TMI Blog2019 (2) TMI 1858X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant comes within the scope and ambit of the expression the advancement of any other object of general public utility . The activity carried on by the appellant does not involve an activity which is in the nature of trade, commerce or business so as to come within the mischief of proviso to section 2(15). As already noted, the appellant is a statutory authority constituted under the provisions of the KUDA Act, whose object is to establish and develop urban areas in an orderly fashion. Even though the appellant-development authority may be involved in developing various residential or commercial areas and thereby preparing house sites or commercial sites and even alienating such sites through auction or through allotting to eligible persons, the said activity cannot be held to be profit motive so as to come within the mischief of the expression trade, commerce or business. The upshot of the aforesaid discussion is that the appellant-assessee is a statutory authority created under the Karnataka Urban Development Authorities Act, 1987. The purpose and intent of creation of the appellant-authority is to establish urban areas in Belgaum in a planned manner. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o comply with all requirements stipulated under rule 17A of the Rules. If there has been any non-compliance with the same, then, the appellant is at liberty to comply with the said requirements in accordance with law. - I. T. A. No. 5020 of 2012. - - - Dated:- 19-2-2019 - Mrs. B. V. Nagarathna And A. S. Bellunke JJ. For the Appellant : V. K. Gurunathan for S. Parthasarathi , Advocates For the Respondent : Y. V. Raviraj , Advocate JUDGMENT MRS. B. V. NAGARATHNA J. -. 1. This appeal was admitted on July 31, 2013 to consider the following substantial questions of law raised in the memorandum of appeal : (i) Whether in law, the finding arrived at by the Tribunal is per verse and contrary to the facts and circumstances inasmuch as whether the activity carried on by the appellant would amount to an activity in the nature of trade, commerce or business to deny registration under section 12A of the Income-tax Act ? (ii) Whether in law, the Tribunal was justified in holding that the appellant had violated rule 17A and that non-filing of audited accounts was not in accordance with rule 17A of the Income-tax Rules, 1962 just to deny a statutory benefit ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 11 and 12 would not apply in relation to the income of a trust or an institution on fulfilment of certain conditions. That under section 12A(1)(aa), a person in receipt of the income, if it makes an application for registration in the prescribed form, then the Commissioner has to register the said trust or institution under section 12A(1)(aa) of the Act. On such registration, the income of the trust or the institution shall be eligible for the benefit under sections 11 and 12 of the Act. That under section 11 of the Act, income from property held under trust for charitable or religious purpose shall not be included in the total income of the previous year of the person in receipt of the income and under section 12 of the Act, any voluntary contributions received by a trust created 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 purpose and the provisions of that section and section 13 shall apply accordingly. Section 13 states that section 11 shall not apply in certain circumstances. 6. Learned counsel for the appellant contended that the appellant being a statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led under section 12A(1)(aa) of the Act on the ground that the appellant is not carrying on any charitable work or activity. In that regard, the appellant's counsel has relied upon certain judgments of the hon'ble Supreme Court as well as this court which could be adverted to at this stage. In the case of Sole Trustee, Loka Shikshana Trust v. CIT reported in [1975] 101 ITR 234 (SC), the hon'ble Supreme Court has highlighted on the concept of charitable purpose as it existed under the provisions of the Indian Income-tax Act, 1922 and that the advancement of an object of general public utility which involved carrying on of any activity for profit, should not come within the ambit of charitable purpose. While pondering on the meaning of the expression charitable purpose under section 2(15) of the Act, the hon'ble Supreme Court held that the expression charity does not necessarily exclude carrying on an activity which yields profit, provided that profit has to be used for what is recognised as charity. The very concept of charity denotes altruistic thought and action. Its object must necessarily be to benefit others rather than one's self ; that in a truly cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominant 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 Corporation [1986] 159 ITR 1 (SC) ; [1986] 2 SCC 391 in which, it had been held that APSRTC was established for the purpose of providing efficient transport system, having no profit motive and therefore, the income earned was not liable to Income-tax. The Co-ordinate Bench held that Bagalkot Town Development Authority was a statutory authority created under the KUDA Act to carry out public purpose and therefore, the assessee was entitled to exemption of tax and dismissed the appeal filed by the Department. 14. In Ahmedabad Urban Development Authority v. Asst. CIT (Exemptions) reported in [2017] 396 ITR 323 (Guj), the Gujarat High Court held that the Tribunal had committed a grave error in holding the activities of the assessee therein, namely, the Ahmedabad Urban Development Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already submitted by learned counsel for the appellant, the appellant-authority is a statutory body constituted under section 3 of the KUDA Act, the object of the appellant-authority is planning and promoting and securing the development of Belagavi urban area and for that purpose to acquire, hold, manage and dispose of movable and immovable properties and to carry out building and engineering operations and to take all steps for the purpose of development of the Belagavi urban area. 17. Sections 15 to 34 pertain to development schemes that could be undertaken by the appellant-authority for the development of the urban area from time to time. Sections 35 and 36 empower the appellant-authority to acquire lands for the purpose of achieving the development schemes by agreement from the owners of the lands. Sections 17 to 19 empower the authority to acquire the lands from the land owners by acquisition process and pay compensation to the land owners. Under section 37 of the Act, the State Government can also transfer to the authority, lands, belonging to it for the purpose of development scheme. There are various provisions under the Act which are supplemental to the main object an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, being a statutory authority, created under the Karnataka Urban Development Authority Act, 1987 has to carry out its activity towards public purposes. Therefore, the argument advanced on behalf of the Revenue that the assessee 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. 19. The next substantial question of law raised by the appellant is with regard to the applicability of the relevant rule in making an application for registration of charitable or religious trust. According to the learned counsel for the appellant, rule 17A of the Rules applies and under the said Rule, an audit report of the accounts of the institution need not be furnished. In other words, the accounts need not be certified by a chartered accountant. The same is a requirement under rule 17B of the Rules wherein the said audit report is required to be furnished when registration is required under rule 17B of the Rules. That the appellant has sought for registration under section 12A(1)(aa) of the Act and hence it is only rule 17A of the Rules which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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