M/S U.P AWAS EVAM VIKAS PARISHAD,LUCKNOW vs. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION), LUCKNOW

PER BENCH:

These three appeals numbering 165, 166 & 701 have been filed by the assessee against the separate orders of learned CIT(A) dated 21/02/2019, 21/02/2019 and 26/11/2019 respectively. The Revenue has also filed Cross Objections against the appeals in I.T.A. No.166 and 701.

I.T.A. No.165/Lkw/2019

“1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in passing the order which is unlawful, unjustified and against the principles of natural justice.

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exemption under section 11 read with section 12, 12A and 13 of the Income-tax Act is not maintainable, for the reasons that the same is hit. (a) By first proviso to section 2(15) read with section 13(8) of the Act, and (b) By the order dated 29.05.2012 as passed by the Ld. C.I.T.- I, Lucknow, cancelling the registration under section 12AA by invoking the provisions of section 12AA (3) of the Act and in subjecting the income of Rs. 9,18,63,62,384/- to tax.

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(a) The appellant Parishad had been constituted by the State Government, merely as its delegate to undertake activities for establishment, incorporation and funding of Housing Development Board in the state of Uttar Pradesh, as per the preamble of Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam 1965 (U.P. AdhiniyamSankhya 1 of 1966)

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(b) The scope of activity to be performed by the appellant Parishad was strictly circumscribed by the provisions contained under section 15 of the said very enactment under the head (function of the Board)

(c)Through the appellant Parishad it was the Government of Uttar Pradesh itself that had been carrying on the objects of General Public Utility, in due discharge of its [States] own functions and

(d) The State Government had not given up its right to the property created even after lapse of considerable period of time

(e) The overall functioning and affairs of the appellant Parishad continued to be within the purview, control and even dictates of the State Government, through its own cadre of civil services. The appellant was liable to be treated as State under Article 12 of the Constitution of India and the Assessing Officer carried a statutory obligation to hold even suo-moto that income shown by the Appellant / computed by the Assessing Officer could not be subjected to Union Taxation under Article 289 of the Constitution of India.

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12 and 13 read with first Proviso to section 2(15) on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1961.”

C.O.No.02/Lkw/2020

“1. That the Ld. CIT(A) erred in having failed to consider the provisions contained in Section 13(8) introduced by the Finance Act, 2012 with retrospective effect from 01.04.2009. 2. That the Ld. CIT(A) failed to take into account the fact that the Assessee was not entitled to the benefit of Section 11 during the year for it had failed to comply with the provisions contained in Section 11(2) of the Act. 3. That the Ld. CIT(A) erred in not taking into account the provisions contained in Section 13(l)(d) of the Act. 4. That the Ld. CIT(A) erred in not taking into consideration provisions contained in Section 13(3) of the Act.”

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631 and others which have been heard today i.e. on 17/05/2022 and detailed written submissions have been filed by the learned Special Counsel for the Revenue which may also be considered as her arguments of the Revenue in these Cross Objections.

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status of a State under Article 12 of the Constitution of India. The functions of the Parishad as described u/s 15 of the Act are reproduced below:

a) To frame and execute housing and improvement schemes and other projects.

b) To plan and coordinate various housing activities in the State and to ensure expeditious and efficient implementation of housing and improvement scheme in the State.

c) To provide technical advice for scrutiny of various projects under housing and improvement scheme sponsored or assisted by Central Govt. or State Govt.

d) To assume management of such immovable properties belonging to the State Government as may be transferred or entrusted to its purpose.

e) To maintain, use, allot, lease or otherwise transfer plots, building and other properties of the Board or of the State Government placed under the control and management of the Board.

f) To organize and run workshops and stores for the manufacture and stock piling of building materials.

g) On such terms and conditions as may be agreed upon between the Board and the State Government, to declare houses constructed by it in execution of any scheme to be houses subject to the U.P. industrial Housing Act, 1955 (U.P. Act No. XXIII of 1955).

h) To regulate building operations.

i) To improve and clear slums.

j) To provide roads, electricity, sanitation, water supply and other civic amenities and essential services in areas developed by it.

k) To acquire movable and immovable properties for any of the purposes before mentioned.

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l) To raise loans from market, to obtain grants and loans from the State Government the Central Government, Local Authorities and Public Corporations and to give grants and loans to Local Authorities. Urban bodies, corporations, hospitals etc.

m) To make investigation, examination or survey of any property or contribute towards the cost of any such investigation, examination or survey made by any local authority or the state Government.

n) To levy betterment fees.

o) To fulfil any other obligation imposed by or under this Act or any other law for the time being in force, and

p) To do all such other acts and things as may be necessary for the discharge of the functions before mentioned

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addition, will be exempt u/s 11 of the Act. We find that the order in the appeals in I.T.A. No.630, 631, 23, 24, 164, 165, 210 & 211 has been pronounced on 08/06/2022 and detailed order has been passed dealing therein the grounds of Cross Objections taken by the Revenue as well as the grounds of appeal taken by the assessee. We find that the grounds taken by the Revenue in the Cross Objections in these appeals are similar to the additional grounds of appeal, which the Revenue had taken in the appeal in I.T.A. No. 630 and others and the grounds of appeal taken by the assessee is primarily on denial of exemption u/s 11 of the Act. Since the facts and circumstances of the appeals are similar to the facts and circumstances of the appeals, already decided vide order dated 08/06/2022, therefore, the decision taken in those appeals is applicable to these appeals of the assessee and Cross Objections of the Revenue. In those appeals, detailed written submissions were filed by both the parties, which have made part of the order in those appeals. However, to avoid unnecessary bulkiness of this order, the written submissions filed by both the parties, have not been made part of this order but still for the sake of completeness, the crux of arguments of both the parties on various grounds of appeals and Cross Objections has been summarized in this order.

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advancement of any other object of general public utility wherein a rider was inserted that such activity should not involve carrying on of any activity in the nature of business/trade or commerce. It was submitted that intent of the legislature was clear whereby it wanted to separate charity from the business. Learned CIT, D.R. argued extensively on the provisions of section 2(15) along with the proviso to section 2(15) of the Act and also invited our attention to powers and functions of the assessee and relying on various case laws, argued extensively and concluded by saying that activities of the assessee necessarily involved carrying on of business or trade and therefore, the assessee was clearly hit by the proviso to section 2(15) of the Act. The crux of arguments of learned CIT, D.R. is that the assessee is engaged in the acquisition of land, construction of houses / housing projects in the same manner as any real estate developer will do and this is a commercial activity of the assessee and therefore, the activities carried on by the assessee are in the nature of trade, commerce or business within the meaning of provisions of section 2(15) of the Act which excludes such institutions from the ambit of being charitable institution. Learned CIT, D.R. further argued that the facts in the present cases necessarily has to be seen from the view point of section 13(8) which provides that the provisions of section 11 granting exemption of income shall not operate if the provisions of the first proviso to clause 15 of section 2 become applicable in the case of such person with effect from 01/04/2009. Learned CIT, D.R. in this respect placed reliance on the judgment of Hon'ble Jammu & Kashmir High Court in the case of Jammu Development Authority wherein the Hon'ble High Court has held that the assessee, engaged in similar activities, cannot be regarded as an institution or trust engaged in the achievement of object of general public utility in view of the insertion of proviso to section 2(15) with effect from 01/04/2009. It was submitted that Hon'ble Court has held that the

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object of general public utility shall not be a charitable purpose if it involves carrying on of activities in the nature of trade, commerce or business or rendering any services in relation to any business. It was submitted that the SLP filed before Hon'ble Supreme Court has also been dismissed by Hon'ble Supreme Court. Learned CIT, D.R. further heavily relied on the judgment of Hon'ble Kerala High Court in the case of Greater Cochin Development Authority where the appeal filed by assessee against the judgment of the Tribunal was dismissed by Hon'ble High Court and the Special Leave Petition filed by assessee was also dismissed by Hon'ble Supreme Court. It was submitted that in that case also the assessee was engaged in the similar activities and therefore, the findings of these case laws are applicable to the present assessee also. The Learned CIT, D.R. also placed reliance on some orders of the Tribunal where under similar facts and circumstances the various Benches of Tribunal has held that assessee was not eligible for exemption u/s 11 of the Act. Though at the same time the Learned CIT, D.R. admitted that some benches of the Tribunal have taken a contrary view and have granted exemption u/s 11 of the Act. It was submitted that in the present cases the judgment of Hon'ble Supreme Court in the case of Vegetable Products will not be applicable and assessee cannot be given the benefit of favourable judgment as there is no ambiguity in the language of provisions and the case law of Vegetable Products is applicable only where there are different opinions due to ambiguity in the language of such provisions.

8.1 As regards ground No. 2 of the Cross Objections, Learned CIT, D.R. submitted that learned Assessing Officer has not considered the provisions of section 11(2) of the Act, which necessitates that the exemption u/s 11 can be granted only if 85% of the surplus, earned during the year, is spent on charitable purposes. Learned CIT, D.R. submitted that this aspect has been totally ignored by both the authorities as the Assessing Officer

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straightforward disallowed the exemption u/s 11 and did not examine this aspect and learned CIT(A) also, while upholding the denial of exemption u/s 11, did not examine this aspect which is a very essential ingredient for allowing exemption u/s 11 of the Act. Therefore, it was prayed that if the issue of exemption is decided in favour of the assessee, this issue of compliance with the provisions of section 11(2) should be set aside to Assessing Officer. Similarly, arguing additional ground No. 3, learned CIT, D.R. submitted that the Assessing Officer has also not taken into account the provisions of section 13(1)(d), which necessitates that the accumulated balance of surplus, if any, has to be invested in accordance with the provisions, as contained in section 11(5) of the Act. Learned CIT, D.R. submitted that any violation of provisions of section 13(1)(d) results into denial of exemption u/s 11 of the Act. Learned CIT, D.R. submitted that this aspect has not been examined by both the authorities therefore, in view of this if the issue of exemption is decided in favour of the assessee, this issue should be set aside to Assessing Officer. Arguing on additional ground No. 4, Learned CIT, D.R. submitted that the provision of section 13(3) of the Act specifically prohibits certain persons to take benefit of any assets of the association and if any benefit is taken by the persons, mentioned in the provision of section 13(3) of the Act, the benefit of section 11 cannot be allowed. It was submitted that the concessional allotment of plots and allotment of plot on priority basis to certain category of persons, attracts the provisions of section 13(3) of the Act and therefore, this issue requires examination at the end of Assessing Officer if the issue of exemption is decided in favour of the assessee. In this respect Learned CIT, D.R. has relied on the following case laws:

(i) CIT II Lucknow vs. Awadh Educational Society in I.T.A. No.142 of 2007 by Hon'ble Allahabad High Court

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(ii) DIT vs. Maruti Centre for Excellence [2012] 208 Taxman 236 (Delhi)

8.2 In reply to the Cross Objections, Learned counsel for the assessee had submitted that by taking ground No.1 regarding non consideration by Assessing Officer of the provisions of section 13(8), the Revenue is again challenging the activities of the assessee which undoubtedly remain the same since the granting of registration u/s 12A of the Act. It was submitted that Hon'ble Allahabad High Court in the case of the assessee itself, vide order dated 18/04/2017, has examined the activities of the assessee and after examining the activities of the assessee has held that the activities of the assessee were charitable in nature. It was submitted that Hon'ble High Court, while deciding this issue in favour of the assessee, has followed the judgment of Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority wherein detailed findings were made. The Learned counsel for the assessee submitted that by taking this ground as ground in the Cross Objections, the Revenue in fact is just supporting the order of Assessing Officer on the issue of exemption u/s 11 of the Act and therefore, it was submitted that the arguments of assessee on the main issue of exemption u/s 11 are quite relevant which should be considered while deciding this ground of Cross Objections.

8.3 As regards the second ground of Cross Objections, Learned counsel for the assessee submitted that she had no objection if the Assessing Officer examines the compliance of the assessee with respect to provisions contained in section 11(2) of the Act.

8.4 Similarly, regarding ground No. 3 of the Cross Objections, Learned counsel for the assessee submitted that she is not averse to setting this

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ground also to the Assessing Officer for examination regarding the provisions contained in section 13(1)(d) of the Act.

8.5 As regards ground No. 4 of Cross Objections, Learned counsel for the assessee submitted that the assessee had granted discount to its employees for allotment of plots and the employees do not fall under the definition of persons mentioned in section 13(3) of the Act. It was submitted that this aspect has already been examined by the Tribunal while granting stay in assessment year 2017-18 vide order dated 19/02/2020 and the Tribunal had sought information from the assessee verified by the Assessing Officer and had observed that the assessee had made allotments only to its employees who does not form part of the persons mentioned in section 13(3) of the Act. In view of these facts, it was submitted that grounds of Cross Objections for assessment year 2017-18 need to be quashed. However, in the assessment year 2015-16 and 2016-17, the examination can be done by the Assessing Officer.

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i. Hon’ble ITAT, Agra in the case of Firozabad Shikohabad Development Authority vs. CIT-II, Agra for A.Y. 2014-15 in ITA No. 55/ Agra/ 2015 dated 07.02.2018

ii. Hon’ble ITAT, Agra in the case of Agra Development Authority in ITA No. 216/Agr/2016 for AY 2011-12, 177/Agr/2014 for AY 2009-10 and 239/Agr/2015 for AY 2010-11 dated 17.05.2021

iii. Hon’ble ITAT, Bangalore in the case of Bangalore Development Authority vs. Additional Commissioner of Income-tax, Bengaluru for A.Y. 2012-13 in ITA No. 1087 & 1104 (BANG) OF 2017 dated 22.03.2019

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iv. Hon’ble Allahabad High Court in the case CIT v. Hapur Pilkhuwa Development Authority, Ghaziabad Development Authority, Kanpur Development Authority, Allahabad Development Authority, Aligarh Development Authority, Jhansi Development Authority and Gorakhpur Development Authority vide order dated 28.06.2016

v. Hon’ble ITAT, Mumbai in the case of Maharashtra Housing & Area Development Authority, Mumbai v. DCIT(Ex) in ITA No. 4133/M/2019 for AY 2015-16 dated 07.09.2021

vi. Hon’ble Gujrat High Court in case of Commissioner of Income-tax (Exemptions) vs. Gujrat Housing Board in Tax Appeal No. 184 of 2019 for AY 2012-13 dated 25.06.2019

vii. Hon’ble Gujrat High Court in the case of Ahmedabad Urban Development Authority vs. Assistant Commissioner of Income- tax (Exemption) in Tax Appeal Nos. 423 to 425 of 2016 for A.Ys. 2009- 10 to 2011-12 dated 02.05.2017.

viii. Hon’ble Gujrat High Court in the case of Surat Urban Development Authority vs. Assistant Commissioner of Income- tax (Exemption) in Tax Appeal Nos 220 of 2020 for AY 2011-12 dated 21.09.2020

13.1 Above all it was argued that the jurisdictional High Court of Allahabad in the case of assessee itself has decided this issue in favour of the assessee and therefore, assessee is eligible for exemption u/s 11 of the Act.

13.2 The learned AR further submitted that in the case of assessee itself for assessment year 2015-16, the case of the assessee was reopened u/s 148 and Assessing Officer has again examined the activities of the assessee and has granted exemption u/s 11 of the Act. The learned A.R. further placed reliance on the provisions of section 10(46) of the Act and submitted that CBDT itself has granted exemption u/s 10(46) on the similar activities being undertaken by different assessees. In this respect reliance was placed on

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the notifications issued by CBDT in the case of Yamuna Expressway Industrial Development Authority and Greater Noida Industrial Development Authority. The learned A.R. argued that CBDT has examined the activities of these organizations and has issued notifications exempting the income u/s 10(46) of the Act. It was submitted that activities being undertaken by assessee are similar to the activities being undertaken by the assessee. In view of all these facts and circumstances it was submitted that the order passed by learned CIT(A) is not as per law, which should be set aside and assessee be allowed exemption u/s 11 of the Act.

“16. We have heard the rival parties and have gone through the material placed on record. The appeals were earlier heard on 24/01/2022. However, during the course of dictation of the order, it was observed that the Special Counsel of the Revenue had placed heavy reliance on the order of Hon'ble Supreme Court in the case of Greater Cochin Development Authority wherein it was claimed that under similar facts and circumstances, Hon'ble Supreme Court had dismissed the appeals filed by the assessee. We observe that the Learned counsel for the assessee had not elaborated on this argument of the Revenue therefore, the cases were refixed and were finally heard on 17/05/2022. Learned counsel for the assessee filed supplementary written submissions, which has been made part of this order. In the supplementary written submissions, the Learned counsel for the assessee has argued that the judgment of Hon'ble Supreme Court in the case of Greater Cochin Development Authority is not applicable to the facts and circumstances of assessee.

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Elaborating on such judgment, Learned counsel for the assessee, through her written submissions, had submitted that in that case the Hon'ble ITAT had held that the activities of the assessee were hit by the proviso to section 2(15) of the Act and Hon'ble High Court had dismissed the appeal of the assessee by holding that no substantial question of law arose in that appeal and in this respect our attention was invited to the judgment of Hon'ble Kerala High Court dated 19/12/2014. We find force in this argument of the ld. Counsel as Hon'ble High Court did not frame any question of law therefore, the Special Leave Petition dismissed by Hon'ble Supreme Court does not lay down any law in this respect and therefore, the judgment of Hon'ble Supreme Court is not a binding precedent. We further find that the judgment of Hon'ble High Court of Jammu & Kashmir in the case of Jammu Development Authority is also not applicable to the assessee as that case related to the denial of registration u/s 12A of the Act and in the present cases there is no dispute regarding registration u/s 12A of the Act as the assessee is duly registered u/s 12A of the Act. Moreover, in this case also the Hon'ble High Court had not framed any question of law.

“13. Considering the nature of the activities that are carried on by the assessee, the factual correctness of which is undisputed, we can only endorse the view taken by the statutory authorities that in view of the proviso to Section 2(15), the activities of the assessee do not qualify to be charitable purpose as defined therein. In such a scenario, the assessing officer was justified in disallowing the exemption claimed and assessing to tax the income of the assessee and the appellate authorities were justified in confirming the same. In such circumstances, we don't see any question of law arising in these appeals to be considered by this Court under Section 260(A) of the Income Tax Act.”

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“3. This appeal was admitted on following substantial question of law:

"Whether under the facts and circumstances of the case, the learned ITAT was right in holding that the registration granted u/s 12A of the I.T. Act cannot be cancelled by the CIT under the provisions of Section 12AA (3) of the I.T. Act when the activities of the assessee were hit by the first and second proviso to section 2(15) of the I.T. Act w.e.f. 01.04.2009."

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18.1 The Hon'ble High Court, it is seen, has relied on its decision in the case of Yamuna Expressway Industrial Development Authority. It would be appropriate to reproduce the relevant portion of the decision of High Court order dated 21/04/2017 passed by Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority in I.T.A. No.107 of 2016 as under:

“31. Reverting back to pivotal issue, we find that CIT (E), at the stage of registration, is not supposed to inquire into the conduct of charitable or other activities to be performed by a trust or institution which has submitted application for registration. That is an investigation to be gone subsequently at the time of assessment by Assessing Authority. In this regard, reliance is placed on Kerala High Court in Sree Anjaneya Medical Trust Versus CIT (2016) 382 ITR 399 and Karnatka High Court in Commissioner of Income Tax and others Versus Sri Gururaja Seva Samithi decided on 3.7.2015 and some other authorities which we may discuss in detail at appropriate stage.

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trade, commerce or business for a cess or fee or any other consideration, excludes all the aforesaid three ''IDAs' from the purview of definition of ''charitable purpose' under Section 2(15) of Act, 1961.

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relief of poverty; trusts for the advancement of education; trusts for the advancement of religion and trusts for other purposes beneficial to the community not falling under any of the preceding heads. In Macduff's case (1896) 2 Ch451 (456) Lord Lindley and other Law Lords held that the words "general public utility" are very wide in their scope and that every object of public utility may not necessarily be a charitable purpose.

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12A and 12AA. Revenue came in appeal to High Court which held that the findings of Tribunal are factual. However, Section 13(1)(b) would not be applicable to DBJ as trust is not created or established for benefit of any particular religious community or caste. Consequently, Revenue's appeal was rejected by High Court vide judgment dated 22.06.2009. Then the matter went to Supreme Court. Objection of Revenue was that object of trust was not wholly religious in nature, but charitable and confined to the benefit of a particular religious community i.e. DB community hence Section 13(1)(b) was attracted, ousting trust from ambit of exemption available under Sections 11 and 12 of Act, 1961. Court held, that, under the scheme of Act 1961, Sections 11 and 12 are substantive provisions. They provide exemption to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by said trust are subject matter of exemption from taxation under Act, 1961. Section 12A and 12AA contain detailed procedural requirements for making application for registration. Registration under Section 12A and 12AA is a condition precedent for availing benefit under Section 11 and 12. Unless institution is registered under Sections 12A and 12AA, it cannot claim benefit of Sections 11 and 12. After referring to various authorities, Court then said that legal effect of true facts and documents is a question of law. Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under Act, 1961 is not a question of fact. It is a question which requires examination of legal effects on proven facts and documents, i.e., the legal implication or object of respondent-trust as contained in trust deed. Words "other objects of "general public utility" were considered in a catena of decisions. The said expression is of the widest connotation. Words ''general' in the said expression is pertaining to a whole class. Court relied on its earlier decision in Commissioner of Income-Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC), and held that advancement of any object or benefit to the public or a section of public is distinguished from benefit to an individual or a group of individuals, and would be a charitable purpose. In Additional Commissioner of Income-Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) a Constitution Bench held, if primary purpose and predominant object of a trust are to promote welfare of general public, the purpose

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would be charitable purpose. If primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to dominant purpose, would not prevent institution from being a valid charitable trust.

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was for general public utility and for charitable purposes. The main objectives of trust are to breed the cattle and endavour to improve quality of cows and oxen in view of need of good oxen as India is prominently an agricultural country, to produce and sale cow milk, to hold and cultivate agricultural land etc. Various activities relating to cow milk and other research maintenance etc., Court held, that objects are of general public utility. Profit making was neither the aim nor object of trust. It was not principal activity. Merely because, while carrying out activities for the purpose of achieving the objects of the trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business.

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group of individuals. Expression "charitable purpose" would prima facie include all objects which promote welfare of general public.

"The JDA was established in October, 1982 by JDA Act. Purpose of JDA is for planning, coordinating and supervising for proper, orderly and rapid development of the areas in Jaipur region, in which several government

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departments, local authorities and other organization are at present engaged within their own jurisdictions to provide also that such authority be enabled either itself or through other authority to formulate and execute plans, projects and schemes for the development of Jaipur region. So that housing, community facilities, civic amenities and other infrastructure are properly created for the population of Jaipur region in the prospective of 2001 AD or thereafter including the intermediate stage and to provide for matters connected with the purpose of aforesaid. Later on this Act further amended from time to time as per need of Jaipur region. As per chapter (vi), functions of the authorities have been defined in item No. (a) to (s). As per item-(h), the authority is authorized to develop agriculture, horticulture, floriculture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicare, tourism, entertainment and similar other activities. As per item- (n), it performs in the area of urban renewal, environment and ecology directly or through its functional boards, therefore, the JDA not only planning the urban area with master development plan and zonal development plan but also sanction projects and schemes for development. The JDA is a tool of State government for coordinated and planned development in Jaipur region. In practical, the main work of JDA is construction of roads, sewerage, parks, play grounds, provide plots for educational, health and cultural institution for over all development of the community. By making planned development it provides smooth transaction so that air pollution can be minimized and save time of the public. If it is left in the hands of private operator, these facilities would not be provided on similar price as provided by the JDA. Whatever, the Revenue is generated through these activities are finally utilized for the benefit of the public. The intention of the institution is not to earn profit but recover the cost of the establishment as well as other expenditure to implement the object of the JDA. The State Government also give the grant to it." (emphasis added)

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"20. Fund of the Authority (1) The Authority shall have and maintain as own fund to which shall be credited

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(a) all moneys received by the Authority from the State Government by way of grants, loans, advances or otherwise (b) all moneys borrowed by the Authority from sources other than the State Government by way of loans or debentures (c) all (fees, tolls and charges) received by the Authority under the Act (d) all moneys received by the Authority from the disposal of lands buildings and other properties movable and immovable and (e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other source."

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available for undertakings to establish themselves, assist financially by loans and to undertake schemes or works, either jointly with other corporate bodies or institutions or with Government or local authorities, or an agency basis, in furtherance of the purposes for which Corporation is established. There also an industrial area was to be declared by notification by State Government. An argument was raised that Corporation was a trading one as it can sell property, transfer land, borrow money and entitled to charge rents and profits etc. Rejecting contention that Corporation is a trading body, Court said:-

"these profits will be themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulations and management of the Corporation. Such a corporation set up by the shareholders carries on business and is intended for making profits. When profits are carned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting builings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but

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out of the sole purpose of establishment, growth and development of industries.

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from definition of "charitable purposes" by application of proviso to Section 2 (15) of Act, 1961. It was also observed that there are two features, which are normally not found in trading corporation (1) that the sums payable to corporation are recoverable as arrears of rent under the Act and (2) on dissolution, assets vest in and liabilities become enforceable against the State Government. Court also said that underlying concept of trading Corporation is buying and selling, but in the case of Corporation under the aforesaid Act, there was no aspect of buying or selling. Corporation carries out the purpose of Act, i.e. development of industries in the State. Constructions of buildings, establishment of industries by letting building on hire or sale, acquisition and transfer of land, in relation to establishment of industrial estates, or development of industrial areas and setting up of industries, it cannot be said to be relating to land or buildings for the reason that State is carrying out the object of Act with the Corporation as an agent in setting up industries in the State. Act aims at buildings and industrial town and the Corporation carries out objects of the Act. Court further said that:-

"The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of the opinion that the Corporation is not a trading one." (emphasis added)

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date of filing of return. It had a net profit of Rs 20,64,84,209/- for Assessment Year 2012-13, but filed return showing income nil. Similarly, for Assessment Year 2013-2014 net profit of Rs.83,39,876/- was shown as nil income. CIT (E) also observed that GNIDA was claiming exemption under Section 10(20) of Act, 1961, but simultaneously sought registration under Section 12AA of Act, 1961. There was no reason for filing application after 12 years. Respondents-authorities could not produce required details, books of accounts or any other evidence to show that it is involved in any charitable activity as such. Having said so, CIT (E) observed "on perusal of material available on record it is seen that applicant assessee is a profit making body and it is not carrying out any charitable activities". Due to non-production of books of accounts and vouchers, CIT (E) said that it could not verify genuineness of activities. Before registration is made, competent authority i.e. CIT (E) has to see object of charitable purposes and genuineness of activities. Respondents-authorities failed to prove the same. CIT (E) also observed that respondents-authorities have got property development income which comprises of sale and development of land and sale of constructed property. It has also got income under the head "urban services", which comprises of lease rent, loan interest, fee, penalties, duties and taxes. Similarly, under head of administration ''IDAs' have got income form interest, forfeiture of property and miscellaneous income. Besides, interest bearing funds have been given interest free loan and grants. All these activities will show that respondents- authorities are primarily engaged in business of development and sale of properties for earning profit and if there is any charitable activity, it is coincidence or incidental to its business. Respondents-authorities are running business purely on commercial line without any intention of any sort of charitable purposes. Attempt of ''IDAs' is to seek parity with LDA or Haridwar Development Authority (hereinafter referred to "HDA") in view of judgments rendered in respect of those bodies, directing grant of registration to CIT(E), was failed by distinguishing and observing that those development authorities were constituted under UPUD Act, 1973 and UPIAD Act, 1976 and provisions of two Acts are significantly different in all respects.

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object of "general public utility". This is a sheer ignoring scope and ambit of statutory provisions of UPID Act, 1976 beyond which respondents-authorities cannot function, being statutory bodies constituted under said Act. They have to function within the provisions of said Act.

"The law requires a conjunctive test whereby objects have to be charitable and genuineness of charitable activities should be established for registration of application u/s 12A. Mere recital of objects or activities without cogent or corroborative evidence are not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. The applicant, in this case is primarily carrying out its business activities for making profit, just like any other private builder/developer. The applicant is neither a local authority, nor carrying out any charitable activity, as such. Like any other private builder or developer is acquiring land at a very low price and then developing the land along with other public utilities, in order to attract the buyers and sell the developed plots/flats with high margin or profit. In the instant case, the documents on record do not suffice to establish the genuineness of activities. The Applicant did not file any specific reply to queries raised and Books of accounts and Vouchers etc were also not produced under the pretext of being "Voluminous", so the claim of the Applicant regarding charitable activities could not be ascertained or verified. As such the findings of fact regarding its charitable activities or rather the lack thereof arrived at on the basis of the evidence filed and arguments addressed stand uncontroverted. This is fatal to the claim of the applicant."

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and misconceived approach so as to exclude respondents- authorities from the ambit of definition of "charitable purposes".

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institution is eligible to be certified for the purposes of Section 80G, is not to act as an Assessing Officer and pronounce upon the pending assessments. Commissioner, in examining this aspect, in respect of pending assessments, in our opinion, exceeded his jurisdiction while considering the application for approval. He, as a matter of fact, stepped into the jurisdiction of Assessing Officer.

"Having regard to the scheme of sections 11, 12 and 13 ultimately what the Commissioner has to look into is not the source of income to the trust but whether such income is applied for charitable or religious purposes. The satisfaction of the Commissioner should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee to claim exemption. For arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into writing in the form of trust deed. If on the date of the application the trust has received income from its property, then find out how the said income has been expended, and whether it can be said that the income is utilized towards charitable and religious purposes, i.e., towards the object of the trust. Therefore, for the purpose of registration under section 12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust." (emphasis added)

"10...... the above provision would suggest that there are no restrictions of the kind which the Revenue is reading into in this case. In other words, the statute does not

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prohibit or enjoin the Commissioner from registering a trust solely based on its objects, without any activity, in the case of a newly registered trust. The statue does not prescribe a waiting period, for a trust to qualify itself for registration......."

....10. It is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the trust and the application of its funds arises at the time of the assessment. Where benefits are claimed by the assessees in terms of section 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the trust, going by the binding judgments of the apex court, what is to be looked into is whether the trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act......... xxxx xxxx.

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"4. The ordinary jurisdiction of the Bench will be determined not by the place of business or residence of the assessee but by the location of the office of the Assessing Officer."

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"i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of Section 12-AA of the Income Tax Act, 1961 and read with Section 2 (15) thereof?

(ii) Whether the findings recorded by the Tribunal to the effect that the respondent-assessee was not carrying out any activity of profit and it's predominant object of welfare of public at large are correct or not?

(iii) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the Commissioner of Income Tax (Exemptions), Lucknow in exercise of power under Section 12-AA of the Income Tax Act, 1961?"

After discussing various provisions of section 12A, 11A and 2(15) of the Act, along with the proviso to section 2(15), has Hon'ble High Court has answered all these three questions in favour of the assessee and against the Revenue.

“As per records assessee UTTAR PRADESH AWAS EVAM VIKAS PARISHAD (PAN: AAAJU0103A) was denied the exemption claimed u/s 11 of the I.T. Act, 1961 by invoking provisions of section 2(15) of the I.T. Act, 1961 and activities of the trust/organization was held as non-charitable. Therefore, all the expenses whether revenue or capital made during the year were for Non-charitable purposes. In view of this, the

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accumulation made during FY 2008-09 amounting to Rs.5,53,18,733/- should have been treated as the income of the FY 2014-15, being spent on non-charitable purpose, invoking section 11(3)(a) of the I.T. Act, 1961, in addition to the surplus income held of the current year.

…………………….. ……………………..

“5. Contention of assessee is examined in the light of the facts and circumstances on record. The Income & Expenditure Account, balance sheet, computation of income etc. for financial year 2010-11 are verified during assessment proceedings.

Returned Income NIL Assessed income NIL

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The contents of such notification has been made part of this order and is reproduced below:

Notification No. 33/2020

Central Government notifies ‘Greater Noida Industrial Development Authority’, an authority constituted by the State Government of Uttar Pradesh, in respect of the specified income arising to that board under section 10(46) of Income Tax Act, 1961. MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes) Notification No. 33/2020-Income Tax New Delhi, the 23rd June, 2020 S.O. 2014(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Greater Noida Industrial Development Authority’, (PAN AAALG0129L), an authority constituted by the State Government of Uttar Pradesh, in respect of the following specified income arising to that Commission, namely:—

(a) Grants received from the State Government;

(b) Moneys received from the disposal/90 years lease of immovable properties;

(c) Moneys received by the way of lease rent & fees or any other charges from the disposal/90 years lease of immovable properties;

(d) The amount of interest earned on the funds deposited in the banks;

(e) The amount of interest/penalties received on the deferred payment received from the Allotees of various immovable properties; and

(f) Water, sewerage and other municipal charges from the Allotees of various immovable properties.

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(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income- tax Act, 1961.

(d) shall file the Audit report along with the Return, duly verified by the accountant as provided in explanation to section 288(2) of the Income-tax Act, 1961 along with a certificate from the chartered accountant that the above conditions are satisfied.

[Notification No. 33/2020 F.No.300196/39/2018- ITA-I] PRAJNA PARAMITA, Director

Similarly, vide notification dated 24th December, 2020 in the 21. case of Yamuna Expressway Industrial Development Authority, which again has been set up by UP State Government and wherein again similar income, arising from similar activities as in the case of Greater Noida Industrial Development Authority, has been held to be eligible for exemption u/s 10(46) of the Act.

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“8. We have heard the rival parties and have gone through the material placed on record. The main objective of the assessee authority is to develop houses at affordable cost for the public and to develop public utilities. The assessee Authority was created by enactment of Uttar Pradesh Urban Development and Planning Act, 1973 by Notification No. 1892/XXXVI-2-21(DA)-72 dated 13.09.1974. In Uttar Pradesh Urban Development and Planning Act, it is mentioned that this Act is being enacted to tackle the problems of town planning and urban development. The assessee Authority has been constituted by the State Government and assessee Authority has no power to take decision on application of funds in contravention to the provisions of the UPUPD Act. The Authority thus cannot be said to be running for profit motive. If any income is earned over and above expenditure, it is used for development work in the city of Lucknow. Authority is just assisting State Government in development of towns which is for the welfare of the public.

a. The appellant Authority is constituted by Uttar Pradesh Urban Development Act, 1973 for the development of Lucknow without profit motive. On the other hand, the private colonizers/ Real Estate Developers are embodied by private firms and

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companies for the development of a housing project undertaken by them with profit motive.

b. The appellant Authority consist of nominees of the State Government and are answerable to the State Government for any course of action taken by them beyond the powers delegated to them by the Act/ State Government, however, private colonizers/ Real Estate Developers consist of private players who are only answerable to each other for their actions.

c. The Authority is neither running for profit motive nor it is actually earning profit. However, in case of private colonizers/ Real Estate Developers, the difference between the actual cost and the sale consideration is exorbitant to earn maximum profits and no discounts are granted to weaker section.

d. The appellant Authority cannot utilize funds in any activity other than the main objects / administration of the Act under which it is constituted, however, no such restrictions are upon such private colonizers/ Real Estate Developers.

e. Books of accounts are audited by auditor appointed by State Government/ office of Authority General of India in case of LDA. On the other hand, audit in case of private colonizers/ Real Estate Developers is done by an auditor appointed by them and in some cases, it is even not compulsory by law.

f. In the case of the appellant Authority, no personal benefit of any person or entity is involved, all the decisions are made within the ambit of law for the overall development of the city, however, private colonizers/ Real Estate Developers, focus mainly on their personal benefits.

9.1 Due to these reasons the development work undertaken by the assessee authority cannot be compared with the development work undertaken by the private colonizers / Real Estate Developers. The assessee has also carried out various

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projects in the city of Lucknow for the welfare of general public which a private colonizer will never do.

i. Numerous parks in the city like Lohia Park in Gomti Nagar, Neebu Park, Hati Park, in Chowk and various other parks in Lucknow were build and are maintained by the appellant Authority. Further, the Gomti River Front developed in Lucknow is now being maintained by the appellant Authority. The parks developed by appellant Authority are open for public irrespective of the place where they live, however, a Real Estate Developer only develops the park that are in its premises and these parks are accessible to its customers only.

ii. Roads, sewage system, etc. which are build and street lights which are installed by the appellant Authority for the benefit of the public at large, however, Real Estate Developers only develops roads, installs lights inside their project areas, and if used by general public, it is considered as trespassing.

iii. All the plots/ flats/ houses allotted by appellant Authority of similar sizes cost the same to the buyer, however, the cost of plots/ flats/ houses of same size as of appellant Authority build by private players is exorbitantly high and also differ if, the property sold by private player are vastu compliant/ east facing/ park facing, etc.

iv. The receipt of money is arising out of sole purpose of growth and development of the areas and if there are surplus funds, they cannot be distributed but are used in forth coming years for development of Lucknow city. No such restriction is upon the Real Estate Developers.

Therefore, from the development undertaken by the appellant Authority, public is benefited at large. It is clear that the benefits of development undertaken by the appellant Authority is not restricted to an individual or particular group of individuals for which its objects should be considered charitable under forth limb of section 2(15) of Income-tax Act. Words “other objects of general public utility” have been decided in catena of decisions. The said expression is widest of

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connotation. Words “general” in the said expression is pertaining to a whole class. If the primary purpose and the predominant object are to promote the welfare of the general public, the purpose would be charitable purpose. In this regard reliance is placed of following judgements of Hon’ble Supreme Court:

i. Commissioner of Income-tax v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC)

ii. Commissioner of Income-Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC)

iii. CIT v. Bar Council of Maharashtra (1981) 130 ITR 28 (SC)

9.2 Further, in the case of Additional Commissioner of Income-Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) a Constitution Bench held that, if primary purpose and predominant object of a trust are to promote welfare of general public, the purpose would be charitable purpose. If primary or predominant object of an institution is charitable, any other object which might not be charitable, but which is ancillary or incidental to dominant purpose, would not prevent institution from being a valid charitable trust. Therefore, irrespective of the fact that LDA receipts include consideration from sale of property, rent, interest, etc., LDA has to be considered as charitable trust in light of abovementioned judgments of Hon’ble Supreme Court and Hon’ble Allahabad High Court in its own case since its predominant object are to promote welfare of general public and L.D.A. cannot be compared with and treated like a real estate developer. Treating L.D.A. like a real estate developer will defeat the very purpose of establishing L.D.A. by an Act of Legislatures.

9.3 From the above facts, it is clear that the Lucknow Development Authority is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in the nature of rendering any service in relation to any trade, commerce or business for a fee or any other consideration. The nature of activities of the assessee Authority,

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the purpose and manner of its formation and the objects for which it has been created goes to show that it is not engaged in carrying on any activity in the nature of trade, commerce or business. The objects of the assessee Authority do not, expressly or impliedly, provide for carrying on of trade, commerce or business. The L.D.A. is only rendering/ providing service to the general public on behalf of the Government without any profit motive or without earning profit. Lands, plots etc. acquired by the L.D.A. and allotted by it are allotted without earning profit after taking into account the direct and indirect expenses. Further, the L.D.A. is registered u/s 12AA of the Income-tax Act, as per the order of the Hon’ble ITAT dated 25.07.2005 in ITA No. 690/LUC/2003 and in pursuance of such order, registration has been granted by the Ld. Commissioner of Income Tax-I u/s 12AA of the Income Tax Act 1961, with effect from 01.04.2003 vide order dated 17.01.2006. Further, the registration u/s 12AA has never been revoked till date.

9.4 The argument of the Revenue is that after insertion comes out of the definition of charitable activities w.e.f. 01/04/2009, any activities in the nature of business or trade comes out by an organization will preclude the same for being an entity engaged in charitable activities. To examine the impact of insertion of proviso to Section 2(15), it is important to look at the intention with which the amendment was brought into force which is discussed below.

9.5 The main intent or purpose of the Legislature in bringing such an amendment is to exclude certain non-genuine NGOs which are carrying on activities in the nature of trade, commerce or business in the garb of advancement of public utilities and enjoying the exemption of income which is accrued because of such activities. In this regard reference can be made to the budget speech of the Hon'ble Finance Minister before the house which affirms the said interpretation, the abstract of which is given below:

“Charitable purpose includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or

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providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under “charitable purpose”. Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected”

9.6 It can very well be seen from the above extract that the intent of the Finance Minister in bringing such an amendment is to target those non-genuine NGOs who carry on activities in the nature of trade or business under the grab of charity. The appellant Authority is a Government body. It does not fall under the category of non-genuine NGOs. The Learned Assessing Officer has taken a narrow and myopic view, by holding that the assessee Authority is carrying on business, which needs to be corrected.

9.7 While dealing with cases such as of L.D.A., a Government body, a narrow and myopic view should not be adopted. While interpreting the terms trade, commerce or business, in the Commentary on Income Tax Law by Chaturvedi & Pithisaria, "business" has been defined / explained as under (Page 1321; Vol I; Fifth edition):

(1) Business

“The word "business” is one of large and indefinite import and connotes something which occupies the time, attention and labour of a person normally with the object of making profit [Jessel M.R. In smith V. Anderson, (1880) 15 Ch D 247, 258; State of Andhra Pradesh v. H. Abdul Bakshi & Bros, (1964) 15 STC 644, 547 (SC); CIT v. Motilal Hirabai Spng. And Wvg. Co. Ltd., (1978) 113 ITR 173 (GUJ); Bharat Development (P.)Ltd. V. CIT, (1982) 133 ITR 471,474/ (Del)]. The word means almost anything which is an occupation or duty requiring attention as distinguished from sport or pleasure and is used in the sense of an occupation continuously carried on for the purpose of profit

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[Rogers Pyatt Shellac & Co. v. Secretary of State, AIR 1925 Cal 34=11TC 363]. Thus the word 'business' is a wider term than, and not synonymous with, trade; and means practically anything which is an occupation as distinguished from a pleasure [ Halsbury's Laws of England, Third Edition, Vo1.38, page 10, quoted in CIT v. Upasana hospital, (19970 225 ITR 845,851 (Ker). Also see, CIT v. Delhi Transport Corporation, (1996) 134 Taxation 386, 392-93 (Del)]. 'Business' is a word which has more extensive I meaning that trade. All trade is business but all business is not trade [Vijaya Bank v. A.N. Tewari, (1995) 83 Taxman 340,342 (Del)]."

The aforesaid Commentary further explains "business" as under on Page 1336:

"Is profit-motive essential to constitute a 'business'? - "Business, without profit is not business, any more than a pickle is candy"[Abbot]. To regard an activity as 'business', there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure [Shah. J., in State of Andhra Pradesh v. H. Abdul Bakshi & Bros. , (1964) 15 STC644, 647(SC); State of Guajrat v. Raipur Mfg. Co. Ltd. , (1967)19 STC 1 (SC) ; Director of Supplies and Disposals v. Member, Board of Revenue (1967) 20 STC 398 (SC); CST v. Anil Co- operative Credit Society, (1969) 24 STC 180, 192 (Gui); Mahammad Faruq, In re (1938) 6 ITR 1, 7 (Ail); Bharat Development (P.) Ltd. v. CIT, (1982) 133 ITR 470,474 (Del); Government Medical Store Depot v. Superintendent of Taxes, (1986) Tax LR 2164 (SC) (1985) 60 STC 296 (SC); Government Medical Store Depot v. State of Haryana, (1986) 63 STC 198(SC))."

The expression "business" has further been defined in the Commentary on Income Tax Law by Chaturvedi &

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Pithisaria (Pages 1322 and 1323; Vol1 ; Fifth edition)as under:

"The word 'business' is a word of large and indefinite import. It is something which occupies the attention and labour of a person for the purpose of profit. It has a more extensive meaning than the word 'trade'. An activity carried on continuously in an organized manner with a set purpose and with a view to earn profit is business [CIT v. M.P. Bazaz, (1993) 200 ITR 131, 135, 136 (Ori)]. Also see, Khoday Distilleries Ltd. v. State of Karnataka, JT 1994 (6) SC 588, 625-26."

(ii) Meaning and Concept of “Trade” and “Commerce”

In the Commentary on Income Tax law by Chaturvedi & Pithisaria, "trade" and "commerce" have been defined as under (Page 1323; Vol 1; Fifth Edition):

“Trade or Commerce- The definition of 'trade' does not find its place in the Act. The dictionary meaning of 'trade' as per dictionary of Webster's New Twentieth Century Dictionary, (Second edition), means amongst others, 'A means of earning one's living, occupation or work'. In Black's Law Dictionary also ‘trade' means a business which a person has learnt or he carries on for procuring subsistence or profit; occupation or employment, etc. [CIT v. Assam Hard Board Ltd., (1997)224 ITR 31.8, 320 (Gauh)]. "Trade" in its primary meaning is the exchanging of goods for goods or goods for money; in its secondary meaning it is repeated activity in the nature of carried business on with a profit motive, the activity being manual or mercantile as distinguished from the liberal arts or learned professions or agriculture [State of Punjab v. Bajaj Electricals Ltd.,(1968) 70 ITR 730, 732 (Sc)]. If a person buys goods with a view to selling them at profit, it is an ordinary case of 'trade'. If

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the transactions are on a large scale, it is called 'commerce, [Gannon Dunkerley & Co. v. State of Madras, (1954) 5 STC 216,244 (Mad)],and it is the continuous repetition of such transactions which will constitute a "business"."

9.8 In the case of State of Punjab and Another v. Bajaj Electricals Ltd (1968) 70 ITR 730(SC), it has been held that essential condition for carrying on business, trade, commerce is making profit. The relevant portion of this judgment is reproduced below:

"Liability to pay tax under Act 7 of 1956 arises if a person carries on trade by himself or through his agent, or follows a profession or is in employment within the State, and to otherwise. The expression "trade" is not defined in the Act. "Trade" in its primary meaning is the exchanging of goods for goods for money; in its secondary meaning it is repeated activity in the nature of business carried on with a profit motive, the activity being manual or mercantile, as distinguished from the liberal arts or learned professions or agriculture."

9.9 Similarly, Hon’ble Supreme Court in the case of Commissioner of Income-tax, Punjab v. Lahore Electric Supply Co. Ltd (1966)60 ITR 1 (S.C) has held as under:

“Income Tax business Income-Carrying On of Business - Government Acquired Assessee Company's Undertaking In Regard To Supply Of Electricity-Mere fact That It Did Not Go Into Liquidation Would Not Establish That It Had Intention To Do Business-at The Relevant Time The Company Was Not Express And Intention To Resume Business-Thus, no Business was Carried On-facts That It had To Pay The Government Half Share Of Profits For Some time and That It Had To Return Deposits To Consumers Would Not Indicate That It was Carrying On Business-Business as Contemplated

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By S.10 Of 1922 Act Is An Activity Capable of Producing A Profit Which Can Be Taxed.”

9.10 In the case of CIT V. K. S. Venkatksubbiah Reddiar (1996), 221 ITR 18,21 (Mad.), Hon'ble Madras High Court has, while holding that profit - motive is essential to constitute a business, observed as under:

“It is, therefore, clear that the two essential requirements for any activity to be considered as business are (i) it must be a continuous course of activity; and (ii) it must be carried on with a profit motive."

Similar findings have been made in the following case laws:

Barendra Prasad Ray v. ITO (1981) 129 ITR 295 (1) (SC)

(2) LalaIndra Sun In Re (1940) 8 ITR 187 (Alld)

(3) NarasinghaKar& CO. v, CIT (1978) 113 ITR 712(Ori)

9.11 From the aforesaid, it is clear that the appellant "Authority" is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in rendering any service in relation to any trade, commerce or business in as much as profit motive is one of the essential conditions of business, trade or commerce as stated above, whereas the L.D.A. has no profit motive. It has been running schemes for various sections of the society in pursuance of the Constitution of India under which every State Government is responsible for Town Planning and for the welfare of the public. Alongwith with affordable houses public utilities are developed as per the plan of the State Government. In recent times houses are being provided to economically weaker section of the society under various schemes of Pradhan Mantri Awas Yojna.

9.12 The objects and activities of the appellant Authority has not changed since grant of registration u/s 12AA of the Act.

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The funds can be utilized in accordance with approved budget by State Government. The ultimate property/ funds of the appellant Authority vest with StateGovernment in case of dissolution by the State Government. The appellant Authority cannot act beyond the Statute through which it was incorporated.

10.1 In the judgment of Hon’ble Allahabad High Court in case of Commissioner of Income-tax vs. Krishi Utpadan Mandi Samite (2010) 1 ALJ 817, their lordship held that charging cess /fee is for the purpose of carrying out object of Act i.e. Krishi Utpadan Mandi Samiti Adhiniyam, 1964. Where dominant purpose of trust is charitable, incidentally if some profit is made and such profit is used for charitable purposes, the said trust/institution does not cease to be established for ''charitable purposes". The dominant object of Mandi Samiti is to regulate, procure and supply of agricultural and some other produce and to meet expenses required for achieving the said object. Legislature has empowered Assessee to levy/cess/fee. Whatever surplus remains in market fund would come back for carrying on the object for which Mandi Samities are established.

10.2 The aforesaid judgement of High Court has been confirmed by the Hon’ble Supreme Court in Appeal reported in (2012) 12 SCC 267.

If the predominant object is to carry out charitable purpose and not to earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity [CIT v. Andhra Pradesh Road Transport Corporation (1986) 159 ITR 1 (SC), Thiagrajan Charities v. Addl. CIT (1997) 225 ITR 1010 (SC),

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Girijan Co-operative Corporation Ltd v. CIT (1989) 178 ITR 359 (AP)].

In view of above, it is held that the receipt of money by way of sale consideration, sundry receipts, interest, rent etc. is arising out of sole purpose of growth and development of the areas and not to earn profit.

“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 were 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

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Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treated to these institutions as is warranted by the 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 absolute 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.

The contention that the assessee are earning profit has no merit as per the ratio laid down in the case Sarafa Association vs. CIT, [2007] 294 ITR 262 (MP), where it was observed that “the promotion of commercial trade is a charitable purpose under Section 2(15) of the Act”. In the case of Director, ITO vs. Govinda, 315 ITR 237 (Mad), it was observed that the construction of commercial complex by charitable trust is eligible.

If the objects of the “Authority” is charitable as public utility then the benefit being a charitable trust is eligible as per the ratio laid down in the case of CIT vs. Gujarat Maritime Board, [2007] 295 ITR 561 (SC), where it was observed that:-

“... in Section 2(15), namely, “any other object of general public utility”. From the said decisions it emerges that the said expression is of the widest connotation. The word “general” in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would

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be a charitable purpose [CIT vs. Ahmedabad Rana Caste Association, [1983] 140 ITR 1 (SC)]. The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [CIT vs. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity [Addl. CIT vs. Surat Art Silk Cloth Manufacturer Association [1980] 121 ITR 1 (SC)].”

Applying the ratio laid down in the case of CIT vs. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), where of in the present case, the “Autonomous Authority” was established for the purpose of predominant of development the area and provide to shelter to the homeless people within the State of U.P. The management and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State.

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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 under Section 12AAA, therefore, cannot be ignored or wished away by 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] 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 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 12.05.2011 in Special Leave Petition No. (Civil) No. 2590/2011.

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We may also like to refer a C.B.D.T. Circular No. 11/2008 dated 19.12.2008, wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:-

“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 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-trust are admittedly charitable in nature.

Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to

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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).

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.

From the record, it also appears that the “Authority” had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, 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 treated to be belonging to the “Authority” or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility.

Moreover, in the instant case, the Assessing Officer has not given any defective in computation of income as per Section 11 as submitted in Form-XB, but observed that the activities of the assessee are not charitable. The activities of the assessees are genuine. So, then it is so, then we find no reason to interfere with impugned orders passed by the Tribunal. The same are hereby sustained along with reasons mentioned therein.

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The answer to the substantial questions of law are in favour of the assessee and against the department.

In view of above, all the appeals filed by the department are dismissed, as stated above.”

Hon'ble Allahabad High Court in the case of Moradabad Development Authority, vide order dated 03/05/2017 had framed the following questions of law:

"(a.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by upholding the order of Ld. CIT (A) by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. In which there is a provision for charging tax if total receipt of entities engaged in advancement of general public utility exceeds Rs.10 Lakh. Whereas the assessee has shown excess of income over expenditure of Rs.16,69,28,027/- by sales of Plots, shops and flats and its activities are in the nature of trade, commerce or business and amended provision of section 2(15) of the Income Tax Act 1961 is squarely applicable in this case.

(b.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by ignoring the fact held 2 in the case of M/s Safdurjung Enclave Educational Society Vs. Municipal Corporation Delhi (1992) 3 SCC 390, in which the Hon'ble Supreme Court of India has held that the activities run on commercial lines do not fall within the ambit of charitable object.

(c.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of the CIT(A) and ignoring the fact that the activities of the authority are hit

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by Section 2(15) of Income Tax Act, 1961 and therefore the applicant is not entitled to get benefit of section 12AA of the Income Tax Act, 1961. The Applicant primarily is not carrying out any activity for advancement of any objective of general public utility, as such. The Applicant was purely involved in commercial activities for the purpose of making profit and charity, if any, was justi incidental to its business. The Authority was acquiring land from farmers and others at a low price, which was developed and sold at a premium to the perspective buyers. Apparently, on dissolution of the authority, all assets shall be transferred to the Government and there was no restriction on the use of these assets by the Government. Therefore the objects pursued by the applicant cannot be termed as charitable in view of the fact that the applicant, was a commercial organization (with no restriction as to the application of assets on dissolution or winding up) Therefore the applicant cannot be termed as charitable organization by any stretch of imagination.

(d.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of Ld. CIT(A) and giving the benefit of section 12A to the assessee as the activities of advancement of the object of general public utility by the appellant authority are undertaken/carried on in a totally commercial manner and activities of the assessee are similar to the Jammu 3 Development Authority wherein registration u/s 12A was not allowed by the Hon'ble ITAT, Amritsar Bench vide order dated 14.06.2012 in ITA No.30(Asr)/2011 in lieu of commercial nature of activities, and the same has already been confirmed by the Hon'ble High Court of Jammu & Kashmir vide order dated 07.11.2013 in ITA No.164/2012 as well as by the Hon'ble Supreme Court of India vide order dated 21.07.2014 in Special Leave to Appeal

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No.4990/2014. Hence the appellant authority is not entitled to registration under section 12A of the Income Tax Act, 1961."

11.1 The above questions of law have been decided against the Revenue and in favour of the assessee and while answering the questions, the Hon'ble Court has followed the judgment in the case of YEIDA. The questions of law, answered in favour of the assessee, if read as a whole, clearly state that the MDA is not doing any business activity and its activities are not hit by the proviso to section 2(15) of the Act. We find that MDA has been constituted under the same Act of Uttar Pradesh Urban Development and Planning Act, 1973 and its objects are similar to the objects of the assessee. Therefore, this judgment of Hon'ble Allahabad High Court in the case of Moradabad Development Authority is directly applicable to the assessee. The arguments of Revenue that in this case the issue before the court was not regarding denial of assessment u/s 11 of the Act but was on the issue of grant of registration u/s 12A of the Act is not correct.

11.2 To negate the arguments of the Revenue that the case law of Yamuna Expressway related to only for registration u/s 12A of the Act, it is important to visit the questions of law framed by Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority, which for the sake of completeness are reproduced below:

(i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of section 12AA of the Income Tax Act, 1961 and read with section 2(15) thereof ? (ii) Whether the findings recorded by the Tribunal to the effect that the respondent- assessee was not carrying out any activity of profit and it’s predominant object of welfare of public at large are correct or not ?

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(iii) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the CIT(E), Lucknow in exercise of power under section 12AA of the IT Act.”

The analysis of the above questions of law, as framed by Hon'ble Court, reflects that first question was regarding entitlement of the assessee for registration u/s 12AA of the Act whereas the second question framed by Hon'ble Court is to the effect as to whether assessee was not carrying out any activity of profit. The Hon'ble Court, after having elaborate discussions on various aspects of various sections of registration, denial of registration u/s 11, 12 and 13, has decided the above three questions in favour of the assessee and against the Revenue. The argument of the Revenue that this judgment of YEIDA do not deal with the denial of exemption u/s 11 does not seem to be correct in view of the specific question framed by the Hon'ble Court as question No. 2. This judgment, which has been followed in the Moradabad Development Authority, therefore, is quite relevant and the case of the assessee is duly covered by the judgment of Moradabad Development Authority. The case laws relied on by Revenue are not applicable to the facts of the case of the assessee. The case law of Jammu Development Authority relates to refusal to the assessee for registration u/s 12A of the Act whereas in the cases before us there exists registration u/s 12A of the Act and the issue involved here is regarding the Exemption u/s 11 of the Act. As regards the reliance placed by Revenue on the case law of Kanpur Development Authority, we find that the said order has been recalled by Lucknow Bench of the Tribunal vide order dated 17/02/2018. We further find that in the case of the assessee itself for assessment year 2018-19, the Assessing Officer himself has allowed exemption u/s 11 of the Act during proceedings u/s 143(3) vide order dated 15/06/2021, a copy of which is placed at pages 361 to 363. We further find that in the case of the assessee itself, for assessment year 2009-10 and 2010-2011, on an appeal filed by the assessee, the CIT(A), vide order dated 01/10/2021 and 16/09/2021 has allowed the appeal of the assessee and has granted exemption u/s 11 of the Act. As regards the argument of Revenue that assessee has violated the provisions of section 13, we find that the act of

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the assessee in allowing some rebate to it’s employees and reservation of some plots for it’s employees does not amount to violation of section 13 as section 13(1)(c) states that income of the trust or organization will not be exempt u/s 11, if any, of the funds or income of the trust is used or applied directly or indirectly for the persons referred to in sub section (3) of section 13. Sub section (3) of Section 13 is reproduced below: “(3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely:— (a) the author of the trust or the founder of the institution; [(b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution upto the end of the relevant previous year exceeds [fifty thousand] rupees;] (c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), [(c), (cc)] and (d) has substantial interest.

11.3 We find from the list of persons mentioned in sub section (3) that employees has not been included in this list. It is Department’s own case that assessee had allowed benefits to employees.

11.4 The Hon'ble Patna High Court in the case of CIT vs. Tata Steel Charitable Trust 78 Taxman 98 (Pat) vide order dated 07/01/1993 has held that employees of the author of the trust do not fall in the specified category of persons referred to in section 13(3) of the Act. The relevant findings of the Hon'ble court are reproduced below:

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“As regards, the second condition, it seems that even if a trust has been created wholly for charitable purposes, when subsequently it is found that its income either enures or is used or applied directly or indirectly for the benefit of any person specified under sub-section (3) of section 13, then such trust becomes disentitled to claim any exemption under section 11. But the list of such persons as contained under section 13(3 ) does not include the employees of the author of the trust. The employees of the author of the trust do not fall within the specified categories of persons referred to in section 13(3). Even section 13(3)(d ), which includes any relative of the author, can have no application in the case of the employees of the author because 'relative' means a person connected by birth or marriage with another person. The person having any other relationship pursuant to a contract like that of employer and employee cannot be said to be a relative. Therefore, the application of part of the income of the trust for the benefit of the employees of TISCO and their relatives could not disentitle the trust from claiming exemption under section 11(1)(a).”

11.5 The facts and circumstances of the case laws relied on by Revenue for the proposition that assessee violated the provisions of Section 13 do not apply to the facts of present cases as in the case of CIT vs. Awadh Educational Society, the assessee had given interest free loan to the treasurer of the society who is listed in the list of specified person u/s 13(3) of the Act whereas in the cases before us the assessee has given benefit to employees who are not specified persons as mentioned in section 13(3) of the Act.

11.6 In the case law of Maruti Centre for Excellence, the assessee was rendering training to its members who, in turn were giving donations to the assessee exceeding an amount of Rs.50,000/- therefore, those persons were the persons listed in sub-clause (b) of Section 13(3) and that is why that case law was decided in favour of the Revenue whereas in the present case, it is undisputed fact that the assessee was allowing discount to its employees, therefore, this case law is not applicable. As regards the applicability of case law of Noida

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Entrepreneurs Association, we find that in that case a CBI inquiry had been conducted and there were gross violation of funds of the assessee which is not in the present case. Therefore, in view of the above, we hold that the assessee had not violated the provisions of section 13(3) of the Act. In view of the above facts and circumstances and judicial precedents, we hold that the assessee is eligible for exemption u/s 11 of the Act and Assessing Officer is directed to allow the benefit of Section 11 to the assessee. In view of the above, ground No. 3 to 7 in I.T.A. No.185 and ground no. 3 to 8 in rest of the appeals are allowed. Ground No. 1 & 2 are general in nature and therefore, these grounds need no adjudication.

11.7 As regards ground No. 8 in I.T.A. No.185 and ground No. 9 in rest of the appeals, we find that the assessee has been transferring certain amounts to IDRF account and was directly reflecting that account in the balance sheet and was not routing through the profit & loss account. The Assessing Officer has also added back these amounts while denying exemption u/s 11 of the Act. We find that this issue has already been dealt by the Hon'ble Allahabad High Court in the case of assessee itself whereby vide order dated 16/09/2013, Hon'ble Allahabad High Court has held that the money transferred to this fund is to be utilized for the purpose of project as specified by the committee having constituted by the Government and the same could not be treated to be belonging to the authority or the receipt is taxable in its hand. Therefore, ground No. 8 in I.T.A. No.185 and ground No. 9 in rest of the appeals are allowed.

11.8 As regards the other disallowance, as agitated by the assessee vide various grounds, we find that these disallowances do not need any specific adjudication as even if these disallowances are upheld, the resultant increase in net income of the assessee will again be eligible for exemption u/s 11 of the Act. Therefore, these additions have become academic in view of our findings in relation to exemption u/s 11 of the Act. Therefore, ground No. 9 to 12 in I.T.A. No.185, ground No. 10- 16 in I.T.A. No.186, ground No. 10 to 15 in I.T.A. No.163, ground No. 10 in I.T.A. No.164 and ground No. 10-12 in I.T.A. No.439 are dismissed as having become infructuous.

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"(a.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by upholding the order of Ld. CIT (A) by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. In which there is a provision for charging tax if total receipt of entities engaged in advancement of general public utility exceeds Rs.10 Lakh. Whereas the assessee has shown excess of income over expenditure of Rs.16,69,28,027/- by sales of Plots, shops and flats and its activities are in the nature of trade, commerce or business and amended provision of section 2(15) of the Income Tax Act 1961 is squarely applicable in this case.

(b.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by ignoring the fact held 2 in the case of M/s Safdurjung Enclave Educational Society Vs. Municipal Corporation Delhi (1992) 3 SCC 390, in which the Hon'ble Supreme Court of India has held that the activities run on commercial lines do not fall within the ambit of charitable object.

(c.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of the CIT(A) and ignoring the fact that the activities of the authority are hit by Section 2(15) of Income Tax Act, 1961 and therefore the applicant is not entitled to get benefit of section 12AA of the Income Tax Act, 1961. The Applicant primarily is not carrying out any activity for advancement of any objective of general public utility, as such. The Applicant was purely involved in commercial activities for the purpose of making profit and charity, if any, was justi incidental to its business. The Authority was acquiring land from farmers and

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others at a low price, which was developed and sold at a premium to the perspective buyers. Apparently, on dissolution of the authority, all assets shall be transferred to the Government and there was no restriction on the use of these assets by the Government. Therefore the objects pursued by the applicant cannot be termed as charitable in view of the fact that the applicant, was a commercial organization (with no restriction as to the application of assets on dissolution or winding up) Therefore the applicant cannot be termed as charitable organization by any stretch of imagination.

(d.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of Ld. CIT(A) and giving the benefit of section 12A to the assessee as the activities of advancement of the object of general public utility by the appellant authority are undertaken/carried on in a totally commercial manner and activities of the assessee are similar to the Jammu 3 Development Authority wherein registration u/s 12A was not allowed by the Hon'ble ITAT, Amritsar Bench vide order dated 14.06.2012 in ITA No.30(Asr)/2011 in lieu of commercial nature of activities, and the same has already been confirmed by the Hon'ble High Court of Jammu & Kashmir vide order dated 07.11.2013 in ITA No.164/2012 as well as by the Hon'ble Supreme Court of India vide order dated 21.07.2014 in Special Leave to Appeal No.4990/2014. Hence the appellant authority is not entitled to registration under section 12A of the Income Tax Act, 1961."

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(ii) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of section 12AA of the Income Tax Act, 1961 and read with section 2(15) thereof ? (ii) Whether the findings recorded by the Tribunal to the effect that the respondent-assessee was not carrying out any activity of profit and it’s predominant object of welfare of public at large are correct or not ?

(iv) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the CIT(E), Lucknow in exercise of power under section 12AA of the IT Act.”

26.1 The argument of the Revenue that this judgment of YEIDA does not deal with the denial of exemption u/s 11 of the Act, is of no consequence. Though in that case, the prime issue was that of grant of registration u/s 12 of the Act, what was examined was the activities of that assessee. It is this aspect of the matter which is in question in the present cases before us also, although the question here is of grant of exemption u/s 11 of the Act. This judgment, which has been followed in the Moradabad Development Authority, therefore, is quite relevant and the case of the assessee is duly covered by the judgment of Moradabad Development Authority.

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Section 13(8)

Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso* to clause (15) of section 2 become applicable in the case of such person in the said previous year. (9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if—

(i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or

(ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.

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preservation of monuments and objects of artistic or historic interest and the advancement of any other object of general public utility. In the proviso inserted in the above section vide Finance Act, 2012 with effect from 01/04/2009, it has been provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it is carrying on any activity in the nature of trade, commerce or business or any activity of rendering 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 unless such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities of that previous year.

“3. This appeal was admitted on following substantial question of law:

"Whether under the facts and circumstances of the case, the learned ITAT was right in holding that the registration granted u/s 12A of the I.T. Act cannot be cancelled by the CIT under the provisions of Section 12AA (3) of the I.T. Act when the activities of the assessee were hit by the first and second proviso to section 2(15) of the I.T. Act w.e.f. 01.04.2009."

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this Court's judgment in Income Tax Appeal No. 107 of 2016: Commissioner of Income Tax, (Exemption), Lucknow Vs. M/s Yamuna Expressway Industrial Development Authority and other two connected appeals decided on 21.04.2017.

Section 11(2)

Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation‡ to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:—

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(a) such person furnishes a statement in the prescribed form and in the prescribed70 manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year:

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u/s 11 of the Act. In view of the above, ground No. 3 of the additional grounds of appeal is allowed for statistical purposes.

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“This Stay Petition has been filed by the assessee with a request to stay the recovery of demand of Rs.3,01,83,05,459/- till disposal of the appeal. 2. The demand has risen due to addition made by the Assessing Officer by rejecting the exemption under section 11 of the Act by holding that the assessee had given benefit to its employees by giving them priority in allotments as well as concessions in the prices of plots and, therefore, was hit by the provisions of section 13(3) of the Act. 3. In pursuance to our directions dated 4/2/2020, the ld. D.R. filed the details of employees regarding the benefit to them in the form of concessions in the allotment of plots, and argued that since the assessee has allotted plots to its employees on concessional basis therefore, there is violation of section 13(3) of the Income Tax Act, and therefore, the stay application filed by the assessee is liable to be dismissed. 4. The ld. Counsel for the assessee, on the other hand, has stated that the employees of the assessee Parishad are not Managers of the Parishad, as they are doing routine work assigned to them and they are not involved in the management of the assessee Parishad. He further submitted that they are also not entrusted with taking managerial/strategic decisions. Moreover, the benefit to the employees has been given as a declared policy as notified in the Parishad Rules. In this regard, our attention was invited to para 36 of the Parishad rules and therefore, it was argued that there is no violation on the part of the assessee. The ld. Counsel for the assessee submitted that the assessee is not a trust but an Institution and therefore, the provisions of section 13(3) of the Act will be attracted only if the benefit has been given to Manager. For the proposition that the employees are not Managers, the ld. Counsel for the assessee relied on the following case law: 1. CIT vs. Tata Steel Charitable Trust, 203 ITR 764 (Patna) 5. Accordingly, the ld. Counsel for the assessee prayed that since the assessee has already deposited more than 30% of the disputed tax and the assessee has been able to make out a prima facie case, due to which, the balance of convenience is in favour of the assessee, the demand sought by the Department may kindly be stayed.

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(1) CIT vs. Awadh Educational Society in I.T.A.No.142 of 2007 by Hon’ble Allahabad High Court (2) Maruti Centre for Excellence [2012] 208 Taxman 236

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taxable in its hand. For the sake of completeness, the findings of Hon'ble Allahabad High Court are reproduced below:

“From the record, it also appears that the “Authority” had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, 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 treated to be belonging to the “Authority” or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility.”

Therefore, ground no. 19 & 20 in I.T.A. No.701 are allowed.

(Order pronounced in the open court on 10/06/2022)

Sd/. Sd/. ( A. D. JAIN ) ( T. S. KAPOOR ) Vice President Accountant Member

Dated:10/06/2022 *Singh

Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow

Assistant Registrar