TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 1403
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....anning and development of cities and same was shown as 'income from other sources'. The assessee has been granted registration under section 12AA of the Income Tax Act. During the course of assessment proceedings, Assessing Officer observed that assessee is carrying on business of sale and purchase of residential houses, construction and multi-storeyed houses, sale of residential plots and commercial plots by auction and earned net profit of Rs. 48.04 Cr during the year under consideration, which is in the nature of trade, commerce and business but does not fall within the meaning of words "the advancement of any other object of public utility" under section 2(15) of the Income Tax Act. However, the assessee has stated that it is not carrying on any business activity but the object of the assessee is planning, development and improvement of city. 2(i) The Assessing Officer observed that contention of the assessee is not correct in view of omission of Section 10(20A) of the Income Tax Act by Finance Act, 2002 w.e.f. 01.04.2003, amendment of Section 2(15) of the Income Tax Act by the Finance Act, 2008 and 2010 w.e.f. 01.04.2009 i.e. assessment year 2009-10 and also in view o....
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....r object of general 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, irrespective of the nature of use or application, or retention of the income from such activity." As a corollary the Hon'ble Bench adjudicated upon the issue whether the assessee trust was entitled to claim exemption u/s. 11 read with section 2(15) of the Income Tax Act. Since in the present case the assessee trust is also an improvement trust formed under the Punjab Town Improvement Act 1922 for the purpose of improvement of the cities and the issue before us is the claim of exemption u/s. 11 read with section 2(15) of the Act, we find that the case of Hoshiarpur Improvement Trust is identical to the assessees case and the ratio propounded therein would squarely apply to the assessees case. Adverting to the decision in the case of Hoshiarpur Improvement Trust (supra) we find that the Hon'ble Bench interpreted the provision of section 2(15) in detail and held at para 17 of its order that where activities in the nature of trade/commerce/business are incidental to the main object of Advancement of general public....
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....s confined to the stand that these activities have been carried out in such a manner as to make profit and no activities directly of any general public utility are carried out. The registration granted to the assessee evidences that the objects of the assessee trust were advancement of objects of general public utility, and there is nothing to demonstrate any paradigm shift from this fundamental position. The allegation is only of the profit making but that does not obliterate the overall objects of general public utility. As regards the maintenance of the separate books of accounts for the business activities pursued by the assessee trust, since all the activities of the assessee trust are said to be of the business nature, the books of accounts maintained by the assessee trust meet this requirement as well. Of course, we will deal with the issue of activities being in the nature of 'profit making activities' a little later, but, suffice to say, that on the admitted facts of this case, so far period prior to 1st April 2009 is concerned and for the reasons set out above, the benefit of Section 11 read with Section 2(15) could not have been declined at all. 32. Turning onc....
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....tive in effect. In view of these discussions, even post insertion of proviso to Section 2(15) but before 1st April 2016, when business activities are carried by the assessee trust "in the course of actual carrying out of such advancement of any other object of general public utility", the benefit of Section 11 read with Section 2(15) cannot be declined. Nothing, therefore, turns on the assessee carrying out, even if that be actually so, activities in the nature of trade, commerce or business etc as long as these activities are carried out in the course of actual carrying out of advancement of any other object of general public utility. The planned development of cities and towns is an object of general public utility, and that is an object consistently followed by the assessee in all its activities. For this short reason alone, the stand of the authorities below must be held to be unsustainable in law." The Hon'ble Bench further held at para 33, 35 and 36, of its order that profit making was not the main object of the assessee trust. 33. We must, however, also deal with the fundamental allegation of the revenue authorities that the assessee has sold residential and commerci....
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.... does not make the functioning of the improvement trust a commercial venture. It is also important that this use of bidding process is only in the context of commercial units etc. The development of commercial areas is in the interest of planned growth of an area and when such commercial areas develop, all the stakeholders in the development of that area benefit. In order of this benefit to the common cause, it is not necessary that the businessmen, buying such units, must also benefit. The denial of any advantage, at the cost of general public, to the business entities buying the commercial areas, in our considered view, does not amount to an defeating an object of general public utility. In this context, it is important to understand the benefit from developing commercial areas, which is for public good, and benefit to the business persons in buying these units from the assessee trust, which can only be for the good of benefit of these entrepreneurs. As for the sale of residential units, it is an admitted position that in terms of the Punjab Town Improvement (Utilization of Land and Allotment of Plots) Rules, 1983, there is a formulae on the basis of which the price is worked out....