2010 (8) TMI 516 - HC - Income Tax

Registration Charitable purposes - activities of the assessees-K.U.M.S. and the Rajasthan State Agriculture Marketing Board enshrined under the Rajasthan Agricultural Produce Markets Act, 1961, within the purview of charitable institutions can be registered as charitable institutions under section 12A of the Income-tax Act, 1961 and entitle to exemption under the provisions of sections 11 and 12 of the Income-tax Act, 1961

Summary

Issues Involved:
1. Eligibility of Krishi Upaj Mandi Samitis (K.U.M.S.) for registration under section 12A of the Income-tax Act, 1961.
2. Entitlement of K.U.M.S. to exemption under section 11 of the Income-tax Act, 1961.
3. Validity of condonation of delay in filing applications for registration under section 12A of the Income-tax Act, 1961.

Detailed Analysis:

1. Eligibility of K.U.M.S. for Registration under Section 12A of the Income-tax Act, 1961:
The primary issue was whether K.U.M.S., constituted under the Rajasthan Agricultural Produce Markets Act, 1961, qualify for registration under section 12A of the Income-tax Act, 1961. The court noted that K.U.M.S. were initially enjoying benefits under section 10(20) of the Income-tax Act until the definition of "local authority" was amended by the Finance Act, 2002, effective April 1, 2003. This amendment excluded K.U.M.S. from the purview of "local authority," thereby removing their tax exemptions under section 10(20). Consequently, K.U.M.S. applied for registration as charitable institutions under section 12A, which the Income-tax Appellate Tribunal (ITAT) directed the Commissioner of Income-tax to grant.

2. Entitlement of K.U.M.S. to Exemption under Section 11 of the Income-tax Act, 1961:
The court examined whether K.U.M.S. are entitled to exemptions under section 11 of the Income-tax Act, 1961, upon being registered under section 12A. It was argued that the Supreme Court's decision in Agricultural Produce Market Committee, Narela v. CIT [2008] 305 ITR 1 did not address the issue of registration under section 12A but only the exemption under section 10(20). The court agreed with the respondents that the Supreme Court's judgment did not preclude K.U.M.S. from being registered under section 12A and subsequently claiming exemptions under sections 11 and 12. The court upheld the ITAT's decision, affirming that K.U.M.S. activities are charitable in nature and thus qualify for registration and consequent exemptions.

3. Validity of Condonation of Delay in Filing Applications for Registration under Section 12A:
In some cases, the ITAT condoned the delay in filing applications for registration under section 12A and directed the Commissioner to grant registration. The court found no fault with the ITAT's decision to condone the delay, emphasizing that the primary consideration was whether K.U.M.S. met the criteria for registration as charitable institutions.

Conclusion:
The court dismissed the appeals filed by the Revenue, affirming that K.U.M.S. constituted under the Rajasthan Agricultural Produce Markets Act, 1961, are eligible for registration under section 12A of the Income-tax Act, 1961. Consequently, they are entitled to exemptions under sections 11 and 12 of the Income-tax Act, 1961. The judgment also validated the ITAT's decision to condone delays in filing for registration, reinforcing the charitable nature of K.U.M.S.' activities. The court referenced similar judgments from other High Courts and the Supreme Court, supporting the view that statutory bodies performing charitable activities are entitled to such registrations and exemptions.