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2016 (5) TMI 1026 - ITAT AHMEDABAD

2016 (5) TMI 1026 - ITAT AHMEDABAD - TMI - Exemption u/s 11 denied - non charitable activity - Held that:- Huge profits have been made by the assessee in these years. If that be so, where is the element of charity? The activity of developing roads, park or laying of sewerage land are not to be seen representing a charitable act. These are just to demonstrate that the assessee shall perform the activity of advancement of any other objects of general public utility. But auction of land to the high .....

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s not been charging nominal fees or selling the land at a nominal rate. It has been making money by putting the land on auction after taking a reserve price. This activity cannot be said to be a charitable activity. In view of the above discussion, we do not find merit in the contentions of the assessee that there was no profit intention in the activities of the assessee. Therefore, it is not entitled for charitable status. The income has to be assessed under the normal provisions i.e. under sec .....

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we deem it appropriate to set aside all the impugned orders and restore the issues to the file of the AO. The ld.AO shall treat the assessee as an “AOP” and determine the taxable income of the assessee under sections 28 to 44 of the Income Tax Act. The ld.AO shall compute the income under the normal provisions of the Income Tax Act, as if applied on a regular business entity. He will re-compute all the claims of the assessee with regard to the depreciation etc., after providing an opportunity o .....

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ectively. The assessee had challenged these orders in appeals before the CIT(A) who dismissed the appeal vide order dated 21.2.2013, 20.1.2014 and 29.5.2015 in the Asstt.Years 2009-10 and 2011-12 respectively. These orders of the ld.CIT(A) are being impugned by the assessee in ITA No.712/Ahd/2013, ITA No.647/Ahd/2014 and 2335/Ahd/2015. 2. In the Asstt.Year 2009-10, the assessee has moved an application under section 154 of the Income Tax Act for rectification of the assessment order. This applic .....

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identical in substance except variation in quantum. The facts on all vital points are common in these assessments. Therefore, for the facility of reference, we take up the facts mainly from the Asstt.Year 2009-10. The grounds in the Asstt.Year 2009-10 in ITA No.712/Ahd/2013 read as under: 1. Ld. CIT (A) erred in law and on facts in dismissing appeal of the appellant without considering and adjudicating each ground of appeal raised before him by concluding that all the grounds relate to section .....

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appellant u/s 28 to 44 of the Act. Both the lower authorities failed to appreciate the fact that the proviso to section 2 (15) was not applicable to the appellant and exemption claimed u/s.11 of the Act ought to have been granted. 4. Ld. CIT (A) erred in law and on facts in not appreciating the fact that the appellant was not engaged in any commercial / business activity but was carrying out charitable activity in accordance with its objects for which Registration u/s 12A of the Act was effecte .....

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0/- claimed in accordance with Clause 2 of Explanation to section 11 (1) of the Act. Ld. CIT (A) ought to have deleted such disallowance made by AO. 7. Ld. CIT(A) erred in law and on facts in confirming action of AO in making addition by disallowing ₹ 60,00,00,000/- claimed u/s 11 (2) of the Act though all the conditions of section 11 (2) were fulfilled by the appellant. 8. Ld. CIT(A) erred in law and on facts in confirming action of AO in making addition of ₹ 179,29,58,000/- disallo .....

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₹ 144,17,69,000/- and capital grants amounting to ₹ 93,24,01,000/- aggregating to ₹ 237,41,70,000/- having no revenue character were considered as income. Capital receipts are never treated as income even while computing income under normal provisions of section 28 to 44 of the Act as it is only net revenue surplus which could be brought to tax under those provisions. 10. Ld CIT (A) erred in law and on facts in confirming the action of AO in disallowing depreciation amounting t .....

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eipts and grant cannot be brought to tax and that all expenses/ disbursement for objects of trust are required to be deducted. Ld CIT (A) erred in law and on facts in omitting to reproduce relevant observations of the case laws which were highlighted in the written submissions. 13. Levy of interest u/s 234A, 234B, 234C & 234D of the Act is unjustified. 14. Initiation of penalty proceedings u/s 271(l)(c) of the Act is unjustified. 4. A perusal of the grounds would indicate that these are argu .....

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employed in this section, and further erred in assessing the income of the assessee under normal provision i.e. sections 28 to 44 of the Act by treating it as AOP instead of assessing it under section 11(2) of the Income Tax Act claimed by the assessee. If this fold of grievance is being redressed by this Tribunal, then all the impugned orders are to be restored, and the AO would be directed to reframe the assessment. In case the stand of the Revenue is upheld, then the quantification of taxabl .....

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the assessee was selected for scrutiny assessment and notice under section 143(2) of the Income Tax Act was issued on 6.9.2010 which was duly served upon the assessee. The ld.AO had issued a questionnaire under section 142(1) of the Act. He called for the details of purchases, sales and premium charged in respect of leasing out of land during the Asstt.Year 2007-08, 2008-09, 2009-10 and 2010-11. In response to the notice of the AO, the assessee has furnished relevant details. These have been re .....

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The relevant extract of the show cause notice issued by the AO on 22.12.2011 has been extracted in the assessment order in para 2.8. It reads as under: 2.8 Based on the above observations and legal provisions of the Act, a show cause notice was issued to the assessee on 22.12.2011, the relevant extract of which is reproduced here under: "You were asked to furnish the details of purchase and sale of land for A.Y. 2007-08, 2008-09, 2009-10 and 2010-11 by AUDA. Upon perusal of details furnishe .....

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y the activities of AUDA pertaining to sale (lease) of land at very high premium be not regarded as commercial activity (and not a charitable activity). Yon are required to show cause as to why deduction u/s.11 of the Act, claimed by AUDA be not denied under such circumstances and income of the trust be brought within the purview of taxation as per normal provisions of the Act (section 28-44). Considering the fact that the object of AUDA is "advancement of any other object of general public .....

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reproduced by the ld.AO in the assessment order. The ld.AO did not accept the contention of the assessee and held that its activities are not of charitable nature. The relevant findings of the AO is worth to note. It reads as under: 2.11 On the basis of facts of the case, submissions filed by the assessee, legal provisions of the Act and discussion in the preceding paragraphs, it is held that: The assessee's object is "advancement of any other object of general public utility". Th .....

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vancement of any other object of general public utility Upon perusal of objects of the trust vis-a-vis the objects defined in the Act, it is concluded that the object of the trust is "advancement of any other object of general public utility" The activity of giving land on lease at premium is a business activity. The reasons for arriving at this conclusion are: The plots of land have been acquired at a very nominal price in the name of town planning scheme, but have been given on lease .....

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dinary people/ citizens has been systematically shifted to big corporate by charging premium. The land of common/ ordinary people is compulsorily acquired by the assessee (AUDA) in the name of land disposal policy and Gujarat Town Planning and Urban Development Act, and the same land is handed over to real estate companies at huge profits. By no stretch of imagination can such an activity be called as charitable activity. This is a purely commercial activity with no element of charity and the on .....

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Section 23A even talks about entrusting of powers and fu rations of AUDA and similar minorities to the government companies. So, the AUDA is considered as homologous to a company in the Gujarat Town Planning and Urban Development Act, which is being referred by the assessee in the entire length of its submission in its support. By the very logic/ rationale also, the charitable activity refers to providing some amenities to the needy people at a reasonable price. In the instant case, the ameniti .....

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ctivity. The two major characteristics of any business activity are profit motive and continuity. From the purchase and sale details pertaining to A.Y. 2007-08, 2008-09 and 2009-10 (reproduced in para 2.3.1), it is clear that the assessee is in the business of giving land on leasehold at a high premium on a continuous basis. The profit motive of the assessee via the referred activity has already been established in the preceding paragraphs. Though the assessee has applied its premium income from .....

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duced here under: "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 oilier consideration, irrespective of the nature of use or application, or retention, of the income from such activity:] Provided further that the first provi .....

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ould not be business income. So, despite the fact that the assessee has applied the entire income earned out of premium in town planning scheme only, but still considering the fact that giving of land on lease and charging of huge premium is a commercial/ business activity, therefore the activity of the assessee does not come in the category of "charitable purpose" as per the provisions of section 2(15) of the Act. The total receipts out of the activity of giving land on leasehold for .....

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ion claimed by the assessee u/s 11 of the Act is disallowed and added to the income of the assessee. The assessee is hereby treated as an AOP, and its income is brought within the purview of taxation as per normal provisions of the Act (section 28-44). Penalty proceedings are initiated for furnishing inaccurate particulars and concealment of income u/s 271(l)(c) of the Act.' 7. The assessee carried the matter in appeal before the ld.CIT(A) who concurred with the ld.AO on all aspects. The ld. .....

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ses of providing infrastructural facilities. Such a claim of selling of small portions of plots was introduced in 1986 to meet with the financial constraints. According to the assessee, the activity of purchase of land and sale of land is specifically provided in the cost of scheme (Section 77), calculation of increment (Section 78) and contribution towards cost of scheme (Section 79). The purpose of selling of small portion of land was for improving infrastructural facilities like roads, draina .....

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imed u/s. 11, it was submitted that the assessee trust is duly registered u/s. 12AA of the Income-tax Act. It was further submitted that even the order cancelling the registration has been cancelled by the Hon'ble ITAT, Ahmedabad and thus the assessments are to be framed as per the provisions of Section 11, 12 & 13 of the Income-tax Act. (d) that the assessee has acted as a trustee in carrying all activities u/s. 23 of Gujarat Town Planning and Urban Development Act. The very motive is t .....

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pointed out that under the sub-clause, it is categorically provides that the proceeds from sale of land shall be used for the purpose of providing infrastructural facility….. 8. On due consideration of the submission of the assessee, the ld.CIT(A) has rejected the stand of the assessee. We deem it appropriate to take note of this finding. It reads as under: 4.5 I have carefully considered the assessment order and submissions made in this regard. I have also perused the various judgments c .....

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act of restoration of certificate u/s 12AA by the Hon'ble ITAT in his case as in such order Hon'ble ITAT, Ahmedabad has merely restored the certificate u/s 12AA. Hon'ble ITAT, Ahmedabad as only merely said in this order that activities of appellant trust are as per its objects. No where in order Hon'ble ITAT, Ahmedabad has certified that the appellant activity are charitable in nature. The relevant para of order of tribunal is reproduced as under; "Before we part with the ma .....

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ort of his contention, he has also relied upon various decisions. However, the issue before us is not whether the assessee is entitled to registration or not because the assessee-institution is already registered vide order of the DIT(Exemption) under Section 12AA(1) dated 23-10-2003. The limited issue in this appeal before us whether the DIT(Exemption)was justified in canceling such registration by invoking the power under Section 12AA(3)." Further, according to the appellant, the power an .....

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s or town planning schemes; (iv) To guide, direct and assist the local authority or authorities and other statutory authorities functioning in the urban development area in matters pertaining to the planning development and use of urban land; (v) To control the development activities in accordance with the development plan in the urban development area; 4[(v-a) to levy and collect such security fees for scrutiny of documents submitted to the appropriate authority for permission for development a .....

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ments, with any local authority, person or organization as the urban development authority may consider necessary for performing its functions; (ix) To carry any development works in the urban development area as may be assigned to it by the State Government from time to time; (x) To exercise such other powers and perform such other Junctions as are supplemental, incidental or consequential to any of the foregoing powers and functions or as may be directed by the State Government." 4.5.3 Pl .....

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ds, 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 4.5.4 In the instant case the plots of land have been acquired by the assessee at a very nominal price in the name of town planning scheme, but nave been given lease at a very high premium by means of auction to the highest bidder. The land is given on lease not even at its jantri rate (stamp value), but at a commercial/ .....

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e definition of 'charitable activity' u/s 2(15) of the Act i.e 'the advancement of any other object of general public-utility'. Further, the fact that the plots of land were acquired from the public at nominal rates and sold to various commercial entities at market rate indicates that the assessee is involved in carrying on the activity which is in the nature of trade, commerce or business. Since the assessee has sold plots of land at a premium, to various commercial entities, wi .....

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land on leasehold at a high premium on a continuous basis and on profit basis. 4.5.5 The contention of the assessee that the said income has been applied to for town planning activity only as per its objects, is not relevant since the income earned is business income and the application of income becomes irrelevant, in view of the proviso to Sec 2(15) of the Act. The two provisos which were inserted in the definition of charitable purpose u/s 2(15) of the Act w.e.f A.Y. 2009-10, are reproduced h .....

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l 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;]" Therefore, the nature of application of the income is not relevant in the case of the assessee whose activity falls under the classification, "advancement of general public utility" and where the provisions of proviso to Sec 2(15) is applicable. 4.5.6 Attention now is drawn to Sec.13(8) of the Act, w.e.f 1/04/2009 (Finance Act 2012). This pr .....

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such person in the said previous year." The new sub-section (8) provides that the exemption under section 11 85 12 will not be available to a Trust, in a previous year, in which the proviso to section 2(15) becomes applicable, for that previous year. 4.5.7 Therefore, in the light of the provisions of Sec 13(8) of the Act, the assessee loses all the exemptions claimed u/s 11 & 12 of the Act. It is clear from the plain reading of the said provision that once proviso to Sec 2(15) becomes a .....

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ssee were denied exemption claim u/s 11 & 12 of the act. The decisions are: (a) Jalandhar Development Authority v. CIT ITAT Amritsar Bench [2010],35 SOT 15 (ASR.)(URO) (b) Jammu Development Authority v. CIT, Jammu* ITAT, Amritsar Bench [2012] 23 Taxmann.com 343 (Asr.) (c) Punjab Urban Planning & Development Authority V; CIT-1, Chandigarh, ITAT Chandigarh Bench B' [2006] 156 TAXMAN 37 aO (CHD.) (MAG.) Wherein it has been held that "The assessee acquired land at nominal rate sand .....

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cities, towns and villages. The said contention could not be accepted because a charitable institution provides services for charitable purposes free of cost and not for a gain. In the present scenario, the similar activities were performed, by big colonizers/developers who were earning a huge profit. If this registration was granted, then a Pandora box would be opened and anybody would claim the exemption from tax. When the objects of the assessee were analysed, it had turned into a huge profi .....

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time, if those facilities were not provided, then nobody would purchase a plot. It could be said that it was a means of attracting people so that maximum people may apply for the same and the hidden cost was already added, so no charity was involved. At best, the assessee could be said to be an authority created to achieve certain objects. 4.5.9 To summarize, it may be concluded that 'even though the activity of appellant are charitable falling under the category " advancement , of any .....

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iscussions, I am of the view that AO was right in withdrawing the benefit of sec 11 & 12 to the appellant. Since all the grounds relate to section 11 & 12, same are therefore dismissed. The claim of depreciation is not allowable as appellant is now treated as AOP. Other grounds relating to chargeability of interest u/s 234A, B & C are also dismissed as it is mandatory to charge the interest. 5. In the result, the appeal is dismissed. 9. Before we take note of the arguments of the res .....

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able institution and he assessed its income under regular provisions i.e. under sections 28 to 44 by treating the assessee as an AOP . Thus, firstly, both the representative have addressed their arguments on this aspect i.e. whether the assessee is to be denied charity status after insertion of proviso to section 2(15) of the Income Tax Act w.e.f. 1-4-2009 i.e. Asstt.Year 2009-10. 10. Shri S.N.Soparkar, ld. senior counsel for the assessee, while impugning the orders of the Revenue authorities ha .....

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e State. 11. The Ahmedabad Urban Development Authority came to into existence in the year 1978. It was established as an authority under section 22 of the TP Act. Upto assessment year 2003, its total income was exempt under section 10(20A) of the Income Tax Act, being an authority constituted in India by a law enacted for the purpose of planning, development and improvement of States, Town, Villages. This, clause was omitted from the Act w.e.f. Asstt.Year 2003-04. The assessee claimed that it wa .....

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o assessment year 2006-07, the status of the assessee to be a charitable institution was accepted by the AO. The ld.counsel for the assessee drew our attention towards assessment orders in order to buttress his contention. In the Asstt.Year 2007-08, the AO did not accept the contentions of the assessee, however, when the dispute travelled upto the Tribunal, then, vide order passed in ITA No.1835/Ahd/2010, the Tribunal has accepted the status of the assessee as a charitable institution . It set a .....

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t page nos.19 to 23, 35 to 39 of the paper book. Thus, according to the ld.counsel for the assessee, right upto the assessment year 2008-09, the assessee was allowed the benefit of charitable institution and its income has been assessed under sections 11, 12 and 13 of the Income Tax Act. He further contended that right from inception upto the Asstt.Year 2008-09, the assessee s income was exempt either under section 10(20A) of the Act or by the operation of registration granted under section 12AA .....

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he activity of purchase and sale of land is a business activity, and therefore, proviso to section 2(15) denude the assessee to claim charity status. The ld.counsel for the assessee had apprised us the powers and functions of an authority established under section 22 of the TP Act. With the help of sections 23, 40, 48A, 91(1)(a) of the T.P.Act, he demonstrated as to how a urban development authority conceive concept of orderly development of an urban area. Specifically on the strength of section .....

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rks, play grounds, garden, open space, etc., 5% for social infrastructure such as schools, dispensaries, fire brigade, and another 15% is earmarked for sale by appropriate authority for residential, commercial or industrial use, depending upon the nature of development. The percentage of allotment of land specified in paragraph-(i) to (iii) of 40jj(a) of T.P.Act may be altered depending upon the nature of development, and for the reasons to be recorded in writing. Similarly, the proceeds from th .....

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ent of the Hon ble Gujarat High Court in the case of Ahmedabad Green Belt Khedut Mandal Vs. State of Gujarat, is reported in 2001(1) GLR 888. Copy of this judgment has been placed on the record. The ld.counsel for the assessee, in this way, emphasized that the assessee does not purchase land. The large piece of land is made available to the assessee under the T.P.Act, which is expected to be sold to raise fund. In given cases, where the land is not covered by T.P.Scheme, the same is acquired und .....

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harity on such an erroneously premises. 13. On the strength of speech of Finance Minister in the Parliament while addressing the amendment in section 2(15) as well as on the strength of CBDT Circular No.11 of 2008, the ld.counsel for the assessee submitted that it was very clear that the charitable trust/institution genuinely engaged in public work would not be affected by this amendment. 14. In his next fold of submissions, he apprised the meaning of expression trade, commerce or business emplo .....

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ority, 38 taxmann.com 246 (All.) v) Institute of Chartered Accountants of India, 13 taxmann.com 175 (Del.) vi) GSI India, 38 taxmann.com 364 (Del) vii) Bureau of Indian Standards, 27 taxmann.com 127 (Del) viii) ITAT, Ahmedabad decision in ITA No.2653 & 2654/Ahd/2012; ix) Ahmedabad South Indian Association Charitable Trust, Tax Appeal No.933 to 936 of 2010 (Guj) 15. The ld.counsel for the assessee further contended that section 91(1)(a) of the T.P.Act provides that all money received by the a .....

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ssessee cannot be treated as trading corporation, because, according to the judgment of the Hon ble Supreme Court, two conditions i.e. sum payable by any person for the corporation are recoverable under the Act, as an arrears of land revenue, and on dissolution of the corporation, the assets would vest along with liabilities in the State Government would take away the status of the assessee from a trading corporation. 16. Shri G.C. Srivastava, the ld.counsel for the Department, while giving repl .....

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This expression had created various difficulties to certain institutions. The restrictions provided in the phrase not involving carrying on any activity for profit was omitted by the Finance Act, 1983 w.e.f. 01.04.1984, but another restrictions was imposed on the business activities carried out by any charitable institution . These restrictions were introduced by way of subsection (4A) of section 11 of the Act. The assessee, who was in business also has to keep separate books of accounts for bu .....

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xemption under section 10 on their own right. He further contended that the assessee was enjoying this exemption under section 10(20A). This section allowed the exemption to any authority constituted by or under any law enacted for the purpose of planning and development or improvement of cities, town or villages. It was omitted by the Finance Act, 2002 w.e.f. 1.4.2003. The exemption enjoyed by the housing board was taken away. The exemption enjoyed by sports bodies like cricket, hockey, footbal .....

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hased that principle that such authorities should enjoy exemption merely because these were created as an instrument of the State or these were engaged in public good was derecognized by the Parliament. The legislative intent was explicit that these were not to get indirect support of the government through tax emption route. Such policy shifts can be driven by one or more considerations like the need for higher revenue or preference of direct subsidization or budgetary support over the indirect .....

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so provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on any activity in the nature, trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess, fee or any other consideration, irrespective of the nature or application of such income. It was also provided by the Finance Act, 2010 with retrospective effect from 1.4.2009 that the first proviso sha .....

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ion is depended upon the receipts in a given year from activity in the nature of trade or business. The benefit would be denied irrespective of the charitable nature of the objects of the trust, and irrespective of whether or not the trust or institution is entitled to registration. If the activities of the assessee are in the nature of trade or commerce, and its receipts exceeds ₹ 25.00 lakhs in the previous year, then the assessee would not be entitled for charitable status. In order to .....

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ther the assessee is rendering any service for a fee, cess or other consideration, and (iii) whether the receipts from such activities cross the threshold of ₹ 25 lakhs during the year under appeal. The ld.counsel for the Revenue submitted that if the aforesaid elements are found to be existed, the assessee would not be entitled to the benefit of exemption irrespective of the fact that it is enjoying the registration under section 12AA of the Income Tax Act. He further submitted that the P .....

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e Central Government for the purpose. The assessee could apply for exemption under section 10 after 1.6.2006, and it is not retrospective in nature. For the earlier years, the pre-amended provisions will apply and the assessee will have to pass the test of proviso to section 2(15). The ld.counsel for the Revenue filed a written note drawing our attention towards specific facts, which would goad the adjudicating authority to hold that the assessee s activity were in the nature of trade, commerce .....

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operty, movable or immovable, as it may deem necessary". Section 40(3) of Chapter V provides the earmarking of the land acquired and it provides that 15% be provided for roads, 5% for parks, gardens, etc, 5% for social infrastructure such as schools, dispensaries and another 15% is earmarked for sale by AUDA for residential, commercial, or industrial use. II. Thus, by virtue of the above provisions 15% of the total notified area is sold by the appellant and from such sale huge profits are d .....

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and then the plots are reallocated to different persons and for different purposes including the sale by the Authority (the appellant). The amount of compensation payable to each individual owner is determined in the notified scheme itself by virtue of the provisions of section 52(3)(iii) which reads as under: "Section 52(3): In the final scheme, the town planning officer shall: i. x-x-x 11. X-X-X iii. estimate the portion of the sums payable as compensation on each plot used, allotted or .....

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f each plot or the recoveries to be made from them is worked out by the authority. Rule 22 of the Rules 1979 reads as under: "(i) The compensation payable under section 45 shall be the difference between the value of the property on the basis of the existing use and that on the basis of the permitted use of both values being determined as on the date of declaration of intention to prepare the scheme. -x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x- v. Form K attached to the Rules 1979 reads as under: .....

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total amount payable by the authority. viii. In the final scheme of things, the Authority does incur a cost for such land which may be adjusted against the recoveries due to the appellant or against the amount payable for the area by way of compensation. It may be submitted that mode of payment of cost of acquisition whether by cash or by way of adjustment against the value of final plot to be allotted to the original owners will not alter the fact that the land is acquired for a cost. ix. As a .....

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e first limb of the proviso to section 2(15) is satisfied. 25.The Authority is also required to make a planned development of the city under a scheme approved by the State Government. It is creating a number of infrastructure facilities and public utility services are being rendered. These services are also being provided for a fee or consideration. Every part of the cost of development is recovered from the owners of the plots of land. The amount of final compensation is determined after making .....

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ny doing the same work as AUDA was not engaged in activity in the nature of trade or business. It would have definitely constituted its business income. It is, then, not possible to urge otherwise to suggest that the activity is not in the nature of trade or business. The nature of the activities of the appellant are no different from that of a developer of a real estate. The difference in the scale of operation or the mode of recovery or degree of profits or how such profits are utilised would .....

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mere fact that the same activity is done by an instrumentality of the state will not alter the character of the activity. The activity will still be in the nature of business or trade. 29.The provisions contained in section 22(1) of Gujarat Urban Development Act 1976 states: "Where the state Government is of the opinion that the object of the proper development or redevelopment of any urban area or group of urban areas in the State together with such adjacent areas as may be considered nece .....

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velopment authority relating to the development or redevelopment of a development area under the Act shall, in relation to such urban development area, be excercised and performed by such urban development authority. " 30.The object of the proper development or redevelopment of any urban area is of the state government and the choice of either constituting an authority for the development or entrusting it to a third party is of the Government. 31.The object of the urban development is of th .....

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ord "Business" as defined in section 2(13) is of wide import and would cover the activities of the appellant. Besides, the condition stipulated in the Proviso to section 2(15) is not the carrying of business per se but only the activity being in the nature of trade or business which further widens the width and amplitude of the proviso. • Institute of charted Accountants of India (347ITR 99 (Del)) • GSI India (360 ITR 138(Del)) (for the limited purpose of import of the words .....

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y of Goad (supra). He further relied upon the order of the ITAT, Amristar Bench in the case of Jammu Development Authority. He pointed out that against this decision, appeal of the assessee was dismissed by the Hon ble Jammu and Kashmir High Court in ITA No.164/2012 (J&K). The SLP filed by the assessee has also been dismissed by the Hon ble Supreme Court. He placed on record copies of these decisions. He further relied upon the order of Belgaun Urban Development Authority, ITA No.214/PNG/201 .....

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education, [yoga,] 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 ser .....

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that the assessee s case would fall in the category of advancement of any other object of general public utility provided in the last limb of the provision. The Hon ble Delhi High Court while expounding the meaning of expression charitable purpose employed in main section has observed that there are four main factors viz. (i) activity should be for advancement of general public utility, (ii) activity should not have any activity in the nature of trade, commerce and business, (iii) the activity .....

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ger relevant because of the amendment. 20. We are called upon to construe the meaning of expression trade, commerce or business employed in the proviso and find out whether the activity of the assessee falls within the ambit of this expression. While appraising us the meaning of this expression, efforts at the end of the assessee was that any activity will be deemed to be in the nature of trade, commerce and business, only if the same is carried out with intention of profit. In other words, pred .....

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urt in the case of Sabarmati Ashram Gaushala Trust, Tax Appeal No.1162 of 2013 was also relied upon. 21. Contrary to this proposition, it was contended by the Revenue that the words used in the proviso are carrying on of any activity in the nature of trade, commerce or business , not the words carrying on of trade, commerce or business . Therefore, the nature of the activities is to be identified. It should be akin to trade, commerce or business. In other words, performance of an act or steps ta .....

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d.counsel for the Revenue emphasised that, if the trade, commerce or business only was required to be considered, then, what is the need to use expression activity ?. It was also pointed out that the expression activity in the nature of should be considered keeping in mind historical development of introduction of this clause in the proviso coupled with the circumstances that the applications of income for charitable work is irrelevant. Meaning thereby that if intention to earn profit is to be c .....

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elaborately in the case of The Institute of Chartered Accountants of India (supra). This is even taken note in the case of GSI India (supra). It is worth to note the analysis noticed by the Hon ble Delhi Court in the case of GSI India (supra) as under: Scope of Trade, Commerce or Business 15. The key words, namely; trade, commerce and business were enumerate and elucidate in Institute of Chartered Accountants of India & Anr. Vs. Director General of Income Tax (Exemptions) Delhi & Ors.(Su .....

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t;. In ordinary parlance, trade, and commerce carry with them the idea of purchase and sale with a view to make profit. If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume, which would convert a trade into commerce. For the purpose of the first proviso to section 2(15), trade is sufficient, therefore, this aspect is not required to be examined in detail. The word .....

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anufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the Legislature is to make the definition extensive as the term "inclusive" has been used. The Legislature has deliberately departed from giving a definite import to the term "business" but made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the nature of trade, commerce and m .....

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busies or occupies or engages the time, attention, labour and effort of persons as a principal serious concern or interest or for livelihood or profit." According to Sampath Iyengar's Law of Income Tax (9th edition), a business activity has four essential characteristics. Firstly, a business must be a continuous and systematic exercise of activity. Business is defined as an active occupation continuously carried on. Business vocation connotes some real, substantive and systematic cours .....

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al act. It is brought about by a transaction between two or more persons. And, lastly, the business activity usually involves a twin activity. There is usually an element of reciprocity involved in a business transaction . In the said case reliance and reference was made to State of Punjab v. Bajaj Electricals Ltd. (1968) 2 SCR 536, Khoday Distilleries Ltd. V. State of Karnataka (1995) 1 SCC 574, Bharat Development (P) Ltd. v. CIT (1982) 133 ITR 470(Del), Barendra Prasad Ray v. Income Tax Office .....

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ned that the said principle is applicable to Sales Tax, Value added tax, Excise duty etc. because these are not taxes on income but the taxable event occurs because of the _ economic activity involved. Even if a person/organization is carrying on trading/business on _no loss no profit principle, it may be liable to pay taxes or comply with the statute when the charge, or incident of tax, is on the _ economic activity . The words trade, commerce and business are etymological chameleon and suit th .....

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ral of Income Tax (Exemptions) Delhi & Ors. (Supra) in the following words: 33. Section 2(15) defines the term charitable purpose. Therefore, while construing the term business for the said Section, the object and purpose of the Section has to be kept in mind. We do not think that a very broad and extended definition of the term business is intended for the purpose of interpreting and applying the first proviso to Section 2(15) of the Act to include any transaction for a fee or money. An act .....

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and other circumstances which justify and show that the activity undertaken is infect in the nature of business. The test as prescribe in Raipur Manufacturing Company (supra) and Sai Publications Fund (supra) can be applied. The six indicia stipulated in Lord Fisher (supra) are also relevant. Each case, therefore, has to be examined on its own facts. The Hon ble Court, thereafter, made lucid analysis of expression business activity . The discussion contained in para-22 of the judgment is worth .....

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quivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated. A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or selfgain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, .....

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self-gain should be missing, and the predominant purpose of the activity should be to serve and benefit others. It was also emphasized that small contribution by way of fees that beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. Quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the fee, purpose or object behind the fees etc. are several factors, which will .....

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ssee came to execute scheme. From reading of section 40(jj)(a) of the Town Planning Act would suggest that 40% of the land would be taken from the land owners. It will be used as per this section viz. (i) fifteen per cent for roads, (ii) five per cent for parks, play grounds, gardens and open space, (iii) five per cent for social infrastructure such as school, dispensary, fire brigade, public utility place as earmarked in the Draft Town Planning Scheme, and (iv) fifteen per cent for sale by appr .....

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g developed land in a township. It is also important to note that this method is not strictly applicable in all conditions. 25. The ld.counsel for the Revenue drew our attention towards section 52(3) of the T.P. Act. He pointed that the Town Planning Officer shall estimate the cost of this scheme (development) and the contribution to be levied on each owner of the plan is to be notified. The final amount of compensation payable to the owners of each plan or the recovery to be made from them is w .....

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n compensation will be paid to the owners. The ld.counsel for the assessee has emphasized that it got the land free of cost. It is wrong to suggest that the assessee got the land free of cost. The cost of land is embedded in the expenditure required to be incurred on development of scheme. Shri G.C. Srivastava, in our understanding has rightly pointed out that, supposing, after notification of the scheme, the law had stipulated and the government had decided to outsource the development work to .....

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example, the assessee has developed 1500 sq.yards of land in a scheme, the cost to develop a scheme is ₹ 60000/-. The assessee should have allotted 15% 1500 sq.yards of land at the rate of 400 per sq.yards to the needy persons/institutions by draw of lots. Instead of this, the assessee has fixed a base price, and thereafter, put the land on auction. It allotted the land to the highest bidder. It has sold the land keeping in view the profit in mind. 26. The ld.counsel for the Revenue has p .....

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s other circumstances are concerned, we are in agreement with the contentions of Shri G.C. Srivastava, which have been noticed by us by taking cognizance of the written submissions filed by the Revenue in para 16 of this order. There are surplus and reserves which are continuously swelling. These are generated by the assessee by way of this activity sale/lease of land and charging fees. The assessee has not been charging nominal fees or selling the land at a nominal rate. It has been making mone .....

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n the Asstt.Year 2009-10, the assessee has pleaded in ground nos.1, 2 and 3 that the ld.CIT(A) has erred in denying the benefit of sections 11 and 12 and assessing under sections 28 to 44 of the Income Tax Act, as an AOP . We have already held that the assessee is not entitled for a charity status, and therefore, it cannot claim the benefit of sections 11 and 12. Its income deserves to be assessed under sections 28 to 44 of the Income Tax Act, as a business entity. Thus, these three grounds are .....

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as erred in confirming the action of the AO in disallowing the deduction claimed at ₹ 42,21,17,250/- being 15% of the receipts as provided in section 11(1)(a) of the Income Tax Act. Since, we have held that the assessee is not a charitable institution , therefore, it is not entitled for the alleged deduction at 15% from the receipt provided in section 11(1)(a). In other words, benefit of section 11 is not available to the assessee. Therefore, this ground is also become infructuous and reje .....

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ecluded to raise any such issue. This ground is also rejected. 33. Ground no.12 is again general ground, which is just argument. Hence, it is rejected. 34. The ground no.13. In this ground, the assessee has challenged levy of interest under sections 234(A), 234(B), 234(C) and 234(D) of the Act. The levy of interest is consequential in nature. Hence, it is rejected. 35. In ground no.14, the assessee has challenged initiation of penalty under section 271(1)(c) of the Act. It is a premature ground. .....

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