Income Tax Appellate Tribunal - Delhi
New Okhla Industrial Development ... vs Assessee on 22 July, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E' NEW DELHI
Before Sh. C.M. Garg, J.M and Sh. O.P. Kant, A.M
Appeal No. 172/DEL/2016
New Okhla Industrial VS CIT(E)
Development Authority Lucknow
Administrative Block, Sector-06,
District- Gautam Budh Nagar,
Noida
APPELLANT RESPONDENT
PAN No. AAALN0120A
Appellant by: Sh. Balbir Singh, Sr. Adv alongwith
Sh. Abinash Mehrotra, Adv,
Sh. Sunil Kumar Gupta, CA,
Sh. Dinesh Verma, CA, and Ms. Raj Rani Lakra, CA,
Respondent by: Shri Rajesh Kumar, CIT- DR.
Date of final hearing : 18/05/2016
Date of pronouncement : 22 /07/2016
ORDER
Per C.M. Garg, JM
. This appeal has been filed against the order of the Commission of the Income Tax (Exemptions) Lucknow dated 19.11.2015 by which application of the appellant for grant of registration under Section 12A of the Income Tax Act, 1961 (for short the Act) has been dismissed.
22. The grounds raised by the appellant read as follows:
1. "Because on the facts and in the circumstances of the case, the Ld. CIT (Exemption), grossly erred in the law and on facts in rejecting the application filed by the assessee seeking grant of Registration U/s 12AA of the Income Tax Act, 1961, without lawfully appreciating the true and correct facts of the case and hence the order is liable to be quashed.
2. Because on the facts and in the circumstances of the case, the Ld CIT (Exemption,) grossly erre4d in law and facts in rejecting the application filed by the assessee, without lawfully appreciating that the assessee is a statutory authority constituted under section 3 of the Uttar Pradesh Industrial Development Act, 1976 (UPIDA) and is duly notified by the Hon'ble Governor of Uttar Pradesh as an Industri9al Township under Article 243Q of the Constitution of India; and is statutorily mandated by section 6 of UPIDA for rendering public utility services, satisfying the requirements of section 2(15) of the Income Tax Act and hence entitled to be g ranted registration under section 12AA of the Act.
3. Because on the facts and in the circumstances of the case, the Ld. CIT (Exemption), grossly erred in law and on facts in treating the assessee as a commercial business entity, whereas the assessee, being a statutory authority notified under Article 243Q of the Constitution of India, is obliged to perform its functions as declared under Schedule XII prescribed under Article 243W of the Constitution of India and hence cannot be treated as Commercial/Business entity and hence the activities of the authority being in accordance with section 2(15) of the Income Tax Act, is liable to be granted registration under section 12AA of the Income Tax Act.
4. Because, the Ld CIT (Exemption), grossly erred in law and on facts in treating the assessee as a Commercial Business Entity, without appreciating that mere earning of surplus receipts from the activities of the assessee for the purpose of SELF-
SUSTAINANCE, cannot be regarded as PROFIT-MOTIVE;
hence such observations of the Ld CIT (Exemption) being in direct conflict of the verdict of the Hon'ble Apex Court in the 3 cases of SHRI RAMTANU CO-OPERATIVE HOUSING SOCIETY 1971 SCR(1) 719, GUJARAT MARITIME BOARD [2008] 166 TAXMAN 58 (SC) AND ANDHRA PRADESH ROAD TRANSPORT CORPORATION 25 TAXMAN 63A (SC) is liable to be repelled being inferior observations in view of the final verdict of the Supreme Court and the assessee be granted registration U/s 12AA.
5. Because on the facts and in the circumstances of the case, the Ld CIT (Exemption) grossly erred in law in failing to apply and follow the binding judgment of the Hon'ble Jurisdictional High Court in the case of Lucknow Development Authority and that of the Hon'ble Jurisdictional ITAT Delhi in the case of Haridwar Development Authority by citing irrelevant/ extraneous reasons and which judgments are squarely applicable to the facts and circumstances of the instant case and on such count the impugned order, being unsustainable in law, deserves to be quashed.
6. Because on the facts and in the circumstances of the case, the LD CIT (Exemption), grossly erred in law and on facts in treating the assessee as a commercial business entity, without appreciating that the objects/ activities of the assessee are in furtherance of public policy and activities of the assessee have not been acknowledged/ taken note-off of the Ld CIT (Exemption), while adjudicating the claim of the assessee and hence the order is liable to be quashed.
7. Because on the facts and in the circumstances of the case, the LD CIT (Exemption), grossly erred in law and on facts, while passing the impugned order in placing reliance upon case law authorities that are clearly distinguishable and inapplicable to the facts and circumstances of the instant case as in none of the cases cited by the Ld CIT (Exemption) the provisions of Chapter IXA of the Constitution of India, get attracted or have been incorrectly interpreted by the Ld CIT (Exemption) and hence on such premise the order being based upon relevant considerations, deserves to be quashed.
8. Because on the facts and in the circumstances of the case, the impugned order of the Ld CIT (Exemption), is liable to be quashed as the same is made by incorrectly observing that 4 proper details were not supplied by the assessee, whereas in contrast, all requisite details were supplied by the assessee before the Ld CIT (Exemption) and the Ld CIT (Exemptions) has rather passed he impugned order in a premeditated and biased manner, violating the principles of Natural Justice, as the order is passed on the same date on which the hearing was fixed and hence the order is liable to be quashed on this court.
9. Because on the facts and in the circumstances of the case, the LD CIT (Exemption), grossly erred in law and on facts in rejecting the application filed by the assessee seeking grant of Registration U/s 12AA of the Income Tax Act, 1961, without appreciating that the Books of Account of the Assessee are duly audited by the State Government Auditor (Local Fund Auditor) and that no expense can be incurred by the assessee without the authority of law or for a purpose otherwise than those enumerated under section 6 of the UPIDA; hence the observations of the CIT (Exemptions) to the contrary are liable to be rejected.
10.That the order passed by the Ld CIT (Exemption) is further liable to be quashed as the same is made in violation to the principles of Natural Justice as the Ld CIT (Exemptions) did not provide due and proper opportunity of hearing to the assessee and hence the order is liable to be quashed on this count as well.
11.Because on the facts and in the circumstances of the case, the Ld CIT (Exemptions), failed to perform its bounden legal obligation to follow and apply the decisions of the Hon'ble Jurisdictional Court and the Hon'ble Jurisdictional Tribunal, in identical facts and circumstances, rather than to frivolously compel the assessee to pursue litigation and for which reason, COSTS are liable to be awarded to the assessee.
12.The Humble Applicant craves for leave to raise any other or further ground of appeal with the permission of the Hon'ble Income Tax Appellant Tribunal"
53. We have heard the arguments of the both the sides and carefully perusal relevant materials placed on record of the Tribunal inter-alia, impugned order of the CIT(E) papers books filed by the assessee and other relevant record.
4. The Ld Senior Counsel first of all submitted that the main grievance of the appellant is covered by the order of the ITAT New Delhi in the case of Haridwar Development Authority, Vs CIT(E) Dehradun, order dated 25.07.2014 (assessee paper book page 52-67) wherein para 7 and 7.1 it has been categorically held that the activity carried out by the assessee comes within the last limb of section 2(15) of the Act vis advancement of other object of general public utility and therefore, it has to be examined whether the same does not involve the carrying on of activity in the nature of trade, commerce, business or any activity of rendering of any services in relation to any trade, commerce or business or cess of fee or any other considerations irrespective of the nature of the huge or application of reduction of the income from such activity.
5. The Ld Senior counsel further pointed out that the prayer of the assessee further get support from the order of the Hon'ble Jurisdictional High Court of Allahabad, in the case of CIT(E) Vs Lucknow Development Authority, (LDA) dated 16.09.2013 passed in ITA No. 149 of 2009 and other related appeals. The Ld. Senior Counsel, further drawn our attention towards relevant operative part of the said decision and pointed out that in that case it was held that the appellant (LDA) was established under the provisions of the Uttar Pradesh Planning and Development Act, 1973 (for short UPUPDA) and thus it was "Statutory Authority" and prior to 6 01.04.2003 the appellant was enjoying exemption under Section 10 (20A) and Section 10 (29) of the Act, and when these provisions were amended with effect from 01.04.2003 then the necessity arose to registrar the authority under Section 12A of the Act. The Ld. Counsel further pointed out that the present appellant has been created under the provisions of (UP) Industrial Area Development Act, 1976 (for short UPIDA) and in this Act the provisions of Uttar Pradesh Urban Planning and Development Act, 1973 has been borrowed and used by the legislation and the Act of 1976 by which present appellant has been created and the provisions in both the acts are perimateria therefore, as per objects mentioned in Section 6 that the authority shall secure the planned development of industrial development areas which is an object of general public utility as provided in the last limb of section 2(15) of the Act.
6. The Ld. Senior Counsel also pointed out that as per ratio of the decision of Hon'ble High Court of Allahabad in the case of CIT(TDS) VS Canara Bank, reported as (2016) 69 taxman.com 204 (Allahabad) it has been held that new Okhla Industrial Development Authority, i.e. appellant of the present appeal is a corporation established by a state Act, and is, therefore, entitled to exemption of payment of Tax at source Under Section 194-A (1 of the Act). The Ld Senior Counsel specially drawn our attention towards paragraphs No. 39 and 40 of the said decision and contended that the appellant has been granted a status of Municipality under Article 243-Q of the Constitution of India, which deals with the Constitution of a Municipality. It was also contended that the UP, state government issued a notification dated 24.12.2001 in exercise of power conferred under the proviso to clause 1 of Article 243-Q of the Constitution which provides that 7 having regard to the size of Noida which has been declared to be an industrial development area by notification dated 17.04.1976 and the municipal services being provided by the Noida, the Governor is pleased to specify that the Noida, would be an "Industrial Township" with effect from the date of publication of the notification which clearly means that instead of Municipal Corporation providing services, Noida would provide the said services. The Ld Counsel further pointed out that in the light of observations of Hon'ble High Court of Allahabad, and as per ratio of decision of Hon'ble Apex Court in the case of S.S. Dhanoa Vs Municipal Corporation Delhi, AIR 1981 SC 1395 it has to be accepted that the appellant will owe its existence to an act of the state i.e. UPIDA, 1976.
7. The Ld Senior Counsel further contended that as per decision of Hon'ble Supreme Court, in the case of Shri Ramsetu Corporative Vs State of Maharashtra AIR 1970 SC 1771, it has been held that the corporation is established for the purpose of securing and assisting the rapid and orderly establishment and organization of industries in the Industrial Areas, and in the Industrial States in the state of Maharashtra selected by the State Government for the purpose and make them available for undertakings to establish themselves is not a government company within the meaning section 617 of the Companies Act, 1956 nor the provisions of said Act, can be said to apply to the corporation because under the provisions contained in section 616 of the Companies Act, the provisions of that Act will apply to a company governed by any special Act. The Ld Counsel vehemently contended that for the purpose of evaluation of objects and activities of the present appellant the provisions of UPIDA, has to be seen and the functions and powers of the appellant are to be gathered from the said Act, which 8 created the existence of appellant for the development of industries in the UP state.
8. The Ld Senior Counsel further pointed out that the CIT(E) rejected application of the appellant for grant of registration under Section 12A of the Act has been dismissed by drawing a conclusion which is clearly against the ratio of the relevant decisions and thus the same cannot be held as sustainable. The Ld Senior Counsel vehemently pointed out that observations in para 9 to 13 of the impugned order the CIT(E) has considered irrelevant facts for dismissing application of the assessee and he has ignored all relevant facts and circumstances regarding objects and activities of the appellant which has been created by the special Act of UP state i.e. UPIDA 1976 which is parematirea to the provisions of earlier UPUPDA Act of 1973. The Ld Senior Counsel also pointed out that the appellant is control by UP Government and after dissolution of authority all properties and funds shall vest in or we released by the State Government of UP, therefore, appellant is quite dissimilar with the other profit making companies and firms. The Ld Senior Counsel lastly pointed out that appellant may kindly be granted registration under Section 12A of the Act, and if any discrepancies or profit motive objects is found them he may denied exemption under Section 11, 13 and other provisions of the Act.
9. Replying to the above the Ld Departmental Representative (DR) drawn our attention towards observations and conclusion recorded by the CIT(E) in the impugned order. First of all he took us through para 3 of the impugned order and submitted that the appellant could not produce details of activities undertaken during AY 2014-15 despite of many opportunities given to the 9 appellant. The Ld DR further pointed out that in order to find out the facts regarding charitable activities of the appellant the CIT(E) granted several opportunities to provide the basis of costing of various plots/flats developed and soled by the appellant along with its sale price in order to ascertain the claim of the appellant regarding charitable activities but the direction of the CIT(E) could not be complied and hence adverse presumption was drawn against the appellant. The Ld DR further pointed out that in the Income Tax Return for AY 2015-16 the appellant claim exemption under Section 10(20) of the Act and at the same time it was seeking registration under Section 12AA of the Act, by filing the application before CIT(E) which is not a bona-fide act of the appellant.
10. The Ld DR further drawn our attention towards para 5 of the impugned order and contended that the appellant is not carrying out any activity for advancement of any object of general public utility and is purely involved in commercial activities for the purpose of making profit by acquiring lands from the farmers and others at a low price and after development the same land is being sold at a premium at high price to the perspective buyers, therefore it is clear that the activities of the appellant are profit motive which cannot be said to a activity of charitable purpose of general public utility. The Ld DR further pointed out that however, on dissolution of the authority all assets shall be transferred to the government and there is no restriction on the further use of these assets by the government and there is no restriction regarding utilization of the left property only for charitable purposes therefore the appellant cannot be term as a charitable organization.10
11. The LD DR also drawn our attention towards second part of para 7 of the impugned order and submitted that although objects of the appellant claimed to be charitable, but in fact same are purely of commercial nature with a profit motive because the assessee has been acquiring land at a very low price selling developed properties at a very high rate by adding the premium, therefore motive of profit earning is clear from such activity. The Ld DR strenuously pointed out that after analyzing all facts and circumstances of the case in the light of relevant provisions the CIT(E) rightly concluded that the assessee is not involved in any charitable activity of general public utility and therefore not eligible for registration under Section 12A of the Act. The LD DR concluded his argument by submitting that the activities of the appellant are of commercial in nature with a profit motive which cannot be said for charitable purpose of general public utility and despite of several opportunities, the appellant could not furnished required details regarding its activities to establish that it is undertaking charitable activities of the nature of general public utility, therefore application for grant of registration under Section 12A of the Act, was rightly dismissed by the CIT(E).
12. During the subsequent hearing on behalf of the revenue a copy of decision of Hon'ble High Court of Allahabad, in the case of New Okhla Industrial Development Authority Vs CCIT in Civil Misc. Writ Petition No. 1338/2005 dated 28.02.2011 was submitted and it was contended by the Ld DR that after 01.03.2003 the appellant is not a local authority within the meaning of section 10(20) of the Act. The LD DR also file copy of the order of Hon'ble High Court of Allahabad wherein Review Petition of the appellant requesting to recall earlier order dated 28.02.2011 has been 11 dismissed. The Ld DR further drawn our attention towards copy of order of Hon'ble Supreme Court in Special Writ Petition (Civil) No. 1820-1821/2011 dated 17.01.2014 and submitted that even in the SLP filed by the appellant prayer of interim relief has been rejected and the situation till date is that the appellant is not a local authority within the meaning of Section 10(20) of the Act.
13. The LD DR reiterated written synopsis filed by the revenue and vehemently argued that despite being repeatedly called for information, the appellant did not provide certain information, and also failed to support its contention that the activity carried out was charitable in nature. The Ld DR pointed out that the appellant did not produce any books of accounts and voucher on the pretext of being "voluminous" and hence, the contention of not appreciating the books of accounts does not arise and this conduct of assessee cannot be said to be a bona-fide act of an applicant seeking registration under Section 12A of the Act even if the contention of the appellant is accepted that it had filed proper and complete details, it is submitted that the details put on record have been thoroughly considered by the Ld. Commissioner. The Ld DR also contended that a speaking order has been passed refusing the registration and giving the details of business activity carried on by the appellant and reasons as to why the activity of the appellant cannot be considered to be a charitable activity.
14. During the last round of hearing the LD DR pointed out that as per decision of Hon'ble Jurisdictional High Court dated 28.02.2011 (supra) the appellant is not a local authority under section 10(20) of the Act, and the assessee is filing Income Tax Return by claiming exemption under Section 12 10 (20) of the Act, which shows the falsity on the part of the assessee. The Ld DR also pointed out that the assessee filed application seeking registration under section 12A of the Act on 15.05.2015 before CIT(E) Lucknow and it should have been filed with Principle Commissioner of Income Tax (PCIT) Noida as the assessing officer of the appellant is DCIT Circle 6, Noida which falls within the administrative control of PCIT Noida and thus application has been filed by the appellant before CIT(E) Lucknow, who has no valid jurisdiction to entertain the same, could not be allowed and the same was rightly dismissed.
15. However, on specific query from the bench the Ld DR fairly accepted that in the impugned order there is no mention of jurisdiction issue and application of the appellant has not been rejected on the jurisdiction ground. The Ld DR also fairly accepted that the assessee cannot file its Return of Income by claiming exemption under Section 11, 13 and other relevant provisions of the Act, without getting registration under Section 12A of the Act.
16. Replying to the above the Ld Senior Counsel also placed rejoinder to the above submissions of the Ld DR on behalf of the revenue and contended that there is no mention of any observations in the impugned order by the CIT(E) that he has no jurisdiction to entertain application of the assessee for grant of registration under Section 12A of the Act and it was not the basis for denial of registration by the CIT(E) therefore, this issue cannot be agitated by the revenue. The Ld Senior Counsel also placed reliance on the recent decision of Hon'ble High Court of Delhi in the case of India Trade Promotion Organization Vs DGIT(E) reported as 371 ITR 333 (Delhi) and 13 contended that the amendment of section 2(15) of the Act, inserted by the finance Act, 2008 has been read down by the High Court by observing that when primary and dominant object of the institution is to advance general public utility activities then income generated by incidental commercial activities does not disentitle the applicant/appellant for registration 12A of the Act, as charitable institution is entitled to exemption.
17. The Ld Senior Counsel drawing our attention towards para 58 of the said decision pointed out that it has been held by their lordship that "the dominant and the prime objective have to be seen. If the dominant and the prime objective of the institution, which claims to have been established for charitable purpose, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a "charitable purpose" on the flip side, where an institution is not driven primarily by a desire or motive to earn profits but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes.
18. The Ld Senior Counsel also pointed out that as per decision of Hon'ble Supreme Court in the case of CIT(E) Vs Gujarat Maritime Board reported as (2008) 166 Taxman 58 (SC) and contended that in this case it was held that when assessee was statutory authority established under Special Act of State of Gujarat and management and control of the assessee was essentially with the state government having no profit motive then the assessee cannot be precluded from claming exemption under Section 11(1) of the Act, in the 14 light of definition of words "charitable purposes" as defined under Section 12 (15) of the Act, even if it has ceased to be a local authorities under Section 10(20) of the Act, and in the similar facts and circumstances of the present case the appellant is ceased to be exist as a local authority under Section 10(20) of the Act, by the order of Hon'ble High Court dated 28.02.2011 but it is entitled for exemption under Section 11(1) of the Act, by establishing that the predominant purpose of the appellant is development of industrial areas and industrials zones in the states, which has been created by the special Act, i.e. UPIDA 1976, under the management and control of the UP state having no profit motive and its activities are of charitable purposes of general public utility. The Ld Senior Counsel lastly pointed out that for securing and getting exemption under Section 11(1) and other relevant provisions of the Act, it is necessary to get registered under Section 12A of the Act which has been denied on the basis of incorrect and irrelevant reasons. The Ld Senior Counsel strenuously argued that after establishing its position of an statutory authority created by the special Act of the state for charitable purpose without any profit motive for development of industrial areas in UP state, which is a general public utility activity, the appellant cannot be precluded from getting registered under Section 12A of the Act.
The Ld Senior Counsel again placed reliance on the decision of Hon'ble Jurisdictional High Court of Allahabad in the case of CIT Vs Canara Bank (supra) and submitted that appellant is a corporation established by a state Act, therefore, it should be granted registration under Section 12A of the Act.
19. The Ld Senior Counsel also drawn our attention towards decision of Hon'ble Supreme Court in case of M.D. H.S.I.D.C and Ors Vs. M/s Hari 15 Om Enterprise and Anr Passed in Civil Appeal No. 1089/2008 dated 16.05.2008 and contended that corporation is a public sector undertaking which develops infrastructure for setting up of industrial units and in view of the object and purport for which the corporation had been constituted and incorporated it must be held to be a government function for charitable purposes of general public utility. The Ld Senior Counsel pointed out that the activities of the appellant are under complete control of State Government having no profit motive and for the purpose of charitable activities of general public utilities therefore, the CIT(E) was not justified and correct in dismissing application of the assessee. No any other argument has been submitted by both the parties.
20. On careful consideration of above submissions at the very outset, we may point out that the main controversy in this appeal is regarding denial of registration under section 12A of the Act to the appellant. From the relevant operative part of the impugned order we observed that the application of the appellant has been rejected mainly on the following grounds:
(i) that the applicant authority could not produce, book, bank statement and vouchers in respect of expenses claimed by the applicant for verification of the activities of the trust and in absence of same it could not be ascertained if the applicant is involved in any charitable activities as claimed by it.
(ii) The CIT(E) also observed that the applicant authority is not carrying any charitable activity as the applicant has got income from lease rent, processing fee, time extension charges, transfer charges, rent permission charges, building plan fee, parking, toll bridge, forfeiture charges, water, swear charges, forms and penalty etc. like other private builders/colonizers.16
(iii) The assessee could not produce details of activity undertaken during FY 2014-15 in spite of many opportunities provided to it to submit basis of costing of various plots/flats along with its sale price in order to ascertain claim of the applicant regarding charitable activities but the assessee failed to reply in this regard.
(iv) It was also observed by the CIT(E) that in the return of income the assessee/applicant has shown nill income by making a provision for development and maintenance of infrastructure of utilities and claiming exemption under section 10(20) of the Act, which was not admissible to the assessee and at the same time applicant is seeking registration under section 12A of the Act, which cannot be allowed.
(v) It was also alleged that from the financial statement filed by the applicant for FY 2013-14 the applicant got property development income which comprises of sale of develop land and sale of constructed property and in view of business activities of the assessee it shows that the applicant is in into the business development and sale of property for earning profit on the commercial lines without any intention of charitable purpose of public utility and there is no charitable activities being done by the applicant at all.
(vi) It was also alleged that the applicant has been acquiring land at a very low price and selling plots/ flats at a very high rate and is therefore earning profit from such activity and thus it can be clearly inferred that the applicant is not involved in any charitable activity and thus not eligible for registration under section 12A of the Act.
(vii) The LD CIT(E) lastly alleged that the applicant is primarily carrying out its business activities for making profit just like any other private builder/developer and applicant is neither a local authority nor carrying out any charitable activity, therefore it is not eligible for registration under section 12A of the Act.
(viii) The activities of the authorities are hit by newly inserted proviso to section 2(15) of the Act because the appellant is primarily running 17 its business on purely commercial lines without any intention of charitable activities.
21. First of all we may point that as per provision of section 12A of the Act, that the pre-condition for applicability of section 11 and 12 of the Act, is that the claimant/assessee should be registered under section 12A of the Act, and procedure for grant of registration has been provided in section 12AA of the Act, which reads as follows:
[Procedure for registration.
12AA. (1) The [Principal Commissioner or] commissioner on receipt of an application for registration of a trust or institution made under clause or clause (aa) of sub-section (1)] of section 12A, shall-
(a) Call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf and
(b) After satisfying himself about the objects of the trust or institution and the genuineness of its activities he-
(i) shall pass an order in writing registering the trust or institution;
(ii) shall if he is not so satisfied, pass an order in writing refusing to register the trust or institution. And a copy of such order shall be sent to the applicant:
22. In view of above provision, in our humble understanding for adjudication of application seeking registration under section 12A of the Act, the granting authority has to satisfy himself about the genuineness of the activities of the applicant and he may also make such inquiries as he may deem necessary in this behalf and after satisfying himself about the objects 18 of the applicant and genuineness of its activities, he shall pass an order in writing registering the applicant under section 12A of the Act. Thus, in the light of above mandate, first of all, the registration granting authority is required to satisfy himself about the objects of the applicant and genuineness of the activities and thereafter, if required, in order to satisfy himself about the genuineness of the activities he may also make such enquiries as he may deem necessary on this behalf. In the present case, the CIT(E) first of all, proceeded to direct the assessee to provide the basis of costing of various flats/plots alongwith sale price in order to ascertain the claim of the assessee regarding charitable activities. Thereafter, he observed that despite of several opportunities the assessee failed to produce the required details and documents. In our understanding of relevant provision pertaining to procedure for grant of registration, first of all the granting authority is required to satisfy himself about the objects of the trust being claimed to be charitable and thereafter genuineness of the activities and if he may deem fit, then, in order to satisfy himself about the genuineness of the activities may also make enquiries. In the present case, the CIT(E), without looking into the source and basis of creation of the appellant authority and without looking into its objects and financial resources, its utilization and application of surplus and incidental profits proceeded to verify the document and evidences pertaining to the activities conducted by the applicant in the A.Y. 20014-15 which is not a proper and justified approach as per mandate of relevant provisions.
22.1 Be that as it may, we have no hesitation to hold that the CIT(E) put cart before the horse by making enquiries regarding activities of the appellant and without giving heel of attention to the statutory provisions and 19 act which created the existence of the appellant and without looking into the objects and financial resources, its application and utilization, further utilization of surplus and incidental profits, if any, and without verifying about the further diversion of funds in the case of dissolution of the authority by considering the relevant provisions of the act of UPIDA, 1976. Thus, the impugned order has not been passed as per letter and spirit of the mandate of section 12AA of the Act which provides procedure for registration and adjudication of application for registration u/s 12A of the Act.
23. In the light of above noted mandate when we proceed to analyze facts and circumstances of the present case then we find that the main contention of Ld CIT DR is that as per order of Hon'ble High Court of Allahabad dated 28.02.2011 (Supra) after 01.03.2003 applicant authority is not a "local authority" within the meaning of section 10(20) of the Act. On this legal contention it has been submitted by the Ld Senior counsel appearing on behalf of the appellant, that in the case of CIT VS Gujarat Maritime Board (Supra) the Hon'ble Supreme Court has held that section 10(20) and section 11 of the Act operate in totally different spares and even if the board (applicant of that case) has seized to be a local authority, then also it is not precluded from claiming exemption under section 11(1) of the Act, and therefore, we have to read section 11(1) of the Act, in the light of definition of the words "charitable purposes" as defined under section 2(15) of the Act. In this decision Hon'ble Supreme Court held that the assessee was establish for the predominant purpose of development of minor ports in the state of Gujarat, the management of control which was essentially with the state government and there was no profit motive, as per provisions of section 73, 74 and 75 of the Gujarat Maritime Board Act, 1981. It was also noticed by 20 their lordship that the income earned by the board has to be depleted and used for the development minor ports in India and after considering entire facts it was held that the assessee was under legal obligation to apply the income which would arise directly and substantially from the business held under the trust for the development of minor port in the state of Gujarat, therefore it was entitled to be registered as charitable trust under section 12A of the Act. On respectful consideration of the ratio of this judgment rendered by Hon'ble Apex Court of India, we are of the view that the order of Hon'ble High Court dated 18.02.2011 does not, in any way, disentitle the applicant for seeking registration under section 12A of the Act as the CIT(E) could not controverted these facts that even if the appellant has seized to be a local authority under section 10(20) of the Act, then also it is entitled for registration under section 12A of the Act, provided it fulfills all required conditions as mandated by the said provision.
24. At this juncture, it would be relevant to consider the ratio of the decision of Hon'ble Jurisdictional High Court of Allahabad in the case of CIT Vs Kanara Bank whereas it has been held that the applicant New Okhla Industrial Development Authority, is a corporation established by a state Act, vis, Uttar Pradesh Industrial Area Development Act 1976, and therefore it is entitled to exemption of payment of tax at source under section 194- A(1) of the Act. The relevant operative part of this decision in para 39 and 40 read as follows:
"39. NOIDA has been granted a status of a Municipality under Article 243-Q of the Constitution of India which deals with the constitution of Municipality. The said Article provides that there shall be constituted in every state,- (a) a Nagar Panchayat for a transitional area, that is to say, an area in 21 transition from a rural area to an urban area (b) a Municipal Council for a smaller urban area and (c) a Municipal Corporation for a larger urban area. The proviso to Article 243-Q, however, stipulates that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, specify to be an industrial township.
40.The State Government has issued a notification dated 24 December 2001 in exercise of the powers conferred under the proviso to clause (1) of the Article 243-Q of the Constitution. The said notification provides that having regard to the size of NOIDA which has been declared to be an Industrial Development Area by a notification dated 17 April 1976 and the municipal services being provided by NOIDA, the Governor is pleased to specify that NOIDA would be an "Industrial Township" with effect from the date of publication of the notification. This clearly means that instead of Municipal Corporation providing services, NOIDA would provide the said services and if that be so, then as observed by the Supreme court in S.S. Dhanoa (supra), NOIDA will owe its existence to an Act of the State.
25. In the light of above observations of Hon'ble Jurisdictional High Court, the creation and existence of present applicant is under the act of UP State i.e. UPIDA 1976, which is providing services of public utilities as a corporation akin to the services of a Municipal Corporation. It was also observed by their lordship that the UP state government has issued a notification dated 20.04.2011 in exercise of the powers conferred under the proviso to clause 1 of Article 243-Q of the Constitution and the said notification provides that having regard to the size of Noida i.e. applicant which has been declared to be an industrial development area by a 22 notification dated 17.04.1976 and the Municipal services being provided by it thus the governor is pleased to specified that the Noida would be an industrial township with effect from the date of publication of the notification.
26. We may further pointed out that in the case of CIT Vs Lucknow Development Authority (Supra) the Hon'ble Jurisdictional high Court of Allahabad, has decided the issue in favour of the assessee authority upholding the order of the tribunal that the income of the assessee is exempted under section 11 of the Act, though there was no condition that no profit should be earned by its activities and the profit earned will not be distributed amongst the stakeholders. In this case it was the contention of the Revenue that assessee is not on different footing from private colonizer and was making huge profits by giving compensation for land which is less than the market value of the actual land owners. As regards the claim of providing public amenities, private colonizers were also providing similar facilities. It was contended that; assessee is a huge profit making agency for which it is taking money from general pubic; assessee did not engage in any charitable and if assessee developed any institution of public importance, the cost was recouped from the public at large; the objects/activities of the assessee were commercial in nature and they did not involve any charity; assessee also auctions plot at market rate and this does not involve any charity and; in every activity of the assessee, there was a scent of commercialization /profit motive and intra-structure/facility provided by the assessee are also provided by private builders. It was contended by the Revenue hat the ITAT has grossly erred in holding that the assessee authority was not established for commercial purposes, but for charitable 23 purposes. The submission of the assessee on the other hand remained that as per section 4 of the Uttar Pradesh Planning & Development Act, 1973, the assessee's object is "an act to provide for the development of certain areas of Uttar Pradesh according to plan and for matter ancillary thereto". The objects of the development authority were referred as per section 7 of the said 1973 Act. The objects shall be to promote and secure the development of the area according to plan and for that purpose the authority shall have the power to acquire, hold manage and disposed off land and other property to carry out building, engineering, mining and other operations to execute works in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto.
27. In that case of Lucknow Development Authority, (Supra) it was also pointed out that as per section 58 of the said Act of 1973, in case of dissolution of the authority the entire assets will be vested in the state government so no profit of interest is involve. It was also noticed that upto AY 2002-03 the authority was enjoying exemption under section 10 (20A) of the Act, and in consequent to the deletion of said provision and insertion of explanation to section 10(20) of the Act, by the finance Act 2002, with effect from 01.04.2003, the assessee was advised to obtain registration under section 12A of the Act. Supporting the application of registration under section 12A of the Act, it was submitted that assessee's income is for "charitable purposes" as defined in section 2(15) of the Act, which covers the objects for "advancement of any other objects for general public utility".
It was submitted by the assessee that the term "objects of general public 24 utility" had been extensively dealt with and defined, to meant that where the objects of an institution cover the public at large or a section of public, the objects are to be held to the "objects of general public utility" as meant in section 2(15) of the Act.
28. The relevant operative part of the decision of Hon'ble Allahabad High Court in the said case are being respectfully reproduced as follows:
"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 18 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 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 19 262 (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 25 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 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)]." 20 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. 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 21 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. 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 26 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 Section 2(15) and deny exemption available under 22 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. The answer to the substantial questions of law are in favour of the assessee and against the department. 23 In view of above, all the appeals filed by the department are dismissed, as stated above. OrderDate:16/09/2013."27
29. In the case of CIT VS Andhra Pradesh State Road Transport Corporation 1986, 25 TAXMAN 63A (SC) the assessee was a road transport corporation established for development of road transport and the road corporation was established under the road Transport Corporation Act, and it was required to carry on its activities on the business principals and its income was to be utilized for road development and expansion of the corporation. Under these facts it was held by the Hon'ble Apex Court, that the assessee did not carry its activities with the object of making profit and its object being one of the general public utility for charitable purposes then it was entitle to exemption under section 4(3) (i) of the Income Tax Act, 1922 which is paremateria to the provisions of section 11 of the Act of 1961 notwithstanding that in carrying on its activities the assessee would act on business principals.
30. During the arguments a copy of the relevant notifications dated 24.12.2001 and 17.04.1976 has been placed on record along with UP Industrial Area Development Act 1976, and schedule twelfth to Article 243- W and 243-Q of Constitution of India, at pages 1 to 26 of assessee's paper book filed on 01.03.2016. As per these notifications and section 6 of relevant Act of 1976 the functions of the authority and its objects read as follows:
(1) The object of the Authority shall be to secure the planned development of the industrial development area.
(2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions:-
(b) to prepare a plan for the development of the industrial development area;28
(c) to demarcate and develop sites for industrial, commercial and residential purpose according to the plan;
(d) to provide infrastructure for industrial, commercial and residential purposes;
(e) to provide amenities;
(f) to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes;
(g) to regulate the erection of building and setting up of industries; and
(h) to lay down the purpose for which a particular site or plot of land shall be used, namely for industrial or commercial or residential purpose or any other specified purpose in such area.
31. In view of above the main object of the authority shall be to secure or ensure the plant development of the industrial development area which would be undertaken by the authority working as a municipal corporation in the specified area given for the purpose of industrial area development in the state.
32. As per section 20 of the UPIDA 1976, the financial activities of the authority regarding its funds would be conducted and operated in following manner:
20. Fund of the Authority-
(1) The authority shall have and maintain its own fund to which shall be credited-
29(a) all moneys received by the Authority from the State Government by way to 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 fee, tolls and charges received by the Authority under this 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 sources (2) The fund shall be applied towards meeting the expenses incurred by the Authority in the administration of this Act for no other purposes.
(3) Subject to any directions of the Stage Government, the Authority may keep in current account of any Scheduled Bank such sum of money out of its funds as it may think necessary for meeting its expected current requirements and invest any surplus money in such manner as it thinks fit.
(4) The state government may after due appropriation made by Legislature by law in that behalf, make such grants, advance and loans to the Authority as that Government may deem necessary for the performance of the functions of the authority under this Act, and all grants, loans and advances, made shall be on such terms and conditions as the State Government may determine.
(5) The Authority shall maintain a sinking fund for the repayment of moneys borrowed under sub-section(5), and shall pay every year into the sinking fund such sum as may be 30 sufficient for repayment within the period fixed of all moneys so borrowed.
(6) The sinking fund or any part thereof shall be applied in ,or towards the discharge of the loan for which such fund was created, and until such loan is wholly discharged it shall not be applied for any other purpose.
33. In the list of above provision regarding management of the funds of the authority it is amply clear that the funds of the authority shall be applied towards meeting of expenses incurred by the assessee for the administration of the affairs of the authority under the said act and not for any other purposes. As per section 58 of the UPIDA, 1976 where the State Government is satisfied that the purposes for which the authority was established under the Act have been substantially achieved so as to render the continued existence of the authority in the opinion of the state government unnecessary that government may by notification in the Gazettee declare that the authority shall be dissolved w.e.f. such date as may be specified in the notification and the authorities shall be deemed to be dissolved accordingly. In sub-section (2) of that section 58 of the Act, it has been provided that from the date of such dissolution, all properties, funds and dues which are vested in or realized by the authority shall waste in or be realized by the state government. It is also provided that the entire nazul lands placed at the disposal of the authority shall revert to the state government. It has been further provided that all liabilities which are enforceable against the authority shall be enforceable against the state government and for the purpose of carrying out any development which has not been duly carried out by the authority and for the purpose of realizing 31 properties, funds and dues referred in clause (a), the functions of the authority shall be discharged by the state government.
34. We may point out that under Article 243-P clause (e) of the Constitution of India "Municipality" has been defined as "means an institution of self-government constituted under Article 243-Q" and under Article 243-W the legislator of the state may by passing laws bestow and empower the municipalities with such powers and authority as may be necessary to enable them to functions as a entity of self-government and such law may also contends provisions for the devolution of the powers and responsibilities imposed upon the municipalities, subject to such conditions as may be prescribed their with respect to the preparation of plans for the economic development and social justice for the public at large. It has been also provided that the performance of functions and implementation of the schemes as may be entrusted to them including those in relation to the matters listed in the twelfth schedule and with such powers the authority would be enable to carryout the responsibilities conferred upon them including those listed in the twelfth schedule.
35. We also note that vide notification no. 6710/77-4-2001-56BHA/99 dated 24.12.2001, the State Government in exercise of powers under the proviso to clause (i) of Article 243Q of the Constitution of India has specified the Greater New Okhla Industrial Development Area to be an Industrial Town-ship w.e.f. the date of the publication of the said notification in the official gazette. In this notification, it has been mentioned that having regard to the size of Greater New Okhla Industrial Development Area which has been declared as an industrial development area by the 32 government notification dated 28.01.1991 and the municipal services are being provided by the Greater New Okhla Industrial Development Authority in that area.
36. In view of above notification and provisions of the UPIDA, 1976, it is amply clear that the appellant has been created by the state act and it has been assigned the object of development of industrial area in the UP State, along with development and industrial township and it is empowered to provide services in that specified area as a municipal corporation therefore, the objects of the appellant, as noted above, are in the nature of charitable purposes of general public utility. It is not the allegation of the CIT(E) that profits or surplus accrued to the authority are not being utilized as per objects of the authority then it cannot be alleged that the assessee is carrying out activities like a private builder or developer who is conducting activities with the profit motive. We may also point out that the assessee during conduct of its activities in pursuant to the objects mandated by the Act, might be acquiring and purchasing lands and subsequently selling the same to the respective beneficiaries at the prevailing market rate through option after the required development but it is not the main object of the authority and as we have noted earlier the predominant object of the authorities to carryout development of industrial area in the state of UP to provide basic infrastructure to the upcoming industries in the state of UP and acquiring of the land and it selling after development is not a predomient object of the authority akin to the private developers and we have no hesitation to hold that such activity as alleged by the CIT(E) is not a main activity with the profit motive but the same an incidental activity to sub-serve and to achieve 33 the charitable objects of general public utility as per mandate of the UPIDA Act, 1976.
37. At this juncture, the ratio of the decision of Hon'ble high Court of Delhi in the case of India Trade Promotion Organization VS DGIT(E) (supra), as relied by the appellant, supports the contentions of the assessee wherein it has been held that the amendment of section 2(15) of the Act, inserted by the finance Act, 2008 has been read down by the High Court by observing that when primary and dominant object of the institution is to advance general public utility activities then income generated by incidental commercial activities does not disentitle the applicant/appellant for registration 12A of the Act, as charitable institution is entitled to exemption. In the present case the dominant and prime objects of the applicant was to be seen by the CIT(E) but he has dismissed application of the authority by considering irrelevant facts and conclusion drawn thereafter cannot be held as sustainable. In our consider pinion if the dominant and the main object of the authority is to develop industrial areas in the state working as a municipal corporation for that specified area with charitable purposes and with the object of creation of infrastructure of general public utility then the authority should be regarded as established for charitable purposes and thus the same would be entitled for registration under section 12A of the Act.
38. In our considered opinion, the ratio of the decision of Hon'ble Supreme Court in the case of M.D. H.S.I.D.C and ORS Vs. M/s Hari Om Enterprise and Anr (Supra), as relied by the appellant, explains that the corporation is a public sector undertaking which develops infrastructure for setting up of industrial units and in view of the object and purport for which 34 the corporation had been constituted and incorporated it must be held to be a government function for charitable purposes of general public utility. Thus we are in agreement with the contention of the Ld Senior Counsel of the appellant that the activities of the appellant are under complete control of State Government having no profit motive and for the purpose of charitable activities of general public utilities therefore, the CIT(E) was not justified and correct in dismissing application of the assessee.
39. It will also be relevant to consider ratio of the decisions of Hon'ble High Court of Allahabad in the case of CIT Vs Lucknow Development Authority (Supra) and order of the ITAT New Delhi in the case Haridwar Development Authority VS CIT(E) (Supra) wherein it has been held that the appellant authority has been created with object of general public utility with the charitable objects within the meaning of section 2(15) of the Act, and thus the proviso of section 2(15) of the Act is not applicable because appellant authority is not carrying out any activity with any profit motive but predominant object of the appellant is the development of the specified area of the district by providing housing, roads, development and maintenance of roads, parks sewerage system and plantation of the specified area and all these activities are being carried out for the welfare of the pupil of the specified area with the charitable purposes for development of infrastructure facilities of general public utility without any profit motive therefore it was held that the predominant object of the authority created under UPUPDA Act, 1973, is not profit earning therefore it was held that it is entitled for registration of under section 12A of the Act. We further observed that the Ld CIT DR has not disputed this factum that the provisions of UPUPDA, Act 1973 are paremateria to the provisions of UPIDA Act, 1976 and thus ratio of 35 the decision of Hon'ble Jurisdictional High Court in the case of Lucknow Development Authority (Supra) and order of the tribunal in the case of Haridwar Development Authority (Supra) are applicable in favour of the assessee.
40. On the basis of forgoing discussion, we reach to a logical conclusion that the CIT(E) dismissed application of assessee for grant of registration under section 12A of the Act, by considering the irrelevant fact and by taking a hyper technical approach and he has not followed procedure for grant of registration as prescribed under section 12AA of the Act. At the same, we observed that the appellant successfully demonstrated that it has been created by the special act of the state i.e. UPIDA 1976 for the purpose of the development of infrastructure of a specified industrial area with a predominant purpose of creating and developing facility for development of industries in the state and its legal existence is akin to a municipal corporation for development of facilities in the specified area which is a charitable activity for the welfare of public at large and thus the same is an activity of general public utility. We are satisfied that there is no prime object or aliment of earning profit as private developer or builder and activities acquiring of land and selling developed property is an incidental and profit earned therefrom has to be used towards objects of the appellant which are of charitable purposes and thus newly inserted proviso to section 2(15) of the Act, cannot be pressed into service for denial of registration under Section 12A of the Act.
3641. Finally, we are inclined to hold that the appellant is entitled for registration under section 12A (1) (a) of the Act, and thus impugned order of the CIT(E) is dismissed and he is directed to grant registration under section 12A of the Act to the appellant authority.
42. In the result, appeal is allowed. Order pronounced in the open court on 22nd July, 2016.
Sd/- Sd/-
(O.P. KANT) (C.M GARG)
Accountant Member Judicial Member
Dated : 22nd July, 2016
VL/Res. Desktop
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT