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TMI Blog2008 (3) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... ipak Misra J.- Regard being had to the similarity of question involved in this bunch of appeals, they were heard analogously and are disposed of by a singular order. For the sake of clarity and convenience, the facts in M. A. I. T. No. 156 of 2006 are adverted to herein. 2. At the outset, it is condign to mention that in this batch of appeals, the assail is to the order passed by the Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur (for short "the Tribunal"), in various appeals preferred by the assessee wherein the Tribunal dealt with the soundness and substantiality of the order passed by Commissioner of Income-tax (Administration) whereby the said authority had declined to extend the benefit of registration of the assessee-respondents, the Krishi Upaj Mandi Samitis under sections 12A and 12AA of the Income-tax Act, 1961 (for brevity, "the Act") and the Tribunal on consideration of the various provisions of the Act and the law in the field overturned the order passed by the Commissioner of Income-tax (Administration) and directed him to grant registration to the assessee. 3. Questioning the justifiability of the order passed by the Tribunal, the Revenue has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid regard has raised the following proponements : (a) The decision rendered in Krishi Upaj Mandi Samiti, Morena (supra) has not analysed the basic facet of section 12AA of the Act which stipulates that a fact finding enquiry is necessary but has proceeded exclusively on the legal base which is facially incorrect on scanning of the anatomy of the provisions. (b) The Commissioner of Income-tax had analysed the facts in entirety to come to the precise and specific conclusion that the Krishi Upaj Mandi Samitis are not meant for charitable purposes and hence, they are not entitled to be registered under the provisions of the Act, but, without dislodging or unsettling the said finding the Tribunal has expressed a contrary opinion which has been erroneously given the stamp of approval by the Division Bench. (c) The Krishi Upaj Mandi Samitis by no stretch of imagination can be regarded as an institution as defined under section 2(15) of the Act and, therefore, conceptually market committee cannot be put on a pedestal of a charitable trust. (d) Section 12AA, as per the decisions of two Division Benches, has been treated to be absolutely procedural or in the realm of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Revenue, raised the following contentions : (i) The decisions rendered in Krishi Upaj Mandi Samiti, Morena (No. 1) (supra) and Krishi Upaj Mandi Samiti, Bhanpura (No. 2) (supra) have laid down the law correctly and, therefore, there is no justification for reconsideration of the lis by a larger Bench. (ii) Section 12A and section 12AA have conferred power on the Com-missioner of Income-tax (Administration) to deal with the matter of registration but while dealing with the matter of registration of Krishi Upaj Mandi Samiti, which is created under the 1972 Act the scheme of the 1972 Act has to be analyzed but the same has not been done by the Commissioner of Income-tax (Appeals), but a correct opinion has been expressed by the Tribunal after analysing the 1972 Act, and hence, concurrence with the order passed by the Tribunal by the Division Bench is absolutely correct. (iii) The amendment that has been introduced amending the provision under section 10(20) and omitting section 10(29) do not really affect that status of Krishi Upaj Mandi Samitis for getting registration in the absence of amendment of section 2(15). (iv) The grant of registration is a conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upaj Mandi Samitis were required to obtain registration under section 12AA of the Act to avail of the benefit of the exemption under section 11 of the Act. 9. In U. P. Forest Corporation v. Deputy CIT [2008] 297 ITR 1, the apex court expressed the opinion that for claiming the benefit under section 11(1)(a) of the Act, registration under section 12A is a condition precedent. Their Lordships have held that section 11 provides for exemption of income which is applied for charitable purposes, and section 12 is in the nature of an Explanation to section 11, section 12A provides that the provision of sections 11 and 12 shall not be applied in relation to income of any trust or institution unless certain conditions precedent are satisfied. Unless an assessee is granted registration under section 12AA of the Act, claim for exemption from payment of tax under section 11(1)(a) of the Act is not tenable. On a perusal of the decision rendered in Krishi Upaj Mandi Samiti, Morena (No. 1) [2009] 308 ITR 380 (MP), it is evincible that the Division Bench in para 30 was posed with the question with regard to entitlement of exemption by the Krishi Upaj Mandi Samitis. The Division Bench has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 579 it has been held as under (page 585) : "10. In Home Office v. Dorset Yacht Co. (All ER P 297) g-h Lord Reid said, `Lord Atkin's speech is to be treated as if it were a statutory definition. It will require qualification in new circumstances. Megarry J. in Shepherd Homes Ltd. v. Sandham (No. 2) [1971] 1 WLR 1062 observed : `One must not, of course, construe even a reserved judgment of Russell L. J. as if it were an Act of Parliament and, in Herrington v. British Railways Board (All ER P 761) ; [1972] 2 WLR 537 (HL). Lord Morris said : `There is always peril in treating the words of a speech or a judg-ment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case'." 13. Keeping the aforesaid principle in view, when the judgment is read in that context, it would be quite clear that the enumeration by the Division Bench at Gwalior of section 11 is only for the limited purpose of determination of charitable character of the samitis. Therefore, there is no need for reconsideration of the decisions by the larger Bench. 14. Presently, we shall advert to the aspect w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her provisions of the enactment rather than that which will give none. vi. The inhibition of the exclusionary clause would be attracted if the purpose of the trust or institution in fact involves the carrying on of an activity for profit or in other words if any activity for profit is actually carried on as an integral part of the purpose or `as a matter of advancement of the purpose'. There must be an activity for profit and it must be involved in carrying out the purpose of the trust or institution or, to put it differently, it must be carried on in order to advance the purpose or in the course of carrying out the purpose of the trust or institution. There is, however, one qualification ; if the constitution of a trust or institution expressly provides that the purpose shall be carried out by engaging in an activity which has a predominant profit motive, there would be no scope for controversy because the purpose would, on the face of it, involve the carrying on an activity for profit and it would be non-charitable even though no activity for profit is actually carried on. vii. The test which has now to be applied is whether the pre-dominant object of the activity involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of general public utility' was not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public was an object to general public utility. To serve as a charitable purpose, it was not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It was sufficient if the intention was to benefit a section of the public as distinguished from specified individuals. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature : where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid. (iv) That the primary objects of the chamber of commerce were not vague or indefinite. (v) That an object of general public utility, such as, promotion, protection, aiding and stimulation of trade, commerce and industries, need not, to be valid, specify the modus or the steps by which the object might be achieved or secured. (vi) That, if the primary purpose be advancement of objects of general public utility, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking held for charitable purposes can fall under section 11 subject to such income fulfilling the requisite conditions of that section." Their Lordships proceeded to state as under (pages 567-68) : "13. At the outset, we may point out that section 10(20) and section 11 of the 1961 Act operate in totally different spheres. Even if the board has ceased to be a 'local authority', it is not precluded from claiming exemption under section 11(1) of the 1961 Act. Therefore, we have to read section 11(1) in the light of the definition of the words `charitable purposes' as defined under section 2(15) of the 1961 Act . . . 16. Applying the ratio of the said judgment in the case of the Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), we find that, in the present case, the Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive, as indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other legal obligation. Be it noted the Commissioner of Income-tax (Administration) has held that Krishi Upaj Mandi Samitis are not institutions. It is submitted by the learned counsel for the assessee that even if a samiti is not treated as an institution it will be covered within the ambit and sweep of the Explanation to section 13 inasmuch as the definition being inclusive includes any other legal obligation and hence, they are charitable trusts. The said view gets fortified by the pronouncement of law in the Gujarat Maritime Board [2007] 295 ITR 561 (SC) to which we have referred to hereinabove. 21. A necessitous clarificatory note. Section 11 deals with exemption. We have already stated that the observations in Krishi Upaj Mandi Samiti, Morena (No. 1) (supra) are of prima facie in nature. The Bench at Indore has followed the said judgment. It is absolutely unambiguous that section 11 is independent of sections 12A and 12AA. In fact, it has been held by the apex court in the case of Gujarat Maritime Board [2007] 295 ITR 561 that section 12A and section 12AA are in the nature of Explanation to section 11. The apex court after expressing the said opinion has held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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