Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (3) TMI 1300 - AT - Income TaxCharitable purpose - Applicability of proviso to section 2(15)- Cancellation of registration u/s 12A - Bangalore Development Authority (BDA) - real estate developer - HELD THAT:- No doubt, it is a fact that one will see a lot of similarities in the activity of the assessee vis-ŕ-vis that of a real estate developer. However, the issue to be considered is, not whether the activity of the assessee is similar to that of the private real estate developer or not, but whether the underlying purpose of the activity is the same as that of the private real estate developer, i.e., making and maximization of profit. In the case of this assessee; viz., BDA, the underlying motive / objective is not making and maximizing of profits, but planned development of Bangalore City. It is important in this context to note the fact that concerned Income Tax authorities have recognized the assessee as a public charitable organization by grant of registration under section 12A of the Act since 26.03.2003 and that the assessee’s objects clause, i.e., section 14 of the BDA Act has not undergone any change or modification since its enactment; which is what must have prompted the Income Tax Department to take the view that it was charitable in nature. In other words, the Income Tax Department considered the assessee, ‘BDA’ to be covered by the provisions of section 2(15) of the Act. It is after the introduction of the proviso to section 2(15) of the Act that the Income Tax Department took a view that the activity of ‘BDA’ was in the nature of trade, commerce or business and cancelled the registration, granted under section 12A of the Act, vide order dated 08.11.2011. The assessee’s registration under section 12A of the Act however stood restored by a decision of the Co-ordinate Bench of this Tribunal vide order in [2015 (7) TMI 198 - ITAT BANGALORE]. In this prevailing factual matrix, there is no change in the objects and the only issue which apparently prompts Revenue to take the view it has taken, i.e., that the activity of the assessee is hit by the proviso to section 2(15) of the Act; is the fact that the activity of the assessee has resulted in huge surplus or profits. In our view, the fact of surplus or shortfall is not to be reckoned as the test for applicability of the proviso to section 2(15) of the Act; but rather, whether the activity is embarked upon solely with the view to earn profit or not; which the AO and CIT(A) have not done. we find that in the case of Ahmedabad Development Authority [2017 (5) TMI 1468 - GUJARAT HIGH COURT], the Hon’ble Gujarat High Court has upheld the appeal of the assessee, by overruling therein the decision of the Ahmedabad Tribunal in that case. In the case of Lucknow Development Authority [2013 (9) TMI 570 - ALLAHABAD HIGH COURT], the Hon’ble Allahabad High Court has upheld the decision of the Lucknow Bench of ITAT which was in favour of the assessee. We find that in the above judicial pronouncements cited by the assessee, the facts are identical to that of the assessee in the case on hand; that the AOs in these cases have taken a view that the activity is in the nature of trade, commerce or business and hit by the proviso to section 2(15) of the Act and the assessees have got relief at the higher appellate forums, viz., the Hon’ble High Courts and / or Tribunals. Further, in view of the decision of the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products [1973 (1) TMI 1 - SUPREME COURT], it is judicially correct to follow the decisions of Hon’ble High Courts of Gujarat and Allahabad which support the case of the assessee (supra), when the same are in favour of the assessee; despite there being decisions contrary by other High Courts; when there is no decision of the jurisdictional High Court against the assessee. In view of the factual and legal matrix of the case, as discussed above, we hold that the activities of the assessee, i.e., Bangalore Development Authority are not hit by the proviso to section 2(15) of the Act. Having held so, we direct the AO to allow the assessee the benefits of section 11 of the Act while giving effect to this order. Consequently, grounds raised by the assessee on this issue are allowed. In view of the finding rendered by us above on the applicability of the proviso to section 2(15) of the Act in the case on hand, all other grounds / issues raised by assessee in this appeal and by Revenue in its cross appeal become academic in nature and do not call for adjudication at this juncture.
|