LexCOMMISSIONER OF INCOME TAX-II versus M/S. KRISHI UTPADAN MANDI SAMITI
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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[2012] 8 S.C.R. 934
COMMISSIONER OF INCOME TAX-II
v.
M/S. KRISHI UTPADAN MANDI SAMIT!
(Civil Appeal No. 7040 of 2012 etc.)
SEPTEMBER 27, 2012
[S.H. KAPADIA, CJI., AND MADAN 8. LOKUR, J.]
Income Tax Act, 1961:
ss.11(1)(a) and 2(15) - Assessee-Market Committee
established under State Krishi Utpadan Mandi Adhiniyam and
registered uls. 12AA of 1961 Act - Statutorily required to
transfer its funds to Mandi Parishad (another institution
established under the Adhiniyam) - Transfer of the funds
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whether would constitute application of income for charitable
purpose within meaning of s. 11 (1 )(a) - Held: The Adhiniyam
was enacted for advancement of the object of general public
utility in terms of s. 2(15) of 1961 Act - The transfer by the
assessee would constitute application of its income for
charitable purpose (which includes advancement of object of
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general public utility) u/s. 11 (1 )(a) - Uttar Pradesh Krishi
Utpadan Mandi Adhiniyam, 1964 - ss. 12.
s.12(1) - Transfer of funds by Mandi Samiti (assessee)
to Mandi Parishad - Whether constitutes application of
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income u/s. 11(1)(a) of 1961 Act- Assessing Officer holding
that assesee not entitled to claim exemption uls. 12(1)
because the contribution by the assessee to the Parishad was
not voluntary but was a statutory requirement -
Held:
Assessing Officer erred in invoking s. 12(1) - ss. 12(1) and
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11(1)(d) deal with voluntary contribution while the issue in the
present case pertained to transfer of amount to the Mandi
Parishad uls. 11(1)(a).
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The question for consideration in the present
934
C0MMISSIONER OF INCOME TAX-II v. KRISHI
935
UTPADAN MANDI SAMITI
appeals was whether amounts transferred by the A
assessee-Mandi Samiti to Mandi Parishad would
constitute application of income for charitable purposes
within the meaning of Section 11 (1 )(a) of the Income Tax
Act, 1961?
The Revenue contended that the amounts B
transferred to the Parishad would not constitute
application of income within meaning of s. 11 (1 )(a) of the
Act in view of the fact that the assessee is only a conduit
which collects Mandi Shulk (fees) and utilization of the
fee is by the Parishad (whose accounts are not verifiable), C
and not by the assessee.
Dismissing the appeals, the Court
HELD: 1.1 Keeping in mind the statutory scheme of
Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 D
whose object falls u/s. 2(15) of Income Tax Act, 1961, there
is no doubt that the assessee satisfies the conditions of
Section 11 (1 )(a) of the Act. The income derived by the
assessee [which is an institution registered under Section
12AA of 1961 Act] from its property has been applied for E
charitable purposes which includes advancement of an
object of general public utility. [Para 6] [942-E-G]
1.2. In the present case, the Department has not
withdrawn the registration under Section 12AA of the Act. F
Even after the amendment of Section 10(20) and Section
10{29) of the Act, the assessee continues. to enjoy the
registration under Section 12AA of the Act for the reason
that the assessee is a Market Committee statutorily
established under Section 12 of the Adhiniyam for the G
advancement of the object of general public utility in
terms of Section 2(15) of the Act. Moreover, it is always
open to the Department to verify and find out whether the
Mandi Parishad has utilized the amounts for the purposes
of the Adhiniyam. [Para 5] [941-D-G]
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936
SUPREME COURT REPORTS
·[2012) 8 S.C.R
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1.3. Under Section 19(2) of the Adhiniyam, all
expenditure incurred by the assessee in carrying out the
purposes of the Adhiniyam [which includes advancing
credit facilities to farmers and agriculturists as also
construction of development works in the Market Area]
B has to be defrayed out of the Market Committee Fund and
the surplus, if any, has to be invested in such manner as
may be prescribed. This is one circumstance in the
Adhiniyam to indicate application of income. Similarly,
under Section 19-8(2) of the Adhiniyam, the assessee is
C statutorily obliged to apply Market Development Fund for
the purposes of development of Market Area. Under
Section 19-8(3), assessee is statutorily obliged to utilize
the amounts lying to the credit in the Market Development
Fund for extending facilities to the agriculturists,
producers and payers of market fees. The Market
D Development Fund is also to be statutorily utilized for
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