AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 1018
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....n short) was granted registration u/s 12AA of the Act on 31.07.2006 , with a condition that surplus of income if any should be utilised for attainment of the objects of the assessee and shall not be utilised for any other purpose and also not to divert the funds to State Government. 2. The Ld.CCIT found that the assessee is engaging in commercial activity and auctioned the lands to highest bidders in gross violation of its objects and entered into joint venture for construction of commercial properties with top builders of the region. Therefore, issued show cause notice calling for the explanation of the assessee as to why the registration granted u/s 12AA of the Act, should not be cancelled. In response to which the assessee filed explanation objecting for cancellation of registration and submitted that the assessee has neither violated the provisions of Andhra Pradesh Urban Areas (Development) Act, 1975(in short, APUDA) nor carried on any activity in violation of the objects of APUDA Act. The assessee further submitted to the Ld.CCIT that the activities of the assessee are genuine and it has carried out its activities in accordance with the APUDA Act, hence, requested not to c....
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.... deeds also show that the lands belonged to VUDA. 2.4. The Ld.CCIT further found that assessee trust entered into joint venture agreement with M/s Radiant Developers Pvt. Ltd., Hyderabad for construction of houses on 27.08.2005. Similarly, it had entered into an agreement with M/s Global Entropolis Asia Pvt Ltd. for construction of houses on 16.02.2008, for the construction of commercial complexes with M/s Vaibhav Sky Scapes Pvt. Ltd. and for construction of shopping malls and multi-complexes with M/s Ambika Empire Pvt. Ltd., thus, viewed that the activity of VUDA is purely commercial in violation of its objects. 2.5. The Ld.CCIT is of the opinion that VUDA neither sold the land belonging to the State Government nor acted as an agent of the State Government and it has sold the lands belonging to the assessee and remitted the sale proceeds to the kitty of state Government against the objects and the sale proceeds ought to have been fully utilized for the purpose of it's objectives. The VUDA was granted registration with a condition that the surplus generated out of the activities should not be diverted for any other purpose and also should not be remitted to the Government acc....
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....o mere Selling Agent for resource mobilisation to state. (iii) Thirdly, the assessee has sold the lands indiscriminately belonging to the State Government and remitted the sale proceeds to Government accounts instead of utilising the funds for it's objective. (iv) Fourthly, from 2008 onwards, the assessee has lost sight of it's objects, and acted like realtor. (v) Lastly the assessee is hit by the amendment to section 2(15) of the Act which has come in to Force from 01/04/2009 and hence, not eligible exemption. 3.1. The Ld.Counsel submitted that as per sub section 3 of section 12AA, the Ld.CCIT is permitted to cancel the registration of an institution or trust which was already granted registration in two circumstances i.e., if the objects of the Trust are not genuine or activities are not being carried out in accordance with objects of the Trust or institution. The Ld.Counsel submitted that the Ld.CCIT has not given any finding that the activities of Trust are not genuine. Then the only ground left for cancellation of registration is under the impression that the assessee is not carrying on the activities in accordance with the objects of the Trust. T....
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....sel submitted that the assessee was granted registration on 09.11.2006 w.e.f. 01.04.2003 and the objects were already mentioned in the Act of 1975 and section 20A was introduced in 1988 i.e. before granting the registration which is dealing with the sale of government lands. As per section 20A, the Government may affect the sale of vacant lands on such terms and conditions as may be prescribed for which section 20 does not come on its way. Therefore argued that sale of Government lands are governed by section 20A of A.P.Urban Development Act as per which the Government is free to sell its lands. In the process, Government has taken the help of the assessee and paid the service charges. Thus the assessee assisted the Government as facilitator. Referring to section 34 of AP Urban Development Areas Act, the Ld.Counsel submitted that the authority shall carry out such directions as may be issued to it from time to time by the Government for efficient administration of this Act and if there is any dispute, the decision of Government is final. Therefore, submitted that as per section 20A of the Act, the Government is permitted to sell the land by open auction and section 34 mandates the ....
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....e Ld.Counsel submitted that VUDA required to sell the lands in open auction to the highest bidder. The procedure of auction is published in all newspapers and given a wide publicity to make known the public regarding sale of land and procedure for sale, thereby VUDA is following complete transparency. Selling the lands in open auction to the highest bidder is also supported by the decisions of Hon'ble Supreme Court in various cases including the case of Spectrum, therefore, submitted that there is no violation of APUDA Act in selling the lands to the highest bidders or entities also. 3.6. With regard to entering into joint venture for construction of buildings and commercial complexes and houses, the Ld.Counsel argued that overall development of areas require infrastructure facilities such as commercial complex, multiplexes etc., hence, VUDA had entered into joint venture for construction of buildings and commercial complexes for furthering its objectives. There is no violation of objectives in entering into joint ventures for construction of commercial complexes, buildings and multiplexes or houses. The Ld.CCIT has not elaborated how it has violated the objects by entering i....
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.... (h) (2013) 86 CCH 212 ChenHC (i) (2013) 37 CCH 203 MumTrib (j) (2013) 37 CCH 585 (k) (2013) 38 CCH 060 (l) (2014) 39 CCH 307 ChdTrib (m) (2014) 165TTJ (Mumbai) 478 4.1. On the other hand, appearing for the Revenue, Sr.Standing Counsel, (in short Standing Counsel) Smt M.Kiranmayee, argued the case. The Ld.Standing Counsel argued that the objects of VUDA as per section 5 of AP Urban Areas (Development) Act, 1975 are to promote and secure the development of all or any of the areas comprised in the development area concerned according to the master plan. 4.2. Referring to section 18 of APUDA Act, the Ld.Standing Counsel submitted that section 18 provides that if any land is required for the purpose of development or any other purpose under the Act, the Government may acquire such land and handover the same to the authority for the purpose for which it has been acquired, on payment by the authority. 4.3. Under section 19 of the APUDA Act, the authority subject to directions given by the Government under the Act, dispose of the land acquired under sec.18 of the Act either by developing it or without carrying on any developmen....
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....d be conducted by VUDA and VUDA would receive the service charges for this purpose. The second being land that would be alienated in favour of VUDA, Visakhapatnam by the Government for development of township. Thus through G.O, the land was alienated to VUDA for sale, hence, the ownership of the land is vested with the VUDA. The Government has specifically directed the VUDA to sell the lands in public auction and directed that the sale proceeds to be remitted to the Government for resource mobilization which is not permissible under the APUDA Act. Therefore, the Ld.Standing Counsel argued that the assessee became the owner of the large tracts of the land and sold the lands in public auction specifically identified by G.O.Ms.No.1401 and remitted the proceeds to the Government, against the provisions of APUDA Act. After selling large tracts of the land and remitting the sale proceeds to Government account, VUDA is taking shelter under G.O.Ms.No.1401 for exemption of its income from taxation which is against the provisions of APUDA Act. The Ld.Standing Counsel argued that the assessee stated that it had acted as an agent and the agent is not entitled for registration u/s 12AA of the A....
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....out the intention of the Government which enables the tax authorities to decide the taxability of sale proceeds, accordingly set aside the order of the AO to reconsider the issue. Therefore argued that before the assessing authority also, the assessee failed to furnish the details, thus, there is no case for granting registration u/s 12AA of the Act. Referring to paper book 2, page No.181, 184 and 186, the Ld.Standing Counsel argued that VUDA paid the consideration to the Government for acquiring the lands mentioned in the table given in the cited G.O. Referring to page No.185 and 187 of the paper book, the Ld.Standing Counsel argued that VUDA has paid the consideration for taking possession of the lands and hence, the VUDA ought to have utilized the funds for it's objects. Having not applied the funds for the objects and remitted the proceeds to Government account, the assessee acted against the objects of the Trust, therefore, argued that the assessee is disentitled for registration u/s 12AA(3) and the Ld.CCIT rightly cancelled the registration. 4.7. Responding to the argument of the Ld.Standing Counsel, the Ld.Counsel of the assessee submitted that page No.181 to 187 are not ....
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.... for registration. Further the assessee is the owner of the lands since, the lands were alienated to the assessee, hence, the funds ought to have been utilized for the purpose of objects, instead of remitting to Government account. We have carefully examined the arguments of both the parties. VUDA is constituted u/s 3 of the Urban Areas (Development) Act, 1975 and its objects are to promote, secure and development of areas in the jurisdiction according it's master plan. The objects of the Authority are defined in section 5 which reads as under : Section 5 5. Object and powers of the Authority :- The object of the 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 and aid 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 amen....
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....ich, subject to the directions given by the Government under this Act, the assessee may dispose of any land acquired by Government and transfer to it without undertaking and carrying out any development thereon. Any such land after taking or carrying out such development as it thinks fit to such persons in such manner and subject to such terms and conditions as it considers expedient for securing the development of the area concerned according to plan. 5.2. Section 20 provides for placement of Government vacant lands at the disposal of Authority on the terms and conditions agreed between the Government and the Authority, in the instant case, VUDA is the Authority. Section 20A provides for sale of Government land by public auction and their administration. As per section 20A, the Government is permitted to sell their vacant lands by public auction on such terms and conditions as may be prescribed. Section 22 of the Act provides for procedure for managing the funds of the assessee. 5.3. Section 34 gives authority to Government to give directions from time to time for efficient administration of the Act. 5.4. In the instant case, the Ld.CCIT viewed that the assessee has lost ....
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....nds earmarked for high income groups and for commercial ventures in public auction violate the objects of the assessee. As long as the sale proceeds are utilized for advancement of the objects without diversion, it does not violate the objects of the assessee. The department did not place any material to show that the funds of the assessee other than the sale proceeds of land in GO No.1401 are diverted for other purposes. Therefore, we, are of the opinion that the same is not against the objects of the Society and do not violate the objects mentioned in APUDA Act. 7. Apart from the above, the Ld.CCIT observed that the assessee had entered into joint venture for construction of commercial buildings which is also treated to be not within the purview of objects of the society. Overall development of the area is the order of the day and for overall development of any city or town, commercial complexes, malls etc., have become the signs of development in the cities. Visakhapatnam is tier II city and private operators do not come forward for building such infrastructure facilities. Hence, it is necessary for VUDA to come forward for developing the malls and commercial complexes for....
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....9.1995 which are not relevant for cancellation of Registration and there is no evidence to show that the sale proceeds of subject lands were remitted to Government. Therefore, the same cannot be taken into consideration for deciding the validity of cancellation of Registration u/s 12AA(3) of the Act. The Ld.Standing Counsel also taken the help of page No.347 of the paper book and argued that the assessee was the owner of the land and Page No.347 of the paper book refers to the sale deed dated 09.03.2004 with Gandeva Properties Pvt. Ltd., which is also not related to the period of cancellation of the registration u/s 12AA(3) of the Act. Thus, the sale proceeds of lands mentioned by the Ld.Standing Counsel which were stated to be belonged to the assessee were neither proved to be remitted to the government nor the parts of the lands in GO No.1401, thus there is no impact on Registration u/s 12AA of the Act. Therefore, we are unable to accept the contention of the Ld.Standing Counsel that the assessee has sold the lands belonging to it and remitted the sale proceeds to Government account. 9. The next contention of the Department is that the assessee acted as an agent for sale of....
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....nds as per the specific directions of the Government and there is no case law brought on record by either parties to support or to prohibit the assessee to sell the lands of the Government. Therefore, we are of the considered opinion that assisting the Government, in sale of lands, after collecting the expenses does not make the assessee disentitle for registration u/s 12AA(3) of the Act. 10. The next contention of the department is that the assessee has carried on commercial activity, hence, the assessee is hit by the amendment to section 2(15) of the Act. In the instant case, the assessee is a Government institution and the department did not place any material to show that the assessee is engaged in the commercial activity. We have already held that the activities such as sale of lands by public auction, entering into joint development agreement for construction of commercial complexes, houses and malls are held to be for public utility services for furtherance of objects, hence, the activities of the assessee are within the purview of the Act and objectives. The assessee has neither established to have made the profit out of the above activities nor proved to be used for oth....