2014 (12) TMI 1314 - HC - Income Tax

Denial of exemption u/s 11 - whether the activities of the appellant would qualify to be a charitable purpose as defined in Section 2(15)? - Held that - It is undisputed that the appellant is charging fees for supervision and centage charges permission for transfer of land copy of records cost of forms cost of plans booklets and that the income on this account during the assessment year 2009-10 was 1, 23, 11, 413/-. It is also undisputed that the appellant has developed several commercial centers and rented it out and that the appellant itself is responsible for the maintenance upkeep and the provision of common facilities. The total receipts of such letting out and maintenance charges during the assessment year came to 4, 09, 73, 498/-. It is also admitted that the commercial space developed by the assessee is auctioned by it to the highest bidder. These activities that are carried on by the assessee are for consideration and purely on commercial lines and these are activities which any other real estate developer is engaged in. Considering the nature of the activities that are carried on by the assessee the factual correctness of which is undisputed we can only endorse the view taken by the statutory authorities that in view of the proviso to Section 2(15) the activities of the assessee do not qualify to be charitable purpose as defined therein. In such a scenario the assessing officer was justified in disallowing the exemption claimed and assessing to tax the income of the assessee and the appellate authorities were justified in confirming the same. - Decided against assessee.

Summary

Issues Involved:
Challenge to common order passed by Income Tax Appellate Tribunal regarding exemption under Section 11 of the Act for the Greater Cochin Development Authority.

Analysis:

1. Common Order Challenge:
The Appeals filed by the Greater Cochin Development Authority challenged the common order passed by the Income Tax Appellate Tribunal. The issues raised in these appeals were identical, leading to a joint hearing and disposal treating ITA No.208 of 2014 as the primary case.

2. Charitable Purpose Qualification:
The key issue in consideration was whether the activities of the appellant qualified as a charitable purpose as defined in Section 2(15) of the Act to claim exemption under Section 11. The appellant, an authority under the Town Planning Act, claimed exemption under Section 11 for the Assessment Years 2009-10 and 2010-11. The Assessing Officer disallowed the exemption based on the amended provision of Section 2(15), resulting in the assessment of total income for tax.

3. Interpretation of Section 2(15):
Section 2(15) defines "charitable purpose" including relief of the poor, education, medical relief, and advancement of general public utility. The proviso states that activities involving trade, commerce, or business for consideration may not qualify as charitable purpose. The appellant contended that their dominant object was not profit-making but serving general public utility, citing legal precedents and statutory provisions.

4. Commercial Activities Evaluation:
The appellant's activities included land development, infrastructure works, and commercial space rental for consideration. The assessing officer and appellate authorities concluded that these activities resembled trade, commerce, or business, thus disqualifying them from charitable purpose under Section 2(15). The appellant's income from supervision charges, land transfers, and commercial centers further supported this assessment.

5. Judicial Decision:
The Court upheld the view that the appellant's activities did not meet the charitable purpose criteria under Section 2(15) due to their commercial nature. Consequently, the exemption claimed was disallowed, and the income was assessed for tax. As no legal questions were found for consideration under Section 260(A) of the Income Tax Act, the appeals were dismissed.

6. Conclusion:
The judgment emphasized the importance of the proviso to Section 2(15) in determining charitable purpose eligibility. The appellant's activities, despite serving public utility, were deemed commercial in nature, leading to the denial of exemption under Section 11. The decision highlighted the significance of factual evidence in assessing tax liabilities concerning charitable entities.