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2015 (6) TMI 458 - AT - Income TaxRegistration u/s 12A rejected - DIT(E) held that assessee is merely engaged in construction of housing projects and selling them to prospective buyers therefore the activity of assessee is more or less like any other real estate developer/builder hence the activity/object of assessee cannot be considered to be a charitable in nature - Held that - There is nothing in this case which provides services to the mankind on charity basis. The argument of the learned counsel is not tenable because a charitable institution provides services for charitable purposes free of cost and not for gain. The object of the assessee is similar to activities performed by big developers who are earning prof it. If the registration is granted to the assessee u/s 12A of the Act then it will open pandora s box and everybody will claim exemption from tax who are incidentally doing some charitable activities in providing parks or roads. The activities of the assessee is nothing but prof it making activities for which it is taking money from general public and no charity activities are carried on for the public. Considering all these facts brought on record by the DIT(E) in our considered view the assessee is not entitled for grant of registration u/s 12A of the Act. Being so we do not find any infirmity in the order of the DITE) in refusing to grant registration u/s 12A to the assessee and accordingly the order of the DIT(E) is hereby confirmed dismissing the appeal of the assessee. See Jammu Development Authority V/s. CIT 2012 (7) TMI 734 - ITAT AMRITSAR - Decided against assessee.
Issues Involved:
1. Eligibility for registration under section 12A of the Income Tax Act. 2. Nature of activities conducted by the assessee and whether they qualify as charitable. 3. Comparison with private real estate developers/builders. 4. Impact of previous exemption under section 10(20) on the current claim under section 12A. 5. Analysis of relevant case laws and precedents. Detailed Analysis: 1. Eligibility for Registration under Section 12A: The primary issue was whether the assessee, a statutory body constituted under the A.P. Housing Board Act, 1956, was eligible for registration under section 12A of the Income Tax Act. The assessee argued that it was engaged in charitable activities by providing housing facilities at concessional rates to different income groups, thus mitigating the housing problem of the general public. However, the DIT(E) rejected the application, stating that the activities of the assessee were commercial in nature and not charitable. 2. Nature of Activities Conducted by the Assessee: The assessee was involved in constructing housing projects and selling them to prospective buyers, including Lower Income Group (LIG), Middle Income Group (MIG), and Higher Income Group (HIG). The DIT(E) noted that the assessee did not sell housing units at cost-to-cost basis but at a profit, although the profit margin was lower compared to private builders due to concessions from the government. The tribunal held that the activities were primarily commercial, with the predominant object being profit-making, which disqualified the assessee from being considered as engaged in charitable activities. 3. Comparison with Private Real Estate Developers/Builders: The tribunal compared the activities of the assessee with those of private real estate developers/builders. It was observed that the assessee's activities were similar to those of private builders, except for the lower profit margin due to governmental concessions. The tribunal concluded that the activities of the assessee were commercial in nature and did not involve charity, as the housing units were not provided free of cost or on a cost-to-cost basis. 4. Impact of Previous Exemption under Section 10(20) on the Current Claim under Section 12A: The DIT(E) initially held that since the assessee had earlier claimed exemption as a local authority under section 10(20), it could not now claim exemption under section 11 as a charitable institution. However, the tribunal disagreed with this reasoning, stating that there was no statutory bar preventing the assessee from seeking registration under section 12A, provided it fulfilled the conditions mentioned therein, including being created for charitable purposes. 5. Analysis of Relevant Case Laws and Precedents: The tribunal considered various case laws cited by both parties. The DIT(E) relied on cases like Jalandhar Development Authority Vs. CIT and Punjab Urban Planning and Development Authority Vs. CIT, where similar authorities were denied registration under section 12A due to their commercial activities. The assessee cited cases where similar authorities were granted registration, such as Rajasthan Housing Board Vs. CIT and Maharashtra Housing and Area Development Authority Vs. ADIT(E). However, the tribunal found these cases factually distinguishable and upheld the DIT(E)'s decision, emphasizing that the assessee's activities were commercial with a profit motive. Conclusion: The tribunal concluded that the assessee's activities were commercial in nature and did not qualify as charitable. Therefore, the assessee was not eligible for registration under section 12A of the Income Tax Act. The appeal was dismissed, and the order of the DIT(E) was upheld.
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