TaxTMI 
TaxTMI 
2015 (2) TMI 287
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....h the object of general public utility which is a charitable object within the meaning of Section 2(15) of the Income Tax Act, 1961. (iv) In concluding that the activities of advancement of the object of general public utility by the appellant authority are undertaken/carried on in a totally business/commercial nature and hence the authority is not entitled for Registration under Section 12A of the Income Tax Act, 1961. (v) In holding that the appellant is neither a trust/society or institution and therefore the provisions of Section 11 and 12/12A are not applicable on the appellant authority. (vi) In holding the case of the appellant as not fit case for continuance of Registration under Section 12A/12AA of the Income Tax Act, 1961. (vii) In rejecting the Registration under Section 12/12AA of the Income Tax Act, 1961 by ignoring the facts that the issue of registration to similar Development Authorities is also covered by the Orders passed by Hon'ble ITAT-Delhi Bench and the other Benches. 2. The Learned Commissioner of Income Tax has brought on record no new facts and ha....
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....pril 2008, but, on the same very day on which the said registration was granted, the assessee was issued a show cause notice requiring the assessee to show cause as to why the registration so granted not be withdrawn as, according to this show cause notice, the "assessee was conducting work on commercial line for profit purposes". The submissions of the assessee did not satisfy the Commissioner, and, accordingly, Commissioner cancelled the registration. When this cancellation was challenged before a coordinate bench of this Tribunal, the matter was remitted to the file of the Commissioner with the following observations: We have heard the parties and have perused the material on record. The bye laws and regulations now produced before us are a matter of public record. The order under appeal does not show that the learned Commissioner required the assessee, a Development Authority, to produce these bye laws and regulations. The assessee did not have any opportunity in this regard. However, since the bye laws and regulations have now been produced before us, the issue of grant/continuation of registration to the assessee, a Development Authority under sec. 12AA of the Act, requires ....
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....ishad. It was noted that, as held in the said decision, the revenue's objections like "the committees and boards being managed by public servants, collection of fines by the committee, no voluntary contributions by outsiders" were without substances, and that "at the stage of the registration, the learned Commissioner has to only record his satisfaction about genuineness of activities of the institution and its charitable purposes". In the said decision, it was also held that since "the above conditions are not shown to be not satisfied in these cases", "there are no hurdles" in the registration under section 12AA. It was in this backdrop that the coordinate bench yet again sent the matter back to the learned Commissioner with the following directions: In view of the above, respectfully following "M/s. Khurja Development Authority" (supra) and "U.P. Awas Evam Vikas Parishad" cited therein, since the Tribunal, in similar cases of local Development Authorities, has held that to be eligible for registration, the matter at hand is remitted to the file of the ld. CIT to decide it de novo in accordance with law, keeping in view the judicial precedents on the issue. 6. Learned Commissio....
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....Commissioner instead of doing that exercise did not bother to make a reference of the previous history. He failed to point out as to why the case of the assessee cannot be treated at par with the case of Khurja Development Authority and other authorities. There is failure on the part of the Learned Commissioner to consider all these aspects in a logical way. On the other hand, he has referred in action at the end of the assessee in submitting the copies of bye laws and other details. We confronted the learned counsel for the assessee as to why the assessee fail to submit these details as observed by the Learned Commissioner in paragraph 3 of the impugned order. The learned counsel for the assessee pointed out that copies of the bye laws were submitted to the Learned Commissioner in the original round of litigation. In our opinion, assessee should have filed these details in the fresh round of litigation. There is contributory negligence at both ends. We would have imposed a cost upon the assessee for its in action, but after having a glance over the order of the Learned Commissioner, we desist from visiting the assessee with cost. Taking into consideration all these aspects, we set....
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....iew of foregoing discussion, it is evident that the authority was established predominantly for commercial purposes and not for meeting out the charitable objects. The income from the authority is thus not exempt u/s 12 of the I.T. Act, 1961 and the basic law relating to exemption u/s 11 is in respect of property held under Trust for which the satisfaction of Commissioner of Income-tax is required about the genuineness of activities s also their charitable nature. It is not in respect of income from any particular activity. If the reasoning as given by the authority is followed, then the income of even private utility companies like BSE, Tata Power and Infrastructure Development, Finance Corporations, like IDFC may also qualify for exemption on doing activities of general public utility which is however against the clear provisions of the statute. Reliance is further placed in the case of Safdurjung Enclave Educational Society vs. Municipal corporation Delhi (9192) 3 SCC 390, wherein the Hon'ble Supreme Court has held that activities being run on commercial lines do not fall within the ambit of charitable object. The objective clauses of the authority as discussed above are in the....
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.... to another order passed by the coordinate bench, which is extensively reproduced and concurred with, operative portion of such an order passed by the coordinate bench so reproduced, was also an integral part of our order. It was not open to the learned Commissioner to act in defiance of our orders. Yet, instead of taking up the matter in appeal before Hon'ble High Court, learned Commissioner has chosen not to follow our directions. Such an approach to any judicial order is unacceptable and we are deeply anguished to take note of such a conduct by the learned Commissioner, particularly as it is fourth round of proceedings, in this case, before the Tribunal. 12. The question of due deference to judicial orders apart, even on merits, the grievance of the assessee deserves to be upheld. 13. The short question that is really required to be adjudicated, on merits of this case, is "whether or not the learned Commissioner was right in exercising his powers under section 12AA(3), in withdrawing the registration granted to the assessee under section 12AA". While grounds of appeal are not happily worded inasmuch as these grounds do not bring to light the correct controversy and refer to re....
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....ineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. 17. It is thus clear that before the granting registration under section 12 AA(1), (a) Commissioner is required to satisfy himself about the objects of the trust or institution, and (b) Commissioner is required to satisfy himself about the genuineness of its activities. When we compare these two pre conditions for exercise of powers under section 12 AA(1), with the preconditions for exercise of the powers under section 12AA (3) - as set out earlier in this order, we find that while Commissioner can examine the objects of the trust or the institution, at the point ....
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....12AA(3) are concerned. While learned Commissioner has, on the basis of elaborate reasoning set out in the impugned order, concluded that, "the objective clauses of the authority..... are in the nature of business with a view to earn profits" and that "the activities of Muzaffarnagar Development Authority are not charitable in nature nor advancement of general public utility within the meanings of Section 2(15) of the Income Tax Act", none of these reasons, even if correct, can be legally sustainable basis for exercise of powers under section 12AA(3). The only occasion to examine whether or not the objects are charitable is when the registration is granted is when examining the application of registration under section 12AA(1) and once no adverse inference is drawn, vis -à-vis the objects, at that stage, that aspect of the matter cannot be examined again in the course of exercise of powers under section 12AA(3). 18. Clearly, therefore, the very foundation of impugned order is wholly unsustainable in law. 19. In any event, the question as to whether an activity of the kind, as carried on by the assessee, is a charitable activity or an activity of general public utility is no....