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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI INTURI RAMA RAO
Date of hearing : 01.10.2018 Date of Pronouncement : 01.10.2018 O R D E R
Per N.V. Vasudevan, Judicial Member
This is an appeal by the assessee against the order of the CIT(Exemptions), Bengaluru dated 28.06.2017 rejecting an application of the assessee for grant of registration u/s. 12AA of the Income-Tax Act, 1961 [“the Act”].
2. The assessee is an authority constituted by the way of Notification No.181 TTP 88 dated 15.04.1988 under The Karnataka Urban Development Authority Act, 1987. The assessee filed an application for Registration under section 12A (a) of the Act vide application dated 05.12.2016 in Form 10A by enclosing the document of Certified copy of the Instrument under which the authority was created i.e., Notification No.HUD 181 TTP 88, dated 15.04.1988. The assessee also submitted the objects of the Authority and activities of the Authority. The object of the Authority is prescribed under section 14 of the Karnataka Urban Development Authorities Act, 1987. The same is as follows:-
Objects of the Authority: The objects of the authority shall be planning and promoting and securing the development of the urban area and for these purposes the authority shall have the power to acquire, hold, manage and dispose of movable and immovable property, whether within or outside the urban area under its jurisdictions, to carry out building, engineering and other operations and generally to do all things necessary or expedient for the purpose of such development and for the purposes incidental thereto.
The ITO Tax Officer (Exemptions) Gulbarga on behalf of the CIT (Exemptions) issued the notice vide dated 09.02.2017 and called for the details i.e., information / clarifications. The assessee in response to the above notice filed a detailed reply by enclosing the various details called for stating as follows:-
(a) There are no donations under the head Corpus fund. (b) The Urban Development Authority is incorporated under "The Karnataka Urban Development Authorities Act, 1987" the Karnataka Act No.34 of 1987 by the Government of Karnataka. It is not a society or a trust, which is required to be registered under the Society or a trust which is required to be registered under society Act or Trust Act which have its own bye-laws. In fact it is a local authority incorporated by an Act of Government. Therefore, as there is no separate bye-laws of the authority, the inclusion of the said clauses in the bye laws is not applicable.
(c) The Urban development authority is meant for the proper development of the city and its funds are to be utilized for the purpose of the development/charitable purpose. As development is also included in the definition of "Charitable activity" under the Act. The appellant has applied for grant of registration under section 12A of the Act.” Further the assessee filed various details called for by the CIT (Exemptions).
The CIT(Exemptions) further issued a letter dated 06.06.2017 requiring the assessee to furnish further details. The assessee in response to the above letter filed a detailed reply vide letter dated 14.06.2017 categorically stating that "The Urban Development Authority is incorporated under 'The Karnataka Urban Development Authorities Act, 1987’ the Karnataka Act No.34 of 1987 by the Government of Karnataka. It is not a society or a trust which is required to be registered under the Society Act or under Trust Act which have its own bye-laws. In fact it is a local authority incorporated by an act of Government. Therefore, as there is no separate bye-laws of the authority, the inclusion of the said clauses in the bye-laws is not applicable. It is incorporated under an act of State Legislature. The incorporated Act itself take care the clauses of Public interest like investment of fund, applicability to all persons irrespective of caste, creed, audit, irrevocable (as an act formed cannot be revoked), and on Dissolution to be considered as Government Property and other applicable clauses." The assessee in the said letter further made submissions and filed the details.
The assessee further filed a letter dated 20.06.2017 quoting the various decisions in support of the contention that the assessee is entitled for registration under section 12A(a) of the Act.
The CIT (Exemptions) without conducting the hearing of the assessee passed the order under section 12AA(1)(b)(ii) by observing as under:-
" The applicant trust filed an application for registration u/s 12AA on 14.12.2016. A letter dated 06.06.2017 was issued to the trust calling for information/calling for details, such as (i) Trust deed copy does not contain mandatory clauses of the IT Act, such as, a) Investment clause, (b) Account clause c) Amendment clause, d) Dissolution clause, e) Irrevocability clause, f) Beneficiary clause & g) Utilisation clause incorporate the same by way of amendment to the trust deed. Hence, in the absence of the amended deed for the above clauses, the genuineness of the activities cannot be verifiable. In the instant case, it is not possible to verify the genuineness of the trust or its activities.
At the stage of registration u/s 12AA, the Commissioner in receipt of an application for registration has to be satisfy himself about the objects of the trust or institution and the genuineness of the trust and its activities. In this connection, the reliance is placed on the decision of the Honorable High Court of Kerala in the case of Self Employers Service Society Vs. CIT (247 ITR 18).
3. At the stage of Registration u/s.12AA, the Commissioner in receipt of an application for Registration of a trust or institution has to satisfy himself about the objects of the trust or institution and the genuineness of its activities.
4. Considering the facts and circumstances of the case as discussed above, the application for registration u/s 12AA is hereby rejected.”
Aggrieved by the aforesaid order of the CIT(Exemptions), the assessee is in appeal before the Tribunal. We have heard the rival submissions. The ld. counsel for the assessee submitted that the findings of the CIT (Exemptions) are contrary to the facts of the assessee’s case and is perverse. It was submitted that the assessee does not have trust deed, yet CIT(Exemptions) has observed that the Trust deed copy does not contain mandatory clauses. It was submitted that when the assessee has not filed Trust deed at all, there is no question of holding that the assessee trust deed does not contain the mandatory clauses. Thus, the order passed is totally on non application of mind and consequently the said order is liable to be quashed.
It was submitted that the CIT(Exemptions) erred in observing in the impugned order that it is not possible to verify the genuineness of the trust or activities when the assessee is the authority created under the State Act and it has filed its objects and activities before the CIT. It was submitted that the case laws relied by the CIT(E) in the case of Self Employers Service Society Vs. CIT (2001) 247 ITR 18 (Ker) is not applicable to the facts of the case of the assessee. Further reliance was placed on the following decisions wherein on the similar type of activity of the assessee were held to be charitable in nature.
(a) Jaipur Development Authority Vs. CIT (2014) 52 taxmann.com 25 (Jaipur-Trib). (b) Haridwar Development Authority Vs. CIT (2015) 57 taxmann.com 6 (Delhi-Trib). (c) CIT Vs. Lucknow Development Authority (2013) 38 taxmann.com 246 (Allahabad). 9. The ld. DR relied on the order of the CIT(Exemptions).
We have considered the rival submissions. It is clear that the reply dated 06.06.2017 filed by the assessee before the CIT(E) that the assessee is an Authority incorporated under the Karnataka Urban Development Authorities Act, 1987 and was neither a trust or society. Further in its letter dated 20.6.2017, the assessee has also cited decisions rendered by judicial forums as to how the assessees who are carrying on activities similar to that of the assessee in the present case were held to be institutions entitled to registration u/s. 12AA of the Act. None of these submissions were considered by the CIT(Exemptions). He has proceeded on the basis that the assessee is a trust constituted under a Trust Deed. Therefore the argument that there was non-application of mind by the CIT(E) to the contentions of the assessee is correct. We are therefore of the view that the impugned order should be set aside and the issue with regard to grant of registration u/s. 12AA of the Act should be remanded to the CIT(Exemptions) for consideration de novo in the light of the facts as brought out by the assessee in its replies dated 06.06.2017 and 20.6.2017. The assessee will also be at liberty to file further evidence to substantiate its case for grant of registration u/s. 12AA of the Act. The CIT(E) is directed to decide the application for grant of registration u/s. 12AA of the Act of the assessee afresh, after affording assessee opportunity of being heard.
For statistical purposes, the appeal by the assessee is treated as allowed.
Pronounced in the open court on this 1st day of October, 2018.