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Mussorie Dehradun Development Authority Versus CIT, Dehradun

2011 (7) TMI 1288 - ITAT DELHI

ITA No. 271/Del/2011 - Dated:- 14-7-2011 - Diva Singh (Judicial Member) And B. C. Meena (Accountant Member) For the Appellant : Mahesh B.Chibber, Adv. For the Respondent : A. K. Monga, Sr.D.R. ORDER Diva Singh (Judicial Member) This is the appeal filed by the assessee against the order dated 26.11.2010 of CIT, Dehradun wherein the assessee has raised the following grounds. 1. On the facts and circumstances of the case and in law, the ld.CIT has grossly erred in rejecting the application for gran .....

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bject of general public utility by the appellant authority are undertaken/carried on in a totally commercial nature and hence the authority is not entitled to registration u/s 12A(a) of the Income Tax Act, 1961. 2. The relevant facts of the case are that the assessee made an application for registration u/s 12A(a) along with certain enclosures. Considering the same the CIT(A) required the assessee to furnish deed/instruments evidencing creation of the organization. The assessee was required to e .....

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how the same was sold out. The assessee was specifically required to address and explain as to at what rate the land was acquired and at what rate it was sold out during the A.Ys 2007-08, 2008-09, 2009-10. Further more the assessee was also required to furnish the details of interest other than FDRs for the year ending 31.3.2007, 31.3.2008, 31.3.2009. Details and nature of any penalty recovered during the year ending 31.3.2007 were also required to be furnished. The assessee was also put to not .....

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as to how it was established for charitable purposes. 3. The A.O. further observed that on examination of its accounts made up to 31.3.2009 for the year ending 31.3.09 it revealed that assessee had collected advance of ₹ 63,74,64,659/- from customers and advances of ₹ 60 lakhs from Doordarshan against the sale of land. Further more as such under the head land purchase and acquisition on 31.3.2009 it was observed that ₹ 12,29,05,629/- as against ₹ 12,10,31,779/- as on 31. .....

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ration u/s 12A may not be rejected in view of the first proviso to S.2(15) of the I.T.Act, 1961. 4. In response thereto the assessee filed written submissions dt. 28.10.2008 contained at pages 2 to 4 of the impugned order which are reproduced hereunder for a ready reference. Sub: Your letter no. CITDDN/Tech/12A/2010-11/5976 dt. 28.10.2010 With reference to above please find enclosed following information along with documentary evidence. 1) Copy of U.P.Govt. G.O. thru which MDDA (Mussorie Dehradu .....

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er the district and launching schemes for the welfare of people of district and not earning profit. If any surplus arises in any of the schemes it is also used for the purpose of development and no part of it is distributed to members or employees. 2) The Authority was set up with an objective of development of area which comes under its purview by providing housing, roads, electric installation, development and maintenance of parks (boost to environment), plantation of trees (again pertaining t .....

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s Operandi of acquiring land is as under. The Authority takes approval from the Board for acquiring any piece of land for development. But the acquisition of land is done by the State Land Acquisition Officer only and the Authority deposits the amount for the land as decided by the SLO. 5) The details of interest other than FDRs for 31.3.2007, 31.3.2008 and 31.3.2009 are enclosed for your ready reference. These interests are on the schemes launched by the authority (annexure III). 6) Penalty rec .....

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stered in his name. The land is sold at circle rate only and in special circumstances the board has power to fix the rate as per directives of the State government (Annexure V). Regarding advance received from Doordarshan ₹ 60 lacs. Authority was asked by the State govt. to acquire and make available land to Doordarshan for their project and the cost of land was fixed at the circle rate fixed by the District Magistrate, Dehradun and no element of profit was included but as the Doordarshan .....

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rther, I bring to your kind notice the objects and activities of Haridwar Development Authority, Haridwar and Special Area Development Authority, Dehradun are similar where an application for exemption u/s12AA of the Income Tax Act, 1961 was filed and your goodself has granted exemption u/s 12AA. To conclude, it is submitted that the MDDA is engaged in activities enshrined in definition of Charitable Purpose given in S.15(2) of the Income Tax Act and is entitled to a certificate of exemption u/s .....

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e the assessee organization has been set up by the State Government to assist it in carrying on specific work does not in itself mean that the assessee organization is established for charitable purposes. The ld.authority was of the view that the development work per se is not synonymous with charity unless all the ingredients of charity are present. Reliance was placed upon order dt. 1.6.2006 in ITA 764/Chd/2003 reported in (2006) 103 TTJ Chandigarh 988 in the order of the Chandigarh Bench of t .....

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tres provided to plot holders were considered to be tools to attract the investors and hidden cost of these facilities were considered to be hidden in the cost charged from the public. It was held that the objects of PUPDA are not charitable in nature but more of commercialized nature involving profit motive. The CIT referring to the said order of the Chandigarh B Bench observed that the Bench observed that similar activities are performed by big colonizers/developers which are earning a huge pr .....

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nt on to hold that if these facilities viz., parks, schools, community centres etc. are not provided then no body would purchase a plot. As such this was considered to be a means of attracting the people so that maximum people apply for the same and the hidden costs are already added so no element of charity is involved. 5.1 The CIT further drew support from the fact that the Chandigarh Bench of the Tribunal relied upon ACIT vs. Thanthi Trust (2001) 165 CTR (SC) 681 and Bihar State Forest Develo .....

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anization had not been brought into existence for charitable purposes and the activities of the organization did not render any charitable activities. On a perusal of assessee s account it was observed that the activities were commercial as interest from its customers on belated payments had been charged. Moreover assessee also recovered penalty from contractors for delay in work. These facts according to CIT prove that assessee was working commercially in absolute terms. The assertion of assess .....

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s charging the cost of it from the public at large and the money is being charged from the public. Hence there is no element of charity ina ssessee s activities as all the activities are more of commercialized in nature. 5.4. He was further of the view that even if it is granted that the assessee had no profit motive, it still could not be denied that its activities of advancement of the object of general public utility were undertaken in a commercial nature, which was clearly hit by the 1st Pro .....

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at the CIT has been persuaded by the findings of orders in the case of different assessees and as far as the assessee in the present appeal is concerned there is no discussion or mention about the objects of the assessee nor is there a discussion on its genuineness. It was argued that the impugned order has been passed purely relying upon the order of the Chandigarh Bench of the Tribunal in the case of PUPDA (supra) and Amritsar Bench of the Tribunal in Jalandhar development authority (supra). A .....

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as his submission that the CIT has discussed variously and at length the specific facts of assesee s case along with its activities which have been analysed in detail. Comparison with the Chandigarh Bench of the Tribunal in the case of PUPDA and JDA has been made and the impugned order deserves to be upheld. However, confronted with the order of the Coordinate Bench of the Delhi Bench of ITAT in case of MDA and the various orders relied upon therein it was his stand that the issue may be restore .....

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