TMI Blog2013 (12) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2008 w.e.f. 01.04.2009, which reads as under: Definitions. 2. In this Act, unless the context otherwise requires,-- (1) ............ (2) ............ (15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year; [emphasis, by underlining, ours] The factual aspect of the controversy is if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the impact of the provisos to section 2(15) being allowed or being given effect to in determination of the total income for a particular year, being a variable phenomenon (refer para 8 in Maharashtra Housing Area Development Authority vs. Addl. DIT(E) [2013] 58 SOT 196 (Mum.)). Reliance was placed on the following decisions: i. CIT vs. Sarvodaya Ilakkiya Pannai [2012] 343 ITR 300 (Mad.); ii. Maharashtra Housing Area Development Authority vs. ADIT(E) (supra); iii. Khar Gymkhana vs. DIT(E) (in ITA No. 373/Mum/2012 dated 10.07.2013); iv. Mahatma Gandhi Charitable Society vs. CIT [2013] 142 ITD 565 (Cochin-Trib.); v. Rajasthan Housing Board vs. CIT [2012] 19 ITR (Trib) 524 (Jp.); vi. Asst. CIT vs. Aurangabad Holiday Resorts (P.) Ltd. [2009] 118 ITD 01 (Pune); and vii. Gujarat Cricket Association vs. DIT (E) [2012] 19 ITR (Trib) 520 (Ahbd). 2.2 On facts, the assessee is an Authority established under an Act passed by the State Legislature, namely, the Mumbai Metropolitan Region Development Act, 1974 ('MMRD Act' hereinafter/PB pgs. 1-38), with the main object to secure the development of the Mumbai Metropolitan Region according to the regiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s spelled out in sections 11 to 13 of the Act, subject to which the exemption to the said income as not forming part of the total income is granted. It is to be noted that per the amended law, applicable w.e.f. 01.04.2009 (i.e., A.Y. 2009-10 onwards), the law links the manner in which the object, per se charitable, is achieved or accomplished, with it being so or regarded as so under the Act, in-so-far as it is toward the advancement of an object of general public utility (Maharashtra Housing Area Development Authority (supra) - para 8). In other words, the only course available in law is for the cancellation of the said registration where the first proviso to section 2(15) is attracted. As regards the application of the second proviso to section 2(15), which limits the operation of the first proviso to an extant threshold limit qua the receipts of the institution from its activities (presently at ₹ 25 lacs), the same, where so, could be reviewed inasmuch as the withdrawal of registration in the first instance had been occasioned or caused only by the invocation of first proviso to section 2(15), to which an exception is made by the second proviso to the section. The compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 124 TTJ (Asr) 598; iv. Tamil Nadu Cricket Association vs. Director of Income-tax (Exemptions) [2013] 57 SOT 439 (Che); v. Punjab Urban Planning Development Authority vs. CIT [2006] 103 TTJ (Chd.) 988; vi. Jammu Development Authority vs. CIT [2012] 52 SOT 153 (Asr.) (URO); vii. Improvement Trust vs. CIT [2013] 30 taxmann.com 58 (Asr.); Findings 3. Having heard both the parties at length, and given our careful consideration to the matter, we proceed with our analysis/decision. 3.1 At the outset, however, it would be relevant to clarify an aspect of the matter having a direct bearing on its adjudication. There is no scope to say of the Revenue's action as being in excess of the jurisdiction of the competent authority on account of the registration withdrawn having been granted u/s. 12A of the Act on 22.07.2002 (PB pg. 39); the registrations under which provision stood included for withdrawal u/s. 12AA(3) only by Finance Act, 2009 w.e.f. 01.06.2010. This is as the registration in the instant case, granted in July, 2002, is in substance; rather, in fact, only a registration u/s. 12AA(1)(b) inasmuch as a registration u/s. 12A could be granted only up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of funds on record. Chapter V of the said Act is titled 'Finance, Budget and Accounts'. Section 18(1), falling there-under, provides for various sources of funds. The same includes contributions and moneys paid to the Authority by the State Government, including the sums placed at its disposal by the State Government out of the proceeds of any cess levied under Chapter VI of the Act; the proceeds of any betterment charges levied under Chapter IV; all fees, costs and charges received by the authority under the Act or any other law for the time being in force; moneys received by way of rents and profits or any other manner or from any other source; moneys received from the disposal of the lands, buildings or other property, moveable or immovable, or other transactions. The interest and rent, received at an aggregate of ₹ 237.64 crores for the previous year relevant to A.Y. 2009-10, would form part of the gross receipt. As such, there is undoubtedly no question of application of second proviso, nor is so contended at any stage. During hearing, the ld. AR would explain us as to how the said receipts are integral to the functioning of the authority, and for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding institution. We are not for a moment advocating a strict meaning to its activity of financing, but only seek to emphasize that in order to be considered as a part of the assessee's regular business or functional activity, it has to be firstly in compliance of the objective of s. 12 of its governing act, qua projects that fall within its purview as a part of the regional plan, being reviewed and supervised by it. Secondly, that the assessee cannot be only or even predominantly a financing organization, and as such earning its revenue primarily or predominantly by way of interest, as financing itself could not be considered as an advancing an object of general public utility. True, financing is a vital input for execution of projects, but then so are other goods and services that go into undertaking the same. Their supply, as also that of funds, as by banks and financial institutions engaged in providing long term finance to public or infrastructure projects, cannot be considered as per se charitable. Again, the terms of lending (e.g. whether as soft loans over long gestation period, or at regular, prevailing rates of interest, etc.) have not been specified, and which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect of the matter. Such a findings, as would be patently clear, is necessary to arrive at a finding as to the satisfaction or otherwise of any of the two conditions of section 12AA(3), i.e., on facts. The primary onus to establish its case in this regard is on the assessee. Conclusion 4. The issue of applicability or otherwise of section 12AA(3) in the instant case being factually indeterminate, we only consider it fit and proper in the facts and circumstances of the case to restore this matter back to the ld. DIT(E) for allowing the assessee a reasonable opportunity to present its case in this regard before him, to be decided per a speaking order and in accordance with law. The ld. DIT(E), though not restricted to the facts and figures for a particular year, shall restrict his inquiry to the factual aspect of the case, i.e., qua the satisfaction of the conditions of section 12AA(3) on facts. That is, the fact that the first proviso to section 2(15) gets attracted shall not influence or colour the ld. DIT(E)'s factual findings nor by itself be considered as a ground for considering the assessee's activities as not genuine or not in accordance with its objects ..... X X X X Extracts X X X X X X X X Extracts X X X X
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