Commissioner of Incometax v. Agricultural Produce Marketing Committee

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The Tax PublishersIT Appeal No. 1163 of 2010 2012 TaxPub(DT) 0428 (Del-HC) : (2011) 336 ITR 0641 : (2011) 244 CTR 0417 : (2011) 198 TAXMAN 0403 : (2011) 062 DTR 0089 INCOME TAX ACT, 1961 --Charitable trust--Registration under section 12ACharitable purpose--The Agricultural Market Committee, ('the AMC') was constituted under section 4 of the AMC Act vide G.O. Ms. No. 842, Food and Agriculture, dated 29-6-1971, as amended by G. O. Ms. No. 512, dated 16-8-1978. It was availing of exemption as a 'local authority' as defined under section 10(20) read with section 10(29) of the Income Tax Act. By the Finance Act, 2002, with effect from 1-4-2003, section 10(29) was deleted and an Explanation was added to section 10(20) mentioning Panchayats, Municipalities, Municipal Committees and Cantonment Boards alone to be a 'local authority', for the purpose of section 10(20). As a result, from the assessment year 2003-04 onwards, AMCs could not claim exemption as a 'local authority'. They, therefore, made an application on 22-8-2006 in Form 10A to the CIT, Guntur seeking registration under section 12A of the Income Tax Act. Their authorized representative appeared, furnished information, produced evidence and filed written submissions. The CIT passed order being F. No. l(50)/R-2/CIT-GNT/2006-07, dated 12-12-2006 rejecting the application for registration under section 12A of the Income Tax Act. It may be mentioned that the applications made by eleven other AMCs in Prakasam District were also rejected by separate orders passed on the same date. The AMC then filed ITA No. 268/Vizag/07, before the Visakhapatnam Bench of the Tribunal. This appeal and appeals filed by other AMCs against similar orders of the CIT were heard by the Bench of the Tribunal. Following the Tribunal's earlier decision, in the case of AMC, Karimnagar in I. T. A. No. 556/Hyd/2005, dated 28-2-2007, the appeals were allowed directing 'the CIT to grant registration to AMCs under section 12A. *Held:* Justified. A brief analysis of provisions 2(15), 10, 11, 12A & 12AA would show that (i) providing relief 13 of the poor ; (ii) establishing institution for education ; (iii) providing medical relief; and (iv) to advance any other object of general public utility are included within the definition of 'charitable purposes'. With effect from 1-4-2009, a new definition has been substituted, in that, if the advancement of object of general public utility involves carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, such activity shall not be a charitable purpose. AMCs which availed of exemption under section 10(20) as a matter of course sought exemption as charitable institutions after the amendment of section 10(20) by the Finance Act, 2002, with effect from 1-4-2003. They were excluded from the purview of being 'local authorities' and, therefore, sought exemption from the assessment year 2003-04 onwards. Except the addition of the proviso, restricting the purport of 'advancement of any other object of general public utility', there is not much difference in section 2(15) as it existed prior to 1-4-2009, and thereafter. After amendment preservation of environment including watersheds, forest and wild life, and preservation of monuments or places/objects of artistic or historic interest are also included in the definition 'charitable purpose'. Be that as it may, what is important is any institution or organization or entity for the advancement of object of general public utility is also considered as an institution or trust for charitable purpose. Section 11 exempts various categories of incomes as enumerated under section 11(1) (a) to (d) from the total income of the previous year. Section 12 exempts voluntary contributions received by a trust created for charitable purposes from the total income. The benefit of section 11 and/or 12 can be claimed only when the conditions as stipulated under section 12A are satisfied. One such condition is that a person in receipt of the income has to apply for registration of the trust or institution in the prescribed form on or before the expiry of a period of one year from the date of creation of the trust or establishment of institution. The proviso to section 12A(1) confers power on the Commissioner to entertain an application under section 12A(1) even after the expiry of period of one year if he is satisfied that the person was prevented from making an application before the expiry of period of one year for sufficient reasons. Section 11(5) requires every trust or institution for a charitable purpose to invest or deposit the money only in the manner provided therein, inter alia, investment in savings certificates as defined in the Government Savings Certificates Act, 1959, deposit with the Post Office Savings Bank, deposit in any account with the scheduled bank, i.e., Reserve Bank of India or its subsidiary bank or any scheduled bank under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or any other bank being a !bank included in the Second Schedule to the Reserve Bank of India Act, 1934, and the like. The breach of section 11(5) would attract section 13(1)(d) of the Income-tax Act and the benefit under sections 11 and 12 would not be available if funds are deposited or invested contrary to section 11(5) or in breach of section 13(1) generally and section 13(1)(d) specifically. The AMC Act provides for establishment of notified market areas/yards for purchase and sale of agricultural produce and livestock and for better regulation of such markets. Various Provincial States even in pre-Independence period had such marketing legislation with the sole purpose of protecting the interests of agriculturists, farmers and growers and to wean them away from exploitation by middlemen. 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. Almost all the States in India have agricultural marketing legislation and the pattern of working for the market committees in each State is almost the same. These Acts and Rules made thereunder provide for complete scheme of markets for the purchase and sale of notified agricultural produce livestock and products. All of them as held by the Supreme Court in three decisions cited hereinabove are intended to serve the welfare of the agriculturists, farmers in getting a fair price for their agricultural produce. The Andhra Pradesh AMC Act is also intended to safeguard the larger interests of agriculturists and farmers who play an important role in the rural economy and contribute to the welfare of the nation. Section 7 of the AMC Act requires every person to obtain a licence from the market committee to set up, establish and use any place in the notified area for the purchase, sale, storage or weighment processing or pressing of any notified agricultural produce. Section 12 empowers the market committee to levy fees on agricultural produce, purchase or sale in the notified market area. These monies form the market committee fund and shall have to be spent in accordance with the provisions of section 14 and the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rules, 1969 (the Rules). It may, therefore, be taken as well accepted that AMCs 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. A market committee is a platform to facilitate equal bargaining power for the sale or purchase of agricultural produce with the main object of ensuring fair and reasonable price for the agricultural produce and livestock brought by the agriculturists and farmers to the market area/yard. The market committee constituted under section 4 of the AMC Act shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of the property and may by its corporate name sue and be sued. It is required to establish as many number of markets as the government may direct for the purchase and sale of notified agricultural produce and shall provide such facilities as may be prescribed by the government (section 4(3)(a) of the AMC Act). There is no dispute that all AMCs provide platforms, godowns, necessary infra-structural facilities like roads, rest houses, water facilities in the market areas and cater to the needs of the sellers and buyers of the agricultural produce in the notified market area. Can it then be said that the AMC is constituted for a charitable purpose, i.e., for the advancement of an object of general public utility ? The CIT considered the applications of the respondent-AMCs elaborately referring to various provisions of the AMC Act, and came to the conclusion that the AMC has the essential attributes of 'local authority' and is a 'person' as defined in section 2(31). He then accepts the position that prior to 1-4-2003, assuming the status of local authority under section 10(20) and as an authority constituted under section 10(29), they availed of exemption. But, after deletion of section 10(29) and amendment of section 10(20) giving a restricted meaning of 'local authority', AMC went out of the category of local authorities, and, therefore, they cannot seek registration under section 12AA. It is also the view of the Commissioner of Income-tax that the Legislature's intention is not to extend the benefit of exemption to local authority under sections 11 to 13 and, therefore, when once the AMC ceases to be a local authority, it cannot again seek exemption under these provisions. The Commissioner of Income-tax also observed that the AMC filed the application, with a delay of more than three decades after its establishment, only when they were denied the status of being a local authority. Therefore, registration cannot be granted. After further analysis of the provisions of the AMC Act, he also came to the conclusion that the exemption, as envisaged in the provisions of sections 11 to 13, is applicable to cases of trust or institutions built up or created by the individuals/associations/groups having privately owned funds/properties/capital/resources for being used towards advancement of the objects of general public utility in return for tax exemption. The AMC, having been constituted under the AMC Act, cannot be treated as a 'person' or a 'trust' for charitable purpose. Section 2(31) defines 'person' in an inclusive manner. It has to be given a broader meaning. Seven categories of persons are mentioned in section 2(31). These are natural persons as well as juristic persons. Indeed, section 2(31) (vii) makes it clear that every artificial juridical person, not falling within clauses (i) to (vi) of section 2(31), is also a 'person' for the purpose of the Act. Even if an AMC does not fall in any of the categories under section 3(31) (i) to (vi), namely, an individual, an HUF, 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 1-4-2003, 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. As per section 4 of the AMC Act, AMC constituted by the Government for every notified area shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of the property and may by its corporate name sue and be sued. It is settled law that a body corporate is a person. It was not the case of AMCs that they were not institutions of charity prior to the amendment of section 10(20) by the Finance Act, 2002. All those statutory, non-statutory entities, concerns and institutions/specified in section 10Ã¢â‚¬â€subject to the prescribed conditionalties and legal requirementsÃ¢â‚¬â€are automatically exempted from payment of tax and those who were not included therein were only required to obtain registration under section 12A so as to claim the benefit under section 11(1). The fact of being covered under any of the clauses of section 10 does not mean that a person is disqualified to seek registration under section 12A. When the statute confers the benefit, there was no necessity for AMCs to seek registration under section 12A. By reason of the amendments by the Finance Act, 2002, when they were denied the exemption by reason of losing the status of 'local authority' for the purpose of the Income-tax Act, so as to claim exemption it was necessary for AMCs to apply for registration under section 12A/12AA. Even though the object of adding the Explanation to section 10(20) was to restrict the benefit under section 10(20), it was never the intention of Parliament to deny the benefit to a juridical person which was otherwise entitled to seek exemption from payment of tax de hors section 10(20). The income derived from property held under trust wholly or partly for charitable or religious purposes shall not be included in the total income of the previous year of the person in receipt of the income. A market committee, constituted under section 4 of the AMC Act, as mandated by section 15 of the AMC Act read with rule 27 of the Rules, is required to establish general or special market places or market yards in the notified area and provide facilities like rest house for ryots, electrification of market yard, auction-cum-weighing shed, auction platforms, internal roads, telephone booth, canteen, office building, godown for use of producer-seller, approach roads, library-cum-club building and resting house for traders (para. 35 of Sreenivasa Traders). Section 12 of the AMC Act read with rule 74 of the Rules empower the market committee to levy and collect fees on any notified agricultural produce, livestock or products of livestock purchased or sold in the market at the rate as specified in the bye-laws of the AMC made by the market committee under section 34 of the AMC Act read with rule 45 of the Rules. Section 7 prohibits any person to set up a place for the purchase, sale, storage, weighment, curing or processing of any agricultural produce or livestock unless he obtains a licence. Rule 48 requires a person to pay the licence fee as prescribed by the Rules. In addition, the brokers, carting or clearing agents and other persons working in the market have to pay licence fee. The market fees and fees collected for granting various licences shall form the market committee fund and out of this, ten per cent, of annual accumulations shall be contributed to the Central Market Fund (sections 14 and 16 of the AMC Act). Under section 18 of the AMC Act, the market committee with the previous sanction of the government may borrow money for carrying out purposes for which it was constituted on the security of any property belonging to it or any fees leviable by it under the AMC Act. Further, for the purpose of meeting the initial expenditure on lands, buildings and equipment, an AMC may obtain loan from the government. The income thus derived by the market committee mainly includes the fees collected for the services provided although quid pro quo was not strictly applied (Sreenivasa Traders, AIR 1983 SC 1246; (1983) 4 SCC 353). The market funds are spent in accordance with the budget prepared by the market committee and are spent according to the financial Rules (Chapter X of the Rules). Rule 27 of the Rules provides powers and duties of market committee. These mainly relate to the establishment, maintenance and managing market yards, providing facilities for marketing of notified agricultural produce, supervise, the conduct of market functionaries, regulate the opening, closing and suspending transactions, provide for settlement of disputes between the seller and buyer. The duties also include the collection, maintenance and dissemination of information in respect of sale price and movement of notified agricultural produce, production, processing and storage of notified commodities, prevention of adulteration. For doing all these, the market committee also has ancillary duties like employing officers and staff for the efficient implementation of the provisions of the AMC Act and the Rules. All these are intended to provide user friendly facilities for farmers and agriculturists as well as traders at one place. The question is whether these functions discharged by an AMC were for the advancement of the object of general public utility. The words 'public utility' or 'general public utility' are not capable of a precise meaning. The question whether a service is of public utility or not has to be discharged in the context of different situations but it is, as considered infra, 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 to one for public purpose. In cases arising under the Indian Income Tax Act, 1922 as well as the 1961 Act, it is held that the expression 'object of general public utility' must be construed by applying the standard of customary law and common knowledge amongst the community to which the parries interested belong. This test, applied in Trustees of the 'Tribune', In re (1939) 7 ITR 415 (PC), seems to have influenced judicial thinking in subsequent decisions as well. The object of general public utility would include all objects which promote the welfare of the general public even if it includes taking up steps affecting trade, commerce or manufacture if the primary purpose is for advancement of objects of general public utility CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC) : 1965 TaxPub(DT) 190 (SC), even if in an insignificant manner the person makes some profit in carrying out the objects (Addl. CIT v. Surat Art Silk (1980) 121 ITR 1 (SC)) : 1980 TaxPub(DT) 0848 (SC). In other words, any activity for the benefit of the public or a section of the public, as distinguished from the benefit to an individual or a group of individuals, would be charitable purpose as the object is for advancement of general public utility. The expression includes all objects to promote the welfare of the public, and when an object is to promote or protect the interest of particular trade or industry that object becomes an object of public utility and would be charitable purpose. (Para 45) An AMC, constituted under the enactment of the State Legislature, is deriving income from property held under legal obligation for a charitable purpose to wit the advancement of general object of utility. It is, therefore, entitled to be registered under section 12A/12AA to enable an AMC to claim exemption as per law. The AMC is constituted under the State Act for the sole purpose of protecting the interest of agriculturists, farmers and growers. The purpose of marketing legislation is to enable purchasers to get a fair price for the commodities by eliminating middlemen and provide regular market with all necessary facilities (M.C.V.S. Arunachala Nadar, AIR 1959 SC 300, Mohd. Hussain, AIR 1962 SC 97 and M. K. Chhipa, AIR 1962 SC 1517). Secondly, the AMC is under legal obligation to provide all necessary infrastructure and market facilities within the market place/yard in notified market area, including water, electricity, auction/trading platforms, facilities for receiving, paying and depositing money, and resolving disputes. Thirdly, the income of the AMC 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 named supra. 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 AMCs. Fifthly, AMCs serve an important aspect of rural economy, i.e., providing facilities for marketing agricultural produce and products of livestock. (Pasra 46) The exemption under section 11(1) inter alia is subject to complying with section 11(5). This prescribes the forms and modes of investing or depositing the money by a trust or charitable institution registered under section 12A. The senior counsel submits that as an AMC is bound to adhere to the financial practices as mandated by the AMC Act, it would not be in a position to comply with section 11(5). This submission is wholly misconceived. It is well settled that 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 CIT was required to look to the objects of the trust and nothing more. (Para 47) In Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of IT (Exemptions) (2006) 285 ITR 327 (Karn) : 2006 TaxPub(DT) 1478 (Karn-HC), an application for registration under section 12A was rejected by the Director on the ground that it is carrying on its activity by letting out marriage hall on hire. The appeal against the said order was also rejected. Before the Karnataka Bench, the contention was that the mode of generating income from the trust property was immaterial for according exemption or registration of the trust. (Para 48) Even otherwise the contention is without substance. Section 14(1) of the AMC Act read with rule 8 of the Rules mandate that 'all moneys received by an AMC 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 AMC shall be defrayed. Under section 11(5)(iii), deposit of the moneys in a scheduled bank is substantial compliance with the law. It is nobody's case that any AMC contravened section 14(1) of the AMC Act at any time in the past. Therefore, the contention of the senior counsel for the revenue was rejected. (Para 49) Denial of registration to the agricultural market committees constituted under section 4(1) of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 is erroneous and the Tribunal has correctly applied the law in reversing the decision of the CIT. (Para 50) SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal No. 1163 of 2010
2012 TaxPub(DT) 0428 (Del-HC) : (2011) 336 ITR 0641 : (2011) 244 CTR 0417 : (2011) 198 TAXMAN 0403 : (2011) 062 DTR 0089

INCOME TAX ACT, 1961

--Charitable trust--Registration under section 12ACharitable purpose--The Agricultural Market Committee, ('the AMC') was constituted under section 4 of the AMC Act vide G.O. Ms. No. 842, Food and Agriculture, dated 29-6-1971, as amended by G. O. Ms. No. 512, dated 16-8-1978. It was availing of exemption as a 'local authority' as defined under section 10(20) read with section 10(29) of the Income Tax Act. By the Finance Act, 2002, with effect from 1-4-2003, section 10(29) was deleted and an Explanation was added to section 10(20) mentioning Panchayats, Municipalities, Municipal Committees and Cantonment Boards alone to be a 'local authority', for the purpose of section 10(20). As a result, from the assessment year 2003-04 onwards, AMCs could not claim exemption as a 'local authority'. They, therefore, made an application on 22-8-2006 in Form 10A to the CIT, Guntur seeking registration under section 12A of the Income Tax Act. Their authorized representative appeared, furnished information, produced evidence and filed written submissions. The CIT passed order being F. No. l(50)/R-2/CIT-GNT/2006-07, dated 12-12-2006 rejecting the application for registration under section 12A of the Income Tax Act. It may be mentioned that the applications made by eleven other AMCs in Prakasam District were also rejected by separate orders passed on the same date. The AMC then filed ITA No. 268/Vizag/07, before the Visakhapatnam Bench of the Tribunal. This appeal and appeals filed by other AMCs against similar orders of the CIT were heard by the Bench of the Tribunal. Following the Tribunal's earlier decision, in the case of AMC, Karimnagar in I. T. A. No. 556/Hyd/2005, dated 28-2-2007, the appeals were allowed directing 'the CIT to grant registration to AMCs under section 12A. Held: Justified.

A brief analysis of provisions 2(15), 10, 11, 12A & 12AA would show that (i) providing relief 13 of the poor ; (ii) establishing institution for education ; (iii) providing medical relief; and (iv) to advance any other object of general public utility are included within the definition of 'charitable purposes'. With effect from 1-4-2009, a new definition has been substituted, in that, if the advancement of object of general public utility involves carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, such activity shall not be a charitable purpose. AMCs which availed of exemption under section 10(20) as a matter of course sought exemption as charitable institutions after the amendment of section 10(20) by the Finance Act, 2002, with effect from 1-4-2003. They were excluded from the purview of being 'local authorities' and, therefore, sought exemption from the assessment year 2003-04 onwards. Except the addition of the proviso, restricting the purport of 'advancement of any other object of general public utility', there is not much difference in section 2(15) as it existed prior to 1-4-2009, and thereafter. After amendment preservation of environment including watersheds, forest and wild life, and preservation of monuments or places/objects of artistic or historic interest are also included in the definition 'charitable purpose'. Be that as it may, what is important is any institution or organization or entity for the advancement of object of general public utility is also considered as an institution or trust for charitable purpose. Section 11 exempts various categories of incomes as enumerated under section 11(1) (a) to (d) from the total income of the previous year. Section 12 exempts voluntary contributions received by a trust created for charitable purposes from the total income. The benefit of section 11 and/or 12 can be claimed only when the conditions as stipulated under section 12A are satisfied. One such condition is that a person in receipt of the income has to apply for registration of the trust or institution in the prescribed form on or before the expiry of a period of one year from the date of creation of the trust or establishment of institution. The proviso to section 12A(1) confers power on the Commissioner to entertain an application under section 12A(1) even after the expiry of period of one year if he is satisfied that the person was prevented from making an application before the expiry of period of one year for sufficient reasons. Section 11(5) requires every trust or institution for a charitable purpose to invest or deposit the money only in the manner provided therein, inter alia, investment in savings certificates as defined in the Government Savings Certificates Act, 1959, deposit with the Post Office Savings Bank, deposit in any account with the scheduled bank, i.e., Reserve Bank of India or its subsidiary bank or any scheduled bank under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or any other bank being a !bank included in the Second Schedule to the Reserve Bank of India Act, 1934, and the like. The breach of section 11(5) would attract section 13(1)(d) of the Income-tax Act and the benefit under sections 11 and 12 would not be available if funds are deposited or invested contrary to section 11(5) or in breach of section 13(1) generally and section 13(1)(d) specifically. The AMC Act provides for establishment of notified market areas/yards for purchase and sale of agricultural produce and livestock and for better regulation of such markets. Various Provincial States even in pre-Independence period had such marketing legislation with the sole purpose of protecting the interests of agriculturists, farmers and growers and to wean them away from exploitation by middlemen. 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. Almost all the States in India have agricultural marketing legislation and the pattern of working for the market committees in each State is almost the same. These Acts and Rules made thereunder provide for complete scheme of markets for the purchase and sale of notified agricultural produce livestock and products. All of them as held by the Supreme Court in three decisions cited hereinabove are intended to serve the welfare of the agriculturists, farmers in getting a fair price for their agricultural produce. The Andhra Pradesh AMC Act is also intended to safeguard the larger interests of agriculturists and farmers who play an important role in the rural economy and contribute to the welfare of the nation. Section 7 of the AMC Act requires every person to obtain a licence from the market committee to set up, establish and use any place in the notified area for the purchase, sale, storage or weighment processing or pressing of any notified agricultural produce. Section 12 empowers the market committee to levy fees on agricultural produce, purchase or sale in the notified market area. These monies form the market committee fund and shall have to be spent in accordance with the provisions of section 14 and the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rules, 1969 (the Rules). It may, therefore, be taken as well accepted that AMCs 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. A market committee is a platform to facilitate equal bargaining power for the sale or purchase of agricultural produce with the main object of ensuring fair and reasonable price for the agricultural produce and livestock brought by the agriculturists and farmers to the market area/yard. The market committee constituted under section 4 of the AMC Act shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of the property and may by its corporate name sue and be sued. It is required to establish as many number of markets as the government may direct for the purchase and sale of notified agricultural produce and shall provide such facilities as may be prescribed by the government (section 4(3)(a) of the AMC Act). There is no dispute that all AMCs provide platforms, godowns, necessary infra-structural facilities like roads, rest houses, water facilities in the market areas and cater to the needs of the sellers and buyers of the agricultural produce in the notified market area. Can it then be said that the AMC is constituted for a charitable purpose, i.e., for the advancement of an object of general public utility ? The CIT considered the applications of the respondent-AMCs elaborately referring to various provisions of the AMC Act, and came to the conclusion that the AMC has the essential attributes of 'local authority' and is a 'person' as defined in section 2(31). He then accepts the position that prior to 1-4-2003, assuming the status of local authority under section 10(20) and as an authority constituted under section 10(29), they availed of exemption. But, after deletion of section 10(29) and amendment of section 10(20) giving a restricted meaning of 'local authority', AMC went out of the category of local authorities, and, therefore, they cannot seek registration under section 12AA. It is also the view of the Commissioner of Income-tax that the Legislature's intention is not to extend the benefit of exemption to local authority under sections 11 to 13 and, therefore, when once the AMC ceases to be a local authority, it cannot again seek exemption under these provisions. The Commissioner of Income-tax also observed that the AMC filed the application, with a delay of more than three decades after its establishment, only when they were denied the status of being a local authority. Therefore, registration cannot be granted. After further analysis of the provisions of the AMC Act, he also came to the conclusion that the exemption, as envisaged in the provisions of sections 11 to 13, is applicable to cases of trust or institutions built up or created by the individuals/associations/groups having privately owned funds/properties/capital/resources for being used towards advancement of the objects of general public utility in return for tax exemption. The AMC, having been constituted under the AMC Act, cannot be treated as a 'person' or a 'trust' for charitable purpose. Section 2(31) defines 'person' in an inclusive manner. It has to be given a broader meaning. Seven categories of persons are mentioned in section 2(31). These are natural persons as well as juristic persons. Indeed, section 2(31) (vii) makes it clear that every artificial juridical person, not falling within clauses (i) to (vi) of section 2(31), is also a 'person' for the purpose of the Act. Even if an AMC does not fall in any of the categories under section 3(31) (i) to (vi), namely, an individual, an HUF, 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 1-4-2003, 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. As per section 4 of the AMC Act, AMC constituted by the Government for every notified area shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of the property and may by its corporate name sue and be sued. It is settled law that a body corporate is a person. It was not the case of AMCs that they were not institutions of charity prior to the amendment of section 10(20) by the Finance Act, 2002. All those statutory, non-statutory entities, concerns and institutions/specified in section 10Ã¢â‚¬â€subject to the prescribed conditionalties and legal requirementsÃ¢â‚¬â€are automatically exempted from payment of tax and those who were not included therein were only required to obtain registration under section 12A so as to claim the benefit under section 11(1). The fact of being covered under any of the clauses of section 10 does not mean that a person is disqualified to seek registration under section 12A. When the statute confers the benefit, there was no necessity for AMCs to seek registration under section 12A. By reason of the amendments by the Finance Act, 2002, when they were denied the exemption by reason of losing the status of 'local authority' for the purpose of the Income-tax Act, so as to claim exemption it was necessary for AMCs to apply for registration under section 12A/12AA. Even though the object of adding the Explanation to section 10(20) was to restrict the benefit under section 10(20), it was never the intention of Parliament to deny the benefit to a juridical person which was otherwise entitled to seek exemption from payment of tax de hors section 10(20). The income derived from property held under trust wholly or partly for charitable or religious purposes shall not be included in the total income of the previous year of the person in receipt of the income. A market committee, constituted under section 4 of the AMC Act, as mandated by section 15 of the AMC Act read with rule 27 of the Rules, is required to establish general or special market places or market yards in the notified area and provide facilities like rest house for ryots, electrification of market yard, auction-cum-weighing shed, auction platforms, internal roads, telephone booth, canteen, office building, godown for use of producer-seller, approach roads, library-cum-club building and resting house for traders (para. 35 of Sreenivasa Traders). Section 12 of the AMC Act read with rule 74 of the Rules empower the market committee to levy and collect fees on any notified agricultural produce, livestock or products of livestock purchased or sold in the market at the rate as specified in the bye-laws of the AMC made by the market committee under section 34 of the AMC Act read with rule 45 of the Rules. Section 7 prohibits any person to set up a place for the purchase, sale, storage, weighment, curing or processing of any agricultural produce or livestock unless he obtains a licence. Rule 48 requires a person to pay the licence fee as prescribed by the Rules. In addition, the brokers, carting or clearing agents and other persons working in the market have to pay licence fee. The market fees and fees collected for granting various licences shall form the market committee fund and out of this, ten per cent, of annual accumulations shall be contributed to the Central Market Fund (sections 14 and 16 of the AMC Act). Under section 18 of the AMC Act, the market committee with the previous sanction of the government may borrow money for carrying out purposes for which it was constituted on the security of any property belonging to it or any fees leviable by it under the AMC Act. Further, for the purpose of meeting the initial expenditure on lands, buildings and equipment, an AMC may obtain loan from the government. The income thus derived by the market committee mainly includes the fees collected for the services provided although quid pro quo was not strictly applied (Sreenivasa Traders, AIR 1983 SC 1246; (1983) 4 SCC 353). The market funds are spent in accordance with the budget prepared by the market committee and are spent according to the financial Rules (Chapter X of the Rules). Rule 27 of the Rules provides powers and duties of market committee. These mainly relate to the establishment, maintenance and managing market yards, providing facilities for marketing of notified agricultural produce, supervise, the conduct of market functionaries, regulate the opening, closing and suspending transactions, provide for settlement of disputes between the seller and buyer. The duties also include the collection, maintenance and dissemination of information in respect of sale price and movement of notified agricultural produce, production, processing and storage of notified commodities, prevention of adulteration. For doing all these, the market committee also has ancillary duties like employing officers and staff for the efficient implementation of the provisions of the AMC Act and the Rules. All these are intended to provide user friendly facilities for farmers and agriculturists as well as traders at one place. The question is whether these functions discharged by an AMC were for the advancement of the object of general public utility. The words 'public utility' or 'general public utility' are not capable of a precise meaning. The question whether a service is of public utility or not has to be discharged in the context of different situations but it is, as considered infra, 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 to one for public purpose. In cases arising under the Indian Income Tax Act, 1922 as well as the 1961 Act, it is held that the expression 'object of general public utility' must be construed by applying the standard of customary law and common knowledge amongst the community to which the parries interested belong. This test, applied in Trustees of the 'Tribune', In re (1939) 7 ITR 415 (PC), seems to have influenced judicial thinking in subsequent decisions as well. The object of general public utility would include all objects which promote the welfare of the general public even if it includes taking up steps affecting trade, commerce or manufacture if the primary purpose is for advancement of objects of general public utility CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC) : 1965 TaxPub(DT) 190 (SC), even if in an insignificant manner the person makes some profit in carrying out the objects (Addl. CIT v. Surat Art Silk (1980) 121 ITR 1 (SC)) : 1980 TaxPub(DT) 0848 (SC). In other words, any activity for the benefit of the public or a section of the public, as distinguished from the benefit to an individual or a group of individuals, would be charitable purpose as the object is for advancement of general public utility. The expression includes all objects to promote the welfare of the public, and when an object is to promote or protect the interest of particular trade or industry that object becomes an object of public utility and would be charitable purpose. (Para 45) An AMC, constituted under the enactment of the State Legislature, is deriving income from property held under legal obligation for a charitable purpose to wit the advancement of general object of utility. It is, therefore, entitled to be registered under section 12A/12AA to enable an AMC to claim exemption as per law. The AMC is constituted under the State Act for the sole purpose of protecting the interest of agriculturists, farmers and growers. The purpose of marketing legislation is to enable purchasers to get a fair price for the commodities by eliminating middlemen and provide regular market with all necessary facilities (M.C.V.S. Arunachala Nadar, AIR 1959 SC 300, Mohd. Hussain, AIR 1962 SC 97 and M. K. Chhipa, AIR 1962 SC 1517). Secondly, the AMC is under legal obligation to provide all necessary infrastructure and market facilities within the market place/yard in notified market area, including water, electricity, auction/trading platforms, facilities for receiving, paying and depositing money, and resolving disputes. Thirdly, the income of the AMC 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 named supra. 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 AMCs. Fifthly, AMCs serve an important aspect of rural economy, i.e., providing facilities for marketing agricultural produce and products of livestock. (Pasra 46) The exemption under section 11(1) inter alia is subject to complying with section 11(5). This prescribes the forms and modes of investing or depositing the money by a trust or charitable institution registered under section 12A. The senior counsel submits that as an AMC is bound to adhere to the financial practices as mandated by the AMC Act, it would not be in a position to comply with section 11(5). This submission is wholly misconceived. It is well settled that 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 CIT was required to look to the objects of the trust and nothing more. (Para 47) In Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of IT (Exemptions) (2006) 285 ITR 327 (Karn) : 2006 TaxPub(DT) 1478 (Karn-HC), an application for registration under section 12A was rejected by the Director on the ground that it is carrying on its activity by letting out marriage hall on hire. The appeal against the said order was also rejected. Before the Karnataka Bench, the contention was that the mode of generating income from the trust property was immaterial for according exemption or registration of the trust. (Para 48) Even otherwise the contention is without substance. Section 14(1) of the AMC Act read with rule 8 of the Rules mandate that 'all moneys received by an AMC 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 AMC shall be defrayed. Under section 11(5)(iii), deposit of the moneys in a scheduled bank is substantial compliance with the law. It is nobody's case that any AMC contravened section 14(1) of the AMC Act at any time in the past. Therefore, the contention of the senior counsel for the revenue was rejected. (Para 49) Denial of registration to the agricultural market committees constituted under section 4(1) of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 is erroneous and the Tribunal has correctly applied the law in reversing the decision of the CIT. (Para 50)