2010 (12) TMI 965 - HC - Income Tax

Amounts paid by the Samitees to the State Agriculture Produce Markets Board under statutory obligation - whether it is application of its receipts entitling exemption under section/allowance from the income - Held that - Mandi Act envisages market areas in the State and the Samitis to govern it. The Samities are a body established and incorporated under section 12 of the Mandi Act - The amount of Mandi Shulk as well as Development Cess sent by the different Mandi Samitis to the State Agricultural Produce Market Board is a utilisation of all the receipts. The amount of Mandi Shulk as well as Development Cess sent by the different Mandi Samitis to the State Agricultural Produce Market Board is a utilisation of all the receipts and the Tribunal as well as Commissioner (Appeals) have rightly deleted the addition.

Summary

Issues:
- Whether amounts paid by Krishi Utpadan Mandi Samitis to the State Agriculture Produce Markets Board under statutory obligation qualify for exemption under the Income Tax Act.

Analysis:
1. Facts and Background:
- The appeals pertain to Assessment Years 2003-04 to 2005-07 under the Income Tax Act involving different Krishi Utpadan Mandi Samitis incorporated under the UP Krishi Utpadan Mandi Samiti Adhiniyam, 1964.
- The main issue is whether the amounts paid by the Samitis to the State Agriculture Produce Markets Board are eligible for exemption under the IT Act.

2. Assessing Officer's Disallowance:
- The Assessing Officer disallowed the amounts paid by the Samitis to the Board, stating it was not proper utilization and thus not eligible for exemption.

3. Appeals and Tribunal Orders:
- The Samitis appealed, and the Commissioner (Appeals) ruled in their favor, allowing the exemption for the amounts sent to the Board.
- The Income Tax Department then filed appeals before the Tribunal, which were dismissed, leading to the present appeals before the High Court.

4. Court's Decision and Reasoning:
- The Court highlighted the purpose of the Mandi Act to ensure fair prices for agricultural produce by regulating agricultural markets through Samitis and the Board.
- It was noted that the Samitis are established under the Mandi Act, which also mandates sending a portion of collected amounts to the Board for market development.
- The Court referred to a previous decision where it was held that the Samitis are entitled to registration under the IT Act.
- Emphasizing that the amounts sent to the Board are utilized for market development and management, the Court concluded that the Samitis are entitled to claim exemption/allowances for the same.
- The Court also cited a similar ruling by the Rajasthan High Court in a comparable case, supporting its decision.

5. Conclusions and Dismissal of Appeals:
- The High Court concluded that the amounts sent by the Samitis to the Board constitute proper utilization of collected funds, entitling them to exemption.
- It upheld the decisions of the Tribunal and Commissioner (Appeals) in deleting the additions, stating that there was no merit in the appeals.
- Consequently, the Court dismissed the appeals in light of its conclusions.