TaxTMI 
TaxTMI 
2021 (11) TMI 307
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....een created with the object of general public utility which is a charitable object within the meaning of Section 2(15), and is eligible for exemption under section 11 of the Act ? 2. Assessee is a Board established under section 3 of Karnataka Housing Board Act,1962( hereinafter referred to as KHB Act) as a successor of Mysore Housing Board which was constituted in the year 1956. The said Act was amended from time to time. The State Government of Karnataka, passed the KHB Act, with a view to satisfy the need of housing accommodation in the state of Karnataka. The Ld.AO observed that as per the annual report for year 2008 and 2009, the primary objective of KHB is to make such schemes and to carry out such works as are necessary for the purpose of dealing with and satisfying the need of housing accommodation. The KHB Act also says that, it endeavors in providing housing to people of Karnataka at affordable cost. The KHB was availing benefit of Section 10(20A) of the Act from its inception upto financial year 2001-02. Section 10(20A) was omitted by Finance Act with effect from 1/04/2003. Thereafter the Board obtained registration under section 12A of the Act on 03/02/2004. 3. It....
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.... Sub total 175,02,45,026 Excess of income over expenditure 24,59,67,953 Less : Income related to prior period 2,69,54,699 (Net) Excess of Income over Expenditure 27,29,22,652 6. The Ld.AO observed that assessee has earned profit over total turnover and after claiming expenses. It is observed by the Ld.AO that the net profit rate was 10% for assessment year 2009- 10 and 14.06% for assessment year 2010-11. The Ld.AO called for details of profit earned during preceding assessment years. The details filed by assessee are as under: Sl.No. Asst. Year Rupees in lakhs 01. 2010-11 2439.78 02. 2009-10 2162.52 03. 2008-09 2724.44 04. 2007-08 3342.62 05. 2006-07 2867.07 7. From the above the Ld.AO was the opinion that, assessee earned profit over a period of time in preceding years, ranging more than 10%, and that it was involved in the systematic commercial activity in the nature of seal of sites, apartments, houses, most of which is being through open auctions to the highest bidder. The Ld.AO thus held that, assessee was running its activities on commercial principles. He....
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....e and therefore do not require adjudications. He also submitted that Ground number 2-2.1 the issue doesn't arise as the registration under section 12A of the Act has been restored by the decision of Hon'able Karnataka High Court in assessee's own case by order dated 12/01/2015. Accordingly, these ground are dismissed as infructuous. 12. It is submitted that facts in respect of Ground Nos.3-4 in both the years under consideration are identical and the issue raised by assessee are same. Accordingly, these grounds in both the years under consideration are disposed of by way of a common order. The Ld.AR by way of written submission submitted as under:- Assessment order passed in the status of AOP(Trust) is bad in law [Ground No. 3] 1.1. The appellant is a Board established under the Karnataka Housing Board (KHB) Act, 1962. As per section 3(2) of the KHB Act, the Board constituted under such Act shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of the property and may by its corporate name sue and be sued. The decision of the Supreme Court in Assistant Commissioner, Assessment II, Bangalore v ....
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....ncipal Secretary to Government. The State Government has given high priority to housing with its own housing programmes for the economically weaker sections in rural and urban areas from centrally sponsored schemes. Housing needs of low, middle and high income groups are also catered to, apart from housing for slum dwellers as a part of their rehabilitation and improvement of slums. 2.3 The Karnataka State Government has passed the Karnataka Housing Board Act, 1962 (KI-IB Act for short hereafter). The KHB Act was passed with a view to satisfy the need of housing accommodation in the state of Karnataka. The Act was passed by the State Government with a view to fulfil the constitutional requirement of providing housing facilities. The preamble to the Act states as under. "An Act to provide for measures to be taken to deal with and satisfy the need of housing accommodation. WHEREAS it is expedient to take such measures, to make such schemes and to carry out such works as are necessary for the purpose of dealing with and satisfying the need of housing accommodation and with that object in view it is necessary to establish a Board for the State of Karnataka an....
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.... may, be sanctioned by the State Government [Section 20]. Such sanctioned programme shall be published in official Gazette [Section 21]. The sanction of the State Government is also required in respect of the supplementary programme and budget as may be submitted by the Board [Section 22]. The Board comes under the administrative control of the department of housing, Government of Karnataka. It is the duty of the Board to undertake labour housing schemes as approved by the State Government [section 58]. The Board is required to submit reports, statements, returns, statistics, particulars etc to the State Government [sections 69 and 70]. The State Government is empowered to order for valuation of assets and liabilities of the Board at any time as it may consider necessary [section 73]. The State Government has formulated Karnataka Housing Board rules in respect of various matters connected with carrying of activities by the Board. The State Government may give such directions to the Board as in its opinion are necessary or expedient for carrying out the purposes of the Act and it is the duty of the Board to comply with such directions [section 84]. If the State Government is satisfi....
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....ed. 226,90,11,264 (Sales) From the above, it would be evident that the net profit rate for the year under consideration was just 1.65%. The impugned finding of the learned AO that the profit rate was in the range of about 10% is therefore factually incorrect. ALTERNATIVE METHOD Net excess of income over expenditure Rs. 21,62,52,660 Less:- Interest income Rs. 4,98,34,617 Rent and Lease rent Rs. 3,64,18,781 Other income from schemes Rs. 9,24,72,950 Rs. 17,87,26,348 Profit Rs. 3,75,26,312 3,75,26,212 (Profit) ----------------------------- x 100 = 1.65%. This is ignoring Rs. 9.72 crores of administration expenses being capitalized. 226,90,11,264 (Sales) Note:- The interest income, rent, lease rent and other income are not operational income. The co-ordinate bench in Karnataka Industrial Areas Development Board v Ad. DIT - ITA No. 378/B/13 dt. 4.9.2015 at page 24 held that there can be no profit element in earning the interest income. 2.8.The appellant carries on various housing schemes as decided by the Ka....
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.... Economically Weaker Section (EWS), Low income group (LIG), Middle income group (MIG) and High income group (HIG) during the year was as under. 2.14 Break up of allotment of old stock during 2008-09 HOUSES & FLAT TOTAL HOUSES EWS LIG MIG HIG 19 62 85 8 174 SITES TOTAL SITES EWS LIG MIG HIG 4 137 325 71 537 2.15 Break up of allotment of 100 HP during 2008-09 HOUSES & FLAT TOTAL HOUSES LIG MIG HIG 254 452 67 773 SITES LIG MIG HIG 2259 1837 978 5038 2.16 The allotment to Economically Weaker Sections (EWS) of the society is made at half of allotment rate to other sections. For instance, if rate per square feet for the other categories is Rs. 400, the allotment rate for EWS category would be Rs. 200 per sq.ft. As per rule 2 of the Karnataka Housing Board Regulations, 1983, income limits of economically weaker section group and low income group, middle income group and higher income group is as under. Sl. No Group Income limit 1 Economically weaker section group and low income group Class of persons whose ann....
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....at a cost of 234.06 Crores. 67 schemes approved by the Government, at the cost of Rs. 888.77 Crores are under implementation to develop 23204 sites and construct 2340 houses. 16 projects are in the different stages of tender at the estimated cost of Rs. 709.55 Crores. The other 12 projects are under formulation. Throughout the State, the Construction of District office Complex at the cost of Rs. 82.25 Crores was completed and handed over to revenue department. The Construction of District Office complex at Davangere at the cost of Rs. 18 Crores and at Udupi at the cost of Rs. 19.90 Crores was under progress. The tenders for the Construction of District Office Complex at Madakeri at the cost of Rs. 9 Crores, Construction of District Office Complex at Bellary for Rs. 30 Crores, Construction of District Office Complex of Rs. 20 Crores were submitted to Revenue Secretary for Approval, Revenue Officers. Quarters at Chikkaballapur at the cost ofRs. 25.00 Crores was approved and the tender was invited. Construction of 30 Mini Vidhana Soudha at the cost of Rs. 68.60 Crores are completed and handed over to revenue department. Construction of Mini Vidhana Soudha at Surapura....
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..... 17.50 crores for each) and construction of polytechnic buildings in 6 places at the cost of Rs. 48.00 crores (each polytechnic at Rs. 8.00 crores), for technical education department of Higher education department, had been approved by the Government. These works were under progress. The proposed Construction of Government first grade college building in 27 places at the cost of 26.80 Crores, for collegiate education department of Higher education department had been approved by the Government. Except Shiralkoppa, Chitaguppa, Ainahalli & Kyathanahalli - Mandya in other places the construction work was under progress. Construction of Administrative office building and staff quarters for Administrative Training Institute in Gulbarga, Bidar, Bellary and Chikkamagaluru at the cost of 5 Crores had been entrusted to Board and the works were under progress. The Construction of Indoor stadium at the cost of Rs. 2.15 crores and Construction of Yatri Nivas Building at the cost of Rs. 1.07 crores at Udupi were nearing completion. The allotment of houses and sites are done as per the KHB Allotment Regulation 1983 Karnataka Gazette Notification No. 28 Volume No. 118 dated 14.7.1983. ....
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.... state exist for public purpose and not for private profit is acknowledged by the CBDT in Circular No. 45 dated 02.09.1970. [Page 195- 196 of case law compilation] Relevant extracts of the circular are as follows. "Several states have set up statutory housing boards for the framing and execution ofhousing and other development schemes. These boards are autonomous organizations and they play an important role in implementing the housing programs of Govt. for the common good. As these boards are serving an important public purpose and do not exist for private profit, the Finance Act, 1970 has made a specific provision in a new clause (20A) of section 10 exempting the income of such boards from tax altogether. This provision, exempts from tax any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both." (emphasis supplied) 2.19 The Apex Court in Queen's Educational Society v CIT [2015] 55 taxmann.com 255 (SC) held that mere surplus does not mean institution is....
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....ction 11 is envisaged on account of 'Profits'. The question of claiming exemption does not arise in the absence of 'profits'. Thus, it cannot be contended that a charitable entity should not make any profits at all. As held by the Madras High Court in the case of DIT (E) v RJBV Vasudevan Educational & Charitable Trust [2015] 370 ITR 517, a Trust is not measured by its financial clout but by its philanthropic disposition. Further, eleemosynary is not an essential element of charity. [Page 240 of case law compilation] The five Judge bench of the Supreme Court in the case of Sri Ramtanu Co-operative Housing Society Ltd v State of Maharashtra 1970 AIR 1771 [Page 559 to 568 of case law compilation] held that features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of a Corporation. It was held that if in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the corporation. It was held that there are various departments of the Govt. which may have excess of income over expenditure. ....
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....2.2106 [reported as Tribune Trust v CIT [2016] 76 taxmann.com 363 (Punjab & Haryana)] [page 569 to 614 of case law compilation] it was held that selling of plots and premises by the trust is only incidental and ancillary to its main purpose which at the cost of repetition is "town improvement" in almost every respect. It was held that even where the plots are developed and premises are constructed and sold at the market price, the activity is not commercial or business venture per se but one necessitated on account of the implementation of the provisions of the trust through statutory schemes. It was held that the main purpose of such schemes is driven by public requirements and not as a commercial venture per se and they are incidental to the main object of the trust. 2.28 The ITAT, Hyderabad Bench in the case of Institute for Development and research in Banking Technology v ADIT(E) [2015] 63 taxmann.com 297 (Hyd) [Page 506 to 529 of case law compilation] after considering the legislative intention, CBDT Circular and various case laws in the context of proviso to section 2(15) held that the activities of the appellant society are charitable, it is needless to say that the....
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....ontext of rejection of registration under section 12A(a) of the IT Act. However, in the present case, the registration under section 12A is intact and is in force. The issue is the present case is whether exemption claimed u/s 11 can be denied relying on first proviso to section 2(15). (ii) The fact sale of projects at market rates to the bidders in auction proceedings was considered by the Hon'ble Bench in deciding the issue against the assessee in the above decision. However, the Gujarat High Court in Ahmedabad Urban Development Authority v ACIT (Exemptions) [2017] 83 taxmann.com 78 (Gujarat) (a superior forum to the Tribunal) has held that sale of properties at market rates in public auction cannot be considered as doing business, trade or commerce. (iii) In Mussoorie Dehradun Development Authority's case, the assessee had admitted the income under the head 'Income from business' and got its accounts audited under section 44AB. However, in the present case, the appellant had claimed exemption under section 11 by admitting the income under the head 'Income from other sources'. Further no tax audit was done u/s 44AB. (iv) In Musso....
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.... in the present case is intact and is in force. Secondly, these decisions have considered the factum of sale of properties at market rates in public auction as a factor against the assessee. However, as explained earlier, the Gujarat High Court in Ahmedabad Urban Development Authority v ACIT (Exemptions) [2017] 83 taxmann.com 78 (Gujarat) has held that sale of properties at market rates in public auction cannot be considered as doing business, trade or commerce. Thirdly, subsequent to these three decisions, many other decisions (both High Courts and Tribunals) have been rendered explaining as to why and how first proviso to section 2(15) will not be applicable. Thus, the aforesaid three decisions relied on by the learned DR are distinguishable on facts and law. Even otherwise, in view of inconsistent/contra decisions, that which favour the assessee to be adopted. 2.36 On facts and circumstances of the case and law applicable, proviso to section 2(15) was not applicable and consequently, exemption under section 11 should be allowed as claimed by the appellant. In response the Ld.CIT.DR defended the order of Ld.CIT(A) and submitted as under:- I. DENIAL OF EXEMPTION u/s 11....
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.... III APPELLANT ITSELF HAD FILED RETURNS OF INCOME IN THE STATUS OF AOP(TRUST) With regard to the contention of the assessee that the Assessing Officer has changed the status in the assessment order and therefore, the order is NULL AND VOID. As verified from the records and seen that the following are the status in which the assessee has filed its returns of income and status in which the Assessing officer has passed assessment order u/s 143(3) of the I.T. Act. From the details below it is noted that for A.Ys 2011-12, and 2013-14 to 2017-18 appellant SUO-MOTO filed returns in the status of AOP (TRUST). So, appellant cannot challenge this ground before the Hon'ble ITAT. SI.No. A.Y. Status as per return of income Status as per Assessment order 1. 2005-06 Artificial Juridical Person AOP 2. 2006-07 -DO- No Scrutiny assessment 3. 2007-08 - AOP(Trust) 4. 2008-09 Trust No Scrutiny assessment 5. 2009-10 Trust AOP (Trust) 6. 2010-11 Trust AOP (Trust) 7. 2011-12 AOP(Trust) AOP 8. 2012-13 Trust AOP 9. 2013-14 AOP (Trust) AOP 10. 2014-15 AOP (Trus....
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.... whether the activity has actually produced an income. 5 Bharat Development Pvt. Ltd. Vs CIT 4 Taxman 58 (Delhi) The Hon'ble Apex Court clarified that by use of the expression `profit motive'. It is not intended that profit must, in fact, be earned. It predicates a motivewhich pervades the whole series of transactions effected by a person in the course of the activity. 6 Adityapur Industrial Area Development Authority Vs Union of India & Ors. 153 taxman 107 (SC) wherein the Hon'ble Supreme Court held that by virtue of deletion of section 10(20A) and insertion of meaning of local authority by way of explanation below section 10(20) by the Finance Act 2002 w.e.f 01.04.2003 i.e A.Y.2003- 04 onwards, the income of the assesse i.e. Adityapur Industrial Area Development Authority was not exempt from taxation and also the provisions of article 289(1) are not attracted. 7 ITO(E), Madurai Vs Kalanjiam Development Financial Services 62 taxmann.com 278 (Chennai-Trib.) [2015] Is in favour of revenue In light of the facts narrated above and the various judicial rulings mentioned above, it is evident that the appellant cannot claim that its activit....
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....so, the object of the assessee will have to be taken as charitable in nature. Therefore, it follows that the assessee will be entitled to deduction u/s 11 subject to fulfillment of necessary conditions mentioned in this provision. The submission of the revenue is that the activities carried out by the assessee are in no way different from the activities carried out by a builder developing a large colony. The submission of the Ld.AR is that there is no profit motive and the activities were carried out in pursuance of the objects of assessee. 12.6 In this connection, the provision contained in section 11(4A) assumes importance, which is to the effect that the provisions contained in sub-section (1), sub-section (2), subsection (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution being profits and gains of business, unless the business is incidental to attainment of objective of the trust, or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. This provision was discussed in the course of proceedings before us and we have summarized the rival submissions....
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.... trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose', even if it incidentally involves the carrying on of commercial activities. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. 12.9 Similarly, entities whose objects continue to be eligible for exemption as charitable institutions, even if they incidentally carry on a commercial activity , subject to following conditions stipulated under section 11(4A) or the seventh proviso to section 10(23) as under: (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business. 12.10 The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' ....
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.... authorities as charitable in nature. The authorities in question before Hon'ble Allahabad High Court were established in the State of UP under the provisions of the Uttar Pradesh Urban Planning & Development Act, 1973. 12.15 In the present facts, the test which has to be applied is whether the object which is said to be non-charitable is the main or primary object of the trust or institution or it ancillary or incidental to the dominant or primary object which is charitable. It is therefore to be seen whether the purpose of the trust or institution in present facts involves carrying on of an activity for 'profit', or in other words, whether an activity for profit is actually carried on as an integral part of the purpose "as a matter of advancement of the purpose". 12.16 The activity must be for profit in order to attract the exclusionary clause. Where an activity is not pervaded by profit motive but is carried on primarily for serving the charitable purpose, it would not be collect to describe it as an activity for profit. But where an activity is carried on with the predominant object of earning profit, it would be an activity for profit, though it may be carried on in adva....
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....ntract and to do all things necessary for the purpose of this Act. Chapter III of the Act deals with Housing Schemes and Land Development Schemes. Sections 17 to 32-A are found in Chapter-III. The relevant sections Sections 17, 18, 18-A, 19, 20, 21, 22, 23, 24 and 32, which are extracted as under: Section 17 of the KHB Act reads as follows: 17. Duty of the world to undertake housing schemes and land development schemes- subject to the provisions of this act and subject to the control of the State Government, the board may incur expenditure and undertake works in any area for the framing an executive of such housing schemes and land development schemes as it may consider necessary from time to time as may be entrusted to it by the State Government. Section 18 of the KHB Act reads as follows: 18. Matter to be provided for by housing schemes.- Notwithstanding anything contained in any other law for the time being in force, a housing scheme may provide for all or any of the following matters, namely.- (a) the acquisition by purchase, exchange or otherwise of any property necessary for or affected by the execution of the scheme; ....
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....rised in the scheme and formation and alteration of streets; (c) drainage, water supply and electricity and carrying out by the Board in the area included in the scheme, drainage sewerage and water supply works; (d) the distribution or redistribution of sites comprised in the scheme; (e) raising the level of any land which the Board may consider expedient to raise to facilitate better drainage; (f) forming open space for the better ventilation of the area comprised in the scheme or any adjoining area; (g) sanitary arrangements required; (h) sites for Parks, Playgrounds, Stadium, recreation grounds, School buildings, Markets, Motor Vehicle Stands, Theatres, Police Stations, Post Offices, Co-operative Societies, Public Urinals and Latrines, Petrol Service Stations, Hospitals, Dispensaries, Banks, Burial and Cremation Grounds and Sites for public purposes of other kinds. Section 19 of the KHB Act reads as follows: 19. Preparation and submission of annual housing programme and land development programme budget and establishment schedule- (1) Before the first day of December in each year, the Board shall prepare ....
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.... 24. Sanctioned housing schemes and land development schemes to be executed- (1) after the program has been sanctioned and published by the state government under section 20 and 21, the board shall, subject to the provisions of section 23, proceeded to executive the housing scheme, the land development scheme or labour housing scheme included in the program. (2) the board shall not execute any housing scheme, land development scheme or labour housing scheme unless the same has been sanctioned by the state government. Section 32 of the KHB Act reads as follows: 32. Schemes entrusted to Board by Government, etc.- (1) The provisions of sections 18 to 24 (both inclusive) shall not be applicable to any housing scheme, land development scheme or labour housing scheme entrusted to the Board by the State Government except to such extent and subject to such modifications as may be specified in any general or special order made by the State Government, and every such order shall be published in the Official Gazette. (2) Notwithstanding anything contained in this Act, the Board shall not be competent to carry on any trading or financing activity....
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....mme, the budget and the schedule of the staff of officers and servants forwarded to it with such modifications as it deems fit. 13.2 The State Government has to then publish the programmes sanctioned by it under Section 20 in the Official Gazette. A supplementary programme and budget may also be sought by the Board and the State Government may sanction such a supplementary programme. The Board can vary any programme or any part of it, even after the sanction made by the State Government, provided that no such variation shall be made if it involves an expenditure in excess of 20% of the amount as originally sanctioned for execution of any housing scheme or land development scheme included in such programme or affects its scope or purpose. 13.3 After the programme has been sanctioned and published by the State Government under Sections 20 and 21, the Board, subject to any variation to be made under Section 23 of the Act can proceed to execute the housing schemes, land development schemes or labour housing schemes included in the programme. This is as per sub-section (1) of Section 24. Therefore, this subsection states that the Board can proceed to execute the scheme included in....
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....he State Government and it being aware that such a scheme would entail acquisition of land, it is not necessary for the very State Government to once again sanction such a scheme, which in the first place has emanated from the State Government itself. On the other hand, when such a scheme is initiated from the Housing Board, it is necessary that not only Sections 18 to 23, but also Section 24 is complied with. 13.7 The reason being, that the Board, which intends to execute a scheme must keep the State Government informed about the programme to execute such a scheme in terms of Sections 18 to 23 and further under Section 24 of the Act. On such schemes being sanctioned by the State Government, it is necessary that the State Government also sanctions housing scheme, land development scheme or labour housing scheme. The reason as already noted being that there may be several schemes incorporated in the programme submitted to the State Government by the Housing Board under Section 19(1)(i) of the Act containing particulars as per sub-Section (2) of Section 19 of the Act. Even on the sanction of such schemes, and it is published in accordance with Section 20 of the Act by the State Go....
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....dget and establishment schedule to the State government in Form 1. On perusal of Form 1, we note that the projects undertaken by assessee are bifurcated into 2 parts. In the 1st part, assessee has to give details of projects undertaken on behalf of State government and in part be the details of such projects undertaken by itself. It is clear from the above that assessee undertakes projects/schemes on behalf of the State government and also through private negotiations. 14.2 Post 01/04/2009, the Courts have held that the predominant intention of assessee needs to be established before invoking the proviso to section 2 (15) of the Act. If the predominant object of the activity was the promotion of commerce and trade in those commodities which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out charitable purpose, then the charitable character of the purpose would not be lost. Under such circumstance, the dominant and real object of the activity being the advancement of the charitable purpose the mere fact, that the activity yielded profit will not alter the charitable character of the asse....
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....d any other monies accruing to the board, shall constitute the Housing Board fund. (5) except as otherwise directed by the state government, all monies and receipts specified in the foregoing provision and forming part of the fund of the board shall be deposited in reserve Bank of India remain a scheduled banger invested in such securities as may be approved by the state government. 14.7 From the above it is clear that the state government do not have any control over the funds of assessee. Further from income and expenditure account it is clear that assessee had income from sales, interest income, rent and lease rent and income from other schemes as enumerated under schedule 15 &16. 14.8 For assessment years under consideration on perusal of schedule 13 the income and expenditure account it is noted that assessee generated income from following seals: Schedule No.13 SALES Amount in Rs. A/C code Head of account As on 31.3.2009 As on 31.3.2008 4803 Sale of houses slum housing scheme 0 0 5000 Sale of house sites 74,796,041 53,835,771 5001 A....
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.... deduction under section 11 or not. The KHB Act is very clear in respect of the funds to constitute the boards fund. Further the other income under schedule 15 and 16 enumerate that the development activities carried on by assessee cannot be construed to be purely charitable in nature. The EMD/Registration fee forefited under schedule 16 cannot be in respect of a housing scheme floated for general public utility/interest. 15.2 The decisions relied by the Ld.AR does not come to rescue as they do not deal with the amended provisions of section 2 (15) of the Act which came into effect from 01/04/2009. The period which was considered by the Hon'ble High Court's in those cases were prior to the insertion of amended section. The subsequent decisions by coordinate benches of this Tribunal also are distinguishable on facts, as those were rendered by relying on the decisions of Hon'ble High Court's for such period during which the provision of section 2 (15) of the act were not on statute. We refer to the decision of Hon'ble Karnataka High Court in case of DCIT Vs. KIADB (supra), wherein identical situation arose for consideration. Hon'ble High Court returned a fact KIADB functions under....
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....upreme Court that by the use of the expression `profit motive' it is not intended that profit must, in fact, be earned. It predicates a motive which pervades the whole series of transactions effected by a person in the course of his activity. (iii) Similarly, the Hon'ble Supreme Court in the case of Laxminarayan Ramgopal and Sons Ltd., Vs. Government of Hyderabad (24 ITR 449) observed that the activities which constitutes carrying on of business need not necessarily consists of activities by way of trade, commerce or manufacture or activities in the exercise of a profession or vocation. They may even consists of rendering services to others which services may he or a variegated character like agency business consisting of numerous and continuous operations. 4.26 Further, one more question would arise. with regard to exemption of income of the assessee being an organ of government by virtue of the article 289(1) of the Constitution of India. This issue was adjudicated by the Hon'ble Supreme Court in the case of Aditvaour Industrial Area Development Authority Vs. Union of India and others ([2006] 153 TAXMAN 107 (SC) wherein it was held by the Hon'ble....
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....as the assessee. At the same time section .10(20A) which related to income of an authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by section 10(20A) on such an authority was taken away. [Para 4] A mere perusal of article 289(1) discloses that a claim of exemption under it must proceed on the foundation that the exemption is claimed in respect of property and income of a State. Once it is held that the property and income is that of the State, a question may well arise as to whether it is still taxable in view of the provision of clause (2) of article 289 which dominantly is in the nature of a proviso. The income of the State within the meaning of clause (1) of article 289 may be taxed by law made' by the Parliament, if such income is derived .from a trade or business of any kind carried on by or on behalf of the Government of a State or any operations connected therewi....
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....de or business as incidental to the ordinary functions of Government. The reason is obvious. Under the Constitution, the State has no power to tax any income other than agricultural income. Under the Constitution, power to tax 'income' is vested only in the Union. Therefore, while any property of the Union is immune from State taxation under article 285(1), income derived by the State from business, as distinguished from Governmental purposes, shall not have exemption from Union taxation unless the Parliament declares such trade or business as incidental to the ordinary functions of Government of the State. [Para 10] Applying the above test to the facts of the instant case, it was clear that the benefit, conferred by section 10(20A) on the assessee had been expressly taken away. Moreover, the Explanation added to section 10(2) enumerates the 'local authorities' which do not cover the assessee. [Para 11] The High Court was right in concluding that the authority could not claim exemption from Union taxation under article 289(1). The impugned notice issued by the Income-tax Authorities was, therefore, valid and legal and could not be successfully challenged i....
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....nstitution given to the assessee u/s 12AA(1)(b)(i) of the I.T. Act. The relevant portion of the order of the ITAT, Amritsar Bench (Jammu Development Authority vs. CIT, Jammu 30 (Asr)/2011) dated 14.6.2012 is reproduced below:- "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 oblgation on the part of the assessee to spend on charitable purpose' only. Also as per clause 53 of the Jammu & Kashmir Development Act, on dissolution of all properties and funds to vest in the Government and for the purpose of realizing properties, the 'Unction of....
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....of any other object of the general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relating to any trade, commerce or business or a cess or fee or any other consideration. We find that no question of law much less a substantial question of law would emerge from the impugned order of the Income Tax Appellate Tribunal warranting admission of the appeal. The appeal is wholly without merit and is thus liable to be dismissed." As the facts of the case involved in the case of the assessee are similar to that of Jammu Development Authority, the decision of the Hon'ble ITAT and Hon'ble High Court is squarely applicable to the case of the assessee. 3. The decision of the ITAT, Chandigarh-B Bench in the case of Punjab Urban Planning And Development Authority (103 TTJ 988), wherein it was held that - "We agree with the conclusion of the learned CIT, as contended by learned CIT-Departmental Representative, that a charitable institution provides services for chairtable purposes free of cost and for no gain and are for t....
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....e purpose because expenditure has to be incurred and has been incurred in acquiring land and construction thereon. Therefore, only the surplus from this activity can be said to be the income derived from property held under trust. There is yet another angle, namely, that some meaning has to be placed on the content of sub-section (4A) of section 11 and especially on the words "unless the business is incidental to attainment of the objective of the trust". The legislature postulates that a charitable institution may have to carry on incidental business for attainment of objective. If the argument of the Ld.AR is that, there is no profit motive in so far as the development authority is concerned and, therefore, there is no question of carrying on any business, then no meaning can be placed on the contents of this provision. 16.3 It has been mentioned earlier that the assessee has carried on systematic activities in a regular manner for construction of Building as per plan, which have led to profit, and such activity is not incidental to the main object of town planning, therefore, it is clear that the assessee has carried on a business which is not incidental to attainment of obje....