TaxTMI 
TaxTMI 
2022 (6) TMI 641
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....erefore, these were heard together and a combined order is being passed. For the sake of completeness, the grounds of appeal in I.T.A. No.165 and grounds of Cross Objections in C.O. No.02 are reproduced below: I.T.A. No.165/Lkw/2019 "1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in passing the order which is unlawful, unjustified and against the principles of natural justice. 2. The Ld. Commissioner of Income Tax (Appeals)has erred in law and on facts in not admitting the appeal filed before him. 3. BECAUSE, the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in holding that the appellant is not a charitable institution and is engaged in charitable activities within the meaning of section 2(15) of Income-tax Act. 4. BECAUSE, the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in holding that appellant's claim for exemption under section 11 read with section 12, 12A and 13 of the Income-tax Act is not maintainable, for the reasons that the same is hit. (a) By first proviso to section 2(15) read with section 13(8) of the Act, and (b) By the ....
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....f I.T. Act. The Appellant Parishad filed appeal against the said order. The said appeal was allowed by Hon'ble I.T.A.T. in ITA No. 405/LKW/2012 vide order dated 30.01.2014 in the favour of appellant Parishad. 9. BECAUSE the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts is not following the judgment of Hon'ble Allahabad High Court dated 16. 09.2013 in the case of Commissioner of Income-tax-I v. U.P. Housing & Development Board in income tax appeal no 114 of 2010 for A.Y. 2003-04 in our own case. 10. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by disregarding the following judgements in case of Moradabad Development Authority whose activities and objects are similar of the appellant Parishad: a. Judgement of Hon'ble Allahabad High Court dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Judgement of Hon'ble ITAT, Delhi dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013- 14 and a. Order of Ld. Commissioner of Income-tax (Appeals), Moradabad for A.Y. 2015-16 dated 28.01.2019 11. BECAUSE wholly without prejudice to the contentions rais....
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....nized on receipts basis on allotment of properties in favour of the applicants. 14. BECAUSE even under Cash System of accounting as is being followed by the appellant, only such receipts bear the nature of income liable for taxation as have resulted in income as such to the appellant and on a due consideration of the nature of receipts reaching the appellant, it could not have been said or held that such receipts were in the nature of income liable for taxation in the hands of the appellant, in the year of receipts itself. 15. BECAUSE depletion in value of "Property Stock" as represented by Houses constructed by the "Appellant" (excluding the cost of land) as charged to the Income and Expenditure Account was liable to be allowed as deduction even in Cash System of Accounting and the Ld. Commissioner of Income-tax (Appeals) was not justified either on facts or in law in confirming the addition of the same to the "Surplus" revealed by the Income and Expenditure Account. 16. BECAUSE in any case, the whole of the sum of Rs.3,84,36,357/- as has been confirmed as addition by the Ld. Commissioner of Income-tax (Appeals) (to the surplus revealed by the Income and....
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....Cross Objections could not be filed within the prescribed time and it was prayed that the delay in filing the Cross Objections may be condoned and the Cross Objections may be heard on merits. Learned counsel for the assessee had no objection to the condonation of delay in filing the Cross Objections therefore, finding the reason for delay in Cross Objections bonafide, we condoned the delay in filing the Cross Objections and asked learned CIT, D.R. to proceed with her arguments on the Cross Objections. 4. Learned CIT, D.R. submitted that the Cross Objections are similar to the additional grounds of Revenue taken by the Revenue in the appeals no.630, 631 and others which have been heard today i.e. on 17/05/2022 and detailed written submissions have been filed by the learned Special Counsel for the Revenue which may also be considered as her arguments of the Revenue in these Cross Objections. 5. Learned counsel for the assessee, on the other hand, submitted that detailed written submissions have been filed in the cases of the assessee and the hearing of which had concluded today i.e. 17/05/2022. It was submitted that since the issues, involved in these appeals and in Cross Objec....
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.... properties of the Board or of the State Government placed under the control and management of the Board. f) To organize and run workshops and stores for the manufacture and stock piling of building materials. g) On such terms and conditions as may be agreed upon between the Board and the State Government, to declare houses constructed by it in execution of any scheme to be houses subject to the U.P. industrial Housing Act, 1955 (U.P. Act No. XXIII of 1955). h) To regulate building operations. i) To improve and clear slums. j) To provide roads, electricity, sanitation, water supply and other civic amenities and essential services in areas developed by it. k) To acquire movable and immovable properties for any of the purposes before mentioned. l) To raise loans from market, to obtain grants and loans from the State Government the Central Government, Local Authorities and Public Corporations and to give grants and loans to Local Authorities. Urban bodies, corporations, hospitals etc. m) To make investigation, examination or survey of any property or contribute towards the cost of any such investigation, examinati....
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....e, the decision taken in those appeals is applicable to these appeals of the assessee and Cross Objections of the Revenue. In those appeals, detailed written submissions were filed by both the parties, which have made part of the order in those appeals. However, to avoid unnecessary bulkiness of this order, the written submissions filed by both the parties, have not been made part of this order but still for the sake of completeness, the crux of arguments of both the parties on various grounds of appeals and Cross Objections has been summarized in this order. 8. First we take up the Cross Objections filed by the Revenue. The first Cross Objections filed by the Revenue is that the learned CIT(A) erred in having failed to consider the provisions contained in section 13(8) introduced by Finance Act, 2012 with retrospective effect from 01/04/2009. The arguments, taken by the Revenue on this ground, revolve around the definition of charitable purpose read with proviso to section 2(15) w.e.f. 01/04/2009. It was submitted that primary purpose of introducing the amendment with effect from 01/04/2009 was with respect to any activity of advancement of any other object of general public ut....
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....arned CIT, D.R. further heavily relied on the judgment of Hon'ble Kerala High Court in the case of Greater Cochin Development Authority where the appeal filed by assessee against the judgment of the Tribunal was dismissed by Hon'ble High Court and the Special Leave Petition filed by assessee was also dismissed by Hon'ble Supreme Court. It was submitted that in that case also the assessee was engaged in the similar activities and therefore, the findings of these case laws are applicable to the present assessee also. The Learned CIT, D.R. also placed reliance on some orders of the Tribunal where under similar facts and circumstances the various Benches of Tribunal has held that assessee was not eligible for exemption u/s 11 of the Act. Though at the same time the Learned CIT, D.R. admitted that some benches of the Tribunal have taken a contrary view and have granted exemption u/s 11 of the Act. It was submitted that in the present cases the judgment of Hon'ble Supreme Court in the case of Vegetable Products will not be applicable and assessee cannot be given the benefit of favourable judgment as there is no ambiguity in the language of provisions and the case law of V....
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.... respect Learned CIT, D.R. has relied on the following case laws: (i) CIT II Lucknow vs. Awadh Educational Society in I.T.A. No.142 of 2007 by Hon'ble Allahabad High Court (ii) DIT vs. Maruti Centre for Excellence [2012] 208 Taxman 236 (Delhi) 8.2 In reply to the Cross Objections, Learned counsel for the assessee had submitted that by taking ground No.1 regarding non consideration by Assessing Officer of the provisions of section 13(8), the Revenue is again challenging the activities of the assessee which undoubtedly remain the same since the granting of registration u/s 12A of the Act. It was submitted that Hon'ble Allahabad High Court in the case of the assessee itself, vide order dated 18/04/2017, has examined the activities of the assessee and after examining the activities of the assessee has held that the activities of the assessee were charitable in nature. It was submitted that Hon'ble High Court, while deciding this issue in favour of the assessee, has followed the judgment of Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority wherein detailed findings were made. The Learned counsel for the as....
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.... of Moradabad Development Authority has also held similar views and held that the similar activities, as carried on by the assessee, are not hit by the proviso to section 2(15) of the Act. 10. As regards the arguments of learned CIT, D.R. of the Revenue that the activities carried on by the assessee involve carrying on of the business, it was submitted that the activities carried on by the assessee are similar to the activities being undertaken by the Lucknow Development Authority and in the case of the Lucknow Development Authority, this Bench of the Tribunal on 10/03/2022, has examined the activities with respect to profit motive and after elaborate discussions has held that such activities carried out by the assessee, though involved earning of profit, but still they cannot be compared with the activities carried out by private builder and therefore, are not hit by the proviso to section 2(15) of the Act. 11. As regards the reliance placed by Learned CIT (D.R.) on the judgment of Hon'ble Jammu & Kashmir High Court in the case of Jammu Development Authority, Learned counsel for the assessee submitted that the issue involved in the Jammu Development Authority was regardi....
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....gra for A.Y. 2014-15 in ITA No. 55/ Agra/ 2015 dated 07.02.2018 ii. Hon'ble ITAT, Agra in the case of Agra Development Authority in ITA No. 216/Agr/2016 for AY 2011-12, 177/Agr/2014 for AY 2009-10 and 239/Agr/2015 for AY 2010-11 dated 17.05.2021 iii. Hon'ble ITAT, Bangalore in the case of Bangalore Development Authority vs. Additional Commissioner of Income-tax, Bengaluru for A.Y. 2012-13 in ITA No. 1087 & 1104 (BANG) OF 2017 dated 22.03.2019 iv. Hon'ble Allahabad High Court in the case CIT v. Hapur Pilkhuwa Development Authority, Ghaziabad Development Authority, Kanpur Development Authority, Allahabad Development Authority, Aligarh Development Authority, Jhansi Development Authority and Gorakhpur Development Authority vide order dated 28.06.2016 v. Hon'ble ITAT, Mumbai in the case of Maharashtra Housing & Area Development Authority, Mumbai v. DCIT(Ex) in ITA No. 4133/M/2019 for AY 2015-16 dated 07.09.2021 vi. Hon'ble Gujrat High Court in case of Commissioner of Income-tax (Exemptions) vs. Gujrat Housing Board in Tax Appeal No. 184 of 2019 for AY 2012-13 dated 25.06.2019 vii. Hon'ble Gujrat High Court in the case of Ahmedabad Ur....
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....ng the course of dictation of the order, it was observed that the Special Counsel of the Revenue had placed heavy reliance on the order of Hon'ble Supreme Court in the case of Greater Cochin Development Authority wherein it was claimed that under similar facts and circumstances, Hon'ble Supreme Court had dismissed the appeals filed by the assessee. We observe that the Learned counsel for the assessee had not elaborated on this argument of the Revenue therefore, the cases were refixed and were finally heard on 17/05/2022. Learned counsel for the assessee filed supplementary written submissions, which has been made part of this order. In the supplementary written submissions, the Learned counsel for the assessee has argued that the judgment of Hon'ble Supreme Court in the case of Greater Cochin Development Authority is not applicable to the facts and circumstances of assessee. Elaborating on such judgment, Learned counsel for the assessee, through her written submissions, had submitted that in that case the Hon'ble ITAT had held that the activities of the assessee were hit by the proviso to section 2(15) of the Act and Hon'ble High Court had dismissed the appeal o....
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.... in the case of Jammu Development Authority that Hon'ble High Courts had not framed any question of law and had dismissed the appeals of the assessees based upon the facts of those assessees and therefore, the dismissal of SLP, filed by the assessee, by Hon'ble Supreme Court, cannot be said to have laid down any law and therefore, the findings of Hon'ble Supreme Court in the case of Greater Cochin Development Authority and in the case of Jammu Development Authority, will not be applicable to the cases of the assessee as in the case of the assessee, the jurisdictional High Court of Allahabad has already decided the issue in favour of the assessee wherein the Hon'ble court has held that the activities of the assessee are not hit by the proviso to section 2(15) of the Act. Since admittedly by both parties, there has not been any change in the activities undertaken by the assessee therefore, the activities undertaken by the assessee during these years under consideration will not be hit by the proviso to section 2(15) of the Act. For the sake of convenience, the findings of Hon'ble Allahabad High Court dated 18/07/2017 in the case of assessee itself are reproduced b....
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.... has been raised that at the stage of considering application for registration, CIT (E) is not entitled to look into the question, whether activities of applicants seeking registration are charitable or not. 33. Under the definition of ''charitable purpose' parties are ad idem that all three IDA's at the best, would have to be covered by the words "advancement of any other object of general public utility". 34. It is also admitted that if fail, they are not entitled for registration. Endeavour on the part of Revenue, is that proviso inserted in Section 2(15) by Finance Act, 2008 with effect from 01.04.2009 excluding activities in the nature of trade, commerce or business or any service rendered in relation to trade, commerce or business for a cess or fee or any other consideration, excludes all the aforesaid three ''IDAs' from the purview of definition of ''charitable purpose' under Section 2(15) of Act, 1961. 35. Explaining amended provision defining "charitable purpose", Central Board of Direct Taxes, (hereinafter referred to as "CBDT"), has issued Circular No.134/34/2008-TPL (Circular No.11/2008) dated 19th Decem....
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....was inserted in Indian Income Tax Act, 1918 adding the phrase "advancement of other objects of general public utility", without any restriction or qualification whatever in Explanation to Section 4 (3). In Trustees of Tribute, in re (1935) 3 ITR 246, 272 (Lah) Justice Tek Chand remarked, that Indian legislature, has used a phraseology which is much wider and more comprehensive than that of fourth head of classification in Special Commissioner Versus Pemsel (supra). The aforesaid remarks of Justice Tek Chand were approved by judicial committee of Privy Council in Trustees of the Tribute, In re (1939) 7 ITR 415(PC). 39. The four heads are to be read in ejusdem generis so as to give relief to public. Simultaneously, they should be given their natural meaning as it can be in common parlance but in a manner so as to keep objects, public in nature. Whether a particular object is of general public utility or not is to be tested by the principles applicable to such case in a Court of Law and by finding out whether Court should record a trust or charity and would undertake its administration and control. 40. In CIT Versus Andhra Pradesh State Road Transport Corporation (19....
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....) under Section 12A read with Section 12AA for registration so as to get exemption under Section 11 of Act, 1961. CIT (E) rejected application by order dated 14th September, 2007. It held that DBJ is not a charitable trust since its object and purpose is confined to only a particular religious community, it would attract provisions of Section 13(1)(b) hence registration was denied. In appeal, Tribunal however took a different view and held that DBJ is entitled to claim registration under Section 12A and 12AA. Revenue came in appeal to High Court which held that the findings of Tribunal are factual. However, Section 13(1)(b) would not be applicable to DBJ as trust is not created or established for benefit of any particular religious community or caste. Consequently, Revenue's appeal was rejected by High Court vide judgment dated 22.06.2009. Then the matter went to Supreme Court. Objection of Revenue was that object of trust was not wholly religious in nature, but charitable and confined to the benefit of a particular religious community i.e. DB community hence Section 13(1)(b) was attracted, ousting trust from ambit of exemption available under Sections 11 and 12 of Act, 1961. C....
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....her than oneself. Supreme goal of all religions is philanthropy which could be manifested in various forms. It has been held that gifts for religious purposes are prima facie gifts for charitable purposes. Court also observed that in Section 13(1)(b) it could be inferred that Legislature intended to include trusts established only for charitable purposes. It does not mean that a trust, if composite one, that is, one for both religious or charitable purposes, then it would not be covered by clause (b) of Section 13(1). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose, which is established for the benefit of any particular religious community or caste. Court, therefore, held that DBJ is a trust based on religious tenets under ''Quran' according to religious faith of Islam. Perusal of objects and purposes of DBJ Trust demonstrate that activities of trust, though both charitable and religious, are not exclusively meant for a particular religious community. The objects do not channel benefit of any community hence would not fall under the ambit of Section 13(1)(b) of Act, 1961. 46. In Director of In....
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....or registration under Section 12A/12AA. On behalf of Revenue, it was argued that LDA is engaged in activities of acquiring land, developing plots, constructing residential as well as commercial places and selling thereto. Sales are also undertaken through auction process and sold to highest bidder, to earn more and more profits. Said activities are trade in nature and liable to tax. Revenue sought to equate LDA with private colonizers and builder. On behalf of LDA various provisions of UPUPD Act, 1973 were placed. This Court held that expression ''general' under Section 2(15) means pertaining to whole class. Advancement of any object or purpose to benefit public or a section of public is distinguished from benefit to an individual or group of individuals. Expression "charitable purpose" would prima facie include all objects which promote welfare of general public. 49. In the context of Gujarat Maritime Board, similar issue came up for consideration in Commissioner of Income-Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC). Here also Commissioner rejected application for registration, but Tribunal allowed it and judgment was confirmed by High Court. Suprem....
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....ters connected with the purpose of aforesaid. Later on this Act further amended from time to time as per need of Jaipur region. As per chapter (vi), functions of the authorities have been defined in item No. (a) to (s). As per item-(h), the authority is authorized to develop agriculture, horticulture, floriculture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicare, tourism, entertainment and similar other activities. As per item- (n), it performs in the area of urban renewal, environment and ecology directly or through its functional boards, therefore, the JDA not only planning the urban area with master development plan and zonal development plan but also sanction projects and schemes for development. The JDA is a tool of State government for coordinated and planned development in Jaipur region. In practical, the main work of JDA is construction of roads, sewerage, parks, play grounds, provide plots for educational, health and cultural institution for over all development of the community. By making planned development it provides smooth transaction so that air pollution can be minimized and save time of the public. If it is le....
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....Government. 54. Funds of IDA shall constitute, under Section 20, as under:- "20. Fund of the Authority (1) The Authority shall have and maintain as own fund to which shall be credited (a) all moneys received by the Authority from the State Government by way of grants, loans, advances or otherwise (b) all moneys borrowed by the Authority from sources other than the State Government by way of loans or debentures (c) all (fees, tolls and charges) received by the Authority under the Act (d) all moneys received by the Authority from the disposal of lands buildings and other properties movable and immovable and (e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other source." 55. Section 20(2) says that funds shall be applied by IDA towards meeting expenses incurred in administration of UPIAD Act, 1976 and for no other purposes. Therefore, there is a complete bar that the funds of authorities can be used only for the purpose of UPIAD Act,1976 and not otherwise. As we have already said, they are for general public utility and not for an individual or any individual ....
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....ideration etc., it has to be used in discharge of objectives and functions provided under UPIAD Act, 1976, for the benefit of general public. 60. In Ramtanu Cooperative Housing Society Limited and another Versus State of Maharashtra and others 1970 (3) SCC 323 a Constitution Bench had an occasion to examine validity of Maharashtra Industrial Development Act of 1962. Under the said Act, provisions were made for incorporation, regulation and winding up of Maharashtra Development Corporation. The true character of Corporation was examined by Court in the light of provisions of Act and it was observed that Corporation is established for the purpose of securing and assisting rapid and orderly establishment and organization of industries in industrial areas and industrial estates in the State of Maharashtra. Functions of Corporation are generally to promote and assist in rapid and orderly establishment, development of industries in Maharashtra and to establish and manage industrial estates at places selected by State Government, develop industrial areas selected by Government for the purpose and make them available for undertakings to establish themselves, assist financially by ....
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....oneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner. The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct. The Corporation accepts deposits from persons, authorities or institutions to whom allotment or sale of land, buildings, or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appointed by the State Government. These provisions in regard to the finance of the Corporation indicate the real role of the Corporation, viz, the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income o....
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.... come within the ambit of activities constituting trade, business or commerce activities, but these authorities failed to place relevant material before CIT (E). He drew our attention to order of CIT(E) dated 19.11.2015. He referred to para-2 of said order wherein it is mentioned that respondent GNIDA could not produce books of accounts nor furnished required details. It had not filed any return for Assessment Year 2012-2013 even after expiry of last date of filing of return. It had a net profit of Rs 20,64,84,209/- for Assessment Year 2012-13, but filed return showing income nil. Similarly, for Assessment Year 2013-2014 net profit of Rs.83,39,876/- was shown as nil income. CIT (E) also observed that GNIDA was claiming exemption under Section 10(20) of Act, 1961, but simultaneously sought registration under Section 12AA of Act, 1961. There was no reason for filing application after 12 years. Respondents-authorities could not produce required details, books of accounts or any other evidence to show that it is involved in any charitable activity as such. Having said so, CIT (E) observed "on perusal of material available on record it is seen that applicant assessee is a profit making ....
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..../omitted with effect from 01.04.2003 and Section 10(20) applies to "local authorities" only and ''IDAs' are not "local authorities" as stated in explanation to Section 10(20) of Act, 1961. 65. It is true that ''IDAs' being not very clear about provisions under which they are exempted, made attempts to refer and rely one or other provisions but a mistake of law in pleading status or claiming a particular advantage under a provision is neither an admission nor will attract principle of estoppel or acquiescence. When law requires something and provides a particular status with particular description, it is to be treated accordingly. A mistaken claim will not make any difference, either for affirmence or denial. 66. When CIT (E) was required to consider application for registration, in our view, it should have concentrated only to the requirement of Section 12A and 12AA, as the case may be, and not other provisions like Section 10(20) or 10(20A) etc. The factum that ''IDAs' would be covered or not, under Section 10(20), would make no difference for the reason, if these authorities satisfy requirement of Section 12A(1), then are enti....
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.... shows immature approach and misapplication to the issue in question. Observations made in para-11 of the order passed by CIT (E), in our view, are nothing but an irrational, illogical and misconceived approach so as to exclude respondents-authorities from the ambit of definition of "charitable purposes". 70. In our view, Tribunal has rightly set at naught aforesaid illegality by setting-aside said order. 71. Entire discussion, if we summarize, can be placed in a small arena of judicial analysis, that is, a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for "charitable purposes" and seek registration under Section 12A(1) of Act, 1961. 72. There is another limb of issue with regard to manner in which CIT (E) has proceeded. It is seriously argued by learned counsel for respondents-authorities that CIT (E), while considering an application for registration under Section 12AA, is not supposed to examine "whether applicant is entitled for certain....
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....he said income has been expended, and whether it can be said that the income is utilized towards charitable and religious purposes, i.e., towards the object of the trust. Therefore, for the purpose of registration under section 12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust." (emphasis added) 76. In Director of Income Tax Versus Foundation of Ophthalmic and Optometry Research Education Centre (2013) 355 ITR 361 (Del.), Delhi High Court said:- "10...... the above provision would suggest that there are no restrictions of the kind which the Revenue is reading into in this case. In other words, the statute does not prohibit or enjoin the Commissioner from registering a trust solely based on its objects, without any activity, in the case of a newly registered trust. The statue does not prescribe a waiting period, for a trust to qualify itself for registration......." 77. Recently Kerala High Court in Sree Anjaneya M....
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....h has been advanced seriously, is that Tribunal should not have directed to grant registration since competent authority is Commissioner, therefore, Tribunal should have directed Commissioner to consider registration. In our view, this submission also sans merit. Tribunal exercises coextensive appellate power against the order of Commissioner. It is the last Court of fact. There is no restriction on the power of Tribunal. Section 254 of Act, 1961 empowers Tribunal to pass such orders as it deems fit. Therefore, in all the matters, where appeal is provided to Tribunal, its power is coextensive with the authorities whose orders are appealed before Tribunal. There is no reason to read power of Tribunal, in a manner so as to linger on a matter between different authorities, particularly when there is no such restriction under the statute and on the contrary, statute confers widest power upon Tribunal. 80. Looking from all angles and giving our serious thoughts and utmost consideration to the arguments advanced on behalf of both sides and in the light of discussions made above, we have no hesitation in answering questions 1 and 2 in favour of respondents-authorities and against....
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....;ble Allahabad High Court, in this case, had framed the following questions of law: "i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of Section 12-AA of the Income Tax Act, 1961 and read with Section 2 (15) thereof? (ii) Whether the findings recorded by the Tribunal to the effect that the respondent-assessee was not carrying out any activity of profit and it's predominant object of welfare of public at large are correct or not? (iii) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the Commissioner of Income Tax (Exemptions), Lucknow in exercise of power under Section 12-AA of the Income Tax Act, 1961?" After discussing various provisions of section 12A, 11A and 2(15) of the Act, along with the proviso to section 2(15), has Hon'ble High Court has answered all these three questions in favour of the assessee and against the Revenue. 19. We further find that in the....
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....s dismissed the SLP filed by the Revenue vide order dated 25/11/2019. We further find that CBDT, vide notification dated 23/06/2020, has allowed exemption u/s 10(46) for assessment year 2013-14 to 2016- 17 to Greater Noida Industrial Development Authority. The said notification allows the activities undertaken by Greater Noida Industrial Development Authority, as activities for charitable purposes. The contents of such notification has been made part of this order and is reproduced below: Notification No. 33/2020 Central Government notifies 'Greater Noida Industrial Development Authority', an authority constituted by the State Government of Uttar Pradesh, in respect of the specified income arising to that board under section 10(46) of Income Tax Act, 1961. MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes) Notification No. 33/2020-Income Tax New Delhi, the 23rd June, 2020 S.O. 2014(E).-In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, 'Greater Noida Industrial Development Authority', (PAN AAALG0129L), an authority ....
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....ey received by way of rent, lease charges from the immovable properties. Therefore, in view of the fact that CBDT itself has considered similar activities as being undertaken by various assessees being of non commercial nature, the activities undertaken by the assessee also cannot be said to be of commercial nature. 23. The Lucknow Bench of the Tribunal vide order dated 10/03/2022 in the case of Lucknow Development Authority, under similar facts and circumstances, has held similar activities being not hit by the proviso to section 2(15) of the Act. In that case the Tribunal has discussed as to what can be said business and what is the profit motive and what is the difference between the private builder and a Government builder. The findings of the Tribunal as contained from para 8 are reproduced below: "8. We have heard the rival parties and have gone through the material placed on record. The main objective of the assessee authority is to develop houses at affordable cost for the public and to develop public utilities. The assessee Authority was created by enactment of Uttar Pradesh Urban Development and Planning Act, 1973 by Notification No. 1892/XXXVI-2-21(DA)-....
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.... office of Authority General of India in case of LDA. On the other hand, audit in case of private colonizers/ Real Estate Developers is done by an auditor appointed by them and in some cases, it is even not compulsory by law. f. In the case of the appellant Authority, no personal benefit of any person or entity is involved, all the decisions are made within the ambit of law for the overall development of the city, however, private colonizers/ Real Estate Developers, focus mainly on their personal benefits. 9.1 Due to these reasons the development work undertaken by the assessee authority cannot be compared with the development work undertaken by the private colonizers / Real Estate Developers. The assessee has also carried out various projects in the city of Lucknow for the welfare of general public which a private colonizer will never do. i. Numerous parks in the city like Lohia Park in Gomti Nagar, Neebu Park, Hati Park, in Chowk and various other parks in Lucknow were build and are maintained by the appellant Authority. Further, the Gomti River Front developed in Lucknow is now being maintained by the appellant Authority. The parks developed by appella....
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....itution Bench held that, if primary purpose and predominant object of a trust are to promote welfare of general public, the purpose would be charitable purpose. If primary or predominant object of an institution is charitable, any other object which might not be charitable, but which is ancillary or incidental to dominant purpose, would not prevent institution from being a valid charitable trust. Therefore, irrespective of the fact that LDA receipts include consideration from sale of property, rent, interest, etc., LDA has to be considered as charitable trust in light of abovementioned judgments of Hon'ble Supreme Court and Hon'ble Allahabad High Court in its own case since its predominant object are to promote welfare of general public and L.D.A. cannot be compared with and treated like a real estate developer. Treating L.D.A. like a real estate developer will defeat the very purpose of establishing L.D.A. by an Act of Legislatures. 9.3 From the above facts, it is clear that the Lucknow Development Authority is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in the nature of rendering any service in relation to any trad....
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....s or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected" 9.6 It can very well be seen from the above extract that the intent of the Finance Minister in bringing such an amendment is to target those non-genuine NGOs who carry on activities in the nature of trade or business under the grab of charity. The appellant Authority is a Government body. It does not fall under the category of non-genuine NGOs. The Learned Assessing Officer has taken a narrow and myopic view, by holding that the assessee Authority is carrying on business, which needs to be corrected. 9.7 While dealing with cases such as of L.D.A., a Government body, a narrow and myopic view should not be adopted. While interpreting the terms trade, commerce or business, in the Commentary on Income Tax Law by Chaturvedi & Pithisaria, "business" has been defined / explained as under (Page 1321; Vol I; Fifth ....
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....a, (1986) 63 STC 198(SC))." The expression "business" has further been defined in the Commentary on Income Tax Law by Chaturvedi & Pithisaria (Pages 1322 and 1323; Vol1 ; Fifth edition)as under: "The word 'business' is a word of large and indefinite import. It is something which occupies the attention and labour of a person for the purpose of profit. It has a more extensive meaning than the word 'trade'. An activity carried on continuously in an organized manner with a set purpose and with a view to earn profit is business [CIT v. M.P. Bazaz, (1993) 200 ITR 131, 135, 136 (Ori)]. Also see, Khoday Distilleries Ltd. v. State of Karnataka, JT 1994 (6) SC 588, 625-26." (ii) Meaning and Concept of "Trade" and "Commerce" In the Commentary on Income Tax law by Chaturvedi & Pithisaria, "trade" and "commerce" have been defined as under (Page 1323; Vol 1; Fifth Edition): "Trade or Commerce- The definition of 'trade' does not find its place in the Act. The dictionary meaning of 'trade' as per dictionary of Webster's New Twentieth Century Dictionary, (Second edition), means amongst others, 'A means of earning o....
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....Government Half Share Of Profits For Some time and That It Had To Return Deposits To Consumers Would Not Indicate That It was Carrying On Business-Business as Contemplated By S.10 Of 1922 Act Is An Activity Capable of Producing A Profit Which Can Be Taxed." 9.10 In the case of CIT V. K. S. Venkatksubbiah Reddiar (1996), 221 ITR 18,21 (Mad.), Hon'ble Madras High Court has, while holding that profit - motive is essential to constitute a business, observed as under: "It is, therefore, clear that the two essential requirements for any activity to be considered as business are (i) it must be a continuous course of activity; and (ii) it must be carried on with a profit motive." Similar findings have been made in the following case laws: (1) Barendra Prasad Ray v. ITO (1981) 129 ITR 295 (SC) (2) LalaIndra Sun In Re (1940) 8 ITR 187 (Alld) (3) NarasinghaKar& CO. v, CIT (1978) 113 ITR 712(Ori) 9.11 From the aforesaid, it is clear that the appellant "Authority" is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in rendering any service in relation to any trade, commerce or ....
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....igh Court has been confirmed by the Hon'ble Supreme Court in Appeal reported in (2012) 12 SCC 267. If the predominant object is to carry out charitable purpose and not to earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity [CIT v. Andhra Pradesh Road Transport Corporation (1986) 159 ITR 1 (SC), Thiagrajan Charities v. Addl. CIT (1997) 225 ITR 1010 (SC), Girijan Co-operative Corporation Ltd v. CIT (1989) 178 ITR 359 (AP)]. In view of above, it is held that the receipt of money by way of sale consideration, sundry receipts, interest, rent etc. is arising out of sole purpose of growth and development of the areas and not to earn profit. 11. We further find that in the case of assessee itself in assessment year 2005-06, the Hon'ble Allahabad High Court in a bunch of cases vide order dated 16/09/2013 has held the assessee to be engaged in charitable activities. Though the year involved in this case is before the insertion of proviso to section 2(15) but the Hon'ble High Court held that even after insertion of proviso to section 2(15), the assessee cannot be said to be engaged in carrying ....
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....it was observed that:- "... in Section 2(15), namely, "any other object of general public utility". From the said decisions it emerges that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [CIT vs. Ahmedabad Rana Caste Association, [1983] 140 ITR 1 (SC)]. The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [CIT vs. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary....
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....Appeal No. 70 of 2009 observed that the Forest Corporation being an statutory entity is entitled for the registration under Section 12A of the Act. The said observations was upheld by the Hon'ble Apex Court vide its order dated 12.05.2011 in Special Leave Petition No. (Civil) No. 2590/2011. We may also like to refer a C.B.D.T. Circular No. 11/2008 dated 19.12.2008, wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:- "2.2. '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. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section 10(23C), which are that - (i) the business sho....
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.... we find no reason to interfere with impugned orders passed by the Tribunal. The same are hereby sustained along with reasons mentioned therein. The answer to the substantial questions of law are in favour of the assessee and against the department. In view of above, all the appeals filed by the department are dismissed, as stated above." Hon'ble Allahabad High Court in the case of Moradabad Development Authority, vide order dated 03/05/2017 had framed the following questions of law: "(a.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by upholding the order of Ld. CIT (A) by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. In which there is a provision for charging tax if total receipt of entities engaged in advancement of general public utility exceeds Rs.10 Lakh. Whereas the assessee has shown excess of income over expenditure of Rs.16,69,28,027/- by sales of Plots, shops and flats and its activities are in the nature of trade, commerce or business and amended provision of section 2(15) of the Income Tax Act 1961 is squarely applicable in this case. (b.) Whe....
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.... Hon'ble Supreme Court of India vide order dated 21.07.2014 in Special Leave to Appeal No.4990/2014. Hence the appellant authority is not entitled to registration under section 12A of the Income Tax Act, 1961." 11.1 The above questions of law have been decided against the Revenue and in favour of the assessee and while answering the questions, the Hon'ble Court has followed the judgment in the case of YEIDA. The questions of law, answered in favour of the assessee, if read as a whole, clearly state that the MDA is not doing any business activity and its activities are not hit by the proviso to section 2(15) of the Act. We find that MDA has been constituted under the same Act of Uttar Pradesh Urban Development and Planning Act, 1973 and its objects are similar to the objects of the assessee. Therefore, this judgment of Hon'ble Allahabad High Court in the case of Moradabad Development Authority is directly applicable to the assessee. The arguments of Revenue that in this case the issue before the court was not regarding denial of assessment u/s 11 of the Act but was on the issue of grant of registration u/s 12A of the Act is not correct. 11.2 To negate t....
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....nd the issue involved here is regarding the Exemption u/s 11 of the Act. As regards the reliance placed by Revenue on the case law of Kanpur Development Authority, we find that the said order has been recalled by Lucknow Bench of the Tribunal vide order dated 17/02/2018. We further find that in the case of the assessee itself for assessment year 2018-19, the Assessing Officer himself has allowed exemption u/s 11 of the Act during proceedings u/s 143(3) vide order dated 15/06/2021, a copy of which is placed at pages 361 to 363. We further find that in the case of the assessee itself, for assessment year 2009-10 and 2010-2011, on an appeal filed by the assessee, the CIT(A), vide order dated 01/10/2021 and 16/09/2021 has allowed the appeal of the assessee and has granted exemption u/s 11 of the Act. As regards the argument of Revenue that assessee has violated the provisions of section 13, we find that the act of the assessee in allowing some rebate to it's employees and reservation of some plots for it's employees does not amount to violation of section 13 as section 13(1)(c) states that income of the trust or organization will not be exempt u/s 11, if any, of the funds or income of ....
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....h or marriage with another person. The person having any other relationship pursuant to a contract like that of employer and employee cannot be said to be a relative. Therefore, the application of part of the income of the trust for the benefit of the employees of TISCO and their relatives could not disentitle the trust from claiming exemption under section 11(1)(a)." 11.5 The facts and circumstances of the case laws relied on by Revenue for the proposition that assessee violated the provisions of Section 13 do not apply to the facts of present cases as in the case of CIT vs. Awadh Educational Society, the assessee had given interest free loan to the treasurer of the society who is listed in the list of specified person u/s 13(3) of the Act whereas in the cases before us the assessee has given benefit to employees who are not specified persons as mentioned in section 13(3) of the Act. 11.6 In the case law of Maruti Centre for Excellence, the assessee was rendering training to its members who, in turn were giving donations to the assessee exceeding an amount of Rs.50,000/- therefore, those persons were the persons listed in sub-clause (b) of Section 13(3) and that ....
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....I.T.A. No.185, ground No. 10- 16 in I.T.A. No.186, ground No. 10 to 15 in I.T.A. No.163, ground No. 10 in I.T.A. No.164 and ground No. 10-12 in I.T.A. No.439 are dismissed as having become infructuous. 24. We further find that Hon'ble Allahabad High Court in the case of Moradabad Development Authority, which is engaged in the similar activities as the assessee, has dismissed the appeal of the Revenue against the order of the Tribunal whereby the Tribunal has held that the activities of that assessee were not hit by the proviso to section 2(15) of the Act. Hon'ble Allahabad High Court in the case of Moradabad Development Authority, vide order dated 03/05/2017 had framed the following questions of law: "(a.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by upholding the order of Ld. CIT (A) by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. In which there is a provision for charging tax if total receipt of entities engaged in advancement of general public utility exceeds Rs.10 Lakh. Whereas the assessee has shown excess of income over expenditure of Rs.16,69,28,027/- by sales of Plot....
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....Asr)/2011 in lieu of commercial nature of activities, and the same has already been confirmed by the Hon'ble High Court of Jammu & Kashmir vide order dated 07.11.2013 in ITA No.164/2012 as well as by the Hon'ble Supreme Court of India vide order dated 21.07.2014 in Special Leave to Appeal No.4990/2014. Hence the appellant authority is not entitled to registration under section 12A of the Income Tax Act, 1961." 25. The learned Special Counsel of the Revenue had argued that the Hon'ble High Court of Allahabad in the case of Moradabad Development Authority had decided the issue in favour of assessee by following the judgment in the case of Yamuna Expressway Industrial Development Authority which was not on the exemption u/s 11 but was on section 12A of the Act. To verify this argument of the Revenue, it is important to visit the judgment of Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority. From the judgment we find that Hon'ble Court had framed the following questions of law: (ii) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and....
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....e effect from 01/04/2009. To adjudicate the above ground, it is important to first visit the provisions of section 13(8) of the Act, which for the sake of convenience is reproduced below: Section 13(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso* to clause (15) of section 2 become applicable in the case of such person in the said previous year. (9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if- (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year. 2....
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....lding that the registration granted u/s 12A of the I.T. Act cannot be cancelled by the CIT under the provisions of Section 12AA (3) of the I.T. Act when the activities of the assessee were hit by the first and second proviso to section 2(15) of the I.T. Act w.e.f. 01.04.2009." 4. Learned counsel for the parties at the outset could not dispute that issue raised in this appeal is squarely covered by this Court's judgment in Income Tax Appeal No. 107 of 2016: Commissioner of Income Tax, (Exemption), Lucknow Vs. M/s Yamuna Expressway Industrial Development Authority and other two connected appeals decided on 21.04.2017. 5. For the reasons stated in aforesaid judgment, the question raised in this appeal is answered against Revenue. 6. Appeal is accordingly dismissed." 31. The Special Counsel of the Revenue, by taking this ground of appeal, as an additional ground of appeal, in fact has challenged the applicability of proviso to section 2(15) to the assessee whereas as per the judgment of Hon'ble High Court, this aspect has already been examined by Hon'ble High Court and which has categorically held that the proviso to section 2(15) are not....
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....g Officer in this respect. However, we find that since the Assessing Officer had outrightly disallowed the exemption u/s 11 of the Act, he has not examined the provisions of section 11(2) of the Act which necessitates that exemption u/s 11 will be available to the assessee only if it fulfills the provisions contained in section 11(2) of the Act. The provisions of section 11(2), as already noted by us above, relates to spending of 85% of the income and accumulation of 15% of the income, which aspect can be examined by the Assessing Officer while allowing exemption u/s 11 of the Act. Therefore, the Assessing Officer is directed to examine this aspect while allowing exemption u/s 11 of the Act. In view of the above, ground No. 2 of the additional grounds of appeal is allowed for statistical purposes. 34. Now coming to ground No. 3 of additional grounds, we find that Revenue has challenged that learned CIT(A) has not taken into account the provisions contained in section 13(1)(d) of the Act. The provisions contained in section 13(1)(d) of the Act relate to investments of the accumulated fund in the specified modes as contained in sub section 5 of section 11 of the Act. This as....
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....: "This Stay Petition has been filed by the assessee with a request to stay the recovery of demand of Rs.3,01,83,05,459/- till disposal of the appeal. 2. The demand has risen due to addition made by the Assessing Officer by rejecting the exemption under section 11 of the Act by holding that the assessee had given benefit to its employees by giving them priority in allotments as well as concessions in the prices of plots and, therefore, was hit by the provisions of section 13(3) of the Act. 3. In pursuance to our directions dated 4/2/2020, the ld. D.R. filed the details of employees regarding the benefit to them in the form of concessions in the allotment of plots, and argued that since the assessee has allotted plots to its employees on concessional basis therefore, there is violation of section 13(3) of the Income Tax Act, and therefore, the stay application filed by the assessee is liable to be dismissed. 4. The ld. Counsel for the assessee, on the other hand, has stated that the employees of the assessee Parishad are not Managers of the Parishad, as they are doing routine work assigned to them and they are not involved in the management of the....
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....any Managerial capacity, so far as regards the discharge of their duties under the Parishad; and that the specific requirement of the section is concerning Managers and not employees. Therefore, the assessee has a prima facie case in its favour and as such the balance of convenience is also in its favour. However, keeping in view the interest of justice to both the parties, we direct the assessee to deposit an amount of Rs.20 crores in two installments of Rs.10 crores each and the first installment is to be paid latest by 29th February, 2020 and the second installment is to be paid latest by 15th March, 2020. The appeal of the assessee is accordingly adjourned for hearing to 23rd March 2020. With these directions, we stay the outstanding demand for a period of six months from the date of this order or till disposal of the appeal, whichever is earlier, provided the assessee deposits the above noted amounts within the prescribed period. 8. In the result, the stay application of the assessee is allowed as indicated above." 37. Learned Special Counsel for the Revenue had relied on the following case laws for the proposition that in case of violation of provisions of s....
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....e become infructuous in view of our decision on the allowability of exemption u/s 11 and therefore, these are dismissed as infructuous. Ground No. 1 & 2 are general in nature and do not require any adjudication. As regards appeal in I.T.A. No.166, ground no. 3 to 12 and 17 are allowed whereas ground no. 13-16 have become infructuous. Ground No. 1 & 2 are general in nature and do not require any adjudication. As regards I.T.A. No.701, ground no. 3-12 and 21 are allowed whereas ground no. 13 to 18 have become infructuous. Ground no. 1 & 2 are general in nature and do not require any adjudication. As regards the Cross Objections No. 2 in I.T.A. No.166, ground No. 1 is dismissed whereas ground no. 2 to 4 are allowed for statistical purposes. In Cross Objections No. 3 in I.T.A. No.701, ground no. 1 & 4 are dismissed whereas ground no. 2 & 3 are allowed for statistical purposes. 16. As regards ground No. 19 & 20 in I.T.A. No.701, we find that the assessee has been transferring certain amounts to IDRF account and was directly reflecting that account in the balance sheet and was not routing through the profit & loss account. The Assessing Officer has added back these amounts while denyi....