J.P Devadhar, J.:— The common question of law raised by the Revenue in all these appeals is,

“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that the market committees constituted under the Agricultural Produce Marketing (Regulation) Act, 1963 are established for charitable purposes and accordingly directing the Commissioner of Income-tax to grant registration under section 12A/12AA of the Income-tax Act, 1961 ?”

2. Heard Mr. Anand Parchure, advocate for the appellants and Mr. Thakkar, advocate, for the respondents. Rule. Rule made returnable forthwith. All these appeals are admitted on the above question of law and by consent of both the parties all these appeals are taken up for final hearing, since the question of law raised is common, all these appeals are disposed of by a common judgment.

3. Under the Income-tax Act, 1961 (“the Act” for short) prior to April 1, 2003, income of all the local authorities was exempt under section 10(20) of the Act. The market committees (“the assessees” for short) constituted under the Agricultural Produce Marketing (Regulation) Act, 1963 (“the 1963 Act” for short) being local authorities were covered under section 10(20) of the Act and their income was exempt. However, by the Finance Act, 2002, with effect from April 1, 2003, an Explanation has been added to section 10(20) of the Act whereby the words “local authority” have been defined to mean the local authorities specifically set out therein. Since the assessees are not included in the said Explanation, exemption under section 10(20) of the Act became not available to the assessees with effect from April 1, 2003.

4. The then Union Finance Minister, however, by his letter dated November 18, 2002, addressed to the Chief Minister of Delhi, clarified that irrespective of the withdrawal of exemption under section 10(20) of the Act, if the assessees are working for advancement of an object for general public utility and there is no profit motive, they can still claim exemption from income-tax as charitable institution after fulfilling the conditions prescribed under section 11 of the Act.

5. Thereupon, the assessees who are the respondents herein made applications in the prescribed form seeking registration under section 12A/12AA of the Act. All those applications were rejected by the Commissioner of Income-tax, Nagpur, inter alia, on the ground that the assessees are commercial establishments and the services rendered by them are not free of costs but are on payment of cess/fees which entails profit motive. The Commissioner of Income-tax further held that the assessees are not registered as a trust and even if they are institutions referred to in section 12A, it would still not be entitled to exemption because, in the present case, neither the income is derived from the property nor the income is derived from voluntary contributions and, therefore, the benefit under sections 11 and 12 of the Act would not be available to the assessees. On appeal filed by the assessees, the Income-tax Appellate Tribunal has reversed the orders passed by the Commissioner of Income-tax and directed the Commissioner of Income-tax to grant registration to the assessees under section 12A/12AA of the Act. Hence, these appeals have been filed by the Revenue under section 260A of the Act.

6. Mr. Parchure, learned counsel appearing on behalf of the Revenue, supported the orders passed by the Commissioner of Income-tax, whereas Mr. Thakkar, learned counsel for the respondents, supported the orders passed by the Tribunal.

7. At the outset, it may be noted that a market committee constituted under the 1963 Act at Pune has been granted registration under section 12A/12AA of the Act by the Commissioner of Income-tax, Pune on October 14, 2003, and the said registration continues to be in operation till date. Thus, according to the Commissioner of Income-tax, Pune the activities carried on by a market committee under the 1963 Act constitute charitable purposes and hence entitled to registration, whereas, according to the Commissioner of Income-tax, Nagpur the activities carried on by the market committees do not constitute charitable purposes. This court in the case of Tax Practitioners Benevolent Fund v. CIT, [2004] 266 ITR 561 (Writ Petition No. 922 of 2003 decided on September 29, 2003) dealing with grant of exemption under section 80G of the Act held that different officers under the Income-tax Act authorised to consider the application for grant of exemption under section 80G of the Act have to apply the same norms, yardsticks and parameters while considering the applications under section 80G and the similar persons cannot be treated differently merely because the officers happened to be different having different territorial jurisdiction. The Tribunal relying upon the aforesaid decision held that when the decision of the Commissioner of Income-tax, Pune has been accepted by the Income-tax Department, it was not open to the Commissioner of Income-tax, Nagpur to take a contrary view and deny registration to the assessees. No fault can be found with the decision of the Tribunal on that ground.

8. Apart from the above, even on the merits the Tribunal held that the assessees are established for advancement of the object of general public utility which is a “charitable purpose” under section 2(15) of the Act and, therefore, the assessees are entitled to registration under section 12A/12AA of the Act. The validity of that finding is challenged in these appeals.

9. It is pertinent to note that to avail of the benefits of section 11 and 12 of the Act, not only the trusts/institutions must be registered under section 12A/12AA of the Act but they must also comply with the conditions set out in sections 11 and 12 of the Act. In other words, a registered trust/institution will not get the benefits of sections 11 and 12 of the Act if the conditions set out therein are not fulfilled. The benefits under sections 11 and 12 of the Act are available to the trusts/institutions created/established wholly for charitable or religious purposes. Section 2(15) of the Act defines “charitable purpose” to include inter alia an institution established for advancement of an object of general public utility.

10. To get registration under section 12A/12AA of the Act, the conditions required to be fulfilled are, firstly, the trust/institution must be created/established for charitable purposes and secondly, the activities of the trust/institution must be genuine. The question is, whether the assessees fulfil these two conditions.

11. In all these cases, the genuineness of the assessees are not in dispute. The only dispute is, whether the assessees are established for charitable purposes, that is, established for advancement of any of the object of general public utility as contemplated under section 2(15) of the Act. According to the assessees they are established for charitable purposes, whereas, according to the Revenue the assessees are not established for charitable purposes.

12. To appreciate the rival contentions, it is necessary to set out few facts relating to the constitution of the assessees. The 1963 Act provides for establishment of market committees (assessees) for every market area specified in the notification issued by the State Government for regulating marketing of the agricultural produce in a specified area. The preamble of the 1963 Act reads thus:

“An Act to regulate marketing of agricultural and certain other produce in market areas and markets to be established therefor in the State; to confer powers upon market committees to be constituted in connection with or acting for purposes connected with such markets; to establish market fund for purposes of the market committees and to provide for purposes connected with the matters aforesaid.”

13. “Agricultural produce” is defined under the 1963 Act to mean all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture, fisheries and forest specified in the Schedule annexed to the 1963 Act.

14. Powers and duties of the market committees (assessees) are set out in section 29 of the 1963 Act. Section 29 of the 1963 Act, to the extent relevant herein, reads thus:

“29. Powers and duties of market committee.—(1) It shall be the duty of a market committee to implement the provisions of this act, the rules and bye-laws made thereunder in the market area; to provide such facilities for marketing of agriculture produce therein as the director (the State Marketing Board or the State Government, as the case may be,) may, from time to time, direct; do such other acts as may be required in relating to the superintendence, direction and control of market or for regulating marketing of agriculture produce in any place in the market area, and for purposes connected with the matters aforesaid, and for that purpose may exercise such powers and perform such duties and discharge such functions as may be provided by or under this Act.

2. Without prejudice to the generality of the foregoing provisions, a market committee may—……

(iii) grant, renew, refuse, suspend or cancel licence;

(iv) maintain and manage the market including admissions to, and conditions for use of, markets within the market area;

(v) provide for necessary facilities for the marketing of agricultural produce within the market in the market area;

(vi) regulate and supervise the auctions of notified agricultural produce in accordance with the provisions and procedure laid down under the rules of this Act or the bye-laws of the market committee;

(vii) regulate the making, carrying out and enforcement or cancellation of sales, weighment, delivery, payment to be made in respect thereof and all other matters relating to the marketing of notified agriculture produce in the prescribed manner;

(viii) take all possible steps to prevent adulteration and to promote and organise grading and standardization of the agricultural produce;

(ix) take measures for the prevention of purchases and sales below the minimum support prices as fixed by the Government from time to time;.

(x) collect, maintain, disseminate and supply information in respect of production, sale, storage, processing, prices and movement of notified agricultural produce including information relating to crops, statistics and marketing intelligence as may be required by the director;

(xi) arrange to obtain fitness (health) certificate from veterinary doctor in respect of animals, catties, birds, etc., which are bought or sold in the market area;

(xii) carry out publicity about the benefits or regulation, system of transactions, facilities provided in the market area, through such media, as, in the opinion of the market committee, may be effective or necessary;

(xiii) provide for settling disputes arising out of any kind of transactions connected with the marketing of agricultural produce and all matters ancillary thereto;

(xiv) subject to the provisions of section 12, acquire, hold or dispose of any movable or immovable property for the purpose of efficiently carrying out its duties;…….

(xvii) levy, take, recover and receive charges, fees, rates and other sums or money to which the market committee is entitled;

(xviii) subject to approval of the director, obtain loans subsidies, subventions from the State and Central Government or any financing agency, for providing warehousing and marketing facilities in the market;

(xix) subject to the approval of the State Marketing Board, prepare budgets, supplementary budgets, make reappropriations in the budget and incur expenditure accordingly;

(xx) keep a set of standard weights and measures in the market against which weighment and measurement may be checked;

(xxi) inspect and verify scales, weight and measures in use in a market areas and also the books of account and other documents maintained by the licensees in such manner as may be prescribed;

(xxii) employ the necessary number of officers and servants for the efficient implementation of the provisions of this Act, rules and bye-laws of the market committee;

(xxiii) pay, salaries and other emoluments, pension, leave allowance, gratuities, compassionate allowance, contributions towards leave allowance, pension or provident fund of the officers and servants employed by the market committee in the manner prescribed;

(xxiv) administer market fund referred to in section 36 of this act and maintain the account thereof and get the same audited in the prescribed manner;

(xxv) prosecute persons for violating the provisions of this act, the rules and the bye-laws and compound offences as provided under section 52A;

(xxvi) provide storage and warehousing facilities in the market area;

(xxvii) with the prior sanction of the State Government or the State Marketing Board or the director undertake any other activity conducive to the promotion of regulation of agricultural marketing;

(xxviii) arrange for the collection of—

(a) such agricultural produce in the market area in which all trade therein is to be carried on exclusively by the State Government by or under any law in force for that purpose, or

(b) such other agricultural produce in the market area, as the State Government may, from time to time, notify in the Official Gazzette (hereinafter referred to as the ‘notified produce’).”

15. Section 31 of the 1963 Act empowers the assessees to levy and collect fees in the prescribed manner at such rates as decided by it but subject to minimum and maximum rates which may be fixed by the State Government by notification in the Official Gazzette in that behalf. Section 36 of the 1963 Act provides that all monies received by a market committee shall form part of a fund to be called market fund and are to be used for the purposes set out in section 37 of the 1963 Act.

16. From the scheme of the 1963 Act, it is evident that the assessees are established to regulate the marketing of agricultural and certain other produce with the object of protecting the interests of the agricultural and some other producers and also the general public who are the ultimate consumers. The object of establishing the market committees is to secure fair price to the agricultural and some other producers and also to make the same available to the ultimate consumer freely, regularly and at fair prices. In other words, the object of the Act is to ensure welfare of the agriculturists as a whole and welfare of the general public at large who are the ultimate consumers of the agricultural produce, which is absolutely essential for the orderly growth of the society. In these circumstances, we have no hesitation in holding that the assessees are constituted for charitable purposes, namely, advancement of an object of general public utility and, therefore, entitled to registration under section 12A/12AA of the Act.

17. Relying upon a decision of this court in the case of President, APMC v. Murari K. Yadav reported in [1986] Mah. L.J 258 it is contended by the Revenue that the assessees are commercial establishments with a profit motive and, therefore, the assessees cannot be said to have been established for charitable purposes. The said decision has no bearing on the facts of the present case, because firstly, in that case, the issue was whether a market committee established under the 1963 Act is a commercial establishment under section 2(4) of the Bombay Shops and Establishment Act, 1948. Secondly, the definition of “commercial establishment” under section 2(4) of the Bombay Shops and Establishment Act includes charitable Trust. Therefore, the fact that the assessees are commercial establishments under the Shops and Establishment Act cannot be a ground to hold that the assessees are not established for charitable purposes especially when the words “commercial establishment” include charitable trusts. Moreover, the said decisions do not lay down any proposition of law that every commercial establishment has profit motive. Therefore, the argument that the assessees are not established for advancement of the object of public utility but are commercial establishments with profit motive cannot be accepted.

18. The expression “object of general public utility” contained in section 4(3) of the Indian Income-tax Act, 1922 (similar to section 2(15) of the Income-tax Act, 1961) has been exhaustively dealt with by the apex court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association, [1980] 121 ITR 1. The apex court has, inter alia held thus:

“The expression ‘object of general public utility’ in section 4(3) would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g, promotion of or opposition to legislation concerning that purpose, is contemplated.”

19. The apex court further held thus (page 27 of 121 ITR):

“… It is in our opinion not at all necessary that there must be a provision in the constitution of the trust or institution that the activity shall be carried on on no profit no loss basis or that profit shall be proscribed. Even if there is no such express provision, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit making or carrying out a charitable purpose. If it is the former, the purpose would not be a charitable purpose but, if it is the latter, the charitable character of the purpose would not be lost.

If we apply this test in the present case, it is clear that the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn, which was carried on by the assessee, was not an activity for profit. The predominant object of this activity was promotion of commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth, which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. It is significant to note that the assessee was a company recognised by the Central Government under section 25 of the Companies Act, 1956, and under its memorandum of association, the profit arising from any activity carried on by the assessee was liable to be applied solely and exclusively for the promotion of trade and commerce in various commodities which we have mentioned above and no part of such profit could be distributed amongst the members in any form or under any guise. The profit of the assessee could be utilised only for the purpose of feeding this charitable purpose and the dominant and real object of the activity of the assessee being the advancement of the charitable purpose, the mere fact that the activity yielded profit did not alter the charitable character of the assessee.”

20. Recently the apex court in the case of Director Of Income Tax v. Bharat Diamond Bourse, [2003] 259 ITR 280 held thus (page 287):

“… Where the main or primary objects are distributive, each and every one of the objects must be charitable in order that the trust be held as a valid charity. But, if the primary or dominant purpose of the institution is charitable and another which, by itself, may not be charitable, but is merely ancilliary or incidental to the primary or dominant object, it would not prevent the institution from validly being recognized as a charity. The test to be applied is, whether the object which is said to be non-charitable is the main or primary object of the trust or institution or it is ancillary or incidental to the dominant object which is charitable.”

21. Applying the tests laid down by the apex court in the aforesaid cases to the facts of the present case, there can be no doubt that the object of the market committees (assessees) established under the 1963 Act is to regulate the entire marketing of agricultural and some other produce from the stage of procuring till it reaches the ultimate consumer, which is squarely covered within the meaning of the expression “advancement of any object of general public utility” contained in section 2(15) of the Act.

22. It is contended by the Revenue that the assessees are established with profit motive because they are not rendering free services but they are charging cess/fees for their services and, therefore, the assessees are not established for charitable purposes. There is no merit in this contention. The cess/fees are charged by the assessees from the purchasers in the market area at the rate prescribed by the State Government for the purpose of carrying out the object of the Act. As held by the apex court in the cases of Surat Art Silk Cloth Manufacturers Association, [1980] 121 ITR 1 and in the case of Bharat Diamond Bourse, [2003] 259 ITR 280 where the dominant purpose of a trust/institution is charitable, incidentally if some profit is made and the said profit is used for charitable purposes, the said trust/institution does not cease to be established for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required to be met with in achieving the said object, the Legislature has empowered the assessees to levy cess/fees. Moreover, surplus remaining in the market fund are ploughed back for carrying out the object of the 1963 Act. Thus, the surplus remaining in the market fund is neither distributed nor accumulated as profits. In these circumstances, it cannot be said that the assessees are established with profit motive so as to deny registration under section 12A/12AA of the Act.

23. It is pertinent to note that prior to April 1, 1984, the words used in section 2(15) of the Act were “advancement of any other object of general public utility not involving the carrying on of any activity for profit”. By the Finance Act, 1983 with effect from April 1, 1984, Legislature has omitted the words “not involving the carrying on of any activity for profit” from section 2(15) of the Act. Thus, after April 1, 1984, even if there is some profit in the activity carried on by the trust/institution, so long as the dominant object is of general public utility, it cannot be said that the said trust/institution is not established for charitable purposes.

24. It is contended by the Revenue that even if the assessees are covered under section 12A of the Act, they would still not be entitled to exemption because their income is neither derived from the property held under trust nor their income is from voluntary contributions made to the institution. There is no merit in this contention because the expression “property” used in section 11 of the Act is of wide amplitude and it includes the business undertaking itself. The word “property” in section 11 includes immovable and movable property like money, shares, securities etc. Therefore, where a trust/institution fulfils all the conditions set out in section 12A/12AA, registration cannot be denied on the ground that some conditions of sections 11 and 12 are not fulfilled. As stated earlier, even after registration unless the conditions set out in sections 11 and 12 of the Act are complied with, no benefit would be available to the registered trust or institution. Therefore, in the facts of the present case the decision of the Tribunal that the assessees who fulfil all the conditions are entitled to registration cannot be faulted. The contention of the Revenue that the assessees are not registered as a trust and hence not entitled for registration is also without any merit, because, there is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust.

25. In the result, the question of law raised herein is answered in the affirmative that is in favour of the assessees and against the Revenue. All these appeals are disposed of accordingly with no order as to costs.