M/S.GREATER COCHIN DEVELOPMENT AUTHORITY (GCDA) V. THE JOINT DIRECTOR OF INCOME TAX, (OSD) KOCHI

ITA/208/2014

AI Insights

The case involves the Greater Cochin Development Authority (GCDA), which appealed against the orders of the Income Tax Appellate Tribunal, Cochin Bench, concerning the assessment years 2009-10 and 2010-11. The GCDA had filed returns claiming nil income and sought exemption under Section 11 of the Income Tax Act, citing their activities as charitable. However, the Assessing Officer and subsequent appellate authorities found that the GCDA's activities, which included charging fees for various services and developing commercial centers, were in the nature of trade or business. The Tribunal's decision, which was challenged in the High Court, upheld the tax assessments made on the GCDA's income.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 755690 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 19-12-2014
• Assessment Year: misc
• Other Referred Cases: Addl. CIT, Gujarat v. Surat Art Silk Cloth Manufacturers Association, Surat (1980 (121) ITR 1)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH; P K R MENON
• Assessee Lawyers: HARISANKAR MENON; MEERA MENON
• Keywords: Assessment; Charitable purpose; Development authority; Exemption; Income Tax
• Section: 143(3); 11; 2(15)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN FRIDAY, THE 19TH DAY OF DECEMBER 2014/28TH AGRAHAYANA, 1936 ITA.No. 208 of 2014 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 792/Coch/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 08-08-2014 APPELLANT(S)/APPELLANT/ASSESSEE: ----------------------------------------------------------- THE GREATER COCHIN DEVELOPMENT AUTHORITY S.A ROAD, KADAVANTHRA, KOCHI 20 REPRESENTED BY ITS SECRETARY BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT(S)/RESPONDENT/REVENUE: ------------------------------------------------------------ THE JOINT DIRECTOR OF INCOME TAX, (OSD) (EXEMPTION), RANGE 4, KOCHI 689 006 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21-11-2014, ALONG WITH ITA. 210/2014, THE COURT ON 19-12-2014 DELIVERED THE FOLLOWING: ITA NO.208/14 APPENDIX APPELLANT'S EXHIBITS ANNEXURE A: COPY OF ASSESSMENT ORDER U/S.143(3) OF TE INCOME TAX ACT, 1961 DATED 30/3/13. ANNEXURE B: COPY OF APPELLATE ORDER NO.ITA51/R-/E/CIT- II/2013-14 DATED 27.9.13. ANNEXURE C: COPY OF ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.792 AND 793/COCH/2013 DATED 8.8.14. //True Copy// PA to Judge Rp ANTONY DOMINIC & ANIL K. NARENDRAN, JJ. =============================== I.T.A.Nos. 208 & 210 of 2014 ==================== Dated this the 19th day of December, 2014 J U D G M E N T Antony Dominic, J. In these Appeals filed by the Greater Cochin Development Authority, the common order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA Nos.792 and 793/2013, which were filed by the appellant, are challenged. 2. Since the issues raised in these appeals are identical in nature, these appeals were heard together and are being disposed of by the common judgment treating ITA No.208 of 2014 as the leading case. 3. The appellant is an authority constituted by the Government of Kerala, under the Town Planning Act for the planning and development of Greater Cochin Area. In so far as ITA No.208/2014 is concerned, the facts which are relevant are that the appellant filed its return of income for the A.Y. 2009-10 on 29.09.2009, returning total income at NIL and claiming exemption under Section 11 of the Act. The Assessing Officer considered the matter and taking note of the amended provision of Section 2(15) of the Act, disallowed the exemption claimed. Accordingly, total income of `8,00,94,700/- was assessed to tax. Similarly, assessment pertaining to the A.Y. 2010-11 was also completed ITA Nos.208 & 210/14 : 2 : disallowing the exemption claimed and it is that issue which is raised in ITA No.210/2014. 4. Appeals were filed before the Commissioner of Income Tax (Appeals), who dismissed the appeals and confirmed the order of assessment. These orders were challenged before the Tribunal and the Tribunal by a common order rendered on 08.08.2014 dismissed the appeals. It is in these circumstances, the appellant has filed these appeals under Section 260(A) of the Income Tax Act. 5. We heard the learned counsel for the appellant and the learned standing counsel appeared for the Revenue. 6. The question that arises for consideration in these appeals is whether the activities of the appellant would qualify to be a charitable purpose as defined in Section 2(15) of the Act to claim exemption as provided under Section 11 of the Act. 7. Before we deal with the factual aspects relied on by the statutory authorities, we shall first refer to Section 2(15) which reads thus: “(15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment including watersheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: ITA Nos.208 & 210/14 : 3 : Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakhs rupees or less in the previous year.” 8. In so far as the first part of Section 2(15) is concerned, even according to the appellant, its activities are in advancement of objects of general public utility and it is therefore claimed that their objects are of a charitable purpose. If as contended, the objects of the appellant are in advancement of general public utility, then the appellant will have to satisfy the requirements of the first proviso to the section. This proviso shows that if the objects of an assessee involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, the object carried on by the assessee for advancement of general public utility shall not be a charitable purpose. It is also clear from ITA Nos.208 & 210/14 : 4 : the last part of this proviso that the above shall be the conclusion irrespective of the nature of use or application or retention of the income from such activity of the assessee. This is the scope and purport of Section 2(15) which was amended and is brought into the present form with effect from 01.04.2009. 9. The contention raised by the appellant is that while appreciating their case, regard must be had to the question whether their dominant object is to do business. According to the appellant, it is only on that basis, it should be found out whether they are carrying on activities in the nature of trade, commerce or business. In support of this contention, learned counsel for the appellant placed considerable reliance on the judgment of the Apex court in Addl. CIT, Gujarat v. Surat Art Silk Cloth Manufacturers Association, Surat (1980 (121) ITR 1), where the Apex court held that where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, the assessee would not lose its character of charitable purpose merely because some profit arises from the activity carried on by it. The assessee also referred us to the budget speech of the Finance Minister while introducing the Finance Bill 2008 and also Circular No.11 of 2008, dated 19.12.2008 and contended that only in a situation where an assessee is trying ITA Nos.208 & 210/14 : 5 : to cover up its actual commercial activities in the guise of charity that the benefit of Section 2(15) can be denied. 10. These contentions raised by the assessee will have to be appreciated with reference to the undisputed facts available on record. Before we undertake that exercise, we wish to clarify that when the above referred judgment relied on by the appellant was rendered, Section 2(15) merely provided that charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. It was considering the scope of this provision that the Apex Court held that the test which has to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit and that where profit making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. In this context, what is important to be noticed is that the statutory provision as it obtained then did not contain any proviso which clarified the circumstances in which the advancement of any other object of general public utility shall not be a charitable purpose. ITA Nos.208 & 210/14 : 6 : 11. Having clarified the factual position as above, we shall now deal with the case of the appellant and find out whether there is any substance in their contention that their activities would qualify to be a charitable purpose as defined in Section 2(15) of the Act. According to the counsel, the appellant was established by the Government of Kerala to satisfy the need for housing accommodation of various sections of the people and especially for planning and development in the cities, towns and villages. It was therefore that they pointed out that they acquired land at nominal rates, developed the same and sell it to general public. It was also their case that they are executing several works of infrastructural development such as markets, water supply and sewerage, development of sports complexes, bridges, bus stand, swimming pools, community centers, public toilets, parks, cremation grounds, schools etc,. 12. We have already stated that for the assessment year, the total income assessed was `8,00,94,700/-. It is undisputed that the appellant is charging fees for supervision and centage charges, permission for transfer of land, copy of records, cost of forms, cost of plans, booklets and that the income on this account during the assessment year 2009-10 was `1,23,11,413/-. It is also undisputed that the appellant has developed several ITA Nos.208 & 210/14 : 7 : commercial centers and rented it out and that the appellant itself is responsible for the maintenance, upkeep and the provision of common facilities. The total receipts of such letting out and maintenance charges during the assessment year came to `4,09,73,498/-. It is also admitted that the commercial space developed by the assessee is auctioned by it to the highest bidder. These activities that are carried on by the assessee are for consideration and purely on commercial lines and these are activities which any other real estate developer is engaged in. It was considering these admitted facts that the assessing officer and the appellate authorities have concurrently come to the conclusion that the activities carried on by the assessee are in the nature of trade, or commerce or business, and that the assessee is receiving consideration in return for its activities. 13. Considering the nature of the activities that are carried on by the assessee, the factual correctness of which is undisputed, we can only endorse the view taken by the statutory authorities that in view of the proviso to Section 2(15), the activities of the assessee do not qualify to be charitable purpose as defined therein. In such a scenario, the assessing officer was justified in disallowing the exemption claimed and assessing to tax the income of the assessee and the appellate authorities were justified in confirming the ITA Nos.208 & 210/14 : 8 : same. In such circumstances, we don’t see any question of law arising in these appeals to be considered by this Court under Section 260(A) of the Income Tax Act. 14. For these reasons, ITA No.208/2014 is dismissed. Since the issue raised in ITA No.210/2014 is identical in all respects and in view of our conclusion as above, this appeal is also dismissed. Sd/- ANTONY DOMINIC JUDGE Sd/- ANIL K. NARENDRAN JUDGE Rp //True Copy// PA TO JUDGE "