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TMI Blog2020 (3) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... , parks, bridges etc. and given a note on the projects which were undertaken and the projects in progress vide note dated 04.10.2019 and argued that the assessee is continuously taking all possible steps for overall development of the areas entrusted to it for orderly growth of the area as per the objects. During the appeal hearing, the Ld.Standing Counsel did not controvert the developmental activities undertaken by the assessee, therefore, we hold that the observation of the Ld.CCIT that the assessee has lost sight of its objects is not based on proper appreciation of facts, hence, we are unable to accept the same. Selling of vacant lands to the highest bidders in auction and entering into joint ventures for construction of buildings - As provided in section 19 of APUDA Act the assessee is permitted to dispose off the lands after development or without carrying out any development in such manner as per the terms and conditions mentioned therein. Sub sec.3 of sec.19 allows the assessee to dispose the lands by sale. Therefore, the assessee is permitted to sell the lands in public auction which is one of the most popular and transparent methods approved by courts also. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find any reason to hold that VUDA is prohibited from helping the Government in selling the Government s vacant lands as per the specific directions of the Government and there is no case law brought on record by either parties to support or to prohibit the assessee to sell the lands of the Government. Therefore, we are of the considered opinion that assisting the Government, in sale of lands, after collecting the expenses does not make the assessee disentitle for registration u/s 12AA(3) of the Act. Assessee has carried on commercial activity, hence, the assessee is hit by the amendment to section 2(15) - In the instant case, whatever surplus generated was used for the activities of the assessee society, therefore, the same cannot be held to be the commercial activities. Even otherwise, through Circular No.21 of CBDT dated 27.11.2016, it has directed the field authorities not to cancel the registration of charitable institution already granted u/s 12AA of the Act just because the provision to section 2(15) comes into play. The process for cancellation of registration to be initiated strictly in accordance with the provisions of section 12AA(3) and 12AA(4) of the Act after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UDA Act. The assessee further submitted to the Ld.CCIT that the activities of the assessee are genuine and it has carried out its activities in accordance with the APUDA Act, hence, requested not to cancel the registration. The Ld.CCIT considered the submissions of the assessee and found that as per APUDA Act, the assessee is established to promote and secure development of all or any of the areas in it s jurisdiction according to Master plan and for that purpose, assessee has been vested with the powers to acquire by way of purchase or otherwise hold, manage, plan, develop and mortgage or otherwise dispose of land and other property. The development is the predominant object of the assessee. The Ld.CCIT further observed that the happenings in the year 2008 and subsequently, VUDA has lost sight of its aims and objects and functioning as a realtor monopolizing real estate activity, making it the prerogative of the big realtors. The Ld.CCIT further observed that the assessee has sold the lands and remitted the sale proceeds to A.P.State Government in gross violation of it s objectives. 2.1. The assessee argued before the Ld.CCIT that it had acted as an agent for resource mobilisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The VUDA was granted registration with a condition that the surplus generated out of the activities should not be diverted for any other purpose and also should not be remitted to the Government account. The Ld.CCIT relied on the decision of ITAT Chandigarh reported in 103 ITA 988 in the case of Punjab Urban Planning and Development Authority. 2.6. The Ld.CCIT observed that the income of the VUDA consists of following sources : (i) Entry fee on parks (ii) General receipts (iii) Rents on auditoriums / theatres/ g.h. (iv) Rents on offices (v) Rents on parks (vi) Rents on shops (vii) A.S. charges on deposit works (viii) A.S. charges on Development charges (ix) A.S. charges on hose cost receipts etc. All these receipts and the activities mentioned above establish that the VUDA is indulging in commercial activity and not an entity engaged in the activities to advance the objects of the assessee. Therefore, viewed that the amended provisions of the Income Tax Act u/s 2(15) which has come into effect from 01.04.2009 are also squarely applicable to the assessee. According to amended provisions, in case of any trust or institution involves in carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is under the impression that the assessee is not carrying on the activities in accordance with the objects of the Trust. The reason assigned for holding that the activities of the Trust are not carried out in accordance with the objects of the Trust, in the opinion of Ld.CCIT, is that the assessee institution is engaged in the commercial activity and acting as an agent to State Government to secure the funds, it engaged in indiscriminate sale of lands belonging to the assessee and remitted the proceeds to the kitty of the state against the objects of the assessee. 3.2. The Ld.Counsel of the assessee submitted that in pursuance of the objects, the assessee has carried out number of public utility services for development of the area such as construction of sports complex, LIG Housing Schemes for lower income group, construction of community hall, seva enclave, development of internal roads, widening of roads, indoor sports complex, construction of roads and drains, public toilets, infrastructure facilities, laying and widening of roads, development of greenery etc. The Ld.Counsel listed out various activities relating to general public utilities which are carried out by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that as per section 20A of the Act, the Government is permitted to sell the land by open auction and section 34 mandates the assessee to carry out the directions. In accordance with the directions issued by the Government, the assessee has sold the lands of the Government and remitted the sale proceeds back to the Government account as facilitator after deducting the expenses. Mere helping the Government to auction the lands cannot make the assessee to be branded as commercial organisation engaged in the commercial activities which is working for development and for public purposes. The Ld.Counsel further submitted that the fee collected by the assessee for sale of lands was utilised for the objects of the assessee trust. The Ld.Counsel further argued that the issue with regard to sale of Government lands is violation of objectives of the assessee or not is not an enquiry to be made under section u/s 12AA(3) of the Act and it is to be verified while framing the assessment u/s 143(3) of the Act. The fact whether the assessee has sold the Government land or not is an issue which required to be examined at the time of assessment with the relevant records, and thus, argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial complexes, buildings and multiplexes or houses. The Ld.CCIT has not elaborated how it has violated the objects by entering into development agreements for construction of commercial complexes. 3.7. With regard to sale of land indiscriminately, the Ld.Counsel submitted that VUDA is permitted to sell the surplus lands, the lands were sold after due approvals from the competent authority as provided by the Act and there is no indiscriminate selling of lands. While selling the lands as discussed earlier, the Ld.Counsel stated that transparent procedure is followed by giving wide publicity, so as to enable the public to participate in auction to acquire the lands and the sale proceeds are utilized for the advancement of objects and not diverted for any other purpose. 3.8. With regard to Ld CCIT s observation that the assessee from 2008 onwards, has lost sight of its objectives and acting like a realtor, the Ld.Counsel submitted that VUDA never lost sight of its objectives. It has carried out all the development activities discussed in this order and it has never acted like realtor. The activities carried out by VUDA development activity, welfare measures etc. are already d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by developing it or without carrying on any developmental activity. 4.4. The Ld.Standing Counsel further submitted that u/s 20 of the APUDA Act, the Government may by notification place at the disposal of the authority all or any vacant lands belonging to or under control of the Government for the purpose of development in accordance with the provisions of the AP UDA Act. After such development of the government vacant lands and it shall be dealt with by the authority in accordance with rules and directions given by the government in this behalf. The Ld.Standing Counsel argued that as per section 18 of the APUDA Act, the Government may acquire land under compulsory acquisition for development or any other purpose under the Act and transfer the said land to the authority on payment of compensation. As per section 20 of the APUDA Act, the government may place at the disposal of the authority, vacant government lands for the purpose of development in terms of provisions of the Act and shall be dealt with by it in accordance with the rules and directions given by the Government in this regard. 4.5. Referring to section 22 of the APUDA Act, the Ld.Standing Counsel argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is not entitled for registration u/s 12AA of the Act. Further the Government can give funds to VUDA for furtherance of its objects, but it cannot take away the funds of the VUDA. The assessee is claiming that it had acted as an agent in resource mobilization of Government of Andhra Pradesh. However, as per the recitals of the sale deeds, the assessee has not mentioned as an agent, it was mentioned as absolute owner. Having acted as an agent, the assessee has also addressed the other issues, such as registration of land, litigation in various courts which is not the obligation of the agents. Therefore, argued that having mentioned in the sale deed as an absolute owner of the lands, the assessee cannot take the plea of an agent. Referring to paper book 3, page No.433 and 436 Clause (b) and (j), the Ld.Standing Counsel brought to our notice that the assessee registered the lands as an absolute owner. While registering the lands to Global Entropolis Asia Private Limited, in clause No.5.3 and 6.1 of the sale deed, assessee mentioned as absolute owner of the tracts of the lands. Referring to page No.391 and 393, in the case of Global Entropolis Asia Private Limited also VUDA claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee submitted that page No.181 to 187 are not part of the lands mentioned in GO No.1401. Page No.234 deals with the Government lands which the VUDA had sold, acting as an agent and the Act nowhere forbids the assessee to act as an agent of the State Government and one single activity of the assessee to facilitate the Government and offering the services cannot make the assessee, disentitle for registration u/s 12AA(3) of the Act. Accordingly, requested to cancel the order passed by the Ld.CCIT and restore the registration u/s 12AA of the Act. 5. We have heard both the parties and perused the material placed on record and gone through the orders of the Ld.CCIT. The Ld.CCIT had cancelled the registration granted u/s 12AA(3) w.e.f. 2006 onwards. The assessee was granted registration u/s 12AA(3) in 2006 w.e.f. 01.04.2003. The reason for cancellation of registration of the assessee is under the impression that the assessee is engaged in commercial activity, acted as an agent of Government of Andhra Pradesh, sold the lands indiscriminately belonging to State Government, from 2008 onwards it had lost sight of the objects and acted like realtor and lastly for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of pollution, other services and amenities and generally to do anything necessary or expedient for purposes incidental thereof. (2) The Authority may, for the purpose of efficient performance of its functions, constitute as many committees as it thinks fit, in such mariner as may be prescribed, and provide by regulations made in this behalf for rules of procedure at the meeting of the Committees and allowances to members thereto. As per the objects, the assessee has power to acquire the land by purchase or otherwise to carry out its objects. 5.1. Section 19 of the APUDA Act provides the procedure for disposal of the lands and section 19 reads as under: Section19 (1) Subject to any directions given by the Government under this Act, the authority or, as the case may be, the local authority concerned may dispose of (a) any land acquired by the Government and transferred to it, without undertaking or carrying out any development thereon ; or (b) any such land after taking or carrying out such development as it thinks fit; to such persons in such manner and subject to such terms and conditions as it considers expedient for securing the development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee has lost sight of the objects from the assessment year 2008 onwards and carrying on commercial activity. In this regard, the Ld.Counsel has elaborately discussed the activities carried out by the assessee for furtherance of the objects and argued that the assessee is continuously engaged in the activities for development of the area in its jurisdiction and carried on various activities which are discussed in detail in para No.3 of this order, such as construction of houses for low income groups, widening of roads, development of various areas as per the master plan, sports complex, maintenance of schools, parks, bridges etc. and given a note on the projects which were undertaken and the projects in progress vide note dated 04.10.2019 and argued that the assessee is continuously taking all possible steps for overall development of the areas entrusted to it for orderly growth of the area as per the objects. Thus submitted that the observation of the Ld.CCIT is misplaced and without any evidence or without any foundation. During the appeal hearing, the Ld.Standing Counsel did not controvert the developmental activities undertaken by the assessee, therefore, we hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial complexes for the benefit of the public. Therefore, we are of the view that entering into joint venture for construction of buildings cannot be held to be against the object of the assessee society. The Ld.CCIT has not brought on record how the construction of commercial buildings are against the objects of VUDA. Therefore, we hold that construction of commercial complexes, Malls etc., and entering into joint ventures for construction of the houses does not violate the objects of APUDA Act. 8. The next contention of the Ld.CCIT as well as the Ld.Standing Counsel of the revenue is that the assessee is the owner of the lands alienated to VUDA, thus the assessee becomes the absolute owner of the lands, hence the assessee ought to have utilized the funds instead of remitting the funds back to Government. For this purpose, the Standing Counsel has referred page No.181 to 187 of the paper book and various pages of paper book No.3. More particularly, the agreement with Global Entropolis Asia Pvt. Ltd. We observe from the paper book that the development agreement entered with Global Entropolis Asia Pvt Ltd enclosed in page No.391 to 426 was cancelled vide cancellation deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an agent for sale of lands and the agent is disentitled for grant of registration u/s 12AA(3) of the Act. The assessee is the government institution constituted u/s 3 of APUDA Act, 1975 and as per section 20A of the Act, the Government is allowed to sell the vacant lands by public auction or otherwise on such terms and conditions as may be prescribed. Even the Ld.CCIT made observation in the order that the Government is permitted to sell their vacant lands by public auction. In general District Collector auctions the lands by public auction. In the instant case, the assessee sold the lands which does not belong to the assessee, but belonged to the Government for which the Govt. of Andhra Pradesh has issued the GO in G.O.Ms.No.1401. Government has given the lands to VUDA for which the VUDA did not make any payment and sold the lands for mobilization of resources to Government account as per para No.6 of G.O.No.1401. There is no evidence brought on record by the department in the order that VUDA has sold the lands allotted to it for development purpose or for any other purpose. The Government has given the lands with a clear direction to auction and remit the proceeds to Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved to be used for other purposes other than it s objects. There was no material placed by the department to establish that the assessee has made trade, commerce or commercial activity and the funds are distributed among the shareholders of the individual persons or for the benefit of any individual or the persons or the association or the profits being remitted to Government account. In the instant case, whatever surplus generated was used for the activities of the assessee society, therefore, the same cannot be held to be the commercial activities. Even otherwise, through Circular No.21 of CBDT dated 27.11.2016, it has directed the field authorities not to cancel the registration of charitable institution already granted u/s 12AA of the Act just because the provision to section 2(15) comes into play. The process for cancellation of registration to be initiated strictly in accordance with the provisions of section 12AA(3) and 12AA(4) of the Act after carefully examining the provisions. The assessee also relied on the following decisions which support the assessee that sale of lands and collection of gross receipts exceeding ₹ 25 lakhs does not automatically cancel the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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