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TMI Blog2005 (6) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the marketing of agricultural produce within the market area, to regulate and supervise auction of notified agricultural produce to, regulate sales, weighment, delivery, payment and allied matters, to take steps to prevent adulteration and to promote and organize grading and standardization of agricultural produce, to prevent purchase and sale below the minimum support price fixed by the Government, to collect, maintain, disseminate and supply information in respect of production, sale, storage, processing, prices of notified agricultural produce including information relating to crop statistics, to give fitness certificate, to provide settling of disputes arising out of marketing of agricultural produce, to keep a set of standard weights and measures, to provide storage and warehousing facilities in the market area and take any other activity conducive to the promotion and regulation of agricultural marketing. Thus, no doubt in my mind that the objects of appellant-institution are the advancement of the object of general public utility. The object of providing facility for marketing of agricultural produce of agriculturist, help them in sale of their produce, provide facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in rejecting assessee's application under section 12AA of the Income-tax Act, 1961. 2. The ld. CIT failed to see that the objects of assessee market committee are advancement of General Public utility as contemplated under section 2(15) of the Income-tax Act, 1961. 3. The ld. CIT erred in observing that the assessee did not submit any document in support of the aims and objects of general public utility as claimed by it. He failed to appreciate that the documents submitted on record did not reveal that the aims and objects of assessee committee are of general public utility. 4. The ld. CIT erred in not appreciating that the market committee was formed with the objects to see that the agriculturist get fair price or their produce, they are not exploited, goods are properly graded and weighed and they are not cheated, make proper arrangement for sellers and purchasers in market price and allied matter and that all these objects constituted the objects of general public utility, coupled with the fact that the assessee committee is prohibited from doing any business of purchase and sale. All these aspects negatived the assumption of learned CIT that the object and activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in section 29(1) and (2) of the Act. All moneys received by the Market Committee by way of cess, licence fee, loans raised by Committee and all grants, loans and contribution made by the State Government constitute the Market Fund as specified in section 36 of the Act. It is to be kept invested in such manner as may be prescribed and the Market Fund is to be expended for the purposes specified in section 37 of the Act. In case of suspension of Market Committee all properties vesting in the Market Committee shall, subject to all its liabilities vest in the State Government. There is no provision for contribution of any share capital by the members elected or otherwise nor is there any provision for distribution of surplus or capital amongst its members. It is run and managed by Market Fund and the said market fund is to be expended only for the purposes mentioned in the Act. 3.2 It is pertinent to note here that the income of Agricultural Produce Market committee was exempt under section 10(20) of the Income-tax Act, 1961 prior to 1-4-2003 as the Market Committee was covered within the meaning of the words "local authority" used in that section as per the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant above named i.e., APMC, Chamorshi in ITA No. 301/Nag./04. The APMC Chamorshi applied for registration as Charitable Institution under section 12A of Income-tax Act, 1961 on 17-3-2004 vide application dated 4-3-2004 before the Commissioner of Income-tax-IV, Nagpur. It was submitted by the assessee that its object were advancement of general public utility as defined in section 2(15) of the Act and hence, the assessee was entitled to registration under section 12A/12AA of the Act. It appeared to the Commissioner that the activity of the assessee was purely commercial in nature and it had nothing to do with the work of charity. Hence he by his letter dated 15-6-2004 called upon the assessee to show cause as to why his application for registration under section 12A should not be rejected. The assessee filed reply dated 28-6-2004 which is placed on page 29 of the Paper Book of the assessee. It was contended that the APMC is established by Government of Maharashtra vide notification dated 4-2-1999. The object of the APMC is to regulate the marketing of agricultural produce and to protect the sellers of agricultural produce who are unorganized in their selling authorities. It ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Committee was a commercial establishment. The Court observed that the perusal of the duties specified in section 29 of the MAMP (Regulation) Act would show that all the activities carried on by the Market Committee were in relation to the marketing or allied activities carried on by the traders. Within the jurisdiction of the Marketing Committee. The assessee did not furnish any document in support of the claim that it was doing the job of "General Public Utility". From the facts discussed above, it is clear that the aim, object and the activity of the assessee is purely commercial in nature. In extends marketing facilities to the farmers for facilitating commercial transactions and charges cess for that. Helping a person or a class of persons in a commercial activity for cess cannot be a charitable purpose. The income and expenditure accounts furnished by the assessee also show that the activity of the assessee is commercial in nature. It is also seen that it is not q governed by Mumbai Public Charitable Trust Act, 1950 and so was not required to be registered with the Charity Commissioner. In view of the discussion made above, the claim of the assessee that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC) 3. DIT v. Bharat Diamond Brouse [2003] 259 ITR 280 (SC) 4. CAIT v. Rubber Board [1997] 226 ITR 722 (Ker.) 5. DIT (Exemption) v. Agri-Horticulture Society [2005] 273 ITR 198 (Mad.) 6. U.P. Forest Corpn. v. Dy. CIT [2003] 129 Taxman 527 (All.) 7. ITO v. Manav Hitkari Trust [1987] 20 ITD 42 (Delhi) (SMC). 5. It was next submitted by the counsel for the assessees that Commissioner of Income-tax, Pune under identical facts and circumstances had granted registration under section 12A/12AA of Income-tax Act, 1961 to the Agricultural Produce Market Committee, Pune. Thus, it was not open to the Department acting through other Commissioner to refuse registration to the appellant APMCs especially when the facts and circumstances in respect of APMC, Pune and appellant APMCs are identical. For this purpose the ld. Counsel for the assessees relied on the decision of Nagpur Bench of the Bombay High Court in writ petition No. 922 of 2003 decided on 29-9-2003. Copy of the said judgment is placed on record. 6. With regard to the reliance placed by the Commissioner of Income-tax on the decision of the Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accompanied by certificate of registration with Charity Commissioner as required vide rule 17 of the Income-tax Rules. He also made the submissions to the following effect: (i) Applicant submitted that the powers and object were clearly specified in section 29 of MAPM (Regulation) Act, 1963. However section 29 enumerates powers and duties of the APMC which is not inclusive of all the objects of the Committee. The applicant has made attempt to equate the powers and duties with the objects which is not correct. Further the objects are not charitable within the meaning of section 2(15) of the Income-tax Act, 1961. (ii) Market Committee does not render services free of cost but it is on payment of cess/fees which shows profit motive. Bombay H.C. in President of APMC, Tumsar v. Murari [1986] MLJ 258 has held that Market Committee was commercial Establishment. (iii) The applicant has referred to the letter of the Union Finance Minister. However it is seen from the letter that it refers to certain conditions required to be fulfilled by the applicant and there is no blanket approval. (iv) It was submitted by the DR that the following submissions of the assessee are not acceptable: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioners were right in refusing registration to the assessees under section as charitable institutions under section 12A/12AA of the Income-tax Act, 1961 and he urged that the impugned orders of the CIT may be upheld. 16. I have heard both the parties and perused the record available q before me. I have also gone through the paper book filed by the assessee which contains various documents on which the ld. Counsel for the assessee has placed his reliance. I have also gone through the written submissions filed by the Departmental Representative. I have also considered the various decisions cited by both the parties. I have also carefully gone through the relevant provisions of Agricultural Produce Marketing (Regulation) Act, 1963. The only issue involved before me is whether the assessee is entitled for registration as charitable institution under section 12A/12AA of the Income-tax Act, 1961 or not. To decide the issue involved in this appeal, it is necessary to reproduce the relevant provisions of the Income-tax Act, 1961. Section 2(15) of the Income-tax Act, 1961, defines the "charitable purpose". This section reads as under: "'Charitable purpose' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12A shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activity of the trust or institution and may also make such inquiries as he may deem necessary in this behalf and (b) after satisfying himself about the objects of the trust or institution and genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied pass an order in writing refusing to register the trust or institution. And a copy of such order shall be sent to the applicant. Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of subsection (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such application under that sub-section from the stage at which they were on that date. (2) Every order granting or refusing registration under clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary object of the chamber were to promote and protect trade and commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries and to watch over and protect the general commercial interest of India or any part thereof. The income and property of the chamber of commerce had to be applied for promotion of its objects. It was held by the Supreme Court that the advancement or promotion of trade, commerce and industry leading to economic prosperity enured for the benefit of entire community. That prosperity would be shared also by those who were engaged in trade, commerce and industry, but on the account the purpose was not rendered any less an object of general public utility. It was also held that the Legislature had used language of great amplitude in defining "Charitable purpose": the definition was inclusive and not exhaustive or exclusive. It was also held that an object beneficial to a section of the public was an object of general public utility. Such section of public should be sufficiently identifiable by some common quality of a public or impersonal nature. 17. In the case of CIT v. Surat Art Silk Cloth Mfrs. Association [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit service organization registered under the Companies Act, 1956 were broadly as under:- "(i) to establish common facilities required to promote export of diamonds. (ii) To establish and promote effective liaison between the diamond trade and Industry in India and abroad. (iii) To promote, advance, protect and develop Trade, Commerce and Industry in India relating to export and import of diamonds (iv) To develop India as a modern and sophisticated diamond market by establishing and maintaining an international trade centre." Assessing Officer held that the objects of the assessee were not charitable within the meaning of section 2(15) of Income-tax Act, 1961. Tribunal and High Court held that the objects of the assessee were for charitable purpose within the meaning of section 2(15). The Hon'ble Supreme Court affirming the decision of the High Court, held that the assessee was an Institution established for charitable purposes and its objects were objects of the advancement of general public utility within the meaning of section 2(15). Addl. CIT v. Surat Art Silk Cloth Mfg. Association [1980] 121 ITR 1 (SC) applied. 19. In the case of CAIT v. Rubber Board [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute. Similarly the fact that the assessee-society was growing plants which were sold in pots and also developed seeds, garden implements, manure etc. by engaging 54 employees was also not in dispute. If that be so the assessee had to receive minimum sale consideration for giving payment to employees and such act of the society by itself, could not be construed as commercial in nature. Definition of section 2(15) was inclusive and had a wide connotation. Its meaning could not be restricted. Therefore, even assuming that it had charged for shooting movies and television serials etc. it only amounted to corpus donation, but would not change the charitable object and purpose of the assessee. Assessee was entitled to exemption under section 11. 21. From the above referred case laws, I am of the considered opinion that the following principles are required lo be considered to treat an institution to be a charitable institution: (i) The objects or the dominant objects of the Trust or Institution should be for the benefit of a section of community or a class identifiable by some common quality of public or impersonal nature. The object for being charitable need not be for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 after referring to the preamble of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 and various sections of the Act including that of section 29 held that "indeed the very object of the Act is to protect sellers of agricultural produce who are in our country mostly rural people and who are unorganized in their selling activities". It is further observed by the Hon'ble High Court as under: "... the purpose of the Act was for the regulation of buying and selling of commercial crops by providing suitable and regulated market by eliminating middlemen and bringing face to face the purchaser and buyer so that they meet on equal terms...." 23. Thus, referring to the tests laid down by the Supreme Court and various other High Courts as also of the above referred judgment of the Bombay High Court, I have no doubt in my mind that the objects of appellant-institution are the advancement of the object of general public utility. The object of providing facility for marketing of agricultural produce of agriculturist, help them in sale of their produce, provide facility for storage, marketing etc. as enumerated in section 29 are definitely the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to minimum wages fixed for the employees in Shops and Commercial Establishment covered under entry 17 of the Schedule to Minimum Wages Act, 1948 and the expression "Shops and Commercial Establishment" have the meaning assigned to them in Bombay Shop and Establishment Act, 1948. Referring to the said definition of "Commercial Establishment" as given in section 2(4) of the said Act the Hon'ble High Court held that the expression "Commercial Establishment" means not only establishment which itself carries on any business, trade or profession but also means an establishment which carries on any work in connection with or incidental to or ancillary to any business, trade or profession. Thus even though the establishment of the petitioner APMC may not carry on any business or trade still the question would be whether it carries on any work in connection with any business, trade or profession. Thus if it can be shown that the Market Committee carries on the work in connection with the said trade or business of traders then by virtue of the definition of the expression "Commercial Establishment" given in section 2(4) of the Bombay Shop and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. Departmental Representative is that the said letter refers to certain conditions required to be fulfilled by the applicant and there is no blanket approval. It is nobody's case that the said letter gives a blanket approval. However, it states that if the Agricultural Produce Marketing Committee are working for advancement of an object of general public utility and there is no profit motive they can still claim exemption from Income-tax as charitable institution fulfilling certain conditions prescribed under section 11 of the Income-tax Act. Thus the letter merely states the legal position. However on analysing the various aspects I have held that the objects of the APMC are of general public utility and that there is no profit motive. 28. It is further submitted by the ld. DR that the Market Committee imposes certain restriction on use of place in market area to certain entities and gives exemption to certain other entities and, hence, it cannot be said that the object of the APMC is to render services to the ultimate user. Market Committee does not charge any fees from the Agriculturist or consumer but it charges fees from the buyer - traders of agricultural produce. Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue in written submission that the application is not accompanied by certificate of registration with Charity Commissioner as required by rule 17 of Income-tax Rules. Reference to rule 17 appears to be erroneous. The relevant rule relating to application for registration of charitable or religious trust etc. is rule 17A and not rule 17. It says that the application shall be accompanied by following document, namely - where the trust is created or institution is established under an instrument, the instrument in original together with one copy and where the trust or institution is established otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution. In this case the APMCs have been established by the State Government by notification under the relevant provisions of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 and each of the appellant has filed the copy of the notification published in the Official Gazette. Thus the institutions have filed the documents evidencing their creation. It is not the requirement of rule 17A to file a certificate of registration with Charity Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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