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2014 (3) TMI 1178 - AT - Income TaxWithdrawal of exemption granted u/s 12AA - Charitable activity u/s 2(15) - As pointed out by assessee that the Trust was formed under the Punjab Town Improvement Act for the improvement of a particular area and even the charges were settled by the Punjab Government and the assessee could not take charges beyond the same and hence no income arising to the assessee - HELD THAT - The assessee Trust before us is the Improvement Trust Malerkotla and the facts of the present case are identical to the facts of Improvement Trust Bathinda which is also formulated under the Punjab Town Improvement Trust Act. As fairly admitted by assessee during the course of hearing that the appeals in the case of various Improvement Trusts under the amended provisions of section 2 (15) of the Act w.e.f. 01.04.2009 were pending before the Hon ble Punjab Haryana High Court. As the facts of the present case are identical to the facts before the Amritsar Bench of the Tribunal in Improvement Trust Bath inda Vs CIT Bathinda 2013 (2) TMI 577 - ITAT AMRITSAR and following the same parity of reasoning we uphold the order of Commissioner of Income Tax in withdrawing the registration granted to the assessee under section 12AA. In view of the ratio laid down by the Hon ble Jammu Kashmir High Court in the case of Jammu Development Authority Vs Union of India another 2013 (11) TMI 1578 - JAMMU AND KASHMIR HIGH COURT and Amritsar Bench of Tribunal in Improvement Trust Bathinda Vs CIT Bathinda 2013 (2) TMI 577 - ITAT AMRITSAR we are in conformity with the order of the Commissioner of Income Tax in withdrawing the registration granted to the assessee under section 12AA - Appeal of the assessee is dismissed.
Issues Involved:
1. Withdrawal of exemption granted under section 12AA of the Income-tax Act, 1961. 2. Justification of the Commissioner of Income Tax-II, Ludhiana's decision based on amended provisions of Section 2(15) of the Income Tax Act, 1961. 3. Determination of whether the activities of the appellant trust fall within the meaning of "Charitable Purpose" as per the amended provisions of Section 2(15). 4. Applicability of the amended Section 2(15) to the appellant trust's activities. Detailed Analysis: 1. Withdrawal of exemption granted under section 12AA of the Income-tax Act, 1961: The appeal by the assessee is against the order of the Commissioner of Income Tax-II, Ludhiana dated 12.02.2013, which withdrew the exemption granted under section 12AA of the Act. The Commissioner of Income Tax noted that the Finance Act, 2008 had amended the definition of 'charitable purpose' under section 2(15) of the Act w.e.f. 01.04.2009. The Commissioner held that the activities of the assessee trust fell within the purview of the first proviso to the amended section 2(15) and were not for charitable purposes, leading to the withdrawal of the registration with retrospective effect from A.Y. 2009-10 onwards. 2. Justification of the Commissioner of Income Tax-II, Ludhiana's decision based on amended provisions of Section 2(15) of the Income Tax Act, 1961: The Commissioner of Income Tax-II, Ludhiana, in view of the ratio laid down by the Amritsar Bench of Tribunal in the case of Jammu Development Authority, noted that the assessee trust was engaged in activities that amounted to trade, commerce, or business. The trust was acquiring land at low prices, developing it, and selling it at a profit, which constituted substantial revenue generation. The Commissioner concluded that these activities were not charitable as defined under the amended section 2(15) of the Act. 3. Determination of whether the activities of the appellant trust fall within the meaning of "Charitable Purpose" as per the amended provisions of Section 2(15): The assessee argued that its activities were for the improvement and expansion of towns in Punjab, as per the Punjab Town Improvement Act, 1922, and were not intended for profit. However, the Commissioner found that the trust's activities, including selling plots and charging various fees, were in the nature of trade, commerce, or business. The Tribunal upheld this view, stating that the trust's activities were similar to those of private real estate developers and did not qualify as charitable under the amended section 2(15). 4. Applicability of the amended Section 2(15) to the appellant trust's activities: The Tribunal noted that the amended section 2(15) introduced provisos that excluded activities involving trade, commerce, or business from being considered charitable if the receipts exceeded Rs. 25 lakhs. The assessee's receipts were more than this threshold. The Tribunal referred to similar cases, such as Improvement Trust, Bathinda, and Jammu Development Authority, where the trusts were found to be engaged in non-charitable activities under the amended provisions. The Tribunal concluded that the assessee trust's activities fell within the scope of the amended section 2(15), justifying the withdrawal of the registration. Conclusion: The Tribunal upheld the order of the Commissioner of Income Tax-II, Ludhiana, in withdrawing the registration granted to the assessee under section 12AA of the Act. The appeal of the assessee was dismissed, and the Tribunal found that the assessee trust's activities were not for charitable purposes as defined under the amended section 2(15) of the Act. Order: The appeal of the assessee is dismissed. Order pronounced in the open Court on 27th March, 2014.
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