ORDER
S.K. Kulshrestha, J.
1. These appeals have been filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) against the various orders passed by the Income Tax Appellate Tribunal with regard to the direction to the Income Tax Authorities to grant registration to the Krishi Upaj Mandi under the provisions of Section 12A and 12AA of the Act.
These appeals have been admitted on the following questions of law:
1) Whether ITA was justified in setting aside of the order passed by the Commissioner which has refused to grant registration to the assessee (Krishi Upaj Mandi Samiti) who had applied by them under Section 12A of the IT Act, 1961 for registration as provided in Section 12A ibid.
2) Whether the respondent/assessee Mandi is entitled to claim registration under Section 12A of the Act, and if so, whether it satisfies requirement both on facts and at law for obtaining registration as provided under Section 12A and 12AA of the said Act
3) Whether the finding recorded by the Tribunal while reversing the order passed by the Commissioner and thereby allowing the application made by the respondent-assessee for obtaining registration under Section the aforesaid Section namely 12A and 12AA is legally and factually sustainable
4) Whether Tribunal was justified in granting registration and that too retrospectively by allowing the application made by the respondent
2. Since the appeals raise common questions of law, they are being disposed of by this common order. However, for convenience the facts have been taken from the record of ITA No. 217/2007 (CIT v. Krishi Upaj Mandi Samiti, Bhanpura).
3. A consolidated order was passed by the ITAT on 23.12.2006 by which the order of the CIT was set-aside and allowing the appeals of the Krishi Upaj Mandis, it was directed that the Commissioner of Income Tax shall take necessary steps to grant registration to all the assessees from the date of their creation. Aggrieved by the orders passed by the ITAT, the Revenue has preferred these appeals which have been admitted on the questions hereinabove reproduced. While not disputing that the controversy has already been decided by this Court, by Gwalior Bench, in Miscellaneous Appeal (I.T.) No. 12/2007 and this Court has held that the market Committees will fulfill the requirements of Section 11 to get exemption and, therefore, they are entitled to registration under Section 12A and 12AA of the Act, the learned Counsel has placed reliance on the judgment of the Apex Court U.P. Forest Corporation and Anr. v. Deputy Commissioner of Income-Tax. Learned Counsel has pointed out, by reference to the said decision that in all such matters, a conjoint reading of Section 11, 12 and 12A of the Act manifests that registration under Section 12A is a condition precedent for availing the benefit under Section 11 and 12 of the Act. Reliance has also been placed on the decision of the Allahabad High Court in Krishi Utpadan Mandi Samiti v. Union of India and Anr. 267 ITR 461 in which the Allahabad High Court has expressed the view that Krishi Utpadan Mandi Samiti are not one of the entities mentioned in Section 10(20) of the Act and, therefore, they were not entitled to exemption under Section 10(20) of the Act. Reference has also been made to the judgment of the Patna High Court in Bihar State Forest Development Corporation v. Commissioner of Income-Tax 224 ITR 757 holding that a State Forest Development Corporation is a Government Company and not entitled to registration under the provisions aforesaid. Attention has also been invited to the decision of the Kerala High Court in Self Employers Service Society v. CIT 247 ITR 18 regarding registration of the society under Section 12AA of the Act.
4. At the outset, we may point out that in the decision of U.P. Forest Corporation and another, the Apex Court was considering the status of the Corporation vis-a-vis its entitlement to exemption under the provisions of the Act. Their Lordships have also taken into consideration the preamble of the Act “An Act to provide for the establishment of a Corporation for better preservation, supervision and development of forest and better exploitation of forest produce within the State and have matters connected therewith”. In the case in hand, the questions referred to above deal with the cases of Krishi Upaj Mandi. The preamble of the M. P. Krishi Upaj Mandi Adhiniyam, 1972 under which the Krishi Upaj Mandi is established refers to providing for better regulation of buying and selling of agricultural produce and the establishment and proper administration of markets of agricultural produce in the State of M.P. unlike in the case of Forest Corporation which also deals with the Forest produce, its sale etc., Though the learned Counsel suggested that these Mandis charge tax and, therefore, they are not covered within the umbrella of Section 12A and 12AA of the Act, a survey of the provisions of the Act indicates that market committee charges fee, for various purposes which have the necessary nexus with the service rendered and thus, quid pro quo. Merely because it is charging fee does not militate against the altruistic purpose, for which these Mandis are established.
5. Before referring to the judgment of this Court in relation to the questions raised in these appeals, we may also point out that Allahabad High Court in Krishi Utpadan Mandi Samiti (supra) was considering the status of the Upaj Mandi under the Explanation to Section 10(20) of the Act. In the present case, question of the Krishi Upaj Mandi being a local authority is not involved and the decision of the Allahabad High Court will, therefore, have no application.
6. In view of the reliance of the learned Counsel for the appellant on the decision of the Supreme Court, the core question arises whether the judgment of this Court in CIT v. Krishi Upaj Mandi Samiti Morena, M.A.(I.T.) 12/2007, delivered on 8.1.2008, concludes the issue with regard to the questions raised in the present appeals. We have already referred to the object for which Krishi Upaj Mandis have been established. Krishi Upaj Mandi does not have any commercial activity but has been constituted under the provisions of the said Act to protect the interest of the farmers and ensure that they are not exploited. It is not shown that the fee charged by the Krishi Upaj Mandi is applied for any purpose to the advantage of the Krishi Upaj Mandi. Under these circumstances, when the object of the Krishi Upaj Mandi is benevolent, it cannot be said that it is not entitled to Registration under Section 12A and 12AA of the Act.
7. In the said decision it has been observed that Sub-section (2) of Section 11 provides that for getting the exemption it is necessary that the income must be applied for Charitable or religious purpose in India to the extent of 85% of the income derived during that year from the property. In the case of the Krishi Upaj Mandi, the Commissioner expressed the view that the Committee charges 2% from the Farm Houses who come to Mandi for sale of the produce as a Mandi Fee and out of 2%, 1.2% is directly transferred to the State Government. It was in this view of the matter that the Commissioner observed that the Mandi was not applying 80% of the Income for Charitable purposes. In this context this Court observed that the sole requirement of the Act was not that the entire income should be applied for charitable purposes. Thus, relying on the provisions of Sub-section (4) of Section 11 and the provisions of Section 12A and 12AA of the Act, it was observed that the Tribunal rightly allowed the appeals filed by Krishi Upaj Mandi Samiti and rightly set aside the order passed by the CIT.
8. We may reiterate that the decision of the Supreme Court is in regard to the entitlement of the U.P.Forest Corporation to registration under the provisions of Section 12AA while the decision rendered by this Court at Gwalior Bench relates to the entitlement of the Krishi Upaj Mandi to registration under Section 12AA. This Court has already found that these Krishi Upaj Mandis are entitled to the exemption as they fulfill the requirement of Section 11 of the Act and thus, they are entitled to registration under Section Sections 12A and 12AA of the Act. This observation is in keeping with the opinion expressed by the apex Court in U.P.Forest corporation (supra) to the effect that for claiming benefit under Section 11(1)(a), registration under Section 12A is a condition precedent. Since this Court has come to the conclusion that the Krishi Upaj Mandi fulfills the requirement of Section 12A and 12AA, and due applications were made to the Commissioner for Registration, the inconsistencies pointed out by the learned Senior Counsel appear illusory and fallacious. We are, therefore, of the considered view that the decision of this Court in similar cases referred to above, clinches the issue and the questions formulated deserve to be answered against the Revenue.
9. In the result, these appeals are dismissed but with no order as to costs. A copy of this order be maintained in each connected appeals.
