Kerala Industrial Infrastruture Dev Corporation(KINFRA), Trivandrum V. The Asstt.Director of Incometax( Exemption), Trivandrum

CO 30/COCH/2014

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0138 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-11-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 25-07-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Keywords: Capital asset; Gift; Business income; Charitable institution; Rule of consistency; Question of law; Capital expenditure
• Section: 12A; 12AA; 28; 2; 11; 15

Judgement Text

ITA NO287/COCH/14 & CO 30/C/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S. GANESAN, JM & CHANDRA POOJARI, AM ITA NO.287/COCH/2014 (ASST YEAR 2010-11 ) & CROSS OBJECTION NO.30/COCH/2014 THE ASST DIRECTOR OF INCOME TAX (EXEMPTION) TRIVANDRUM KERALA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPN TC NO.31/2312 KINFRA HOUSE SASTHAMANGALAM PO TRIVANDRUM 695 010 ( APPELLANT/RESPONDENT) VS (RESPONDENT/CROSS OBJECTOR) PAN NO. AABCK0384K ASSESSEE BY SRI G SARANGAM/ SRI C PANKAJKRISHNAN REVENUE BY SRI M ANIL KUMAR, CIT-DR DATE OF HEARING 13 TH NOV 2014 DATE OF PRONOUNCEMENT 24 TH DEC 2014 ORDER PER CHANDRA POOJARI, AM: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE IS DIRECTED AGAINST THE ORDER DATED 14.2.2014 OF TH E CIT(A)-V KOCHI AND ITS RELATES TO THE AY 2010-11. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - V , KOCHI IN SO FAR AS ON THE POINTS MENTIONED BELOW AR E CONCERNED IS OPPOSED TO LAW ON THE FACTS AND CIRCUMSTANCES OF TH E CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE NOTED THAT AS PER THE RECENT AMENDMENT IN SECTION 2 (15) WITH EFFECT FROM A.Y 2009-10 , IT IS CLARIFIED THE ADVANCEMENT OF ANY OTHER OBJECT ITA NO287/COCH/14 & CO 30/C/2014 2 OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE , ' IF I T INVOLVES CARRYING ON ACTIVITY IN THE NATURE OF TRADE , COMMERCE OR BUSINESS , OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O TRADE , COMMERCE OR BUSINESS , FOR A CESS OR A FEE OR ANY OTHER CONSIDERATION IRRE SPECTIVE OF THE NATURE OF OR ON APPLICATION , OR RETENTION OF THE I NCOME FROM SUCH ACTIVITIES ' AND RECEIPTS EXCEEDS RS . 25 LAKHS. 3 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN ALLOWING THE EXEMPTION CLAIMED U/S 11 ON THE BASIS THAT THE I R ACT I VITIES ARE ' CHARITABLE ' IN NATURE WHEN THE ASSESSEE ITSELF HAS ADMITTED THA T IT HAS RECEIVED RS.64.85 CRORES FROM SALE OF LAND AND LEASING. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF IN COME - TAX (APPEALS)-V, KOCHI ON THE ABOVE POINTS MAY BE SET A SIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS REGISTERED U/S 12AA OF THE ACT AND HAS CLAIMED EXEMPTION U/S 11. THE ASSESSEE IS WHOLLY AND EXCLUSIVELY ENGAGED IN DEVELOPMENT OF INDUSTRIAL INFRASTRUCTURE IN THE STATE OF KERALA AND THIS CORPORATION HAS BEEN SET UP AS A NON PLAN ALLO CATION IN THE STATE BUDGET FOR UNDERTAKING INFRASTRUCTURE DEVELOPMENT PROJECTS IN THE STATE. THE ASSESSING OFFICER EXAMINED THE CLAIM FOR EXEMPTION U/S 11 OF THE ACT. ACCORDING TO THE AO, IN VIEW OF THE PROVISIONS OF SECTION 2(15) OF T HE ACT, WHICH, DEFINES CHARITABLE PURPOSE' AND AS THE 4TH LIMB OF THE DEFINITION I.E THE PROVISO FOR THE 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY,' SHALL NOT BE CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITIES OF RE NDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR A FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION, OF ITA NO287/COCH/14 & CO 30/C/2014 3 THE INCOME FROM SUCH ACTIVITY. WITH THE AMENDMENT BROUGHT ON THE STATUTE, THE ASSESSING OFFICER HAS EXAMINED THE 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', IN VIEW OF THE FACT, WHETH ER THE ASSESSEE'S INCOME INCLUDED INCOME FROM TRADE OR LETTING OF LAND AND B UILDING, LEASE RENT AND INTEREST, AND WHETHER IT IS IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE'S INCOME S HOULD BE TREATED AS BUSINESS INCOME AND AS SUCH IT SHOULD NOT BE ENTITL ED FOR CLAIM OF EXEMPTION U/S 11 OF ACT. ACCORDINGLY, THE INCOME FROM BUSINESS H AS BEEN COMPUTED BY THE AO UNDER THE NORMAL PROVISIONS OF SECTION 15 TO 59 , AND THE TOTAL INCOME ASSESSED AT NET PROFIT AS PER PROFIT AND LOSS ACCOU NT OF RS.29,04,84,642/-, ALONG WITH THE DISALLOWANCE OF RS.1 0,01,06,162/-. 2.1 AGGRIEVED WITH THE DISALLOWANCE MADE BY THE A O, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ON THE GROUND THAT (I) T HE AO HAS NOT BEEN CORRECT IN WITH- HOLDING THE EXEMPTION U/S 11 OF THE ACT IN VIEW OF AMENDMENT OF SECTION 15 OF THE ACT WHICH IS IN EFFECT FROM THE AY 2009-10 AND (II) TH E AO HAS WRONGLY ADDED BACK A SUM OF RS. 1,01,06,162/- AS CAPITAL EXPENDITURE INCURRED DURIN G THE YEAR WHICH HAS NOT BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AT ALL. 2.3 THE CIT(A) OBSERVED THAT THE AO HAS NOT GONE IN TO INTO ANALYZING THE FACTS AS WELL AS MERIT OF THE CASE AS TO HOW THE ASSESSEE C ORPORATION COULD BE HELD TO HAVE BEEN ENGAGED IN THE COMMERCIAL ACTIVITIES IN P URSUIT OF EARNING PROFITS. ITA NO287/COCH/14 & CO 30/C/2014 4 ACCORDING TO THE CIT(A), THE ADVANCEMENT OF ANY OTH ER OBJECT OF 'GENERAL PUBLIC UTILITY' IS A QUESTION OF FACT, IF THE APPEL LANT IS ENGAGED IN ACTIVITIES IN THE NATURE OF TRADING, COMMERCIAL OR BUSINESS OR RENDER S ANY SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS, IS TO BE DECIDED ON TH E BASIS OF FACTS AND NOT ON CERTAIN NOTIONS WHICH IS BASED ON SWEEPING GENERALIZATIONS. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IS A CORPORATION, WHICH IS WHOLLY OWNED BY THE GOVERNMENT, WHICH IS A SUB SOVEREIGN AND FOR THAT M ATTER, THE ASSESSEE GETS THE STATUS OF THE STATUTORY CORPORATION HAVING WIDE OBJ ECTIVES FOR PROMOTION OF INFRASTRUCTURE IN THE STATE OF KERALA, AS A PRECURS OR TO INDUSTRIAL GROWTH AND PROMOTION. ACCORDING TO THE CIT(A), THE PROVISIONS OF FUNDS ARE MADE AVAILABLE BY THE STATE, AS WELL AS THE CENTRAL GOVERNMENT, IN THE FORM OF GRANT-IN-AID OR BUDGETARY SUPPORT OR UNDER ANY OTHER SCHEME. IT HA S BEEN SUBMITTED BY THE ASSESSEE THAT ON THE NET PROFIT STATUS WHICH HAS AR ISEN ON ACCOUNT OF, MONTHLY INTEREST EARNED ON DEPOSITS OF SURPLUS FUND. AS A MATTER OF FACT, THE ASSESSEE CORPORATION HAS BEEN WORKING IN ORDER TO ACHIEVE A WIDER SOCIAL OBJECTIVE TO MAKE CONDUCIVE ENVIRONMENT FOR THE INFRASTRUCTURE G ROWTH IN THE STATE OF KERALA AND AS, IN ACCORDANCE WITH THE POLICIES OF THE GOVE RNMENT. THE ACTIVITIES ARE NOT DESIGNED TO EARN PROFIT AND TO DIVERT THE SAME TO OTHER PURPOSES. EVEN THE PROFITS, WHATSOEVER EARNED, HAS NOT BEEN UTILIZED F OR DISTRIBUTING DIVIDENDS ETC. SINCE THIS IS A QUESTION OF FACT, AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF TRADE, BUSINESS ETC., THE SAME HAS TO BE ESTABLISHED AT THE STRENGTH OF ANALYSIS OF ITS FINANCIALS. ACCORDINGLY, THE CIT (A) OBSERVED THAT IN THE INSTANT ITA NO287/COCH/14 & CO 30/C/2014 5 CASE, THE ASSESSING OFFICER HAS DISALLOWED THE ASS ESSEES CLAIM WITHOUT MAKING A CLEAR CASE ESTABLISHED ON FACTS. ON ANALYZING THE ACTIVITIES OF THE ASSESSEE CORPORATION AND ACCORDINGLY, IT HAS BEEN HELD THAT IT IS A DESERVING CASE FOR CLAIMING EXEMPTION U/S 11 OF THE ACT AND THEIR NATU RE OF ACTIVITIES ARE NOTHING BUT FOR CHARITABLE PURPOSE. ACCORDINGLY, THE CIT(A ) DELETED THE ADDITION MADE BY THE AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEF ORE US. THE OTHER ISSUES RAISED BY THE ASSESSEE WAS NOT DEALT BY THE CIT(A) AND DISMISSED THAT GROUNDS AS INFRUCTUOUS, AGAINST WHICH THE ASSESSEE HAS FILE D CROSS OBJECTION. 5 THE LD DR RELIED ON THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE GREATER COCHIN DEVELOPMENT AUTHORIT Y IN ITA NOS 792 & 793/COCH/2013 VIDE ORDER DATED 8 TH AUG 2014. 5.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE SU BMITTED THAT T HE RESPONDENT IS A STATUTORY CORPORATION ESTABLISHED U NDER KERALA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT ACT, 1993 (KI ID ACT 1993). THE LD AR INVITED OUR ATTENTION TO PARA 48 OF THE ORDER P ASSED IN THE CASE OF GCDA(SUPRA) WHEREIN IT HAS BEEN HELD BY THE HELD B Y THE BENCH AS UNDER: 'CHARITABLE INSTITUTION PROVIDES SERVICES EITHER AT FREE COST OR ON COST TO BASIS AND NOT FOR PROFIT ITA NO287/COCH/14 & CO 30/C/2014 6 'IF THE ACTIVITIES OF THE ASSESSEE ARE ANALYZED, IT HAS TURNED INTO A HUGE PROFIT MAKING AGENCY FOR WHICH IT IS TAKING MONEY FROM GENERAL PUBLIC. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT NO CHARITY IS INVOLVED AND IF ANY INSTITUTION OF PUBLIC IMPORTANC E LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED / DEVELOPED, THE ASSESSEE IS CHARGING THE COST OF IT FROM PUBLIC AT LARGE AND THE MONEY IS COMING FROM THE COFFER OF THE GOVERNMENT . IT CAN BE SAID THAT OBJECTS/ACTIVITIES OF THE ASSESSEE ARE MORE COMMERC IALIZED IN NATURE AND SAID THAT THE OBJECTS OF THE ASSESSEE THOUGH CLAIM ED TO BE CHARITABLE, BUT ARE ACTUALLY ARE PURELY COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS A KNOWN FACT THAT THE ASSESSEE IS ACQUIRING LAND AT VERY LOW PRICES AND SELLING THE S AME LAND ON VERY HIGH RATES AND IS ALSO EARNING HUGE PROFIT THEREFROM. A NEW TREND HAS ALSO EMERGED THAT THE ASSESSEE HAS STARTE D AUCTIONING THE PLOTS BY WAY OF BIDDING AT THE MARKET RATE AND SOMETIMES MORE THAN THAT AND CHARGING INTEREST ON BELATED PAY MENTS. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT NO CHARIT Y IS INVOLVED. FURTHER THE ASSESSEE HAS CONVERTED ITSELF INTO A HU GE BUSINESS HOUSE . SIMILAR DEVELOPMENTS / INFRASTRUCTURE FACILITIES ARE ALSO PROVIDED BY PRIVATE DEVELOPERS, THESE DAYS, THEN TH EY WILL ALSO CLAIM THE STATUS OF CHARITABLE INSTITUTION'. 5.2 ACCORDINGLY, THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE I S A STATUTORY CORPORATION ESTABLISHED WITHOUT ANY PROFI T MOTIVE VESTED WITH THE TASK OF CARRYING OUT SUB-SOVEREIGN FUNCTIO NS ON BEHALF OF THE STATE GOVT. THIS CLEARLY DISTINGUISHES THE ACTI VITIES OF THE ASSESSEE CORPORATION FROM THAT OF GEDA DEALT WITH BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL. IT WAS FURTHER SUBMITTED THAT AS OBSERVED BY BENCH, THE TRANSFER OF LAND ON ITA NO287/COCH/14 & CO 30/C/2014 7 LEASE BASIS HAS BEEN EFFECTED AT OR BE L OW COST IN MOST CASES AT THE RATES APPROVED BY THE PRICING COMMITTEE CONSTITUTED BY THE GOVT . FOR FACILITATING AND ACCELERATING DEVELOPMENT OF IN DUSTRIAL INFRASTRUCTURE IN THE STATE OF KERALA . IT IS A WIDELY KNOWN FACT THAT POOR INFRASTRUCTURE IS ACTING AS A SERIOUS OBSTACLE FOR INDUSTRIAL DEVELOPMENT AND THERE WAS NO OPTION BUT TO DEVELOP THE INDUSTRIAL INFRASTRUCTURE AT ANY COST. HENCE LAND I S BEING ACQUIRED AT RATES FIXED BY REVENUE AUTHORITIES AT F AIR PRICES AND DEVELOPED INTO INDUSTRIAL PARKS BY INVESTING IN EXT ERNAL / INTERNAL INFRASTRUCTURE AND OFFERED TO PUBLIC FOR L ONG LEASE OF 90 YEARS AT SUBSIDISED RATES UTILIZING THE GOVERNMENT GRANTS . THIS BY NO STRETCH OF IMAGINATION CAN BE TERMED AS CARRY ING ON ACTIVITIES OF TRADE, INDUSTRY OR COMMERCE AND SERVI CES IN RELATIONS TO TRADE INDUSTRY OR COMMERCE AS PROVIDED IN THE PROVISO TO SEC.2( 15) OF THE INCOME-TAX ACT, 1961 . THE RESPONDENT CORPORATION IS ONLY UNDERTAKING SUB SOVE REIGN FUNCTIONS ON BEHALF OF THE STATE GOVERNMENT AS ITS AGENT AS PER OBJECTIVES SPELT OUT IN THE KIID ACT, 1993 . 5.3 THE LD AR EXPLAINED THE PREAMBLE TO THE KIID AC T, 1993 AND ESTABLISHMENT / FUNCTIONAL OBJECTIVES AS DETAILED I N SECTION 4 OF THE ACT CLEARLY THROWS LIGHT ON THE MAIN OBJECTIVE OF S ETTING UP THE ITA NO287/COCH/14 & CO 30/C/2014 8 RESPONDENT CORPORATION WHICH IS REPRODUCED BELOW : PREAMBLE WHEREAS IT IS EXPEDIENT TO PROVIDE THE ESTABLISHMENT OF INDUSTRIAL AREAS AND FOR THE ORGANIZATION OF INDUST RIAL GROWTH CENTRES IN THE STATE OF KERALA AND FOR SETTING UP I NFRASTRUCTURE FACILITIES FOR INDUSTRIES AND FOR THAT PURPOSE TO CONSTITUTE AN INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION A ND FOR MATTERS CONNECTED THEREWITH. SECTION 4 - ESTABLISHMENT AND INCORPORATION FOR THE PURPOSES OF SECURING AND ASSISTING IN THE R APID AND ORDERLY ESTABLISHMENT AND ORGANISATION OF INDUSTRIA L AREAS AND INDUSTRIAL ESTATES IN THE STATE AND FOR THE PURPOSE OF ESTABLISHING GROWTH CENTRES AND INFRASTRUCTURE FACILITIES CONNEC TION WITH THE ESTABLISHMENT AND ORGANISATION OF SUCH INDUSTRIES, THERE SHALL BE ESTABLISHED A CORPORATION BY NAME KERALA INDUSTRIAL INFRASTRUCTURAL DEVELOPMENT CORPORATION SECTION 9 THE FUNCTIONS OF THE CORPORATION ARE DETAILED IN SE CTION 9 OF THE ACT IS AS UNDER: 'GENERALLY TO PROMOTE AND ASSIST IN THE RAPID AND ORDERLY ESTABLISHMENT, GROWTH AND DEVELOPMENT OF INDUSTRIES AND TO MEET OTHER ANCILLARY OBJECTIVES AS DETAILED IN SUB SECTION (2) OF THE ABOVE SECTION'. 5.4 ACCORDINGLY, IT WAS SUBMITTED THAT THE CORPORAT ION IS ONLY AN EXTENDED WING OR ARM OF THE GOVT. TO IMPLEMENT AND ACHIEVE THE OBJECTIVES LAID DOWN IN THE KIID ACT AND THIS BY NO MEANS IS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, BUSINESS OR COMMERCE AND MUCH LESS A SERVICE FOR TRADE, BUSINESS OR COMMERCE AS PROVIDED IN ITA NO287/COCH/14 & CO 30/C/2014 9 SECTION 2 (15) OF THE IT ACT. IN SUPPORT OF ITS CON TENTION, THE LD AR MRELIED ON THE FOLLOWING CASE LAWS: I) IN THE CASE OF ICAI VS DG OF ITO(EXMP) 347 ITR 99 ( DEL) II) IN THE CASE OF BUREAU OF INDIAN STANDARDS VS DIR GE N OF INCOME TAX (EXEMP.) 358 ITR 78(DEL) III) IN THE CASE OF JODHPUR DEVP AUTHORITY VS CIT 27 TAX MANN.COIM. 183 IV) IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY VS C IT 35 SOT 15 (ASR) V) IN THE CASE OF DCIT VS ALIGARH DEVELOPMENT AUTHORIT Y IN ITA NO.255/AGRA/2013 ETC VI) IN THE CASE OF ICAI VS DG OF ITO (EXEMP) 358 ITR 91 (DEL) VII) IN THE CASE OF CIT VS LUCKNOW DEVP AUTHORITY-ITA 14 9 OF 2009 LAWS(ALL) 2013-9-161 VIII) IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECT ION AND POLLUTION CONTROL BOARD VS CIT 42 SOT 343 IX) IN THE CASE OF AGRA DEVEP AUTHORITY VS CIT IN APPEA L 166 OF 2012 DT 11.1.2013 X) IN THE CASE OF HARIDWAR DEVP AUTHORITY ITA NO 3056/ DEL/2012 DT 25.7.2014 XI) IN THE CASE OF JODHPUR DEVP AUTHORITY VS CIT 145 TT J (JD) 221 XII) IN THE CASE OF AHMEDABADURBAN DEP AUTHORITY ITA NO 754/AHD/2010 DT21.5.2010 XIII) IN THE CASE OF DIRECTOR OF INCOME TAX (EXP VS SABAR MATI ASHRAM GAUSHALA TRUST 223 TAXMAN 43 (GUJ) 6 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED TH E RELEVANT MATERIAL ON RECORD. IN THIS CASE THE ASSESSEE HAS BEEN CONSTITU TED BY THE GOVT OF KERALA TO PROVIDE FOR THE ESTABLISHMENT OF INDUSTRIAL AREAS A ND FOR THE ORGANIZATION OF INDUSTRIAL GROWTH CENTERS IN THE STATE OF KERALA AN D FOR SETTING UP INFRASTRUCTURE FACILITIES FOR INDUSTRIES. THE ARGUMENTS OF THE LD AR IS THAT THE ASSESSEE WAS ESTABLISHED FOR THE PURPOSE OF CARRYING OUT CHARITA BLE ACTIVITY AS DEFINED IN SEC. 2(15) OF THE I T ACT WHICH INCLUDES RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. IN SUPPORT OF HIS ITA NO287/COCH/14 & CO 30/C/2014 10 CONTENTION, THE LD AR RELIED VARIOUS JUDGMENTS AS M ENTIONED ABOVE. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS BEEN GRANTED WITH R EGISTRATION U/S 12AA OF THE ACT VIDE ORDER DATED 31.10.2005 OF THE CIT AND THE REGISTRATION HAS NOT BEEN CANCELLED TILL THE DATE. IN OTHER WORDS, THE REGIST RATION IS EFFECTIVE IN THIS ASSESSMENT YEAR ALSO. THE GRANT OF REGISTRATION IS NOT AN EMPTY FORMALITY AS IT HAS TO BE GRANTED AFTER SATISFYING THAT THE OBJECTS ARE CHARITABLE IN NATURE. SINCE THE REGISTRATION HAS EFFECT FOR THE ASSESSMENT UNDER CO NSIDERATION ALSO, THE OBJECT OF THE ASSESSEE WILL HAVE TO BE CONSIDERED AS A CHARIT ABLE IN NATURE. FURTHER, WE NOTICED THAT FOR THE AY, THE ASSESSEE CARRIED OUT V ARIOUS ACTIVITIES. 6.1 IN THIS CASE, THE CORPORATION HAS NO CAPITAL AS PER THE PROVISIONS OF THE ABOVE ACT AND FUNDS REQUIRED FOR MEETING THE OBJECTIVES LAID DOWN IN THE ACT ARE ALLOTTED BY THE STATE GOVT. UNDER PLAN AND NON-PLAN SCHEME IN THE STATE BUDGET AND THE TOTAL FUNDS SO DISBURSED TO THE CORPORATION TO-DATE IS RS 405.41 CRORES. 6.2 FURTHER, THE FUNDS ARE ALSO PROVIDED BY THE CEN TRAL GOVT. FOR INVESTMENT IN INDUSTRIAL INFRASTRUCTURE PROJECTS FR OM TIME TO TIME BY SPECIFICALLY NAMING THE PROJECT, THE DETAILS OF WHICH GIVEN TO DATE IS RS.134.67 CRORES (INCLUDING THE AMOUNT RECEIVED FROM SUBSIDIARY COMPANY ITA NO287/COCH/14 & CO 30/C/2014 11 6.3 APART FROM THE ABOVE, FUNDS ARE PROVIDED BY THE CENTRAL GOVT.UNDER OTHER SCHEMES LIKE ASIDE , ETC. DETAILS OF WHICH ARE GIVEN SO FAR TO-DATE IS AS UNDER: ASIDE SCHEME - RS.129.4 7 CRORES . 6.4 FROM THE ABOVE PARTICULARS, IT COULD BE NOTED T HAT THE SUBSTANTIALLY LONG TERM FUNDING OF THE INVESTMENT N EEDS OF THE CORPORATION FOR INDUSTRIAL INFRASTRUCTURE DEVELOPME NT IS BY WAY OF GRANTS / LOANS FROM THE CENTRAL AND STATE GOVT. ONL Y. 6.5 THE FUNDS SO RECEIVED AS ABOVE ARE ACCOUNTED UN DER SEPARATE GRANT ACCOUNT IN THE BALANCE SHEET AS CORP US FUNDS GIVEN TO MEET SPECIAL PURPOSE PUBLIC UTILITY PROJECTS AND THE PROVISION OF SUCH LARGE FUNDS BY THE CENTRA L / STATE GOVT. MAKES IT CLEAR THAT THE ACTIVITIES OF THE COR PORATION ARE OF A NON-PROFIT MOTIVE NATURE. THE FUNDS GIVEN AS ABOVE WHICH REMAIN UNUTILISED WILL REVERT BACK TO THE GOV T. AT THE TIME OF WINDING UP OF THE CORPORATION AFTER MEETING ITS OBJECTIVES FOR WHICH IT IS ESTABLISHED / SET-UP . 6.7 THE CORPORATION HAS MADE SURPLUS FROM VARIOUS A CTIVITIES AS COULD BE NOTED FROM THE AUDITED ACCOUNTS FOR THE PA ST FOUR YEARS , IF THE SURPLUS FROM SALE OF 63 ACRES OF LAND GIVEN AT RE.1 BY THE GOVT . OF KERALA AT HI-TECH PARK IN INDUSTRIAL BELT OF KALAMASSERY IN COCHIN CORPORATION CREDITED TO PROFI T AND ITA NO287/COCH/14 & CO 30/C/2014 12 LOSS ACCOUNT OF THE YEAR AND INTEREST INCOME ON DEP OSITS WITH BANKS, OUT OF SURPLUS FUNDS TEMPORARILY INVEST ED AS UNDER IS EXCLUDED AS PER DETAILS GIVEN BELOW: RS. NET SU RPLUS AS PER P&L A/C. FOR THE 29 , 10,83 , 866 NET SURPLUS AS PER P&L A/C. FOR THE F.Y.2010-11 9,33,41,419 NE T SURPLUS AS PER P&L A/C . FOR THE F.Y.2011-12 10,09,32 , 464 NET SURPLUS AS PER P&L A/C. FOR THE F.Y.2012-13 2,10,26,135 6.8 ACCORDING TO THE LD AR, THE INTEREST INCOME PAR TAKES THE NATURE OF GRANT AS SURPLUS FUND IS OUT OF GRANT OF STATE GOVERNMENT ONLY. THE VERY FACT THAT GOVT . OF KERALA HAS TRANSFERRED 240 ACRES OF PRIME LAND IN THE INDUSTRIAL BELT OF KALAMASSERY HA VING MARKET VALUE OF CRORES OF RUPEES MAKES IT CLEAR THAT CORPORATION IS ONLY AN EXTENDED ARM / WING OF THE GOVT. OF KERALA AND THAT BY NO STRETCH OF IMAGINATION IT IS A COMMERCIAL ENTITY . 7 THUS, THE LD AR PLEADED THAT THE ACTIVITY HAS BEE N UNDERTAKEN IN PURSUANCE OF THE MAIN OBJECT AND THERE IS NO MOT IVE TO MAKE PROFIT AND THE ACTIVITY CANNOT BE SAID TO BE BUSINE SS ACTIVITY. IN SUPPORT OF HIS CONTENTION, THE LD AR RELIED ON VAR IOUS JUDGMENTS AS MENTIONED ABOVE. 7.1 TO GRANT DEDUCTION U/S 11, THE ASSESSEE IS REQU IRED TO FULFILL THE ITA NO287/COCH/14 & CO 30/C/2014 13 NECESSARY CONDITIONS MENTIONED IN THE PROVISIONS. IN THIS CONNECTION, THE PROVISION CONTAINED IN SECTION 11(4A) ASSUMES I MPORTANCE, WHICH IS TO THE EFFECT THAT THE PROVISIONS CONTAINE D IN SUB-SECTION (1), SUB-SECTION (2), SUBSECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUT ION BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTA L TO ATTAINMENT OF OBJECTIVE OF THE TRUST, OR, AS THE CASE MAY BE, INS TITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TR UST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. THE SUBMIS SION OF THE REVENUE IS THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE IN NO WAY DIFFERENT FROM THE ACTIVITIES CARRIED OUT BY A BUIL DER DEVELOPING A LARGE COLONY. THE SUBMISSION OF THE LD. COUNSEL IS THAT THERE IS NO PROFIT MOTIVE AND THE ACTIVITIES HAVE BEEN CARRIED OUT IN PURSUANCE OF THE OBJECT CLAUSE. IN THIS CONNECTION, THE DEFI NITION OF THE TERM 'BUSINESS' FURNISHED IN SECTION 2(13) WAS ALSO DISC USSED. THE WORD 'BUSINESS' HAS BEEN DEFINED IN AN INCLUSIVE MANNER TO INCLUDE ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. THE C ASE OF THE LD. COUNSEL IS THAT THIS PROVISION IS NOT APPLICABLE. H OWEVER, HE HAS NOT ELABORATED IT ANY FURTHER IN THIS MATTER. THEREFORE , IT WILL BE APPROPRIATE FOR US TO EXAMINE THIS DEFINITION IN A GREATER DETAIL. ITA NO287/COCH/14 & CO 30/C/2014 14 7.2 THE HONBLE ORISSA HIGH COURT THE CASE OF CIT V. M.P. BAJAJ [1993] 200 ITR 131 /[1992] 65 TAXMAN 91 HAVE EXAMIN ED THE DEFINITION AND AFTER CONSIDERING A NUMBER OF DECISI ONS, IT HAS BEEN HELD BY THAT AN ACTIVITY CARRIED ON CONTINUOUSLY IN AN ORGANIZED MANNER WITH A SET PURPOSE AND WITH A VIEW TO EARN P ROFIT IS 'BUSINESS'. THE RELEVANT PORTION OF THE ORDER OF T HE HONBLE ORISSA HIGH COURT READS AS UNDER:- 'THE WORD 'BUSINESS' IS A WORD OF LARGE AND INDEFIN ITE IMPORT. IT IS SOMETHING WHICH OCCUPIES THE ATTENTION AND LABOU R OF A PERSON FOR THE PURPOSE OF PROFIT. SECTION 2(13) OF THE ACT DEFINES' BUSINESS' TO INCLUDE '... ANY TRADE, COMME RCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATU RE OF TRADE, COMMERCE OR MANUFACTURE'. WHEN A WORD IS DEF INED TO 'MEAN' SOMETHING, THE DEFINITION IS PRIMA FACIE RES TRICTIVE AND EXHAUSTIVE AS WAS INDICATED BY THE SUPREME COURT IN THE CASE OF VANGUARD FIRE AND GENERAL INSURANCE CO. LTD. V. FRASER AND ROSS [1960] 30 COMP CAS (INS) 13 ; AIR 1960 SC 971. WHERE, HOWEVER, THE WORD DEFINED IS DECLARED TO 'INCLUDE' CERTAIN THINGS, THE DEFINITION IS EXTENSIVE. (SEE ARDESHIR H. BHIWANDIWALA V. STATE OF BOMBAY [1961-62] 20 FJR 11 3 ; AIR 1962 SC 29). IN SMITH V. ANDERSON [1880] 15 CH. D. 247, 258 (CA), JESSEL M.R., AFTER CITING DEFINITIONS OF 'BUS INESS' FROM SEVERAL DICTIONARIES, SAID, 'ANYTHING WHICH OCCUPIE S THE TIME AND ATTENTION AND LABOUR OF A MAN FOR THE PURPOSE O F PROFIT IS BUSINESS.' FURTHER ON, HE REMARKS (AT PAGE 260) : ' THERE ARE MANY THINGS WHICH IN COMMON COLLOQUIAL ENGLISH WOUL D NOT BE CALLED A BUSINESS, EVEN WHEN CARRIED ON BY A SINGLE PERSON, WHICH WOULD BE SO CALLED WHEN CARRIED ON BY A NUMBE R OF PERSONS.' FOR INSTANCE, A MAN WHO IS THE OWNER OF A HOUSE DIVIDED INTO SEVERAL FLOORS AND USED FOR COMMERCIAL PURPOSES, E.G., OFFICES, WOULD NOT BE SAID TO CARRY ON A BUSI NESS BECAUSE HE LET THE OFFICES AS SUCH. BUT, SUPPOSE A COMPANY WAS FORMED FOR THE PURPOSE OF BUYING A BUILDING, OR LEA SING A HOUSE, TO BE DIVIDED INTO OFFICES AND TO BE DIVIDE INTO OFFICES AND TO BE LET OUT - SHOULD NOT WE SAY, IF THAT WAS THE OBJECT OF ITA NO287/COCH/14 & CO 30/C/2014 15 THE COMPANY, THAT THE COMPANY WAS CARRYING ON BUSIN ESS FOR THE PURPOSE OF LETTING OFFICES? THE SAME OBSERVATIO N MAY BE MADE AS REGARDS A SINGLE INDIVIDUAL BUYING OR SELLI NG LAND, WITH THIS ADDITION, THAT HE MAY MAKE IT A BUSINESS, AND THEN IT IS A QUESTION OF CONTINUITY. WHEN YOU COME TO AN ASSOCIA TION OR COMPANY FORMED FOR A PURPOSE, YOU WOULD SAY AT ONCE THAT IT IS A BUSINESS, BECAUSE THERE YOU HAVE THAT FROM WHI CH YOU WOULD INFER CONTINUITY. THE WORD 'BUSINESS' HAS A M ORE EXTENSIVE MEANING THAN THE WORD 'TRADE'. IN NARASIN GHA KAR AND CO. V. CIT [1978] 113 ITR 712, THIS COURT HAD O CCASION TO DEAL WITH ALMOST A SIMILAR CONTROVERSY. IT WAS HELD THAT THE INCOME OF THE ASSESSEE IN THAT CASE FROM THE SHOPS WAS ASSESSABLE UNDER SECTION 28 OF THE ACT AS INCOME FR OM BUSINESS, AND SINCE THE ASSESSEE WAS CARRYING ON A BUSINESS, IT WAS ENTITLED TO REGISTRATION. THE DECISIONS ON WHIC H RELIANCE HAS BEEN PLACED BY LEARNED COUNSEL FOR THE REVENUE WERE ALSO CONSIDERED BY THIS COURT IN NARASINGHA KAR'S C ASE [1978] 113 ITR 712 (ORISSA). THE TESTS INDICATED IN THOSE TWO CASES WERE APPLIED AND CONCLUSIONS WERE ARRIVED AT. IN KARNANI PROPERTIES LTD. V. CIT [1971] 82 ITR 547 , THE APEX COURT HAS OBSERVED THAT, AN ACTIVITY CARRIED ON CONTINUOUSLY IN AN ORGANISED MANNER WITH A SET PURPOSE AND WITH A VIEW TO EARN PROFITS IS 'BUSINESS'. SIMILARLY, WHEN THE ASSESSEE TOOK A PLOT OF LAND ON LEASE, CONSTRUCTED SOME STRUCTURES THEREON AND LET THEM OU T TO SHOPKEEPERS AND STALL-HOLDERS, THE APEX COURT CONST RUED THE ACTIVITY TO BE BUSINESS. (SEE S. G. MERCANTILE CORP ORATION P. LTD. V. CIT [1972] 83 ITR 700 (SC). KEEPING IN VIE W THE DECISIONS OF THE APEX COURT IN KARNANI PROPERTIES CASE [1971] 82 ITR 547 AND S. G. MERCANTILE CORPORATION'S CASE [1972] 83 I TR 700 AND ALSO THE DECISION OF THIS COURT IN NARASINGHA KAR'S CASE [1978] 113 ITR 712 (ORISSA), THE TRIBUNAL HELD THAT THE AC TIVITIES CARRIED ON BY THE ASSESSEE AMOUNTED TO BUSINESS. THE CONCLU SION IS ESSENTIALLY ONE OF FACT, AND, IN OUR CONSIDERED OPI NION, DOES NOT GIVE RISE TO A QUESTION OF LAW. ACCORDINGLY, OU R ANSWER TO THE REFRAMED QUESTION IS IN THE AFFIRMATIVE, IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 7.3 THEREFORE, THE QUESTION BEFORE US IS WHETHER, T HE ACTIVITY OF CONSTRUCTION AND SALE/LEASE OF IMMOVABLE PROPERTY C ONSTITUTES 'BUSINESS'?. WE MAY CLARIFY THAT THE QUESTION IS N OT WHETHER, ALL ITA NO287/COCH/14 & CO 30/C/2014 16 OBJECT CLAUSE OF THE ASSESSEE CONSTITUTES BUSINESS OR NOT? THE ONLY OBJECTION OF THE ASSESSEE IN REGARD TO THE FIRST ME NTIONED QUESTION IS THAT THERE IS NO PROFIT MOTIVE. IN OTHER WORDS, THE RE IS NO DOUBT THAT THE ACTIVITY HAS BEEN CARRIED ON CONTINUOUSLY IN AN ORGANIZED MANNER WITH A SET PURPOSE. THE QUESTION IS ONLY REG ARDING THE PROFIT MOTIVE. IT IS CLEAR FROM THE ACCOUNTS THAT THIS ACT IVITY HAS BEEN UNDERTAKEN WITH A VIEW TO EARNING PROFIT SO AS TO U SE THE PROFIT FOR THE OBJECT OF THE AUTHORITY. THUS, THE ASSESSEE HAS CONSISTENTLY EARNED SUBSTANTIAL PROFIT. THEREFORE, THE ACTIVITY HAS BEEN CARRIED ON WITH PROFIT MOTIVE AND IN THE SAME MANNER IN WHICH A PRIVATE BUILDER OF LARGE TOWNSHIP WILL CONDUCT HIS BUSINESS . 8 IN VIEW OF THE ABOVE DISCUSSION, IN OUR OPINION, THE ISSUE RAISED IN THE REVENUES APPEAL IS SQUARELY COVERED BY THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF T HE GREATER COCHIN DEVELOPMENT AUTHORITY IN ITA NO 792 & 793/COCH.2013 VIDE ORDER DATED 8 TH AUG 2014 WHEREIN IT HAS BEEN HELD AS UNDER: 43. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX(A) AND OTHER MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS BEEN CONSTITUTED BY THE GOVERNMENT OF KERALA. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE WAS CONSTITUTED U NDER THE ACT OF THE GOVERNMENT FOR MAKING BETTER PLANNING AND REGULATIN G DEVELOPMENT AND USE OF LAND IN PLANNING AREAS DELINEATED FOR THE PU RPOSE, PREPARATION OF REGIONAL PLANS/MASTER PLANS AND IMPLEMENTATION THER EOF AND ALSO FOR GUIDING AND DIRECTING THE PLANNING AND DEVELOPMENT PROCESS IN THE STATE. THE MAJOR THRUST OF ARGUMENT ON BEHALF OF THE LEARN ED COUNSEL IS THAT THE ITA NO287/COCH/14 & CO 30/C/2014 17 ASSESSEE IS OF GENERAL PUBLIC UTILITY AND WAS ESTAB LISHED TO SATISFY THE NEED FOR HOUSING ACCOMMODATION OF VARIOUS SECTIONS OF TH E PEOPLE OF KERALA AND SPECIALLY FOR PLANNING AND DEVELOPMENT IN THE C ITIES, TOWN AND VILLAGES AND IS OF CHARITABLE NATURE. 44. BEFORE COMING TO ANY CONCLUSION, WE ARE SUPPOSE D TO SEE THE MEANING OF THE WORD 'CHARITABLE PURPOSE' WHICH HAS BEEN DEFINED IN SECTION 2(15) OF THE ACT WHICH INCLUDES RELIEF TO T HE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. A STRONG CONTENTION WAS RAISED BY THE LEAR NED COUNSEL THAT THE ASSESSEE IS ALSO EXECUTING THE DEVELOPMENT OF FOLLO WING WORKS/INFRASTRUCTURES: (A) DEVELOPMENT OF MARKET (B) WATER SUPPLY AND SEWERAGE (C) DEVELOPMENT OF SPORTS COMPLEXES (D) BRIDGES (E) BUS QUEUE SHELTERS (F) BUS STANDS (G) SWIMMING POOLS (H) COMMUNITY CENTRES (I) PUBLI C TOILETS (H) DEVELOPMENT OF PARKS (I) CREMATION GROUNDS (J) CONSTRUCTION OF SCHOOLS, ETC. 45. THE LEARNED COUNSEL DURING ARGUMENT TOOK A STRO NG PLEA THAT ON IDENTICAL FACTS REGISTRATION UNDER SECTION 12A OF T HE ACT WAS ACCORDED TO LUCKNOW DEVELOPMENT AUTHORITY AND JODHPUR DEVELOPME NT AUTHORITY WHEREIN THE OBJECTS ARE IDENTICAL TO THE PRESENT AS SESSEE. ACCORDING TO THE LD. AR IF THE ACT UNDER WHICH THE ASSESSEE WAS CONS TITUTED IS ANALYSED, IT IS THE SAME AS IN THE ABOVE CASES AND WHEN REGISTRA TION HAS BEEN GRANTED TO THOSE AUTHORITIES, THEN NO TWO YARDSTICKS SHOULD BE ADOPTED. 46. AT THE OUTSET, WE ARE OF THE VIEW THAT WE ARE N OT AGREEABLE WITH THE CONTENTION OF THE LEARNED COUNSEL. AT THE SAME TIME, RES JUDICATA IS ITA NO287/COCH/14 & CO 30/C/2014 18 NOT APPLICABLE IN INCOME-TAX PROCEEDINGS. WE DO NOT WANT TO COMMENT AS TO WHY AND HOW THE REGISTRATION WAS GRANTED TO THES E AUTHORITIES AS THE SAME IS NOT PENDING BEFORE US FOR ADJUDICATION. REL IANCE CAN BE PLACED UPON THE DECISION PRONOUNCED BY THE HON'BLE APEX CO URT IN THE CASE OF DISTRIBUTORS (BARODA) (P) LTD. V. UNION OF INDIA AN D ORS. (155 ITR 120) WHEREIN THE HON'BLE APEX COURT HELD THAT 'IT IS ALMOST AS IMPORTANT THAT THE LAW SHOULD BE SETTLED PERMANENTLY AS THAT IT SHOULD BE SETTLED CORRECTLY BUT THERE MAY BE CIRCUMSTANCES WHERE PUBLIC INTEREST DEMANDS THAT TH E PREVIOUS DECISION BE REVIEWED AND RECONSIDERED. THE DOCTRINE OF STARE DECISES SHOULD NOT DETER THE COURT FROM OVERRULING AN EARLIER DECISION , IF IT IS SATISFIED THAT SUCH DECISION IS MANIFESTLY WRONG OR PRECEDES UPON A MISTAKEN ASSUMPTION IN REGARD TO THE EXISTENCE OR CONTINUATI ON OF A STATUTORY PROVISION OR IS CONTRARY TO ANOTHER DECISION OF THE COURT.' HOWEVER, TWO VIEWS REASONABLY MAY BE POSSIBLE. PERPETUATION OF E RROR IS NOT A HEROISM. HOWEVER, WE MAKE IT CLEAR THAT THIS OBSERVATION OF OURS SHOULD NOT BE TREATED TO BEAR ANY EFFECT IN THE CASE OF OTHER ASS ESSEES. AT THE SAME TIME, ORDER PASSED BY A LOWER AUTHORITY IS NOT BIND ING ON THE TRIBUNAL. HOWEVER, IT MAY BE A GOOD ARGUABLE POINT BY THE PAR TIES. THIS ISSUE REQUIRES DELIBERATION FROM A DIFFERENT ANGLE WHETHE R THE ASSESSEE WAS CONSTITUTED TO PROVIDE ANY CHARITY TO THE PUBLIC AT LARGE OR TO SATISFY THE NEEDS FOR HOUSING ACCOMMODATION FOR THE PEOPLE OF K ERALA AND ALSO PLANNING AND DEVELOPMENT OF THE CITIES, TOWNS AND V ILLAGES OR WHETHER THE DEVELOPMENT IN SUCH A WAY IS OF CHARITABLE NATURE. A PLEA WAS RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT FUNDS ARE PROVIDED BY THE KERALA GOVERNMENT OR GENERATED BY THE ASSESSEE ITSE LF. TO GENERATE ITS FUNDS FOR CARRYING OUT ITS OBJECTS, THE ASSESSEE IS ACQUIRING LANDS, DEVELOPING THEM AND SELLING THE PLOTS TO THE GENERA L PUBLIC WHO APPLY FOR THE SAME. EVEN THE ECONOMICALLY WEAKER STRATA OF THE SOCIETY IS GENERALLY APPLYING. IT IS NOT THE CASE THAT THE ASSESSEE IS A LLOTTING HOUSES TO THE POOR MASSES FREE OF COST. THE HON'BLE APEX COURT IN THE CASE OF ASSTT. CIT V. THANTHI TRUST (2001) 165 CTR (SC) 681 : (2001) 2 47 ITR 785 (SC) HAS DELIBERATED UPON THE ISSUE OF CHARITABLE PURPOSES W HEREIN THE FOUNDER OF A DAILY NEWSPAPER CREATED A TRUST IN MARCH, 1954 AN D THE OBJECTS OF THE TRUST WERE ORIGINALLY TO ESTABLISH NEWSPAPER AS AN ORGAN OF EDUCATED PUBLIC OPINION FOR THE TAMIL READING PUBLIC. IN JUL Y, 1957, A SUPPLEMENTARY DEED MAKING THE TRUST IRREVOCABLE AND ANR. SUPPLEME NTARY DEED FOR ESTABLISHING AND RUNNING A SCHOOL/COLLEGE FOR TEA CHING JOURNALISM WERE ADDED. THE QUESTION BEFORE THE HON'BLE COURT WAS WH ETHER THE INCOME OF THE TRUST WAS EXEMPT FROM INCOME-TAX DURING THE REL EVANT PERIOD, THE HON'BLE APEX COURT WHILE COMING TO A PARTICULAR CON CLUSION REVERSED THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS AND HE LD THAT THE TRUST DID NOT FALL WITHIN THE PROVISIONS OF SECTION 11(4A), A S IT THEN STOOD, AND WAS NOT ENTITLED TO EXEMPTION FROM TAX. ITA NO287/COCH/14 & CO 30/C/2014 19 47. THE HON'BLE APEX COURT ALSO CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS WHICH WERE REFERRED TO IT BY THE RES PECTIVE COUNSEL AS ARE AVAILABLE IN THE SAID ORDER SPECIALLY AT P. 787 . HOWEVER, THERE IS A MAJOR SHIFT IN THE LAW WITH REGARD TO INSTITUTIONS WHO ARE CLAIMING CHARITIES. IT IS A WELL KNOWN FACT THAT IN SOME OF THE SITUATIONS THE PROVISIONS OF LAW IS MISUSED IN THE NAMES OF CHARIT IES. IF AN EXPANDED/BROADER LATITUDE IS EXTENDED TO THE WORD C HARITY, THEN THERE ARE SO MANY INSTITUTIONS/DEPARTMENTS WHO WILL TRY TO CO ME UNDER THE UMBRELLA OF THIS PROVISION TO MISUSE THE PROVISION. THEREFOR E, FOR THE BROAD DEVELOPMENT OF THE NATION/SOCIETY A STRICT AND POSI TIVE VIGIL IS REQUIRED SO THAT THE PROVISION CAN BE SAVED FROM ITS MISUSE IN ANY MANNER. WE ARE AWARE THAT NO ACTIVITY CAN BE CARRIED ON EFFICIENTL Y, PROPERLY UNLESS AND UNTIL IT IS CARRIED OUT ON BUSINESS PRINCIPLE BUT I T DOES NOT MEAN THAT THE PROVISION IS MISUSED IN ANY MANNER UNDER THE GARB O F CHARITY AND ANY INSTITUTION BE ALLOWED TO BECOME RICHER AND RICHER UNDER THE GARB OF CHARITY BY MAKING IT A NON-TAX PAYABLE ORGANIZATION . IN THE CASES OF ADDL. CIT V. SURAT SILK CLOTH MANUFACTURERS ASSOCIATION ( 121 ITR 1) AND CIT V. BAR COUNCIL OF MAHARASHTRA, 22 CTR (SC) 106, IT WAS HELD THAT WHAT IS PREDOMINANT OBJECT OF THE ACTIVITY- WHETHER, IT IS TO CARRY OUT A CHARITABLE PURPOSE AND NOT TO EARN PROFIT-THE PURPOSE SHOULD B E THAT IT SHOULD NOT LOSE ITS CHARITABLE CHARACTER. 48. THE MAJOR THRUST OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSEE IS OF GENERAL PUBLIC UTILITY AS IT SATISFI ES THE NEED FOR HOUSING ACCOMMODATION FOR THE SECTION OF THE PEOPLE OF STAT E OF KERALA, SPECIFICALLY COCHIN AND IS ALSO DOING PLANNING AND DEVELOPMENT OF THE CITIES, TOWNS AND VILLAGES. WE ARE NOT AGREEABLE WI TH THE ARGUMENT OF THE LEARNED COUNSEL BECAUSE A CHARITABLE INSTITUTION PR OVIDES SERVICES FOR CHARITABLE PURPOSES EITHER AT FREE OF COST OR ON CO ST TO COST BASIS AND NOT FOR PROFIT. IN THE PRESENT SCENARIO, THE SIMILAR AC TIVITIES ARE PERFORMED BY BIG COLONIZERS/DEVELOPERS WHO ARE EARNING A HUGE PR OFIT. IF THIS INCOME IS EXEMPTED U/S. 11, THEN WE WILL OPEN A PANDORA BOX A ND ANYBODY WILL CLAIM THE EXEMPTION FROM TAX. IF THE ACTIVITIES OF THE ASSESSEE ARE ANALYSED, IT HAS TURNED INTO A HUGE PROFIT-MAKING A GENCY FOR WHICH IT IS TAKING MONEY FROM THE GENERAL PUBLIC. IN SUCH A SIT UATION, WE ARE OF THE VIEW THAT NO CHARITY IS INVOLVED AND IF ANY INSTITU TION OF PUBLIC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED/DEVELOP ED, THE ASSESSEE IS CHARGING THE COST OF IT FROM THE PUBLIC AT LARGE AN D THE MONEY IS COMING FROM THE COFFER OF THE GOVERNMENT. IT CAN BE SAID T HAT OBJECTS/ACTIVITIES OF THE ASSESSEE ARE MORE OF COMMERCIALIZED NATURE AND WE DO NOT FIND ANY CHARITY IN IT. AT THE SAME TIME, IF THESE FACILITIE S ARE NOT PROVIDED, THEN NOBODY WILL PURCHASE A PLOT. IT CAN BE SAID THAT IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDEN COST IS ALREADY ADDED, SO NO CHARITY IS INVO LVED. AT BEST, THE ITA NO287/COCH/14 & CO 30/C/2014 20 ASSESSEE CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS. IT CAN BE SAID THAT IT IS THE DUTY OF THE GOVERNMENT TO CREATE/PROVIDE ALL THESE FACILITIES TO PUBLIC AT LA RGE, WHICH IS BEING DONE THROUGH THIS AGENCY IN A PARTICULAR AREA. AT THE SA ME TIME, THE FUNDS WHICH ARE PROVIDED TO THE ASSESSEE BY THE GOVERNMEN T IS AGAIN A PUBLIC MONEY OR GENERATED FROM THE PUBLIC ITSELF, SO WHERE IS THE CHARITY? IF THE ACTIVITIES OF THE ASSESSEE AND THE ARGUMENTS OF THE LEARNED COUNSEL ARE PUT IN A JUXTAPOSITION, IT CAN BE SAID THAT THE OBJ ECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHARITABLE, BUT ACTUALLY ARE O F PURELY COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS A KNO WN FACT THAT THE ASSESSEE IS ACQUIRING THE LAND AT VERY LOW PRICES A ND SELLING THE SAME LAND ON VERY HIGHER RATES AND IS EARNING A PROFIT THEREF ROM. A NEW TREND HAS ALSO EMERGED THAT THE ASSESSEE HAS STARTED AUCTIONI NG THE PLOTS BY WAY OF BIDDING AT THE MARKET RATE AND SOMETIMES MORE THAN THAT AND CHARGING INTEREST ON BELATED PAYMENTS. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT NO CHARITY IS INVOLVED. RATHER THE ASSESSEE HAS CON VERTED ITSELF INTO A BIG BUSINESS HOUSE. SIMILAR DEVELOPMENT/INFRASTRUCTURE/ FACILITIES ARE ALSO PROVIDED BY PRIVATE DEVELOPERS THESE DAYS, THEN THE Y WILL ALSO CLAIM THE STATUS OF A CHARITABLE INSTITUTION. 49. DURING ARGUMENT, THE LD. COUNSEL RELIED UPON THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF ADDL. CIT VS. SUR AT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) WHERE THE ASSESSE E WAS INCORPORATED UNDER THE COMPANIES ACT WHEREIN THE DOMINANT OR THE PRIMARY PURPOSE OF THE ASSESSEE WAS TO PROMOTE COMMERCE AND TRADE IN A RT SILK YARN, RAW SILK, COTTON YARN, ART SILK CLOTH, SILK CLOTH AND C OTTON CLOTH AS SET OUT IN CLAUSE (A) AND THE OBJECT SPECIFIED IN CLS. (B) TO (E) AND THE OBJECT WAS FOUND TO BE PUBLIC UTILITY NOT INVOLVING THE CARRYI NG ON OF ANY ACTIVITY FOR PROFIT WITHIN THE MEANING OF SECTION 2(15), THE ASS ESSEE WAS HELD TO BE ENTITLED FOR EXEMPTION UNDER SECTION 11(1)(A) OF TH E ACT. HOWEVER, IN THE PRESENT CASE THERE IS A PROFIT MOTIVE OF THE ASSESS EE, SO IT WILL NOT HELP IN ANY MANNER. 50. THE HON'BLE APEX COURT IN THE CASE OF CIT V. BA R COUNCIL OF MAHARASHTRA, 22 CTR (SC) 106 WHERE THE PRIME DOMINA NT PURPOSE WAS FOR THE ADVANCEMENT OF OBJECT OF PUBLIC UTILITY, IT WAS HELD TO BE ENTITLED TO EXEMPTION. THE LEARNED COUNSEL FOR THE ASSESSEE, DU RING ARGUMENT RAISED A PLEA THAT TOTALITY OF CIRCUMSTANCES HAS TO BE SEE N SPECIALLY THAT ALL MONEY GOES WITH THE STATE GOVERNMENT AND NOT IN PRI VATE HANDS, THE PRICES ARE FIXED AND THE ASSESSEE IS NOT A COMMERCI AL ORGANIZATION AND THE PREDOMINANT ACTIVITY OF THE ASSESSEE IS TO DEVELOP INFRASTRUCTURE AND CONTENDED THAT RULE OF CONSISTENCY HAS TO BE SEEN. WE ARE OF THE VIEW THAT PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INC OME- TAX PROCEEDINGS. HOWEVER, WE AGREE WITH THE LEARNED COUNSEL TO THE E XTENT THAT EQUALLY ITA NO287/COCH/14 & CO 30/C/2014 21 IMPORTANT IS THE RULE OF CONSISTENCY. WE ARE OF THE VIEW THAT CONSISTENCY HAS TO BE SEEN IN TOTALITY OF CIRCUMSTANCES WHICH D EPENDS UPON FACTS OF EACH CASE IN THE LIGHT OF PRIMARY OBJECT AND REAL A CTIVITIES DONE BY THE ASSESSEE, SO THESE JUDICIAL PRONOUNCEMENTS IN OUR H UMBLE OPINION ARE NOT GOING TO HELP THE ASSESSEE. FURTHER, ON SCRUTINY OB JECTS; OF THE ASSESSEE- TRUST, THERE WAS NO DEFINED DOMINANT CHARITABLE PUR POSE IN THE TRUST DEED TO WHICH THE SAID OBJECTS WOULD SERVE AS ANCILLARY OBJECTS AND WHICH WERE MEANT TO FEED THE DOMINANT PURPOSE. THE TRUST DEED EMPOWERED THE AUTHORITIES OF THE TRUST TO SPEND THE FUNDS OF THE TRUST FOR THE PURCHASE OF IMMOVABLE PROPERTY AND SINCE NO PART OF THE INCOME OF THE TRUST WAS APPLIED ON ANY SPECIFIC CHARITABLE PURPOSES, THE EX EMPTION UNDER SECTION 11 OF THE ACT WAS DENIED. IN VIEW OF THESE FACTS A ND JUDICIAL PRONOUNCEMENTS, WE ARE SUPPOSED TO SEE THE PREDOMIN ANT OBJECT OF THE ASSESSEE. IF ALL THE OBJECTS AND ACTIVITIES ACTUALL Y CARRIED OUT BY THE ASSESSEE ARE ANALYSED AND KEPT IN JUXTAPOSITION WIT H THE VARIOUS JUDICIAL PRONOUNCEMENTS, WE ARE OF THE VIEW THAT ACTIVITIES OF THE ASSESSEE ARE MORE OF COMMERCIAL NATURE WITH PROFIT-ORIENTED INTE NT, SO NO LENIENCY SHOULD BE SHOWN TO THE ASSESSEE. THE DEPARTMENT MAY ALSO GET SUPPORT FROM THE DECISION OF THE HON'BLE PATNA HIGH COURT A S PRONOUNCED IN THE CASE OF BIHAR STATE FOREST DEVELOPMENT CORPORATION V. CIT, 224 ITR 757 WHERE THE GOVERNMENT COMPANY WAS FORMED FOR PROMOTI ON AND DEVELOPMENT OF FORESTRY. THE ASSESSEE- CORPORATION WAS PERMITTED UNDER MEMORANDUM OF ASSOCIATION TO ENGAGE IN COMMERCIAL A CTIVITIES AND THERE WAS NO RESTRICTION ON APPLICATION OF MONEY, THE COR PORATION WAS NOT HELD TO BE A CHARITABLE TRUST AND CONSEQUENTLY NOT ENTIT LED TO EXEMPTION. SIMILAR IS THE CASE IN THE PRESENT APPEAL OF THE AS SESSEE. HOWEVER, IF THE ARGUMENT OF THE ASSESSEE IS ANALYSED ON POINT OF GE NERAL PUBLIC UTILITY, STILL IT CAN BE SAID THAT COMMERCIAL ANGLE WITH PROFIT MO TIVE IS INVOLVED WHICH HAS BECOME PREDOMINANT OBJECT OF THE ASSESSEE. EVEN IF THIS ISSUE IS ANALYSED AS CONTENDED BY THE LEARNED COUNSEL FOR TH E ASSESSEE THAT APPLICATION OF INCOME IS NOT THE CRITERIA IN THE LI GHT OF THE DECISION OF HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF FIFT H GENERATION EDUCATION SOCIETY V. CIT , STILL WE ARE OF THE VIEW THAT IF T HE OBJECTS AND REAL SITUATION IS ANALYSED, THE OBJECTS ARE NOT OF CHARI TABLE NATURE, ALMOST IN EVERY ACTIVITY THERE IS A SCENT OF COMMERCIALIZATIO N/PROFIT MOTIVE BUT IN THE CHARITABLE INSTITUTION NO PROFIT MOTIVE IS INVOLVED AND THE SERVICE IS DONE MAINLY WITH THE INTENT OF SOCIAL/RELIGIOUS UPLIFTME NT OF THE MASSES IN GENERAL. ADMITTEDLY, THE ASSESSEE IS DOING SOME ACT IVITIES LIKE HOUSING/INFRASTRUCTURE DEVELOPMENT AND THE PUBLIC I S ALSO BENEFITED BUT FOR THE SAME THE ASSESSEE HAS ALREADY CHARGED IN TH E FORM OF HIDDEN COST. RATHER THE ASSESSEE IS GENERATING INCOME, SO NO CHA RITY IS INVOLVED. A CHARITABLE INSTITUTION PROVIDES SERVICES FOR CHARIT ABLE PURPOSES FREE OF COST AND FOR NO GAIN AND ARE FOR THE BENEFIT OF PUBLIC A T LARGE. AS WE HAVE DISCUSSED IN THE PRECEDING PARA, THE ASSESSEE ACQUI RES LAND AT NOMINAL ITA NO287/COCH/14 & CO 30/C/2014 22 RATES AND AFTER DEVELOPING THE SAME, THE SAME LAND (IS SOLD) ON HIGH PROFIT WHICH CANNOT BE SAID TO BE A CHARITABLE ACTIVITY. EV EN JUST FOR ARGUMENT SAKE, UNDER THE PRESENT FACTS, IF REGISTRATION IS G RANTED, THEN EVERY PRIVATE COLONIZER WILL CLAIM CHARITY. THE FACILITIES WHICH ARE PROVIDED TO THE PLOT HOLDERS ARE INCIDENTAL TO THE COMMERCIAL ACTIVITY C ARRIED OUT BY THE COMMERCIAL DEVELOPERS/BUILDERS AND IF CERTAIN FACIL ITIES LIKE PARKS, COMMUNITY CENTER, SCHOOL ARE PROVIDED IS NOT ONLY B ASIC REQUIREMENT, RATHER A TOOL OF ATTRACTING THE INVESTORS WHEREIN T HE HIDDEN COST OF THESE FACILITIES IS ALREADY INCLUDED. IN THE ABSENCE OF T HESE FACILITIES, NORMALLY THE PURCHASER MAY NOT INVEST AND THE PRICES MAY BE LESS. 51. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEME NTS, WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE HAS BEEN RIGHTL Y REJECTED BY THE CIT(A). THE STAND OF THE CIT(A) IS UPHELD. ACCORD INGLY, THE APPEALS OF THE ASSESSEE ARE, THEREFORE, DISMISSED. 52. THE COORDINATE BENCH OF THE TRIBUNAL AT AMRITSAR, FOLLOWING THE DECISION IN THE CASE OF PUNJAB URBAN PLANNING AND A REA DEVELOPMENT AUTHORITY VS. CIT, 156 TAXMAN 37 (CHD.) HELD, IN TH E CASE OF JALANDHAR DEVELOPMENT AUTHORITY V/S.CIT (2009)124 TTJ (ASR) 5 98, TO WHICH ONE OF US, VIZ. AUTHOR MEMBER, IS A PARTY, THAT DENIAL OF REGISTRATION UNDER S.12AA(A) OF THE ACT TO THAT ASSESSEE, WHICH WAS AL SO CONSTITUTED UNDER PUNJAB REGIONAL AND TOWN PLANNING AND DEVELOPMENT A CT, 1995, WAS JUSTIFIED. THE OBJECTS OF THE AUTHORITY IN THAT CAS E AS NOTED BY THE TRIBUNAL IN PARA 3 OF ITS ORDER READS AS FOLLOWS: 'THE OBJECTS OF THE AUTHORITY SHALL BE TO PROMOTE A ND SECURE BETTER PLANNING AND DEVELOPMENT OF ANY AREA OF THE STATE A ND FOR THAT PURPOSE THE AUTHORITY SHALL HAVE THE POWERS TO ACQUIRE BY W AY OF PURCHASE TRANSFER, EXCHANGE OR GIFT OR TO HOLD, MANAGE, PLAN , DEVELOP AND MORTGAGEE OR OTHERWISE DISPOSE OF LAND OR OTHER PRO PERTY OR TO CARRY OUT ITSELF OR IN COLLABORATION WITH ANY OTHER AGENCY OR THROUGH ANY OTHER AGENCY ON ITS BEHALF, BUILDING, ENGINEERING, MINING AND OTHER OPERATIONS TO EXECUTE WORKS IN CONNECTION WITH SUPPLY OF WATER , DISPOSAL OF SEWERAGE, CONTROL OF POLLUTION AND OTHER SERVICES A ND AMENITIES AND GENERALLY TO DO ANYTHING WITH THE PRIOR APPROVAL OR ON DIRECTION OF THE STATE GOVERNMENT, FOR CARRYING OUT THE PURPOSES OF THE ACT.' 53. AT THIS JUNCTURE, IT MAY BE OBSERVED THAT THE A BOVE OBJECTS NOTED BY THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CONTEX T OF JALANDHAR DEVELOPMENT AUTHORITY, IS ALMOST IDENTICAL TO THE A SSESSEES CASE. CONSIDERING THE CONTENTION OF THE ASSESSEE WITH REG ARD TO THE CHARITABLE ITA NO287/COCH/14 & CO 30/C/2014 23 NATURE INVOLVED IN ITS ACTIVITIES, AND ALSO TAKING INTO ACCOUNT THE CASE-LAW CITED BEFORE IT IN THAT BEHALF, HELD IN CONCLUSIVE PORTION OF PARA 6.1 OF THAT ORDER AS FOLLOWS- 'IT IS A WELL KNOWN FACT THAT IN SOME OF THE SITUAT IONS THE PROVISIONS OF LAW ARE MISUSED IN THE NAMES OF CHARITIES. IF AN EXPAND ED /BROADER LATITUDE IS EXTENDED TO THE WORD CHARITY, THEN THERE ARE SO MAN Y INSTITUTIONS / DEPARTMENTS WHO WILL TRY TO COME UNDER THE UMBRELLA OF THIS PROVISION TO MISUSE THE PROVISION. THEREFORE, FOR THE BROAD DEVE LOPMENT OF THE NATION / SOCIETY, A STRICT AND POSITIVE VIGIL IS REQUIRED SO THAT THE PROVISION CAN BE SAVED FROM ITS MISUSE IN ANY MANNER. NO ACTIVITY CA N BE CARRIED ON EFFICIENTLY, PROPERLY UNLESS AND UNTIL IT IS CARRIE D OUT ON BUSINESS PRINCIPLE BUT IT DOES NOT MEAN THAT THE PROVISION IS MISUSED IN ANY MANNER UNDER THE GRAB OF CHARITY AND ANY INSTITUTION BE ALLOWED TO BECOME RICHER AND RICHER UNDER THE GRAB OF CHARITY BY MAKING IT A NON -TAX PAYABLE ORGANIZATION. A CHARITABLE INSTITUTION PROVIDES SER VICES FOR CHARITABLE PURPOSES FREE OF COST AND NOT FOR A GAIN. IN THE PR ESENT SCENARIO, SIMILAR ACTIVITIES ARE PERFORMED BY BIG COLONIZERS/DEVELOPE RS WHO ARE EARNING A HUGE PROFIT. IF THIS REGISTRATION IS GRANTED, THEN ANYBODY WILL CLAIM THE EXEMPTION FROM TAX. IF THE ACCOUNTS OF THE ASSESSEE ARE ANALYSED, IT HAS TURNED INTO A HUGE PROFIT-MAKING AGENCY FOR WHICH I T IS TAKING MONEY FROM THE GENERAL PUBLIC. IF ANY INSTITUTION OF PUBLIC IM PORTANCE LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED /DEVELOPED, THE ASSES SEE IS CHARGING THE COST OF IT FROM THE PUBLIC AT LARGE AND THE MONEY I S COMING FROM THE COFFER OF THE GOVERNMENT. IT CAN BE SAID THAT OBJECTS/ACTI VITIES OF THE ASSESSEE ARE MORE OF COMMERCIALIZED NATURE AND NO CHARITY IS INVOLVED IN IT. AT THE TIME, IF THESE FACILITIES ARE NOT PROVIDED, THEN NO BODY WILL PURCHASE A PLOT. IT CAN BE SAID THAT IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDEN COST I S ALREADY ADDED, SO NO CHARITY IS INVOLVED. AT BEST, THE ASSESSEE CAN B E SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS. IT C AN BE SAID THAT IT IS THE DUTY OF THE GOVERNMENT TO CREATE / PROVIDE ALL THES E FACILITIES TO PUBLIC LARGE, WHICH IS BEING DONE THROUGH IS AGENCY IN A P ARTICULAR AREA. AT THE SAME TIME, THE FUNDS WHICH ARE PROVIDED TO THE ASSE SSEE BY THE GOVERNMENT IS AGAIN A PUBLIC MONEY OR GENERATED FRO M PUBLIC ITSELF. THE OBJECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHARI TABLE, BUT ACTUALLY ARE OF PURELY COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. 54. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO HOLD THAT THE CIT(A) IS JUSTIFIED IN REJECTING THE CLAIM OF EXEMPTION U/S. 11 OF THE I.T. ACT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE COORDINATE BENCH OF THIS TRIBUNAL (SUPRA), WE DECIDE THIS ISSUE IN FAVOUR OF THE REVE NUE AND AGAINST THE ASSESSEE. ITA NO287/COCH/14 & CO 30/C/2014 24 9 NOW WE WILL TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. 10 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION. 1 THE CIT(A)HAS ERRED IN NOT ADJUDICATING ON THE AD DITION DISALLOWANCE TOWARDS CAPITAL EXPENDITURE AMOUNTING TO R S.10,0 1 ,06 , 162 ON THE GROUND THAT THIS HAS BECOME INFRACTOUS O N A L LOWING THE MAIN GROUND COVERED B Y THE APPEAL I.E. , ADMISSIBILIT Y OF EXEMPTIONS FROM INCOME TAX U/S . 11 AND 12 OF THE INCOME TAX ACT, 1961 ON FACTS OF THE CASE AND PROVISIONS OF LAW. 2 THE CIT(A) OUGHT TO H A VE NOT E D THAT CAPITAL EXPENDITURE HAS NOT BEEN DEBITED TO THE INCOME AND EXPENDITURE A I C. FOR THE YEAR OF THE APPELLANT AT ALL AND IF FOR AN Y REASON IT IS ULTIMATELY HELD THAT THE APPELLANT IS NOT ENTITLED TO EXEMPTION SS] S.LL AND 12 OF THE ACT, THE ADDITION I DISALLOWANCE OF TH E CA P ITAL EXPENDITURE SHOULD HAVE B EEN DIRECTED TO BE DELETED. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MA Y BE MODIFIED TO THE EXTENT PRA Y ED FOR A S ABO V E . 11 WE FIND THAT THE ISSUES RAISED BY THE ASSESSEE A RE NOT ADJUDICATED BY THE CIT(A) FOR THE REASONS THAT THE MAIN CLAIM OF EXEMPTION U/S 11 HAS BEEN ALLOWED. SINCE WE HAV E REVERSED THE ORDER OF THE CIT(A) UPHOLDING THE EXEMPTION U/S 11, THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION WOUL D GO BACK TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. 12 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED ITA NO287/COCH/14 & CO 30/C/2014 25 WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 DAY OF DEC 2014 SD/- SD/- (N.R.S. GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 24TH DEC 2014 RAJ* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT, 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN 1 DATE OF DICTATION 8 DEC 2014 2 DT ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DI CTATING MEMBER 10 DEC 2014 3 DT ON WHICH THE APPROVED DRAFT COMES TO THE SR PS/ PS 4 DT ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DIC TATING MEMBER 5 DICTATION PAID PLACED IN THE ORIGINAL FILE (NO.OF P AGES) 6 DT OF PRONOUNCEMENT 7 DT ON WHICH THE FILE GOES TO THE BENCH CLERK 29 TH DEC 2014 8 DT ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DT ON WHICH THE FILE GOES TO AR 10 DT OF DISPATCH OF THE ORDER