HOWRAH CITY POLICE TRAFFIC DEVELOPMENT & MANAGEMENT SOCIETY,HOWRAH vs. CIT(EXEMPTIONS), KOLKATA , KOLKATA

The assessee in the present case is a society which was primarily formed to establish, operate and manage pre-paid taxi booths opened or to be opened at various placed as per the order issued by the Transport Department, Govt. of West Bengal vide No. 1481-WT/SM-74/99 Pt dated 12.04.2013. The application was filed by the assessee society on 30.03.2017 for grant of exemption u/s 10(23C)(iv)(v) for A.Y. 2014-15. From the perusal of para no. 2 of the order dated 12.04.2013 (supra), the Ld. CIT(Exemption) was of the 2 Howrah City Police Traffic Development & Management Society view that the assessee society was established to discourage the Taxi Workers Union to arrange and operate pre-paid taxi booth at important inter-sections. He held that any endeavour to discourage these unions apparently in contradiction to the democratic and socialistic principles enshrined in the Constitution could not be for the advancement of general public utility. He also noted that the source of income of the assessee society is the service charges collected from the pre-paid taxi booths. He further noted that even though the traffic police were in no way associated with the society, they had performed the duties undertaken by the society for the management of pre-paid taxi booths on receipt of service charges by the society. He held that the service charges thus had flown from a commercial transaction entered into by the society with taxi unions for the services to be rendered by the traffic police. He also held that the activity of the society thus was nothing but a mercantile activity based on a contract entered in pursuance of the order issued by the Transport Department, Government of West Bengal and it was in the nature of monopolistic trade practice. He accordingly held that the collection of service charges by the assessee society was in the nature of trade and even if it was to be assumed for the sake of argument that the object of the assessee society was in the nature of advancement of general public utility, it ceased to be a charitable activity by virtue of proviso to Section 2(15) of the Act. He further held that since the application for exemption u/s 10(23C)(iv)/(v) was made by the assessee society on 30.03.2017, the exemption as sought by the assessee society could have been granted only from the F.Y. 2016-17 and not from F.Y. 2013-14 relevant to A.Y. 2014-15 as sought by the assessee society. He accordingly held that the case of the 3 Howrah City Police Traffic Development & Management Society assessee society was not fit for grant of registration u/s 10(23C)(iv/(v) and rejected the application of the assessee. Aggrieved by the order of the Ld. CIT(Exemptions), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that proper and sufficient opportunity was not afforded by the Ld. CIT (Exemptions) to the assessee to meet the various objections raised by him while rejecting its application for grant of registration u/s 10(23C)(iv)/(v). He has submitted that even the application of the assessee for registration u/s 12AA was rejected by the ld. CIT (Exemption) on almost similar grounds and the Tribunal vide its order dated 10.06.2020 passed in ITAT No. 1407/Kol/2018 has already remitted the matter back to the Ld CIT(Exemption) for fresh adjudication after recording the following observations / directions. “After giving a thoughtful considseration to the CIT(Exemption)’s detailed discussing extracted herein paragraph, we find no merit to express our agreement with the same in entirety. Ld. CIT(DR) fails to dispute that the CIT(Exemption) herein has nowhere recorded a specific finding as to whether the assessee’s dominant activity of providing prepaid taxi booths to railway passengers prima fcie involves any profit making or not. We observe in view of the facts and circumstances involved in the instant list that such an establishment of prepaid taxi booths is collaboration with local taxi operators; and that too at the local police level, indeed brings the sense of security amongst the general public. Mr. Meena has sought to highlight the ld. CIT(Exemptions)’s findings that the setting up of prepaid taxi booths in the name of assessee society amounts to violation of the scheme of the constitution (supra). And also the assessee’s aggregate receipts indicate its profit motive whilst earning surplus of income over expenditure right from assessment year 2013-14 to 2016-17. We find no reason to sustain the Revenu’s foregoing objections. We make it clear that Hon’ble Gujarat High Court’s decision in DIT(E) vs Sabarmati Ashram

4 Howrah City Police Traffic Development & Management Society Gaushala Trust Tax Appeal No. 1162 of 2013 dated 15.01.2014 holds that it is the concerned predominant activity that has to be considered as to whether it was in the nature of trade or commerce regarding general public utility limb u/s 2(15) of the Act. Hon’ble Apex Court’s latest decision in M/s. Ananda Social and Educational Trust vs CIT Civil Appeal No. 5437 and 5438 of 2012 dated 19.12.2020 holds that commencement of charitable activities is not a mandatory condition for claiming 12AA registration. We have quoted the lordship’s decision keeping in mind the fact that the CIT(Exemption) has declined the assessee’s impugned registration on the ground that it has not filed income tax return for four assessment years (supra). We thus are of the opinion that the CIT(Exemption) needs to examine the entire issue of assessee’s registration afresh as per law. We accept the assessee’s instant sole grievance for statistical purposes and restor the instant lis back to the CIT(Exemption) for his fresh adjudication within three effective opportunities of hearing.”

Keeping in view the aforesaid order of the Tribunal as well as all the facts of the case, the ld. counsel for the assessee has urged that this matter may also be sent back to the Ld. CIT (Exemption) for fresh consideration. Since the Ld. DR has also not raised any objection in this regard, we set aside the impugned order of the Ld. CIT(A) and remit the matter back to him for disposing of the application of the assessee for grant of exemption u/s 10(23C)(iv)/(v) afresh after giving proper and sufficient opportunity of being heard to the assessee.

Before parting, it is noted that the order is being pronounced after ninety (90) days of hearing. However, taking note of the extraordinary situation in the light of the COVID – 19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs JSW

In the result, the appeal of the assessee is treated as allowed for statistical purpose. Order Pronounced in the Open Court on June 19, 2020.