CIT KOTA vs. K.U.M.S. SAWAI MADHOPUR

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ITA/778/2008HC RajasthanRJHC02031090200730 January 20174 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue was squarely covered by its earlier decision in Commissioner of Income Tax vs. Krishi Upaj Mandi Samiti, Shrimadhopur (2011) 331 ITR 174 (Raj.). The Court agreed with the assessee that the controversy regarding registration under Section 12A and consequent exemption under Sections 11 and 12 was not involved in the Supreme Court's Narela's case. The Court found that the assessee Samitis had applied for registration under Section 12A and for consequent exemption under Section 11 as charitable institutions. The Court reiterated that if such registration is valid, the consequences under Chapter III of the Income-tax Act by virtue of Sections 11 and 12 are bound to follow. The Court rejected the Revenue's objection that since the assessee had claimed exemption prior to April 1, 2003, under Section 10(20) as a local authority, it could not apply for registration as a charitable institution under Section 12A. The High Court concluded that the activities of the Assessees-K.U.M.S. and the Rajasthan State Agriculture Marketing Board bring these institutions within the purview of "charitable institutions" entitling them for registration under Section 12A and exemption under Sections 11 and 12. Therefore, the appeals preferred by the Revenue deserved to be dismissed.

What were the facts?

The appellant, CIT, Kota (Revenue), has appealed against the order of the Income Tax Appellate Tribunal (Tribunal) which allowed the assessee's appeal for statistical purposes. The assessee is K.U.M.S. Sawai Madhopur. The core issue revolves around whether the assessee, a Krishi Upaj Mandi Samiti, is eligible for exemption from tax. The Tribunal had previously held that the assessee's appeal and the Revenue's appeals had become infructuous because the assessee was allowed registration under Section 12A of the Income Tax Act, 1961. The Revenue's contention was that the issue before the Tribunal was whether the assessee fell under the Explanation to Section 10(20) of the Act.

What were the issues?

1. Whether, under the facts and circumstances, the Tribunal was justified in holding that the appeals of the assessee and the Revenue had become infructuous because the assessee Samiti was allowed registration under Section 12A of the Act, when the issue before the Tribunal was whether the assessee Samiti falls under the four corners of the Explanation to Section 10(20) of the Act? (Question of law and fact, concerning Section 12A and Section 10(20) of the Income Tax Act, 1961). 2. Whether the income of Krishi Upaj Mandi Samiti can be held to be exempt from tax under the facts and circumstances of the case? (Question of law, concerning taxability of income). 3. Whether, under the facts and circumstances, the Tribunal erred in not deciding the legal issues and simpliciter held that the income of the assessee Samiti is not liable to tax? (Question of law, concerning procedural fairness and substantive decision). Assessee's Contentions: The assessee argued that the Krishi Upaj Mandi Samitis are entitled to be registered under Section 12A of the Income Tax Act, 1961, considering the nature of their work, and upon such registration, they are entitled to claim exemption under Sections 11 and 12 of the Act. Reliance was placed on the High Court's decisions in CIT v. Krishi Upaj Mandi Samiti, Jaisalmer, and the Allahabad High Court's decision in CIT v. Krishi Utpadan Mandi Samiti. Revenue's Contentions: The Revenue contended that the assessee Samiti should fall under the four corners of the Explanation to Section 10(20) of the Act, and that the assessee having claimed exemption prior to April 1, 2003, under Section 10(20) as a local authority, could not apply for registration as a charitable institution under Section 12A.

Which sections of the Income-tax Act were involved?

Section 12A,Section 10(20),Section 11,Section 12

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. D.B. Income Tax Appeal No.778/2008 DATE OF ORDER ::: 30.1.2017 HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE

VINIT KUMAR MATHUR Ms. Parinitoo Jain, for the appellant.

1.

By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has allowed the appeal of the assessee for statistical purposes.

2.

This court while admitting the appeal on 18.2.2009 had framed substantial question of law:- “(1) Whether under the facts and in the circumstances of the case, the Tribunal is justified in holding that the appeals of the assessee and the appeals of the revenue have become infructuous since the assessee Samiti has been allowed registration u/s. 12A of the Act whereas the issue before the Tribunal was that whether the assessee Samiti falls under the four corners of Explanation to Section 10 (20) of the Act? (2) Whether the income of Krishi Upaj Mandi Samiti can be held to be exempt from tax under the facts and circumstances of the case? (3) Whether under the facts and circumstances of the case, the Tribunal has erred in not deciding the legal issues and has simplicitor held that the income of the assessee Samiti is not liable to tax?” 3. under:- “10. We have considered the rival submissions and we are in agreement with learned Counsel for the Respondents that so far as the case before the hon'ble Supreme Court of Agricultural Produce Market Committee, Narela's case [2008] 305 ITR 1 is concerned, the present controversy with regard to the registration under Section 12A of the agricultural produce marketing committees and the consequent exemption as a result thereof under Sections 11 and 12 of the Income-tax Act, 1961 was not involved in the said case. Independent of the registration under Section 12A, the said judgment would have been applicable to the facts and circumstances in case the Respondents-Assessees were claiming the exemption under Section 10(20) of the Income- tax Act, 1961 as they had been doing, prior to the amendment by virtue of the Finance Act, 2002, when the Explanation was added below Clause (20) of Section 10 of the Income-tax Act, 1961 which came into force on April 1, 2003 i.e. the assessment year 2002-03. 11. In the present case, however, the K.U.M.S. have applied for being registered under Section 12A and for the grant of consequent exemption under Section 11 as a result of having been registered as a charitable institution. In case such registration is valid and the K.U.M.S. are entitled to such registration, the consequence thereof provided under Chapter III of the Income-tax Act by virtue of Sections 11 and 12 are bound to follow on the satisfaction of the required grounds. In support of the judgment of the learned Tribunal, learned Counsel for the Respondents- Assessees submitted that this Court in several cases has upheld the orders of the learned Income-tax Appellate Tribunal upholding the registration of the K.U.M.S. under Section 12A of the Income-tax Act and holding them entitled for the grant of consequent exemption under the provisions of Section 11 of the Income-tax Act. Learned senior counsel Mr. N. M. Ranka further submitted that several other High Courts have also taken the same view. Learned Counsel for the Assessees-Respondents submitted that the Division Bench of this Court in the case of CIT v. K. U. M. S., Jaisalmer reported in (Raj) 331 ITR

3 135 (Raj) : 2008 216 CTR 277 has upheld the contention of the Assessees that the agricultural produce market boards constituted under the Rajasthan Agricultural Produce Markets Act, 1961 are entitled to be registered under Section 12A of the Income-tax Act, 1961 looking to the nature of the work which these boards are performing under the provisions of the Rajasthan Agricultural Produce Markets Act, 1961 and on being so registered under Section 12A they would be entitled to claim the benefit of the exemption under the provisions of Sections 11 and 12 of the Income-tax Act, 1961.” The court further held as under:- “21. There is, therefore, no substance in the aforesaid objection of the learned Counsel for the Revenue that the Assessees having already claimed exemptions prior to April 1, 2003 under Section 10(20) of the Income-tax Act, 1961 as a local authority it could not apply for registration as a charitable institution under Section 12A of the Income-tax Act, 1961 and claim consequent exemption on that basis. Similar views with regard to the registration under Section 12A have been taken by the Allahabad High Court in the case of CIT v. Krishi Utpadan Mandi Samiti reported in [2011] 331 ITR 154 (All) : 231 CTR 505 (All)(I.T. Appeal Nos. 80 to 83 of 2007 decided on December 2, 2009).

22.

In the light of the aforesaid discussion, we are of the view that these appeals preferred by the Revenue against the decision of the learned Income-tax Appellate Tribunal, in the facts and circumstances, deserve to be dismissed. Our answer to the question, therefore, is that the learned Income-tax Appellate Tribunal has rightly held that looking to the activities of the Assessees-K.U.M.S. and the Rajasthan State Agriculture Marketing Board enshrined under the Rajasthan Agricultural Produce Markets Act, 1961 and the Rules framed thereunder are such which would bring these institutions, namely the samitis within the purview of "charitable institutions" so as to entitle them for being registered as charitable institutions under Section 12A of the Income-tax Act, 1961 and entitle them for 4 exemption under the provisions of Sections 11 and 12 of the Income-tax Act, 1961.”

4.

The view taken by this Court is required to be followed.

5.

In that view of the matter, the issues are answered in favour of assessee against the Department.

6.

Consequently, the appeal stands dismissed. (Vinit Kumar Mathur), J. (K.S. Jhaveri), J. Brijesh43.

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