TaxTMI 
TaxTMI 
2014 (8) TMI 305
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....at there was receipt which seemed to be related to trade, commerce or business, violating the amended provisions of section 2(15) of the I.T. Act. Accordingly, a show cause notice was issued to the assessee as to why registration granted to the assessee trust/ society may not be reviewed in the context of the new provisions of section 2(15) of the Act and to show cause as to why the approval granted u/s 12A/80G may not be withdrawn. The assessee in detail explained the constitution of assessee society and the activities undertaken by it and pointed out that development of the district by providing housing, roads, development and maintenance of parks (boost to environment), plantation of trees (again pertaining to environment), providing sewerage system (clean and healthy environment), are all objects for the welfare of the people of the district; as also these are objects of general public utility. The assessee further pointed out as under: "Your attention is drawn to the fact that there are so many similar authorities functioning in the state of U.P., Uttarakhand and other stats of India and different Benches of the Income Tax Appellate Tribunal (ITAT ) have held that activitie....
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....red only for public purposes. Section 57 of the said Act also provides that Authorities could make its bye-laws with the approval of the State Government. Section 58 provided that in case of dissolution of the Authority, all the properties, funds and dues which are vested in or realizable by the Authority, shall vest in or to be realizable by the State Government. Various sections of the said Act make it abundantly clear that the activities of the Authorities were aimed at public purposes and not personal one We, therefore have no hesitation in holding that the activities of the assessee before us are for advancement of general public utility. 4. Copy of Govt. G.O through which Authority was created/ formed: To conclude, it is submitted that the Haridwar Development Authority is engaged in activities enriched in definition of Charitable Purpose given in sub-section 15 of Section 2 of the Income Tax Act." 2.1. Further, in response to notice dated 14-12-2011, the assessee submitted as under: ".... 3. The funds of the authority are generated by way of development fee, map fee, stamp duty, stacking fee etc. for which the State government has authorized it by Special Act. 4.....
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....arrying out any activity in the nature of trade, commerce or business, nor it is rendering any service in relation to such trade, commerce or business. The Authority is performing such regulatory functions as assigned to the authority by legislation. 8. The regulatory function being carried out by the Haridwar Development Authority was only incidental to the main object which is development of Haridwar, Pauri, Tehri and parts of Dehradun and all developmental schemes as well as beautification of the said Districts comes under the purview m which is certainly an object of general public utility and, therefore, qualifies to be termed as 'charitable activity for the purpose of section 2(15). 9. The newly amendment section 2(15) will apply only to the entities whose purpose is 'advancement of any other object of public utility' i.e. the fourth limb of definition of 'chartable purpose; contained in section 2( 15), hence entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act, if they carryon commercial activities. 10. That similar views and conclusions have been arrived at by the Chandigarh B Bench of IT AT in its order d....
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....s-a-vis the situation prevailing now, there was no cause of action for withdrawing the registration. In view of the above submission we request your goodself not to withdraw registration u/s 12AA of the Income Tax Act." 2.2. Ld. CIT did not accept the assessee's contention and withdrew the registration relying on following decisions: - ITAT Chandigarh Bench 'B' in the case of Punjab Urban planning & development authority Vs. CIT (ITA no. 764/Chd/2003 dated 1-6- 2006 reported in 103 TTJ-Chd.-988) Wherein after examining the activities undertaken by the authority it was held that they were not of charitable nature but mere of commerce nature involving profit motive. - ITAT Amritsar Bench in the case of Jalandhar Development Authority Vs. CIT (2009) 124 TTJ(ASR) 598. 2.3. Ld. CIT also referred to CBDT Circular no. 11/2008 dated 19-12- 2008 wherein the amended provisions of section 2(15) were explained and it was pointed out that the entities which were carrying on commercial activities would not be entitled for exemption u/s 11. 2.4. The findings of ld. CIT are summarized as under: (i) The activity undertaken by the authority was in the nature of trade, c....
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.... general public utility which is a charitable object within the meaning of section 2(15) of the Income Tax Act, 1961. 4. On the facts and circumstances of the case and in law, the Ld. CIT has erred in holding that the activities of the appellant are not charitable. 5. On the facts and circumstances of the case and in law, the Ld. CIT has grossly erred in concluding that the activities of advancement of th4e object of general public utility by the Appellant Authority are undertaken/ carried on in a totally commercial nature and hence the registration granted to the Authority is liable to be cancelled. 6. On the facts and circumstances of the case and in law, the Ld. CIT is not justified in comparing the appellant with private builders, completely ignoring the fact that the appellant authority has not been created with the object of earning profit and any surplus generated by the Authority has to be spent for the benefit of the area itself which the appellant Authority is duly bound to develop as per its aims and objects. 7. On the facts and circumstances of the case and in law, the Ld. CIT in canceling the registration has erroneously ignored the fact that he issue of re....
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....other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto. 4.3. Ld. Counsel further referred to section 14 of the UP Urban Planning & Development Act and pointed out that after the declaration of any area as developed area, no development of land can be undertaken or carried out or continued in that area by any person or body (including a department of Government) unless permission for such development has been obtained in writing from the Vice Chairman in accordance with the provisions of this Act. 4.4. Ld. Counsel pointed out that no private colonizer could carry on any activity relating to construction in the developed area notified u/s 3 of the UP Urban Planning & Development Act. Therefore, ld. CIT's observation that every builder would become entitled to exemption is devoid of any merit. 4.5. Ld. Counsel further referred to section 17 of the Act and pointed out that compulsory acquisition of land in regard to the activities to be pursued by the authority was to be done by the state government under the provisions of Land Acquisition Act. He, therefore, submitted that it is....
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....lished for charitable purposes. In the case of the assessees, the dominant object is to regulate procurement and supply of agricultural and some other produce and to meet the expenses required for achieving the said object, the Legislature has empowered the assessees to levy cess/ fees. Moreover, surplus remaining in the market fund are ploughed back for carrying out the object for which these Mandi Samitis are established. Thus, the surplus remaining in the market fund is neither distributed nor accumulated as profits. In these circumstances, it cannot be said that the assessees are established with profit motive so as to deny registration under Section 12A/ 12AA of the Act. 4.10. With reference to aforementioned para, ld. Counsel submitted that in the present case also the surplus remaining is neither distributed nor accumulated as profits and applied for the objects of the trust. 4.11. Ld. Counsel thereafter referred to the ITAT Ahmedabad Benches order dated 7-6-2013 in the case of Sabarmati Ashram Gaushala Trust Vs. ADIT (Exemption) [ ITA no. 670/Ahd/2013], contained at pages 68 onwards of the PB, wherein, inter alia, in para 5, following observations are made: "We find t....
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....activities of general welfare covered by the expression "any other object of general public utility" in section 2(15) of the Act. In view of the judgment of the hon'ble Supreme Court in the case of Gujarat Maritime Board [2007] 295 ITR 561 and the Division Bench judgment of this court in the case of Market Committee [2007] 294 ITR 563, we are of the view that the question sought to be raised is covered against the Revenue." 5. Ld. DR submitted that the ld. Commissioner has dealt with all the cases. He submitted that circle rat at which the Authority gives the land is market rate and, therefore, ld. CIT, relying on the decision of the ITAT Chandigarh Bench 'B' in the case of Punjab Urban Planning & Development Authority Vs. CIT (2006) 103 TTJ (Chd) 988, rightly held that while carrying out its objects it was acquiring land on normal rate and selling the same after developing it to general public at a higher rate. The facilities, like parks, schools, community centres etc., provided to plot holders were tools to attract investors and hidden cost of these facilities were already include din cost charged from public. 5.1. Ld. DR pointed out that ld. CIT also referr....
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.... Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year. 7.1. The assessee was set up as per U.P. Govt. G.O. dated 04/06/1986 under Uttar Pradesh Nagar Yojna Evam Vikas Adhiniyam 1973 (based on Delhi Development Act 1957) with an objective of development of Hardwar, Pauri, Tehri and part of Dehradun and all development schemes as well as beautification of the District came under its purview. In the objects, it is, inter alia, mentioned that the existing local bodies and other authorities inspite of their best efforts had not been able to cope with the problems of town planning and urban development and, therefore, to tackle the same resolutely the State Government considered it advisable that in such developing areas, Development Authorities patterned on the Delhi Development Authority be established. The entire activities are controlled/ administered through various government orders and notifications. 7.2. It is noticeable that in section 2(15) preservation of environment (including watersheds, forests and wildlife) and preservation of mon....
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....clusive right to the Development Authority for development of land in respect of area which has been declared as development area u/s 3. After such declaration no development of land shall be undertaken or carried out or continued in that area by any person or body (including a department of government), unless permission of such development ahs been obtained in writing from the Vice Chairman in accordance with the provisions of the Act. 7.6. Further, the development has to be carried out as per the plans. Section 18 of the Act requires the State government to acquire the land and transfer the same to the Development Authority. The Authority is not entitled to gift the land but to dispose of the land by way of sale, exchange or lease or by the creation of any easement, right or privilege or otherwise. 7.7. Section 20 deals with the fund of the Authority, which is reproduced hereunder: "20. Fund of the Authority - (1) The Authority shall have and maintain its own fund to which shall be credited - (a) All moneys received by the Authority from the Stage Government by way of grants, loans, advances or otherwise; (b) All moneys borrowed by the Authority from sources other....
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....tive. Unless there was a profit motive, it cannot be said that an entity was carrying on any trade, commerce or business. 7.11. We further find that in case of Krishi Utpadan Mandi Samity (supra), the Hon'ble Allahabad High Court, while dealing with the proviso to section 2(15), inter alia, observed that main object is to be considered and incidentally if some profit is made and the said profit is used for charitable purpose the said trust/ institution does not cease to be established for charitable purpose. 7.12. We further find that in the case of Muzaffarnagar Development Authority (supra), the ITA T following the decisions in the case of U.P. Avas Evam Vikas Parishad (supra); and M/s Khurja Development Authority Vs. CIT (supra), allowed the assessee's appeal. 7.13. Further in the case of Sabarmati Ashram Gaushala Trust Vs. ADIT (E) (supra), we find that Tribunal has held that profit motive is must for holding an activity to be in the nature of trade, commerce or business. 7.14. Since the decision of Hon'ble Allahabad High Court is in the case of U.P. Avas Evam Vikas Parishad (supra) is applicable to the facts of the case, therefore, we do not find any re....
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....plication under section 12A in form 10A for registration of the institution before the Commissioner. The proviso to clause (a) has been substituted by the Finance Act, 1991 w.e.f. 1st October, 1991 and provides that if an application for registration of the trust is made after the specified period, the Commissioner may register the trust or institution from the date of creation of the trust or the establishment of the institution if he is satisfied, for reasons to be recorded, that the person was prevented from making the application before the expiry of the period for sufficient reasons. If he is not so satisfied, the registration would take effect from first day of the financial year in which the application is made as per (ii) proviso to section 12(A)(1)(a) which reads as under: (ii) "from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied. Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007." 11. Respectfully following the above decision of Hon'ble Allahabad High Court we condone the delay and direct the ld. Commissioner....