Andhra Pradesh State Seed Certification Agency, Hyderabad v. DIT (Exemptions), Hyderabad

ITA 869/HYD/2012 | misc
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 86922514 RSA 2012
Assessee PAN AAATA4858L
Bench Hyderabad
Appeal Number ITA 869/HYD/2012
Duration Of Justice 4 year(s) 3 month(s) 30 day(s)
Appellant Andhra Pradesh State Seed Certification Agency, Hyderabad
Respondent DIT (Exemptions), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-09-2016
Date Of Final Hearing 01-08-2016
Next Hearing Date 01-08-2016
Assessment Year misc
Appeal Filed On 31-05-2012
Judgment Text
ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NO.869/HYD/2012 (ASSESSMENT YEAR: NA) ANDHRA PRADESH STATE SEED CERTIFICATION AGENCY HYDERABAD PAN: AAATA 4858 L VS DIRECTOR OF INCOME TAX (EXEMPTIONS) HYDERABAD FOR ASSESSEE: SHRI S. RAMA RAO FOR REVENUE: SHRI V. SRINIVAS DR O R D E R PER SMT. P. MADHAVI DEVI J.M. THIS IS ASSESSEES APPEAL AGAINST THE ORDER U/S 12A A(3) OF THE ACT WITHDRAWING THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12AA OF THE ACT DATED 1.1.2004 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED U/S 12AA OF THE INCOME TAX ACT 1961 VI DE ORDERS DATED 01.01.2004. IT WAS ALSO GRANTED REGISTRATION U/S 10(23C)(IV) OF THE ACT VIDE NOTIFICATION DATED 11.03.2004. THE CBDT RECOGNIZED THE ASSESSEE SOCIETY AS NOTIFIED FOR THE A.YS 1995-96 TO 1997-98 AND TREATED IT AS A CHARITABLE INSTITUTION. 3. FROM THE INCOME AND EXPENDITURE A/C OF THE ABOVE SOCIETY FOR THE ACCOUNTING YEAR ENDED ON 31.03.2009 RELEVANT TO A.Y 2009-10 THE DIT (E) NOTICED THAT THE ASSESSEE S OCIETY HAS DATE OF HEARING : 01.08.2016 DATE OF PRONOUNCEMENT : 30.09.2016 ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 2 OF 11 RECEIVED SUBSTANTIAL AMOUNT SHOWN AS INCOME UNDER D IFFERENT HEADS AND THE EXCESS OF INCOME OVER THE EXPENDITURE WAS SHOWN AT RS.1 76 65 492. FROM SCRUTINY OF SUCH ACCOUNTS T HE DIT (E) NOTICED THAT THE ASSESSEE IS NOT RUNNING FOR CHARIT ABLE PURPOSES BUT HAS BEEN RUNNING FOR THE PURPOSE OF PROFIT AS N O MAJOR EXPENDITURE WAS FOR DIRECT BENEFIT OF FARMERS. HE O BSERVED THAT THE DIRECT BENEFICIARIES ARE THE TRADERS OF QUALITY SEE DS WHO ENTERED INTO CONTRACTS WITH THE GROWERS FOR USE OF LAND FOR THE PURPOSES OF CULTIVATION AND APPROACHED THE ASSESSEE FOR CERTIFI CATION OF THE SAME FOR SUBSEQUENT TRADING. HE ALSO OBSERVED THAT THE OBJECTIVES OF THE SOCIETY DID NOT INDICATE INVOLVING ANY OBJEC T OF GENERAL PUBLIC UTILITY. THEREFORE AFTER REFERRING TO THE P ROVISO TO SECTION 2(15) OF THE ACT INSERTED BY THE FINANCE ACT OF 2008 THE DIT (E) ISSUED A SHOW CAUSE NOTICE DATED 30.11.2011 DIRECTI NG THE ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION GRAN TED EARLIER U/S 12AA OF THE ACT SHOULD NOT BE WITHDRAWN. 4. THE ASSESSEE VIDE ITS REPLY DATED 22.03.2012 EXPLAINED THAT IT WAS ESTABLISHED BY THE GOVT. OF A NDHRA PRADESH BY ISSUANCE OF NOTIFICATION THROUGH G.O.MS. NO.435 DATED 01.06.1977 AND THAT THE OBJECTIVES OF THE SOCIETY A RE INDICATED IN THE MEMORANDUM OF ASSOCIATION. IT WAS SUBMITTED TH AT THE DIT (E) HAD GRANTED REGISTRATION U/S 12AA OF THE ACT W. E.F. 22.08.2003 AFTER VERIFICATION OF THE CHARITABLE NATURE OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE AND THAT THE ASSESSEE IS CONTINU ING TO CARRY ON THE SAME ACTIVITY FULFILLING ITS OBJECTIVES BY REND ERING ITS SERVICES TO THE PUBLIC IN ACCORDANCE WITH THE OBJECTIVES OF THE SOCIETY. REFERRING TO THE OBJECTIVES OF THE SOCIETY IT WAS SUBMITTED THAT THE MAJOR THRUST OF THE ASSESSEE SOCIETY IS TO HELP IN PRODUCTION OF QUALITY SEEDS AND PREVENTING INFERIOR QUALITY OF SE EDS FROM BEING USED AND THAT BY CERTIFYING THE SEEDS TO BE QUALITY SEED THE ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 3 OF 11 ASSESSEE IS NOT IN ANY WAY HELPING THE TRADERS AS T HE SAME FACILITATES THE FARMERS TO PURCHASE THE QUALITY SEE D. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS NOT ENGAGED IN ANY T RADING ACTIVITIES AND THEREFORE IS NOT GOVERNED BY THE PR OVISO TO SECTION 2(15) OF THE ACT. THE DIT (E) AFTER CONSIDERING AS SESSEES CONTENTIONS AND ALSO THE OBJECTIVES OF THE SOCIETY HAS OBSERVED THAT THE ASSESSEE IS NOT CARRYING ON THE ACTIVITIES IN ACCORDANCE WITH THE OBJECTIVES OF THE SOCIETY. HE HELD THAT T HE ASSESSEE IS RENDERING DIFFERENT SERVICES AND IS COLLECTING VARI OUS CHARGES FROM TRADERS/SOCIETIES AND THEREFORE THESE ACTIVITIES A RE IN THE NATURE OF COMMERCIAL ACTIVITIES CARRIED OUT BY THE SOCIETY AND HENCE FALLS WITHIN THE PROVISO TO SECTION 2(15) OF THE I.T. ACT . THUS OBSERVING THAT THE ASSESSEE HAS LOST ITS CHARACTER AS A CHARI TABLE ORGANIZATION AS IT IS NOT CARRYING OUT ACTIVITIES I N ACCORDANCE WITH THE OBJECTIVES OF THE SOCIETY HE HAS WITHDRAWN THE REGISTRATION U/S 12AA (3) OF THE ACT. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITE RATING THE ASSESSEES SUBMISSIONS BEFORE THE AUTHORITIES B ELOW SUBMITTED THAT THE ASSESSEE IS A SOCIETY ESTABLISHED BY THE G OVT. OF ANDHRA PRADESH IN ACCORDANCE WITH THE SEEDS ACT OF 1966 AN D AFTER VERIFICATION OF CHARITABLE NATURE OF ITS OBJECTIVES ONLY IT WAS GRANTED REGISTRATION U/S 12AA OF THE I.T. ACT. HE S UBMITTED THAT UNLESS THERE IS CHANGE IN THE SOCIETYS OBJECTIVES OR THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE IN CONTRAVENTION OF ITS OBJECTIVES THE REGISTRATION U/S 12AA(3) CANNOT BE WITHDRAWN. I N SUPPORT OF HIS CONTENTION HE PLACED RELIANCE UPON THE FOLLOWI NG DECISIONS: A) ITAT BANGALORE BENCH IN THE CASE OF KODVA SAMAJA VS. DIT (2013) REPORTED IN 57 SOT 73 (BANGALORE). ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 4 OF 11 B) CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY VS. CI T REPORTED IN 134 TTJ 781. C) ITAT CHANDIGARH BENCH IN THE CASE OF H.P. GOVT. ENERGY DEVELOPMENT AGENCY VS. CIT (2010) REPORTED I N 135 TTJ(CHD) (UO)33. FURTHER HE HAS ALSO DRAWN OUR ATTENTION TO THE CBDT CIRCULAR NO.21/2016 (F.NO.197/17/2016-ITA-I) DATED 27.05.2016 WHEREIN THE CBDT HAS DIRECTED THE AUTHORITIES NOT TO CANCEL THE REGISTRATION OF THE CHARITABLE ORGANIZATION JUST BE CAUSE THE PROVISO TO SECTION U/S 2(15) HAS COME INTO FORCE. 6. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE W AS INVOLVED IN THE COMMERCIAL ACTIVITIES AND THEREFORE THE PROVIS O TO SECTION 2(15) OF THE ACT IS APPLICABLE. FURTHER HE ALSO REL IED UPON THE FACT THAT THE ASSESSEE HAS NOT BEEN GRANTED FURTHER REGI STRATION U/S 10(23C)(IV) OF THE ACT AGAINST WHICH THE ASSESSEE H AS CARRIED THE APPEAL BEFORE THE HON'BLE HIGH COURT AND THE HON'BL E HIGH COURT HAS REJECTED THE ASSESSEES APPLICATION HOLDING THA T THE ASSESSEE IS NOT CARRYING ON ANY CHARITABLE ACTIVITY. THEREFO RE ACCORDING TO HIM THE ASSESSEE IS NOT ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT AND WAS RIGHTLY WITHDRAWN BY THE DIT (E). IN RE BUTTAL THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE OR DER OF THE HON'BLE HIGH COURT WAS IN THE CASE OF REJECTION OF REGISTRATION UNDER SECTION 10(23C)(IV) OF THE ACT AND THEREFORE THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. HE SUBMITTED THAT THE ORDER OF THE HON'BLE HIGH COURT WAS FOR THE A.Y 2010-11 AGAINST THE REJECTION/CANCELLATION OF TH E REGISTRATION U/S 10(23C)(IV) OF THE ACT DUE TO CHANGE IN LAW. HE SUBMITTED THAT THE CBDT CIRCULAR WAS NOT AVAILABLE AT THE TIME WHE N THE HON'BLE HIGH COURT WAS SEIZED OF THE MATTER AND HE ALSO TRI ED TO BRING OUT THE DIFFERENCE BETWEEN SECTION 12AA AND SECTION 10( 23C)(IV) OF THE ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 5 OF 11 ACT. HE SUBMITTED THAT REGISTRATION U/S 12AA OF THE ACT IS FOREVER UNTIL IT IS WITHDRAWN WHILE REGISTRATION U/S 10(23 C)(IV) OF THE ACT IS TO BE RENEWED ANNUALLY AND THAT WHILE THE AMOUNT APPLIED FOR CHARITABLE PURPOSES IS EXEMPT FROM TAX U/S 12AA OF THE ACT THE INCOME FROM A PARTICULAR SOURCE ONLY IS EXEMPT FROM TAX U/S 10(23C) OF THE ACT. HE SUBMITTED THAT WHETHER THE I NCOME IS EXEMPT U/S 11 NEEDS TO BE VERIFIED ANNUALLY EVEN T HOUGH REGISTRATION U/S 12AA IS GRANTED. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD WE FIND THAT THE ASSESSEE SOCIETY HAS BE EN GRANTED REGISTRATION U/S 12AA OF THE I.T. ACT. THE DIT (E) HAS SOUGHT TO WITHDRAW THE REGISTRATION GRANTED U/S 12AA OF THE A CT ON TWO GROUNDS I.E. (I) IN VIEW OF THE PROVISO TO SECTION 2(15) OF THE ACT THE ASSESSEE SOCIETY HAS LOST ITS CHARACTER AS A CH ARITABLE ORGANIZATION; AND (II) THE ASSESSEE IS NOT CARRYING ON ACTIVITIES IN ACCORDANCE WITH THE OBJECTIVES OF THE SOCIETY. AS F AR AS THE FIRST CONDITION IS CONCERNED WE FIND THAT THE CBDT CIRCU LAR DATED 27.05.2016 HAS CLARIFIED THAT JUST BECAUSE THE PROV ISIONS OF SECTION 2(15) COMES INTO PLAY THE REGISTRATION GRA NTED TO A CHARITABLE INSTITUTION U/S 12AA OF THE ACT NEED NOT BE CANCELLED OR WITHDRAWN AND THE PROCESS OF CANCELLATION OF REG ISTRATION IS TO BE INITIATED STRICTLY IN ACCORDANCE WITH THE PROVIS IONS OF 12AA(3) AND 12AA(4) OF THE ACT AND AFTER CAREFULLY EXAMININ G THE PROVISIONS OF THE ACT. THE DECISION OF THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE FOR THE A.Y 2010-11 REPORTED IN 356 ITR 360 (AP) IS AGAINST THE REJECTION OF ASSESSEES APPLICA TION FOR REGISTRATION U/S 10(23C)(IV) OF THE ACT. THE HON'BL E HIGH COURT HAS HELD THAT THE ASSESSEE IS NOT A CHARITABLE INSTITUT ION IN VIEW OF THE SECOND LIMB OF THE PROVISO TO SECTION 2(15) OF THE ACT. THE HON'BLE HIGH COURT HAS HELD THAT THE ASSESSEE IS CERTIFYING THE SEEDS ON ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 6 OF 11 THE APPLICATION OF A SOCIETY OR AN AGENT WITH WHOM THE SEED GROWERS HAVE ENTERED INTO AN AGREEMENT AND WHO AFT ER SECURING SUCH CERTIFICATION SELLS SUCH SEEDS TO FARMERS AT MARKET PRICE DETERMINED BY THEM. THE HON'BLE HIGH COURT HAS COME TO THE CONCLUSION THAT THIS INVOLVES COMMERCIAL ACTIVITY A S IT FACILITATES TRADE COMMERCE OR BUSINESS IN THE CERTIFIED SEEDS BEING SOLD BY THE CLIENTS OF THE SOCIETY AND THEREFORE THE PROVI SIONS OF THE PROVISO TO SECTION 2(15) OF THE ACT COMES INTO OPER ATION. THE JUDGMENT OF THE HON'BLE HIGH COURT IS DATED 17.12.2 012 I.E. AFTER WITHDRAWAL OF THE REGISTRATION U/S 12AA(3) OF THE A CT VIDE ORDERS DATED 13.4.2012. FOR READY REFERENCE THE RELEVANT P ARAS OF THE DECISION OF THE HON'BLE HIGH COURT ARE REPRODUCED H EREUNDER: 13. WE HAVE NOTED THE CONTENTIONS OF BOTH PARTIES. 14. BEFORE DEALING WITH THE RESPECTIVE CONTENTIONS WE PROPOSE TO TAKE NOTE OF SECTION 10 (23C) (IV) OF THE ACT AND SECTIO N 2(15) OF THE ACT. 'SECTION 10. INCOMES NOT INCLUDED IN TOTAL INCOME: IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED- ........... (23C) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF O F - (IV) ANY OTHER FUND OR INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSES WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY HAVING REGARD TO THE OBJECTS OF THE FUND OR INSTITUTION AND ITS IMPORTANCE THROU GH OUT INDIA OR THROUGH OUT ANY STATE OR STATES; OR ...........' 15. SECTION 2 (15) AS AMENDED BY FINANCE (NO.2) ACT 2 009 IS AS FOLLOWS: '(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE P OOR EDUCATION MEDICAL RELIEF (PRESERVATION OF ENVIRONMENT (INCLUDING WAT ERSHEDS FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST ) AND THE ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINE SS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COM MERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECT IVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SU CH ACTIVITY:' 16. A READING OF THE ABOVE PROVISIONS OF THE INCOME TA X ACT SHOW THAT INCOME RECEIVED BY ANY PERSON ON BEHALF OF AN INSTI TUTION ESTABLISHED FOR ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 7 OF 11 'CHARITABLE PURPOSE' (AS DEFINED IN SECTION 2(15) O F THE ACT) WHICH MAY BE APPROVED BY THE PRESCRIBED AUTHORITY ALONE WOULD BE EXCLUDED FROM THE TOTAL INCOME OF A PREVIOUS YEAR OF SUCH PERSON UNDE R SECTION 10(23C) (IV) OF THE ACT. WHILE UNDER THE MAIN PART OF SECTION 2( 15) ACTIVITIES WHICH INVOLVE RELIEF OF THE POOR EDUCATION MEDICAL RELI EF PRESERVATION OF ENVIRONMENT (INCLUDING WATER SHEDS FORESTS AND WIL D LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTERESTS WOULD AUTOMATICALLY COME WITHIN THE PURV IEW OF 'CHARITABLE PURPOSE' ACTIVITIES WHICH ADVANCE 'ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY' WOULD QUALIFY ONLY IF SUCH ACTIVITY DOES N OT INVOLVE: (I) CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS; (II) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS. 17 . SECTION 8 OF THE SEEDS ACT 1966 EMPOWERS THE STA TE GOVERNMENT OR THE CENTRAL GOVERNMENT IN CONSULTATION WITH THE STA TE GOVERNMENT TO ESTABLISH BY NOTIFICATION IN THE OFFICIAL GAZETTE A CERTIFICATION AGENCY FOR THE STATE TO CARRY OUT THE FUNCTIONS ENTRUSTED TO T HE CERTIFICATION AGENCY BY OR UNDER THE SEEDS ACT. THE PETITIONER WAS REGIS TERED UNDER THE ANDHRA PRADESH (TELANGANA AREA) PUBLIC SOCIETIES RE GISTRATION ACT 1350 FASLI WITH REGISTRATION NO. 334/76. BY G.O.MS. NO.435 FOOD AND AGRICULTURE (EP-II) DEPARTMENT DATED 01-06- 1977 T HE STATE GOVERNMENT APPROVED THE PROPOSAL OF THE DIRECTOR OF AGRICULTUR E AND DIRECTED THAT THE PETITIONER SHALL CARRY ON THE FUNCTIONS OF THE CERTIFICATION AGENCY UNDER THE SEEDS ACT 1966 IN THE ANDHRA PRADESH STA TE WITH EFFECT FROM 01-06-1977. THE OBJECTS OF THE PETITIONER HAVE ALRE ADY BEEN SET OUT ABOVE. THE PETITIONER THUS CERTIFIES THE SEEDS WHIC H MEET THE MINIMUM SEEDS CERTIFICATION STANDARDS AS PER INDIAN MINIMUM SEED CERTIFICATION STANDARDS 1988. SEED GROWERS ENTER INTO CONTRACT W ITH A SOCIETY/AGENT WHO APPROACHES THE PETITIONER FOR CERTIFICATION OF THE SEEDS AND AFTER SECURING CERTIFICATION THEY SELL THE CERTIFIED SEE DS TO THE FARMERS AT A MARKET PRICE DETERMINED BY THEM. THE PETITIONER COL LECTS A FEE FOR PROVIDING CERTIFICATION AS THE PROCESS OF CERTIFICA TION INVOLVES TECHNICAL AND SCIENTIFIC EVALUATION OF THE SEEDS ALTHOUGH THE FEE COLLECTED BY IT WOULD BE ENOUGH TO ENABLE IT TO SUSTAIN ITS ACTIVIT IES AND MAY NOT RESULT IN MUCH PROFIT. THE TERM 'ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY' USED IN SECTION 2 (15) OF THE ACT INCLUDES ALL OBJECTS TO PROMOTE THE WELFARE OF THE PUBLIC PARTICULARLY WHEN THE OBJ ECT IS TO PROMOTE OR PROTECT THE INTEREST OF A PARTICULAR TRADE OR INDUS TRY. THE ACTIVITY OF THE PETITIONER WHICH FACILITATES SALE OF CERTIFIED SEED S TO FARMERS THEREFORE FALLS WITHIN 'ADVANCEMENT OF ANY OTHER OBJECT OF GE NERAL PUBLIC UTILITY' INCLUDED IN THE DEFINITION OF THE TERM 'CHARITABLE PURPOSE' AS DEFINED IN SECTION 2 (15) OF THE ACT BUT IN VIEW OF THE FACT T HAT CERTIFICATION OF SEEDS BY THE PETITIONER FACILITATES TRADE COMMERCE OR BU SINESS IN THE CERTIFIED SEEDS BY THE CLIENT OF THE PETITIONER THE PROVISO TO THE SAID SECTION WOULD COME INTO OPERATION. THUS THE PETITIONER'S ACTIVITY ASSISTS THE SALE OF CERTIFIED SEEDS AND IS 'IN RELATION TO ANY TRADE C OMMERCE OR BUSINESS' ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 8 OF 11 AND THEREFORE ITS ACTIVITY CANNOT BE HELD TO BE A ' CHARITABLE PURPOSE'. IN THIS VIEW OF THE MATTER WE HOLD THAT THE 1ST RESPO NDENT RIGHTLY REJECTED THE APPLICATION OF THE PETITIONER FOR APPROVAL UNDE R SECTION 10 (23C) (IV) OF THE ACT. 18. IN THE CASE OF AGRICULTURAL MARKET COMMITTEE (SUPR A) THIS COURT HELD THAT AN AGRICULTURAL MARKET COMMITTEE ESTABLISHED U NDER THE ANDHRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKET S ACT 1966 IS AN INSTITUTION ESTABLISHED FOR 'CHARITABLE PURPOSE' EN TITLED TO BE REGISTERED UNDER SECTION 12A AND 12AA OF THE I.T.ACT AND THEIR INCOME FROM PROPERTY IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR UNDER SECTION 11 OF THE ACT. AFTER CONSIDERING THE PROVISIONS OF THE ACT THE DIVISION BENCH OF THIS COURT HELD THAT THE AGRI CULTURAL MARKET COMMITTEES ARE CONSTITUTED UNDER THE ABOVE ACT FOR THE SOLE PURPOSE OF PROTECTING THE INTEREST OF AGRICULTURISTS FARMERS AND GROWERS THAT THE PURPOSE OF THE SAID ACT IS TO ENABLE PURCHASERS TO GET A FAIR PRICE FOR THE COMMODITIES BY ELIMINATING MIDDLEMAN AND PROVIDE RE GULAR MARKET WITH ALL NECESSARY FACILITIES THAT THE INCOME OF THE MA RKET COMMITTEE FROM DIFFERENT SOURCES IS DERIVED WITHOUT ANY PROFIT MOT IVE AND IS USED TO MEET THE EXPENDITURE FOR PROVIDING MARKET FACILITIES. IN OUR VIEW THE SAID DECISION HAS NO APPLICATION TO THE PRESENT CASE AND WAS BASED UPON AN INTERPRETATION OF THE VARIOUS PROVISIONS OF THE AND HRA PRADESH (AGRICULTURAL PRODUCE AND LIVESTOCK) MARKETS ACT 1 966 AND THE ATTENTION OF THE DIVISION BENCH DOES NOT APPEAR TO HAVE BEEN DRAWN TO THE PROVISO TO SECTION 2 (15) OF THE I.T. ACT MORE PARTICULARLY THE PORTION 'ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION..........'. SINCE AGRICULTURAL MARKET COMMITTEES RENDER SERVICES 'IN RELATION TO TRADE COMMERCE OR BUSINESS' BY FACILITATING TRADE IN AGRI CULTURAL COMMODITIES BY FARMERS/GROWERS OF AGRICULTURAL PRODUCE OR LIVES TOCK WE ARE OF THE OPINION THAT THE ACTIVITY OF AGRICULTURAL MARKET CO MMITTEE MAY NOT COME WITHIN THE AMBIT OF 'CHARITABLE PURPOSE'. 19. THE COUNSEL FOR THE PETITIONER SUBMITS THAT THE PE TITIONER IS ITSELF NOT ENGAGING IN ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE COMMERCE OR BUSINESS AND THEREFORE IT HAS TO BE HELD TO BE AN A GENCY WHOSE ACTIVITIES ARE FOR 'CHARITABLE PURPOSE' UNDER SECTION 2(15) OF THE ACT AND THEREFORE ENTITLED TO THE BENEFIT UNDER SECTION 10(23C)(IV) O F THE ACT. THE CONTENTION OF THE PETITIONER'S COUNSEL IF ACCEPTED WOULD MEAN THAT THE WORDS 'ANY ACTIVITY OF RENDERING ANY SERVICE IN REL ATION TO ANY TRADE COMMERCE OR BUSINESS' IN THE FIRST PROVISO TO SECTI ON 2(15) OF THE ACT HAVE TO BE IGNORED. THIS IS NOT PERMISSIBLE BECAUSE THE HIGH COURT CANNOT SUBSTITUTE OR IGNORE THE WORDING IN A PROVIS ION IN A STATUTE. IN ASWINI KUMAR BOSE V. ARABINDA GHOSE AIR 1952 SC 368 THE SUPREME COURT HELD THAT IT IS NOT A SOUND PRINCIPLE OF CONS TRUCTION TO BRUSH ASIDE WORDS IN A STATUTE AS BEING INAPPOSITE SURPLUSAGE IF THEY CAN HAVE APPROPRIATE APPLICATION IN CIRCUMSTANCES CONCEIVABL Y WITHIN THE CONTEMPLATION OF THE STATUTE. IN MAHINDRA AND MAHIN DRA'S CASE (SUPRA) THE SUPREME COURT HELD THAT THE HIGH COURT CANNOT S UBSTITUTE THE LANGUAGE IN A STATUTE OR SUBORDINATE LEGISLATION. ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 9 OF 11 20. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FI NANCE BILL 2008 AND THE BUDGET SPEECH OF THE MINISTER OF FINANCE FO R 2008-2009 DELIVERED ON 29-02-2008 EXTRACTED ABOVE CLEARLY INDICATE THAT THE FIRST PROVISO TO SECTION 2 (15) AS EXTRACTED ABOVE WAS INTRODUCED BY THE FINANCE (NO.2) ACT 2009 WITH EFFECT FROM 01-04-2009 TO EXCLUDE EN TITIES CARRYING ON REGULAR TRADE COMMERCE OR BUSINESS OR PROVIDING SE RVICES IN RELATION TO ANY TRADE COMMERCE OR BUSINESS AND EARNING INCOMES FROM CLAIMING TO BE ENGAGED IN ACTIVITIES FOR 'CHARITABLE PURPOSE'. 21. THE KERALA HIGH COURT IN INFO PARKS KERALA'S CASE (SUPRA) TOOK NOTE OF THE ABOVE EVENTS AND HELD AS FOLLOWS: 'YET ANOTHER IMPORTANT ASPECT TO BE NOTED IN THIS C ONTEXT IS THAT AFTER THE AMENDMENT BY INCORPORATING A PROVISO TO SECTION 2(1 5) THE FOURTH LIMB AS TO THE ADVANCEMENT OF 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' WILL NO LONGER REMAIN AS CHARITABLE PURPOSE IF IT INVOLVES CARRYING ON OF: (A) ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS; (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR A FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. THE FIRST LIMB OF EXCLUSION FROM CHARITABLE PURPOSE UNDER CLAUSE (A) WILL BE ATTRACTED IF THE ACTIVITY PURSUED BY T HE INSTITUTION INVOLVES ANY TRADE COMMERCE OR BUSINESS. BUT THE SITUATION CONTEMPLATED UNDER THE SECOND LIMB [CLAUSE (B)] STANDS ENTIRELY ON A DIFFERENT PEDESTAL WITH REGARD TO THE SERVICE IN RELATION TO THE TRADE COMMERCE OR BUSINESS MENTIONED THEREIN. TO PUT IT MORE CLEAR WHEN THE MATTER COMES TO THE SERVICE IN RELATION TO THE TRAD E COMMERCE OR BUSINESS IT HAS TO BE EXAMINED WHETHER THE WORDS 'ANY TRADE COMMERCE OR BUSINESS' AS THEY APPEAR IN THE SECOND LIMB OF CLAUSE (B) ARE IN CONNECTION WITH THE SERVICE REFERRED TO THE TRADE COMMERCE OR BUSINESS PURSUED BY THE INSTITUTIONS TO WHICH THE SERVICE IS GIVEN BY THE ASSESSEE. IF THE SAID WORDS ARE ACTUALLY IN RESPECT OF THE TRADE COMMERCE OR BUSINESS OF THE ASSESSEE ITSELF THE SAID CLAUSE (SECOND LIMB OF THE STIPULATION UNDER CLAUSE (B) IS RATHER OTIOSE. SINCE THE ACTIVITY OF THE ASSESSEE INVOLVING ANY TRADE COMMERCE OR BUSINESS IS ALREADY EXCLUDED FROM THE CHARITABLE PURPOSE BY VIRTUE OF THE FIRST LIMB (CLAUSE (A)) ITSELF THERE IS NO NECESSITY TO STIPULATE FURTHER BY WAY OF CLASUE (B ) ADDING THE WORDS 'OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMENCE OR ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 10 OF 11 BUSINESS. AS IT STANDS SO GIVING A PURPOSIVE INTERPRETATION TO THE STATUTE IT MAY HAVE TO BE READ AND UNDERSTOOD THAT THE SECOND LIMB OF EXCLUSION UNDER CLAUSE (B) IN RELATION TO THE SERVICE RENDERED BY T HE ASSESSEE THE TERMS 'ANY TRADE COMMERCE OR BUSINESS REFER TO THE TRADE COMMERCE OR BUSINESS PURSUED BY THE RECIPIENT TO WHOM THE SERVI CE IS RENDERED (AS THERE MAY BE A SITUATION INVOLVING LETTING OUT THE PREMISES FOR PURPOSES OTHER THAN INVOLVING TRADE COMMERCE OR BUSINESS AS WELL).' 22. WE ENDORSE THE SAID VIEW OF THE KERALA HIGH COURT IN THE ABOVE CASE AND WE RESPECTFULLY FOLLOW THE SAME. 23. IN THE CASE OF INSTITUTE OF CHARTERED ACCOUNTANTS (SUPRA) THE DELHI HIGH COURT HAD TAKEN THE VIEW THAT THE ACTIVITY OF CONDUCTING COACHING CLASSES BY THE SAID INSTITUTE WAS NOT ENOUGH TO DEP RIVE THE INSTITUTE OF APPROVAL UNDER SECTION 10 (23C) OF THE ACT AND THE MATTER WAS REMITTED TO THE INCOME TAX DEPARTMENT TO CONSIDER THE MATTER WH ETHER THE INSTITUTE CARRIED ON BUSINESS OR NOT WHEN ITS PRIMARY AND DOM INANT ACTIVITY IS TO REGULATE THE PROFESSION OF CHARTERED ACCOUNTANCY AN D TO CONSIDER THE APPLICATION OF THE PROVISO OF SECTION 2(15) OF THE ACT INTRODUCED WITH EFFECT FROM 01-04-2009. ALTHOUGH THERE IS DISCUSSIO N IN THIS CASE AND ALSO THE OTHER CASE (4 SUPRA) ON THE SUBJECT THERE IS N O FINALITY ATTACHED TO THE ABOVE ISSUE AS IN BOTH CASES THE MATTER WAS REMITTE D TO THE DEPARTMENT TO CONSIDER THE APPLICATION OF THE SAID INSTITUTE FOR APPROVAL UNDER SECTION 10 (23C) (IV) OF THE ACT. THEREFORE THEY ARE OF NO ASS ISTANCE TO THE PETITIONER. 24. WE ARE ALSO OF THE VIEW THAT THE DECISION OF THIS COURT IN NEW NOBLE EDUCATION SOCIETY'S CASE (SUPRA) IS NOT APPLICABLE AS THE SAID DECISION RELATES TO EDUCATIONAL INSTITUTIONS CLAIMING EXEMPT ION UNDER SECTION 10(23C)(VI) OF THE ACT AND THE PROVISIONS OF SECTIO N 2(15) OF THE ACT WERE ONLY REFERRED TO INCIDENTALLY TO HOLD THAT SECTION 2(15) IS WIDER IN TERMS THAN SECTION 10(23C)(VI) OF THE ACT AND THAT IF THE ASSESSEE'S CASE DOES NOT FALL WITHIN SECTION 2 (15) OF THE ACT IT IS DIFFIC ULT TO CONSIDER THE ASSESSEE AS COMING UNDER SECTION 10(23C)(VI) OF THE ACT. IT IS ALSO OBSERVED THAT A CERTIFICATE SIGNED BY THE COMMISSIONER OF ENDOWMENT S UNDER SECTION 43 OF THE AP CHARITABLE AND HINDU RELIGIOUS INSTITUTIO NS AND ENDOWMENTS ACT 1987 IS ONLY ONE OF THE FACTORS BUT NOT CONCLU SIVE PROOF THAT AN ASSESSEE IS A CHARITABLE INSTITUTION EXISTING SOLEL Y FOR THE PURPOSE OF EDUCATION. ON AN APPRECIATION OF THE FACTS RELATING TO EACH OF THE PETITIONERS IN THE SAID CASES THE COURT HELD THAT THE EXISTENCE OF AN EDUCATIONAL INSTITUTION SOLELY FOR THE PURPOSE OF E DUCATION IS A PRECONDITION FOR GRANT OF APPROVAL AND AS THE OBJEC TS OF THE SOCIETIES WHICH WERE PETITIONERS BEFORE THE SAID BENCH WERE N OT EXCLUSIVELY FOR EDUCATIONAL PURPOSE BUT INCLUDED OBJECTS FOR NON-ED UCATIONAL PURPOSES THE CHIEF COMMISSIONER CANNOT BE FAULTED FOR REJECT ING THE APPLICATIONS SEEKING APPROVAL UNDER SECTION 10(23C)(VI) OF THE A CT. THIS JUDGMENT THEREFORE IS OF NO ASSISTANCE TO THE REVENUE. 25. FOR THE ABOVE REASONS WE HOLD THAT THE 1ST RESPON DENT HAD RIGHTLY REJECTED THE APPLICATION OF THE PETITIONER FOR APPR OVAL UNDER SECTION 10(23C)(IV) OF THE ACT ON THE GROUND THAT THE PETIT IONER HAS NOT RENDERED ITA NO 869 O F 2012 AP STATE SEED CERTIFICATION AGENCY HYDERABAD PAGE 11 OF 11 ITS SERVICES DIRECTLY TO THE FARMERS BUT IS RENDERI NG ITS SERVICES DIRECTLY TO ITS CLIENTS/AGENTS WHO ARE ENGAGED IN TRADING OF TH E CERTIFIED SEEDS WITH PROFIT MOTIVE AND THEREFORE ITS ACTIVITIES ARE NOT FOR THE 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' AND HEN CE NOT FOR 'CHARITABLE PURPOSE' IN VIEW OF SECOND LIMB OF THE FIRST PROVIS O TO SECTION 2(15) OF THE ACT. 26. ACCORDINGLY THE WRIT PETITION IS DISMISSED. NO CO STS. THUS IT CAN BE SEEN THAT THE HON'BLE HIGH COURT WA S DEALING WITH THE JUSTIFIABILITY OF REJECTION OF REGISTRATION U/S 10(23C)(IV) OF THE ACT AND IN THE PROCESS THE HON'BLE HIGH COURT HAS EXAMINED THE NATURE OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE AND HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND HEN CE IS NOT FOR CHARITABLE PURPOSES IN VIEW OF THE SECOND LIMB OF T HE FIRST PROVISO TO SECTION 2(15) OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE ON SIMILAR SET OF FACTS (THOUGH IN THE SUBSEQUENT A.Y 2 010-11) WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE DI T (E). 8. IN THE RESULT ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD DATED 30 TH SEPTEMBER 2016. VINODAN/SPS COPY TO: 1 SHRI S. RAMA RAO ADVOCATE FLAT NO.102 H.NO.3-6- 643 SHRIYAS ELEGANCE ST.NO.9 HIMAYATNAGAR HYDERABAD 500029 2 DIRECTOR OF INCOME TAX (EXEMPTIONS) HYDERABAD 3 ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS) HYDERAB AD 4 THE DR ITAT HYDERABAD 5 GUARD FILE BY ORDER