisfied, that the determination by the Income-tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng exemptions under sections 11 and 12 arid not under section 10 of the Act. . ." 51 The aforesaid submission had been advanced for a totally different purpose, namely, to highlight the fact that registration under section 12AA of the Income-tax Act did not ipso facto result in the grant of any income-tax exemption to a municipal committee. The effort, on the part of learned counsel, while advancing the instant contention, was to show, that registration under section 12AA of the Income-tax Act did not ipso facto bestow any benefit on the market committee. He clarified that, for the benefit of income-tax exemption, it would again be open to the petitioner to independently determine whether the market committee, had utilised the income for which it seeks exemption, for a charitable purpose, in terms of the mandate of section 11 of the Income-tax Act, and only such income, which is so utilised, to the satisfaction of the income-tax authorities, would not be included, in the total income of the market committee, for the assessment year, under reference for levy of tax. We find merit in the aforesaid contention. We, therefore hereby clarify that it will be open to the petitioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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