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Income Tax Appellate Tribunal, HYDERABAD BENCH ‘SMC - B, HYDERABAD
Before: SHRI V. DURGA RAO
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘SMC - B', HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER
ITA Nos. 399, 400, 401 & 402Hyd/2017 Assessment Years: 2003-04, 2004-05, 2005-06 & 2006-07 Agricultural Market vs. Income-tax Officer, Committee, Sarangapur. Ward – 1, Nirmal. PAN – AAALA 0825H Appellant Respondent Assessee by: Shri S. Rama Rao Revenue by: Shri Nilanjan Dey Date of hearing: 13/05/2019 Date of pronouncement: 24/05/2019 O R D E R
All these appeals filed by the assessee are directed against the order of CIT(A) – 6, Hyderabad, all dated, 14/12/2018 for AYs 2003-04 to 2006-07. As identical issues are involved in all these appeals, they were clubbed and heard together and therefore, a common order is passed for the sake of convenience.
Brief facts of the case, as taken from AY 2003-04, are, assessee is an Agricultural Market Committee (in short ‘AMC’) formed under the AP Agricultural produce and Live Stock Markets Act, 1966 (in short ‘APA Act’) and engaged in providing marketing facilities/market-led extension services, inter-alia, to the formers of Sarangapur Area of Adilabad District. Assessee’s main source of income is market fees from traders/buyers of agricultural produce and license fees from commission agents who mediate between traders and
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farmers, apart from others. The assessee is assessed to income tax in the status of local authority. The assessee did not file any return of income for the impugned AY 2003-04 of the Act.
2.1 In the assessment order, the AO observed that consequent to insertion of Explanation below section 10(20) of the Act by Finance Act, 2002 w.e.f.01.04.2003, the income of the assessee is no longer exempt from tax. Accordingly, in view of the fact that the assessee did not file any return of income for the impugned A Y 2003-04, the AO had reason to believe that the income of the assessee had escaped assessment within the meaning of 147 of the Act. In view of this, the AO initiated the proceedings u/s.147 of the Act by way of issuing a notice u/s. 148 of the Act dated 28.08.2007. I response thereto, the assessee filed the return of income on 31.12.2008 disclosing nil income, after claiming exemption u/s. 11 of the Act. Thereafter, the assessment was completed u/s. 143(3) rws 147 of the Act dated 31.12.2008 determining the total income of the assessee at Rs.8,59,953/-. While doing so, the assessee's claim of exemption u/s. 11 of the Act was denied by the AO.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) and before the CIT(A), the assessee submitted that the ITAT in assessee’s own case in ITA No. 903/Hyd/2013 & Anr, vide order dated 17/09/2013 directed the DIT(E) to grant registration u/s 12AA of the Act. It, was therefore, submitted that the AO was not justified in denying the exemption u/s 11 of the Act.
3.1 After considering the submissions of the assessee, the CIT(A) confirmed the order of AO by observing that the DIT(E)
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has not yet passed any order granting registration u/s 12AA of the Act, to the assessee and, therefore, the assessee is not entitled to claim exemption u/s 11 of the Act.
Aggrieved by the order of the CIT(A), the assessee is in appeal before us, raising the following grounds of appeal, which are common in all the appeals under consideration: “1. The order of the learned Commissioner of Income- Tax (Appeals) is erroneous both on facts and in law. 2. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the appellant is entitled for registration uls 12A as directed by the Hon'ble ITAT vide order passed in ITA No.903/Hyd/2013 dated 17.9.2013. 3. As an alternate, the appellant submits that when the Hon'ble Tribunal directed the Director of Income-Tax (Exemptions) to pass an order granting registration uls 12A and when the matter was pending for more than six months the registration is deemed to have been granted. 4. The learned Commissioner of Income-Tax (Appeals) ought to have held that the appellant is entitled for exemption uls 11 of the I.T. Act. 5. The learned Commissioner of Income-Tax (Appeals) ought to have found that the appellant incurred expenditure of Rs.1,39,105/- on developmental works, which are allowable as a deduction uls 36(I)(xii) of the I.T. Act. 6. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of me Assessing officer in levying tax at maximum marginal rate. 7. the ld. CIT(A) erred in confirming levy of interest u/s 234A and 234B of the IT Act.”
Before us, ld. Counsel for the assessee submitted that the assessee’s application for granting registration u/s 12AA is pending before the DIT(E). Further, he submitted that, in the meanwhile, AO has adjudicated the issue, which was
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confirmed by the CIT(A). He therefore submitted that since the ITAT has directed the DIT(E) to grant registration u/s 12AA to the assessee and since the consequential order has not yet passed by the DIT(E), the order of CIT(A) may be set aside and remit the matter back to the file of AO for deciding the issue afresh.
Ld. DR, on the other hand, relied on the orders of revenue authorities.
We have considered the rival submissions and perused the material on record. The assessee filed an application before the DIT(E) to grant registration u/s 12AA of the Act, and the same was denied by DIT(E). Against the order of DIT(E), the assessee carried the matter in appeal before the CIT(A) and the ITAT vide its order dated 17/09/2013 (supra) directed the DIT(E) to grant registration u/s 12AA, by observing as under:
“4. We have heard both the parties and perused the material on record. In our opinion, the judgement relied on by the DIT(E) in the case of AP State Seed Certification Agency has no relevance to the facts of the case. The Tribunal is consistently holding that object for which the Agricultural Market Committee was formed is for the purpose of carrying on the objectives as enumerated in section 2(15) of the Act and the proviso to the section is not applicable to the assessees' cases. We have considered the earlier order of the Tribunal and also the judgement of the Supreme Court in the case of Agricultural Produce Market Committee vs. CIT (301 ITR 1). We take support from the judgement of jurisdictional High Court in the case of CIT vs. Agricultural Market Committee (336 ITR 641) (AP), wherein the High Court held as under: "Charitable purpose" in section 2(15) of the Income-tax Act, 1961 includes relief to the poor, education, medical relief and the advancement of any other object of general public utility. The words "public utility" or "general public utility" are not capable of a precise meaning. The question whether service is public utility or not has to be determined in the context of different situations but it
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is well-settled that "public utility" means public purpose depending upon the context in which it is used in the statute or the Rules. Indeed, in some decisions, public utility is considered very similar public purpose. At the time of considering the application made for registration as a trust or a charitable institution under section 12A read with section 12AA the Commissioner is required to look at the objects of the trust and nothing more.
The Agricultural Marketing Acts provide for establishment of notified market areas/yards for purchase and sale of agricultural produce and livestock and for better regulation of such markets. The purpose of marketing legislation is to enable purchasers to get a fair price for the commodities by eliminating middlemen and provide a regulating market with facilities for correct weighments, storage, accommodation and equal powers of bargain for reasonable price to the growers and the consumers. Agricultural marketing committees discharge an important duty and function of protecting the interest of a large body of persons, namely, agriculturists, farmers and growers of agricultural produce and livestock.
An agricultural marketing committee constituted under the enactment of the State Legislature derives income from property held under legal obligation for a charitable purpose to wit the advancement of an object of general utility. Even if an agricultural marketing committee does not fall in any of the categories under section 2(31)(0 to (vi) of the Act, namely, an individual, a Hindu undivided family, a company, a firm, an association of persons or body of individuals and local authority, it certainly falls within the scope of artificial juridical person. By the Finance Act, 2002, with effect from April 1, 2003, an Explanation was inserted to section 2(31) which makes it clear that, inter alia, an artificial juridical person shall be deemed to be a person whether or not it is established or incorporated with the object of deriving income, profits or gains. Agricultural marketing committees were entitled to seek exemption under section 10(20) read with section 10(29) till March 31,2003 but by reason of amendment to section 10(20) and deletion of section 10(29) with effect from April 1, 2003, they, for the purpose of the Act, ceased to be "local authorities". This itself would not disqualify them from claiming exemption under sections 11(1) and 12 provided they are considered as institutions established for advancement of objects of general public utility, because the Parliamentary benefit under section 10(20) is
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altogether different from the benefit granted By the tax machinery subject to statutory conditions contained in sections 11 to 13. An agricultural marketing committee is constituted under the State Act for the sole purpose of protecting the interest of agriculturists, farmers and growers. Secondly, the agricultural marketing committee is under legal obligation to provide all necessary infrastructure and market facilities within the market place/yard in a notified market area, including water, electricity, auction/trading platforms, facilities for receiving, paying and depositing money, and resolving disputes. Thirdly, the income of the agricultural marketing committee 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. 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 the Central Market Fund, inter alia, for providing grants to needy agricultural marketing committees. Fifthly, agricultural marketing committees serve an important aspect of rural economy, i.e., providing facilities for marketing agricultural produce and products of livestock. Section 14(1) of the Agricultural Marketing Committee Act read with rule 8 of the Rules mandate that "all moneys received by an agricultural marketing committee shall be deposited in a single banking account with the nearest Government treasury, or with the sanction of the Government in a bank" out of which all the expenditure of the agricultural marketing committee shall be defrayed. Under section 11 (5)(iii), deposit of the moneys in a scheduled bank is substantial compliance with the law. An agricultural marketing committee is entitled to be registered under section 12A/12AA." 5. In view of the above judgement of the jurisdictional High Court, we are inclined to hold that the assessees have to be granted with registration u/s. 12AA of the Act.” 7.1 In view of the directions of ITAT, we find that the denial of assessee’s claim u/s 11 of the Act by the revenue authorities is not justified. Therefore, we set aside the order of CIT(A) and remit the matter back to the file of AO with a direction to re-do the assessment afresh after passing the order by DIT(E) granting registration to the assessee u/s 12AA of the Act and accordingly, allow the assessee’s claim of
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exemption u/s 11 of the Act. Thus, the grounds raised by the assessee on this issue i.e. ground Nos. 2 to 4 are treated as allowed for statistical purposes.
7.2 Ground No. 1 is general in nature. Ground Nos. 5 & 6 are also remitted to the file of the AO for deciding afresh the issues raised in these grounds. As regards ground No. 7, regarding levy of interest u/s 234A & 234B, charging interest under these sections are consequential in nature, therefore, the AO is directed accordingly.
As the grounds and facts in AYs 2004-05, 2005-06 and 2006-07 are materially identical to that of AY 2003-04, following the conclusions drawn therein, were remit the grounds raised in these appeals also to the file of AO for fresh consideration.
In the result, all the appeals under consideration are treated as allowed for statistical purposes. Pronounced in the open court on 24th May, 2019.
Sd/- (V. DURGA RAO) JUDICIAL MEMBER Hyderabad, dated 24th May, 2019. kv Copy forwarded to: 1. Agricultural Market Committee, Market Yard, Sarangapur (M), Nirmal District. 2. ITO, Ward – 1, Nirmal 3. CIT(A) - 6, Hyderabad 4. Pr. CIT - 5, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard File