DCIT, EXEMPTION CIRCLE, GHAZIABAD vs. ALIGARH DEVELOPMENT AUTHORITY (ADA), ALIGARH

PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: This appeal has been preferred by the department against order dated 01.03.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-Aligarh {CIT(A)} for assessment year 2012-13 wherein the Ld. First Appellate Authority has allowed the assessee the

2 ITA No. 4263/Del/2017) (Aligarh Development Authority) benefit of Section 11 of the Income Tax Act, 1961 (hereinafter called the Act) for the captioned year.

2.0 The brief facts of the case are that the assessee is an authority constituted under the Uttar Pradesh Urban Planning and Development Act, 1973 to promote and secure development of areas according to plan and for that purpose, the authority has been empowered to acquire, hold, manage and dispose land and other properties, to carry out building activities, engineering, mining and other operations, to execute works in connection with the supply of electricity and water, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for the purpose of such development. The income of the authority was exempt u/s 10(20A) of the Act till 1st April, 2003. Subsequently, the assessee was granted registration u/s 12A of the Act.

2.1 During the year under consideration, the return of income was filed declaring income at Rs. Nil after claiming application of Rs. 11,80,65,130/- towards charitable purposes against receipts of Rs. 10,12,46,566/-. The assessee’s case was

3 ITA No. 4263/Del/2017) (Aligarh Development Authority) selected for scrutiny and Assessing Officer (AO) reached the conclusion that the assessee-authority was not entitled benefit u/s 11 of the Act in view of the scope of the phrase “advancement of any other object of general public utility” as per the amended Section 2(15) of the Act. Accordingly, the Assessing Officer held that the assessee was not entitled to the benefit of Section 11 of the Act.

2.2 Aggrieved, the assessee carried the matter before the Ld. First Appellate Authority who was pleased to decide in favour of the assessee by following the judgment of the Hon’ble Allahabad High Court in Income Tax Appellate Tribunal no. 657 of 2007 in the case of Hapur Pilkhuwa Development Authority and other authorities wherein the assessee also was one of the authorities covered by the said order of the Allahabad High Court.

2.3 Now, the department is before this Tribunal challenging Act of the Ld. CIT (A) in allowing the benefit of Section11 to the assessee.

2.4 The following grounds of appeal have been raised by the department.

4 ITA No. 4263/Del/2017) (Aligarh Development Authority) “1. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts by allowing the benefit of Section 11 to the assessee ignoring the facts that the assessee is engaged in activity in the nature of trade, commerce or business.

3.0 The Ld. Sr. Departmental Representative placed reliance on the order of the Assessing Officer and submitted that in view of the amended Section 2(15) of the Act and also in view of the activities of the assessee, the assessee had been rightly denied the benefit of exemption u/s 11 of the Act. It was vehemently argued that the Ld. CIT (A) had wrongly allowed the benefit of Section 11 to the Assessee. 4.0 Per contra, the Ld. Authorised Representative submitted that the case of the assessee was covered by the judgment of the

5 ITA No. 4263/Del/2017) (Aligarh Development Authority) Hon’ble Allahabad High Court in assessee’s own case and since the Ld. First Appellate Authority had followed the judgment of the Allahabad High Court, the same had binding precedential value. 5.0 We have heard the rival submissions and have also perused the material on record as well as the order of the Hon’ble Allahabad High Court in the case of Hapur Pilkhuwa Development Authority And Others wherein the assessee i.e. Aligarh Development Authority was also one of the respondent parties and appears at serial no. 5 in the said order bearing ITA No. 96 of 2009. The relevant observations of the Hon’ble Allahabad High Court are contained in paragraphs 11 to 21 and the same are being reproduced here-in-under for a ready reference :- It is not in dispute that HPDA is an authority 11. constituted in India by or under any law enacted either for the dealing with and satisfying the need for housing accommodation or for the purpose of planning development or improvement of cities, towns and villages or for both and was exempted from Tax under Section 10(20A) of Act, the said Section 10(20A) has been omitted by Finance Act, 2002 with effect from 01.04.2003. However, that fact relevant to answer the question of registration under Section 12A. Registration under Section 12A is permissible to a 12.

6 ITA No. 4263/Del/2017) (Aligarh Development Authority) Trust or a Institution so as to exclude provisions of Section 1 1 and 12 of Act, 1961. Section 11 and 12 talks of a Trust or Institution created wholly for charitable or religious purpose. We have to examine whether HPDA can be said to be an "Institution" created wholly for charitable purpose. The term "charitable purpose" is defined in Section 13. 2(15) of Act, 1961 and before Finance Act, 2008 whereby it was substituted with effect from 01.04.2009 and has been made much detailed, it read as under: "(15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;" (emphasis added) Now it has been substituted with effect from 14. 01.04.2009 and reads as under: "(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historical interest and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering

7 ITA No. 4263/Del/2017) (Aligarh Development Authority) any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year." (emphasis added) "Advancement of any other object of general public 15. utility" is a term of very wide connotation. There is no requirement for the purpose of Section 12 that Institution must be registered under Act, 1882 or Act, 1860. CIT added this condition on his own though we do not find any such condition provided under Section 12A or 12AA of Act, 1961. In order to consider whether creation of HPDA is for advancement of general public utility. Tribunal has looked into objects and purposes of U.P. Act, 1973 and also the purpose of acquisition of land by HPDA, which is only for public purpose and not personal one. Learned Counsel for appellant has submitted that 16. Tribunal has ignored the fact that authority was engaged in activities other than those mentioned in its main object. It is further submitted that Tribunal has erred in coming to conclusion that authority carries on charitable work. It is

8 ITA No. 4263/Del/2017) (Aligarh Development Authority) submitted that Tribunal erred in considering definition of "charitable purpose" as defined under Section 2 (15) and definition of 'income' as given under Section 2 (24) read with Rule 17-A (a) and 1962 CBDT instruction No.1024 dated 9.11.1976. Learned Counsel has relied on judgment of this Court in ITA No.231/2006, U.P. State Industrial Development Corporation Ltd. Vs. Commissioner of Income Tax-ll, Kanpur, decided on 5.7.20016. Learned Counsel appearing for respondent has 17. submitted that Tribunal has committed no error as it is duty of authority to formulate scheme in an area which is not developed and, therefore, application for such registration was sought for. He has relied on the decision of Apex Court in Commissioner of Income Tax-ll Vs. Krishi Utpadan Mandi Samiti, (2012) 12 SCC 267, and on judgment in Commissioner of Income Tax Vs. Lucknow Development Authority, (2014) 98 DTR 183, and contended that respondent had fulfilled the criterion for registration under Section 12-A of the Act. We find it unnecessary to go for much research work 18. and debate issue further for the reason that in respect to a similar authority, namely, "Lucknow Development Authority", which is also constituted under U.P. Act, 1973, a similar question, whether activities of Development Authority can be said to be 'charitable' as defined under Section 2(15) came up for consideration before a Division

9 ITA No. 4263/Del/2017) (Aligarh Development Authority) Bench in CIT Vs. Lucknow Development Authority 2014 (98) DTR (All) 183 and Court held as under: "21. We have heard learned counsel for the parties and gone through the material available on record. It is undisputed fact that the assessee is a "statutory authority" which was established under the provisions of the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee was enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A. In view of the objects, there is no good reason for holding that statutory bodies could not be treated as "charitable" within the meaning of Section 2(15). The object of the "Authority" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 & 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treatment to these institutions as is warranted by the

10 ITA No. 4263/Del/2017) (Aligarh Development Authority) facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolutse or conclusive. It is subject to control of Sections 60 to 63. If it is found by keeping in view the provisions of Sections 60 to 63 that it is not so includible then such income does not qualify for any relief." "25. Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of Sections 11 & 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) of Section 12AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution, and (ii) about the objects of the trust or institution. Section 12A stipulates that the provisions of Sections 11 & 12 shall not apply in relation to income of a trust or an institution unless the conditions stipulated therein are fulfilled. Thus, granting of registration under Section 12AA denotes that the conditions laid down in Section 12A stand fulfilled. The effect of such a certificate of registration 26.

11 ITA No. 4263/Del/2017) (Aligarh Development Authority) under Section 12AAA, therefore, cannot be ignored or wished away the Assessing Officer by adopting a stand that the trust or institution is not fulfilling the conditions for applicability of Sections 11 & 12. In the case of Gestetner Duplicators P. Ltd. vs. CIT (1979) 8 CTR (SC) 371 : (1979) 117 ITR 1 (SC), the Apex Court was called upon to determine as to whether the contribution made by the employer should be treated as a business expenditure, the requirement being contribution should be made to a recognized provident fund. Needless to mention that this Hon'ble Court in 27. the case of CIT vs. M/s. U.P. Forest Corporation Ltd., in Income Tax Appeal No. 70 of 2009 observed that the Forest Corporation being an statutory entity is entitled for the registration under Section 12A of the Act. The said observations was upheld by the Hon'ble Apex Court vide its order dated 12th May, 2011 in Special Leave Petition (Civil) No. 2590 of 2011. We may also like to refer a C.B.D.T. Circular 28. No. 11 of 2008 dated 19th December, 2008 [(2009) 221 CTR (St) 1 : (2009) 17 DTR (St) 1] wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:

12 ITA No. 4263/Del/2017) (Aligarh Development Authority) "2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11 (4A) or the seventh proviso to Section 10(23C), which are that- (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of accounts should be maintained in respect of such business." For the applicability of proviso to Section 29. 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non- commercial lines with no motive to earn profits, for fulfillment of its 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). The aims and objects of the assessee-

13 ITA No. 4263/Del/2017) (Aligarh Development Authority) trust are admittedly charitable in nature. 30. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). 31. There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 for the relevant assessment year. 32. From the record, it also appears that the "authority" had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15th January, 1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committed having constituted by the State Government under the said notification and the same could not be

14 ITA No. 4263/Del/2017) (Aligarh Development Authority) treated to be belonging to the "authority" or the receipt of taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility." 19. The findings and observations in the aforesaid judgment are squarely applicable in the case in hand also. 20. We also find that another statutory body, namely, Krishi Utpadan Mandi Samiti constituted under U.R Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter referred to as "Act, 1964") was also registered under Section 12AA of Act, 1961 and the question whether amount transferred to Mandi Parishad would constitute application of income for ‘charitable purpose' under Section 11(1 )(a) of Act, 1961 has been decided against Revenue by Supreme Court in Commissioner of Income Tax Vs. Krishi Utpadan Mandi Samiti 2012 (12) SCC 267 wherein Court has also confirmed this Court's judgment dated 04.12.2009 passed by this Court at Lucknow in I.T.A. No. 102 of 2009. 21. In view of above, we answer above question against Revenue and confirm judgment of Tribunal impugned in all these appeals. 22. All the appeals are, accordingly, dismissed.”

5.1 Therefore, in view of the judgment of the Hon’ble Allahabad High Court in assessee’s own case, which the Ld. CIT (A)

15 ITA No. 4263/Del/2017) (Aligarh Development Authority) has followed, we find no reason to interfere with the impugned order. Accordingly, the grounds raised by the revenue are rejected. 6.0 In the final result the appeal of the department stands dismissed. Order pronounced in the open court on 19th March, 2020

sd/- sd/- (R.K.PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Date: 19th March, 2020 *Binita* Copy of order to: - 1) The Appellant; 2) The Respondent; 3) The CIT; 4) The CIT(A)-, Aligarh 5) The DR, I.T.A.T., New Delhi; True Copy By Order ITAT, New Delhi

Date of dictation 17.03.2020 Date on which the typed draft is placed before the 18.03.2020 dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS

16 ITA No. 4263/Del/2017) (Aligarh Development Authority) Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order