TMI Blog2016 (7) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment of facilities in the specified area which is a charitable activity for the welfare of public at large and thus the same is an activity of general public utility. We are satisfied that there is no prime object or aliment of earning profit as private developer or builder and activities acquiring of land and selling developed property is an incidental and profit earned therefrom has to be used towards objects of the appellant which are of charitable purposes and thus newly inserted proviso to section 2(15) of the Act, cannot be pressed into service for denial of registration under Section 12A of the Act. Finally, we are inclined to hold that the appellant is entitled for registration under section 12A (1) (a) of the Act, and thus impugned order of the CIT(E) is dismissed and he is directed to grant registration under section 12A of the Act to the appellant authority. - Decided in favour of assessee. - Appeal No. 172/DEL/2016 - - - Dated:- 22-7-2016 - Sh. C.M. Garg, J.M And Sh. O.P. Kant, A.M For the Appellant : Sh. Balbir Singh, Sr. Adv alongwith Sh. Abinash Mehrotra, Adv, Sh. Sunil Kumar Gupta, CA, Sh. Dinesh Verma, CA, and Ms. Raj Rani Lakra, CA For the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be regarded as PROFIT-MOTIVE; hence such observations of the Ld CIT (Exemption) being in direct conflict of the verdict of the Hon ble Apex Court in the cases of SHRI RAMTANU CO-OPERATIVE HOUSING SOCIETY 1971 SCR(1) 719, GUJARAT MARITIME BOARD [2008] 166 TAXMAN 58 (SC) AND ANDHRA PRADESH ROAD TRANSPORT CORPORATION 25 TAXMAN 63A (SC) is liable to be repelled being inferior observations in view of the final verdict of the Supreme Court and the assessee be granted registration U/s 12AA. 5. Because on the facts and in the circumstances of the case, the Ld CIT (Exemption) grossly erred in law in failing to apply and follow the binding judgment of the Hon ble Jurisdictional High Court in the case of Lucknow Development Authority and that of the Hon ble Jurisdictional ITAT Delhi in the case of Haridwar Development Authority by citing irrelevant/ extraneous reasons and which judgments are squarely applicable to the facts and circumstances of the instant case and on such count the impugned order, being unsustainable in law, deserves to be quashed. 6. Because on the facts and in the circumstances of the case, the LD CIT (Exemption), grossly erred in law and on facts in treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per opportunity of hearing to the assessee and hence the order is liable to be quashed on this count as well. 11. Because on the facts and in the circumstances of the case, the Ld CIT (Exemptions), failed to perform its bounden legal obligation to follow and apply the decisions of the Hon ble Jurisdictional Court and the Hon ble Jurisdictional Tribunal, in identical facts and circumstances, rather than to frivolously compel the assessee to pursue litigation and for which reason, COSTS are liable to be awarded to the assessee. 12. The Humble Applicant craves for leave to raise any other or further ground of appeal with the permission of the Hon ble Income Tax Appellant Tribunal 3. We have heard the arguments of the both the sides and carefully perusal relevant materials placed on record of the Tribunal inter-alia, impugned order of the CIT(E) papers books filed by the assessee and other relevant record. 4. The Ld Senior Counsel first of all submitted that the main grievance of the appellant is covered by the order of the ITAT New Delhi in the case of Haridwar Development Authority, Vs CIT(E) Dehradun, order dated 25.07.2014 (assessee paper book page 52-67) wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity, i.e. appellant of the present appeal is a corporation established by a state Act, and is, therefore, entitled to exemption of payment of Tax at source Under Section 194-A (1 of the Act). The Ld Senior Counsel specially drawn our attention towards paragraphs No. 39 and 40 of the said decision and contended that the appellant has been granted a status of Municipality under Article 243-Q of the Constitution of India, which deals with the Constitution of a Municipality. It was also contended that the UP, state government issued a notification dated 24.12.2001 in exercise of power conferred under the proviso to clause 1 of Article 243-Q of the Constitution which provides that having regard to the size of Noida which has been declared to be an industrial development area by notification dated 17.04.1976 and the municipal services being provided by the Noida, the Governor is pleased to specify that the Noida, would be an Industrial Township with effect from the date of publication of the notification which clearly means that instead of Municipal Corporation providing services, Noida would provide the said services. The Ld Counsel further pointed out that in the light of observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UP, therefore, appellant is quite dissimilar with the other profit making companies and firms. The Ld Senior Counsel lastly pointed out that appellant may kindly be granted registration under Section 12A of the Act, and if any discrepancies or profit motive objects is found them he may denied exemption under Section 11, 13 and other provisions of the Act. 9. Replying to the above the Ld Departmental Representative (DR) drawn our attention towards observations and conclusion recorded by the CIT(E) in the impugned order. First of all he took us through para 3 of the impugned order and submitted that the appellant could not produce details of activities undertaken during AY 2014-15 despite of many opportunities given to the appellant. The Ld DR further pointed out that in order to find out the facts regarding charitable activities of the appellant the CIT(E) granted several opportunities to provide the basis of costing of various plots/flats developed and soled by the appellant along with its sale price in order to ascertain the claim of the appellant regarding charitable activities but the direction of the CIT(E) could not be complied and hence adverse presumption was drawn again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lish that it is undertaking charitable activities of the nature of general public utility, therefore application for grant of registration under Section 12A of the Act, was rightly dismissed by the CIT(E). 12. During the subsequent hearing on behalf of the revenue a copy of decision of Hon ble High Court of Allahabad, in the case of New Okhla Industrial Development Authority Vs CCIT in Civil Misc. Writ Petition No. 1338/2005 dated 28.02.2011 was submitted and it was contended by the Ld DR that after 01.03.2003 the appellant is not a local authority within the meaning of section 10(20) of the Act. The LD DR also file copy of the order of Hon ble High Court of Allahabad wherein Review Petition of the appellant requesting to recall earlier order dated 28.02.2011 has been dismissed. The Ld DR further drawn our attention towards copy of order of Hon ble Supreme Court in Special Writ Petition (Civil) No. 1820-1821/2011 dated 17.01.2014 and submitted that even in the SLP filed by the appellant prayer of interim relief has been rejected and the situation till date is that the appellant is not a local authority within the meaning of Section 10(20) of the Act. 13. The LD DR reiterated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration under Section 12A of the Act. 16. Replying to the above the Ld Senior Counsel also placed rejoinder to the above submissions of the Ld DR on behalf of the revenue and contended that there is no mention of any observations in the impugned order by the CIT(E) that he has no jurisdiction to entertain application of the assessee for grant of registration under Section 12A of the Act and it was not the basis for denial of registration by the CIT(E) therefore, this issue cannot be agitated by the revenue. The Ld Senior Counsel also placed reliance on the recent decision of Hon ble High Court of Delhi in the case of India Trade Promotion Organization Vs DGIT(E) reported as 371 ITR 333 (Delhi) and contended that the amendment of section 2(15) of the Act, inserted by the finance Act, 2008 has been read down by the High Court by observing that when primary and dominant object of the institution is to advance general public utility activities then income generated by incidental commercial activities does not disentitle the applicant/appellant for registration 12A of the Act, as charitable institution is entitled to exemption. 17. The Ld Senior Counsel drawing our attention t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Senior Counsel strenuously argued that after establishing its position of an statutory authority created by the special Act of the state for charitable purpose without any profit motive for development of industrial areas in UP state, which is a general public utility activity, the appellant cannot be precluded from getting registered under Section 12A of the Act. The Ld Senior Counsel again placed reliance on the decision of Hon ble Jurisdictional High Court of Allahabad in the case of CIT Vs Canara Bank (supra) and submitted that appellant is a corporation established by a state Act, therefore, it should be granted registration under Section 12A of the Act. 19. The Ld Senior Counsel also drawn our attention towards decision of Hon ble Supreme Court in case of M.D. H.S.I.D.C and Ors Vs. M/s Hari Om Enterprise and Anr Passed in Civil Appeal No. 1089/2008 dated 16.05.2008 and contended that corporation is a public sector undertaking which develops infrastructure for setting up of industrial units and in view of the object and purport for which the corporation had been constituted and incorporated it must be held to be a government function for charitable purposes of general pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstructed property and in view of business activities of the assessee it shows that the applicant is in into the business development and sale of property for earning profit on the commercial lines without any intention of charitable purpose of public utility and there is no charitable activities being done by the applicant at all. (vi) It was also alleged that the applicant has been acquiring land at a very low price and selling plots/ flats at a very high rate and is therefore earning profit from such activity and thus it can be clearly inferred that the applicant is not involved in any charitable activity and thus not eligible for registration under section 12A of the Act. (vii) The LD CIT(E) lastly alleged that the applicant is primarily carrying out its business activities for making profit just like any other private builder/developer and applicant is neither a local authority nor carrying out any charitable activity, therefore it is not eligible for registration under section 12A of the Act. (viii) The activities of the authorities are hit by newly inserted proviso to section 2(15) of the Act because the appellant is primarily running its business on purely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Thereafter, he observed that despite of several opportunities the assessee failed to produce the required details and documents. In our understanding of relevant provision pertaining to procedure for grant of registration, first of all the granting authority is required to satisfy himself about the objects of the trust being claimed to be charitable and thereafter genuineness of the activities and if he may deem fit, then, in order to satisfy himself about the genuineness of the activities may also make enquiries. In the present case, the CIT(E), without looking into the source and basis of creation of the appellant authority and without looking into its objects and financial resources, its utilization and application of surplus and incidental profits proceeded to verify the document and evidences pertaining to the activities conducted by the applicant in the A.Y. 20014-15 which is not a proper and justified approach as per mandate of relevant provisions. 22.1 Be that as it may, we have no hesitation to hold that the CIT(E) put cart before the horse by making enquiries regarding activities of the appellant and without giving heel of attention to the statutory provisions and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. On respectful consideration of the ratio of this judgment rendered by Hon ble Apex Court of India, we are of the view that the order of Hon ble High Court dated 18.02.2011 does not, in any way, disentitle the applicant for seeking registration under section 12A of the Act as the CIT(E) could not controverted these facts that even if the appellant has seized to be a local authority under section 10(20) of the Act, then also it is entitled for registration under section 12A of the Act, provided it fulfills all required conditions as mandated by the said provision. 24. At this juncture, it would be relevant to consider the ratio of the decision of Hon ble Jurisdictional High Court of Allahabad in the case of CIT Vs Kanara Bank whereas it has been held that the applicant New Okhla Industrial Development Authority, is a corporation established by a state Act, vis, Uttar Pradesh Industrial Area Development Act 1976, and therefore it is entitled to exemption of payment of tax at source under section 194- A(1) of the Act. The relevant operative part of this decision in para 39 and 40 read as follows: 39. NOIDA has been granted a status of a Municipality under Article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial township with effect from the date of publication of the notification. 26. We may further pointed out that in the case of CIT Vs Lucknow Development Authority (Supra) the Hon ble Jurisdictional high Court of Allahabad, has decided the issue in favour of the assessee authority upholding the order of the tribunal that the income of the assessee is exempted under section 11 of the Act, though there was no condition that no profit should be earned by its activities and the profit earned will not be distributed amongst the stakeholders. In this case it was the contention of the Revenue that assessee is not on different footing from private colonizer and was making huge profits by giving compensation for land which is less than the market value of the actual land owners. As regards the claim of providing public amenities, private colonizers were also providing similar facilities. It was contended that; assessee is a huge profit making agency for which it is taking money from general pubic; assessee did not engage in any charitable and if assessee developed any institution of public importance, the cost was recouped from the public at large; the objects/activities of the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic utility had been extensively dealt with and defined, to meant that where the objects of an institution cover the public at large or a section of public, the objects are to be held to the objects of general public utility as meant in section 2(15) of the Act. 28. The relevant operative part of the decision of Hon ble Allahabad High Court in the said case are being respectfully reproduced as follows: We have heard learned counsel for the parties and gone through the material available on record. It is undisputed fact that the assessee is a Statutory Authority which was 18 established under the provisions of the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee were enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A. In view of the objects, there is no good reason for holding that statutory bodies could not be treated as charitable within the meaning of Section 2(15). The object of the Authority is to provide shelter to the homeless people, therefore, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [CIT vs. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity [Addl. CIT vs. Surat Art Silk Cloth Manufacturer Association [1980] 121 ITR 1 (SC)]. 20 Applying the ratio laid down in the case of CIT vs. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), where of in the present case, the Autonomous Authority was established for the purpose of predominant of development the area and provide to shelter to the homeless people within the State of U.P. The management and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State. Further, it may be mentioned that Section 12AA of the Act lays down the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section 10(23C), which are that - (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of accounts should be maintained in respect of such business. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under 22 Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable purposes then it was entitle to exemption under section 4(3) (i) of the Income Tax Act, 1922 which is paremateria to the provisions of section 11 of the Act of 1961 notwithstanding that in carrying on its activities the assessee would act on business principals. 30. During the arguments a copy of the relevant notifications dated 24.12.2001 and 17.04.1976 has been placed on record along with UP Industrial Area Development Act 1976, and schedule twelfth to Article 243- W and 243-Q of Constitution of India, at pages 1 to 26 of assessee s paper book filed on 01.03.2016. As per these notifications and section 6 of relevant Act of 1976 the functions of the authority and its objects read as follows: (1) The object of the Authority shall be to secure the planned development of the industrial development area. (2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions:- (b) to prepare a plan for the development of the industrial development area; (c) to demarcate and develop sites for industrial, commercial and residential purpose according to the plan; (d) to provide infrastructure for industrial, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions as the State Government may determine. (5) The Authority shall maintain a sinking fund for the repayment of moneys borrowed under sub-section(5), and shall pay every year into the sinking fund such sum as may be sufficient for repayment within the period fixed of all moneys so borrowed. (6) The sinking fund or any part thereof shall be applied in ,or towards the discharge of the loan for which such fund was created, and until such loan is wholly discharged it shall not be applied for any other purpose. 33. In the list of above provision regarding management of the funds of the authority it is amply clear that the funds of the authority shall be applied towards meeting of expenses incurred by the assessee for the administration of the affairs of the authority under the said act and not for any other purposes. As per section 58 of the UPIDA, 1976 where the State Government is satisfied that the purposes for which the authority was established under the Act have been substantially achieved so as to render the continued existence of the authority in the opinion of the state government unnecessary that government may by notification in the Gazettee dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this notification, it has been mentioned that having regard to the size of Greater New Okhla Industrial Development Area which has been declared as an industrial development area by the government notification dated 28.01.1991 and the municipal services are being provided by the Greater New Okhla Industrial Development Authority in that area. 36. In view of above notification and provisions of the UPIDA, 1976, it is amply clear that the appellant has been created by the state act and it has been assigned the object of development of industrial area in the UP State, along with development and industrial township and it is empowered to provide services in that specified area as a municipal corporation therefore, the objects of the appellant, as noted above, are in the nature of charitable purposes of general public utility. It is not the allegation of the CIT(E) that profits or surplus accrued to the authority are not being utilized as per objects of the authority then it cannot be alleged that the assessee is carrying out activities like a private builder or developer who is conducting activities with the profit motive. We may also point out that the assessee during conduct of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Enterprise and Anr (Supra), as relied by the appellant, explains that the corporation is a public sector undertaking which develops infrastructure for setting up of industrial units and in view of the object and purport for which the corporation had been constituted and incorporated it must be held to be a government function for charitable purposes of general public utility. Thus we are in agreement with the contention of the Ld Senior Counsel of the appellant that the activities of the appellant are under complete control of State Government having no profit motive and for the purpose of charitable activities of general public utilities therefore, the CIT(E) was not justified and correct in dismissing application of the assessee. 39. It will also be relevant to consider ratio of the decisions of Hon ble High Court of Allahabad in the case of CIT Vs Lucknow Development Authority (Supra) and order of the ITAT New Delhi in the case Haridwar Development Authority VS CIT(E) (Supra) wherein it has been held that the appellant authority has been created with object of general public utility with the charitable objects within the meaning of section 2(15) of the Act, and thus the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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