2012 (1) TMI 163 - AT - Income Tax

Exemption u/s 11 - JDA entitlement for registration - seek for registration under s. 12A/12AA. - Held that - In case the authority has not complied with the provision of s. 11(4) of the Act then perhaps exemption under s. 11 may not be applicable. However, for the purpose of registration, we feel that JDA is entitled for registration. We had already noticed that Tribunal, Jaipur Bench has allowed the registration in the case of Jaipur Development Authority. Accordingly, we direct the learned CIT to allow registration under s. 12AA of the Act. Sub-cl. (a) of s. 12A requires that application of registration should be filed within one year from the date of creation of the trust. In case the same is filed before 1st June, 2007 then the first proviso to s. 12A(a) permitted the learned CIT to condone the delay. However, the first proviso to s. 12A(a) is not applicable for the application made on or after 1st June, 2007. Hence, the learned CIT can allow the registration from first year of the financial year in which the application is made. Hence registration, if any, to be allowed will be from the first day of financial year in which application is made or from the date of creation of trust whichever is later.

Issues Involved:
1. Validity of the order under Section 12AA.
2. Consideration of facts and submissions by CIT.
3. Compliance with notices and principles of natural justice.
4. Reliance on external materials without providing opportunity to the appellant.
5. Definition of "charitable purpose" under Section 2(15).
6. Nature of activities carried out by the appellant.
7. Exemption of income under amended provisions of Section 10(20).
8. Grant of registration under Section 12A/12AA with retrospective effect.
9. Consistency with decisions in similar cases.
10. Compliance with audit requirements under Section 288(2).
11. Relevance of furnishing audit reports for registration.
12. Impact of JDA taking over UIT.
13. Overall validity of the impugned order.

Detailed Analysis:

1. Validity of the Order under Section 12AA:
The appellant argued that the order passed by the learned CIT under Section 12AA of the IT Act, 1961, was "patently invalid, contrary to provisions of law, contrary to all canons of natural justice, contrary to binding judgments rendered in similar matters and is void ab initio."

2. Consideration of Facts and Submissions by CIT:
The appellant claimed that the learned CIT-1, Jodhpur, "grossly erred in not properly considering the facts and submissions mentioned in the application under Section 12A submitted in the prescribed Form 10A along with various annexures and also the elaborate facts stated in various written submissions including the oral and written submissions submitted during hearing on 28th Sept., 2010."

3. Compliance with Notices and Principles of Natural Justice:
The appellant contended that the CIT-1 "grossly erred in observing that the appellant did not comply with the notices issued pursuant to submission of application for registration in prescribed Form 10A under Section 12A." The appellant maintained that they had duly complied with all notices and made written submissions on each date of hearing, which were not rebutted by the CIT.

4. Reliance on External Materials Without Providing Opportunity to the Appellant:
The appellant argued that the CIT erred in placing reliance on "many newspapers cuttings" supplied by the AO without providing any opportunity to the appellant to explain or rebut the same, rendering the order "patently void and most unjustified."

5. Definition of "Charitable Purpose" under Section 2(15):
The CIT held that the activities carried out by the appellant did not come within the ambit and scope of the definition of "charitable purpose" as defined in Section 2(15) of the IT Act, 1961. The appellant contested this interpretation.

6. Nature of Activities Carried Out by the Appellant:
The CIT compared the appellant's activities to those of a builder, which the appellant argued was a gross error. The appellant maintained that their activities were for the planned development of the city and other objects for the advancement of general public utility without any profit motive.

7. Exemption of Income under Amended Provisions of Section 10(20):
The appellant contended that their income continued to be exempt under the amended provisions of Section 10(20) of the IT Act, 1961. Alternatively, they argued that they qualified for registration under Section 12A and that their income was exempt under Sections 11 and 12.

8. Grant of Registration under Section 12A/12AA with Retrospective Effect:
The appellant argued that they should have been granted registration under Section 12A/12AA with retrospective effect from the assessment year 2003-04, as they fulfilled all the conditions for such registration.

9. Consistency with Decisions in Similar Cases:
The appellant highlighted that the IT Department had granted registration under Section 12A/12AA to Jaipur Development Authority under identical facts and circumstances. The appellant argued that the CIT erred in not accepting the binding precedents of jurisdictional High Court and other Courts cited before him.

10. Compliance with Audit Requirements under Section 288(2):
The CIT-1 made an ex parte presumption that the appellant had not fulfilled the requirement of getting the accounts audited by an accountant as defined in Section 288(2) and had not filed the audit report in the prescribed form along with the returns of income. The appellant argued that they were not liable for obtaining such an audit report as their income never exceeded the maximum amount not chargeable to income-tax in any previous year.

11. Relevance of Furnishing Audit Reports for Registration:
The appellant argued that the requirement of furnishing the audit report in the prescribed form was not relevant and not mandatory for the grant of registration under Section 12A/12AA. They contended that compliance with this requirement could be examined only during assessment proceedings and not while considering the application for registration.

12. Impact of JDA Taking Over UIT:
The appellant argued that JDA had taken over UIT by virtue of passing the relevant Acts, and therefore, registration under Section 12A/12AA in the name of either JDA or UIT was clearly allowable with retrospective effect from the assessment year 2003-04.

13. Overall Validity of the Impugned Order:
The appellant argued that the impugned order under Section 12AA passed by the learned CIT was bad in law and on the facts, and requested that it be quashed and declared null and void, directing the CIT to grant registration under Section 12A/12AA from the assessment year 2003-04.

Tribunal's Decision:
The Tribunal observed that the main object of JDA is urban planning, including preparation of master development plans and zonal development plans. The Tribunal noted that the objects of JDA are in the nature of public utility and that the activities carried out by the appellant were not different from the activities carried out by a builder developing a large colony. However, the Tribunal clarified that such activities were incidental to the objects of the authority and directed the CIT to allow registration under Section 12AA of the Act. The Tribunal also noted that the registration could be allowed from the first day of the financial year in which the application was made or from the date of creation of the trust, whichever is later. The appeal of the assessee was partly allowed.

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