Facts of the Case

The present appeal was filed by the Revenue against the order dated 31.05.2019 passed by the Income Tax Appellate Tribunal concerning Assessment Year 2012–13.

The respondent/assessee, being an Agricultural Produce Marketing Committee (APMC), filed its return declaring a loss after excluding income amounting to ₹6,04,06,259 under Section 10(26AAB) of the Income Tax Act, 1961.

The return was subjected to scrutiny and an assessment order under Section 143(3) was passed, wherein the Assessing Officer added the said amount to the total income.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who allowed the claim. The Revenue thereafter filed an appeal before the Tribunal, which upheld the assessee’s claim. The Revenue then approached the Delhi High Court.

 Issues Involved

  1. Whether income earned by an Agricultural Produce Marketing Committee (APMC) by way of fees from activities relating to fish, poultry, and eggs qualifies for exemption under Section 10(26AAB) of the Income Tax Act, 1961.
  2. Whether the term “agricultural produce” includes products such as fish, poultry, and eggs for the purpose of exemption under the said provision.

 Petitioner’s (Revenue) Arguments

  • The Revenue contended that “agricultural produce” should be restricted to produce arising from cultivation.
  • It was argued that fish, poultry, and eggs do not fall within the traditional meaning of agricultural produce.
  • Therefore, income derived from such activities cannot be exempt under Section 10(26AAB).
  • Consequently, the assessee wrongly excluded such income from its total taxable income.

 Respondent’s (Assessee) Arguments

  • The assessee submitted that it is an APMC constituted under relevant legislation to regulate marketing of produce.
  • It was argued that Section 10(26AAB) grants exemption to “any income” of such committees and not merely agricultural income.
  • The assessee relied on the definition of “agricultural produce” under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998, which includes fish, poultry, and eggs.
  • Hence, the income earned from regulating such products qualifies for exemption.

 Court’s Findings / Order

  • Section 10(26AAB) uses the expression “any income” and not “agricultural income”.
  • The exemption applies to income earned by APMCs in the course of regulating marketing of agricultural produce.
  • Since the Income Tax Act does not define “agricultural produce”, reliance on the definition under the Delhi Agricultural Produce Marketing (Regulation) Act, 1998 is justified.
  • The said definition is broad and includes fish, poultry, eggs, and other animal husbandry products.
  • The fees earned by the assessee were directly connected with regulating the marketing of such produce.

Accordingly, the Court held that the Tribunal’s decision was correct and required no interference. The appeal was dismissed.

 Important Clarification

  • The judgment clarifies that Section 10(26AAB) covers “any income” of APMCs, provided there is a nexus with the activity of regulating marketing.
  • The term “agricultural produce” is to be interpreted broadly, especially in the context of APMC legislation.
  • Even non-traditional agricultural items like fish, poultry, and eggs are covered under the exemption.
  • The ruling reinforces that statutory interpretation must align with the purpose of APMC laws and not adopt a narrow meaning.

 Sections Involved

  • Section 10(26AAB), Income Tax Act, 1961
  • Section 143(3), Income Tax Act, 1961
  • Section 32, Income Tax Act, 1961 (depreciation context)
  • Section 2(1)(a), Delhi Agricultural Produce Marketing (Regulation) Act, 1998


Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS08022023ITA722023_164815.pdf

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