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2020 (3) TMI 1018 - AT - Income TaxExemption u/s 11 - cancellation of registration u/s 12AA(3) - assessee is engaged in the commercial activity and selling the vacant lands to the highest bidders and entering into joint venture for construction of buildings for commercial purposes which is not the object of the assessee - HELD THAT:- In the instant case, the Ld.CCIT viewed that the assessee has lost sight of the objects from the assessment year 2008 onwards and carrying on commercial activity. In this regard, the Ld.Counsel has elaborately discussed the activities carried out by the assessee for furtherance of the objects and argued that the assessee is continuously engaged in the activities for development of the area in its jurisdiction and carried on various activities which are discussed in detail in para No.3 of this order, such as construction of houses for low income groups, widening of roads, development of various areas as per the master plan, sports complex, maintenance of schools, parks, bridges etc. and given a note on the projects which were undertaken and the projects in progress vide note dated 04.10.2019 and argued that the assessee is continuously taking all possible steps for overall development of the areas entrusted to it for orderly growth of the area as per the objects. During the appeal hearing, the Ld.Standing Counsel did not controvert the developmental activities undertaken by the assessee, therefore, we hold that the observation of the Ld.CCIT that the assessee has lost sight of its objects is not based on proper appreciation of facts, hence, we are unable to accept the same. Selling of vacant lands to the highest bidders in auction and entering into joint ventures for construction of buildings - As provided in section 19 of APUDA Act the assessee is permitted to dispose off the lands after development or without carrying out any development in such manner as per the terms and conditions mentioned therein. Sub sec.3 of sec.19 allows the assessee to dispose the lands by sale. Therefore, the assessee is permitted to sell the lands in public auction which is one of the most popular and transparent methods approved by courts also. The Department did not explain how the sale of lands earmarked for high income groups and for commercial ventures in public auction violate the objects of the assessee. As long as the sale proceeds are utilized for advancement of the objects without diversion, it does not violate the objects of the assessee. The department did not place any material to show that the funds of the assessee other than the sale proceeds of land in GO No.1401 are diverted for other purposes. Therefore, we, are of the opinion that the same is not against the objects of the Society and do not violate the objects mentioned in APUDA Act. It is necessary for VUDA to come forward for developing the malls and commercial complexes for the benefit of the public. Therefore, we are of the view that entering into joint venture for construction of buildings cannot be held to be against the object of the assessee society. CCIT has not brought on record how the construction of commercial buildings are against the objects of VUDA. Therefore, we hold that construction of commercial complexes, Malls etc., and entering into joint ventures for construction of the houses does not violate the objects of APUDA Act. Assessee is the owner of the lands alienated to VUDA, thus the assessee becomes the absolute owner of the lands, hence the assessee ought to have utilized the funds instead of remitting the funds back to Government - Sale proceeds of lands mentioned by the Ld.Standing Counsel which were stated to be belonged to the assessee were neither proved to be remitted to the government nor the parts of the lands in GO No.1401, thus there is no impact on Registration u/s 12AA of the Act. Therefore, we are unable to accept the contention of the Ld.Standing Counsel that the assessee has sold the lands belonging to it and remitted the sale proceeds to Government account. Contention of the Department is that the assessee acted as an agent for sale of lands and the agent is disentitled for grant of registration u/s 12AA(3) - VUDA has also collected the service charges and utilized the same for it’s objects. Revenue also did not place any evidence or material to show that the VUDA is barred from acting as an agent or in assisting the sale of Government’s lands. When Government is giving the loans, funds, grants, loans and advances and giving all the support for advancement of it’s objects, we do not find any reason to hold that VUDA is prohibited from helping the Government in selling the Government’s vacant lands as per the specific directions of the Government and there is no case law brought on record by either parties to support or to prohibit the assessee to sell the lands of the Government. Therefore, we are of the considered opinion that assisting the Government, in sale of lands, after collecting the expenses does not make the assessee disentitle for registration u/s 12AA(3) of the Act. Assessee has carried on commercial activity, hence, the assessee is hit by the amendment to section 2(15) - In the instant case, whatever surplus generated was used for the activities of the assessee society, therefore, the same cannot be held to be the commercial activities. Even otherwise, through Circular No.21 of CBDT dated 27.11.2016, it has directed the field authorities not to cancel the registration of charitable institution already granted u/s 12AA of the Act just because the provision to section 2(15) comes into play. The process for cancellation of registration to be initiated strictly in accordance with the provisions of section 12AA(3) and 12AA(4) of the Act after carefully examining the provisions. There is no material placed before us to establish that the assessee is not carrying on the activities in accordance with the objects or the activities of the assessee are not genuine. CCIT has cancelled the registration on presumptions and assumptions without having proper material. Therefore, we cancel the order of the Ld.CCIT passed u/s 12AA(3) of the Act and restore the registration granted to the assessee. Accordingly, appeal of the assessee is allowed.
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