TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 458
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....able activity. After verifying the information submitted as well as considering the submissions made by assessee, ld. DIT(E) held that exemption u/s 11 cannot be a substitute or alternative for exemption earlier granted u/s 10(20) of the Act to a local authority. Further, ld. DIT(E) held that assessee is merely engaged in construction of housing projects and selling them to prospective buyers, therefore, the activity of assessee is more or less like any other real estate developer/builder, hence, the activity/object of assessee cannot be considered to be a charitable in nature. On the aforesaid basis, ld. DIT(E) held that assessee is not eligible for registration u/s 12A of the Act. 3. Being aggrieved of the aforesaid order of ld. DIT(E), assessee filed appeal before the ITAT. However, appeal was filed with a delay of 1013 days. Though, assessee before the Tribunal pleaded for condonation of delay, but, the ITAT on considering submissions of assessee along with the cause shown for delay were not satisfied with the reason shown and accordingly dismissed the appeal of assessee vide order dated 14/05/2010 passed in ITA No. 110/Hyd/2008 without condoning the delay. The aforesaid order....
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....sr.) 598 2. Punjab Urban Planning and Development Authority Vs. CIT, [2006] 103 TTJ 988 3. AP State Housing Corporation Ltd. Vs. DIT(E), ITA No. 1845/H/12, dt. 19/04/2013. 6. In the rejoinder, ld. AR submitted, decisions relied upon by ld. DR are fully distinguishable as they do not relate to housing board and unlike assessee they are engaged in various other activities apart from building housing projects. Further, ld. AR submitted, there are many cases where registration u/s 12A has been granted to authorities undertaking similar activity. In support of such proposition, ld. AR relied upon the following decisions: 1. Rajasthan Housing Board Vs. CIT, 51 SOT 383 2. Maharashtra Housing and Area Development Authority Vs. ADIT(E), 58 SOT 196 3. Jodhpur Development Authority Vs. CIT, 145 TTJ (JD) 221 Further, ld. AR relying upon a decision of ITAT, Mumbai in case of City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT, 2012, 138 ITD 381 (Mum.) submitted before us, housing board is actually carrying on the activity of building housing projects as an agent of the State Government, hence, it cannot be said that activities undertaken by assessee are of commercial ....
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....ct and it is inclusive one. As per the said provision, charitable purpose includes education, medical relief, relief to poor or advancement of any other object of general public utility. In the present case, as held by ld. DIT(E) assessee is merely engaged in the activity of building housing projects and selling them to the prospective buyers having a different economic status. Thus, the activities of assessee is in no way different from the activities carried on by a private builder/developer engaged in similar activity of building housing projects and selling them to prospective customers. Though, it may be a fact that assessee is able to sell housing projects at a lesser cost due to some concessions granted by Government, but, that itself cannot be considered to be a charitable activity as assessee is deriving profit from such activity of selling housing projects. It is not the case of assessee that it is providing such housing projects either free of cost or on cost to cost basis. That being the case, assessee has to be treated at par with any other private builder/developer involved in such activity. Moreover, the activity of the assessee if at all can be considered to be for ....
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....lopment Authority with effect from such date as may be specified therein. (2)...... (3)Every Authority so constituted shall be a body corporate by the name of the development area for which it is constituted having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable, immovable and to contract; and shall by the said name sue and be sued." Section 5 of the said Act dealing with the objects and powers of an authority so constituted, reads as follows- "5. Objects and powers of the Authority - The object of Authority shall be to promote and secure the development of all or any of the areas comprised in the development area concerned according to plan and for that purpose, the Authority shall have the power to acquire, by way of purchase or otherwise, hold, manage, plan, develop and mortgage or otherwise dispose of land and other property, to carry out by or on its behalf building, engineering, mining and other operations, to execute works in connection with supply of water and electricity, disposal of sewerage and control of pollution, other services and amenities and generally to do anything necessary or expedient for purp....
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....o any conclusion, we are supposed to see the meaning of the word 'charitable purpose' which has been defined in Section 2(15) of the Act which includes relief to the poor, education, medical relief and advancement of any other object of general public utility. A strong contention was raised by the learned Counsel for the assessee that the assessee/PUDA is also executing the development of following works/infrastructures: (a) Development of rehri market (b) Water supply and sewerage (c) Development of sports complexes (d) Bridges (e) Bus queue shelters (f) Bus stands (g) Swimming pools (h) Community centres (i) Public toilets (j) Development of parks (k) Cremation grounds (l) Construction of schools, etc. Regarding the purpose of the Act, which is available at p. 13 of the paper book of the assessee and to which our attention was also drawn, it speaks about various amenities and utilities as has been mentioned in Section 2(b) of the said Act. The learned Counsel for the assessee during argument took a strong plea that on identical facts registration under Section 12A of the Act was accorded to Patiala Urban Planning & Development Authority, Patiala, vide....
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....is of charitable nature. A plea was raised by the learned Counsel for the assessee that funds are provided by the Punjab Government or generated by the assessee itself. To generate its funds for carrying out its objects, the assessee is acquiring lands, developing them and selling the plots to the general public who apply for the same. Even the economically weaker strata of the society is generally applying. It is not the case that the assessee is allotting houses to the poor masses free of cost. The Hon'ble apex Court in the case of Asstt. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) has deliberated upon the issue of charitable purposes wherein the founder of a daily newspaper created a trust in March, 1954 and the objects of the trust were originally to establish newspaper as an organ of educated public opinion for the Tamil reading public. In July, 1957, a supplementary deed making the trust irrevocable and Anr. supplementary deed for establishing and running a school/college for teaching journalism were added. The question before the Hon'ble Court was whether the income of the trust was exempt from income-tax during the relevant period, The Hon....
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....e analysed, it has turned into a huge profit-making agency for which it is taking money from the general public. In such a situation, we are of the view that no charity is involved and if any institution of public importance like schools, community centers are created/developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government. It can be said that objects/activities of the assessee are more of commercialized nature and we do not find any charity in it. At the same time, if these facilities are not provided, then nobody will purchase a plot. It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added, so no charity is involved. At best, the assessee can be said to be an authority created to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through his agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from the public it....
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....or road development, it was held to be of charitable purposes and thus income was exempted but it is not so in the case of the present assessee. The Hon'ble apex Court in the case of CIT v. Bar Council of Maharashtra (supra) where the prime dominant purpose was for the advancement of object of public utility, it was held to be entitled to exemption. The learned Counsel for the assessee, during argument raised a plea that totality of circumstances has to be seen specially that all money goes with the State Government and not in private hands, the prices are fixed and the assessee is not a commercial organization and the predominant activity of the assessee is to develop infrastructure and contended that rule of consistency has to be seen for which reliance was placed upon the decisions pronounced in Union of India and Ors. v. Kaumudini Narayan Dalai and Anr. ,CTT v. Shivsagar Estate , CIT v. Federation of Indian Chambers of Commerce and Industry and also the decision in the case of Dy. CIT v. United Vanaspati Ltd. (2004) 83 TTJ (Chd)(TM) 201 : (2004) 88 ITD 313 (Chd)(TM). We are of the view that principles of res judicata do not apply to income-tax proceedings. However, we agree....
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....ip remains with the committee but in the case of the assessee it goes to individual and the learned CIT was not satisfied with the explanation of the assessee. Likewise in the judicial pronouncements in New Life in Christ Evangelistic Association (NLC) v. CIT as relied by the assessee, it can be said that it is a religious trust, so not applicable to the present facts as the assessee is auctioning the plots on huge profits and even the Hon'ble Courts are intervening to enhance compensation on petitions filed by land owners. However, if the argument of the assessee is analysed on point of general public utility, still it can be said that commercial angle with profit motive is involved which has become predominant object of the assessee. Even if this issue is analysed as contended by the learned Counsel for the assessee that application of income is not the criteria in the light of the decision of Hon'ble High Court of Allahabad in the case of Fifth Generation Education Society v. CIT , still we are of the view that if the objects and real situation is analysed, the objects are not of charitable nature, Almost in every activity there is a scent of commercialization/profit mot....
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....the State and for that purpose the authority shall have the powers to acquire by way of purchase transfer, exchange or gift or to hold, manage, plan, develop and mortgagee or otherwise dispose of land or other property or to carry out itself or in collaboration with any other agency or through any other agency on its behalf, building, engineering, mining and other operations to execute works in connection with supply of water, disposal of sewerage, control of pollution and other services and amenities and generally to do anything with the prior approval or on direction of the State Government, for carrying out the purposes of the Act." 13. At this juncture, it may be observed that the above objects noted by the Amritsar Bench of the Tribunal in the context of Jalandhar Development Authority, is almost identical to S.5 of the Andhra Pradesh Urban Areas (Development) Act, 1975, under which the assessee was created, and which we have already extracted hereinabove. Considering the contention of the assessee with regard to the charitable nature involved in its activities, and also taking into account the case-law cited before it in that behalf, held in conclusive portion of para 6.1 o....
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....here profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very higher rates and is earning as profit therefrom. A new trend has also emerged that the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments In such a situation, no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution. The facilities which are provided to the plot holders are incidental to the commercial activity carried out by the assessee and if certain facilities like parks, community center, school are provided, it is not only basic requirement, rather a tool attracting the investors wherein the hidden cost of these facilities is already included. In the absence of these facilities, normally the purchaser may not invest and the prices may be less. In view of these facts, the assessee's activities not being of charitable nature, the application of....
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.... the duty of the Government to create/provide all these facilities to public at large, which is being done through his agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated form the public itself, so where is the charity? If the activities of the assessee and the arguments of both the learned counsel are put in a juxtaposition, it can be said that the objects of the assessee, though claimed to be charitable; but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very high rates and is earning a profit therefrom. A new trend has also emerged that JDA, i.e. the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments. In such a situation, we are of the view that no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development /infrastructure/- facilities are also provided by private developers these days, then they will also claim....
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....f generally public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use of application, or retention, of the income from such activity." 7.1. Further, as per Finance Act, 2010, after first proviso, second proviso has been added w.e.f. 01.04.2009, which is read as under: "Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year". 7.2 As a matter of fact from the perusal of the order of the Ld. CIT, it appears that first proviso so inserted by the Finance Act, 2008 w.e.f. 01.04.2009 was not taken into consideration while granting registration vide order dated 30.09.2009. Therefore, in the facts and circumstances of the case, we concur with the views of the Ld. CIT, who had placed reliance on the decision of five Member Bench of Hon'ble Supreme Court in the case of A Distributors (Baroda) P. Ltd. vs. Union....
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....cide the issue by his order in view of the decision of the Hon'ble Supreme Court in the case of A. Distributors (Baroda) P. Ltd. vs. Union of India and Ors. 155 ITR 120 (SC). Therefore, in the facts and circumstances of the present case and following our order in the case of M/s. Jalandhar Development Authority (supra) being on identical facts, the registration u/s 12AA cannot be granted to the assessee and the Ld. CIT has rightly cancelled the registration so granted. 7.4. Also, we concur with the views of the Ld. CIT(A) vide para 3.2 to 6.2 of his order that prior to insertion of these provisos i.e. first and second proviso to section 2(15) of the Act, certain bodies were treated as 'charitable' on the ground of advancement of object of general public utility. However, after the insertion of the above proviso, the advancement of any other object of general public utility shall not be a 'charitable purposes' if it involves the carrying on of :- a) Any activity in the nature of trade, commerce or business; b) Any activity of rendering any service in relation to any trade, commerce or business. d) For a cess or fee or any other consideration, irrespective....
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....ligibility criteria for grant of registration under section 12A of the Act, which was allowed vide order dated 30.09.2009. It is at this juncture that the first proviso and second proviso were added by the Finance Act, 2008 w.e.f. 01.04.2009, as mentioned hereinabove. Therefore, after insertion of the said proviso, any institution carrying on of any activity in the nature of trade, commerce or business etc. as mentioned hereinabove, shall not be a charitable purpose. As per objects of the assessee, it is observed that the main object of the assessee is to promote and secure the development of local area and there is no charitable purpose or any activity for general public utility. The activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business. Further profit making by the assessee is not mere incidental or by product of the assessee. There is no real object of the assessee and there is no spending of the income exclusively for the purpose of charitable activities and profits of the assessee are not used for charitable purpose under the terms of the object and there is no obligation on the part of the assessee to....
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....ordingly uphold his order and reject the grounds of the assessee in this appeal." 11. The issue under consideration is identical to that of the said case decided by the coordinate bench in the case of Tirupathi Urban Development Authority (supra). Further, as seen from the Memorandum of Association and Articles of Association filed by the assessee before us, the object of the assessee cannot be said that it is in the nature of general public utility and the objects stated therein make the assessee a commercial organisation and there is no stipulation on utilization of income only for the purpose of charitable activities. The assessee being a commercial organisation just like any business entity engaged in the real estate business. The surplus funds generated by the assessee throughout various activities could be distributed as dividend and there is no restriction for declaration of dividend to the members of the assessee company as is evident from the Clause No. 99 of the Articles of Association. As the dominant object of the assessee was not charity, either its commercial activity carried on with prof it motive and also there is no clause for application of income for charitable....