MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY,MUMBAI vs. DDIT (E) 1(1), MUMBAI

ITA No.5701/Mum/2014 A.Y.2011-12 1 Maharashtra Housing & Area Development Authority Vs. Dy. DIT (Exemption)-1(1)

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORESHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER ITA No. 5701/Mum/2014 (A.Y. 2011-12) Maharashtra Housing & Vs. Dy. Director of Income Area Development Tax (Exemption)-1(1) Authority, Finance Room No. 504, 5 th Floor, Controller, MHADA, Piramal Chambers, Griha Nirman Bhavan, Lalgaug, 4th Floor, Kala Nagar, Mumbai – 400 012 Bandra (East), Mumbai – 400 051 स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No: AAAJM0344H Appellant .. Respondent

Appellant by : Shri Nishant Thakkar & Ms. Jasmin Amalsadvala Respondent by : Dr. Mahesh Akkhade Date of Hearing 21.03.2022 Date of Pronouncement 20.04.2022 आदेश / O R D E R PER AMARJIT SINGH, AM: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-1, Mumbai, which in turn arises from the order passed by the A.O. u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2012-13. The assessee has assailed the impugned order on the following grounds before us:

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“1. Lack of jurisdiction 1.1 The learned CIT(A) erred on facts of the case and in law in not appreciating the circumstances and the manner in which the Notice dated 31st July, 2012, allegedly issued under s.143(2) of the Act, was bad in law inasmuch as there was no service of notice on the appellant, and in confirming the assessment order in this regard. 1.2 The learned CIT(A) erred on facts and in law in upholding the validity of the Assessment Order dated 19th March, 2014, passed by the AO without appreciating that the notice dated 31st July, 2012 issued under s. 143(2) of the Act was not served on the appellant on or before 30th September, 2012 whereafter the issuance of such notice was barred by limitation in view of Proviso to Clause (ii) of sub-s.(2) of s.143 of the Act. Relief claimed: The Assessment Order dated 19th March, 2014, be declared null and void being devoid of jurisdiction 2.0 Denial of exemption under s. 11 The learned CIT(A) erred on facts and circumstances of the case and in law in upholding the Assessment Order appealed against denying exemption under s. l1 of the Act. Relief claimed: The appellant be granted exemption under s. 11 of the Act. 3.0 Relief of Poor The learned CIT(A) failed on facts and circumstances of the case and in law in appreciating That the activities of the appellant are carried out towards the object of providing relief to the poor, and should be seen as such. Relief claimed: The activities of the appellant be declared as carried out pursuant to the object of "Relief of the Poor". 4.0 Engaged in Business: The learned CIT(A) erred on facts and in law in confirming the assessment order appealed against insofar as the assessment order holds that Proviso to s. 2(15) of the Act applies to the appellant disentitling the appellant to the exemption under s. 11 of the Act. Relief claimed: The appellant be declared one to which Provisos to s.2(15) of the Act do not apply. 5.0 Excess Capitalization of Interest - Rs.7,90,72,840/- The learned CIT(A) erred on facts of the case in dismissing Ground No.5 of Appeal before him with observations that the appellant has made no other submissions, in disregard of the Statement of Facts appended to the Memo of Appeal before him showing the nature of the addition.

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Relief claimed: The addition of Rs.7,90,72,840 be directed to be deleted. The appellant craves leave to add to, alter, amend or modify the ground(s) of appeal.” 2. Fact in brief is that return of income declaring nil income was filed on 26.09.2011. The case was subject to scrutiny assessment and notice u/s 143(2) and 142(1) was issued. The assessee is a registered charitable organization with DIT(Exemption), Mumbai, u/s 12A and claimed exemption u/s 11 of the Act. During the course of assessment the AO held that the assessee is not a valid trust as per the detailed discussion made in the assessment year 2010-11 and therefore not eligible for exemption u/s 11 of the Act. During the course assessment the A.O also noticed that assessee trust cannot be construed as charitable within the meaning of charitable purpose as defined u/s 2(15) of the I.T. Act as amended w.e.f 01.04.2009. The Assessing Officer was of the view that assessee was engaged in various commercial activities which is in the nature of business, therefore, assessee was issued show cause notice for denial of exemption u/s 11 of the Act on the ground that assessee cannot be construed as a charitable within the meaning of charitable purpose as defined u/s 2(15) of the I.T. Act as amended w.e.f 01.04.2009 and from the return of income filed by the assessee it is seen that the assessee was engaged in various commercial activities which prima facie were in the nature of business. In response, the assessee explained that it provides comfortable housing to the poor economically weaker sections, low income groups and middle income groups and these activities qualified as relief of the poor which were one of the categories of charitable activities described in Sec. 2(15) of the Act and therefore, proviso 2 to Sec. 2(15) does not apply. It is also claimed that assessee was not engaged in business or trade therefore, it was not covered by proviso 2 of

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Section 2(15) of the Act. The detailed submission given by the assessee was produced at page no. 4 to 8 of the assessment order. The submission of the assessee was not acceptable to the assessing officer and stated that assessee was carrying out activities which were in the nature of business or trade the fact that the assessee who is engaged in providing various commercial /business services was supported by the assessee’s service tax registration certificate which clearly mentioned that assessee was providing various services. It is also stated that financial activities of the assessee year after year shows that the assessee was generated huge profit in the name of service which shows that there was existence of profit motive in the case of the assessee. The Assessing Officer has pointed out that object of the asessee falls under the category of advancement of any other object of general public utility, assessee’s acceptance fees for the services provided by the assessee and the total receipt of the assessee was more than Rs.25 lac, therefore, the assessee was hit by the amendment of Sec. 2(15) w.e.f 01.04.2009, therefore, assessee was not entitled to exemption u/s 11 in view of the provision of Sec. 13(8) of the Act. Accordingly, the Assessing Officer held that assessee trust was not eligible for any exemption u/s 11 and accordingly, taxed the entire income of the assessee trust by denying the benefit of exemption u/s 11 of the Act.

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in favour of the assessee vide ITA No. 6678/Mum/2013, dated 04.06.2019 for A.Y.2010-11. On the other hand, the ld. D.R supported the order of the lower authorities.

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noticed that the Ld. CIT has passed order on 31.03.2014 and the ITAT has adjudicated this case on 04.06.2009 which indicate that at the time of passing the order by the ld. CIT(A) the issue was not adjudicated by the ITAT. The relevant operating part of this order is reproduced as under: para 41 page (80-105) of ITAT order.

“41 In view of the aforesaid judgment and the clarification given by the Ld. Sr. Counsel, the contention raised by Mr. Dave that MHADA has entered into earning of profit by selling properties by inviting tenders or entering into joint ventures with developers cannot be accepted. On the other hand, the material and evidence placed on record indicate that:- I. The allotment of tenements is based On income criteria. ii The pricing of tenements:-  The pricing mechanism is completely regulated and is contained in Circular dated 09.11. 1982.  As per the said Circular the prices are based on historical costs.  Prices of tenements are further reduced by grants given by the government which clearly demonstrates the intention to provide relief to the poor.  With respect to tenements meant for the EWS and LIO category no profit is charged.  The profit charged on MIG and HIG housing is utilised to subsidise EWS and LIG Housing.  Prices are not determined based on market values in fact are lower by more than 50% of the ready reckoner prices.  Prices have no correlation with demand supply - despite demand for the houses being 70 times the supply, the prices are not revised, but the tenements continue to be sold on controlled/regulated prices and allotment of tenements is by drawal of lots and not by auction.  In fact the prices at which the tenements arc sold results in a loss to MHADA if the real replacement cost of land is taken into consideration. 42. On the issue that MHADA has accumulated huge reserves and has huge surplus as raised by Mr. Dave, who had also filed a chart showing profit margin over the period of time right from the A.Y. 2006-07 to 2010-11, Mr. Dastur pointed out that this surplus are by and large notional, because of the fact that the Income and Expenditure A/c is debited with the historical cost of land which is largely of very low cost and if present day value is taken into consideration MHADA will incur a huge loss. Mr. Dastur submitted a working showing how much fund MHADA will require if it had to replenish land used for thousands of tenements constructed during the relevant year. We find substance in the contention of Mr. Dastur that the surpluses are required and justified in the case of MHADA, because the land has to be replaced/ replenished for carrying out its activities and in fact it was pointed out before us that the surplus generated are not even sufficient to replace the land utilised during the year. Accordingly, no adverse inference can be drawn on the point that the assessee had and reserves in its accounts. Further on a perusal of the find that the working of surplus given

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by Mr. Dave also includes huge amount of interest income and if such an interest component is removed, then the aforesaid surplus is approximately between 35% and 40%. The main reason for the surplus as noted and discussed by us earlier is on account of the historical cost of land being debited to the Income and expenditure account. If these are to be valued at market price as any normal builder will purchase, then leave alone the surplus the assesses would incur huge losses, which was tried to be demonstrated before us by way of working separately. In any case, we agree with the contention of Mr. Dastur that surpluses are required to be replenish the land bank for carrying out the activity of constructing tenements for the needy people, Mere fact that there have been surpluses or reserves cannot mean that the assessee does not exist For charitable purposes. There is a mechanism provided u/s 11 that, if the surpluses are more than the required statutory limit of 15% the same after lapse of certain period gets taxed. Thus, this argument of the Ld. Special counsel Mr. Dave does not hold any merit. 43. Another very important decision which explains the scope of newly inserted proviso to section 2(15) is that of Hon’ble Delhi High Court in the case of India Trade Promotion organization Vs. DGIT(E) (supra), wherein in this case, the Hon'ble High Court had referred to entire background of insertion of the proviso to Finance Bill; debate in the Parliament and reply of Finance Minister; the judicial pronouncements on the point; and after considering the entire gamut of judicial precedents and legal implications, their Lordships have observed and held as under: - 53. From the said decision, it is apparent that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the prominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is nor the desire to earn profits but, the object of promoting trade and commerce not for itself but for the nation both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 the equality clause enshrined in Article 14 of the Constitution) it is well settled that the courts should always endeavour to uphold the Constitutional validity of o provision and, in doing so, the provision in question may have to he read down, as pointed out above, in Arun Kumar (supra). 54. It would be pertinent to reiterate that Section 2(15) is only a definition clause. Section 2 begins with the words, in this Act, unless the context otherwise required. The expression "charitable purpose" appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression "charitable purpose", as defined in Section 2(15) of the said Act, is read m the context of Section 10(23C)(iv) of the staid Act, we would have to give up the strict arid literal interpretation sought to be given to the expression "charitable purpose"

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by the revenue. With respect, we do not agree with the views of the Kerala and Andhra Pradesh High Courts. 55. It would be appropriate to also examine the observations of another Division Bench of this court in G.S. 1 (supra). While considering Circular No. 27 of 2008 issued by the CBDT to which a reference has been made earlier in this judgment, the Division Bench held that it was evident from the said circular that the new. proviso to Section 2(15) of the said Act was ''applicable to assesses, u/ho are engaged in commercial activities, i.e. carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax to ability as it was noticed that the object 'general utility' was sometimes used as a mask or device to hide the true purpose which was trade, commerce or business. From this, it is evident that the introduction of the proviso to Section 2(15) by virtue of finance Act, 2008 was directed to prevent the unholy practice of trade, commerce and business entities from masking their activities and portraying them in the garb of an nativity with the object of a public utility. It was not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities and to expose their true identities. The object was not to hurt genuine charitable organizations. And. this way also the assurance given by the Finance Minister while introducing the finance Bill 2008. In G.S.I (supra) it was contended by the revenue that GSI (India had acquired intellectual property rights from GSI (Belgium/ and thereafter received registration fees from third parties in India. This was sought to be equated to royalty payments. It was also contended that GSI (India) had huge surpluses of receipts over expenditure and that payments were made to GS1 (Belgium), According to the revenue, all this entailed that GSI (India) was engaged in business, trade or commerce. The petitioner herein refuted this. In this backdrop, this court asked the question - can it be said that the petitioners engaged m activities which constitute business, commerce or trade? While answering the said question, the court held as under:- “21 ……. As observed above, legal terms, trade commercial or business in Section 2(15), mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce.” The Court further held 22. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is anti- thesis of activity undertaken with, profit motive or activity undertaken on sound or recognized business principles, Charity driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. The antiquated definition of charity, which entails and receiving nothing the return is outdated. A mandatory feature would be charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not concert charitable activity into business, commerce or trade m the absence of contrary evidence Quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits the comparison to the fee, purpose and object behind the fee etc are several factors which will decide the seminal question, is it business?"

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the scope of restriction provided in proviso to section 2(15). If the principle said down by Hon’ble High Court is applied here in this case, then ostensibly under the facts and circumstances of the case the assessee as discussed above, would not only be held as an institution carrying out 'charitable purposes but its activities clearly are beyond the scope of restrictive provisions of the proviso. The most crucial test and the findings which needs to be seen specifically if the proviso to section 2(15) is to be applied in the cases like assessee is to see, whether their activities can be reckoned as m die nature of trade, commerce and business. Some of the tests of applicability of proviso in cases like that of assessee which are statutory bodies providing housing needs to the needy and poor people can be short listed in following manner: (i) Is the Institution supported/promoted by the state? (ii) Is it constituted under an Act of the Legislature? (iii) Has the Institution been incorporated for implementing principles enunciated in the Constitution of India ? (iv) Are the activities of the institution closely regulated and controlled by the state? : II (iv) Has the institution been conferred with powers which a businessman would never enjoy, say, eviction of a tenants or closure of roads etc.? (v) Is the institution required to carry but activities like repairs to building, demolition of dangerous structures etc, which would not be the duties of a businessman carrying on building activities? ; (vii) Does the institution look after the elementary needs of a citizen by providing basic housing? (viii) Does the state subsidize the activities of the Institution? (ix) Is the Institution managed by Government servants or private businessmen? (x) Is there a restriction placed on who can purchase the properties? That is, income criteria has to be met applicant or his family member should not already be in possession of a housing unit? (xi) Are the prices at which the Institution is to sell its properties closely regulated and monitored? (xii) Does the Institution sell properties at below the market price? If it sells the property at below the market price, is it substantially below the market price? (xiii) In implementation of its objects and purpose does the Institution sell its properties at a low price and consciously and deliberately forgoes the profit which it could easily have made. (xiv) Does the Institution stick to its resolve to sell properties at pre-determined rates even though the demand supply position for housing is such that it could have sold the properties at a much higher rate?

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(xv) Does ii sell properties by inviting bids and allotting the property on the basis of a draw of lots rather than allotting the properties by holding an auction which would ensure the receipt of the highest price? (xvi) Does the Institution sell its properties primarily to the economically less fortunate at a concessional price rather than the maximum price available from any free purchaser who would offer a higher price? (xvii) Is the making of profit deliberately shunned? (xviii) Does the institution continues to operate and run its activities as per its framed policy and rules and sells its properties in the manner and at the rates as per its regulations even though the demand for the properties of the institution far exceeds their supply?” If the aforesaid tests are applied on the facts of the present case which been discussed in detail hereinabove, the only inference /conclusion which can be drawn is that the assessee passes through all the tests and it is not existing or carrying out its activity under the restrictive conditions as envisaged in proviso to section 2(15), i.e, but carrying out its activities in the nature of trade, commerce or business profit motive. 45. We have by and large made our sincere endeavor to address the rival contentions and objections raised by the revenue's ld. counsel as well as the Id. counsel for the assessee on merits before us, Now, we would like to deal upon the various judgments which have been relied on by Mr. Dave, the Ld. Special Counsel for the revenue during the course of hearing to demonstrate that the ratio and the principle laid down on various decisions as relied upon by the id. Counsel of the assessee arc not applicable in the cage of the assesses or will not have any impact on our conclusion arrived by us. The brief discussions of these judgments are dealt herewith:- (a) On the issue of MHADA's unique status qualifying it to be regarded as a charitable organisation de hors the definition in S.2(15), Ld. Special Counsel has placed reliance on various other case laws viz. SMN Chettiar Vs. CIT (AIR 1966 Mad 103], The Trustees of the Tribune (66 SCC 241), Som Prakash Reki (1 SCC 449), Rajasthan State Electricity (AIR 1967 SC 1857) and Pradeep Kumar Biswas (5 SCC 111) and Arnold Rodricks (AIR 1966 SC 1788). In our view these decisions have no bearing on the issue that arises on the facts of the present case. Insofar as the decision in the case of Apar Pvt. Ltd. & Anr. Vs. UOI (1986) 1 Bom CR 196 (FB) is concerned, we agree with the submission of Mr. Dastur that the decision is wholly distinguishable on facts inasmuch as in that case the Revenue contention was to read down a legislatively widened definition of the word India to include territorial waters, this argument was rejected by the Hon’ble High Court; which is not the submission before us. Insofar as the decision in the case of Chamber of Commerce (4 ITR 397) is concerned we are unable to accept the submission of the Ld. Sp. Counsel that the High Court's findings should read as holding that the definition of the words "charitable purpose" is to be read strictly/narrowly as contended. (b) On the issue whether MHADA's activities whether relief to the poor, Ld. Special Counsel has placed reliance on the decision in the case of Ketan Tirodkar vs. Office of the Hon’ble Chief Minister of Maharashtra, to submit that the reserved quotas are not subjected to income criteria. We have perused the judgment of the Hon’ble High Court and find that the allegations are against the State Government, for allegedly inappropriately utilizing the government

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quota under Regulation 16 of the MHAD (Estate, Management, Sale, Transfer and Exchange of Tenements) Regulations, 1981, On a reading of Regulation 16, it becomes clear that MHADA exercises no control over allotments under the said Regulation, Mr. Dastur, while dealing with this judgment has drawn our attention to the decision of the Hon’ble High Court of Chandrabhan Sukhdeo Sangle [2014 (3) Bom. CR 692], referred to in Tirodkar's decision, where the court struck down a General Resolution of the State Government providing for allocation unto the said Regulation 16 without fixing any income criteria. In view of the foregoing we are unable to accept the submission of the Ld. Special Counsel that the tenements allotted by MHADA are not subjected to income criteria. (c) While opposing the submission of Mr. Dastur as to the inapplicability of the proviso owing to MHADA being a statutory body is, concerned, Ld. Special Counsel has placed reliance on (a) the decision in the case of Entertainment Society of Goa [ISO 299], (b) Belgaum Urban Dev. Authority [214/Pnj/2011] and (c) Tamil Nadu Industrial Guidance and Export Promotion Bureau (142 ITD 192), to support his contention that such a restriction is not contemplated on by the language of the proviso. At the outset these three decisions take views which are contrary to the law laid down by the Hon’ble Delhi High Court in the case of Bureau of Indian Standards (supra). Moreover, the duties, control, powers and functions of the assessee’s in those cases cannot be compared to that of MHADA. In view of the foregoing, we find ourselves unable to follow these decisions relied upon by the Ld. Special Counsel. (d) On the issue that the proviso can have no application to MHADA since it cannot foe regarded as a wearing a mask of charity, Ld. Special Counsel has placed reliance on the decision in the case of Ahmedabad Urban Development Authority (“AUDA") (ITA No. 712 and 711/Ahd/2013). Having perused the decision in the case of AUDA, we do not find that Tribunal has given a finding on this aspect of the matter. Undoubtedly, the order of the Hon’ble Tribunal does make a reference to Circular No. 11, the Finance Minister's Speech and the decision of Sabarmati Ashram Gaushala Trust (supra), however that is only as a reference on the reliance placed by the Assessee. Further, we find that the activities of AUDA cannot be compared to that of MHADA for the reasons that (a) there is no obligation on AUDA to provide housing to the needy weaker section of the Society; (b) the sales are at commercial rate; and (c) the sales are by way of auction. In view above, we are unable to follow the decision relied upon by the Ld. Sp. Counsel. (e) On the issue that MHADA's activities are not aimed at making a profit and hence the proviso has no application, Mr. Dave has placed reliance on several decision viz., the decisions in the case of Currimbhoy Ebrahim (1 ITR 341), Shaw Wallace (AIR 1932 PC 138), Masagaon Dock (34 ITR 368), Raja Rameshwar Rao (42 ITR 179), Meera Khan (73 ITR 735), Maharashtra Industrial Development Corp. v/s. Commissioner of Service Tax -I (2014 TIOL 1809 CESTAT MUM) and Murasoli Trust [2016] 156 ITD 761 (Chennai Trib.). All these decisions have no bearing on the issue that arises on the facts of the present case. The following decisions cited, by him are quite relevant, which we shall discuss in brief:

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“i. Insofar as the decision in the case of Punjab Urban 0evelopment Authority Vs CIT (2006) 103 TTJ 988 (Chandigarh)], is concerned, the same has been considered in a later decision of Hoshiarpur Improvement Trust Vs. ITO Ward, 1 (61 Taxmann.com 162) where m the Hon’ble Tribunal has distinguished the decision the case of PUDA thus “39. As for the decision of the coordinate bench in the case of the. Punjab Urban Development Authority u/s.CIT 1(2006 ) 103 TTJ 988 (Chandigarh), it is a case in which there is no mention about selling the residential units and plots at the price on the basis of a formulae laid down by the statute. In the present case, there is no dispute on this aspect, and that is a crucial aspect having bearing on conclusions”. We find that the aforesaid distinction equally applies in the facts of the present case inasmuch as the sale price of MHADA's tenements are also determined on the basis of set norms as legislatively laid down and not by market forces. Further, PUPA's method of sale was by way of auctioning, which is not so in the present case where the tenements are allotted on the basis of draw of lots and on a fixed price uninfluenced by market forces. We therefore find that decision in the case of PUDA has no application to the facts of the case. ii. Insofar as the decision in the case of Jalandhar Development Authority v/s. CIT (124 TTJ 598) (Asr), is concerned, the said decision was rendered on facts identical to that in PUDA's case and the Hon’ble Tribunal followed its decision m PUDA's case to hold that Jalandhar Development Authority is not entitled to registration u/s 12A. Hence, this decision too has no application to the facts of the present case. iii. As regard the decision in the case of Indore Development Authority (ITA No.366/Ind/2008) is concerned, we find that the same is wholly distinguishable on facts. In that case, the Indore Development Authority ("IDA") had filed returns and offered its income to tax after withdrawal of Sections 10(20)/(20A) of the Act, for the first time for A.Y. 08-09 that IDA filed an application for registration u/s. 12A, which application was rejected and came to be the subject matter of dispute before the Tribunal. Further, the Tribunal drew adverse inference since IDA did not furnish information called for by the Hon’ble Bench for it to test the correctness of the submissions with respect to its activities carried on. Moreover, the Tribunal in the case of IDA has found that it makes huge profits, auctions land, did not have any obligation to use income for any Charitable purpose, worked on a commercial pattern and the objects only masked its actual commercial activities. In view of such factual findings, the decision in IDA'S case is wholly distinguishable from the facts of the case at hand and hence inapplicable. iv. Insofar as the decision of Amritsar Bench of the Handle Tribunal in the case of Jammu Development Authority v/s. CIT [2012] (52 SOT 153), which, stood upheld by the decision of the Hon’ble High Court of Jammu & Kashmir (ITA No. 164 of 2012) and against which Special Leave Petition has been dismissed (SLP Civil 4990 of 2014), is concerned, it is seen that, the Tribunal on facts found that Jammu Development Authority (JDA) was carrying the activity to promote and secure better planning and development and it further found that JDA was engaged in auctioning. Ld. Special Counsel has submitted that Section 164 to 169 of the MHAD Act are similar to the provisions of the Jammu and Kashmir Development Act, 1970 (Jammu Act) and therefore, the decision squarely applies to the facts of the case at hand. We have cursorily perused the said provisions of the Jammu Act and do not fed our self in agreement with his submission that they are identical in terms of the provisions of the MHAD Act, 1976. JDA, unlike MHADA, was not formed pursuant to Article 39(b) of the Constitution of India and that the object of the Jammu Act is town planning as opposed to provision of

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affordable housing to the weaker sections of the community. Further JOA was engaged in auctioning of plots acquired by it. As demonstrated by MHADA, before us it does not engage in any auctioning, rather allots tenements by drawing lots and that too at prices which are more than 50% below the market prices. Further, the Tribunal in JDA's case heavily relied upon the decision of the co-ordinate Bench in case Jalandhar Development Authority (supra). The case of Jalandhar Development Authority in turn follows the decision of the Hon’ble Tribunal in the case of Punjab Development Authority (supra). The decision in the case of Punjab Development Authority (PUDA), as found by us above, is distinguishable on facts. Further we find considerable force in the submission of Mr. Dastur that the decision in the case of Jammu Development Authority has no application to MHADA's case inasmuch as Hon’ble High Court in own case while dismissing the appeal filed by the Revenue against the order of this Tribunal restoring registration u/s JDA by its order April 18, 2016 (in ITA No. 2274 of 2013), has declined to apply the decision in the case of Jammu Development Authority of the case of MHADA. v. Insofar as the decisions in the case of The Belgaum Development .Authority v/s. C1T (ITA No. 214/PNJ/ 2011) (supra) and Greater Cochin Development Authority v/s. JDIT(OSD)(E) [2014] 49 taxmann.com 506 (Cochin Trib.) are concerned it is seen that the finding and the facts are quite identical to that in the case of Jalandhar Development Authority and the Tribunal has followed the decision of the Jalandhar Development Authority (supra). As found by us above, the decision In the case of Jaladhar Authority is distinguishable on facts. In these circumstances the said two decisions also have no application to the facts of the present case. vi. As regards the decision to the case of Housing Board of Haryana Vs. CIT (ITA No. 1200/CHD/2004), is concerned, the Tribunal upon finding that the facts therein are identical to that in the case of Punjab Urban Development Authority, followed the decision of the Hon’ble Tribunal in the case of Punjab Urban Development Authority (supra). As discussed above, the decision in the case of Punjab Urban Development authority is distinguishable on facts and therefore, in these circumstances the said decision has no application to the facts of the present case. vii. We have also gone through the decision of Ahmedabad Urban Development Authority vs. ACIT (E) ( 711-712/Ahd/2013). From perusal of pages 7 to 10 of the Tribunal order it can be seen that the Assessing Officer in that case had recorded a finding that the manner in which assessee therein conducted its activities was clearly with a motive to maximize profit. For e.g. the Assessing Officer therein observes that "The plots of land have been acquired at a very nominal price in the name of town planning scheme, but have been given on lease at a very high premium by means of auction to the highest bidder. The land is given on lease not even at its jantri rate (stamp value), but at a commercial/ market rate. This virtue of the land transaction is very characteristic of commercial activity with a profit motive”. The findings of the Assessing Officer was concurred with by the Commissioner of Income-tax (Appeals) as reproduced at Pages 10 to 18 of the order. It is upon a such findings of facts that the Hon'ble Tribunal has concluded that the activities of the Assesses therein were aimed at maximizing profit. The manner in which MHADA operates, as found by us in the earlier page of this order, is wholly different the manner in which Ahmedabad Urban Development Authority conducted its affairs, and hence, this decision will have no Application to the present case.

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viii. Insofar as the decision in the case of Yash Society v/s. CCIT & Others, [Writ Petition No.2565 of 2010], is concerned it was a case where the Hon'ble High Court has concurred with finding of fact of the DIT that the charitable -activity undertaken by Yash Society in its hospital was very Tow as compared to its other activities and that the profits from other activities were used to acquire assets, which is contrary to the objects of the Society. This is not so in the facts of the present case. As found by us above, 85% of MHADA’s activities are for the EWS/LIG Category, the prices at which MHADA allots tenements are not determined based on market forces and are indeed far lower than the market prices despite there being a huge demand, In view of the foregoing we are of the opinion that the decision of the Hon'ble High Court is distinguishable on facts.” (f) On the decision of Bureau of Indian Standards v/s DGIT(E) [89 DTR 93](Del), Ld. Special Counsel has submitted that the decision has no application to the facts of the case at hand inasmuch as the Hon’ble Delhi High Court was concerned is cancellation of registration and not with exemption under 11 of the Act. We do not agree with the distinction sought to be drawn by the Ld. Special Counsel. It is pertinent to note here that the registration was denied by invoking the proviso and it is in this context that the Hon’ble High Court has concluded that the proviso has no application to assessee’s such as the appellant therein. Insofar as the decision in the ca.se of Hoshiarpur Improvement Trust (ITA No. 496/Asr/2013, reported in 61 Taxmann.com 162), Ld. Special Counsel has submitted that the decision ha& no application to the facts of the case at hand inasmuch S.22 to 26 of the enactment under which the assessee therein show that the same was materially different from the MHAD Act, 1976, We are unable to see how S.22 to 26 deal with an object which is materially different from that of MHADA. S.22 to 26 refer to activities of the trust with respect to provision of housing, in fact we agree with Mr. Dastur, that unlike in the case of MHADA, despite the Fact that the assessee therein having no obligation to provide housing for the weaker sections it was held that Section II exemption was allowable; hence MHADA's case stood on a far better footing. (g) On the judgment of India Trade Promotion (371 ITR 333], Ld. Special Counsel sought to distinguish the decision on the ground that the matter was being considered by the Hon'ble High Court in its Writ Jurisdiction and further that it was rendered in the context of a S.25 of Companies Act and was, concerned with exemption u/s 10[23C) of the IT Act. He further pointed out that the decision of the Hon’ble Delhi High Court disagreed with the decisions of the Hon'ble Kerala High Court and the Hon'ble Andhra Pradesh High Court, We are unable to find ourselves persuaded by the distinction drawn by the ld. Special Counsel, The Hon'ble Delhi High Court was concerned with the constitutional challenge to the proviso to S. 2(15), the very proviso with which we are concerned in the present case and hence the mere fact that the decision was passed in exercise of their Writ jurisdiction would not have any bearing on law laid down therein. The decision of the Hon'ble Delhi Court clearly deals with the applicability of the proviso to Sec. 2(15). Insofar as the submission of the Hon'ble Kerala High Court and the Hon'ble Andhra Pradesh High Court have taken a different view in the matter is concerned, we find that the Hon'ble Delhi High Court has dealt with those decisions and find ourselves bound by the finding therein. We also find, the reliance placed by Mr. Dastur on election of the Hon'ble Jurisdictional High Court in the case of Seimens India Ltd, Vs. ITO [143 ITR 120] (Bom) apposite. (h) Lastly on the decision in the case of GSI v/s DGIT(E)[2014] (360 ITR 138) Ld. Special Counsel sought to distinguish the decision on the ground that the Hon’ble High Court was concerned with the grant of registration prior to the

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proviso coming into force. We find the, submission of the Ld, Special Counsel to be factually incorrect, because, the registration in case was granted on 17.11.2008, which is after the introduction of the proviso by the Finance Act, 2008. 46. Finallly, we find considerable force in the submission of Mr. Dastur that the decision of the Hon'ble High Court in MHADA’s own case in ITA No.2174 of 2013 dated April 18, 2016 is of vital importance. Having perused the questions raised before the Hon’ble High Court and in that light considering the observations of the Hon’ble High Court particularly contained in para 6 we find that the observation of the Handle High Court quite support the conclusion arrived by us hereinabove. We are unable to agree with the proposition of Mr. Dave that the decision of the Hon’ble High Court should not be taken into consideration merely because it was concerned with the issue of cancellation of registration. The findings of the Hon’ble High Court contained in para 6 of its judgment are on the manner and nature in which activities are conducted by MHADA, which aspect is absolutely relevant for deciding the issue at hand. 47. We have endeavored to deal with most of the decisions relied upon by the Ld. Special Counsel for the revenue which in our opinion required specific mentioning, However, if there are any decisions which have not been referred to by us here in this order, it is only for the reason that we do not find those decisions to have any material relevance to the issue before us. 48. In view of our aforesaid finding, we do not deem it fit to enter into the semantics of other arguments as raised by the Ld. Sr. Counsel like assessee being a unique organization therefore, it is to be treated as existing for charitable purpose; or on the issue that it is existing for giving relief to the poor". Our finding is mostly confined to Proviso to section 2(15), that is, the assessee is not covered by the restriction as envisaged therein and its activities fall within advancement of objects of general public utility, hence existing for “charitable purposes”. 49. Further, the issues raised in ground no. 3 will become purely academic in view of our finding given above that the assessee is entitled for benefit u/s. 11 and accordingly, its income and expenditure have to be computed of section 11 to section 13. 50. With these observations the assessee’s appeal is treated as allowed. 51. Before parting, it would be pertinent to state reasons for delay in passing of the order. Here in this case, effective hearing by this constitution took place from 11th May, 2015 and thereafter marathon arguments from both the sides took place which spilled over more than 50 hearings as per the record, including the dates of effective hearings followed by detail written submissions, which were as follows: - 11th May 2015, 14th May 2015, 1st June 2015, 2nd June 2015, 1st September 2015, 8th September 2015, 8th October 201, 14th October 2015, 26th November 2015, 30th November 2015, 21st December 2015, 22nd December 2015, 5th January 2016, 6th January 2016, 3rd February 2016, 8th February 2016, 9th February 2016,

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25th April 2016, 26th April 2016, 27th April 3016, 1st July 2016, 11th July 2O16, 29th July 2016, and finally on 8th August 2016. 52. The hearing was thus finally concluded on 1.8.2016. Thereafter, draft order was proposed on which there was discussion on several issues amongst us. However, after discussion it had transpired that certain clarification was required from the side of the appellant's counsel, specifically with regard to price mechanism and sale price of the units determined by the appellant MHADA for the sale price of the unit i.e. LIG, MIG and HIG; and secondly, the status of claim made u/s 11 and 12 for the assessment year 2009-10. Thereafter, the case was re-fixed for limited clarification on these two points from the appellant's counsel and accordingly, the case was refixed for hearing on 15.03.2017 in order to give opportunity to the department also, even though on this point detail counter from side of revenue was made before us. The matter was then again adjourned. Thereafter, a letter dated 4th April, 2017 was filed by CIT (Exemption) stating that the Special Counsel representing the case of the Department. Shri Girish Dave had returned his brief and the case file to the department, and therefore, the point on which clarification has been sought by bench may kindly be communicated so that same can be also provided to the A.O for his response. Thereafter, the query letter was sent through registry to the CIT (Exemption) and to appellant vide letter dated 9.5.2017. The matter was posted for hearing once again on 11.05.2017. On that date also, adjournment was sought on behalf of the department. In the meantime, the appellant's counsel has submitted his reply dated 7th June, 2017 which has been taken into consideration by us in our order, which is reproduced here under: "At the outset we wish to apologies for the delay in responding to the queries/ clarifications sought by the Hon'ble Bench. We wish to submit that the concerned Counsels appointed in the matter were not available during the month of May due to court vacations and hence there has been a delay in filing, the response. With reference to the queries raised our point wise responses are as under: Query I: “The Authorized Representative to clarify whether the sale price of the units is computed for the whole project in one go or phase units with reference to Pages to Annexure 3 (Sale price Booklet)” Appellants Response: The Appellant wishes to submit that the sale price of the units are computed phase wise. This is established by Page, 30 of the Sale Price Booklet. In addition to the aforementioned the Letter dated 29 November, 2011 filed by the ld. Departmental Representative pertaining to grant of Environment Clearance for the Proposed Mass Housing Project ("MHP III”) for redevelopment with EWS type tenements at Survey No. 563 of village Malvani Malad (W) also evidences the fact that the sale price is computed phase wise. Query 2: “Authorized Representative is requested to state the status of the claim made u/s. 11 & 12 for A.Y. 2009-10. Appellants Response:

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a. The DIT(A) had cancelled the Appellants registration of the appellant u/s 12A, by relying on the newly inserted proviso to Section 2(15) of the Act made by order doted 22 December, 2011. b. Pursuant to this cancellation, the Assessing Officer (A.O) u/s 143 (3) far AY 2009-10 u/s 143(3) of the Act on 27 December, 2011 denying exemption u/s 11 to the Appellant solely on the ground that the Appellant’s registration under Section 12A had been cancelled. c. Aggrieved by the Order of DIT(E) canceling the appellants registration an appeal was filed before the Hon’ble Tribunal. d. Against the order of the AO passed u/s 143 (3), the Appellant filed an appeal before the CIT(A); e. The order of the DIT(E) cancelling registration was set aside by the Hon’ble Tribunal Me its order dated 22 February, 2013 and the registration u/s 12A was restored. f. Before the CIT(A) could dispose of the appeal for A Y 2009-10, the DIT(E) passed an order dated 28 March, 2014 u/s 263 of the Act, setting aside the original assessment order on the ground that the AO committed an error by not invoking Proviso to s.2(15) and directed the AO to reframe assessment. g. Being aggrieved by the order u/s 263 passed by the DIT(E), the Appellant has filed an appeal before the Hon’ble ITAT and the same is pending for hearing. h. Thereafter, in view of the order u/s 263 the CIT(A) disposed of the quantum appeal of the. Appellant on the ground that since the original assessment order had become "nonest" therefore no appeal can lie against the same. Being aggrieved by this Order of the CIT(A) the Appellant has preferred an appeal before Tribunal and the same is currently pending. i. In view of the order of the DIT(E) u/s 263 the AO has passed an order u/s section 143(3) of the Act r.w.s. 263 of the Act, dated March 20, 2015 denying exemption u/s 11 by invoking proviso to S.2(15). Appeal against this Assessment Order dated March 20, 2015 is pending adjudication before the CIT(A).” 53. Thereafter, the date of hearing was fixed from time to time (as per record) and on each time on behalf of the department either adjournment was sought for or none appeared on behalf of the department. Since, we had heard the parties at length which lasted for several hearing as per details incorporated above and detailed draft order was prepared which but for the above clarification, was agreed upon, therefore, we did not deem fit to release the matter again for fresh hearing as it would have caused great hardship to the parties after great effort was put from both the sides and also there was no such request by any party to release the matter. Finally, the case was heard on 26th October, 2018. Thereafter, final draft order was proposed for pronouncement, but, as one of us (Judicial Member), is posted in Delhi, therefore, pronouncement of the order could not be made within 90 days. Further, since the appeal for the AY 2011-12 (ITA 5071/M/14) was also clubbed together, on which we had not heard any arguments from the parties, though it was stated that issues involved were similar, therefore, it was thought fit to re-fix the matters for passing necessary

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orders delinking the appeal for AY 2011-12 (ITA 5071/M/14) from the captioned appeal and pronounce the order in the appeal heard by us. Hence, the matter was posted today for this limited purpose, after intimating to the parties. Thus, the delay in pronouncing the order was only due to the aforesaid reasons.” Respectfully, following the decision of ITAT as supra the grounds of appeal of the assessee are allowed.

Order pronounced in the open court on 20.04.2022

Sd/- Sd/- (KAVITHA RAJAGOPAL) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 20.04.2022 PS: Rohit आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//

(Asst. Registrar) ITAT, Mumbai