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TMI Blog2014 (3) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of sec. 10(26AAB) of the Act inserted by the Finance Act 2008 w.e.f. 1.4.2009 shall have prospective operation and accordingly, it was held that the said provisions cannot be applied retrospectively from 1.4.2003. Subsequently, these Assessees moved miscellaneous petitions seeking recall of the orders passed by the Tribunal in order to dispose the grounds urged on merits. Accordingly, these appeals were recalled by the Tribunal, vide its common order dated 13.04.2012. 2. In the course of present proceedings, Ld. Counsel placed on record a request for admitting the additional ground which is a legal ground on the issue of claim of exemption u/s 11 of the Act. This ground is as under: "Without prejudice to the other grounds filed earlier, direction may be given to the Commissioner of Income Tax concerned to grant Registration u/s 12A and Exemption u/s 11(1) & 11(2) of I.T. Act may also be granted wherever required in line with other AMCs in the State of Andhra Pradesh." Since it is a legal ground, the same is admitted after considering the arguments of the Ld. CIT(DR). 3. The Ld. Counsel in course of arguments submitted that the license fee is not taxable as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agricultural market committees, the Finance Minister in his reply to the debate in the Lok Sabha on 24.9.2008 on the Finance Bill, 2008 observed as under: "6. Clause 3 of the Finance Bill, 2008 seeks to amend the definition of 'charitable purpose' so as to exclude any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature or use of application, or retention, of the income from such activity. The intention is to limit the benefit to entities which are engaged in activities such as relief of the poor, education, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear the mask of a charity. A number of Hon'ble Members have written to me expressing their concern on the possible impact of the proposal on Agricultural Produce Market Committees (APMC) or State Agricultural Marketing Boards (SAMB). Since there is no intention to tax such committees or insert a new clause (26AAB) in section 10 of the Income-tax Act to provide exemption to any inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue. However, it was fairly considered that the Hon'ble High Court has clearly stated that Agricultural Market Committees are intended for registration u/s 12A. 7. We have considered the issue and rival contentions. As briefly stated above, the Hon'ble High Court in the batch of appeals in the case of CIT Rajahmundry Vs. AMC Tanuku in ITA No.421 of 2010 and others dated 30.3.2011 considered various issues, when the issue was contested with reference to retrospective/retroactive application of section 10(26AAB). While considering the issue, the Hon'ble High Court has considered the assessments of the AMCs in 3 different phases. In the judgement of the Hon'ble jurisdictional High Court of Andhra Pradesh, the issue of exemption to AMCs prior to 1.4.03, period from 1.4.03 to 2009 and after 1.4.09 has been considered elaborately and decided as under: Exemption of AMCs as local authorities The exemption from tax liability of the AMCs constituted under Section 4(1) of the Andhra Pradesh (Agricultural Produce & Livestock) Markets Act, 1956 (the AMC Act), has a chequered history. In view of the enacting history and precedent law, we can visualize three distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserting an Explanation to expand the tax base, and to prohibit all local authorities except those mentioned in the Explanation. In other words, with effect from 01.4.2003, AMCs could not be considered local authorities nor would it be said that there is ambiguity or doubt after 01.4.2003 as to the status of AMCs being local authorities because of the clear language in the Explanation to Section 10(20) of the Act, and also the decision of the Supreme Court in Narela AMC. Exemption of AMCs as Juridical persons for the advancement of the object of general public utility The second period is from 01.4.2003 to 31.3.2009. As noticed supra, under Chapter III of the Act, an assessee may claim exemption from payment of tax on the income derived from property held for charitable or religious purposes. This is subject, however, to the condition that the assessee obtains registration under Section 12AA of the Act. An assessee, who is covered by any of the clauses in Section 10 of the Act, is neither precluded nor disqualified from seeking registration under Section 12A of the Act, on the statutory exemption under Section 10 of the Act having been withdrawn by Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilities for receiving, paying and depositing money, and resolving disputes. Thirdly, the income of AMC from different sources - licence fees, market fees, loans etc., which is derived without any profit motive is to be used to meet the expenditure for providing market facilities named supra. Fourthly, all the income has to be deposited in the market committee fund, out of which ten per cent shall be contributed to the Central Market Fund which shall vest in the Government, which exercises power of supervision and superintendence over the market committees. The Government administers and applies Central Market Fund inter alia for providing grants to needy AMCs. Fifthly, AMCs serve an important aspect of rural economy, i.e., providing facilities for marketing agricultural produce and products of livestock. Exemption of AMCs after 01.4.2009 After insertion of Section 10(26AAB) of the Act, in computing the total income of the previous year of an AMC, for the period commencing from 01.4.2009, its income shall not be included in the total income. It is plain that, from 01.4.2009 an AMC is exempted from paying income tax not as a 'local authority', or as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t advisedly intended to give exemption under Section 10(20) of the Act only to the four named categories of local authorities, and not to AMCs. 8. As can be seen from the detailed judgement of the Hon'ble AP High Court, the exemption was to be granted to AMCs prior to 1.4.03 as a local authority and after 1.4.09 u/s 10(26AAB). For the period from 1.4.03 to 31.3.09, the Hon'ble Andhra Pradesh High Court has considered that the AMCs are eligible for registration u/s 12A/12AA and can claim exemption as per law. Therefore, assessee's contention that they are eligible for exemption u/s 11 are to be accepted and accordingly since the assessing officer has not examined this aspect, the issue has to be restored to the file of the A.O. for fresh consideration. 9. Incidental to the above issue, it was submitted by Assessees that AMCs have applied for registration u/s 12A/12AA, which are pending before the Ld. CIT. If the above applications have not been disposed of by this time, we advise the Ld. CIT to consider them and grant registration as the issue of claim u/s 11 was already decided in Assessee's favour by the orders of the jurisdictional High Court. 10. As far as the issue of consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. However, Assessee's claim for exemption has to be considered with reference to the provisions of section 11 and therefore we are of the opinion that the entire assessment has to be reconsidered afresh in the light of the various decisions of the Hon'ble High Court and Tribunal on this issue. 12. Assessee is free to file the certificate u/s 10 for claim of exemption in case the same is not filed, as the issue of filing of form 10 has already been considered by the coordinate bench in the case of AMC Gopalapuram and others in ITA No.227/Vizag/2009 dated 8.11.2012, where the issue was decided by para 6, 7 & 8 as under: 6. The first defect pointed out by the Assessing Officer is with regard to the purpose of accumulation of funds. In the Form No. 10, these assessees have stated the purpose of accumulation as under:- "For betterment of market Committee including Construction of Structures, Spillover works, New works, to contribute fund to any department as per needs" The Assessing Officer considered the above said purpose as general in nature and by taking support from the decision of the Hon'ble Calcutta High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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