Appeal allowed, registration restored under section 12AA. Assessee's activities deemed lawful.

The Tribunal allowed the appeal of the assessee, canceling the Chief Commissioner of Income Tax's order and restoring the registration under section 12AA of the Income Tax Act. The Tribunal found that the assessee's activities, including selling lands and remitting proceeds to the government, were in line with its objectives and permissible under the law. Additionally, the Tribunal determined that the amendment to section 2(15) did not apply to the assessee as it was not engaged in commercial activities, ultimately concluding that the cancellation of registration was unjustified.

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Issues Involved:
1. Cancellation of registration under section 12AA(3) of the Income Tax Act, 1961.
2. Engagement in commercial activities by the assessee.
3. Acting as an agent for the Government of Andhra Pradesh.
4. Sale of lands and remittance of proceeds to the Government.
5. Applicability of section 2(15) of the Income Tax Act post-amendment.

Issue-wise Detailed Analysis:

1. Cancellation of Registration under Section 12AA(3):
The Chief Commissioner of Income Tax (CCIT) cancelled the registration granted to the assessee under section 12AA(3) based on the belief that the assessee was engaging in commercial activities and not adhering to its stated objectives. The CCIT argued that the assessee was auctioning lands and entering into joint ventures for commercial purposes, which violated the conditions of its registration. The Tribunal, however, found that the CCIT's decision was based on presumptions and lacked proper material evidence. It was noted that the assessee had continuously carried out development activities in line with its objectives, such as constructing housing for low-income groups, developing infrastructure, and maintaining public amenities. The Tribunal concluded that the CCIT's cancellation of registration was unjustified and restored the registration.

2. Engagement in Commercial Activities:
The CCIT argued that the assessee was engaged in commercial activities by auctioning lands and entering into joint ventures for constructing commercial properties. The Tribunal, however, found that such activities were permitted under the Andhra Pradesh Urban Areas (Development) Act (APUDA Act) and were necessary for the overall development of the area. The Tribunal held that selling lands in public auctions and entering into joint ventures for constructing commercial complexes did not violate the assessee's objectives, as long as the proceeds were used for public utility services and furthering the assessee's objectives.

3. Acting as an Agent for the Government of Andhra Pradesh:
The CCIT contended that the assessee acted as an agent for the Government of Andhra Pradesh by selling government lands and remitting the proceeds to the government, which was against the objectives of the assessee. The Tribunal found that the assessee was permitted to assist the government in selling lands under the APUDA Act and that such actions were within the scope of its objectives. The Tribunal noted that the government had directed the assessee to sell the lands and remit the proceeds to the government account, and there was no evidence to suggest that the assessee had violated its objectives or misused the funds.

4. Sale of Lands and Remittance of Proceeds to the Government:
The CCIT argued that the assessee sold lands indiscriminately and remitted the proceeds to the government, which was against its objectives. The Tribunal found that the sale of lands was conducted transparently through public auctions, and the proceeds were used for public purposes. The Tribunal noted that the sale of lands was permitted under the APUDA Act and that the proceeds were used for development activities in line with the assessee's objectives. The Tribunal concluded that the sale of lands and remittance of proceeds to the government did not violate the assessee's objectives.

5. Applicability of Section 2(15) Post-Amendment:
The CCIT held that the assessee was hit by the amendment to section 2(15) of the Income Tax Act, which came into effect from 01.04.2009, and thus not eligible for exemption. The Tribunal found that the assessee's activities were within the purview of public utility services and were not commercial activities. The Tribunal noted that the Central Board of Direct Taxes (CBDT) had issued a circular clarifying that the registration under section 12AA should not be cancelled merely because the provision to section 2(15) comes into play. The Tribunal concluded that the amendment to section 2(15) did not apply to the assessee, as it was not engaged in commercial activities.

Conclusion:
The Tribunal allowed the appeal of the assessee, cancelling the order of the CCIT and restoring the registration under section 12AA of the Income Tax Act. The Tribunal found that the assessee had continuously carried out activities in line with its objectives and that the CCIT's decision to cancel the registration was based on presumptions and lacked proper material evidence. The Tribunal held that the sale of lands and remittance of proceeds to the government, as well as entering into joint ventures for constructing commercial properties, were within the scope of the assessee's objectives and did not violate the provisions of the APUDA Act. The Tribunal also concluded that the amendment to section 2(15) did not apply to the assessee, as it was not engaged in commercial activities.

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