2019 (1) TMI 1272 - HC - Income Tax

Charitable activity - Registration u/s 12A denied - whether activities of Development Authority can be said to be charitable as defined under Section 2(15)? - Held that - The Tribunal has followed its earlier decisions with regard to two another development authorities whereby the registration was granted under Section 12-AA of the Income Tax Act, 1916. The said decisions have also been upheld by this Court in its decision in Income Tax Appeal 2016 (8) TMI 1305 - ALLAHABAD HIGH COURT by coming to the conclusion that the respondent-authority had fulfilled the criteria for grant of registration under Section 12-A of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Grant of registration to a development authority under Section 12-A of the Income Tax Act.
2. Qualification of aims, objects, and activities of the development authority as charitable under Section 12-A.
3. Eligibility of a development authority as a 'Local Authority' for exemption under various sections of the Act.

Issue 1: Grant of Registration under Section 12-A:
The High Court heard arguments from both parties regarding the department's appeal against the Tribunal's order granting registration to the respondent, a development authority, under Section 12-A of the Income Tax Act. The main contention raised was whether the development authority, being a 'Local Authority' under the Uttar Pradesh Urban Planning & Development Act, 1973, qualifies for registration under Section 12-A as a Trust or Institution. The Tribunal based its decision on previous cases involving other development authorities, where registration was granted under Section 12-AA, and upheld by the Court. Consequently, the High Court concluded that the respondent authority met the criteria for registration under Section 12-A, ruling in favor of the assessee.

Issue 2: Charitable Nature of Aims and Activities:
Another issue raised was whether the aims and activities of the development authority could be considered charitable within the scope of Section 12-A. The Tribunal's decision, supported by previous cases and upheld by the Court, affirmed that the respondent authority's objectives aligned with the requirements for registration under Section 12-A. This alignment with charitable purposes led to the Court ruling in favor of the assessee on this issue as well.

Issue 3: Eligibility as a 'Local Authority' for Exemption:
The third issue revolved around whether the development authority, being a 'Local Authority,' could qualify for exemption under various sections of the Income Tax Act, which is a condition for registration under Section 12-A. The Tribunal's decision, consistent with previous judgments, disregarded the 'Local Authority' status as a barrier to registration under Section 12-A, leading to a ruling favoring the assessee. The Court's decision against the revenue on this issue further solidified the registration granted to the development authority.

In conclusion, the High Court dismissed the department's appeal, upholding the Tribunal's decision to grant registration to the development authority under Section 12-A of the Income Tax Act. The judgment favored the assessee on all issues raised, emphasizing the alignment of the authority's objectives with charitable purposes and the fulfillment of registration criteria despite its classification as a 'Local Authority.'