TMI Blog2022 (6) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10(46) on the similar activities being undertaken by different assessees. In this respect reliance was placed on the notifications issued by CBDT in the case of Yamuna Expressway Industrial Development Authority and Greater Noida Industrial Development Authority. CBDT has examined the activities of these organizations and has issued notifications exempting the income u/s 10(46) of the Act - activities being undertaken by assessee are similar to the activities being undertaken by the assessee. In view of all these facts and circumstances assessee be allowed exemption u/s 11 of the Act. We find that after noting down the detailed arguments of both the parties in appeals issue decided the issue of grant of exemption u/s 11 in favour of the assessee. Transferring certain amounts to IDRF account and was directly reflecting that account in the balance sheet and was not routing through the profit loss account - AO has added back these amounts while denying exemption u/s 11 - HELD THAT:- We find that this issue has already been dealt by the Hon'ble Allahabad High Court in the case of Lucknow Development Authority [ 2013 (9) TMI 570 - ALLAHABAD HIGH COURT ] has held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 13(8) of the Act, and (b) By the order dated 29.05.2012 as passed by the Ld. C.I.T.- I, Lucknow, cancelling the registration under section 12AA by invoking the provisions of section 12AA (3) of the Act and in subjecting the income of Rs. 9,18,63,62,384/- to tax. 5. BECAUSE the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in holding to the effect that the appellant does not qualify to be an institution for 'Charitable Purposes' in terms of First Proviso to section 2(15) of the I.T. Act, as it is carrying on activities in the nature of trade / commerce / business and in subjecting the surplus revealed by Income and Expenditure Account (as enhanced by various additions) to taxation in terms of impugned order. 6. BECAUSE the Appellant vehemently begs to contend that it has not been engaged in any activity in the nature of trade, commerce or business or any other activity of rendering any service in relation to any trade, commerce or business as per first proviso to section 2(15) of the Act and view to the contrary as has been taken by the Commissioner of Income-tax (Appeals) is wholly inconsistent with the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the contentions raised in the foregoing grounds and on a due consideration of the overall background of the instant case, particularly that: (a) The appellant Parishad had been constituted by the State Government, merely as its delegate to undertake activities for establishment, incorporation and funding of Housing Development Board in the state of Uttar Pradesh, as per the preamble of Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam 1965 (U.P. AdhiniyamSankhya 1 of 1966) (b) The scope of activity to be performed by the appellant Parishad was strictly circumscribed by the provisions contained under section 15 of the said very enactment under the head (function of the Board) (c)Through the appellant Parishad it was the Government of Uttar Pradesh itself that had been carrying on the objects of General Public Utility, in due discharge of its [States] own functions and (d) The State Government had not given up its right to the property created even after lapse of considerable period of time (e) The overall functioning and affairs of the appellant Parishad continued to be within the purview, control and even dictates of the State Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income and Expenditure Account) under the head 'depletion in value of stock' did not pertain to the year under appeal and such 'add back' is not only illegal but is excessive also. 17. BECAUSE the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the disallowance of the payments aggregating to Rs. 10,50,00,000/- made to Contributory Provident Fund as had been set up under the provisions of the the U.P. Awas Evam Vikas Parishad Contributory Provident Fund Regulation, 1973 by invoking the provisions of section 36(1)(iv) of the Act. 18. BECAUSE the payments in question had been made in due discharge of the Regulatory provisions under which appellant had come into existence and section 36(1)(iv) is not at all applicable and the disallowance confirmed by the Ld. Commissioner of Income-tax (Appeals) is wholly illegal. 19. BECAUSE the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in disallowing the exemption u/s 11, 12 and 13 read with first Proviso to section 2(15) on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Objections, are similar to the appeals heard today i.e. on 17/05/2022 therefore, the written arguments filed by the assessee and oral arguments advanced in those appeals may be considered as arguments of the assessee in these appeals also. It was also submitted by both the parties that decision of the Tribunal in the appeals in I.T.A. No.630, 631 others can be followed in these appeals and cross Objections. It was submitted that in I.T.A. No.701 there is another issue of IDRF which the AO has separately added back and which the learned CIT(A) has also upheld. It was submitted that this issue is squarely covered in favour of the assessee by the order of Hon'ble Allahabad High Court dated 16/09/2013 wherein Hon'ble High Court has decided the issue in favour of the assessee. Learned D. R. on the other hand relied on the orders of the authorities below on this issue. 6. We have heard the rival parties and have gone through the material placed on record. We find that the assessee is a Parishad namely The Uttar Pradesh Awas Evam Vikas Parishad which has been incorporated by the Legislative Assembly vide Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam 1965. The sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or the state Government. n) To levy betterment fees. o) To fulfil any other obligation imposed by or under this Act or any other law for the time being in force, and p) To do all such other acts and things as may be necessary for the discharge of the functions before mentioned 7. The assessee has been granted exemption u/s 12A of the Act being a charitable organization for achievement of advancement of objects of general public utility. The assessee filed returns of income claiming its income as exempt u/s 11 of the Act. The Assessing Officer denied the exemption u/s 11 by holding that the assessee was hit by the proviso to section 2(15) of the Act as the assessee has been doing the activities which amounts to carrying on of business or trade. On appeal before learned CIT(A), the learned CIT(A) also upheld the order of Assessing Officer by holding that the assessee was hit by the proviso to section 2(15) of the Act. Against the orders passed by learned CIT(A), the assessee has filed these appeals. The Revenue has also filed Cross Objections in I.T.A. No.166 and 701. The assessee has taken various grounds of appeal regarding denial of exemption u/s 11 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity should not involve carrying on of any activity in the nature of business/trade or commerce. It was submitted that intent of the legislature was clear whereby it wanted to separate charity from the business. Learned CIT, D.R. argued extensively on the provisions of section 2(15) along with the proviso to section 2(15) of the Act and also invited our attention to powers and functions of the assessee and relying on various case laws, argued extensively and concluded by saying that activities of the assessee necessarily involved carrying on of business or trade and therefore, the assessee was clearly hit by the proviso to section 2(15) of the Act. The crux of arguments of learned CIT, D.R. is that the assessee is engaged in the acquisition of land, construction of houses / housing projects in the same manner as any real estate developer will do and this is a commercial activity of the assessee and therefore, the activities carried on by the assessee are in the nature of trade, commerce or business within the meaning of provisions of section 2(15) of the Act which excludes such institutions from the ambit of being charitable institution. Learned CIT, D.R. further argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are different opinions due to ambiguity in the language of such provisions. 8.1 As regards ground No. 2 of the Cross Objections, Learned CIT, D.R. submitted that learned Assessing Officer has not considered the provisions of section 11(2) of the Act, which necessitates that the exemption u/s 11 can be granted only if 85% of the surplus, earned during the year, is spent on charitable purposes. Learned CIT, D.R. submitted that this aspect has been totally ignored by both the authorities as the Assessing Officer straightforward disallowed the exemption u/s 11 and did not examine this aspect and learned CIT(A) also, while upholding the denial of exemption u/s 11, did not examine this aspect which is a very essential ingredient for allowing exemption u/s 11 of the Act. Therefore, it was prayed that if the issue of exemption is decided in favour of the assessee, this issue of compliance with the provisions of section 11(2) should be set aside to Assessing Officer. Similarly, arguing additional ground No. 3, learned CIT, D.R. submitted that the Assessing Officer has also not taken into account the provisions of section 13(1)(d), which necessitates that the accumulated balance of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the Cross Objections, the Revenue in fact is just supporting the order of Assessing Officer on the issue of exemption u/s 11 of the Act and therefore, it was submitted that the arguments of assessee on the main issue of exemption u/s 11 are quite relevant which should be considered while deciding this ground of Cross Objections. 8.3 As regards the second ground of Cross Objections, Learned counsel for the assessee submitted that she had no objection if the Assessing Officer examines the compliance of the assessee with respect to provisions contained in section 11(2) of the Act. 8.4 Similarly, regarding ground No. 3 of the Cross Objections, Learned counsel for the assessee submitted that she is not averse to setting this ground also to the Assessing Officer for examination regarding the provisions contained in section 13(1)(d) of the Act. 8.5 As regards ground No. 4 of Cross Objections, Learned counsel for the assessee submitted that the assessee had granted discount to its employees for allotment of plots and the employees do not fall under the definition of persons mentioned in section 13(3) of the Act. It was submitted that this aspect has already been examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the registration u/s 12A was not granted to the assessee and Hon'ble High Court had dismissed the appeal of assessee and on appeal, Hon'ble Supreme Court had dismissed the SLP filed by the assessee. Learned counsel for the assessee submitted that the issue involved in the present cases is the exemption u/s 11 of the Act as in the present case there is no dispute regarding registration of the assessee u/s 12A which is already in existence. Therefore, the case laws relied on by learned CIT, D.R. is not applicable to the facts and circumstances of the case. Without prejudice it was submitted that in the case of Jammu Development Authority, Hon'ble High Court had not framed any question of law what to talk of substantial question of law and therefore, any order passed by Hon'ble Supreme Court by way of dismissing the SLP does not lay down any precedent as the said case is binding only to the particular facts and circumstances of that case. 12. As regards the reliance placed by Learned counsel for the assessee on the case of Greater Cochin Development Authority, it was submitted that in this case also the Hon'ble Kerala High Court had not framed any question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Exemption) in Tax Appeal Nos. 423 to 425 of 2016 for A.Ys. 2009- 10 to 2011-12 dated 02.05.2017. viii. Hon ble Gujrat High Court in the case of Surat Urban Development Authority vs. Assistant Commissioner of Incometax (Exemption) in Tax Appeal Nos 220 of 2020 for AY 2011-12 dated 21.09.2020 13.1 Above all it was argued that the jurisdictional High Court of Allahabad in the case of assessee itself has decided this issue in favour of the assessee and therefore, assessee is eligible for exemption u/s 11 of the Act. 13.2 The learned AR further submitted that in the case of assessee itself for assessment year 2015-16, the case of the assessee was reopened u/s 148 and Assessing Officer has again examined the activities of the assessee and has granted exemption u/s 11 of the Act. The learned A.R. further placed reliance on the provisions of section 10(46) of the Act and submitted that CBDT itself has granted exemption u/s 10(46) on the similar activities being undertaken by different assessees. In this respect reliance was placed on the notifications issued by CBDT in the case of Yamuna Expressway Industrial Development Authority and Greater Noida Industrial Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in that appeal and in this respect our attention was invited to the judgment of Hon'ble Kerala High Court dated 19/12/2014. We find force in this argument of the ld. Counsel as Hon'ble High Court did not frame any question of law therefore, the Special Leave Petition dismissed by Hon'ble Supreme Court does not lay down any law in this respect and therefore, the judgment of Hon'ble Supreme Court is not a binding precedent. We further find that the judgment of Hon'ble High Court of Jammu Kashmir in the case of Jammu Development Authority is also not applicable to the assessee as that case related to the denial of registration u/s 12A of the Act and in the present cases there is no dispute regarding registration u/s 12A of the Act as the assessee is duly registered u/s 12A of the Act. Moreover, in this case also the Hon'ble High Court had not framed any question of law. 17. We find that Hon'ble Punjab Haryana High Court in the case of the Tribune Trust Chandigarh vs. CIT has observed that where the High Court had not framed any question of law, the SLP dismissed by Hon'ble Supreme Court do not lay down any law. We find that Hon'ble Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law: Whether under the facts and circumstances of the case, the learned ITAT was right in holding that the registration granted u/s 12A of the I.T. Act cannot be cancelled by the CIT under the provisions of Section 12AA (3) of the I.T. Act when the activities of the assessee were hit by the first and second proviso to section 2(15) of the I.T. Act w.e.f. 01.04.2009. 4. Learned counsel for the parties at the outset could not dispute that issue raised in this appeal is squarely covered by this Court's judgment in Income Tax Appeal No. 107 of 2016: Commissioner of Income Tax, (Exemption), Lucknow Vs. M/s Yamuna Expressway Industrial Development Authority and other two connected appeals decided on 21.04.2017. 5. For the reasons stated in aforesaid judgment, the question raised in this appeal is answered against Revenue. 6. Appeal is accordingly dismissed. 18.1 The Hon'ble High Court, it is seen, has relied on its decision in the case of Yamuna Expressway Industrial Development Authority. It would be appropriate to reproduce the relevant portion of the decision of High Court order dated 21/04/2017 passed by Hon'ble Allahabad Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imbs, namely, relief of the poor, education or medical relief. It will apply only to entities whose purpose is advancement of any other object of general public utility i.e. 4th limb of definition of ''charitable purpose . 36. Entities which carry on commercial activities will not be eligible for exemption under Section 11 or 10 (23C) of Act, 1961. Whether an entity is carrying on activities in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activities. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment for providing road transport facilities to general public, and a statutory enactment obliged the Corporation to handover to the Government all income left over after meeting expenses which was to be invested by Government for road development, its activities do not involve carrying on of an activity for profit and its income would be exempted as that of an institution meant for advancement of an object of general public utility. 41. Broadly, it is said that a valid trust for a charitable or religious purposes involves: 1) the specification or identification 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 referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by said trust are subject matter of exemption from taxation under Act, 1961. Section 12A and 12AA contain detailed procedural requirements for making application for registration. Registration under Section 12A and 12AA is a condition precedent for availing benefit under Section 11 and 12. Unless institution is registered under Sections 12A and 12AA, it cannot claim benefit of Sections 11 and 12. After referring to various authorities, Court then said that legal 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to insertion of proviso in Section 2(15) of Act, 1961, Court said that activity of a trust would be excluded from the term ''charitable purpose', if it is engaged in any activity in the nature of trade, commerce or business or any service in relation to trade commerce or business for a cess, fee and/or any other consideration. Intention is not to exclude genuine charitable trust of general public utility, but is aimed at excluding activities in the nature of trade commerce or business, which are masked as charitable purpose . Gujarat High Court said that the main object of trust 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 purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntially received from business held under trust for development of minor ports in State of Gujarat. Court distinguished Section 10(20) and Section 11 of Act, 1961 and held that both provisions operate in totally different spheres. If Board ceased to be local authority , it is not precluded from claiming exemption under Section 11(1) in the light of definition of charitable purposes under Section 2(15) of Act, 1961. Advancement of any object of benefit to public or a section of public as distinguished from benefit to an individual or a group of individuals could be a charitable purpose . It was held that Gujarat 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 level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is generated through these activities are finally utilized for the benefit of the public. The intention of the institution is not to earn profit but recover the cost of the establishment as well as other expenditure to implement the object of the JDA. The State Government also give the grant to it. (emphasis added) 51. We would now examine in the light of above definition as explained by CBDT vide Circular dated 19th December, 2008 and exposition of law, discussed above, whether an IDA constituted under a provincial enactment, on the subject of Industrial Development, would satisfy requirement of Section 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r UPIAD Act, 1976. Similarly, an ''IDA' may also borrow money by way of loan or debenture from such sources, other than Government, on such terms and conditions as may be approved by State Government. For re-payment of borrowed money, an IDA' is required to maintain a sinking fund. Accounts of ''IDAs' are to be audited vide Section 22, in the area declared as ''industrial township'. There may not be constituted any ''municipality' though it is obligatory under Article 243 (Q) of Constitution, but proviso to Article 243 (Q) (1) authorizes Governor to specify an ''IDA' as industrial 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furtherance of the purposes for which Corporation is established. There also an industrial area was to be declared by notification by State Government. An argument was raised that Corporation was a trading one as it can sell property, transfer land, borrow money and entitled to charge rents and profits etc. Rejecting contention that Corporation is a trading body, Court said:- these profits will be themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulations and management of the Corporation. 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 Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent-authorities i.e. ''IDAs' and it is a complete answer in the present case also to the argument that Cess/Fee and other considerations realized by ''IDAs' render their activities in the nature of trade, business or commercial so as to exclude them from definition of charitable purposes by application of proviso to Section 2 (15) of Act, 1961. It was also observed that there are two features, which are normally not found in trading corporation (1) that the sums payable to corporation are recoverable as arrears of rent under the Act and (2) on dissolution, assets vest in and liabilities become enforceable against the State Government. Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities. Before registration is made, competent authority i.e. CIT (E) has to see object of charitable purposes and genuineness of activities. Respondents-authorities failed to prove the same. CIT (E) also observed that respondents-authorities have got property development income which comprises of sale and development of land and sale of constructed property. It has also got income under the head urban services , which comprises of lease rent, loan interest, fee, penalties, duties and taxes. Similarly, under head of administration ''IDAs' have got income form interest, forfeiture of property and miscellaneous income. Besides, interest bearing funds 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 68. CIT (E) has attempted to equate these ''IDAs' with private builders and developers. Para-11 of said order is reproduced as under:- The 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/develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may discuss hereinafter. 73. First decision in the line is this Court's judgment in Fifth Generation Education Society Versus Commissioner of Income Tax (1990) 185 ITR 634 (All) wherein it has been said that at the stage of considering application for registration, Commissioner is not to examine application of income. All that he may examine is whether application is made in accordance with the requirements of Section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He may also see whether objects of the trust are charitable or not, but it is not proper to examine application of income. The Commissioner is also not supposed to see whether any activity carried out 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the trust and the application of its funds arises at the time of the assessment. Where benefits are claimed by the assessees in terms of section 11 and 12 of the Act, the question as to the nature of such contribution and income 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appeal is passed. It is, thus, contended that since order was passed by CIT(E) at Lucknow, therefore, in view of Rule 4(1) read with Notification dated 29.05.2001, appeal should have been filed at Lucknow Bench and not at Delhi. 82. We find that jurisdiction is not to be determined, as per aforesaid notification, with reference to the place where order under appeal was passed, but it has to be determined with reference to the location of office of Assessing Officer. Para-4 of Standing Order under Income Tax Appellate Tribunal, Rules 1963 (hereinafter referred to as Rules, 1963 ) issued with reference to Rule 4 (1) of Rules, 1963 reads as under: 4. The ordinary jurisdiction of the Bench will be determined not by 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 terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order are reproduced below: As per records assessee UTTAR PRADESH AWAS EVAM VIKAS PARISHAD (PAN: AAAJU0103A) was denied the exemption claimed u/s 11 of the I.T. Act, 1961 by invoking provisions of section 2(15) of the I.T. Act, 1961 and activities of the trust/organization was held as non-charitable. Therefore, all the expenses whether revenue or capital made during the year were for Non-charitable purposes. In view of this, the accumulation made during FY 2008-09 amounting to Rs.5,53,18,733/- should have been treated as the income of the FY 2014-15, being spent on non-charitable purpose, invoking section 11(3)(a) of the I.T. Act, 1961, in addition to the surplus income held of the current year. .. .. 5. Contention of assessee is examined in the light of the facts and circumstances on record. The Income Expenditure Account, balance sheet, computation of income etc. for financial year 2010-11 are verified during assessment proceedings. 6. In view of the facts and documents on record, total income of the assessee Parishad is assessed as under: Returned Income NIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from the disposal/90 years lease of immovable properties; (c) Moneys received by the way of lease rent fees or any other charges from the disposal/90 years lease of immovable properties; (d) The amount of interest earned on the funds deposited in the banks; (e) The amount of interest/penalties received on the deferred payment received from the Allotees of various immovable properties; and (f) Water, sewerage and other municipal charges from the Allotees of various immovable properties. 2. This notification shall be effective subject to the conditions that Greater Noida Industrial Development Authority,- (a) shall not engage in any commercial activity; (b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and (c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Incometax Act, 1961. (d) shall file the Audit report along with the Return, duly verified by the accountant as provided in explanation to section 288(2) of the Income-tax Act, 1961 along with a certificate from the chartered accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and assessee Authority has no power to take decision on application of funds in contravention to the provisions of the UPUPD Act. The Authority thus cannot be said to be running for profit motive. If any income is earned over and above expenditure, it is used for development work in the city of Lucknow. Authority is just assisting State Government in development of towns which is for the welfare of the public. 9. As regards the Revenue s stand to compare the assessee with a private colonizer, we observe that the major source of income of the assessee authority is from the sale of plots, houses, shops, rent, sundry receipts and interest, still the assessee authority cannot be compared with a private Real Estate Developers for several reasons. Few such reasons are discussed below: a. The appellant Authority is constituted by Uttar Pradesh Urban Development Act, 1973 for the development of Lucknow without profit motive. On the other hand, the private colonizers/ Real Estate Developers are embodied by private firms and companies for the development of a housing project undertaken by them with profit motive. b. The appellant Authority consist of nominees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system, etc. which are build and street lights which are installed by the appellant Authority for the benefit of the public at large, however, Real Estate Developers only develops roads, installs lights inside their project areas, and if used by general public, it is considered as trespassing. iii. All the plots/ flats/ houses allotted by appellant Authority of similar sizes cost the same to the buyer, however, the cost of plots/ flats/ houses of same size as of appellant Authority build by private players is exorbitantly high and also differ if, the property sold by private player are vastu compliant/ east facing/ park facing, etc. iv. The receipt of money is arising out of sole purpose of growth and development of the areas and if there are surplus funds, they cannot be distributed but are used in forth coming years for development of Lucknow city. No such restriction is upon the Real Estate Developers. Therefore, from the development undertaken by the appellant Authority, public is benefited at large. It is clear that the benefits of development undertaken by the appellant Authority is not restricted to an individual or particular group of individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in carrying on any activity in the nature of trade, commerce or business. The objects of the assessee Authority do not, expressly or impliedly, provide for carrying on of trade, commerce or business. The L.D.A. is only rendering/ providing service to the general public on behalf of the Government without any profit motive or without earning profit. Lands, plots etc. acquired by the L.D.A. and allotted by it are allotted without earning profit after taking into account the direct and indirect expenses. Further, the L.D.A. is registered u/s 12AA of the Income-tax Act, as per the order of the Hon ble ITAT dated 25.07.2005 in ITA No. 690/LUC/2003 and in pursuance of such order, registration has been granted by the Ld. Commissioner of Income Tax-I u/s 12AA of the Income Tax Act 1961, with effect from 01.04.2003 vide order dated 17.01.2006. Further, the registration u/s 12AA has never been revoked till date. 9.4 The argument of the Revenue is that after insertion comes out of the definition of charitable activities w.e.f. 01/04/2009, any activities in the nature of business or trade comes out by an organization will preclude the same for being an entity engaged in charitable ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anderson, (1880) 15 Ch D 247, 258; State of Andhra Pradesh v. H. Abdul Bakshi Bros, (1964) 15 STC 644, 547 (SC); CIT v. Motilal Hirabai Spng. And Wvg. Co. Ltd., (1978) 113 ITR 173 (GUJ); Bharat Development (P.)Ltd. V. CIT, (1982) 133 ITR 471,474/ (Del)]. The word means almost anything which is an occupation or duty requiring attention as distinguished from sport or pleasure and is used in the sense of an occupation continuously carried on for the purpose of profit [Rogers Pyatt Shellac Co. v. Secretary of State, AIR 1925 Cal 34=11TC 363]. Thus the word 'business' is a wider term than, and not synonymous with, trade; and means practically anything which is an occupation as distinguished from a pleasure [ Halsbury's Laws of England, Third Edition, Vo1.38, page 10, quoted in CIT v. Upasana hospital, (19970 225 ITR 845,851 (Ker). Also see, CIT v. Delhi Transport Corporation, (1996) 134 Taxation 386, 392-93 (Del)]. 'Business' is a word which has more extensive I meaning that trade. All trade is business but all business is not trade [Vijaya Bank v. A.N. Tewari, (1995) 83 Taxman 340,342 (Del)]. The aforesaid Commentary further explains business as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.8, 320 (Gauh)]. Trade in its primary meaning is the exchanging of goods for goods or goods for money; in its secondary meaning it is repeated activity in the nature of carried business on with a profit motive, the activity being manual or mercantile as distinguished from the liberal arts or learned professions or agriculture [State of Punjab v. Bajaj Electricals Ltd.,(1968) 70 ITR 730, 732 (Sc)]. If a person buys goods with a view to selling them at profit, it is an ordinary case of 'trade'. If the transactions are on a large scale, it is called 'commerce, [Gannon Dunkerley Co. v. State of Madras, (1954) 5 STC 216,244 (Mad)],and it is the continuous repetition of such transactions which will constitute a business . 9.8 In the case of State of Punjab and Another v. Bajaj Electricals Ltd (1968) 70 ITR 730(SC), it has been held that essential condition for carrying on business, trade, commerce is making profit. The relevant portion of this judgment is reproduced below: Liability to pay tax under Act 7 of 1956 arises if a person carries on trade by himself or through his agent, or follows a profession or is in employment within the State, and to oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der which every State Government is responsible for Town Planning and for the welfare of the public. Alongwith with affordable houses public utilities are developed as per the plan of the State Government. In recent times houses are being provided to economically weaker section of the society under various schemes of Pradhan Mantri Awas Yojna. 9.12 The objects and activities of the appellant Authority has not changed since grant of registration u/s 12AA of the Act. The funds can be utilized in accordance with approved budget by State Government. The ultimate property/ funds of the appellant Authority vest with StateGovernment in case of dissolution by the State Government. The appellant Authority cannot act beyond the Statute through which it was incorporated. 10. As regards the objection of Revenue regarding surplus of income, we observe that the receipt of money by way of sale consideration, sundry receipts, interest, rent etc. is arising out of sole purpose of growth and development of the areas. Surplus of funds if any, cannot be distributed but are used in subsequent years for development of Lucknow city only. Therefore, surplus of funds should not be equated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished under the provisions of the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee were enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A. In view of the objects, there is no good reason for holding that statutory bodies could not be treated as charitable within the meaning of Section 2(15). The object of the Authority is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 13 and give such treated to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 121 ITR 1 (SC)]. Applying the ratio laid down in the case of CIT vs. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), where of in the present case, the Autonomous Authority was established for the purpose of predominant of development the area and provide to shelter to the homeless people within the State of U.P. The management and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State. Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of Sections 11 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) of Section 12AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution, and (ii) about the objects of the trust or institution. Section 12A stipulates that the provisions of Sections 11 12 shall not apply in relation to income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll within the ambit of charitable object. (c.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of the CIT(A) and ignoring the fact that the activities of the authority are hit by Section 2(15) of Income Tax Act, 1961 and therefore the applicant is not entitled to get benefit of section 12AA of the Income Tax Act, 1961. The Applicant primarily is not carrying out any activity for advancement of any objective of general public utility, as such. The Applicant was purely involved in commercial activities for the purpose of making profit and charity, if any, was justi incidental to its business. The Authority was acquiring land from farmers and others at a low price, which was developed and sold at a premium to the perspective buyers. Apparently, on dissolution of the authority, all assets shall be transferred to the Government and there was no restriction on the use of these assets by the Government. Therefore the objects pursued by the applicant cannot be termed as charitable in view of the fact that the applicant, was a commercial organization (with no restriction as to the application of assets on dissolution or win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of section 12AA of the Income Tax Act, 1961 and read with section 2(15) thereof ? (ii) Whether the findings recorded by the Tribunal to the effect that the respondent-assessee was not carrying out any activity of profit and it s predominant object of welfare of public at large are correct or not ? (iii) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the CIT(E), Lucknow in exercise of power under section 12AA of the IT Act. The analysis of the above questions of law, as framed by Hon'ble Court, reflects that first question was regarding entitlement of the assessee for registration u/s 12AA of the Act whereas the second question framed by Hon'ble Court is to the effect as to whether assessee was not carrying out any activity of profit. The Hon'ble Court, after having elaborate discussions on various aspects of various sections of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution; [(b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution upto the end of the relevant previous year exceeds [fifty thousand] rupees;] (c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), [(c), (cc)] and (d) has substantial interest. 11.3 We find from the list of persons mentioned in sub section (3) that employees has not been included in this list. It is Department s own case that assessee had allowed benefits to employees. 11.4 The Hon'ble Patna High Court in the case of CIT vs. Tata Steel Charitable Trust 78 Taxman 98 (Pat) vide order dated 07/01/1993 has held that employees of the author of the trust do not fall in the specified category of persons referred to in section 13(3) of the Act. The relevant findings of the Hon'ble court are repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation of funds of the assessee which is not in the present case. Therefore, in view of the above, we hold that the assessee had not violated the provisions of section 13(3) of the Act. In view of the above facts and circumstances and judicial precedents, we hold that the assessee is eligible for exemption u/s 11 of the Act and Assessing Officer is directed to allow the benefit of Section 11 to the assessee. In view of the above, ground No. 3 to 7 in I.T.A. No.185 and ground no. 3 to 8 in rest of the appeals are allowed. Ground No. 1 2 are general in nature and therefore, these grounds need no adjudication. 11.7 As regards ground No. 8 in I.T.A. No.185 and ground No. 9 in rest of the appeals, we find that the assessee has been transferring certain amounts to IDRF account and was directly reflecting that account in the balance sheet and was not routing through the profit loss account. The Assessing Officer has also added back these amounts while denying exemption u/s 11 of the Act. We find that this issue has already been dealt by the Hon'ble Allahabad High Court in the case of assessee itself whereby vide order dated 16/09/2013, Hon'ble Allahabad High Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipal Corporation Delhi (1992) 3 SCC 390, in which the Hon'ble Supreme Court of India has held that the activities run on commercial lines do not fall within the ambit of charitable object. (c.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of the CIT(A) and ignoring the fact that the activities of the authority are hit by Section 2(15) of Income Tax Act, 1961 and therefore the applicant is not entitled to get benefit of section 12AA of the Income Tax Act, 1961. The Applicant primarily is not carrying out any activity for advancement of any objective of general public utility, as such. The Applicant was purely involved in commercial activities for the purpose of making profit and charity, if any, was justi incidental to its business. The Authority was acquiring land from farmers and others at a low price, which was developed and sold at a premium to the perspective buyers. Apparently, on dissolution of the authority, all assets shall be transferred to the Government and there was no restriction on the use of these assets by the Government. Therefore the objects pursued by the applicant cannot be termed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfare of public at large are correct or not ? (iv) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the CIT(E), Lucknow in exercise of power under section 12AA of the IT Act. 26. The analysis of the above questions of law, as framed by Hon'ble Court, reflects that first question was regarding entitlement of the assessee for registration u/s 12AA of the Act whereas the second question framed by Hon'ble Court is to the effect as to whether assessee was not carrying out any activity of profit. The Hon'ble Court, after having elaborate discussions on various aspects of various sections of registration, denial of registration u/s 11, 12 and 13, has decided the above three questions in favour of the assessee and against the Revenue. 26.1 The argument of the Revenue that this judgment of YEIDA does not deal with the denial of exemption u/s 11 of the Act, is of no consequence. Though in that case, the prime issue was that of grant of registration u/s 12 of the Act, what was examined was the activities of that assessee. It is this aspect of the matter which is in question in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eservation of monuments and objects of artistic or historic interest and the advancement of any other object of general public utility. In the proviso inserted in the above section vide Finance Act, 2012 with effect from 01/04/2009, it has been provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity unless such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities of that previous year. 30. Admittedly, under the definition of charitable purposes, the objects of the assessee fall into advancement of any other object of general public utility. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that while allowing relief, the learned CIT(A) has failed to comply with the provisions of section 11(2) of the Act. To adjudicate this ground, it is important to first visit the provisions of section 11(2) of the Act, which for the sake of completeness is reproduced below: Section 11(2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- (a) such person furnishes a statement in the prescribed form and in the prescribed70 manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 13(3) of the Act, which for the sake convenience is reproduced below: (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. 36. We find that this provision relates to use of funds of the assessee by the author of the trust or the founder of the institution or any person who has made a substantial contribution to the trust or institution, or any relative of any such author, founder, pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution and therefore, the provisions of section 13(3) of the Act will be attracted only if the benefit has been given to Manager. For the proposition that the employees are not Managers, the ld. Counsel for the assessee relied on the following case law: 1. CIT vs. Tata Steel Charitable Trust, 203 ITR 764 (Patna) 5. Accordingly, the ld. Counsel for the assessee prayed that since the assessee has already deposited more than 30% of the disputed tax and the assessee has been able to make out a prima facie case, due to which, the balance of convenience is in favour of the assessee, the demand sought by the Department may kindly be stayed. 6. The ld. D.R., however, objected to the contentions of the ld. Counsel for the assessee that the employees of the assessee Parishad are not covered by the provisions of section 13(3) of the Income Tax Act. The ld. D.R. heavily placed reliance on the following case laws for the proposition that the employees are covered for the purpose of violation of section 13(3) of the Act: 1. CIT vs. Awadh Educational Society, dated 13/9/2011 (Alld) 2. DIT vs. Maruti Center for Excellence, 208 Taxman 236 (Delhi) 3. Noi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est free loan to the treasurer of the society who is listed in the list of specified person u/s 13(3) of the Act whereas in the cases before us the assessee has given benefit to employees who are not specified persons as mentioned in section 13(3) of the Act. 39. In the case law of Maruti Centre for Excellence, the assessee was rendering training to its members who, in turn were giving donations to the assessee exceeding an amount of Rs.50,000/- therefore, those persons were the persons listed in sub-clause (b) of Section 13(3) and that is why that case law was decided in favour of the Revenue whereas in the present case, it is undisputed fact that the assessee was allowing discount to its employees, therefore, this case law is not applicable. However, we find that such stay order was passed in assessment year 2017-18 whereas the present cases relate to earlier years therefore, the Assessing Officer can again examine these facts while granting exemption u/s 11 of the Act in the present previous years. However, while examining such facts, the Assessing Officer will have to consider the ratio of judgment in the case of Tata Steel Ltd. where employees of the assessee had been h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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