TMI Blog2019 (2) TMI 1749X X X X Extracts X X X X X X X X Extracts X X X X ..... ions stipulated under section 12AA(3), which empowers the registering authority to cancel registration, do not exist in the case of the asses see? - HELD THAT:- It is only if the activities of such trusts or institutions are not genuine or are not being carried out in accordance with the objects of the trust or institution, on being satisfied about the same the registration under section 12A(1)(aa) of the Act could be cancelled and not in any other circumstances. In the instant case, the registration of the respondent-entity was sought to be cancelled on the basis of the insertion of the proviso to clause (15) of section 2 of the Act on the premise that the activity carried out by the respondent was purely trade and commerce and for a profit motive. But in the instant case of Karnataka Industrial Areas Development Board, it has been explained that the statutory authority therein was involved in the orderly development of industrial areas and hence, its activity was for the purpose of and in the nature of public utility service. The nature of the respondent-entity has been already discussed. Neither of the circumstances stated above apply in so far as the respondent-assessee is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in following the judgment of this hon'ble court in the case of the KIADB wherein it is held that the two conditions stipulated under section 12AA(3), which empowers the registering authority to cancel registration, do not exist in the case of the asses see ? 3. According to the Revenue, the respondent-assessee was constituted by notification issued by the State Government bearing No. HUD/849/TTP/87 dated December 22, 1987 under the provisions of the Karnataka Urban Development Authorities Act, 1987 (hereinafter referred to as the KUDA, 1987 , for the sake of convenience). The assessee being a statutory body constituted under the Karnataka Urban Development Authorities Act, 1987, is for the purpose of carrying out the object of the said Act, which is to provide for the establishment of Urban Development Authorities for the planned development of major and important urban areas in the State. The assessee is constituted for the urban areas of Hubli-Dharwad as a planning authority. The assessee applied for registration under section 12A(1)(aa) of the Act and it was granted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or business and does not come within the exception (1) or (2) above and therefore, in view of the amendment made to clause (15) of section 2 of the Act by inclusion of the aforesaid proviso, the Commissioner of Income-tax was justified in cancelling the certificate of registration issued under section 12A(1)(aa) of the Act. Learned counsel for the Revenue contended that substantial questions of law may be answered in favour of the Revenue as the activity by the assessee is hit by the proviso to clause (15) of section 2 of the Act and is not for a charitable purpose. 6. He next contended that the Tribunal was not right in following the judgment of this court in the case of Karnataka Industrial Areas Development Board (KIADB) wherein two conditions have been stipulated for cancellation of the registration under section 12AA(3) of the Act and that in the absence of compliance of the said two conditions, it cannot be cancelled. He contended that the nature of activity of the assessee herein cannot be compared with the nature of activity carried on by the Karnataka Industrial Areas Development Board and therefore, the Tribunal was not right in placing reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to above. That the said judgment has stipulated two conditions for exercise of power under section 12AA(3) of the Act and those conditions are mandatory. Hence, the Commissioner could not have cancelled the certificate of registration issued in favour of the assessee in the instant case. Hence, the substantial question of law No. 2 may also be answered against the appellant-Revenue and in favour of the assessee. 10. It is also brought to our notice at the Bar that the judgment of this court in the case of Karnataka Industrial Areas Development Board has been confirmed by the hon'ble Supreme Court as special leave petition filed by the Revenue has been dismissed by the order dated April 27, 2015. 11. The detailed narration of facts and contentions would not call for reiteration. It is not in dispute that the respondent-assessee was registered under section 12A(1)(aa) of the Act and certificate of registration was issued on March 6, 2008. Clause (15) of section 2 of the Act defines charitable purpose , inter alia, to include the advancement of any other object of general public utility. The said section was amended by insertion of new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted from tax under section 11 of the Act. The Co-ordinate Bench considered the expression any other object of general public utility under section 2(15) of the Act and interpreted it by saying that the said expression must have a widest connotation with the advancement of any object or benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. The said expression would prima facie include all objects which would promote the welfare of the general public. That if the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. 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. Referring to CIT v. Andhra Pradesh State Road Transport Corpo ration reported in [1986] 159 ITR 1 (SC) ; [1986] 2 SCC 391 in which, it had been held that APSRTC was established for the purpose of providing effi cient transport system, having no profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it deviated from its objects and that therefore, the proviso to section 2(15) was not applicable to the facts and circumstances of the case. Conse quently, it was held that the assessee therein was entitled to exemption provided under section 11 for the relevant assessment year. (d) From the aforesaid judgments what emerges is that in respect of two similar authorities, namely, Bagalkot Town Development Authority and Lucknow Development Authority which are similar to the appellate authority, it has been held that they are entitled to registration under sec tion 12A(1)(aa) of the Act and to the benefit under sections 11 and 12 of the Act. As already submitted by learned counsel for the appellant, the appellate authority is a statutory body constituted under section 3 of the Karnataka Urban Development Authorities Act, 1987, the object of the appellate authority is planning and promoting and securing the develop ment of Hubli Dharwad Urban area and for that purpose to acquire, hold, manage and dispose of movable and immovable property and to carry out building and engineering operations and to take all steps for the purpose of development of the Belagavi urban area. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards public purposes. Therefore, the argument advanced on behalf of the Revenue that the asses see was not entitled for exception under section 11 of the Act, is untenable and is rejected. In the circumstances, substantial question of law No. 1 is answered in favour of the assessee and against the Revenue. 12. In view of the aforesaid dicta what emerges is that the nature of activity of the respondent-assessee must be considered. As already noted, the assessee is a statutory authority constituted under the provisions of the Karnataka Urban Development Authorities Act, 1987. In the circumstances, it is held that despite the insertion of the proviso, the assessee was entitled to continue the certificate of registration under section 12A of the Act, as even though the objects of the assessee fall within the limit of any other object of general public utility, but, having regard to the aforesaid dicta, it is held that its activity is not of a commercial nature for the purpose of earning profit, but being statutory body its objects are to ensure orderly development of urban areas of Hubli-Dharwad. In the circumstances, substantial question of law No.1 is answered ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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