Commissioner Of Income-Tax, Panchkula v. The Haryana Warehousing Corporation

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income-tax, Panchkula Versus The Haryana Warehousing Corporation ITA No. 563 of 2006 Date of Decision: 30.8.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Mr. Sanjay Bansal, Senior Advocate with Ms. Shaveta Malhotra, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1.This order will dispose of ITA Nos. 563 of 2006, 630 and684 of 2008 as common questions are involved. The facts are beingtaken from ITA No. 563 of 2006. 2.ITA No. 563 of 2006 has been preferred by the revenueunder Section 260A of the Income Tax Act, 1961 (in short “the Act”)against the order of the Income Tax Appellate Tribunal, Bench-A,Chandigarh (hereinafter referred to as “the Tribunal”) dated 19.5.2006in ITA No. 668/Chandi/2003, raising following substantial questions oflaw:- “1.Whether on the facts and in the circumstancesof the case, the ITAT was right in law in directing to grant the registration under Section12AA of the Act, even when the assesseecorporation is neither a trust nor a charitableinstitution and its income is neither derivedfrom the property held under trust wholly orcharitable or religious purposes nor fromvoluntary contributions? Whether on the facts and in the circumstancesof the case, the ITAT was right in law indirecting to grant the registration under Section12AA of the Act, even when the assessee hasfailed to fulfil the basic legal requirement to filethe original document evidencing its creation,and to file copies of the audited accounts of thethree preceding years which is a mandatoryprovision as per Section 12(A)(b) of the IncomeTax Act, 1961? Whether on the facts and in the circumstancesof the case, the ITAT was right in law indirecting to grant the registration u/s 12AA ofthe Act, even when under the WarehousingCorporation Act, the assessee corporation is adeemed company and is liable for income taxin respect of its income, profits and gains?” 3.The assessee is a Corporation established under theprovisions of the Warehousing Corporations Act,1962 (in short “1962 ITA No. 563 of 2006 Act”). It was earlier claiming exemption under Section 10(29) of the Actbut after deletion of the said provision w.e.f. 1.4.2003, it applied forregistration under Section 12AA of the Act. The said application wasrejected by the Commissioner mainly on the ground that the assesseewas earning income and was declaring dividends. The profits wereploughed back for expanding its activities and then earning largerincomes. Thus, the activities were on commercial principles for profitmotive which could not be held to be charitable in nature. On appeal,the Tribunal reversed the said view and held that main purpose of theassessee was to provide better facilities for storage and transportationof food-grains which were objects of general public utility. Thedominant object being general public utility, incidental profit making didnot affect its character as a charitable organization. Reliance wasplaced on judgment of the Hon'ble Supreme Court in Director ofIncome-tax v. Bharat Diamond Bourse, 259 ITR 280 (SC). Thefinding recorded by the Tribunal is as under:- “In the present case, the activities of the assesseeare also of similar nature as in the cases before theDelhi Bench of the ITAT (supra). We accordinglyhold that the appellant had been established mainlywith a view to advancing the object of general publicutility, which falls within the definition of 'charitablepurposes'. The ld Commissioner of Income-tax was,therefore, required to consider the application of theassessee in accordance with law. Some of thereasons given by the Commissioner refusing “In the present case, the activities of the assesseeare also of similar nature as in the cases before theDelhi Bench of the ITAT (supra). We accordinglyhold that the appellant had been established mainlywith a view to advancing the object of general publicutility, which falls within the definition of 'charitablepurposes'. The ld Commissioner of Income-tax was,therefore, required to consider the application of theassessee in accordance with law. Some of thereasons given by the Commissioner refusing registration are also unwarranted. The assessee-corporation has been constituted under the statute-an Act of the Parliament. The State Govt. hasissued notification for constitution of the assessee-corporation, copy whereof was filed before the CIT.Since the dominant object of constitution of thecorporation was advancement of the object ofgeneral public utility, the assessee was entitled toregistration u/s 12A.” 4.We have heard learned counsel for the parties and perused the record. 5.Learned counsel for the appellant submits that Section 30(2) of the 1962 Act provides that the Warehousing Corporation maydeclare dividend. Under Section 39, it was deemed to be a companywhich is liable to income-tax and super-tax on its income, profits andgains. Under Section 18 (2), the State Warehousing Corporation is abody corporate and can acquire, hold and dispose of property. He alsosubmits that the assessee was carrying on trading activities ofpurchasing wheat and selling the same which is one of its statutoryfunctions under Section 24 (d). 6.On the other hand, learned counsel for the assesseesubmits that its case was covered under Section 2(15) of the Act. It wasconstituted under a statute to advance a public purpose of runningwarehouses for storage of agricultural produce and carrying on otherallied activities under Section 24 of the 1962 Act. Merely because it wasa juristic person to acquire, hold and dispose of property and was deemed to be a company and declared dividend did not deviate from itscharacter as charitable body covered under Section 2(15) of the Act.Under Section 19 of the Act, 50% share capital was subscribed to bythe Central Warehousing Corporation while the remaining 50% by theState Government. He submits that there was no substantial questionof law as the Tribunal has followed judgment of the Hon'ble SupremeCourt in Bharat Diamond Bourse's case (supra) which judgment wasfurther reiterated by the Hon'ble Supreme Court in Commissioner ofIncome-Tax v. Gujarat Maritime Board, [2007] 295 ITR 561. He alsoplaced reliance on order passed by this Court on 5.7.2010 in ITA No.333 of 2009 (The Commissioner of Income Tax v. MarketCommittee, Pundri). 7.It is clear by reference to the statutory provisions of the Actthat the assessee has been constituted with the object of warehousingof agricultural produce and other activities and matters connectedtherewith. Constitution of the assessee is under the statutory provisionsby way of a notification in official gazette by the State Government withthe approval of Central Warehousing Corporation. The CentralWarehousing Corporation is constituted under Section 3 by the CentralGovernment. The functions of the assessee are statutory functions ofacquiring and building godowns and warehouses and running of suchwarehouses for storage of agricultural produce and other similarcommodities providing facilities for transport of agricultural produce andto act as agent of Central Warehousing Corporation for purchasing,selling, storing and distribution of such produce. These being statutoryfunctions of the assessee clearly falls under Section 2(15) of the Act as ITA No. 563 of 2006 interpreted by the Hon'ble Supreme Court in Bharat Diamond Bourse ITA No. 563 of 2006 interpreted by the Hon'ble Supreme Court in Bharat Diamond Bourse and Gujarat Maritime Board cases (supra), no fault can be foundwith the finding recorded by the Tribunal. Mere fact that it can acquire,hold and dispose of property which is feature of every juristic personand that it is deemed to be a company and can declare dividend will notin any manner deviate from the character of the assessee. 8.We may refer to following observations in judgment of the Hon'ble Supreme Court in Gujarat Maritime Board: “We have perused a number of decisions of this courtwhich have interpreted the words, in section 2(15),namely, “any other object of general public utility”.From the said decisions it emerges that the saidexpression is of the widest connotation. The word“general” in the said expression means pertaining toa whole class. Therefore, advancement of any objectof benefit to the public or a section of the public asdistinguished from benefit to an individual or a groupof individuals would be a charitable purpose (CIT v.Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression would prima facieinclude all objects which promote the welfare of thegeneral public. It cannot be said that a purposewould cease to be charitable even if public welfare isintended to be served. If the primary purpose andthe predominant object are to promote the welfare ofthe general public the purpose would be charitable purpose. When an object is to promote or protect theinterest of a particular trade or industry that objectbecomes an object of public utility, but not so, if itseeks to promote the interest of those who conductthe said trade or industry (CIT v. Andhra Chamber ofCommerce [1965] 55 ITR 722 (SC). If the primary orpredominant object of an institution is charitable, anyother object which might not be charitable but whichis ancillary or incidental to the dominant purpose,would not prevent the institution from being a validcharity (Addl. CIT v. Surat Art Silk ClothManufacturers Association [1980] 121 ITR 1 (SC).” 9.The matter being covered by the judgments, referred toabove, the questions are answered against the revenue and in favour ofthe assessee. 10.The appeals are dismissed. (ADARSH KUMAR GOEL) JUDGE August 30, 2010gbs (AJAY KUMAR MITTAL)JUDGE -8- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax, Panchkula Versus Haryana Warehousing Corporation ITA No. 684 of 2008 Date of Decision: 30.8.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant.Mr. Sanjay Bansal, Senior Advocate with Ms. Shaveta Malhotra, Advocate for the respondent. ADARSH KUMAR GOEL, J. For orders, see ITA No. 563 of 2006 (Commissioner of Income-tax, Panchkula v. The Haryana Warehousing Corporation). (ADARSH KUMAR GOEL) JUDGE August 30, 2010gbs (AJAY KUMAR MITTAL)JUDGE -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax, Panchkula Versus Haryana Warehousing Corporation ITA No. 630 of 2008 Date of Decision: 30.8.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant.Mr. Sanjay Bansal, Senior Advocate with Ms. Shaveta Malhotra, Advocate for the respondent. ADARSH KUMAR GOEL, J. For orders, see ITA No. 563 of 2006 (Commissioner of Income-tax, Panchkula v. The Haryana Warehousing Corporation). (ADARSH KUMAR GOEL) JUDGE August 30, 2010gbs (AJAY KUMAR MITTAL)JUDGE