9911796707
TMI Blog2007 (3) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic utility contained in section 2(15) of the Act. It is contended by the Revenue that the assessees are established with profit motive because they are not rendering free services but they are charging cess/fees for their services and, therefore, the assessees are not established for charitable purposes. There is no merit in this contention. The cess/fees are charged by the assessees from the purchasers in the market area at the rate prescribed by the State Government for the purpose of carrying out the object of the Act. As held by the apex court in the cases of Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 and in the case of Bharat Diamond Bourse where the dominant purpose of a trust/institution is charitable, incidentally if some profit is made and the said profit is used for charitable purposes, the said trust/institution does not cease to be established for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required to be met with in achieving the said object, the Legislature has empowered the assessees to levy cess/fees. Moreover, surp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant : Anand Parchure For the Respondent : C. J. Thakkar and S. C. Thakkar JUDGMENT 1. J. P. Devadhar J.--The common question of law raised by the Revenue in all these appeals is, "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that the market committees constituted under the Agricultural Produce Marketing (Regulation) Act, 1963 are established for charitable purposes and accordingly directing the Commissioner of Income-tax to grant registration under section 12A/12AA of the Income-tax Act, 1961 ?" 2. Heard Mr. Anand Parchure, advocate for the appellants and Mr.Thakkar, advocate, for the respondents. Rule. Rule made returnable forthwith. 3. All these appeals are admitted on the above question of law and by consent of both the parties all these appeals are taken up for final hearing. since the question of law raised is common, all these appeals are disposed of by a common judgment. 4. Under the Income-tax Act, 1961 ("the Act" for short) prior to April 1, 2003, income of all the local authorities was exempt under section 10(20) of the Act. The market committees ("the assessees&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the orders passed by the Commissioner of Income-tax, whereas Mr. Thakkar, learned counsel for the respondents, supported the orders passed by the Tribunal. 8. At the outset, it may be noted that a market committee constituted under the 1963 Act at Pune has been granted registration under section 12A/12AA of the Act by the Commissioner of Income-tax, Pune on October 14, 2003, and the said registration continues to be in operation till date. Thus, according to the Commissioner of Income-tax, Pune the activities carried on by a market committee under the 1963 Act constitute charitable purposes and hence entitled to registration, whereas, according to the Commissioner of Income-tax, Nagpur the activities carried on by the market committees do not constitute charitable purposes. This court in the case of Tax Practitioners Benevolent Fund v. CIT [2004] 266 ITR 561 (Writ Petition No. 922 of 2003 decided on September 29, 2003) dealing with grant of exemption under section 80G of the Act held that different officers under the Income-tax Act authorised to consider the application for grant of exemption under section 80G of the Act have to apply the same norms, yardsticks and para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, according to the Revenue the assessees are not established for charitable purposes. 13. To appreciate the rival contentions, it is necessary to set out few facts relating to the constitution of the assessees. The 1963 Act provides for establishment of market committees (assessees) for every market area specified in the notification issued by the State Government for regulating marketing of the agricultural produce in a specified area. The preamble of the 1963 Act reads thus : "An Act to regulate marketing of agricultural and certain other produce in market areas and markets to be established therefor in the State ; to confer powers upon market committees to be constituted in connection with or acting for purposes connected with such markets ; to establish market fund for purposes of the market committees and to provide for purposes connected with the matters aforesaid." 14. "Agricultural produce" is defined under the 1963 Act to mean all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture, fisheries and forest specified in the Schedule annexed to the 1963 Act. 15. Powers and duties of the market co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erinary doctor in respect of animals, cattles, birds, etc., which are bought or sold in the market area ; (xii) carry out publicity about the benefits or regulation, system of transactions, facilities provided in the market area, through such media, as, in the opinion of the market committee, may be effective or necessary ; (xiii) provide for settling disputes arising out of any kind of trans actions connected with the marketing of agricultural produce and all matters ancillary thereto ; (xiv) subject to the provisions of section 12, acquire, hold or dis pose of any movable or immovable property for the purpose of efficiently carrying out its duties ; . . . (xvii) levy, take, recover and receive charges, fees, rates and other sums or money to which the market committee is entitled ; (xviii) subject to approval of the director, obtain loans subsidies, subventions from the State and Central Government or any financing agency, for providing warehousing and marketing facilities in the market ; (xix) subject to the approval of the State Marketing Board, prepare budgets, supplementary budgets, make reappropriations in the budget and incur expenditure accordingly ; (xx) keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of protecting the interests of the agricultural and some other producers and also the general public who are the ultimate consumers. The object of establishing the market committees is to secure fair price to the agricultural and some other producers and also to make the same available to the ultimate consumer freely, regularly and at fair prices. In other words, the object of the Act is to ensure welfare of the agriculturists as a whole and welfare of the general public at large who are the ultimate consumers of the agricultural produce, which is absolutely essential for the orderly growth of the society. In these circumstances, we have no hesitation in holding that the assessees are constituted for charitable purposes, namely, advancement of an object of general public utility and, therefore, entitled to registration under section 12A/12AA of the Act. 18. Relying upon a decision of this court in the case of President, APMC v. Murari K. Yadav reported in [1986] Mah. L. J. 258 it is contended by the Revenue that the assessees are commercial establishments with a profit motive and, therefore, the assessees cannot be said to have been established for charitable purposes. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit making or carrying out a charitable purpose. If it is the former, the purpose would not be a charitable purpose but, if it is the latter, the charitable character of the purpose would not be lost. If we apply this test in the present case, it is clear that the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn, which was carried on by the assessee, was not an activity for profit. The predominant object of this activity was promotion of commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth, which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. It is significant to note that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention. The cess/fees are charged by the assessees from the purchasers in the market area at the rate prescribed by the State Government for the purpose of carrying out the object of the Act. As held by the apex court in the cases of Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 and in the case of Bharat Diamond Bourse [2003] 259 ITR 280 where the dominant purpose of a trust/institution is charitable, incidentally if some profit is made and the said profit is used for charitable purposes, the said trust/ institution does not cease to be established for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required to be met with in achieving the said object, the Legislature has empowered the assessees to levy cess/fees. Moreover, surplus remaining in the market fund are ploughed back for carrying out the object of the 1963 Act. Thus, the surplus remaining in the market fund is neither distributed nor accumulated as profits. In these circumstances, it cannot be said that the assessees are established with profit motive so as to deny registration u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
