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TMI Blog2013 (12) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... ion then such activity will not lose its character of a charitable purpose merely because some profit arises from the activity – Following CIT v. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT OF INDIA] - The expression 'any other object of general public utility' include all objects which promote the welfare of the general public - If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be a charitable purpose – Decided in favour of assessee. Penalty u/s 271B – The assessee was not granted registration u/s 12A and exemption u/s 11 - The assessee had shown gross receipts of Rs. 1,42,02,845 - Held that:- In view of the order of the Tribunal to grant the assessee registration u/s 12A – Penalty cannot be imposed - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ust or on the lands under the ownership of trust. 7. To develop the environment of the city by planting tree and by providing drainage system and retaining walls, etc. 8. To provide the roads, electricity, water and drainage system in a planned way in the Kachi colonies falling within the jurisdiction of the trust. 9. To get the beautification of the city in a planned way. 10. To regularise the agriculture lands for non-agricultural purposes." 3.1. However, the application for registration was rejected by the learned Commissioner of Income-tax vide order dated September 24, 2007. Against the said order, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Jodhpur in I. T. A. No. 736/JU/07 wherein vide order dated April 28, 2008, the matter was remanded back for fresh adjudication after considering the judgment of the hon'ble apex court in the case of CIT v. Gujarat Maritime Board [2007] 295 ITR 561 (SC). The learned Commissioner of Income-tax, on the direction of the Tribunal, adjudicated the case and observed that the facts of the assessee's case were different from the facts involved in the case of CIT v. Gujarat Maritime Board [2007] 295 ITR 561 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y this Bench of the Tribunal in the case of Jodhpur Development Authority v. CIT [2012] 145 TTJ (Jd) 221 wherein it has been held as under : "The then Union Finance Minister by his letter dated 18th November, 2002 addressed to the Chief Minister of Delhi, clarified that irrespective of the withdrawal of exemption under section 10(20), if the assessees are working for advancement of an object for general public utility and there is no profit motive, they can still claim exemption from income-tax as charitable institution after fulfilling the conditions prescribed under section 11. The word 'it' in the phrase 'if it involves the carrying on of any activity in the nature of trade, commerce or business, etc.' in the proviso to section 2(15) qualifies the 'object of general public utility' and not its 'advancement' or accomplishment or carrying out. Any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce, or business for payment to be non-charitable within the meaning of proviso must be carried on by the trust or institution, not to subserve its charitable purposes, but with the real object of carrying on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted registration. The word 'institution' has a wide ambit as seen from its meaning in the Oxford Dictionary, than the word 'person' used in the Act. Therefore, there was no reason as to why the assessee performing a useful social purpose should not have been termed as an institution registerable under section 12AA. Therefore, the assessee constituted an institution under section 12A. Section 12A provides that provisions of sections 11 and 12 shall not apply to the income of any trust or institution, unless it has made an application for its registration in the prescribed form and in the prescribed manner. The assessee had made an application to the Commissioner in the prescribed form and in the prescribed manner. Therefore, apart from the delay in filing the application, conditions of section 12A(a) were satisfied. The procedure for registration has been prescribed in section 12AA. On a careful study of this section, it is clear that the Commissioner has to examine the following two things before registering a trust or an institution : (a) objects of the trust or the institution, and (b) genuineness of its activities. On a combined perusal of the provisions of sections 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hon'ble Supreme Court in the case of CIT v. Gujarat Maritime Board [2007] 295 ITR 561 (SC) held as under (headnote) : "The expression 'any other object of general public utility' in section 2(15) of the Income-tax Act, 1961, is of the widest connotation. That 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 a charitable purpose. 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 registration under section 12A of the Income-tax Act, 1961, as a charitable institution. The Commissioner rejected the assessee's application. On appeal, the Appellate Tribunal held that the object of the assessee was to develop and maintain minor ports in the State of Gujarat which was an object of general public utility and directed the Commissioner to register the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reasonable opportunity of being heard to the assessee. 9. Now we will deal with I. T. A. Nos. 59 to 61/Jodh/2011 relating to assessment years 2003-04 to 2005-06. All these three appeals relate to the penalty of Rs. 1,00,000 levied by the Assessing Officer by invoking the provisions of section 271B of the Income-tax Act which had been confirmed by the learned Commissioner of Income-tax (Appeals). 10. First we will deal with I. T. A. No. 59/Jodh/2011 relating to the assessment year 2003-04. The facts of the case, in brief, are that the assessee filed the return of income declaring total income at nil. In the return gross loss was shown at Rs. 2,15,60,346, which was claimed to be carried forward to the next year. However, the assessment was completed at a loss of Rs.1,81,59,300 by disallowing the benefit of carry forward of loss. The Assessing Officer observed that the assessee had shown gross receipts of Rs. 1,42,02,845 and as per the provisions of section 44AB, the assessee was required to get its accounts audited and to submit the copy of audit report within prescribed time limit before the Assessing Officer but the assessee failed to comply with the provisions of section 44A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn any income but the trust was working for the benefit of public at large and that a trust which was carrying on activities similar to business activities but not for profit motive could not be construed as carrying on business activity. The reliance was placed on the following judgments of the honourable Supreme Court : 1. CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC). 2. CST v. Sai Publication Fund [2002] 126 STC 288 (SC) 3. Sole Trustee, Lok Shikshana Trust v. CIT [1975] 101 ITR 234 (SC). 11.1. It was stated that the assessee had shown only loss, which was admitted by the Assessing Officer and even after scrutiny only loss was determined. It was further stated that the activities of the assessee-trust not being in the nature of the business, the provisions of section 44AB were not attracted and the consequent levy of penalty under section 271B was not justified. 11.2. The learned Commissioner of Income-tax (Appeals), after considering the submissions of the assessee, observed that the gross receipts of the assessee were Rs. 1,42,02,845, which exceeded the limit prescribed under section 44AB of the Act and the assessee was required under the law not only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had a reasonable cause for not getting its accounts audited under section 44AB of the Act and also there was no intention of the assessee to cause loss to the Revenue, so as per section 271B of the Act, penalty should not be levied. Reliance was placed on the judgment of the honourable Uttarakhand High Court in the case of CIT v. Iqbalpur Co-operative Cane Development Union Ltd. [2009] 23 DTR 60 (Uttarakhand) ; [2009] 179 Taxman 27 (Uttarakhand). 13. In his rival submissions the learned Departmental representative strongly supported the orders of the authorities below. 14. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is noticed that the Assessing Officer while levying the penalty under section 271B of the Act, observed that the assessee-trust was not registered under section 12A of the Act, therefore, it was not entitled to deduction under section 11 of the Act and its income has rightly been assessed as business income vide assessment order dated October 3, 2007. Thus, the assessee was required to get his accounts audited and to submit copy of such audit report as per the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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