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TMI Blog2015 (1) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... or any activity of rendering any service in relation to trade, commerce or business, for a cess or a fee or any other consideration irrespective of the nature of or on application, or retention of the income from such activities" and receipts exceeds Rs. 25 lakhs. 3. The learned Commissioner of Income Tax (Appeals) has erred in allowing the exemption claimed u/s 11 on the basis that their activities are 'charitable' in nature when the assessee itself has admitted that it has received Rs. 64.85 crores from sale of land and leasing. 4. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income-tax (Appeals)-V, Kochi on the above points may be set aside and that of the Assessing Officer restored." 2 Brief facts of the case are that the assessee is registered u/s 12AA of the Act and has claimed exemption u/s 11. The assessee is wholly and exclusively engaged in development of industrial infrastructure in the State of Kerala and this corporation has been set up as a non plan allocation in the State Budget for undertaking infrastructure development projects in the State. The Assessing Officer examined the claim for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be decided on the basis of facts and not on certain notions which is based on sweeping generalizations. The CIT(A) further observed that the assessee is a corporation, which is wholly owned by the Government, which is a sub sovereign and for that matter, the assessee gets the status of the statutory corporation having wide objectives for promotion of infrastructure in the state of Kerala, as a precursor to Industrial growth and promotion. According to the CIT(A), the provisions of funds are made available by the State, as well as the Central Government, in the form of grant-in-aid or budgetary support or under any other scheme. It has been submitted by the assessee that on the net profit status which has arisen on account of, monthly interest earned on deposits of surplus fund. As a matter of fact, the assessee corporation has been working in order to achieve a wider social objective to make conducive environment for the infrastructure growth in the state of Kerala and as, in accordance with the policies of the Government. The activities are not designed to earn profit and to divert the same to other purposes. Even the profits, whatsoever earned, has not been utilized for distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, we are of the view that no charity is involved. Further the assessee has converted itself into a huge business house. Similar developments/infrastructure facilities are also provided by private developers, these days, then they will also claim the status of charitable institution". 5.2 Accordingly, the ld AR further submitted that the assessee is a statutory corporation established without any profit motive vested with the task of carrying out sub-sovereign functions on behalf of the State Govt. This clearly distinguishes the activities of the assessee corporation from that of GEDA dealt with by the co-ordinate Bench of this Tribunal. It was further submitted that as observed by Bench, the transfer of land on lease basis has been effected at or below cost in most cases at the rates approved by the pricing committee constituted by the Govt. for facilitating and accelerating development of industrial infrastructure in the state of Kerala. It is a widely known fact that poor infrastructure is acting as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or commerce and much less a service for trade, business or commerce as provided in Section 2 (15) of the IT Act. In support of its contention, the ld AR mrelied on the following case laws: i) In the case of ICAI vs DG of ITO(Exmp) 347 ITR 99 (Del) ii) In the case of Bureau of Indian Standards vs Dir Gen of Income Tax (Exemp.) 358 ITR 78(Del) iii) In the case of Jodhpur Devp Authority vs CIT 27 Taxmann.coim. 183 iv) In the case of Jalandhar Development Authority vs CIT 35 SOT 15 (ASR) v) In the case of DCIT vs Aligarh Development Authority in ITA No.255/Agra/2013 etc vi) In the case of ICAI vs DG of ITO (Exemp) 358 ITR 91 (Del) vii) In the case of CIT vs Lucknow Devp Authority-ITA 149 of 2009 Laws(All) 2013-9-161 viii) In the case of Himachal Pradesh Environment Protection and Pollution Control Board vs CIT 42 SOT 343 ix) In the case of Agra Devep Authority vs CIT in Appeal 166 of 2012 dt 11.1.2013 x) In the case of Haridwar Devp Authority ITA No 3056/Del/2012 dt 25.7.2014 xi) In the case of Jodhpur Devp Authority vs CIT 145 TTJ (Jd) 221 xii) In the case of AhmedabadUrban Dep Authority ITA No 754/Ahd/2010 dt21.5.2010 xiii) In the case of Director of Income Tax (Exp vs S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans from the Central and State Govt. only. 6.5 The funds so received as above are accounted under separate grant account in the balance sheet as Corpus Funds given to meet special purpose public utility projects and the provision of such large funds by the Central / State Govt. makes it clear that the activities of the Corporation are of a non-profit motive nature. The funds given as above which remain unutilised will revert back to the Govt. at the time of winding up of the Corporation after meeting its objectives for which it is established / set-up. 6.7 The Corporation has made surplus from various activities as could be noted from the audited accounts for the past four years, if the surplus from sale of 63 Acres of land given at Re.1 by the Govt. of Kerala at Hi-Tech Park in industrial belt of Kalamassery in Cochin Corporation credited to Profit and Loss account of the year and interest income on deposits with banks, out of surplus funds temporarily invested as under is excluded as per details given below: Rs. Net surplus as per P&L A/c. for the 29,10,83,866 Net surplus as per P&L A/c. for the F.Y.2010-11 9,33,41,419 Net surplus as per P&L A/c. for the F.Y.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition and after considering a number of decisions, it has been held by that an activity carried on continuously in an organized manner with a set purpose and with a view to earn profit is "business". The relevant portion of the order of the Hon'ble Orissa High Court reads as under:- "The word "business" is a word of large and indefinite import. It is something which occupies the attention and labour of a person for the purpose of profit. Section 2(13) of the Act defines" business" to include "... any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". When a word is defined to "mean" something, the definition is prima facie restrictive and exhaustive as was indicated by the Supreme Court in the case of Vanguard Fire and General Insurance Co. Ltd. v. Fraser and Ross [1960] 30 Comp Cas (Ins) 13 ; AIR 1960 SC 971. Where, however, the word defined is declared to "include" certain things, the definition is extensive. (See Ardeshir H. Bhiwandiwala v. State of Bombay [1961-62] 20 FJR 113 ; AIR 1962 SC 29). In Smith v. Anderson [1880] 15 Ch. D. 247, 258 (CA), Jessel M.R., after citing definitions of "business" from several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the decisions of the apex court in Karnani Properties case [1971] 82 ITR 547 and S. G. Mercantile Corporation's case [1972] 83 ITR 700 and also the decision of this court in Narasingha Kar's case [1978] 113 ITR 712 (Orissa), the Tribunal held that the activities carried on by the assessee amounted to business. The conclusion is essentially one of fact, and, in our considered opinion, does not give rise to a question of law. Accordingly, our answer to the reframed question is in the affirmative, in favour of the assessee and against the Revenue." 7.3 Therefore, the question before us is whether, the activity of construction and sale/lease of immovable property constitutes "business"?. We may clarify that the question is not whether, all object clause of the assessee constitutes business or not? The only objection of the assessee in regard to the first mentioned question is that there is no profit motive. In other words, there is no doubt that the activity has been carried on continuously in an organized manner with a set purpose. The question is only regarding the profit motive. It is clear from the accounts that this activity has been undertaken with a view to ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur Development Authority wherein the objects are identical to the present assessee. According to the Ld. AR if the Act under which the assessee was constituted is analysed, it is the same as in the above cases and when registration has been granted to those authorities, then no two yardsticks should be adopted. 46. At the outset, we are of the view that we are not agreeable with the contention of the learned Counsel. At the same time, res judicata is not applicable in income-tax proceedings. We do not want to comment as to why and how the registration was granted to these authorities as the same is not pending before us for adjudication. Reliance can be placed upon the decision pronounced by the Hon'ble Apex Court in the case of Distributors (Baroda) (P) Ltd. v. Union of India and Ors. (155 ITR 120) wherein the Hon'ble Apex Court held that "it is almost as important that the law should be settled permanently as that it should be settled correctly but there may be circumstances where public interest demands that the previous decision be reviewed and reconsidered. The doctrine of stare decises should not deter the Court from overruling an earlier decision, if it is satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial pronouncements which were referred to it by the respective counsel as are available in the said order specially at p. 787. However, there is a major shift in the law with regard to institutions who are claiming charities. It is a well known fact that in some of the situations the provisions of law is misused in the names of charities. If an expanded/broader latitude is extended to the word charity, then there are so many institutions/Departments who will try to come under the umbrella of this provision to misuse the provision. Therefore, for the broad development of the nation/society a strict and positive vigil is required so that the provision can be saved from its misuse in any manner. We are aware that no activity can be carried on efficiently, properly unless and until it is carried out on business principle but it does not mean that the provision is misused in any manner under the garb of charity and any institution be allowed to become richer and richer under the garb of charity by making it a non-tax payable organization. In the cases of Addl. CIT v. Surat Silk Cloth Manufacturers Association (121 ITR 1) and CIT v. Bar Council of Maharashtra, 22 CTR (SC) 106, it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 a 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, we are of the view that no charity is involved. Rather the assessee has converted itself into a big business house. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution. 49. During argument, the Ld. Counsel relied upon the decision of the Hon'ble Apex Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (supra) where the assessee was incorporated under the Companies Act wherein the dominant or the primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth as set out in Clause (a) and the object specified in cls. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support from the decision of the Hon'ble Patna High Court as pronounced in the case of Bihar State Forest Development Corporation v. CIT, 224 ITR 757 where the Government company was formed for promotion and development of forestry. The assessee- corporation was permitted under memorandum of association to engage in commercial activities and there was no restriction on application of money, the corporation was not held to be a charitable trust and consequently not entitled to exemption. Similar is the case in the present appeal of the assessee. However, if the argument of the assessee is analysed on point of general public utility, still it can be said that commercial angle with profit motive is involved which has become predominant object of the assessee. Even if this issue is analysed as contended by the learned Counsel for the assessee that application of income is not the criteria in the light of the decision of Hon'ble High Court of Allahabad in the case of Fifth Generation Education Society v. CIT , still we are of the view that if the objects and real situation is analysed, the objects are not of charitable nature, Almost in every activity there is a scent of commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authority shall have the powers to acquire by way of purchase transfer, exchange or gift or to hold, manage, plan, develop and mortgagee or otherwise dispose of land or other property or to carry out itself or in collaboration with any other agency or through any other agency on its behalf, building, engineering, mining and other operations to execute works in connection with supply of water, disposal of sewerage, control of pollution and other services and amenities and generally to do anything with the prior approval or on direction of the State Government, for carrying out the purposes of the Act." 53. At this juncture, it may be observed that the above objects noted by the Amritsar Bench of the Tribunal in the context of Jalandhar Development Authority, is almost identical to the assessee's case. Considering the contention of the assessee with regard to the charitable nature involved in its activities, and also taking into account the case-law cited before it in that behalf, held in conclusive portion of para 6.1 of that order as follows- "It is a well known fact that in some of the situations the provisions of law are misused in the names of charities. If an expanded /bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 11 of the I.T. Act. Therefore, respectfully following the decision of the coordinate Bench of this Tribunal (supra), we decide this issue in favour of the revenue and against the assessee. 9 Now we will take up the CROSS OBJECTION filed by the assessee. 10 The assessee has raised the following grounds in its Cross Objection. 1 The CIT(A)has erred in not adjudicating on the addition disallowance towards capital expenditure amounting to Rs. 10,0 1 ,06, 162 on the ground that this has become infractous on allowing the main ground covered by the appeal i.e., admissibility of exemptions from income tax u/S.11 and 12 of the Income Tax Act, 1961 on facts of the case and provisions of law. 2 The CIT(A) ought to have noted that capital expenditure has not been debited to the Income and Expenditure AI c. for the year of the appellant at all and if for any reason it is ultimately held that the appellant is not entitled to exemption ss] S.ll and 12 of the Act, the addition I disallowance of the capital expenditure should have been directed to be deleted. For the above and other grounds that may be adduced at the time of hearing, the order of the CIT(A) may be modified to the extent pray ..... X X X X Extracts X X X X X X X X Extracts X X X X
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