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TMI Blog2014 (11) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and development of Greater Cochin Area. The return of income for the assessment year 2009-10 was filed on 29-09-2009 retuning a total income at NIL after claiming exemption u/s. 11. In view of the amended provisions of sec. 2(15), the Assessing officer disallowed this exemption and accordingly the total income was assessed at Rs. 8,00,94,700/-. The Assessing officer after analyzing the amendment brought in the statute in section 2(15) with effect from 01-04-2009, had gone into the details of activities undertaken by the GCDA. It is brought out in the assessment order that GCDA charges fees for supervision and centage charges, permission for transfer of land, copy of records, cost of forms, cost of plans, booklets etc. that have grossed upto Rs. 1,23,11,413/- in this assessment year. In view of these activities undertaken, Assessing officer concluded that the society in the advancement of its objects, charges and receives a consideration. The Assessing officer has also pointed out that as part of the town planning schemes, several commercial centres are developed and rented out by the society and the society itself is responsible for the maintenance, upkeep and the provision of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial lines are claiming exemption on their income either u/s. 10(23C) or Section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the "advancement of an object of general public utility" as is included in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines is contrary to the intention of the provision. With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2(15) so as to provide that "the advancement of any other object of general pubic utility' shall not be a charitable purpose if it involves the carrying on of the following activities: (a) Any activity in the nature of trade, commerce or business or (b) Any activity of rendering any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity." 7. Accordingly, the assessee submitted that the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is important is that the profit gets derived from the activities of the society which may be incidental to the activities undertaken, and the activities are in the nature of trade, commerce and business and in that case, the assessee cannot claim exemption u/s. 11. According to the CIT(A), the decision in the case of Infoparks vs. CIT (392 ITR 404) is not applicable to the facts of the present case as the ratio of that decision is on one of the main activity of treating the income from property in the nature of trade, commerce and business. Relying on the decisions in the case of J&K Development Authority and Ghaziabad Development Authority wherein the activities carried out by the authorities were in the nature of trade, commerce and business, the CIT(A) concluded that the Assessing officer was right in holding that the assessee is covered by the amendment to section 2(15) of the Act since the assessee derived income from such activities being more than Rs. 25 lakhs and the activities also fall in the category of trade, commerce and business and also in the category of any activity of rendering any service in relation to any trade, commerce and business. Accordingly, the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tility involves:- (i) Carrying of any activity in the nature of trade, commerce or business and (ii) Carrying on of any activity of rendering of any service in relation to any trade, commerce or business, for a cess or fee. The Ld. AR submitted that it is only if a particular case is falling under either of the above circumstances, the first proviso referred above will apply. 13. The Ld. AR submitted that the assessee herein, as stated earlier is constituted through a statute of the State Government. The assessee's organization has been entrusted by the Government of Kerala the task of planning and developing the area in the specified schedule for the best interest of the society at large. The appellant in the course of this activity has been entrusted with some land which was hitherto held by the Government of Kerala. The appellant had developed the said land and some buildings are also constructed thereupon. The said building is let out by the appellant and rent is also received therefrom. Similarly, some portion of the land has also been sold by the appellant. In this connection, it is to be noticed that the appellant is not engaged in real estate business as is highlighted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sai Publication Fund (2002) 258 ITR 70, since the activity of the appellant is not predominantly business in nature, the benefit of exemption cannot be denied to it by virtue of the proviso to section 2(15). 16. Further, the Ld. AR submitted that the fact that even law makers had never intended to cover cases like the present one is clear from the budget speech of the Finance Minister while introducing the Finance Bill, 2008, as under: "..........Charitable purpose' includes relief of the poor, education, medial relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected." Therefore the Parliament has clarified that the intention was never to assess genuine charitable organization like the appellant herein. So much so, the assessment proceedings are illegal on account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, in the case of GCDA the rental income realized is not by providing any activity or rendering any service in relation to any trade, commerce or business. 20. According to the Ld. AR other service provided by GCDA are also highlighted as involving in business. The services like collection of transfer fee for transfer of land, building, centage fee from municipalities and panchayaths, etc. are listed as business incomes. The transfer fees for properties are prescribed to regulate and restrict the transfer of the amenities provided to the weaker sections of the society to the more privileged sections of the society and are prescribed at the behest of the Government of Kerala. GCDA is involved largely in providing housing to the weaker sections of society. It wants to ensure that these do not go out of the hands of the deprived persons to whom these houses are allotted. Hence a transfer procedure is prescribed to ensure that GCDA is informed of all transfers. This cannot be considered as rendering service as business. The centage charges are part of the revenues of the local government bodies provided for the functioning of GCDA. They are not collection from the public or charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. In these facts and circumstances of the case, and the assessee was entitled to exemption provided u/s. 11 for the relevant assessment year." This case, it is true, considered the issue with respect to the assessment years prior to the amendment w.e.f. 01-04-09. But the Hon'ble Court has also considered the impact of the above provision as incorporated w.e.f. 01-04-09 and so much so the findings in this case apply to the facts of the present case also. (ii) Jodhpur Development authority vs. CIT (2012) 27 Taxman.com 183 wherein similar set of facts the issue was decided in favour of the development authority. (iii) Samarpan Samiti vs. CIT (2012) 24 Taxman.com 205 wherein the activity of running blood bank and proposals to deny the benefit alleging that the same is a commercial activity is set aside by the ITAT Agra Bench. (iv) The decision of the Delhi High Court in the case of ICAI vs. Director General of Income Tax (2013) 35 Taxman.com 140 wherein the Hon'ble Delhi High Court has found that when the dominant objective of ICAI was only to regulate the profession of Chartered Accountancy in India, it is a charitable institution and mere receipt of a fee for conducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation cannot be held to be a dealer in goods so as to be denied exemption u/s. 11A of the I.T. Act. 28. The Ld. AR submitted that the judgment of High Court of Kerala in the case of Infoparks Kerala vs. DCIT (2010) 329 ITR 404 cannot be applicable to the facts of the present case. 29. The Ld. AR further relied on the judgment of the Allahabad High Court in the case of CIT vs. Lucknow Development Authority, Gomti Nagar (2013) 38 Taxman.com 246 wherein it was held that the where the Trust has carried out its activities on non commercial lines with no motive to earn profits, for fulfillment of 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) of the Act. 30. The Ld. AR also relied on the judgment of Jodhpur Bench of ITAT in the case of Jodhpur Development Authority vs. CIT reported in (2012) 145 TTJ 221 wherein it was held that where the main object of the assessee was urban planning and traffic control and management including preparation of master development plans and zonal development plans which are in the nature of public utility, even though the assessee might be selling cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the Assessing officer held that the activity of letting out of property, and provision of services constituted an activity in the nature of trade, commerce or business. The Ld. CIT(A) has also held that the "GCD Authority is acting like a REAL ESTATE GIANT who enters into land deals and opts to take up construction and sales of commercial and residential complexes' in the process, it auctions the land developed to the highest bidders and such auctions are done following commercial principles and prevailing market rate and consequently result in commercial profits in the hands of the society. Assessee may not have a profit motive but the fact remains that various activities undertaken by it results in commercial profits in the hands of the society. It is held in the case of J&K Development Authority that the development activities carried out by such authorities is in the nature of trade, commerce and business". 35. In this connection the Ld. DR relied on the decision of the Hon'ble High Court of Kerala in the case of INFOPARKS Kerala reported in 329 ITR 404, the relevant extract is reproduced hereunder: "From the nature of activities being pursued by the petitioners, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any trade, commerce or business" as they appear in the second limb of clause(b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee.". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relation to the service rendered by the assessee the terms "any trade, commerce or business" refer to the trade, commerce or business pursued by the recipient to whom the service is rendered." 38. The Ld. DR submitted that in the case of Greater Cochin Development Authority, the assessee has sold land to private builders an others, and rented out commercial space on market rate which are today the Gateway Residency Hotel, the GCDA Shopping Complex, the Asoka Tarangini Apartments, the Bay Pride Mall, Kerala Trade Centre etc. hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, even on dissolution or winding up by not having any restriction on application of asset for charitable purpose, the objects pursued by the assessee cannot be said to be a charitable in nature. In the facts and circumstances of the present case, we concur with the views of the ld. CIT that Jammu Development Authority is an Authority established with the motive of profit constituted under the Jammu & Kashmir Development Act, 1970 and that the activities of such Authority are hit by section 2(15) of the Act read with first and second proviso and are not in line with the objects of the Authority/Trust so far as the activities relating to purchase and sale o properties, as mentioned hereinabove. Hence, the activities are not genuine to the extent, mentioned hereinabove and the Ld. CIT, Jammu, has rightly being satisfied held that the Jammu Development Authority is not entitled to registration and accordingly cancelled the registration so granted. We find no infirmity in the order of the Ld. CIT, Jammu and the same is upheld. Thus, all the grounds of the assessee are dismissed." 40. In view of the above facts, the Ld. DR reiterated that the Assessing officer and the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the learned Counsel is that the assessee is of general public utility and was established to satisfy the need for housing accommodation of various sections of the people of Kerala and specially for planning and development in the cities, town and villages and is of charitable nature. 44. Before coming to any conclusion, we are supposed to see the meaning of the word 'charitable purpose' which has been defined in Section 2(15) of the Act which includes relief to the poor, education, medical relief and advancement of any other object of general public utility. A strong contention was raised by the learned Counsel that the assessee is also executing the development of following works/infrastructures: (a) Development of market (b) Water supply and sewerage (c) Development of sports complexes (d) Bridges (e) Bus queue shelters (f) Bus stands (g) Swimming pools (h) Community centres (i) Public toilets (h) Development of parks (i) Cremation grounds (j) Construction of schools, etc. 45. The learned Counsel during argument took a strong plea that on identical facts registration under Section 12A of the Act was accorded to Lucknow Development Authority and Jodhp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same. Even the economically weaker strata of the society is generally applying. It is not the case that the assessee is allotting houses to the poor masses free of cost. The Hon'ble apex Court in the case of Asstt. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) has deliberated upon the issue of charitable purposes wherein the founder of a daily newspaper created a trust in March, 1954 and the objects of the trust were originally to establish newspaper as an organ of educated public opinion for the Tamil reading public. In July, 1957, a supplementary deed making the trust irrevocable and Anr. supplementary deed for establishing and running a school/college for teaching journalism were added. The question before the Hon'ble Court was whether the income of the trust was exempt from incometax during the relevant period, The Hon'ble Apex Court while coming to a particular conclusion reversed the decision of the Hon'ble High Court of Madras and held that the trust did not fall within the provisions of Section 11(4A), as it then stood, and was not entitled to exemption from tax. 47. The Hon'ble Apex Court also considered various judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortance like schools, community centers are created/developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government. It can be said that objects/activities of the assessee are more of commercialized nature and we do not find any charity in it. At the same time, 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 this 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 the public itself, so where is the charity? If the activities of the assessee and the arguments of the learned Counsel are put in a juxtaposition, it can be said that the objects of the assessee, though claimed to be charitable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be seen in totality of circumstances which depends upon facts of each case in the light of primary object and real activities done by the assessee, so these judicial pronouncements in our humble opinion are not going to help the assessee. Further, on scrutiny objects; of the assessee-trust, there was no defined dominant charitable purpose in the trust deed to which the said objects would serve as ancillary objects and which were meant to feed the dominant purpose. The trust deed empowered the authorities of the trust to spend the funds of the trust for the purchase of immovable property and since no part of the income of the trust was applied on any specific charitable purposes, the exemption under Section 11 of the Act was denied. In view of these facts and judicial pronouncements, we are supposed to see the predominant object of the assessee. If all the objects and activities actually carried out by the assessee are analysed and kept in juxtaposition with the various judicial pronouncements, we are of the view that activities of the assessee are more of commercial nature with profit-oriented intent, so no leniency should be shown to the assessee. The Department may also get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tool of attracting the investors wherein the hidden cost of these facilities is already included. In the absence of these facilities, normally the purchaser may not invest and the prices may be less. 51. In view of these facts and judicial pronouncements, we are of the view that the claim of the assessee has been rightly rejected by the CIT(A). The stand of the CIT(A) is upheld. Accordingly, the appeals of the assessee are, therefore, dismissed. 52. The coordinate Bench of the Tribunal at Amritsar, following the decision in the case of Punjab Urban Planning and Area Development Authority vs. CIT, 156 Taxman 37 (Chd.) held, in the case of Jalandhar Development Authority V/s.CIT (2009)124 TTJ (Asr) 598, to which one of us, viz. author member, is a party, that denial of registration under S.12AA(a) of the Act to that assessee, which was also constituted under Punjab Regional And Town Planning and Development Act, 1995, was justified. The objects of the Authority in that case as noted by the Tribunal in para 3 of its order reads as follows: "The objects of the authority shall be to promote and secure better planning and development of any area of the State and for that purpose th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated /developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government. It can be said that objects/activities of the assessee are more of commercialized nature and no charity is involved in it. At the time, 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 large, which is being done through is 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. 54. In view of the above discussion, we are inclined to hold that the CIT(A) is justified in rejecting the claim of exemption u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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