Registration u/s 12AA Can Not Be Denied to Deemed Company Under a State Act ?

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The assessee is a Corporation established under the provisions of the Warehousing Corporations Act, 1962 (in short ?1962 Act?). It was earlier claiming exemption under section 10(29) of the Act but after deletion of the said provision with effect from 1-4-2003, it applied for registration under section 12AA of the Act. The said application was rejected by the Commissioner mainly on the ground that the assessee was earning income and was declaring dividends. The profits were ploughed back for expanding its activities and then earning larger incomes. Thus, the activities were on commercial principles for profit motive which could not be held to be charitable in nature. On appeal, the Tribunal reversed the said view and held that main purpose of the assessee was to provide better facilities for storage and transportation of food-grains which were objects of general public utility.

On revenue?s appeal:

The issue before , PUNJAB AND HARYANA High Court in Haryana Warehousing Corporation 196Taxman260 was

Whether on the facts and in the circumstances of the case, the ITAT was right in law in directing to grant the registration under section 12AA of the Act, even when under the Warehousing Corporation Act, the assessee corporation is a deemed company and is liable for Income-tax in respect of its income, profits and gains??

The PUNJAB AND HARYANA High Court held vide its order 8/30/2010 as under :

7. It is clear by reference to the statutory provisions of the Act that the assessee has been constituted with the object of warehousing of agricultural produce and other activities and matters connected therewith. Constitution of the assessee is under the statutory provisions by way of a notification in official gazette by the State Government with the approval of Central Warehousing Corporation. The Central Warehousing Corporation is constituted under section 3 by the Central Government. The functions of the assessee are statutory functions of acquiring and building godowns and warehouses and running of such warehouses for storage of agricultural produce and other similar commodities providing facilities for transport of agricultural produce and to act as agent of Central Warehousing Corporation for purchasing, selling, storing and distribution of such produce. These being statutory functions of the assessee clearly falls under section 2(15) of the Act as interpreted by the Hon?ble Supreme Court in Bharat Diamond Bourse?s case (supra) and Gujarat Maritime Board?s case (supra), no fault can be found with the finding recorded by the Tribunal. Mere fact that it can acquire, hold and dispose of property which is feature of every juristic person and that it is deemed to be a company and can declare dividend will not in 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?s case (supra).

?We have perused a number of decisions of this court which have interpreted the words, in section 2(15), namely, ?any other object of general public utility?. From the said decisions it emerges that the said expression is of the widest connotation. The word ?general? in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose (CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression 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. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry- CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity – Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC).?

9. The matter being covered by the judgments, referred to above, the questions are answered against the revenue and in favour of the assessee.

10. The appeals are dismissed.