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2013 (12) TMI 354 - AT - Income TaxRefusal of registration under section 12A The assessee, a trust, is established by the State Act called Rajasthan Urban Improvement Act, 1959 by the State of Rajasthan and the predominant purpose of the assessee is the development of the urban areas in the State of Rajasthan - Held that - The main objects of the assessee are to construct the roads, provide the water and electricity facility, to construct the drainage system, to improve the gardens and open space, to provide housing facility by allotting the residential plots, etc., which are in the nature of general public utility and even though the assessee might be carrying on with a profit motive but such activity was incidental to the objects of the assessee - Following CIT v. Improvement Trust 2008 (10) TMI 80 - PUNJAB AND HARYANA HIGH COURT - If the predominant object of such activity is to carry out the charitable purposes of the trust or institution then such activity will not lose its character of a charitable purpose merely because some profit arises from the activity Following CIT v. Gujarat Maritime Board 2007 (12) TMI 7 - SUPREME COURT OF INDIA - The expression any other object of general public utility include all objects which promote the welfare of the general public - If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be a charitable purpose Decided in favour of assessee. Penalty u/s 271B The assessee was not granted registration u/s 12A and exemption u/s 11 - The assessee had shown gross receipts of Rs. 1,42,02,845 - Held that - In view of the order of the Tribunal to grant the assessee registration u/s 12A Penalty cannot be imposed - Decided in favour of assessee.
Issues Involved:
1. Refusal of registration under section 12A of the Income-tax Act, 1961. 2. Confirmation of various disallowances made by the Assessing Officer for assessment years 2003-04 to 2007-08. 3. Penalty levied under section 271B of the Income-tax Act for assessment years 2003-04 to 2005-06. Detailed Analysis: Issue 1: Refusal of Registration under Section 12A The primary grievance of the assessee was the refusal of registration under section 12A of the Income-tax Act, 1961. The assessee had applied for registration on August 31, 2006, but the application was rejected by the Commissioner of Income-tax on September 24, 2007. The Tribunal initially remanded the case for fresh adjudication considering the Supreme Court judgment in CIT v. Gujarat Maritime Board [2007] 295 ITR 561 (SC). Upon reconsideration, the Commissioner again rejected the application, differentiating the facts from the Gujarat Maritime Board case and relying on the decision in Jalandhar Development Authority v. CIT [2009] 124 TTJ (Amritsar) 598. The Tribunal examined the objectives of the assessee, which included planning and implementing commercial or residential projects, providing basic services, and developing urban areas. The Tribunal found that the predominant purpose of the assessee was the development of urban areas in Rajasthan, aligning with the definition of "any other object of general public utility" under section 2(15) of the Act. Citing similar cases, such as CIT v. Improvement Trust [2009] 308 ITR 361 (P&H) and Jodhpur Development Authority v. CIT [2012] 145 TTJ (Jd) 221, the Tribunal concluded that the assessee's activities were charitable in nature and entitled to registration under section 12A. The Tribunal set aside the Commissioner's order and directed that the assessee be granted registration under section 12A. Issue 2: Confirmation of Various Disallowances For assessment years 2003-04 to 2007-08, the assessee challenged the disallowances made by the Assessing Officer. Both parties agreed that if registration under section 12A was granted, these issues should be remanded back to the Assessing Officer. Since the Tribunal directed the registration under section 12A, it remanded the issues back to the Assessing Officer for fresh adjudication in accordance with the law, ensuring due and reasonable opportunity of being heard to the assessee. Issue 3: Penalty under Section 271B The appeals for assessment years 2003-04 to 2005-06 pertained to the penalty of Rs. 1,00,000 levied under section 271B for failure to get accounts audited as per section 44AB. The Assessing Officer had levied the penalty because the assessee's gross receipts exceeded the limit prescribed under section 44AB, and the assessee failed to get its accounts audited and submit the audit report within the stipulated time. The assessee contended that it was not engaged in any business, trade, or commerce and was a trust created by the Rajasthan State Government for the systematic and planned improvement of the city. The assessee argued that its activities were not in the nature of business, trade, or vocation, and thus, section 44AB was not applicable. The Commissioner of Income-tax (Appeals) upheld the penalty, stating that the assessee's activities were commercial and carried out with a profit motive. The Tribunal, however, noted that the income was considered business income only because the assessee was not registered under section 12A. Since the Tribunal directed the registration under section 12A, it remanded the issue back to the Assessing Officer to be decided afresh, considering the bona fide belief of the assessee that its income was exempt and thus not subject to audit under section 44AB. Conclusion The appeal in I.T.A. No. 169/Jodh/2011 was allowed, granting the assessee registration under section 12A. The remaining appeals in I.T.A. Nos. 59 to 61/Jodh/11 for assessment years 2003-04 to 2005-06 and I.T.A. Nos. 88 to 92/Jodh/11 for assessment years 2003-04 to 2007-08 were remanded back to the Assessing Officer for fresh adjudication. The order was pronounced in the open court on January 18, 2013.
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