TMI Blog2016 (6) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2011-12 on the following grounds: 1) That the order of Ld. CIT(A) is defective both in law and facts of the case. 2) That the order of Ld. CIT(A) is bad in law as the amendment in section 2(15) is effective w.e.f. 01.04.2009 and the assessment in the case has been completed considering the activities of assessee which are not Advancement of any other object of general public utility. 3) That the order of Ld. CIT(A) is bad in law by ignoring the ratio laid in the cases of PUDA and JDA (to the extent improvement trusts carry out land development in a similar manner as development authorities do. 2. The brief facts of the case are that assessee is an artificial judicial person having income from planning and development of cities and same was shown as 'income from other sources'. The assessee has been granted registration under section 12AA of the Income Tax Act. During the course of assessment proceedings, Assessing Officer observed that assessee is carrying on business of sale and purchase of residential houses, construction and multi-storeyed houses, sale of residential plots and commercial plots by auction and earned net profit of ₹ 48.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the case of Hoshiarpur improvement Trust Vs. ITO, ITA No. 496/ASR/2013 relied upon by the assessee, the assessee was an Improvement Trust constituted under the Punjab Town Improvement Act (PTIA), 1922, by the Government of Punjab with the principal objective of bringing about improvement in towns by the means set out under section 22 to 26 of the PITA. The Hon'ble Amritsar Bench in the impugned case dealt with the issue whether the manner in which the assessee trust was conducting its activities constituted advancement of general public utility as set out in section 2(15) and further whether the work ceased to be for charitable purpose due to the first proviso to Section 2(15) which lays down that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, irrespective of the nature of use or application, or retention of the income from such activity. As a corollary the Hon'ble Bench adjudicated upon the issue whether the assessee trust was entitled to claim exemption u/s. 11 read with section 2(15) of the Income Tax Act. Since in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce these activities were carried out with the larger and predominant objective of general public utility. It is only when, to use the words of the CBDT circular cited earlier in this order and the beneficial impact of which has the binding force on the field authorities under section 119 of the Act, the Assessing Officer finds that the income is income of any other business which is not incidental to the attainment of the objectives of the trust or institution that the such an income will not be exempt from tax . There is no finding to that effect by any of the authority below. In any case, it is not even the case of revenue authorities that the activities of the trusts do not serve the objects of the general public utility but the case is confined to the stand that these activities have been carried out in such a manner as to make profit and no activities directly of any general public utility are carried out. The registration granted to the assessee evidences that the objects of the assessee trust were advancement of objects of general public utility, and there is nothing to demonstrate any paradigm shift from this fundamental position. The allegation is only of the profit mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out for advancement of objects of general public utility. This situation at best falls in the second category. However, these cases, for the detailed reasons set out above, the exclusion of these cases from Section 2(15) is only effective 1st April 2016, i.e. assessment year 2016-17. The law is well settled by a five judge bench of Hon'ble Supreme Court, in the case of Vatika Township Pvt. Ltd. (supra), that, following the maxim lex prospicit non respici, the law, particularly with respect to a requirement which is more onerous on the assessee, cannot be treated as retrospective in effect unless it is specifically legislated to be so. In our considered view, therefore, this amendment cannot be treated as clarificatory or retrospective in effect. In view of these discussions, even post insertion of proviso to Section 2(15) but before 1st April 2016, when business activities are carried by the assessee trust in the course of actual carrying out of such advancement of any other object of general public utility , the benefit of Section 11 read with Section 2(15) cannot be declined. Nothing, therefore, turns on the assessee carrying out, even if that be actually so, activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the institutions, which claim to be pursuing charitable activities, but also the economic dynamics and motivations of such activities. 36. Learned Departmental Representative has pointed out that the commercial plots and units are auctioned off which shows that the idea is to make maximum profits but what he clearly overlooks is the fact that since it is not a desirable state of affairs for the State to subsidize businesses, and to ensure highest degree of transparency in maximising returns from public assets, competitive bidding for commercial units is a safe option, and that the use of bidding process is justified for the larger causes. The bidding process ensures transparency in functioning of the improvement trusts and that, by itself, does not make the functioning of the improvement trust a commercial venture. It is also important that this use of bidding process is only in the context of commercial units etc. The development of commercial areas is in the interest of planned growth of an area and when such commercial areas develop, all the stakeholders in the development of that area benefit. In order of this benefit to the common cause, it is not necessary that the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g away the residential units at subsidized or low prices but in pursing the object of advancement of object of general public utility in planned development of the are in accordance with the policies of the State Government. Thereafter the Hon'ble Bench concluded at para 40 of the order that the assessee trust was entitled to claim exemption u/s. 11 read with section 2(15) of the Act, as follows: 40. For the reasons set out above, we are of the considered view that the authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee trust was not covered by advancement of any object of general public utility. We, therefore, direct the Assessing Officer to delete the disallowance of exemption of ₹ 65,20,690. The assessee gets the relief accordingly. Grievances of the assessee are upheld. Since as stated above the facts in the present case are identical to that in the case of Hoshiarpur Improvement Trust (supra), respectfully following the same we hold that the assessee trust is carrying out charitable activity of advancement of public utility and the business activity carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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