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TMI Blog2013 (9) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). Registration u/s 12AA - Held that:- The effect of such a certificate of registration under Section 12AAA cannot be ignored or wished away by the Assessing Officer by adopting a stand that the trust or institution was not fulfilling the conditions for applicability of Sections 11 12. Proceedings u/s 143(2) - Whether the ITAT was correct in law in holding that without exhausting the provisions contained in section 143(2) of the Act the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial question of law:- "Whether the learned Income Tax Appellate Tribunal was correct in law in holding that without exhausting the provisions contained in section 143(2) of the Act the proceedings initiated by the Assessing Officer by issuing notice u/s 148 of the Act were not valid in the given facts and circumstances of the case". Remaining two appeals were connected with the above-mentioned appeals. The facts and circumstances in all the appeals are identical. Hence, all the appeals are disposed of by this consolidated order for the sake of brevity. However, the dates, figures, etc. have been taken from the leading ITA No. 149 of 2009 for adjudication of the present appeals. The brief facts of the case (ITA No. 149 of 2009) are that for the assessment year under consideration, the assessee has filed its return showing the NIL income and claimed exemption under Section 11 of the Income Tax Act, 1961, being an "Authority" as was notified by the Government of Uttar Pradesh under Section 4 of Uttar Pradesh Planning and Development Act, 1973 (for short, "the Act"). However, for the assessment year under consideration, the AO while passing the assessment order under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earn more and more profits. The said activities are "trade" in nature and liable to tax. Thus, the activities being in the nature of trade and as such the benefit which is extended to charitable activities are not available as per the ratio laid down in the cases of P.C. Raja Ratam Institution vs. Municipal Corporation of Delhi, (1990) 181 ITR 354 (SC); and Christian Children Fund Inc. vs. Municipal Corporation of Delhi, (1994) 4 SCC 377. Learned counsel further argued that the assessee is not on different footing from private colonizers and was making huge profits by giving compensation for land which is less than the market value of the actual land owners. As regards the claim of providing public amenities, private colonizers were also providing similar facilities. According to learned counsel, (i) assessee is a huge profit making agency for which it is taking money from general public; (ii) assessee did not engage in any charitable and if assessee developed any institution of public importance, the cost was recouped from the public at large; (iii) the objects/activities of the assessee were commercial in nature and they did not involve any charity; (iv) assessee also auctions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable under the head "Income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity within or outside its own jurisdictional area". Explanation.-For the purposes of this clause, the expression "local authority" means- (i) Panchayat as referred to in clause (d) of Article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of Article 243P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in Section 3 of the Cantonments Act, 1924 (2 of 1924)". So, the income was exempted from the taxation. Following the deletion of Section 10(20A) and insertion of Explanation in Section 10(20) by the Finance Act, 2002, applicable w.e.f. 01.04.2003, the assessee was advised to seek registration under Section 12A of the Act, which at the relevant time read as :- "Section 12A. The provisions of Section 11 and Section 12 shall not apply in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility [***]" It is also a submission of the learned counsel for the assessee that the term "objects of general public utility" had been extensively dealt with and defined, to meant that where the objects of an institution cover the public at large or a section of public the objects are to be held to the "objects of general public utility" as meant in Section 2(15) of the Act. For this purpose, he relied on the ratio laid down in the case of Additional CIT, Gujarat vs. Surat Art Silk Cloth Manufacturer Association, (1980) 121 ITR 1. According to learned counsel, in the case of CIT vs. Lucknow Industrial Development Authority, Lucknow in ITA No. 156 of 2008 (copy of which is available on record), the Hon'ble High Court has held that the assessee being a "Statutory Authority" which was established under the Uttar Pradesh Industrial Area Development Act, 1976, is entitled to registration under Section 12AA of the Act. Similarly, learned counsel also relied on the ratio laid down in the case of CIT vs. Krishi Utpadan Mandi Samiti, (2011) 331 ITR 154, where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Gujarat Maritime Board, [2007] 295 ITR 561 (SC), where it was observed that:- "... in Section 2(15), namely, "any other object of general public utility". From the said decisions it emerges that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [CIT vs. Ahmedabad Rana Caste Association, [1983] 140 ITR 1 (SC)]. The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or 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 [CIT vs. Andhra Cham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., in Income Tax Appeal No. 70 of 2009 observed that the Forest Corporation being an statutory entity is entitled for the registration under Section 12A of the Act. The said observations was upheld by the Hon'ble Apex Court vide its order dated 12.05.2011 in Special Leave Petition No. (Civil) No. 2590/2011. We may also like to refer a C.B.D.T. Circular No. 11/2008 dated 19.12.2008, wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:- "2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section 10(23C), which are that - (i) the business should be incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X
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