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TMI Blog2014 (8) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... ay can be condoned by the Commissioner in case of Trust or institution - there is a provision for condoning the delay in making the registration u/s 12A - The proviso (i) to Section 12A(1)(a) contained a provision for condonation of delay - if an application for registration of the trust is made after the specified period, the Commissioner may register the trust or institution from the date of creation of the trust or the establishment of the institution if he is satisfied, for reasons to be recorded, that the person was prevented from making the application before the expiry of the period for sufficient reasons - original application u/s 12AA was filed on 28-11-2003 with the Commissioner, Dehradun, which had been rejected and thereafter in view of the changed legal position i.e. order dated 20-1-2009, u/s 12AA granting registration by the Commissioner - there was reasonable cause for delay in filing the application which should have been condoned instead of adopting a technical view as taken by CBDT – Decided in favour of Assessee. - ITA Nos. 3056/Del/2012 & 3013/Del/2013, ITA No. 6058/Del/2012 - - - Dated:- 25-7-2014 - Shri S. V. Mehrotra And Shri C. M. Garg,JJ. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 dt: 25.07.2005. 3. Lucknow Development Authority, Lucknow Bench. 4. Kanpur Development Authority, Lucknow Bench. 5. Khurja Development Authority-ITA No. 1851 (DEL) 2009 order dt: 14.07.2009 . 6. Saharanpur Development Authority- ITA No. 5008 (Del) 2007 order dated 20.06.2008. 7. Hapur Pilkhuwa Development Authority- ITA No. 2735/Del/2006, order dated 15.05.2007. 8. Ghaziabad Development Authority- ITA No. 2903 (Del) 2006 order dated 31.01.2007. 9. Ayodhya Faizabad Development Authority. 10. Unnao- Shuklaganj Development Authority ITA no. 686,690,696,703 and 736 (Luck)/2003 for A.Y. 2003-04 dt: 25.07.2005. 11.Muzzafamagar Development Authority decided by ITAT, Delhi E Bench on 0 1.02.20 1 0 the latest order on the issue. Your kind attention is drawn to paragraphs 39, 40 and 41 from the order of U.P Awas Evam Vikas Pari shad, which are reproduced as under:- . 39. From the perusal of the objects of the Parishad, we find that the objects of the Parishad schemes and other projects, to plan and coordinate various housing activities in the State and to ensure expeditious and efficient implementation of housing and improvement schemes in the state. As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited to any specific period. In the case of Haridwar Development Authority, it is bound as per direction of State govt. to transfer specific percentage of its receipts to the infrastructure Development Fund. Such fund has been utilized for infrastructure development purpose after approval of members of the Samiti which consist of District Magistrate, Vice President of Development Authority, Mukhya Nagar Adhikari (MNA) , Nagar Nigam/Executive Officer, Nagarpalika Parishad and Representative of Jal Nigam. Therefore, at the time of receipts of funds from various sources as mentioned above, there is statutory obligation to transfer specific percentage or receipts to the Infrastructure Development Fund and Hardwar Development Authority has no right to remain with the Authority, but the same has been administered strictly by the instructions of the Government. 5. That the amount set apart and meant for utilization only as per the directions of the State Government as application of funds. Therefore, the amount so set apart as per the statutory obligation as not liable to tax in the hands of the Authority. 6. The receipts of the Authority are by way of development fees, map fees, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to show cause as to why, in view of the fact that the assessee was earning income from various kinds of fees and charges and in view of restricting the scope of an object of general public utility by amending section 2(15), the registration granted to the assessee should not be withdrawn. It was pointed out that, with effect from the assessment year 2009- 2010 and by the virtue of amendment to section 2( 15) vide Finance Act 2008, 'advancement of any object of general utility' cannot be treated as a charitable purpose if 'it involves the carrying out of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fees or any other consideration, irrespective of nature of use of application of the income from such activity'. Learned Commissioner's case was that since the assessee was earning income over the years in the nature of license fees, consent fees, testing charges etc and since the basic objective of the protection of environment pursued by the Board involves the carrying on if such activities and the earning of such income, the object pursued ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by assessee for getting better value for the plots and residential houses. 2.5. Ld. CIT pointed out that provision of these facilities was incidental to the business of the assessee. She further pointed out that if on the basis of these activities exemption was granted to the assessee, then every builder and colonizer would become eligible for claiming exemption u/s 12A on the pretext of providing facilities of general public utility. 2.6. The deletion of section 10(20A) justifies the intention of the legislature to bring the housing development authority under the ambit of taxation. 2.7. The case laws relied upon by the assessee were different as most of them related to the period before the amendment in Finance Act, 2008 applicable from 1-4-2009. Therefore, after the change of the definition of 'charitable purpose' itself, an authority like HAD does not pass the acid test. 2.8. Objects of the authority are purely commercial in nature because of the clear profit motive. 2.9. From the facts on record it is evident that HAD acquires and then develops the land for selling at higher rate earning huge profits thereon. It sells property in auction, allots prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the submissions made before ld. CIT, reproduced earlier and pointed out that ld. CIT neither examined the objects and activities, pursued by the assessee nor the cases cited by assessee. 4.1. Ld. Counsel referred to sub-section (3) to section 12AA and pointed out that before canceling the registration granted to the assessee, the CIT should be satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. He submitted that assessee/ authority has been established u/s 4 of the UP Urban Planning Development Act, 1973 by issuing notification in the gazette by the State Government. Ld. Counsel further referred to Sec. 4(1) (2) of the UPUPD Act, as reproduced below: 4. The Development Authority -(1) The State Government may, by notification in the Gazette constitute for the purposes of this Act, an Authority to be called the Development Authority for any development area. (2) The Authority shall be a body corporate, by the name given to it in the said notification, having perpetual succession and a common seal with power to acquire, hold and dispose of property, both mova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as with the State government. 4.6. Ld. Counsel further referred to section 18 which deals with the disposal of land by Authority and pointed out that this disposal of the land was to be done by the Authority by way of sale, exchange or leave or by the creation of any easement, right or privilege or otherwise but not by way of gift. 4.7. Ld. Counsel further referred to section 20 which deals with funds of the Authority and pointed out that as per sub-section (2) the fund is to be applied towards meeting the expenses incurred by the Authority in the administration of this Act and for no other purposes. He submitted that no profit motive was involved. 4.8. With reference to all these sections, ld. Counsel submitted that the entire administration with reference to this land was to be under the control and supervision of state government and this work has been undertaken by the assessee as an instrumentality of state. 4.9. Ld. Counsel referred to the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Krishi Utpadan Mandi Samiti (2010) 1 All LJ 817, contained at page 44 onwards of the PB and referred to para 41 of the said decision, which is reproduced herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of trade, commerce or business, only if same is carried on with the intention to earn profit. The Courts in series of decisions have held that it is an activity carried on in a systematic manner with a view to earn profit, which will be termed as business . Accordingly, in order to hold that the activity is in the nature of trade, commerce or business, there should be profit motive. If during the course of carrying out any activity on non-commercial lines, some profit is received by the Trust, which is incidental to the activities of the trust, the same shall not be construed to be activity in the nature of trade, commerce or business of the assessee. 4.12. Thereafter, ld. Counsel referred to the decision of Hon'ble Punjab Haryana High Court in the case of CIT Vs. Improvement Trust (2009) 308 ITR 361 (P H) contained at page 33 onwards of the PB, wherein the Hon'ble High Court has observed as under: We have heard learned counsel for the parties and perused the record. Learned counsel for the assessee has drawn our attention to the judgment of the hon'ble apex court in the case of CIT v. Gujarat Maritime Board [2007] 295 ITR 561, wherein the question for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that ld. CIT(A) has also observed in para 12 that the case laws cited in the reply of the assessee were different as most of them related to the period before the amendment in the Finance Act, 2008 becoming applicable from 1-4-2009. Accordingly, ld. CIT rightly concluded that the objects of the assessee were purely commercial in nature and cannot be said to be charitable. He submitted that ld. CIT rightly concluded that the assessee acquired and then developed the land for selling it at a higher rate, earning huge profits thereon by way of auction, allotment at market rates and charged interest for delayed payments of the instalments by the buyers. 6. Ld. Counsel for the assessee in the rejoinder submitted that the decisions in the cases of Punjab Urban Planning Development Authority (supra) Jalandhar Development Authority (supra) are not applicable in the present case because this Authority is constituted under the U.P. Urban Planning Development Act, 1973 and is under the jurisdiction of Hon'ble Allahabad High Court. 7. We have heard rival submissions and perused the record of the case. The first proviso to section takes out an activity from the ambit of char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment), providing sewerage system ( clean and healthy environment) are all objects for the welfare of the people of the district; as also these are objects of general public utility. However, since these are the objects of general publicity utility and the boost to environment is only incidental to the activity undertaken by the assessee, therefore, the activity carried out by assessee comes within the last limb of section 2(15) viz. advancement of any other object of general public utility and, therefore, it is to be examined whether the same doe not involve the carrying on of activity in the nature of trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business or cess or fee or any other consideration irrespective of the nature of use or application or reduction of the income from such activity. 7.3. In this regard, we would first refer to the various sections dealing with the activity undertaken by the assessee. As per section 3 of the U.P. Urban Planning Development Act, 1973, first of all the State has to form an opinion that any area within the state requires to be developed according to plan and on formation of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any other manner or from any other source. (f) The fund shall be applied towards meeting the expenses incurred by the Authority in the administration of this Act and for no other purposes. 7.8. All these provisions in the Act lead to inescapable conclusion that State Govt. constituted Development Authority for the welfare of people and not with any profit motive. 7.9. Now we will examine the proviso to section 2(15) with reference to above broad scheme of the Act. From the above it is evident that the main object of the assessee is development of the area as per the mandate of U.P. Urban Planning Development Act, 1973. The activity undertaken by the Authority comes within the object of general public utility but it cannot be concluded that it involves the carrying on of any activity in the nature of trade, commerce or business. Unless the activity undertaken by the assessee comes within the ambit of trade, commerce or business, the proviso would not get attract. 7.10. Hon'ble Supreme Court in the case of CIT vs. Gujarat Maritime Board 295 ITR 561 has held that where the assessee was under a legal obligation to apply its income which was directly and substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the object of general public utility which is a charitable object within the meaning of section 2(15) and the proviso to section 2(15) is not applicable because assessee-Authority is not carrying out activity with any profit motive but the predominant object is welfare of people at large. 8. In the result, the grounds raised by assessee are allowed and the registration is restored. ITA no. 3056/Del/2012: 9. In this appeal the main issue before the CIT was that the assessee Authority was created with the object of general public utility which is a charitable object within the meaning of section 2(15) of the I.T. Act. The ld. Commissioner has granted registration u/s 12AA to the assessee Authority vide letter 137/2008-09 dated 9-3-2009 w.e.f. 20-1-2009 i.e. only from the date of application. The assessee filed application dated 28-3-2009 to CIT for granting exemption u/s 12AA w.e.f. 1-4-2002 but ld. CIT vide his order dated 1-5-2009 advised the assessee to approach the CBDT u/s 119(2)(b) for getting the delay condoned. However, CBDT vide its order dated 6-1-2011 rejected the assessee's application for condonation. 10. Ld. Counsel referred to the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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