TaxTMI 
TaxTMI 
2018 (8) TMI 2172
X X X X Extracts X X X X
X X X X Extracts X X X X
....aradari, Patiala. All the appeals have common facts, for convenience sake, facts are being taken from I.T.A. No.161 of 2016. 2. The Revenue has filed the appeal under Section 260A of Income Tax Act, 1961 (for short 'the Act') against the order dated 31.08.2015 of Income Tax Appellate Tribunal (for short 'I.T.A.T.'). The Tribunal quashed the order of the Commissioner of Income Tax (CIT), cancelling the registration of assessee-Trust. 3. As per the appellant, following substantial questions of law arise for consideration of this Court : (i) Whether the Hon'ble ITAT has erred in law by simply making a reference to its decision in case of Kapurthala Improvement Trust and thereby ignoring the specific directions of this Hon'ble Court to discuss the scope of proviso to Section 2(15) of the Act while deciding the case afresh? (ii) Whether the Hon'ble ITAT is right in law by saying that the powers accorded by Section 12AA(3) of the Act doesn't allow the CIT to cancel the registration granted earlier when insertion of proviso to Section 2(15) predicate new circumstances vis-a-vis both the objects and genuineness of the activities? (iii) Whether the Hon'ble I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r consideration, irrespective of the nature of use or application, or retention, of the income from such activity" 7. In view of amendment, a show cause notice was issued on 20.06.2012 to the assessee-Trust to show cause as to why registration granted under Section 12AA of the Act, be not cancelled. 8. The assessee filed a detailed reply to the notice. In the reply, the works and objects of the assessee-Trust were mentioned. It was further submitted that though the assessee-Trust may be earning some profits, but the utilization of that funds was for public utilities. The C.I.T. held that the activities of the assessee-Trust were not for charitable purpose within the meaning of amended Section 2(15) of the Act and the registration was cancelled vide order dated 20.07.2012. 9. Aggrieved of the order of cancellation, an appeal was filed before the Tribunal, the same was dismissed vide order dated 18.12.2012. 10. The Trust filed appeal challenging the order of CIT and the Tribunal. This Court in the appeal filed by the assessee-Trust vide order dated 06.08.2014 set aside the order of the Tribunal and remanded the matter back to it for deciding the issue afresh, keeping in v....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prior to amendment in Section 2(15) of the Act? 14. Learned counsel for the Revenue contended that the activities of the assessee-Trust does not fall within ambit of 'charitable purpose' under Section 2(15) of the Act as it stood from 01.04.2009. It was urged that the activities of the assessee are more akin to the developer and builder. The assessee-Trust purchased land at nominal rates and after carving out plots, the same were sold at exorbitant rates and thereby assessee-Trust earned huge profits. Reliance was placed upon decision of Division Bench of this Court in the case of Tribune Trust vs. Commissioner of Income Tax and another (2017) 390 ITR 547. 15. The second limb of the argument of the learned counsel for the Revenue was that being a statutory body that itself will not entitle the assessee-Trust for exemption. Reliance in this regard was placed upon the decisions of Supreme Court in the case of A.P. State Transport Corporation vs. Income Tax Officer (1964) 52 ITR 524, Adityapur Industrial Area Development Authority vs. Union of India 2006 (283) ITR 97 and Calcutta State Transport Corporation vs. Commissioner of Income Tax 1996 (219) ITR 515. 16. The next cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion No.71 dated 12.12.2008 (free of cost). (d) "Community Hall" measuring 2000 sq. Yds. To be erected & built in Rajiv Gandhi Nagar, Gurukul Nagar, Gurukul Road, Bathinda, Vide Resolution No. 75 dated 30.09.2008 (free of cost). (e) The Trust is to provide "Service Lane" 16 wide with parking and footpath". The amount to be spent is Rs. One Crore Vide Resolution No. 48 dated 26.08.2008 (free of cost). (f) The Trust has given as "Charity" of 'town cleaning machine' (vaccum Machine) to the Municipal Corporation, Bathinda, for Rs. 64.86 Lakhs vide Resolution No.56 (app. Rs. Ten Lacs) vide Letter No.1146 dated 24.09.2007 (free of cost). (g) To provide Land as well as construction of building for 14 plots measuring 1512 sq. ydds. valuing Rs. 45.2 lacs and construction cost Rs. 64.86 lakhs vide Resolution No. 56 dated 31.08.2006 and were handed over to the poor (free of cost). (h) To construct "Road divider" and development & renovation of Guiana-Bathinda-Mansa-G.T. Road, costing Rs.10.64 crore vide Resolution No.41 dated 31.12.2008 (free of cost). (i) Donation of Rs. 5 Lacs to : Deaf & Dumb school" for the welfare of such handicap stud....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Trust has been formed to carry-on business of coloniser or developer. The CIT was swayed by the fact that the profit was being earned and the said profit was converted into percentage to show that the margin of the profit was huge. There is not even iota of evidence on record to show that the said profit earned was not used for the purpose of general public utilities. There is no requirement in the provisions that the activities of charitable purposes have to be undertaken only by donations or have to be by financial aid of the government. Therefore, the CIT was not correct in cancelling the registration under Section 12AA of the Act especially when the surplus fund was being utilised for charitable purpose. 22. In the case of Improvement Trust Moga (supra), similar contentions raised by the learned counsel for the Revenue have been considered and rejected by this Court. The relevant portion of the decision is quoted below : XX XX XX "72. The Tribunal rightly rejected the contention that to fall within the ambit of the words " advancement of any other object of general public utility" the trust must necessarily be involved only in implementing poverty alleviat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot an absolute power independent of and unconnected with the assessee's statutory functions under the PTI Act. 77. The predominant activity of and the purpose for the establishment of the assessee is summed up in two words "town improvement" in the title "Punjab Town Improvement Act, 1922." The preamble is titled "An Act for the improvement of Certain Areas." The preamble states "whereas it is expedient to make provision for the improvement and expansion of towns in Punjab." The Act in general and Chapter-IV thereof in particular indicates the reason for and the basis of the establishment of the trust. Almost every section in the Chapter indicates clearly that the trust is established for the purpose of "advancement of the object of general public utility." This is the predominant purpose of the trust. 78. The language of the provisions of the Act are self-explanatory in this regard. The trust must deal with the buildings unfit for human habitation, the danger caused or likely to be caused to the health of the inhabitants of the area on account of the congested conditions of streets or buildings or want of light, air, ventilation or proper conveniences in an area ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., trade and business ventures. The creation and incorporation of the trust under section 3 is for a public purpose. We have no doubt whatsoever that the activities of the trust fall within the meaning of the words " charitable purpose" in Section 2(15). 82. Whether the mandate of the Act is followed by such a trust is a different matter. The facts in that regard are relevant in examining whether the activities of the trust of a given year entitled it to the benefit of the Income Tax Act. Mere profit making on account of certain incidental or ancillary activities of the trust do not disentitle it to the exemptions. The Trust constituted under the PTI Act is likely to make profit on account of its commercial or business activities such as when it acts pursuant to the power under section 28(2)(iii) by disposing off its lands. That, however, does not take it out of the definition of 'charitable purpose' in Section 2(15). As we held earlier, trade, commerce and business in Section 2(15) must be such as to involve an element of profit. Profit, however, is not the predominant motive of such trusts. In our view considering the nature of the Act, selling of plots and premises by th....