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TMI Blog2009 (6) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration under s. 12A of the Act - Decided against the assessee - IT APPEAL NO. 562 (ASR.) 2008 - - - Dated:- 12-6-2009 - Member(s) : H. S. SIDHU., CHANDRA POOJARI. ORDER-CHANDRA POOJARI, A.M.: This appeal by the assessee is directed against the order of CIT-II, Jalandhar, dt. 29th Sept., 2008 for the asst. yr. 2008-09. 2. The assessee has raised following grounds: "1. That the CIT, Jalandhar-II, was not justified in not granting the registration under s. 12A to the appellant trust. 2. That the CIT failed to appreciate that it is well settled law that registration has to be granted to the trust where the objects of the trust are charitable in nature. 3. That the CIT has exceeded his jurisdiction by applying presumptions and assumptions on the application of the proposed income of the trust. 4. That the CIT failed to appreciate that objects of the trust are charitable in nature as envisaged in s. 2(15) of the IT Act and therefore, registration ought to have been granted. 5. That the order of the CIT is against the law and facts of the case." 3. The brief facts of the case are that the assessee filed an application in Form No. 10A on 28th March, 2008 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no voluntary contributions received by the assessee and from this angle he refused to grant registration under s. 12A of the Act. Hence, the assessee is in appeal before us. All the grounds are inter-related, hence we are adjudicating the grounds in its entirety, and not ground by ground. 4. The learned counsel for the assessee submitted that the assessee trust was constituted vide notification of Government of Punjab, dt. 16th July, 2007 with an object of carrying out all functions of PUDA relating to development, redevelopment of areas to be executed by Jalandhar Development Authority. This fact has been recorded by CIT, Jalandhar in his order. Thereafter, the assessee applied for registration under s. 12AA on 28th March, 2008. 4.1 He further submitted that the CIT, Jalandhar processed the application and raised various queries which have been replied vide letter dt. 12th July, 2008 and appended on pp. 1 to 14 of the paper book. He further stated that the main objects of the society/trust have again been reproduced by the CIT in para 4 of his order. Further the CIT in para 6 of his order has admitted that the applicant assessee is a local authority. 4.2 He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the trust or institution. A business whose income is utilized by the trust or the institution is a business which is incidental to the attainment of the objectives of the trust or institution. 4.8 He further submitted that in the above case, the Supreme Court held that prior to introduction of s. 11(4A), the requirement that business should be carried on in the course of actual carrying out of primary purpose of the trust applied both to business held under trust as property and business carried on by the trust without the business itself being held as property under trust. The s. 11(4A) as amended w.e.f. 1st April, 1992 made it easier to get exemption from income as any business carried on which is incidental to achieving the purpose of the trust will satisfy the requirements of this section. 4.9 He submitted that all that it requires for the business income of a trust or institution to be exempt is that the business should be incidental to the attainment of objectives of the trust or institution. 4.10 He submitted that even running road transport is entitled to exemption as was held in the case of CIT vs. Andhra Pradesh State Road Transport Corporation (1986) 52 CTR (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f minor ports in the State of Gujarat. The assessee was established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board was essentially with the State Government and there was no profit motive. The assessee, was, therefore, entitled to registration under s. 12A." 4.12 He further submitted that the Hon'ble Supreme Court observed that according to s. 2(15), the expression "charitable purpose" has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and "advancement of any other object of general public utility". In this case, the Court is concerned with the interpretation of the expression "advancement of any other object of general public utility". Under s. 11(1), income from properly held for charitable purpose is not includible and does not form part of total income. Sec. 11(1) has three sub-ss. (a), (b) and (c). 4.13 He further submitted that in all the three sub-sections the words used are "income derived from property held under trust wholly for charitable purposes". Under s. 11(4) the expression "property held under trust" includes a business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry. 4.17 He further submitted that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose would not prevent the institution from being a valid charity. 4.18 He relied on the judgment in the case of CIT vs. Andhra Pradesh State Road Transport Corporation, wherein it was held that since the corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax. 4.19 He further submitted that the Hon'ble Supreme Court found in the case of Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive. The income earned by the Board is deployed for the development of minor ports in India. He further submitted that the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc. therefore, where a trust/institution fulfils all the conditions set out in s. 12A/12AA, registration cannot be denied on the ground that some conditions of ss. 11 and 12 are not fulfilled. 4.24 He submitted that even, after the registration unless the conditions set out in ss. 11 and 12 are complied with, no benefit would be available to the registered trust or institutions. The contention of the Revenue that the assessees were not registered as trust and, hence not entitled for registration was also without any merit, because there is no such requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust. 4.25 He also drew our attention to the decision of Special Bench of Tribunal reported in Samaj Kalyan Parishad vs. ITO (2007) 107 TTJ (Del)(SB) 302 : (2007) 105 ITD 29 (Del)(SB), wherein it has been held that: "that if the profits of the business carried on by the trust feed the charitable objects then it can be said that the activity earned on by the trust is not guided solely by a profit motive. In the instant case, though it was not the assessee's case that the business of Mahila Shil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is carrying on activity in the nature of trade, commerce or business and for that purpose, the learned CIT placed reliance on the judgment of Hon'ble Supreme Court in the case of Indian Chamber of Commerce vs. CIT. Now the contention of the assessee is that this judgment was overruled by the Hon'ble Supreme Court by the their Lordships consisting of five Judges in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association, wherein it has been held as follows: "The true meaning of the last ten words in s. 2(15), viz., 'not involving the carrying on of any activity for profit', is that when the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not." In view of judgment of the Hon'ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's income was exempt from under s. 11(1)." 6.1 This is not the position in the present case before us and the aforesaid judgment is squarely distinguishable and did not apply to the facts of the present case. The object with which the assessee was formed may appear to be a general public utility, but then there were other objects as well which make the assessee a commercial organisation that no restriction as to how its income could be utilised. Considering the principle set out in the above decision. we find that the assessee is a commercial organisation just like any business firm engaged in t lie real estate business. Further, in the case of Indian Chamber of Commerce vs. CIT it was held as under: "that the activities of the chamber being activities carried on for profit, in the absence of any restriction in its memorandum and articles of association against the making of profit from those activities, the income of chamber from those activities was liable to income-tax. Sec. 2(15) must be interpreted according to the language used therein and against the background of Indian life. By definition in s. 2(15) the benefit of exclusion from total income is taken away wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if these facilities are not provided, then nobody will purchase a plot. It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added, so no charity is involved. At best, the assessee can be said to be an authority created to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through an agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from public itself. The objects of the assessee, though claimed to be charitable, but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very higher rates and is earning as profit therefrom. A new trend has also emerged that the assessee, has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments. In such a situation, no charity is involved. Rather the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee is also obliged to look after the safety, health and convenience of persons visiting the market area. A market committee is also obliged to construct and repair link roads, approach roads, culverts and bridges etc. One of the many specified activities of a market committee is to extend loans to financially weak communities, as well as in the repayment of such loans and the interest thereon. The activities of the market committee were non-profit oriented. The activities of the market committee specially in view of the provisions of the Markets Act, statutorily delineating the activities, duties and responsibilities of a market committee, are certainly activities which fell within the framework of the words, 'any other object of general public utility'. Contained ,in the definition of the term 'public purpose' in s. 2(15). Thus, the market committee in question was a charitable trust under s. 11." In the case of CIT vs. Gujarat Maritime Board it was held as under: "The assessee, the Gujarat Maritime Board, which was constituted under the Gujarat Maritime Board Act, 1981, for the purpose of development and maintenance of minor ports in the State of Gujarat, applied for regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, in the present case dominant object of the assessee was not charity, either it is commercial activity carried on with profit motive. This is evident from the object clause mentioned in s. 28(1) of the Development Act, 1995 which has already been reproduced above in the body of the order in para 3. As seen from the above object clause regarding application of income, we do not find application of any income of the assessee for charitable purposes including relief to the poor, education or medical relief and advancement of any other object of general public utility. 6.4 The major thrust of the learned counsel for the assessee is that JDA is of general public utility as it satisfies the need for housing accommodation for the selection (section) of the people of State of Punjab and is also doing planning and development of the cities, towns and villages. We are not agreeable with the argument of the learned counsel because a charitable institution provides services for charitable purposes free of cost and not for a gain. In the present scenario, the similar activities are performed, by big colonizers/developers who are earning a huge profit. If this registration is granted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT is squarely applicable to the facts of the present case, since JDA was formed to do the same act which PUDA was performing vide Notification No. 13/31/04-1HG02/5370, dt. 16th July, 2006. 6.6 The learned counsel for the assessee further relied on the decision of Tribunal, Delhi Bench, Special Bench in the case of Samaj Kalyan Parishad vs. ITO wherein it has been held that if the profits of the business carried on by the trust feed the charitable objects then it can be said that the activity earned on by the trust is not guided solely by a profit motive. In that case, the surplus from the Mahila Shilp Kala Kendra had been consistently applied for the charitable activities carried on by the assessee. 6.7 In the above case, profits of the business carried on by the assessee are used for charitable objects. Hence, it was said that the activity carried on by the assessee is not for profit motive. But this fact is missing in the present case. Hence, the ratio of the above order cannot be applied to the facts of the present case. In our opinion, the assessee is not engaged in the activities of relief to the poor, education of medical relief, and advancement of any other object of g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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