CIT KOTA vs. K.U.M.S TONK

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ITA/663/2008HC RajasthanRJHC02031623200725 January 20174 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeals preferred by the Revenue deserved to be dismissed. It relied on its own decision in Commissioner of Income Tax vs. Krishi Upaj Mandi Samiti, Shrimadhopur (2011) 331 ITR 174 (Raj.). The Court affirmed that the activities of Krishi Upaj Mandi Samitis, as enshrined under the Rajasthan Agricultural Produce Markets Act, 1961, bring these institutions within the purview of 'charitable institutions'. Therefore, they are entitled to registration under Section 12A and consequently to exemption under Sections 11 and 12 of the Income-tax Act, 1961. The Court rejected the Revenue's objection that an assessee claiming exemption under Section 10(20) prior to April 1, 2003, could not seek registration under Section 12A. The Court found no substance in this objection. The substantial questions of law were answered in favour of the assessee. The appeal was dismissed.

What were the facts?

The Commissioner of Income Tax (Appellant) appealed against an order of the Income Tax Appellate Tribunal (Tribunal) which had allowed the appeal of the assessee, Krishi Upaj Mandi Samiti, Tonk (Respondent). The Tribunal had reversed the order of the Assessing Officer (AO). The High Court admitted the appeal and framed substantial questions of law. The Appellant contended that the Tribunal's view was contrary to law and that the defects pointed out by the AO were not considered. The Respondent argued that the assessee Samiti had been allowed registration under Section 12A of the Income Tax Act, 1961, making the issue of exemption under Section 10(20) infructuous. The High Court considered its own previous judgment in a similar case.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether the Tribunal was justified in holding that the appeals of the assessee and revenue became infructuous because the assessee Samiti was allowed registration under Section 12A, when the issue was whether the Samiti fell under Section 10(20) Explanation. 2. Whether the income of the Krishi Upaj Mandi Samiti could be held to be exempt from tax. 3. Whether the Tribunal erred in not deciding the legal issues and simply holding the income not liable to tax. Assessee's Contentions: The assessee contended that having been granted registration under Section 12A, the issue of exemption under Section 10(20) became infructuous. They relied on this Court's decisions in CIT vs. Krishi Upaj Mandi Samiti, Shrimadhopur (2011) 331 ITR 174 (Raj.) and CIT v. K. U. M. S., Jaisalmer (2008) 331 ITR 135 (Raj.), which upheld the registration of such Samitis under Section 12A and consequent exemption under Sections 11 and 12. Revenue's Contentions: The Revenue contended that the Tribunal's view was contrary to law and that the defects pointed out by the AO were not considered. They argued that the assessee, having claimed exemption under Section 10(20) prior to April 1, 2003, 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

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 663 / 2008 The Commissioner of Income Tax,, Kota ----Appellant Versus Krishi Upaj Mandi, Samiti, Tonk. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain ____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Judgment 25/01/2017

1.

By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the original assessee reversing the order of AO.

2.

This Court while admitting the matter on 21.1.2009 framed the following substantial questions of law: “(i) Whether under the facts and in the circumstances of the case, the Tribunal is justifed 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? (ii) Whether the Income of Krishi Upaj Mandi Samiti can be held to be exempt from tax under the facts and circumstances of the case? (iii) 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

(2 of 4) [ITA-663/2008] of the assessee Samiti is not liable to tax? 3. has been held as 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

(3 of 4) [ITA-663/2008] 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 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

(4 of 4) [ITA-663/2008] registered as charitable institutions under Section 12A of the Income-tax Act, 1961 and entitle them for exemption under the provisions of Sections 11 and 12 of the Income-tax Act, 1961.”

6.

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

7.

In that view of the matter, both the issues are answered in favour of assessee against the Department. Consequently, the appeal stands dismissed. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. /bm gandhi 84

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