2019 (6) TMI 1044 - AT - Income Tax

Exemption u/s 10(26AAB) - AO held that marketing of fish, poultry and eggs should not be termed as marketing of agricultural products and that it was rather a trading venture of certain non agricultural goods - HELD THAT - The main function of the marketing committee is to facilitate free and fair trade of the agricultural produce and not to undertake trading on this own behalf. It has to provide a place where the producer and the consumers can meet and trade freely. The committee is entitled to a fee for the service rendered. It is recovered from the commission agents who undertake the trading on behalf of the purchaser and the seller. The assessee has been appointed u/s 35 of the DAPM Act to facilitate trading in fish poultry, eggs etc. The composition of committee is approved by the Lt. Governor of Delhi has been notified in the Delhi Gazette, NCTD No. 200 dated 31.08.2001. The word agricultural produce has not been defined under the Income Tax Act. The AO held that since fish, poultry and eggs did not constitute agricultural commodity it could not fall under the term of agricultural produce. However, at this juncture, it is important to note the context in which the term agricultural produce has been used. It has been used in the context of the activities of APMC (from which it derives income) constituted under the DAPM for the purpose of regulating and marketing. It is therefore, incumbent to see the relevant Act which empowers the committee to undertaken the regulating and marketing of commodities. In view of the expanded meaning given to the term agricultural produce by the DAPM Act, it is our considered opinion that the word agricultural produce , used in connection with APMC connotes a very wide meaning bringing within its preview a large gamut of commodities besides agricultural products. Since the income accrues to the APMCs from pursuing these activities, the Income Tax Act, also perceives a wider meaning by referring to the DAPM. If the term agricultural produce is given a wider meaning in terms of the definition of agriculture produce as defined in section 2 (a) of the DAPM Act and as specified in the Schedule of the said Act, fish, poultry and eggs would also be covered under the definition of agriculture produce as they have been specified in the Schedule to the DAPM Act. On reaching such conclusion, the benefit of exemption u/s 10(26AAB) will automatically follow. CIT (A) has also reached a similar conclusion by importing the definition of agriculture produce from the DAPM Act and we find his reasoning and logic to be perfectly in order. Therefore, we find no reason to differ with the findings of the CIT (A). - Decided against revenue.

Summary

Issues Involved:

1. Eligibility for exemption under Section 10(26AAB) of the Income Tax Act, 1961.
2. Definition and scope of "agricultural produce" under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 (DAPM Act).

Detailed Analysis:

1. Eligibility for Exemption Under Section 10(26AAB) of the Income Tax Act, 1961:

The core issue is whether the assessee, an Agricultural Produce Market Committee (APMC) regulating the marketing of fish, poultry, and eggs, qualifies for exemption under Section 10(26AAB) of the Income Tax Act, 1961. The assessee claimed exemptions for the assessment years 2009-10, 2010-11, and 2012-13, which were disallowed by the Assessing Officer on the grounds that fish, poultry, and eggs do not constitute agricultural produce. The CIT (A) ruled in favor of the assessee, leading to the revenue's appeal.

2. Definition and Scope of "Agricultural Produce" Under the DAPM Act:

The Assessing Officer argued that the term "agricultural produce" should be limited to products derived directly from the land, such as crops, and not include fish, poultry, and eggs. The Departmental Representative reiterated that the exemption under Section 10(26AAB) is meant for entities dealing with traditional agricultural products as defined by agricultural operations on land.

The assessee countered by referring to the DAPM Act, 1998, which defines "agricultural produce" broadly to include products from animal husbandry, pisciculture, and other related activities. The DAPM Act's schedule explicitly lists fish, poultry, and eggs as agricultural produce. The assessee also highlighted that other marketing committees constituted under the same Act and dealing with similar products had been granted exemptions.

Tribunal's Findings:

The tribunal examined the provisions of the DAPM Act, 1998, which empowers the establishment of marketing committees to regulate a wide range of agricultural produce, including fish, poultry, and eggs. The tribunal noted that the DAPM Act provides a broad definition of agricultural produce, encompassing various commodities beyond traditional crops.

The tribunal concluded that the term "agricultural produce" in Section 10(26AAB) of the Income Tax Act should be interpreted in line with the DAPM Act's definition. This broader interpretation includes fish, poultry, and eggs as agricultural produce. The tribunal emphasized that the primary function of the marketing committee is to facilitate free and fair trade of agricultural produce, not to engage in trading itself.

The tribunal upheld the CIT (A)'s decision, affirming that the assessee is entitled to the exemption under Section 10(26AAB) of the Income Tax Act. Consequently, the revenue's appeals for all three assessment years were dismissed.

Conclusion:

The tribunal's judgment clarifies that the definition of "agricultural produce" under the DAPM Act should be applied when determining eligibility for exemptions under Section 10(26AAB) of the Income Tax Act. This inclusive interpretation ensures that entities regulating a wide range of agricultural products, including fish, poultry, and eggs, can benefit from the exemption. The tribunal's decision reinforces the broader legislative intent to support various agricultural marketing activities.