2021 (1) TMI 1076 - AT - Income Tax

Exemption u/s 11 - Registration u/s.12AA denied - registration granted already earlier was cancelled by order dated 04.05.2012 and the same is pending before ITAT and also the commercial receipts of the assessee for this period exceeding 25% of the total receipts of the said period and the activity of the assessee is of not charitable activity - HELD THAT - We find that the cancellation order passed by the Ld. CCIT(OSD) has been cancelled by Hon'ble ITAT 2020 (3) TMI 1018 - ITAT VISAKHAPATNAM wherein the Hon'ble ITAT categorically gave a finding that there is no material to say that the assessee is carrying the activities not in accordance with the objects or the activities of the assessee are not genuine. The Ld. CCIT has cancelled the registration on presumptions and assumptions without having proper material. The objects of the assessee are one and the same and there is no material before us to say that the assessee is carrying on its activities contrary to the objects and the activities are not genuine. The Department has not placed any material before us that the objects and activities are not genuine. Therefore, we are of the opinion that the Ld. CIT(Exemptions) is not correct in rejecting the registration applied by the assessee u/s. 12AA of the Act. Thus, we are of the considered opinion that the assessee is entitled for registration u/s. 12AA of the Act. Accordingly, we grant the registration to the assessee u/s. 12AA of the Act - Decided in favour of assessee.

Issues Involved:
1. Registration under Section 12AA of the Income Tax Act.
2. Cancellation of previous registration due to alleged commercial activities.
3. Compliance with Section 2(15) of the Income Tax Act regarding charitable purposes.
4. Legitimacy of activities carried out by the assessee.
5. Remittance of sale proceeds to the government account.
6. Assessee acting as an agent for the government in land sales.

Issue-Wise Detailed Analysis:

1. Registration under Section 12AA of the Income Tax Act:
The appeal was directed against the order of the Commissioner of Income Tax (Exemptions), Hyderabad, which rejected the assessee's application for registration under Section 12AA. The assessee, Visakhapatnam Metropolitan Region Development Authority (VMRDA), filed the application after being formed by dissolving the Visakhapatnam Urban Development Authority (VUDA).

2. Cancellation of Previous Registration Due to Alleged Commercial Activities:
The VUDA had previously been granted registration under Section 12AA on 31.07.2006, which was canceled on 04.05.2012 by the Chief Commissioner of Income Tax (CCIT) on the grounds of engaging in commercial activities. The cancellation was based on the amendment to Section 2(15) effective from 01.04.2009, which states that the advancement of any other object of general public utility shall not be considered charitable if it involves trade, commerce, or business activities exceeding ?25 lakhs.

3. Compliance with Section 2(15) of the Income Tax Act Regarding Charitable Purposes:
The CCIT's order was challenged, and the Hon'ble ITAT found that the cancellation was based on presumptions and assumptions without proper material evidence. The ITAT noted that the activities of the assessee, such as selling lands in public auctions and entering into joint ventures, were in line with their objects and did not constitute commercial activities.

4. Legitimacy of Activities Carried Out by the Assessee:
The ITAT examined the activities of the assessee, including development projects, construction of houses, widening of roads, and maintenance of public amenities. It was concluded that these activities were in accordance with the objects of the assessee and were for public utility services. The ITAT held that the department did not provide evidence to show that the assessee's activities were not genuine or contrary to its objects.

5. Remittance of Sale Proceeds to the Government Account:
The ITAT addressed the contention that the assessee remitted sale proceeds to the government account instead of utilizing them for its objects. It was found that the lands sold were not part of the lands in G.O.No.1401 and that the sale proceeds were not remitted to the government. The ITAT held that assisting the government in selling lands and collecting service charges did not disqualify the assessee from registration under Section 12AA.

6. Assessee Acting as an Agent for the Government in Land Sales:
The ITAT considered whether the assessee acted as an agent for the government in selling lands. It was concluded that the assessee, being a government institution, was permitted to sell government lands by public auction as per specific directions. The ITAT found no prohibition against the assessee acting as an agent for the government and held that this did not make the assessee ineligible for registration under Section 12AA.

Conclusion:
The ITAT allowed the appeal, canceling the order of the CCIT and restoring the registration granted to the assessee under Section 12AA. The ITAT found that the activities of the assessee were genuine and in accordance with its objects, and there was no material evidence to support the cancellation of registration. The ITAT directed that the assessee be granted registration under Section 12AA of the Act.

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