TaxTMI 
TaxTMI 
2014 (5) TMI 1172
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....empt from Income tax u/s. 10(20A) of the Income Tax Act, 1961. The Section 10(20A) was deleted w.e.f. 01.04.2002 relevant for assessment year 2003-04. The registration as a Charitable Institution was required for this purpose. 4. That the appellant craves leave for any addition, deletion or in the grounds of appeal on or before the disposal-of the same. 3. The present appeal was instituted by the assessee on 09.12.2009 and the appeal was adjourned from date to date ranging from 02.08.2005 onwards, both at the request of the ld. AR for the assessee or the ld. DR for the revenue. The appeal was fixed for hearing on 13.08.2013 and then on 14.10.2013 and the appeal was adjourned at the request of the ld. AR for the assessee on both the dates. However, on 04.12.2013, the Bench did not function and the matter was listed for hearing on 05.03.2014. None appeared on behalf of the assessee on the appointed date of hearing nor any application was moved. In view of the same, we proceed to dispose of the present appeal after hearing the ld. DR for the revenue. The only issue raised in the present appeal is denial of registration under section 12AA of the Act. 4. The brief facts of the case a....
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....f sufficient reasons was not condoned. (ii) Clauses (a) and (b) of Section 21 of the 'Haryana Housing Board Act' empowered the Board to acquire any property or land by way of purchase, exchange or otherwise; division of the land into plots and sale thereof either before or after any further development of land without any restriction on the powers of the Board which intractably involved built-in profit motive. (iii) Under section 40(1) of the 'Haryana Housing Board Act', the assessee was empowered to charge 'betterment charges' not only from the owners of land comprised in any housing schemes undertaken by the Board but also from the owners of land adjacent to the areas comprised in the housing schemes. The betterment charges as per section 40(2) were equal to half of the increase in the estimated value of land after completion of housing schemes, which were recoverable as arrears of land revenue, thus, enabling the assessee to earn profits. (iv) Section 44 of the housing Board Act empowered the assessee to retain, lease, sell, exchange, or otherwise dispose of any land or other property vested in it and comprising in any sanctioned housing schemes to any....
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....t "unsold houses have been valued at cost. 8. The Commissioner of Income Tax further observed that the Board was treating its houses as stock in trade clearly on commercial principles and than the resultant profit/loss was accounted for. 9. The Commissioner of Income Tax, on the perusal of the Income & Expenditure account for the year ending 31.03.2004 noted that, "excess of income over expenditure was at Rs. 13.13 crores. The items of income credited to the Income & Expenditure account show the profit on sale of houses at Rs. 5.99 crores and income from auction of booths/houses at Rs. 2.06 crores. The interest income received from allottees has been shown at Rs. 20.9 crores. Further in the first part of the Income and Expenditure account for the period ending 31.03.2004 total expenditure of Rs. 9.67 crores has been booked. It is observed that Rs. 3.65 lacs are on account of maintenance of Netaji Subhash Park, 3.25 lacs on, account of office building and Rs. 63.31 lacs on account of depreciation of assets. This totals upto Rs. 71 lacs. If expenses like legal charges and expenses on account of fixing on hoardings is excluded the total expenditure works out to about Rs. One crore.....
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....after, the Commissioner of Income Tax at pages 17 and 18 had elaborately considered the construction schemes floated by the assessee and the huge profits earned by the assessee from year to year from the so called charitable projects of construction houses. The Commissioner of Income Tax thus held that the assessee board was not entitled to grant of registration under section 12AA of the Act and its application under section 12A(a) of the Act was rejected. 12. The ld. DR for the revenue has filed written submissions and even the ld. AR for the assessee had filed written submissions which are available on record. The ld. DR for the revenue has pointed out that the assessee was created under the Haryana Housing Board Act, 1971 and even the Chandigarh Housing Board was created under the said Haryana Housing Board Act, 1971. On one hand Chandigarh Housing Board was filing its return of income and paying taxes and on the other hand, the assessee Board before us has sought registration under section 12A of the Act claiming its activities to be charitable in nature. Further distinction was drawn on the reliance placed by the assessee on the decision of Hon'ble Supreme Court in CIT vs....
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....) at page 29], acquisition and disposal of land [section 39(1) at page 32], Betterment charges, recovery and power to dispose land [section 40(1), 43 and 44 at page 33], application of Housing Board Fund [section 57 at page 36] and dissolution of Board [section 80 at page 41] are as per the provisions of Haryana Housing Board Act, 1971. 15. The assessee was originally claiming its income as exempt under section 10(20A) of the Act but w.e.f. 01.04.2002, the income of the assessee became chargeable consequent to the omission of section 10(20A) of the Act by the Finance Act, 2002 w.e.f. 01.04.2003. The plea of the assessee was that it was a Trust/Institution engaged in promotion/advancement of any other object of general public utility as defined under section 2(15) of the Act and hence, was eligible for grant of registration under section 12AA of the Act. 16. The assessee on the one hand is claiming the status of charitable organization and on the other hand, the Chandigarh Housing Board had filed its return of income for the assessment years 2003-04, 2004-05 and 2005-06 declaring income of Rs. 23.91 crores, Rs. 23.57 crores and Rs. 25.49 crores, respectively and paid the taxes. Th....
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.... be available in all such cases where business carried on by the assessee is incidental to the attainment of charitable purpose from objects of general public utility. But where the assessee is engaged in carrying on commercial activities which is reflected in the huge profits/surplus generated from year to year, the assessee cannot be held to be engaged in charitable activities making it eligible for claim of registration under section 12AA of the Act. 21. We further find that similar issue arose before the Chandigarh Bench of Tribunal in Punjab Urban Planning & Development Authority Vs CIT (supra) wherein it has been held as under : The term 'charitable purpose', as defined in section 2(15), includes relief to the poor, education, medical relief and advancement of any other object of general public utility. A plea was raised by the assessee that funds were provided by the Punjab Government or generated by the assessee itself. To generate the funds for carrying out its objects, the assessee was acquiring lands, developing them and selling the plots to the general public who applied for the same. Even the economically weaker strata of the society was generally applying. I....
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....arted 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 was involved. Rather the assessee had converted itself into a big businessman. Similar development/infrastructure/facilities are provided by private developers these days, then they will also claim the status of a charitable institution. If all the objects and activities actually carried out by the assessee were analysed and kept in juxtaposition with the judicial pronouncements, it was clear that activities of the assessee were more of commercial nature with profit-oriented intent; so no leniency was to be shown to the assessee. Further, almost in every activity of assessee, there was a scent of commercialization/profit motive. In the charitable institution, no profit motive is involved and the service is done mainly with the intent of social/religious Upliftment of the masses in general. Admittedly, the assessee was doing some activities like housing/infrastructure development and the public was also benefited but for the same the assessee had already charged in the form of hidden cost. Since the assessee was gen....