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2014 (11) TMI 882 - AT - Income TaxDenial of exemption u/s 11 – Scope of term charitable purpose u/s 2(15) - Assessee was constituted under the Act of the Government for making better planning and regulating development and use of land in planning areas delineated for the purpose, preparation of regional plans/master plans and implementation thereof and also for guiding and directing the planning and development process in the State - Held that:- No activity can be carried on efficiently, properly unless and until it is carried out on business principle but it does not mean that the provision is misused in any manner under the garb of charity and any institution be allowed to become richer and richer under the garb of charity by making it a non-tax payable organization – in Additional Commissioner of Income-Tax, Gujarat Versus Surat Art Silk Cloth Manufacturers Association (And Other References) [1979 (11) TMI 1 - SUPREME Court] it was held that what is predominant object of the activity- whether, it is to carry out a charitable purpose and not to earn profit-the purpose should be that it should not lose its charitable character - the similar activities are performed by big colonizers/developers who are earning a huge profit - If this income is exempted u/s. 11, then we will open a pandora box and anybody will claim the exemption from tax - If the activities of the assessee are analysed, it has turned into a huge profit-making agency for which it is taking money from the general public - no charity is involved and if any institution of public importance like schools, community centers are created/developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government - at best, the assessee can be said to be an authority created to help it to achieve certain objects. The assessee acquires land at nominal rates and after developing the same, the same land (is sold) on high profit which cannot be said to be a charitable activity - even just for argument sake, if registration is granted, then every private colonizer will claim charity - The facilities which are provided to the plot holders are incidental to the commercial activity carried out by the commercial developers/builders and if certain facilities like parks, community center, school are provided is not only basic requirement, rather a tool of attracting the investors wherein the hidden cost of these facilities is already included - In the absence of these facilities, normally the purchaser may not invest and the prices may be less - the claim of the assessee has been rightly rejected by the CIT(A) – the order of the CIT(A) is upheld – Decided against assessee.
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