TMI Blog2017 (4) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, it should have concentrated only to the requirement of Section 12A and 12AA, as the case may be, and not other provisions like Section 10(20) or 10(20A) etc. The factum that ''IDAs' would be covered or not, under Section 10(20), would make no difference for the reason, if these authorities satisfy requirement of Section 12A(1), then are entitled for registration after following procedure laid down under Section 12AA. A mere wrong claim on the part of these authorities will not be of any disadvantage to them. The consideration on the part of CIT (E), it appears, is more influenced by concept of first three heads of charitable trusts. Apparently, it has lost objectivity in looking into thrust, ambit and spirit of 4th head i.e. advancement of any other object of "general public utility". This is a sheer ignoring scope and ambit of statutory provisions of UPID Act, 1976 beyond which respondents-authorities cannot function, being statutory bodies constituted under said Act. They have to function within the provisions of said Act. Mere recital of objects or activities without cogent or corroborative evidence are not sufficient by themselves to enable a registering authority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , J. ) 1. Heard Shri Ashok Mehta, learned Senior Advocate and Additional Solicitor General of India, assisted by Shri Alok Mathur, and Gaurav Mahajan, Advocates, appearing on behalf of appellants and Shri Balbir Singh, learned Senior Advocate, assisted by Shri Abhinav Mehrotra, Shri Ashish Chaturvedi, and Ms. Rubal Maini, Advocates appearing for respondents. 2. Appeals number 107/2016 and 108/2016 under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as Act, 1961 ) have come up at the instance of Commissioner of Income Tax (Exemption) (hereinafter referred to as CIT(E)/Revenue ), assailing judgment and order dated 19.05.2016 passed by Income Tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as Tribunal ) in Income Tax Appeals number 112/Del/2016 and 113/Del/2016. Appeal number 114/2016 has come up against judgment and order dated 22.07.2016 passed by Tribunal in Income Tax Appeal No. 172/Del/2016. 3. Tribunal has held that Greater Noida Industrial Development Authority (hereinafter referred to as GNIDA ); Yamuna Expressway Industrial Development Authority (hereinafter referred to as YEIDA ); and New Okhla Industrial Development aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment 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, commercial and residential purposes; (e) to provide amenities; (f) to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes; (g) to regulate the erection of buildings and setting up of industries: and (h) to lay down the purpose for which a particular site or plot of land shall be used, namely for industrial or commercial or residential purpose or any other specified purpose in such area. (emphasis added) 8. Section 8 of UPIAD Act, 1976 confers power upon an ''IDA' to issue directions regarding architectural features of elevation or frontage of any building, alignment of buildings on any site, restrictions and conditions in regard to open spaces to be maintained, in and around buildings, and height and character of buildings, number of residential buildings that may be erected on any site, regulation of erection of shops, workshops, warehouses, factories or bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Mahapalika, be excessive if calculated in the aforesaid manner, the Mahapalika may fix the annual value at any less amount which appears to it equitable : Provided further that where the Mahapalika so resolves, the annual value in the case of owner occupied building and land shall for the purposes of assessment of property taxes be deemed to be 25% less then the annual value otherwise deter mine under the section. (2) If the State Government considers it necessary or expedient in the public interest it may, by a general or special order, exempt wholly or partly - any such transferee or occupier or any class thereof from the taxes levied under sub-section (1). 12. NOIDA was constituted as the first authority under Act, 1976 as ''IDA' for area of New Okhla, vide Notification dated 17th December, 1976. GNIDA was constituted by a Notification dated 28.01.1991 issued under Section 3. Similarly, YEIDA was constituted by Notification dated 24.04.2001. 13. NOIDA and GNIDA were declared Industrial Township by Notification dated 24.12.2001. YEIDA was declared Industrial Township by Notification dated 18.12.2015. 14. All the three IDAs filed applications for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notification of creation of Authority. Reply to point (iv) No donations have been received by the Authority. Reply to point (v) The details are contained in the compiled Accounts. Reply to point (vi) Accounts of the Authority have been audited by the U.P. Local Fund. As the Authority is not registered u/s 12AA of the Income Tax Act, so there is no Audit Report in Form 10B. Reply to point (vii) No fund of the Authority has been set apart/accumulated during last 3 years for any specific object of the Authority as required under the provisions of section 11 (2) of the Income Tax Act, 1961. Reply to point (viii) As the Authority is a state government authority and performing sovereign functions, it has voluminous bank transactions, hence cannot be produced in hard and can be produced in soft, if permitted so. Reply to point (ix) Charitable activities carried out during the last three years: as per section 6 of the U.P. Industrial Development Act. Reply to point (x) The authority is an instrumentality of the State Government and as such is entrusted with the tasks assigned to it under the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons without considering the entire material placed before it. 21. Section 11 of Act, 1961 provides that income derived from property held under trust, wholly for charitable or religious purposes, shall not be included in the total income of the previous year of the person in receipt of income subject to certain conditions stated therein. 22. Section 12 deals with the income of trust or Institution from contributions and provides that any voluntary contributions received by a trust, credited wholly for charitable or religious purposes or by an Institution established, wholly for such purposes, shall for the purposes of Section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of Sections 11 and 13 shall apply accordingly. 23. Sub Section (2) provides that value of any services, being medical or educational services made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in Section 13 (3) Clause (a), ( b) ,(c), (cc) or (d) shall be deemed to be income of such trust or institution derived from property hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. 25. Section 12AA lays down procedure for registration and reads as under:- ...12AA.(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab)of sub-section (1)] of section 12A, shall-- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-- (i)shall pass an order in writing registeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. (emphasis added) 26. Section 13 talks of certain conditions when Section 11 or 12 shall not apply. 27. Thus Section 11 of Act, 1961 grants exemption to income derived from property held for charitable purpose . What is charitable purpose , to examine it, one has to go to Section 2 (15) of Act, 1961, which is an inclusive definition. The definition of charitable purpose has undergone amendments from time to time. In order to appreciate scope and ambit, changes made from time to time are to be seen, which may demonstrate intention of legislature. The definition has undergone changes from time to time in Act, 1961,which are reproduced as under: (15) Charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. 30. However, we shall not make our analysis short by referring to above citations but would like to scrutinize the issue in the light of provisions as are existing and available. For the purpose of registration, Commissioner has to examine whether application has been submitted in accordance with requirement of statute. Commissioner can not examine whether the income derived by the person concerned is from the activities which are charitable in nature or not. All the three IDAs have been conferred status of industrial township as contemplated under Article 243 (Q) proviso of Constitution. It shows that the bodies are to perform municipal functions in their respective jurisdictions and therefore they enjoy to some extent, status of a local authority also. 31. Reverting back to pivotal issue, we find that CIT (E), at the stage of registration, is not supposed to inquire into the conduct of charitable or other activities to be performed by a trust or institution which has submitted application for registration. That is an investigation to be gone subsequently at the time of assessment by Assessing Authority. In this regard, reliance is placed on Kerala High Court in Sree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities. It is said that an Assessee, if engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose . In such a case, object of general public utility will be only a mask or a device to hide the true purpose, which is trade, commerce or business, or rendering of any service in relation to trade, commerce or business. In our view, each case would depend on its own facts and no generalization is possible. 37. Recapitulating history of definition of expression charitable purpose , we find that phrase advancement of object of general public utility was raised sometimes during course of arguments in Morice Versus Bishop of Durham (1805) 10 Ves Jr 522 by Sir Samuel Romilly when he tried to subsume charitable purposes under four heads i.e. relief of the indigent, the advancement of learning, the advancement of religion and the advancement of objects of general public utility. Substance of the above statement was taken note by Lord Macnaghten in Special Commissioners Versus Pemsel (1891) A.C. 531 (HL), where he pointed out that charity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the property, the subject matter of the trust; 2) the dedication of the property; 3) the constitution of the public as the beneficiary; and 4) the specification of the objects on which or for which income from the property is to be spent or applied. 42. In the context of Krishi Utpadan Mandi Samiti, a similar question came up for consideration before this Court in CIT Versus Krishi Utpadan Mandi Samitee 2010 (1) ALJ 817. It was held that charging of cess/fee is for the purpose of carrying out object of Act i.e. Krishi Utpadan Mandi Samiti Adhiniyam, 1964 (hereinafter referred to as U.P. Act,1964 ). Where dominant purpose of trust is charitable, incidentally if some profit is made and such profit is used for charitable purposes, the said trust/institution does not cease to be established for ''charitable purposes . The dominant object of Mandi Samiti is to regulate, procure and supply of agricultural and some other produce and to meet expenses required for achieving the said object. Legislature has empowered Assessee to levy/cess/fee. Whatever surplus remains in market fund would come back for carrying on the object for which Mandi Samities are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al effect of true facts and documents is a question of law. Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under Act, 1961 is not a question of fact. It is a question which requires examination of legal effects on proven facts and documents, i.e., the legal implication or object of respondent-trust as contained in trust deed. Words other objects of general public utility were considered in a catena of decisions. The said expression is of the widest connotation. Words ''general' in the said expression is pertaining to a whole class. Court relied on its earlier decision in Commissioner of Income-Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC), and held that advancement of any object or benefit to the public or a section of public is distinguished from benefit to an individual or a group of individuals, and would be a charitable purpose. In Additional Commissioner of Income-Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) a Constitution Bench held, if primary purpose and predominant object of a trust are to promote welfare of general public, the purpose would be chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was for general public utility and for charitable purposes. The main objectives of trust are to breed the cattle and endavour to improve quality of cows and oxen in view of need of good oxen as India is prominently an agricultural country, to produce and sale cow milk, to hold and cultivate agricultural land etc. Various activities relating to cow milk and other research maintenance etc., Court held, that objects are of general public utility. Profit making was neither the aim nor object of trust. It was not principal activity. Merely because, while carrying out activities for the purpose of achieving the objects of the trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. 47. In Delhi High Court this dispute was raised in Institute of Chartered Accountants of India Vs. Director General of Income-tax (Exemption) [2012] 347 ITR 99 (Delhi). Court held that activities of institute i.e. fundamental or dominant function of institute was to exercise overall control or regulate activities of members/enroll chartered accountants and merely if same institute was holding coaching classes would not generate income. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat Maritime Board was established for predominant purpose of development of minor ports within State of Gujarat and its management was given in the hands of Government. Income earned by Board is deployed for development of minor ports in the State. In the circumstances, it was held within the ambit of definition of ''charitable trust' under Act, 1961. 50. In the case of Jaipur Development Authority, Revenue held that major source of income is sale of plots and built up properties. Remaining income is received from various charges, fees and penalties levelled and collected by Jaipur Development Authority. Jaipur Bench of Tribunal in I.T.A.No.182/JP/2012, Jaipur Development Authority, J.L.N. Marg, Jaipur Vs. The C.I.T.-II Jaipur, decided on 30.09.2014, held that Jaipur Development Authority is entitled for registration under Section 12A and in this context said as under:- The JDA was established in October, 1982 by JDA Act. Purpose of JDA is for planning, coordinating and supervising for proper, orderly and rapid development of the areas in Jaipur region, in which several government departments, local authorities and other organization are at present engaged wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(15) of Act, 1961 and would not be disqualified by attracting proviso thereto. 52. In this regard, we may examine functions of aforesaid ''IDAs' vis-a-vis nature of funds they collect in different forms. All three ''IDAs' are statutory bodies. They cannot function beyond authority conferred by UPIAD Act, 1976. Section 6 provides object of IDA which includes acquisition of land; preparation of a plan for development of industrial development area; demarcation and development of sites for industrial, commerce and residential purposes according to plan; providing infrastructure for industrial, commercial and residential purposes; to provide amenities; allocate transfer either by sale or lease or otherwise plots of land for industrial, commercial and residential purposes; regulate erection of buildings and setting up of industries and laying down plans for which a particular site or plot of land shall be used i.e. for industrial, commercial or residential purposes; and, to regulate industrial, commercial, residential or any other specified purpose. Therefore basic object is to develop and regulate of an area notifying as industrial development area. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l township and municipal services thereof shall be provided by ''IDA' in that area. Therefore, within the area, the ''IDAs' have been declared industrial township and municipal services are to be provided by them. 56. We may also examine some other aspects commented by Revenue to exclude ''IDAs' from the ambit of Section 2(15) of Act, 1961. 57. One of the queries made by CIT (E) was evidence regarding ownership of land, building in the name of ''IDAs', audit report of preceding three years with income and expenditure receipt and payment account and also whether any fund has been set apart/accumulated during last three years for any specified object or trust. We have already noted that the statute i.e. UPIAD Act, 1976, itself takes care of funds stating that ''IDAs' shall use entire fund, whatever is available from various resources, for the purpose of UPIAD Act, 1976 and in performance of their objectives and duties under the said Act. 58. With reference to Section 6 (2)(i), IDA acquire land, develop the same and sell at the cost of acquisition plus development. For the purpose of maintenance cost, it charges lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation. Such a corporation set up by the shareholders carries on business and is intended for making profits. When profits are carned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting builings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of the sole purpose of establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also said that underlying concept of trading Corporation is buying and selling, but in the case of Corporation under the aforesaid Act, there was no aspect of buying or selling. Corporation carries out the purpose of Act, i.e. development of industries in the State. Constructions of buildings, establishment of industries by letting building on hire or sale, acquisition and transfer of land, in relation to establishment of industrial estates, or development of industrial areas and setting up of industries, it cannot be said to be relating to land or buildings for the reason that State is carrying out the object of Act with the Corporation as an agent in setting up industries in the State. Act aims at buildings and industrial town and the Corporation carries out objects of the Act. Court further said that:- The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds have been given interest free loan and grants. All these activities will show that respondents-authorities are primarily engaged in business of development and sale of properties for earning profit and if there is any charitable activity, it is coincidence or incidental to its business. Respondents-authorities are running business purely on commercial line without any intention of any sort of charitable purposes. Attempt of ''IDAs' is to seek parity with LDA or Haridwar Development Authority (hereinafter referred to HDA ) in view of judgments rendered in respect of those bodies, directing grant of registration to CIT(E), was failed by distinguishing and observing that those development authorities were constituted under UPUD Act, 1973 and UPIAD Act, 1976 and provisions of two Acts are significantly different in all respects. 63. Interestingly, CIT (E) while admitting that after dissolution of these ''IDAs', assets and properties shall vest in Government, it has taken it as a negative factor and relevant to exclude ''IDAs' from ambit of charitable purposes by observing that there is no restriction that the left over property shall be use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law requires a conjunctive test whereby objects have to be charitable and genuineness of charitable activities should be established for registration of application u/s 12A. Mere recital of objects or activities without cogent or corroborative evidence are not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. The applicant, in this case is primarily carrying out its business activities for making profit, just like any other private builder/developer. The applicant is neither a local authority, nor carrying out any charitable activity, as such. Like any other private builder or developer is acquiring land at a very low price and then developing the land along with other public utilities, in order to attract the buyers and sell the developed plots/flats with high margin or profit. In the instant case, the documents on record do not suffice to establish the genuineness of activities. The Applicant did not file any specific reply to queries raised and Books of accounts and Vouchers etc were also not produced under the pretext of being Voluminous , so the claim of the Applicant regarding charitable activities could not be ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by society is charitable in nature or not. That is not the requirement of Section 12A. 74. Gujrat High Court in N.N. Desai Charitable Trust Versus Commissioner of Income Tax 2000 (246) ITR 452 (Guj.) held that authority, examining the question whether a fund of institution is eligible to be certified for the purposes of Section 80G, is not to act as an Assessing Officer and pronounce upon the pending assessments. Commissioner, in examining this aspect, in respect of pending assessments, in our opinion, exceeded his jurisdiction while considering the application for approval. He, as a matter of fact, stepped into the jurisdiction of Assessing Officer. 75. In Sanjeevamma Hanumanthe Gowda Charitable Trust Versus Director of Income Tax (Exemption) (2006) 285 ITR 327 (Kar.) Karnataka High Court said: Having regard to the scheme of sections 11, 12 and 13 ultimately what the Commissioner has to look into is not the source of income to the trust but whether such income is applied for charitable or religious purposes. The satisfaction of the Commissioner should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be looked into. At the time of registration of the trust, going by the binding judgments of the apex court, what is to be looked into is whether the trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act......... xxxx xxxx. 13. Going by the provisions of sections 12A and 12AA of the Income-tax Act, we hold that the grounds raised by the registering authority and upheld by the appellate authority for rejection of registration to the appellant trust cannot be sustained. The authorities could have examined only the genuineness of the trust and its activities. They did not have material to hold that the trust was either not genuine or its activities were not what was professed in the deed of trust...... (emphasis added) 78. A taxation statute is to be interpreted strictly but not to the extent of disturbing natural consequence, which is evident from a plain and simple reading, particularly when statute is unambiguous. When a provision is clear, there is no reason to go beyond enactment and find out some objective intention by mere guess work which may not have been there. Similarly, a stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place of business or residence of the assessee but by the location of the office of the Assessing Officer. 83. We may also mention, at this stage, that in the aforesaid Standing Order, jurisdiction of various Benches constituted at different places, have been given in detail and jurisdiction of Delhi Bench has been given at Serial No. 11 and it covers District Gautam Budh Nagar also. Item 11 of the aforesaid Standing Order giving details of territorial jurisdiction of Delhi Bench of Income Tax Tribunal reads as under: 11. Delhi Benches (7) - National Capital of Territory of Delhi. - Districts of Bhiwani, Faridabad, Gurgaon, Hissar, Jhajjar, Karnal, Mohindergarh, Ranipat, Rewari, Rohtak and Sonepat of Haryana. - District of Badaun, Bijnor, Bulandshahr, Gautam Budh Nagar, Ghaziabad, Jyotiba Rao Phule Nagar, Meerut, Moradabad, Muzaffar Nagar, Rampur and Saharanpur of Uttar Pradesh. - District of Almora, Chamoli, Dehradun, Haridwar, Nainital, Pauri Garhwal, Pithoragarh, Tehri Garhwal, Udham Singh Nagar and Uttarkashi of Uttaranchal. 84. In the present case, Assessing Authority of respondents is at Gautam Budh Nagar and, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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