Fee Earned By APMC For Regulating Poultry Market, Exempt Under S. 10(26AAB) of Income Tax Act: Delhi High Court

Rejecting the argument of the revenue department that unless income which is earned by an APMC is relatable to agricultural produce, it cannot be excluded from its total income, the bench of Justices Rajiv Shakdher and Tara Vitasta Ganju remarked that Section 10(26AAB) uses the expression “any income” and not “agricultural income” of the APMC.

While observing that the Income Tax Act does not provide the definition of “agricultural produce”, the Court reckoned that the definition of agricultural produce, as contained in Section 2(1)(a) of the Delhi Agricultural Produce Marketing (Regulation) Act, 1998, read with the Schedule, is wide enough, which includes all kinds of produce, including fish, poultry, and eggs. Therefore, even otherwise, the fee earned by the APMC from regulating the poultry market would constitute income derived from regulating agricultural produce and the same would be excluded from its total income, the Court held.

As per Section 10(26AAB) of the Income Tax Act, any income of an APMC or a board, which is constituted under any law for the purpose of regulating the marketing of agricultural produce, shall not be included in its total income.

The respondent/assessee, M/s Fish Poultry and Egg Marketing Committee, is an Agricultural Produce Marketing Committee (APMC) whose return for the relevant assessment year was subjected to scrutiny. The Assessing Officer (AO) passed an assessment order under Section 143(3) of the Income Tax Act, making additions to the assessee’s income. The amount excluded by the assessee under Section 10(26AAB), was added to its income. Against this, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)), who ruled in favour of the assessee.

The revenue department filed an appeal before the Income Tax Appellate Tribunal (ITAT). Dismissing the appeal of the revenue department, the ITAT concluded that the fee/ income derived by the respondent/assessee for regulating the poultry market, would fall within the scope of Section 10(26AAB). It ruled that the expression “agricultural produce” would cover products like fish, poultry, and eggs, as regulated by the respondent/assessee.

The revenue department challenged the order of the ITAT before the Delhi High Court.

The department argued before the Court that the ITAT had committed an error by holding that the said poultry products fell within the scope of the expression “agricultural produce”. It averred that agricultural produce is that produce which is yielded in the course of cultivation and not the kind of poultry products regulated by the assessee. It pleaded that since the income earned by the respondent/assessee is not derived from agricultural produce, it could not have excluded the same from its total income by taking recourse to the provisions of Section 10(26AAB).

While noting that the definition of “agricultural produce” is not provided in the Income Tax Act, the Court referred to Section 10(26AAB) of the Act. The bench reckoned that the said provision excludes “any income” of the APMC or board, which must be constituted under any law in force. Further, the income earned by the APMC or board should have nexus with the purpose of regulating the marketing of agricultural produce.

“Therefore, the argument advanced by Mr Hossain, on behalf of the appellant/revenue, that unless income which is earned is relatable to agricultural produce, it cannot be kept out of the pale of total income of the assessee, is clearly not tenable, since the expression incorporated in Section 10(26AAB) of the 1961 Act is “any income” and not “agricultural income” of the Agricultural Produce Market Committee or Board,” the Court said.

Referring to the facts of the case, the Court took note that the wholesalers of poultry produce bring their products, which include fish, poultry and eggs, to the designated spots where they are cleaned, sorted and sold to the traders.

It observed that the respondent/assessee, M/s Fish Poultry and Egg Marketing Committee, has been constituted under the Delhi Agricultural Marketing (Regulation) Act, 1976 and was appointed as a regulator under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 to facilitate trading in fish, poultry and eggs. The fee that the respondent/assessee obtains helps the purpose for which it is constituted i.e., regulating the marketing of agricultural produce, the Court said.

The bench further took note that since “agricultural produce” is not defined in the Income Tax Act, the ITAT had taken recourse to the definition of “agricultural produce” provided under Section 2 of the Delhi Agricultural Produce Marketing (Regulation) Act.

“The definition of agricultural produce, as contained in Section 2(1)(a) of the 1998 Act, read with schedule, as extracted above, is wide, which includes all kinds of produce, including fish, poultry, and eggs. Therefore, even otherwise, the fee earned by the respondent/assessee, as held by the Tribunal, would constitute income derived from regulating agricultural produce,” the High Court said.

The Court thus upheld the order of the ITAT and dismissed the appeal.

Case Title: PC Commissioner of Income Tax vs. M/s Fish Poultry and Egg Marketing Committee

Citation: 2023 LiveLaw (Del) 246

Counsel for the Appellant: Mr Zoheb Hossain, Sr. Standing Counsel with Mr Vipul Agarwal and Mr Parth Semwal, Standing Counsels

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