BHIWADI INTEGRATED DEVELOPMENT AUTHORITY,BHIWADI, ALWAR vs. COMMISSIONER OF INCOME TAX (EXEMPTIONS), JAIPUR

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 595/JPR/2023 cuke The CIT (Exemption) Bhiwadi Integrated Development Authority, Vs. Jaipur. Bhagat Singh Colony Bhiwadi, Alwar. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAALB 2450 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Shri Shyam Lal Agarwal (C.A.)& Shri Tarun Agarwal (C.A.) jktLo dh vksjls@Revenue by: Shri Ajay Malik (CIT) lquokbZ dh rkjh[k@Date of Hearing : 02/11/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 16/01/2024 vkns'k@ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This is appeal is filed by the assessee against orders of the Learned Commissioner of Income Tax (Exemptions), Jaipur [herein after referred to as “Ld.CIT(E)] dated 31.07.2023passed under section 12AB of the Income Tax Act, 1961 [ here in after referred as Act ].

The assessee has raised the following grounds of appeal:- 2.

“1. The Ld. CIT(E) has erred is law as well as in facts in rejecting the application of the appellant under section 12AB of the Income Tax Act, 1961

2 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) considering that the “applicant is not holding property and income held under trust”.

3 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) hearing on 27/07/2023 and further details were sought for from the assessee & date of submission was fixed as 28/07/2023. Thereafter, the assessee didn't furnish any response. Since, it is a limitation matter, therefore, the case is decided on thebasis of materialfiled by the assessee along with its application in Form no. 10AB and reply filed by the applicant on various dates. During the pendency of application for registration u/s 12AB of the Act, various details were called for and it is in the view of the ld. CIT(E) that the assessee has not submitted the details in full, therefore, the registration of the assessee was rejected by observing as under:- 3.9Thus, in light of above facts, the activities conducted by the applicant are highly profitable in nature to the extent of 55% and are outside the purview of charitability and therefore, cannot be considered as charitable at all. Further such huge margin, no clause in act that assessee could give goods and services at cost or nominal margin and assessee’s unwillingness to give details of cost and margin on various streams of income, and selling land at auction when read with section 2(15), read with decision of Hon’ble Apex Court in case AUDA, it is clear that receipts of assessee fall under the mischief of trade and commerce thus hit by proviso to 2(15), which in turn make assessee ineligible as charitable institute.

4 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) Bhiwadi Integrated Township (BIT), a Special Investment Region comprising the entire area of 363 villages of Behror, Neemrana, Mundawar, Kotkasim and Tijara Tehsils of Alwar district. The Copy of the notification and the Rajasthan Special Investment Region Act 2016 is attached as Annexure 1 to the Paper-book. The objective of BIDA is to provide for establishment, planning, development, operation, maintenance, management and regulation of BIDA region in the State and to provide for matters connected therewith or incidental there to. The main activities of BIDA under section10 of the act are available at page No. 10 to 12 of the paper-book. Apart from acquisition lands for development & allotment of land for the purpose as per the prevailing rules & regulations, the activities mainly includes to regulate the development activities in the special investment region in accordance with the plans & schemes prepared under chapter V & the building regulations made by the regional development authority in this behalf: • To ensure the provision of sufficient infrastructure facilities & public & civil facilities & to make sustainable arrangements for adequate maintenance thereof. • To provide/ civil facilities within the region & to provide municipal services within the region. • To provide urban transport facilities for the region. • To make arrangements for observance & promotion of safety, order, health & environment safeguards, disaster management for the special investment region. • To give directions to any government agency or persons functioning in the region or periphery thereof in matters pertaining to plans & schemes. To carry out surveys & prepare & execute plans & schemes as per the act. To classify earmark & demarcate & develop the special investment region & the periphery for purposes & usages inter alia for any economic activity, infrastructure facility including housing and industrial areas & public & civil facility & to encourage & promote aesthetics & efficiency & generate revenues in the process of development. To regulate grant, suspend, withdraw or cancel approvals for permissions in accordance with the provisions of this act. • To remove encroachment & construction not authorized & are in violation of the act & rules / regulations. The authority applied for the registration as charitable institution under section 12A where the provisional registration was granted on 27.5.2021 from AY 2021-22 to 2023- 24 under the new provisions for registration. The copy of the provisional registration certificate is available at page no. 40-42 of the paper-book. Further the permanent registration was applied within the extended date before the LdCIT(exemptions) which was declined vide its order dated 21.7.2023. Our appeal is against this order of rejection before your kind Honours. II. Grounds of Appeal: 1. The Ld CIT(E) has erred is law as well as in facts in rejecting the application of the appellant under section 12AB of the Income Tax Act, 1961 considering that the "applicant is not holding property and income held under trust".

5 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) 2. The Ld CIT(E) has erred is law as well as in facts in rejecting the application of the appellant under section 12AB of the Income Tax Act, 1961 considering that the profitability and applicability of proviso to Section 2(15) of the Income Tax Act, 1961. Our ground wise submissions are as below: III. Ground no. 1 "The Ld CIT(E) has erred is law as well as in facts in rejecting the application of the appellant under section 12AB of the Income Tax Act, 1961 considering that the "applicant is not holding property and income held under trust" The Learned CIT(Exemptions) has concluced that the applicant in not holding property and income held under trust for the reason that the BIDA is a revocable trust and that it is not eligible for registration under Section 12AB. The Ld CIT (Exemptions), Jaipur has held at page 13 of its order that, "2.9 It is also important to mention here that based on above decision and discussion, it is clear that first of all the immunity under article 289(1) of constitution is only available to states and not to its bodies/institution, which are separate bodies/entities, and secondly, even in case of states, it is not all the income that is exempt under article 289(1), if the activity of state resemble to trade or commerce same is taxable under 289(2). It is very important to mention that charitable trusts are allowed to carry out trade and commerce activities, if they are undertaken in course of actually carrying out advancement of GPU activity, for which such trust or institution exists, however, proviso to section 2(15) put limit to 20% such receipts to total receipts. Thus if we see state us charitable institution, there is diff, for states any trade or commerce activity is taxable, while, for charitable institution it is exempt up to 20% of receipts subject to conditions as specified under 2(15) of 1.T. Act. Thus if the profit or surplus so earned by charitable institute is allowed to be reverted back to state government, as envisaged by assesse, same would be as if trade and commerce activities of states would be out of union taxation, which is against the article 289(2) of constitution itself. Thus, the concept of irrevocability of property and income over any institution has to be imposed, despite it being state. 2.9 Therefore, in view of the above, it is derived that BIDA is holding properties and income under revocab!? trust, which can be utilized for any object by state government on its dissolution, thus there is no bar that same would be used solely for the charitable objects. Thus, the applicant is not eligible for grant of registration u/s 12AB." Our Submissions on Ground no.1 We would like to submit before your Honours that the interpretation of the Ld CIT is not correct and baseless, the Ld. CIT in his order had not been able to brought any fact regarding genuineness of the institution activities. He has not been able to understand that the government authorities doing sovereign functions, will have to continue as the functions shall have to be discharged by the Government. The provisions of the Rajasthan Special Investment Region Act, 2016 are very clear on this aspect. We would like to reproduce Section 115 of the Act which lays down as follows: "105. Ultimate dissolution of Trust, and transfer of its assets and liabilities to the Municipal Board. - (1) When all schemes sanctioned under this Act have been executed or have been so far executed as to render the continued existence of the Trust, in the opinion of the State

6 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) Government, unnecessary, the State Government may by notification declare that the Trust shall be dissolved from such date as may be specified in this behalf in such notification, and the Trust shall be deemed to be dissolved accordingly. (2) From the said date- (a) all properties, funds and dues which are vested in or realisable by the Trust shall vest in and be realisable by the Municipal Board; b) all liabilities which are enforceable against the Trust shall be enforceable against the Municipal Board; (c) for the purpose of completing the execution of any scheme sanctioned under this Act, which has not been fully executed by the Trust, and of realising properties, funds and dues referred to in clause (a) the functions of the Trust under this Act shall be discharged by the Municipal Board as if it were the Trust under this Act; and (d) the Municipal Board shall keep separate accounts of all moneys respectively received and expended by it under this Act, until all loans raised hereunder have been repaid and until all other liabilities referred to in clause (b) have been duly met." Hence, it is clear from the above that if the appellant is dissolved by the Government, it would only go back to the government or similar entity only to continue carrying out the sovereign functions. The Ld. CIT with the interpretation that even government is a business entity and all civil & public utilities are part of the business like a private sector entity is actually the disregard to the federal structure of the Constitution. This is an undisputed fact that the State Government with the power vested in it through the Constitution of India is ultimately responsible to carry out sovereign functions required for the development of all the areas as a whole under its jurisdiction. Thus, if in case, any entity/body incorporated/constituted by the State does not function at the scale of required development and not able to provide the services as intended by the Act or it is required to create a larger body to function, it is upon the State Government to create a better system in form of constituting another authority/entity in place of the existing, so as to achieve the objects of the General Public utility. The provision never meant or intend towards revocability at all being the activities are sovereign functions and thus the question of revocability does not arise. Even that upon dissolution of any trust, if there is such condition that the fund/properties of any trust would vest in the State Government upon dissolution, it cannot be considered as a revocability clause. It is apparently evident that before the existence of the appellant Authority, UIT Bhiwadi was carrying the development functions in Bhiwadi and it was owing all assets. However, as the need arise to create a larger body for the development function and to include the nearby areas of the Bhiwadi region, BIDA came into existence in place of UIT, Bhiwadi, just like in case when Jaipur Development Authority came into existence, it was originally a JIT and then converted to development authorities. Hence, these sovereign functions has to be performed and carried on, there can be no revocation of it. IV. Ground No. 2 "The Ld CIT(E) has erred is law as well as in facts in rejecting the application of the appellant under section 12AB of the Income Tax Act, 1961 considering that the profitability and applicability of proviso to Section 2(15) of the Income Tax Act, 1961. A. Our submissions:

7 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) We would like to submit that BIDA has been created for the development of the Bhiwadi region and not with the objective to earn profit by carrying out any trade, commerce or business and any activity in relation to any trade, commerce or business. Kindly refer the main activities of BIDA under section 10 of the Act available at page no. 10 to 12 of the paper-book. Apart from acquisition lands for development & allotment of land for the purpose as per the prevailing rules & regulations, the activities mainly includes to regulate the development activities in the special investment region in accordance with the plans & schemes prepared under chapter V & the building regulations made by the regional development authority in this behalf: •To ensure the provision of sufficient infrastructure facilities & public & civil facilities & to make sustainable arrangements for adequate maintenance thereof. To provide/ civil facilities within the region & to provide municipal services within the region. To provide urban transport facilities for the region. •To make arrangements for observance & promotion of safety, order, health & environment safeguards, disaster management for the special investment region. •To give directions to any government agency or persons functioning in the region or periphery thereof in matters pertaining to plans & schemes. •To carry out surveys & prepare & execute plans & schemes as per the act. •To classify earmark & demarcate & develop the special investment region & the periphery for purposes & usages inter alia for any economic activity, infrastructure facility including housing and industrial areas & public & civil facility & to encourage & promote aesthetics & efficiency & generate revenues in the process of development. To regulate grant, suspend, withdraw or cancel approvals for permissions in accordance with the provisions of this act. To remove encroachment & construction not authorized & are in violation of the act & rules / regulations. The authority has provided the copies of various work orders for public utilities & civil amenities works in respect to the foresaid activities of the authority to the Learned CIT(E). In view of the above it is apparent that the authority is constituted to carry mostly the functions as laid down in article 243W (twelfth schedule) of the Constitution of India, the copy of which is enclosed as annexure to the submissions. Further the authority is also carrying the municipal functions in the region. It is therefore apparent that the authority is carrying the sovereign functions of the government as required & mandatory under the constitution of India. Here is it a matter of great surprise that Ld. Cit(exemptions) has passed an unjustified and baseless order mentioning that the authority is a business entity. B. No Distribution of surplus The Surplus is not distributed among its members and that it is utilised for the development of the Bhiwadi Region only. It is also to be understood here that the Rajasthan Special Region Act, 2016, does not provide anywhere that the surplus/profit would be directly or indirectly be transferred to any beneficiary or State, which is also the main test for any Charitable Trust to show that it does not intend to carry out any

8 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) trade, commerce or business, hence it cannot be said that without any profit motive, the Appellant Authority is a business entity. C. Non-applicability of proviso to Section 2(15) BIDA was constituted under the Rajasthan Special Region Act, 2016 with the predominant objective to provide for establishment, planning, development, operation, maintenance, management and regulation of Special Investment Regions in the State and to provide for matters connected therewith or incidental there to and not for carrying out any function in relation to trade, business or commerce. The objective thereto is not to carry out any trade, commerce or business or to carry out an activity in relation of any trade, commerce or business, hence, the second proviso of Section 2(15) is not violated/or applicable in this case. D. Clarification on the judgment of Honourable Supreme Court in case of AUDA We would also like to refer the judgment of the Honourable Supreme Court in case of Ahemadabad Urban Development Authority. The Ld Commissioner has grossly erred and put up the same with wrong notions in arbitrary basis. He has completely failed to understand the applicability of the same over the Statutory Authorities created to undertake the sovereign functions. The Honourable Supreme Court has concluded the judgment mentioned at page 141as TV. Summation of Conclusions' by segregating applicability of first proviso to Section 2(15) of the Income Tax Act, 1961 according to the nature of the organisations. At para 190 on page 142 of the judgment, the applicability has been discussed over the 'Authorities, corporations, or bodies established by statute', which is reproduced as under:- "The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions/services' (such as housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra) The judgment is apparently clear in its intention and wording that the receipts of the statutory corporations, board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions/services housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning has to be excluded from the mischief of business. E. Eligibility for exemption of the Authority after withdrawal of Section 10(20A) of the income Tax Act, 1961- As per the Section 10(20A), "(20A) any income of an authority' constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both;" All the Authorities constituted under any law enacted for the purpose of planning, development or improvement of cities, towns and villages or for both, were exempted from the Income Tax Act, 1961 under Section 10(20A) before 01.04.2003.

9 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) It has also been held at page in the above referred judgment that, "In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act." F. The Registration under section 12AB and its continuance- cleared The above judgment endorse the matter of registration under section 12AB, however, the learned CIT (E) instead of discussing issues on the matter of registration, has divided his attention by analysing all the issues with the view of making assessment of income of the appellant. We would like to submit to your good self directly from the first para on page 146 of the judgment, where it has been held that, "At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) auvancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee's activities amount to "trade, commerce or business" based on its receipts and income (i.e., whether the amounts charged are on cost- basis, or significantly higher). If it is found that they are in the nature of "trade, commerce or business", then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption." G. The appeal of revenue against the UITs and Development Authorities were rejected by the Honourable Supreme Court The Ld CIT(E) has not bothered himself to read the desicion where the appeal of all the UITs and Development Authorities has been decided against the revenue. Here, we would like to quote from the order itself at page146 and 147 of the order, "In accordance with the foregoing discussion, and summary of conclusions, the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga 158, the Hoshiarpur Improvement Trust159, Bathinda Improvement Trust160, Fazilka Improvement Trust161, Sangrur Improvement Trust 162; Patiala Improvement Trust163, Jalandhar Improvement Trust164, Kapurthala Improvement Trust165, Pathankot Improvement Trust166, Improvement Trust, Hansi167, and the Special Leave Petitions filed against the Gujarat CA Nos. 9974/2018 and 10371/2017 Co Nos. 12058/2017 and 9886/2018 CA Nos. 16375/2017, 2047/2019 and Diary No. 5683/2019 CA No. 10598/2018 CA No. 17527/2017 CA Nos. 9860/2018, 8321/2018, 2335/2019, 4449/2019 and 4957/2019 CA Nos. 12869/2017 and 10406/2018 CA No. 11259/2018 D. No. 44856/2018 CA No. 9200/2018 Maritime Board168 and Karnataka Water Supply and Drainage Board169 are rejected. (ii) The revenue's appeals against Ahmedabad Urban Development Authority 170, the Gujarat Housing Board171, the Gandhinagar Urban Development Authority 172, Rajkot Urban Development Authority 173, Surat Urban Development Authority 174, Jamnagar

10 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) Area Development Authority 175, and the Gujarat Industrial Development Corporation 176 are rejected. Likewise, the revenue's appeals against Agra Development Trust177; UP Awas Evam Vikas Parishad 178; Raebareli Development Authority 179, Rajasthan Housing Board 180; Mangalore Urban Development Authority 181; Mathura Vrindavan Development Authority 182; Meerut Development Authority 183; Belgaum Development Authority 184; Moradabad Urban Development Authority 185, Yamuna Expressway Industrial Development Authority 186; Greater Noida Industrial Development Authority 187; New Okhla Industrial Development authority 188 and Karnataka Industrial Area Development Board189 are rejected." H. New amendment from the Assessment year 2024-25 for the development authorities In the above discussed case of ACIT (Exemptions) vs. Ahmedabad Urban Development Authority, the Hon'ble Supreme Court of India has made a clear distinction when it comes to -, boards that were set up by the state or central government to do "public functions" or "services." The court has held in such cases that the amounts or any money whatsoever charged for public services are prima facie to be excluded from the mischief of business or commercial receipts because their objects are essential for the advancement of public purposes or functions. In light of the foregoing, it is proposed in the Finance Bill 2023 to amend the Income Tax Act to exclude the income of a body, authority, board, trust, or commission that is not a company from the scope of Section 10(46) of the Income Tax Act, and to insert a new clause (46A) in Section 10 to exempt their income. The new Section 10(46A) proposes to exempt any income derived by a body or authority, board, trust, or commission, other than a company, established or constituted by or under a central or state act for one or more of the following purposes: i) addressing and meeting the need for housing accommodations; (ii) city, town, or village planning, development, or improvement; (iii) regulating, or regulating and developing, any activity for the general public's benefit; or (iv) regulating anything that has to do with the reason it was made for the good of the general public Hence, we again submit that the Ld CIT(E) has completely misunderstood the intention of the judiciary and failed to read the clear distinction made by the Hon'ble Supreme Court in case of statutory authorities from the other charitable trusts. I. Mere surplus does not make any institution Business Entity The Ld. CIT has also taken a note that the charges levies fixed by the authority are higher than cost, while, it is surprising to note that the authority has to ensure the development of the whole region, to provide all infrastructure facilities, civil amenities public utility services, while in our view, no other entity is carrying on the similar functions, then how it was compared that the charges fixed are higher in cost. There may be surplus in a particular year as various development works are ongoing and the authorities is having cash basis system of accounting, the said surpluses, if any in a particular year, would be invested to carry its objects for the further years. That is why the legislature has included specific section 11(2), according to which if the receipts is not applied in that year, it can be applied in next 5 years for which the appropriate form

11 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) has to be filed. Further, there is also a section 13 (3) in the IT act, which lays down that if the registered institution is not able to use/apply the said set apart of income within the permissible time, it would become part of the taxable income. In view of the said provision, it is apparently clear that on the basis of surplus, it cannot be concluded that it is a trading or business entity. Further, we would also like to rely on a recent order passed by the Hon'ble Coordinate Bench in the case of Rajasthan Paramedical Council in ITA no. 30331/JP/2022 Order dated 3.4.2023 at para 6 of the order at page no. 164 of the paper-book (last five lines). "The surplus cannot lead by itself that the activities are from trade commerce or business. There can be a revenue surplus in particular years which is allowed to be applied in the next years as permitted under the act. The unapplied amount becomes the income of the assesse after end of the time limit. In view of the above it is apparent that the Ld. CIT instead of examining the facts on merits of the case, has gone arbitrarily on different interpretations & diverted the issues. Apparently, the authority therefore eligible to be registered as charitable institutions under provision of section 12A of the IT Act." J. Ruling in favour of Development Authorities We would also like to rely upon various judgments of Hon'ble High Courts and Hon'ble Tribunals, on the matter of registration under section 12A and non-applicability of proviso to Section 2(15) of the I.T. Act passed in favour of the Development Authorities. The copy of order of Honourable Coordinate Bench in the case of Jaipur Development Authority vs. CIT (page 167-190 of paper-book). The operating part at page 23 of the order is reproduced below: "The appellant is a government agency and engaged in the coordinate and planned development of Jaipur region and which is predominant object of it. The learned CIT also erred in applying the provisions of Section 293(c) of the Act, in this case, which applied withdrawal of approval granted under any provision of this Act, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision. For cancellation of registration, the specific provision U/s 12AA is provided. Therefore, we are of the considered view that learned CIT was no right to withdraw the registration of the appellant from A.Y. 2009- 10. Accordingly, we set aside the order of the learned CIT(A) and directed to grant the registration to the JDA." Further, in the order passed by the Honule Rajasthan High Court in the case of CIT vs Jodhpur Development Authority (page 114-147 of paper-book), the operating part at page 32 of the order is reproduced below: "The appellant is a government agency and engaged in the coordinate and planned development of Jaipur region and which is predominant object of it. The learned CIT also erred in applying the provisions of Section 293(c) of the Act, in this case, which applied withdrawal of approval granted under any ITA 182/JP/2012 Jaipur Development Authority Vs. CIT 24 provision of this Act, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision. For cancellation of registration, the specific provision U/s 12AA is provided. Therefore, we are of the considered view that learned CIT was no right to withdraw the registration of the appellant from A.Y. 2009- 10. Accordingly, we set aside the order of the learned CIT(A) and directed to grant the registration to the JDA." K. Recent Development in case of Statutory Bodies

12 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) In the case of CIT (Exemptions) vs Gandhinagar Urban Development Authority (454 ITR 43), the Honorable Supreme Court after considering the judgment of AUDA, has dismissed the SLP of the Revenue. Further, in a M.A. filed by Department for clarification in the case of Ahmedabad Urban Development Authority, the Honourable Supreme Court has clarified at para 4 that, "A plain reading of the conclusions recorded in Para 253 (A)(B)(C) (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- in relation to the assessment years in question. These conclusions are accurately reflected in the final, operative directions in Para 254. In Para 254 (1) to (iv), the conclusions recorded are against the revenue. However, in Para 254 (v), (vi), (vii) and (vii), the conclusions, are in favour of the revenue." The copy of this para is enclosed. Hence, in view of the same, there is a clear ruling that the appeal of revenue against Development and Urban Authorities has been rejected and decided in favor of the Assessee, which means that the proviso to Section 2(15) is not applicable to them and they are entitled to claim the benefits of section 11 and 12 of the I.T. Act. The copy of the order is enclosed. Further, relying on provisions of law in case of charitable institutions as applicable upon the Statutory Authorities, the permanent registration has been granted to many Statutory Authorities by the Department, out of which, the copy of the registration of Jaipur Development Authority and Rajasthan Paramedical Council is available at page 191-195 of the paper-book. L. Prayer In view of the above submission, your kind honours are requested to issue the directions to grant the permanent registration, in confirmation of the provisional registration granted and oblige in the public interest.”

S No. Particulars Page No. 1. Copy of the notification and the Rajasthan Special Investment 1-39 Region Act, 2016 2. Provisional registration certificate and Form No. 10AB filed on 40-48 02.01.2023 3. Reply submitted to ld. CIT(E) dated 21.03.2023 49-50 4. Submissions made before CIT(E) dated 27.07.2023 51-57 5. Copy of Balance Sheet and Income & Expenditure Account for 58-63

13 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) the FY 2019-20 to 2021-22 6. Order of Honorable Supreme Court in the case of Addl. CIT vs. 64-113 Surat Art Silk Cloth manufacturers Association 7. Order of Honorable Rajasthan High Court in the case of CIT vs. 114-147 Jodhpur Development Authority 8. Order of Honorable coordinate Bench in the case of RPMC vs. 148-166 CIT(E) 9. Honorable Coordinate Bench in the case of Jaipur Development 167-190 Authority vs. CIT 10. Copy of permanent registration of JDA and RPMC 191-195

14 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) Based on these arguments the ld. AR of the assessee prayed that the rejection of benefit u/s 11 & 12 of the Act cannot be denied to the assessee. The ld. AR of the assessee also to drive home to the various contentions so raised relied upon the decision of Rajasthan Para-medical Council vs. CIT(E) in ITA No. 331/JP/2022 dated 03.04.2023and Jaipur Development Authority vs. CIT in ITA No. 182/JP/2012 dated 30.09.2014, therefore, considering that aspect of the matter the registration the assessee is eligible to get the registration.

8 We have heard the rival contentions and perused material available on record. The Bench noted that the ld. CIT(E) rejected the registration u/s. 12AB of the Act on the reason that the activities conducted by the applicant are highly profitable in nature to the extent of 55 % and are outside purview of charitability and therefore, not considered the activities

15 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) as charitable in nature. The ld. CIT(E) also noted that the assessee earn huge margin and there is no clause that assessee would give goods and services at cost or nominal margin and assessee’s unwillingness to give details of cost and margin on various streams of income, and selling land at auction when read with section 2(15) read with the decision of the apex court in AUDA. Based on these observationthe reasons advanced by the ld. CIT(E) is that the assessee is not holding property and income held under trust and profitability and applicability of proviso to section 2(15). The bench noted that the reasons advanced by the ld. CIT(E) are not sufficient to reject the application for registration based on the set of facts placed before us. The bench noted from the facts placed on record that the assessee is developing and selling the government owned land and CIT(E) considered this activity as business activity and ld. CIT(E) failed to appreciate that the assessee is engaged to develop the Bhiwadiarea and the activity is not meant for profit and assessee is making auction as per the prudent practices of selling the government land at appropriate market rate on auction and the same cannot be termed as business and profit making activity. Even in the judgment of the AUDA the apex court held that when the trust carrying the activity @ 20 % margin could be considered and would not vitiate the purpose of charitable activity. The issue for

16 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) registration of Jodhpur Development Authority, Jodhpur has been dealt by the Hon’ble Jurisdictional Rajasthan High Court and as relied upon the by the ld. AR of the assessee we have considering the binding precedent has followed the judgment of the jurisdictional high court wherein the reference on the issue was as under:- “4. Precisely, the question comes for consideration of this court is whether the activities of JDA, Jodhpur and UIT, Sri Ganganagar, which have been constituted and established by the Government of Rajasthan under the provisions of Jodhpur Development Authority Act, 2009 ('JDA Act') and Urban Improvement Trust Act, 1959 ('UIT Act'), for the purposes of planning, coordinating and supervising the proper, orderly and rapid development of Jodhpur Region and for the purposes of improvement and expansion of the urban area of Sri Ganganagar as specified, respectively, fall within the definition of 'charitable purposes' as defined under Section 2(15) of the Act of 1961 so as to make them entitled to registration under the provisions of Section 12A read with Section 12AA of the Act of 1961, for claiming the benefit of exemption under Section 11 and 12 read with Section 13 of the Act of 1961?

On the above issue the jurisdictional high court has held that “8. We have considered the rival submissions of the learned counsels for the parties and perused the relevant provisions as also the various decisions cited at the Bar.

17 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) institution in the manner and to the extent specified shall not be included in the total income of the previous year. Sub-section (2) of Section 11 deals with situation where income referred to in clause (a) and (b) of sub-section (1) read with Explanation to the sub-section is not applied or is not deemed to have been applied to the charitable purpose 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 and mandates that such income shall not be included in the total income of the previous year of the person in the receipt of the income on the compliance of the conditions specified in sub-clauses (a) and (b). Sub-section (3) of Section 11, provides that any income referred to in sub-section (2) which is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or ceases to remain invested or deposited in any of forms or modes specified in sub-section (5) or is not utilized for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub- section or in the year immediately following the expiry thereof or is credited or paid to any trust or institution registered under Section 12A or any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause 23C of Section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be accumulated or set apart or ceases to remain so invested or deposited or credited or paid or as the case may be, of the previous year immediately following the expiry of the aforesaid period.

18 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) the person is subject to fulfillment of the conditions specified under Section 12A of the Act, which includes the making of an application by the trust for registration and granting of the registration by the Commissioner in accordance with the procedure laid down under Section 12 AA.

19 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) cannot be recognized as for charitable purposes so as to make them entitled for registration under Section 12A of the Act of1961.

20 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) 20. In Sole Trustee, Lok Shikshana Trust vs. CIT, (1975) 101 ITR, 254, the Hon'ble Supreme Court observed: "If the profit must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The restrictive condition that purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the object."

21 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) 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 be a charitable purpose (CIT v. Ahmedabad Rana Caste Association [(183) 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 v. 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 v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)). The present case in our view is squarely covered by the judgment of this court in the case of CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC) in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income- tax. Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), we find that, in the present case, the Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive, as indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat. In the circumstances, in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case." (emphasis added)

22 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) mandi fees is not shown to be spent wholly for the purpose of relief of the poor, education, or medical relief, but under the scheme of the Act, being the Rajasthan Agricultural Produce Markets Act, 1961, the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include advancement of "any other object of general public utility".

23 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) 27. From various decisions of the Hon'ble Supreme Court discussed hereinabove, the settled position of law emerges is that 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, may be involving element of profit, would not prevent the institution from being a valid charitable trust.

24 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region. Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of Section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under Section 12A read with Section 12AA of the Act of 1961. As a matter of fact, it is not even the case of the Revenue that the object of general public utility sought to be achieved by constitution and establishment of the JDA as such, involve carrying on of any activity for profit and therefore, it is immaterial if some income is earned by ancillary and incidental activities, which as per the mandate of the relevant statute, is used for achieving or implementing such object. The genuineness of the activities of the JDA, which are regulated by the provisions of the JDA Act and the Rules made thereunder, cannot be doubted. Thus, the order passed by the ITAT holding the JDA, Jodhpur entitled for registration under Section 12A read with Section 12AA of the Act of 1961, does not suffer from any infirmity or illegality.”

Respectfully following the above detailed binding precedent of the jurisdictional high court and since the decision of the apex court as argued by the ld. DR is dealing with the taxability of the profit earned and it does not deal with the registration of the trust and since there is no contrary

25 ITA No. 595/JPR/2023 Bhiwadi Integrated Development Authority vs. CIT(E) judgment referred by the revenue, we have considering the binding precedent decided by the Hon’ble ed by the jurisdictional high court in the case Jodhpur Development Authority and direct the ld. CIT(E) to grant the registration as per provision of section 12AB of the Act.

In the light of the above discussion the appeal filed by the assessee is allowed. Order pronounced in the open court on 16/01/2024.

Sd/- Sd/- ¼jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 16/01/2024 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Bhiwadi Integrated Development Authority, Alwar. 1. 2. izR;FkhZ@ The Respondent- CIT, Exemption ,Jaipur. 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZQkbZy@ Guard File ITA No.595/JPR/2023) vkns'kkuqlkj@ By order,

सहायकपंजीकार@Aेेजज. त्महपेजतंत