2015 (1) TMI 1333 - HC - Income Tax

Treatment to assessee Samiti as registered under Section 12-A - the assessee got itself registered under Section 12-A w.e.f. 26.9.2005 - Held that - Section 11 of the Act of 1961 provides that subject to the provisions of Sections 60 to 63 the income derived from property held under trust wholly for charitable or religious purpose shall not be included in the total income of the previous year of the person in receipt of the income. The Krishi Upaj Mandi Samiti being created under a statute is discharging public charitable functions from the date of its establishment and as such merely the fact of certification at a belated stage will not make it disentitled to have benefit of Section 11 ibid. Looking to peculiar fact that the instant assessee was created under the Rajasthan Agriculture Produce Market Act 1961 with its statutory duties and liabilities we are of the view that the Income Tax Appellate Tribunal was justified in holding that the Samiti is a charitable institution from inception and thus is entitled for getting its income computed by taking into consideration provisions of Section 11(1) of the Act of 1961 even for the years prior to having certificate under Section 12-A of the Act of 1961.

Summary

Issues:
Interpretation of Section 11 of the Income Tax Act, 1961 in relation to charitable institutions' registration under Section 12-A and entitlement to tax benefits.

Analysis:
The judgment by the Rajasthan High Court involved a crucial question of law regarding the treatment of a Krishi Upaj Mandi Samiti as a registered charitable institution under Section 12-A of the Income Tax Act, 1961. The primary issue was whether the Tribunal was justified in considering the Samiti as registered under Section 12-A for the relevant year, even though the registration was obtained at a later date. The Samiti, established under the Rajasthan Agriculture Produce Market Act, 1961, was deemed a charitable institution for income tax purposes under Section 12-A. The Assessing Officer initially denied the Samiti deduction under Section 11 before the registration certificate was issued. The Commissioner of Income Tax (Appeals) upheld this decision, but the Income Tax Appellate Tribunal ruled in favor of the Samiti, allowing the computation of income under Section 11 for all years.

The Court examined the provisions of Section 11 of the Income Tax Act, 1961, which exempt income derived from property held under trust for charitable purposes from the total income. It emphasized that the Samiti, being a statutory body discharging public charitable functions since its establishment, was entitled to the benefits of Section 11 irrespective of the timing of the registration certificate under Section 12-A. The Court noted that the mere delay in certification did not disqualify the Samiti from being considered a charitable institution. Given the unique circumstances of the Samiti's creation under a specific statute with statutory duties and liabilities, the Court agreed with the Tribunal's decision that the Samiti qualified as a charitable institution from its inception, allowing income computation under Section 11 even for years preceding the registration under Section 12-A.

In conclusion, the Court dismissed the appeal, affirming the Income Tax Appellate Tribunal's decision that the Samiti should be treated as a charitable institution entitled to the tax benefits under Section 11 of the Income Tax Act, 1961.