The High Court answered a reference question regarding the tax exemption status of an Agricultural Market Committee. The Court held that despite the Finance Act 2002 restricting Section 10(20) exemptions, the Agriculture Market Committee remains a Local Authority entitled to exemption.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE HON'BLE SRI JUSTICE V.V.S. RAO AND THE HON'BLE SRI JUSTICE B.N. RAO NALLA
REFERENCE CASE No.274 OF 1996
ORDER: (Per Hon’ble Sri Justice V.V.S. Rao)
The reference under Section 256(1) of the Income Tax Act, 1961 (the Act) is at the instance of the Commissioner of Income Tax, Guntur.
“Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the assessee is a “Local Authority” and that the gains derived by it are exemption from tax.”
This question is referred for the opinion of this
Court in the following background and facts.
The respondent-assessee is an Agricultural Market Committee, Kadiri (AMC) constituted under Section 4(1) of the
Andhra Pradesh (Agricultural Produce and Live Stock) Markets Act, 1956. The said AMC was issued a notice under Section 139(2) of the Act by the Income Tax Officer, Hindupur. As there was no response, a notice under Section 142(1) of the Act was issued and thereafter as there was no response yet again, the assessing officer completed assessment ex parte under Section 144 of the Act and raised demand. The appeal by the AMC was allowed by the Commissioner of Income Tax (Appeals) holding that the AMC being a Local Authority under Section 10(20) of the Act, their income is exempt from the tax. The view was also affirmed by the Income Tax Appellate Tribunal and aggrieved thereby the revenue sought the reference to this Court. During the course of the submissions, both the
counsel brought to our notice a latest judgment of this [1] Court in CIT v. Agriculture Market Committee to which one of us (VVSR,J) is a Member. Therein, noticing the law as it existed prior to the Finance Act, 2002, with effect from 01-04-2003, this Court held that the AMC is a local authority under Section 10(20) of the Act. The relevant observations are as follows.
Section 10(20) of the Act, extracted hereinabove, exempts a local authority from tax. The term “local authority” was not defined prior to the Finance Act, 2002. The Supreme Court in Union of India v. R.C. Jain , AIR 1981 SC 951 ; [1981] 2 SCC 308, Calcutta State Transport Corporation v. CIT [1996] 219 ITR 515 (SC) ; [1996] 8 SCC 758 and the Delhi High Court in Agricultural Market Produce Committee [2011] 250 ITR 369 (Delhi) adopted the meaning of “local authority” as defined in section 3(31) of the General Clauses Act, 1897. In Budha Veerinaidu [1983] 143 ITR 1021 (AP) and Agricultural Market Committee [1983] 143 ITR 1020 (AP), this court, having regard to various provisions of the Agricultural Market Committee Act, held that a market committee is a local authority.
The Finance Act, 2002, inserted an Explanation defining the expression “local authority” from April 1, 2003. As a result, units of local self-Government like Panchayats and Municipal bodies governed by Part IX and Part IX-A of the Constitution of India, and Cantonment Boards, were alone brought within the expression “local authority”. The immediate effect is that from the financial year 2003-04 onwards all agricultural market committees were barred from claiming exemption as local authorities under section 10(20) of the Act.
In view of the above decision of the jurisdictional High Court, the reference is answered in the affirmative in favour of the assessee and against the revenue. The Reference Case is disposed of accordingly.
________________ (V.V.S. RAO, J)
_____________________ (B.N. RAO NALLA, J)
November 29, 2011. PV
[1] [2011] 337 ITR 299 (AP)
3 issues framed by the court
Whether the Appellate Tribunal was correct in holding that an Agricultural Market Committee constituted under the Andhra Pradesh Agriculture Markets Act is a Local Authority under Section 10(20) of th
Whether the gains derived by the Agricultural Market Committee qualify for tax exemption under the amended definition of Local Authority.
Whether the Agricultural Market Committee can claim exemption from tax as a Local Authority based on Supreme Court precedents despite the specific amendment in the Finance Act, 2002.
Colour shows how this judgement treated each authority
Union of India v. R.C. JainReferred¶11
Union of India v. R.C. Jain, AIR 1981 SC 951 · Who else cites this
Calcutta State Transport Corporation v. CITReferred¶11
Calcutta State Transport Corporation v. CIT
Agricultural Market Produce CommitteeReferred¶11
Delhi High Court in Agricultural Market Produce Committee
Budha VeerinaiduReferred¶11
Budget of India v. CIT
Agricultural Market CommitteeReferred¶11
Agricultural Market Committee v. CIT
CIT v. Agriculture Market CommitteeReferred¶9
CIT v. Agriculture Market Committee
2 provisions across 1 enactments
Commissioner of Income Tax, Guntur
V.V.S. RAO
B.N. RAO NALLA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
