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2016 (8) TMI 1305 - HC - Income TaxEligibility to registration under Section 12A - whether activities of Development Authority can be said to be charitable as defined under Section 2(15)? - Held that - Another statutory body, namely, Krishi Utpadan Mandi Samiti constituted under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter referred to as Act, 1964 ) was also registered under Section 12AA of Act, 1961 and the question whether amount transferred to Mandi Parishad would constitute application of income for charitable purpose under Section 11(1)(a) of Act, 1961 has been decided against Revenue by Supreme Court in Commissioner of Income Tax Vs. Krishi Utpadan Mandi Samiti 2012 (10) TMI 26 - SUPREME COURT wherein held that keeping in mind the statutory scheme of 1964 Adhiniyam, whose object falls u/s 2(15) of 1961 Act, there is no doubt that the assessee satisfies the conditions of Section 11(1)(a) of 1961 Act. Therefore, income has been applied for charitable purposes. Also, Assessing Officer had erred in invoking Section 12(1) since question of control may be relevant in the context of Section 11(1)(d) or u/s 12(1). - Decided in favour of assessee
Issues Involved:
1. Eligibility of Hapur Pilkhuwa Development Authority (HPDA) for registration under Section 12AA of the Income Tax Act, 1961. 2. Interpretation of "charitable purpose" under Section 2(15) of the Income Tax Act, 1961. 3. Applicability of commercial activities to charitable institutions. 4. Relevance of registration under the Indian Trusts Act, 1882, or Societies Registration Act, 1860 for granting registration under Section 12AA. Detailed Analysis: 1. Eligibility of HPDA for Registration under Section 12AA of the Income Tax Act, 1961: The primary issue was whether the HPDA, constituted under the U.P. Urban Planning and Development Act, 1973, was eligible for registration under Section 12AA of the Income Tax Act, 1961. The Commissioner of Income Tax (CIT) had rejected HPDA's application, stating it was not an institution working for charitable purposes as it was not registered under the Indian Trusts Act, 1882, or the Societies Registration Act, 1860. The Tribunal, however, allowed HPDA's appeal, following its earlier decisions regarding similar bodies like the Ghaziabad Development Authority and Lucknow Development Authority, which were also constituted under the U.P. Act, 1973, and were granted registration under Section 12AA. 2. Interpretation of "Charitable Purpose" under Section 2(15) of the Income Tax Act, 1961: The court examined whether HPDA could be considered an institution created wholly for charitable purposes. The term "charitable purpose" was defined in Section 2(15) of the Act, which included relief of the poor, education, medical relief, and the advancement of any other object of general public utility. The court noted that the definition was expanded by the Finance Act, 2008, but the core principle remained the same. The Tribunal had looked into the objects and purposes of the U.P. Act, 1973, and the purpose of land acquisition by HPDA, concluding that its activities were for public purposes and not personal gain. 3. Applicability of Commercial Activities to Charitable Institutions: The CIT had argued that HPDA's activities were not charitable as it sold land at commercial rates and did not follow commercial accounting principles. However, the court referred to the Tribunal's findings and the Supreme Court's judgment in Commissioner of Income Tax-II Vs. Krishi Utpadan Mandi Samiti, which clarified that incidental commercial activities do not disqualify an institution from being considered charitable if the primary purpose is public utility. The court emphasized that the intention of the trustees and the manner in which activities are conducted are crucial in determining the applicability of the proviso to Section 2(15). 4. Relevance of Registration under the Indian Trusts Act, 1882, or Societies Registration Act, 1860: The court found no requirement in Section 12A or 12AA of the Income Tax Act that an institution must be registered under the Indian Trusts Act, 1882, or the Societies Registration Act, 1860, to qualify for registration under Section 12AA. The CIT had added this condition on his own, which was not supported by the law. The court reiterated that the statutory bodies like HPDA, created for public utility under specific state acts, could be considered for registration under Section 12AA without needing registration under the aforementioned acts. Conclusion: The court dismissed all the appeals, confirming the Tribunal's judgment that HPDA was eligible for registration under Section 12AA of the Income Tax Act, 1961. The court held that the activities of HPDA were charitable in nature as defined under Section 2(15) and that there was no requirement for registration under the Indian Trusts Act, 1882, or the Societies Registration Act, 1860, for granting registration under Section 12AA. The court also noted that incidental commercial activities did not disqualify an institution from being considered charitable if the primary purpose was public utility.
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