TaxTMI 
TaxTMI 
2013 (9) TMI 570
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....assed in ITA No. 45/Luc/2010; 114/2010 2003-04 04.08.2010 passed in ITA No. 228/Luc/2009; 04/01/11 2006-07 30.09.2010 passed in ITA No. 42/Luc/2010; 31/2010 2004-05 21.10.2009 passed in ITA No. 278/L/2009 On 22.04.2010, a Coordinate Bench of this Court has admitted the Appeal No. 149 of 2009, on the following substantial question of law:- "Whether keeping the facts and circumstances of the case, the Tribunal had committed substantially illegal by holding that the income of the assessee is exempted under Section 11 of the Income Tax Act, though there is no condition that no profit should be earned by its activities and the profit earned will not be distributed amongst the stake holders and the finding of the Tribunal with regard to exemption under Section 12 of the Act is also substantially illegal ?" On 26.03.2010, a Coordinate Bench of this Court has admitted the Appeal No.31 of 2010, on the following substantial question of law:- "Whether by assuming registration under Section 12AA of the Income Tax Act and exempting income of the Assessee without considering the dispute in terms of Sections 11, 12 & 13 of the Income Tax Act coup....
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....has justified the orders passed by the AO. He submits that the assessee had applied for the registration as charitable institute under Section 12AA of the Act before the CIT, and the same was granted in pursuance to the orders dated 25.07.2005, passed by the Tribunal. 4. Learned counsel further submits that while passing the assessment order under scrutiny, the Assessing Officer examined the nature of activities of the assessee and came to the conclusion that the entire activities of the assessee during the year under consideration are beyond the purview of charitable purposes and the income earned by the assessee is not eligible for the benefits available under Section 11 of the Act. So, the Assessing Officer has assessed the income as business income and taxed accordingly. 5. It is also a submission of the learned counsel that in case of a trust, if there is income derived from property held under trust or from voluntary contributions and to ascertain whether in the case of the assessee the character of income falls under any one of the two categories envisaged in Sections 11(1)(a), (b), (c), and (d), the factual activities being carried out by the assessee is to be examine....
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....hereto". The Act declared the assessee is an "Authority" under Section 7. The objects of the Authorities are as under:- "7. Objects of the Authority-The objects of the Authority shall be to promote and secure the development of the development area according to plan and for that purpose the Authority shall have the power to acquire, hold, mange and dispose of land and other property, to carry out building, engineering, mining and other operations, to execute works in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto: Provided that save as provided in this Act nothing contained in this Act shall be construed as authorizing the disregard by the authority of any law for the time being in force." 9. Learned counsel also submits that as per Section 58 of the Act, in case of dissolution of the authority, the entire assets will be vested with the State Government. So, no profit of interest is involved. 10. Up to the assessment year 2002-03, the assessee was also enjo....
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....rust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied; (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. [(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of Section 11 and 12 shall apply in relation to the income of such tr....
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....ects, there is no good reason for holding that statutory bodies could not be treated as "charitable" within the meaning of Section 2(15). The object of the "Authority" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 & 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treated to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolute or conclusive. It is subject to control of Sections 60 to 63. If it is found by keeping in view the provisions of Sections 60 to 63 that it is not so includible then such income does not qualify for any relief. 18. The contention that the assessee are earning profit has no merit as per the ratio laid down in the case Sarafa Assoc....
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....t and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State. 21. Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of Sections 11 & 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) of Section 12AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution, and (ii) about the objects of the trust or institution. Section 12A stipulates that the provisions of Sections 11 & 12 shall not apply in relation to income of a trust or an institution unless the conditions stipulated therein are fulfilled. Thus, granting of registration under Section 12AA denotes that the conditions laid down in Section 12A stand fulfilled. 22. The effect of such a certificate of registration under Section 12AAA, therefore, cannot be ignored or wished away by the Assessing Officer by adoptin....