2008 (3) TMI 497 - HC - Income Tax

Registration under section 12A - Exemption - As per the judgment of the Punjab and Haryana High Court in CIT v. Market Committee 2007 -TMI - 2128 - HIGH COURT, PUNJAB AND HARYANA and CIT v. Agricultural Produce & Market Committee - Held that the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include advancement of any other object of general public utility . - Hence, In the samiti is entitled to be registered under section 12A

Summary

Issues:
1. Delay condonation in filing application under section 12A of the Income-tax Act, 1961
2. Granting registration under section 12A of the Act of 1961
3. Charitable activities of the samiti as defined in section 2(15) read with sections 11 and 12 of the Act of 1961

Delay Condonation and Registration under Section 12A:
The appeal before the Rajasthan High Court involved the Revenue challenging the Tribunal's order regarding the condonation of delay in filing an application under section 12A of the Income-tax Act, 1961. The Tribunal had framed substantial questions of law related to the justification of condoning the delay and directing the grant of registration under section 12A to the assessee-samiti. The High Court observed that the samiti, previously enjoying exemption as a local authority, sought registration under section 12A after losing the exemption. The court analyzed the provisions of section 12A and 12AA, emphasizing the conditions for income tax exemption for trusts or institutions, including the requirement for registration. The court held that under the Rajasthan Agricultural Produce Markets Act, 1961, the samiti's income, even if not entirely spent on traditional charitable purposes, was required to be used for public utility, making it eligible for registration under section 12A.

Charitable Activities and Legal Precedents:
The High Court further examined the definition of "charitable purpose" under section 2(15) of the Act, which includes the advancement of any object of general public utility. It noted that the samiti's income, derived from cess or mandi fees, was mandated to be utilized for public utility purposes as per the Act. The court referenced judgments from the Punjab and Haryana High Court and the Bombay High Court to support its conclusion that the samiti qualified for registration under section 12A. The court distinguished a Delhi High Court judgment cited by the Revenue, clarifying that it pertained to a different provision and did not address the entitlement to exemption through registration under section 12A. Consequently, the court ruled in favor of the samiti, dismissing the Revenue's appeal.

In conclusion, the Rajasthan High Court upheld the Tribunal's decision, affirming the condonation of delay in the application process and granting registration under section 12A to the samiti. The court determined that the samiti's activities aligned with the requirements for charitable purposes under the Income-tax Act, making it eligible for registration despite not solely focusing on traditional charitable endeavors.