Housing Board Haryana, Panchkula V. CIT, Panchkula

ITA 1200/CHANDI/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77089 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2014
• Assessment Year: misc
• Appeal Filed On: 23-11-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Charitable institution; Source of fund; Competent authority; Condonation of delay
• Section: 12A; 12AA; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1200/CHD/2004 (UNDER SECTION 12AA(1)(B)(II) HOUSING BOARD HARYANA, VS THE COMMISSIONER OF INCOME TAX PLOT NO. C-15, PANCHKULA. AWAS BHAWAN, SECTOR 6, PANCHKULA. PAN : AAALH0022P (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 05.03.2014 DATE OF PRONOUNCEMENT : 30.05.2014 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, PANCHKULA DATED 30.09.2 004 AGAINST THE ORDER PASSED UNDER SECTION 12AA OF THE INCOME-T AX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT PANCHKULA HAS ERRED BOTH IN LAW AND ON FACTS IN DERIVING THE REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961 AND REJECTING THE APPLICATION UNDER SEC TION 12A(A) OF THE INCOME TAX ACT,1961. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT PANCHKULA HAS ERRED BOTH IN LAW AND O N FACTS THE REGISTRATION UNDER SECTION 12AA HAS BEEN DENYING WI THOUT CITING ANY SPECIFIC ISSUE ON MERIT, 3. THAT THE APPELLANT WAS A LOCAL AUTHORITY AND WAS EXEMPT FROM INCOME TAX U/S10(20A) OF THE INCOME TAX ACT, 1961. THE SECTION 2 10(20A) WAS DELETED W.E.F. 01.04.2002 RELEVANT FO R ASSESSMENT YEAR 2003-04. THE REGISTRATION AS A CHARITABLE INSTITUTION WAS REQUIRED FOR THIS PURPOSE. 4. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADD ITION, DELETION OR IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOS AL- OF THE SAME. 3. THE PRESENT APPEAL WAS INSTITUTED BY THE ASSESSE E ON 09.12.2009 AND THE APPEAL WAS ADJOURNED FROM DATE T O DATE RANGING FROM 02.08.2005 ONWARDS, BOTH AT THE REQUEST OF THE LD. AR FOR THE ASSESSEE OR THE LD. DR FOR THE REVENUE. THE APPEAL WAS FIXED FOR HEARING ON 13.08.2013 AND THEN ON 14.10.2013 AND TH E APPEAL WAS ADJOURNED AT THE REQUEST OF THE LD. AR FOR THE ASSE SSEE ON BOTH THE DATES. HOWEVER, ON 04.12.2013, THE BENCH DID NOT FU NCTION AND THE MATTER WAS LISTED FOR HEARING ON 05.03.2014. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE APPOINTED DATE OF HEA RING NOR ANY APPLICATION WAS MOVED. IN VIEW OF THE SAME, WE PROC EED TO DISPOSE OF THE PRESENT APPEAL AFTER HEARING THE LD. DR FOR THE REVENUE. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS DENIAL O F REGISTRATION UNDER SECTION 12AA OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS CREATED ON 14.05.1971 UNDER THE HARYANA HOUSING BOARD ACT, 197 1, AND CLAIMED EXEMPTION OF ITS INCOME UPTO A.Y. 2002-03 UNDER SEC TION 10(20A) OF THE INCOME TAX ACT. CONSEQUENT UPON OMISSION OF SECTION 10(20A) OF THE INCOME TAX ACT BY THE FINANCE ACT, 2 002, W.E.F. 01.04.2003, THE ASSESSEE FILED APPLICATION DATED 04 .03.2004 SEEKING REGISTRATION U/S 12AA OF THE INCOME TAX ACT BY CLAI MING ITS STATUS AS THAT OF A TRUST/INSTITUTION ENGAGED IN PROMOTION /ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE A SSESSEE CLAIMED THAT IT FELL WITHIN THE DEFINITION OF CHARITABLE P URPOSE AS DEFINED UNDER SECTION 2(15) OF THE ACT. THE ASSESSEE ALSO FILED AN 3 APPLICATION FOR CONDONATION OF DELAY IN FILING THE PRESENT APPLICATION BEFORE THE COMMISSIONER OF INCOME TAX, AS EARLIER THE ASSESSEE BOARD WAS CLAIMING EXEMPTION UNDER SECTION 10(20A) OF THE ACT AND AFTER THE AMENDMENT TO THE SAID SECTION W.E.F. 01.04.2002, THE ASSESSEE BECAME LIABLE TO PAY TAXES ON ITS PROFITS. THE PLEA OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX WAS THAT IT WAS PROVIDING SOCIAL AND AFFORDABLE HOU SES FOR THE LOWER INCOME GROUP WHICH WAS AN ACT OF GENERAL PUBLIC UTI LITY COVERED UNDER SECTION 2(15) OF THE ACT. THE ASSESSEE, THUS MADE A PLEA FOR CONDONING THE DELAY IN FILING THE APPLICATION AND A LLOWING REGISTRATION UNDER SECTION 12A OF THE ACT W.E.F. 01 .04.2002. THE COMMISSIONER OF INCOME TAX REFUSED THE REQUEST FOR CONDONATION OF DELAY AGAINST WHICH THE ASSESSEE IS NOT IN APPEAL A ND THE ONLY ISSUE RAISED BY THE ASSESSEE VIDE GROUND NO. 1 TO 3 IS AG AINST DENIAL OF REGISTRATION UNDER SECTION 12AA OF THE ACT. 5. THE COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE ACTIVITIES CARRIED ON BY THE ASSESSEE WHICH ARE REP RODUCED AT PAGES 4 TO 6 OF THE ORDER OF COMMISSIONER OF INCOME TAX AND AFTER CONSIDERING THE VARIOUS CASE LAWS RELIED UPON BY TH E ASSESSEE, EXAMINED THE OBJECTS AND ACTIVITIES OF THE AUTHORIT Y. 6. AFTER EXAMINING THE AIMS AND OBJECTIVES OF THE H ARYANA HOUSING BOARD, ACTIVITIES UNDERTAKEN BY IT. AND THE PROVISIONS OF LAW, THE CIT, PANCHKULA HAD REFUSED REGISTRATION ON SEVERAL GROUNDS AS UNDER: (I) THE ASSESSEE WAS REQUIRED TO FILE APPLICATION F OR REGISTRATION BEFORE THE EXPIRY OF ONE YEAR FROM THE DATE OF CREATION/ESTABLISHMENT OF BOARD BUT THE APPLICAT ION WAS FILED LATE. THE INORDINATE DELAY IN FILING APPL ICATION 4 FOR REGISTRATION IN ABSENCE OF SUFFICIENT REASONS W AS NOT CONDONED. (II) CLAUSES (A) AND (B) OF SECTION 21 OF THE 'HARY ANA HOUSING BOARD ACT' EMPOWERED THE BOARD TO ACQUIRE ANY PROPE RTY OR LAND BY WAY OF PURCHASE, EXCHANGE OR OTHERWISE; DIVISION OF THE LAND INTO PLOTS AND SALE THEREOF EI THER BEFORE OR AFTER ANY FURTHER DEVELOPMENT OF LAND WIT HOUT ANY RESTRICTION ON THE POWERS OF THE BOARD WHICH INTRICABLY INVOLVED BUILT-IN PROFIT MOTIVE. (III) UNDER SECTION 40(1) OF THE 'HARYANA HOUSING B OARD ACT', THE ASSESSEE WAS EMPOWERED TO CHARGE 'BETTERMENT CHARGES' NOT ONLY FROM THE OWNERS OF LAND COMPRISED IN ANY HOUSING SCHEMES UNDERTAKEN BY THE BOARD BUT ALS O FROM THE OWNERS OF LAND ADJACENT TO THE AREAS COMPR ISED IN THE HOUSING SCHEMES. THE BETTERMENT CHARGES AS P ER SECTION 40(2) WERE EQUAL TO HALF OF THE INCREASE IN THE ESTIMATED VALUE OF LAND AFTER COMPLETION OF HOUSING SCHEMES, WHICH WERE RECOVERABLE AS ARREARS OF LAND REVENUE, THUS, ENABLING THE ASSESSEE TO EARN PROFIT S. (IV) SECTION 44 OF THE HOUSING BOARD ACT EMPOWERED THE ASSESSEE TO RETAIN, LEASE, SELL, EXCHANGE, OR OTHER WISE DISPOSE OF ANY LAND OR OTHER PROPERTY VESTED IN IT AND COMPRISING IN ANY SANCTIONED HOUSING SCHEMES TO ANY PERSON. V) UNDER SECTION 56, THE BOARD HAS CREATED A FUND CALLED 'HOUSING BOARD FUND' IN WHICH ALL THE PROCEEDS OF L AND OR ANY KIND OF PROPERTY SOLD BY IT, ALL RENTS, INTE REST, PROFITS AND OTHER MONEYS ACCRUING TO THE BOARD CONSTITUTED THE FUND, WHICH ITSELF ENVISAGED PROFIT EARNED DURING THE COURSE OF ITS ACTIVITIES OF UNDER TAKING HOUSING SCHEMES. (VI) THE OTHER ACTIVITIES LIKE DEVELOPMENT OF ROAD S AND PARKS, DRAINAGE, WATER AND ELECTRIC SUPPLY, COMMERC IAL CENTRES, SANITATION SERVICES IN RURAL/UNDEVELOPED A REAS AND PLANTATION OF TREES ETC. WERE INCIDENTAL TO AND IN 5 FURTHERANCE OF THE MAIN OBJECTS OF CARRYING OUT VAR IOUS HOUSING SCHEMES WITH PROFIT MOTIVE. (VII) UNDER VARIOUS HOUSING SCHEMES, THE BOARD CONS TRUCTED HOUSES OF VARIOUS CATEGORIES AND ALLOTTED TO THE APPLICANTS. THE HOUSES SURRENDERED BY THE ALLOTTEES FOR ANY REASONS WERE RESOLD TO THE PUBLIC THROUGH AUCTI ONS A PROFIT OF RS.2.06 CRORES WAS SHOWN FROM AUCTION OF BOOTHS/HOUSES IN THE INCOME AND EXPENDITURE ACCOUNT AS ON 31.03.2004. (VIII) IN THE INCOME AND EXPENDITURE ACCOUNT, THE S TOCK OF UNSOLD HOUSES WAS VALUED AT COST CLEARLY REFLECTING THE COMMERCIAL PRINCIPLES OF ACCOUNTING. AS ON 31.03.20 04, THE PROFIT ON SALE OF HOUSE WAS SHOWN AT RS.5.99 CR ORES BESIDES THE INTEREST INCOME OF RS.20.90 CRORES, PENALTIES/FINES OF RS.63.61 CRORES, PROCESSING AND TRANSFER CHARGES OF RS. 1.57 CRORES ESTABLISHING TH E FACT THAT THE BOARD WAS CARRYING OUT ITS ACTIVITIES ON T OTALLY COMMERCIAL PRINCIPLES. (X) IN ADDITION TO CHARGING OF COMPULSORY INTEREST AT VARYING RATES ON THE COST OF LAND AND COST OF CONSTRUCTION AS ALSO THE UNFORESEEN CHARGES @5%, THE BOARD WAS CHARGING COMPULSORY PROFIT (O) / 10% AND 5% FROM ALLOTTEES OF HIG AND MIG CATEGORIES, RESPECTIVELY, THOUGH NO COMPULSORY PROFIT WAS CHARGED FROM THE ALLOTTEES OF LIG AND EWS CATEGORIES. (XI) THE ASSESSEE BOARD WAS ENGAGED IN UNDERTAKING VARIOUS HOUSING SCHEMES ON COMMERCIAL PRINCIPLES AND WAS PREDOMINANTLY A PROFIT MAKING BODY. 7. THE COMMISSIONER OF INCOME TAX ON THE PERUSAL OF THE ACCOUNTS FOR THE YEAR ENDING 31.03.2004 NOTED THE F OLLOWING : (I) SCHEDULE 8 FORMING PARTS OF THE BALANCESHEET IN THE FORM OF' NOTES ON ACCOUNTS' SHOWS THAT AS PER SL.NO.5 'PROFI T/LOSS ON SALE OF HOUSES 6 DEPICTS THE DIFFERENCE BETWEEN EXPENDITURE BOOKED I N ACCOUNTS AND SALE PRICE OF THE COMPLETED HOUSES. II) UNDER SL.NO.10 OF SCHEDULE 8, IT IS-STAT ED THAT 'UNSOLD HOUSES HAVE BEEN VALUED AT COST.' 8. THE COMMISSIONER OF INCOME TAX FURTHER OBSERVED THAT THE BOARD WAS TREATING ITS HOUSES AS STOCK IN TRADE CLE ARLY ON COMMERCIAL PRINCIPLES AND THAN THE RESULTANT PROFIT /LOSS WAS ACCOUNTED FOR. 9. THE COMMISSIONER OF INCOME TAX, ON THE PERUSAL O F THE INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDING 31 .03.2004 NOTED THAT , EXCESS OF INCOME OVER EXPENDITURE WAS AT RS.13. 13 CRORES. THE ITEMS OF INCOME CREDITED TO THE INCOME & EXPEND ITURE ACCOUNT SHOW THE PROFIT ON SALE OF HOUSES AT RS.5.99 CRORES AND INCOME FROM AUCTION OF BOOTHS/HOUSES AT RS.2.06 CRORES. THE INT EREST INCOME RECEIVED FROM ALLOTTEES HAS BEEN SHOWN AT RS.20.9 C RORES. FURTHER IN THE FIRST PART OF THE INCOME AND EXPENDITURE ACCOUN T FOR THE PERIOD ENDING 31.03.2004 TOTAL EXPENDITURE OF RS.9.67 CROR ES HAS BEEN BOOKED. IT IS OBSERVED THAT RS.3.65 LACS ARE ON ACC OUNT OF MAINTENANCE OF NETAJI SUBHASH PARK, 3.25 LACS ON , ACCOUNT OF OFFICE BUILDING AND RS.63.31 LACS ON ACCOUNT OF DEPRECIATI ON OF ASSETS. THIS TOTALS UPTO RS.71 LACS. IF EXPENSES LIKE LEGAL CHARGES AND EXPENSES ON ACCOUNT OF FIXING ON HOARDINGS IS EXCLU DED THE TOTAL EXPENDITURE WORKS OUT TO ABOUT RS. ONE CRORE. THE B ALANCE MORE THAN RS.8 CRORES HAS BEEN SPENT ON ACCOUNT OF DIFFE RENT STAFF AND ALLIED ACTIVITIES. IT SHOWS THAT THE BOARD IS MORE EMPLOYEE-CENTRIC AND IS LESS GENERAL UTILITY SERVICES ORIENTED. IT I S SIGNIFICANT TO NOTE HERE THAT THE BOARD HAS NOT BOOKED ANY LOSS ON ACCO UNT OF AUCTION 7 OF 'BOOTHS/HOUSES DURING THE YEAR SHOWING THAT THER E WAS NO LOSS IN THIS ACTIVITY AS AGAINST THE INCOME OF RS.2.06 CROR ES. IT IS ALSO INTERESTING TO NOTE THAT BOARD HAS RECEIVED AN AMOU NT OF RS.3.06 LACS ON ACCOUNT OF APPLICATION FORMS ONLY. IT HAS R ECEIVED RS.63.61 LACS ON ACCOUNT OF PENALTY/FINES RECOVERED FROM ITS ALLOTTEES. THESE PENALTY/FINES ARE RECOVERED FOR VARIOUS DELAYS IN P AYMENTS AND OTHER NON PAYMENTS IN COMPLIANCE WITH THE ORDERS OF THE COMPETENT AUTHORITY OF THE BOARD. THE RECEIPTS ON ACCOUNT OF PROCESSING/TRANSFER FEE OF HOUSES HAS BEEN SHOWN AT RS.1.57 CRORES. ALL THESE ENTRIES OF INCOME & EXPENDITURE ~F HIGHL IGHTED FROM OUT OF THE ACCOUNTS OF THE BOARD INDICATE THAT THE BOAR D IS CARRYING ON ITS ACTIVITIES ON TOTALLY COMMERCIAL PRINCIPLES AND RECOVERS EVERY BIT OF COST INCURRED BY IT AND ALSO EARNS HUGE PROFITS FOR ITSELF AND ITS EMPLOYEES. THE PROFITS FOR THE PERIOD ENDING MARCH, 2004 HAS BEEN SHOWN AT RS.13.13 CRORES, FOR THE PERIOD ENDING MAR CH, 2002 AT RS.7.61 CRORES AND FOR THE PERIOD ENDING MARCH, 200 1 AT RS.8.68 CRORES. 10. IT WAS FURTHER HELD THAT E VEN IF IT WAS ADMITTED FOR THE SAKE OF ARGUMENT THAT THE BOARD IS NOT CHARGING ANY COMPULS ORY PROFIT FROM THE EWS AND LIG CATEGORIES, IT CANNOT BE ACCEPTED T HAT ALL ITS ACTIVITIES ARE BEING UNDERTAKEN ON THE PRINCIPLE OF NO PROFIT, NO LOSS. IT CANNOT BE BOARD'S CASE THAT THERE IS LOSS TO THE BOARD ON ACCOUNT OF SALE OF HOUSES UNDER THE EWS AND LIG SCHEME SINCE, IT IS OPERATING ON NO PROFIT NO LOSS BASIS. HOWEVER, FROM THE SALE OF ALL OTHER CATEGORY OF PLOTS, HUGE PROFITS ARE BEING MADE YEAR AFTER YEAR. THE HOUSES/BOOTHS SOLD THROUGH AUCTION UNDERSTANDABLY REAP HIGHER PRO FITS. IT HAS BEEN SEEN THAT THE BOARD IS ALSO ENJOYING INTEREST INCOM E ON VARIOUS DEPOSITS/FIXED DEPOSITS WITH THE BANK THE MONEY FOR WHICH IS SOURCED FROM ITS PROFITS. IN THIS WAY, THE END RESULT OF IT S ACTIVITIES PUT 8 TOGETHER IS THAT THE BOARD IS MAKING HUGE PROFITS A ND IT IS CLEARLY ENABLED IN THIS PURSUIT OF MAKING PROFITS BY THE VA RIOUS PROVISIONS OF THE ACT WHICH HAS BEEN DISCUSSED AT LENGTH HEREINBE FORE. 11. THEREAFTER, THE COMMISSIONER OF INCOME TAX AT P AGES 17 AND 18 HAD ELABORATELY CONSIDERED THE CONSTRUCTION SCHE MES FLOATED BY THE ASSESSEE AND THE HUGE PROFITS EARNED BY THE ASS ESSEE FROM YEAR TO YEAR FROM THE SO CALLED CHARITABLE PROJECTS OF C ONSTRUCTION HOUSES. THE COMMISSIONER OF INCOME TAX THUS HELD T HAT THE ASSESSEE BOARD WAS NOT ENTITLED TO GRANT OF REGISTR ATION UNDER SECTION 12AA OF THE ACT AND ITS APPLICATION UNDER S ECTION 12A(A) OF THE ACT WAS REJECTED. 12. THE LD. DR FOR THE REVENUE HAS FILED WRITTEN SU BMISSIONS AND EVEN THE LD. AR FOR THE ASSESSEE HAD FILED WRITTEN SUBMISSIONS WHICH ARE AVAILABLE ON RECORD. THE LD. DR FOR THE REVENU E HAS POINTED OUT THAT THE ASSESSEE WAS CREATED UNDER THE HARYANA HOU SING BOARD ACT, 1971 AND EVEN THE CHANDIGARH HOUSING BOARD WAS CREA TED UNDER THE SAID HARYANA HOUSING BOARD ACT, 1971. ON ONE HAND CHANDIGARH HOUSING BOARD WAS FILING ITS RETURN OF INCOME AND P AYING TAXES AND ON THE OTHER HAND, THE ASSESSEE BOARD BEFORE US HAS SOUGHT REGISTRATION UNDER SECTION 12A OF THE ACT CLAIMING ITS ACTIVITIES TO BE CHARITABLE IN NATURE. FURTHER DISTINCTION WAS D RAWN ON THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF HON'BLE SUPREME COURT IN CIT VS. GUJARAT MARITIME BOARD (295 ITR 56 1) AND DECISION OF PUNJAB AND HARYANA HIGH COURT IN CIT VS . MARKET COMMITTEE (294 ITR 563). THE PLEA OF THE LD. DR FO R THE REVENUE BEFORE US WAS THAT THE SOURCES OF INCOME BOTH IN TH E CASE OF GUJRAT MARITIME BOARD AND THE MARKET COMMITTEE (SUPRA) WER E UNDER THE CONTROL OF THE STATE GOVERNMENT AND THERE WAS NO PR OFIT MOTIVE 9 INVOLVED IN ITS ACTIVITY. IN THE CASE OF MARKET CO MMITTEE (SUPRA), THE CONTROL WAS UNDER THE MARKETS ACT. HOWEVER IN THE FACTS OF THE PRESENT CASE, IT IS TO BE SEEN WHETHER THE ASSESSEE WAS PREDOMINANTLY ENGAGED IN PROMOTING THE OBJECTS OF G ENERAL PUBLIC UTILITY OR ENGAGED IN THE ACTIVITIES FOR THE PURPOS E OF EARNING PROFIT BEARING THE MASK OF GENERAL PUBLIC UTILITY. FURTHE R RELIANCE WAS PLACED UPON THE DECISION OF THE CHANDIGARH BENCH OF TRIBUNAL IN THE CASE OF PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHO RITY VS. CIT (103 TTJ (CHD) 988 AND THE DECISION OF HON'BLE ITAT , AMRITSAR IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY REPORTED IN 52 SOT 153 DULY AFFIRMED BY THE HON'BLE HIGH COURT OF JAMMU AN D KASHMIR VIDE ORDER DATED 2.11.2013 IN ITA NO. 164/2012. TH E PERUSAL OF THE RECORD AND THE DOCUMENTS FILED BY THE COUNSELS BEFO RE US REFLECT THAT THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS IN WHICH RELIANCE WAS PLACED UPON THE DECISION OF HON'BLE PUNJAB & HARYAN A HIGH COURT IN IMPROVEMENT TRUST, MOGA 308 ITR 361 (P&H) IN ADD ITION TO THE RATIO LAID DOWN IN MARKET COMMITTEE VS CIT 94 TTJ 6 92 (DLI). 13. AFTER CONSIDERING THE VARIOUS DOCUMENTS AVAILAB LE IN THE FILE, THE PROVISIONS OF HARYANA HOUSING BOARD ACT, THE OR DER OF COMMISSIONER OF INCOME TAX AND THE PLEADINGS RAISED BY THE ASSESSEE BY WAY OF WRITTEN SUBMISSIONS AND THE LD. DR FOR THE REVENUE, WE PROCEED TO DECIDE THE PRESENT ISSUE OF CLAIM OF REGISTRATION UNDER SECTION 12AA OF THE ACT, WHICH W AS REJECTED BY THE COMMISSIONER OF INCOME TAX. 14. THE ASSESSEE IS CONSTITUTED UNDER THE HARYANA H OUSING BOARD ACT, 1971 AND THE COPY OF THE SAID ACT IS AVAILABLE AT PAGES 22-41 ALONGWITH FORM NO. 36. SECTION 3(2) PROVIDES THAT T HE BOARD SHALL BE A BODY CORPORATE BESIDES A LOCAL AUTHORITY UNDER THE LAND 10 ACQUISITION ACT UNDER SECTION 3(3) (REFER PAGE 26). THE RELEVANT SECTION RELATING TO FRAMING AND UNDERTAKING HOUSING SCHEMES, ACQUISITION AND PURCHASE OF LAND AND ALLOTMENT OF A CCOMMODATION TO ANY CLASS OF INHABITANT [SECTION 20, 21(B), 21(C), 21(D) AND 21(M) AT PAGE 29], ACQUISITION AND DISPOSAL OF LAND [SECTION 39(1) AT PAGE 32], BETTERMENT CHARGES, RECOVERY AND POWER TO DISP OSE LAND [SECTION 40(1), 43 AND 44 AT PAGE 33], APPLICATION OF HOUSING BOARD FUND [SECTION 57 AT PAGE 36] AND DISSOLUTION OF BOA RD [SECTION 80 AT PAGE 41] ARE AS PER THE PROVISIONS OF HARYANA HOUSI NG BOARD ACT, 1971. 15. THE ASSESSEE WAS ORIGINALLY CLAIMING ITS INCOME AS EXEMPT UNDER SECTION 10(20A) OF THE ACT BUT W.E.F. 01.04.2 002, THE INCOME OF THE ASSESSEE BECAME CHARGEABLE CONSEQUENT TO THE OMISSION OF SECTION 10(20A) OF THE ACT BY THE FINANCE ACT, 2002 W.E.F. 01.04.2003. THE PLEA OF THE ASSESSEE WAS THAT IT W AS A TRUST/INSTITUTION ENGAGED IN PROMOTION/ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS DEFINED UNDER S ECTION 2(15) OF THE ACT AND HENCE, WAS ELIGIBLE FOR GRANT OF REGISTRATI ON UNDER SECTION 12AA OF THE ACT. 16. THE ASSESSEE ON THE ONE HAND IS CLAIMING THE ST ATUS OF CHARITABLE ORGANIZATION AND ON THE OTHER HAND, THE CHANDIGARH HOUSING BOARD HAD FILED ITS RETURN OF INCOME FOR TH E ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 DECLARING INCOME OF RS. 23.91 CRORES, RS. 23.57 CRORES AND RS. 25.49 CRORES, RESP ECTIVELY AND PAID THE TAXES. THE DETAILS IN THIS REGARD ARE AVAILABL E AT PAGE 13 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE ASSESSEE HAD FURTHER FILED THE INCOME AND EXPENDITURE ACCOUNT AT PAGES 49 AND 50 O F THE PAPER BOOK WHICH REVEALED THAT THE ASSESSEE HAS SHOWN TO TAL INTEREST 11 INCOME RANGING FROM RS.19.90 CRORES TO RS. 29.70 CR ORES AND GROSS INCOME OVER THE EXPENDITURE RANGING FROM RS. 18.09 CRORES TO 28.91 CRORES OVER THE PERIOD FROM FINANCIAL YEARS 2000-01 TO 2004-05, WHICH SHOW HUGE PROFIT GENERATION ON REGULAR AND CO NSISTENT BASIS. 17. THE LD. AR FOR THE ASSESSEE IN THE WRITTEN SUBM ISSIONS HAD RELIED UPON THE DECISION OF HON'BLE SUPREME COURT I N CIT VS. GUJARAT MARITIME BOARD (295 ITR 561) AND DECISION O F PUNJAB AND HARYANA HIGH COURT IN CIT VS. MARKET COMMITTEE (294 ITR 563). THE PROFIT AND SURPLUS GENERATED IS FROM THE ONLY O NE AND PREDOMINANT ACTIVITY OF SALE/AUCTION OF PLOTS/FLATS TOGETHER WITH INTEREST BUT THE ACTIVITIES CARRIED OUT BY THE ASSE SSEE ARE IN NO WAY DIFFERENT FROM THAT OF ANY BUILDER ACTING ON COMMER CIAL PRINCIPLES. 18. COMING TO IMPROVEMENT TRUSTS CONSTITUTED UNDER THE PROVISIONS OF THE TOWN IMPROVEMENT TRUST ACT, 1922 (PUNJAB), IT IS SEEN THAT SECTION 22 OF THE TOWN IMPROVEMENT TRUST ACT EMPOWERS THE TRUST TO FRAME A GENERAL IMPROVEMENT SCHEME FOR THE PUBLIC UTILITY OF A LOCAL AREA OR PART THEREOF. THE PRINCI PAL OBJECTS OF THE TRUST ARE TO BRING ABOUT IMPROVEMENT IN THE TOWN BY PROVIDING STREETS, HOUSING FACILITIES OR MAKING PROVISION FOR DRINKING WATER ETC. SECTIONS 23 TO 26 OF THE SAID ACT PROVIDED FOR STREET SCHEMES, DEVELOPMENT AND EXPANSION SCHEME, HOUSING ACCOMMODA TION SCHEMES AND RE-HOUSING SCHEME. THE OBJECTS OF THE T RUST ARE TO PROVIDE BENEFIT TO THE PUBLIC WITHIN ITS LOCAL LIMI TS RATHER THAN TO ITSELF. 19. THE HON'BLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF IMPROVEMENT TRUST, MOGA (308 ITR 361) HELD THAT, 'W HERE PRINCIPAL OBJECT OF ASSESSEE-TRUST WAS TO BRING ABOUT IMPROVE MENT IN TOWN BY 12 PROVIDING STREETS, HOUSING FACILITIES OR MAKING PRO VISION FOR DRINKING WATER, ETC., ITS ACTIVITIES BEING CHARITAB LE IT WAS ENTITLED TO REGISTRATION'. THEREFORE, THE PREDOMINANT OBJECTS I N THE CASE OF IMPROVEMENT TRUSTS ARE GENERAL IMPROVEMENT OF THE T OWNS BY PROVIDING BASIC AMENITIES AND THE HOUSING SCHEMES W ERE ANCILLARY AND INCIDENTAL TO ATTAINMENT OF SUCH AIMS AND OBJEC TIVES. 20. NOW COMING TO THE FACTS OF THE PRESENT CASE, TH E EXEMPTION WOULD BE AVAILABLE IN ALL SUCH CASES WHERE BUSINESS CARRIED ON BY THE ASSESSEE IS INCIDENTAL TO THE ATTAINMENT OF CHA RITABLE PURPOSE FROM OBJECTS OF GENERAL PUBLIC UTILITY. BUT WHERE THE ASSESSEE IS ENGAGED IN CARRYING ON COMMERCIAL ACTIVITIES WHICH IS REFLECTED IN THE HUGE PROFITS/SURPLUS GENERATED FROM YEAR TO YEA R, THE ASSESSEE CANNOT BE HELD TO BE ENGAGED IN CHARITABLE ACTIVITI ES MAKING IT ELIGIBLE FOR CLAIM OF REGISTRATION UNDER SECTION 12 AA OF THE ACT. 21. WE FURTHER FIND THAT SIMILAR ISSUE AROSE BEFORE THE CHANDIGARH BENCH OF TRIBUNAL IN PUNJAB URBAN PLANNING & DEVELO PMENT AUTHORITY VS CIT (SUPRA) WHEREIN IT HAS BEEN HELD A S UNDER : THE TERM CHARITABLE PURPOSE , AS DEFINED IN SECTION 2(15), INCLUDES RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND A DVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. A PLEA WAS RAISED BY THE ASSESSEE THAT FUNDS WERE PROVIDED BY THE PUNJAB GOVERNMENT O R GENERATED BY THE ASSESSEE ITSELF. TO GENERATE THE FUNDS FOR CARRYING OUT ITS OBJECTS, THE ASSESSEE WAS ACQUIRING LANDS, DEVELOPING THEM AND S ELLING THE PLOTS TO THE GENERAL PUBLIC WHO APPLIED FOR THE SAME. EVEN T HE ECONOMICALLY WEAKER STRATA OF THE SOCIETY WAS GENERALLY APPLYING . IT WAS NOT THE CASE THAT THE ASSESSEE WAS ALLOTTING HOUSES TO THE POOR MASSES FREE OF COST. THE MAJOR THRUST OF THE ASSESSEE WAS THAT THE PUDA WAS OF GENERAL PUBLIC UTILITY AS IT SATISFIED THE NEED FOR HOUSING ACCOMMODATION FOR THE SECTION OF THE PEOPLE OF THE STATE OF PUNJAB AND WA S ALSO DOING PLANNING AND DEVELOPMENT OF THE CITIES, TOWNS AND VILLAGES. THE ARGUMENT OF THE ASSESSEE COULD NOT BE ACCEPTED BECAUSE A CHARITABLE INSTITUTION PROVIDES SERVICES FOR CHARITABLE PURPOSES FREE OF COST AND N OT FOR A GAIN. IN THE PRESENT SCENARIO, THE SIMILAR ACTIVITIES ARE PERFOR MED BY BIG COLONIZERS/DEVELOPERS WHO ARE EARNING A HUGE PROFIT . IF THE REGISTRATION WAS GRANTED, IT WOULD OPEN A PANDORA BOX AND ANYB ODY WOULD CLAIM THE EXEMPTION FROM TAX. IF THE ACCOUNTS OF THE ASSE SSEE WERE ANALYSED, IT WOULD SHOW THAT ASSESSEE HAD TURNED INTO A HUGE PRO FIT MAKING AGENCY 13 FOR WHICH IT WAS TAKING MONEY FROM THE GENERAL PUBL IC. IN SUCH A SITUATION, IT WAS CLEAR THAT NO CHARITY WAS INVOLVE D AND IF ANY INSTITUTION OF PUBLIC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTRE S WERE CREATED/DEVELOPED, THE ASSESSEE WAS CHARGING THE CO ST OF IT FROM THE PUBLIC AT LARGE. IT COULD BE SAID THAT OBJECTS/ACTI VITIES OF THE ASSESSEE WERE MORE OF A COMMERCIALIZED NATURE AND NO CHARITY WAS FOUND IN IT. AT THE SAME TIME, IF THOSE FACILITIES WERE NOT PROVIDE D, THEN NOBODY WOULD PURCHASE A PLOT. IT COULD BE SAID THAT IT WAS A MEA NS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MIGHT APPLY FOR THE S AME AND THE HIDDEN COST WAS ALREADY ADDED, SO NO CHARITY WAS INVOLVED. AT BEST, THE ASSESSEE COULD BE SAID TO BE AN AUTHORITY CREATED T O HELP IT TO ACHIEVE CERTAIN OBJECTS. IT COULD BE SAID THAT IT IS THE DU TY OF THE GOVERNMENT TO CREATE/PROVIDE ALL THESE FACILITIES TO PUBLIC AT LA RGE, WHICH IS BEING DONE THROUGH THE AGENCY IN A PARTICULAR AREA. AT THE SAM E TIME, THE FUNDS WHICH WERE PROVIDED TO THE ASSESSEE BY THE GOVERNME NT WAS AGAIN A PUBLIC MONEY OR GENERATED FROM THE PUBLIC ITSELF, S O WHERE WAS THE CHARITY? THUS, IT COULD BE SAID THAT THE OBJECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHARITABLE, ACTUALLY WERE OF PURELY C OMMERCIAL NATURE, WHERE PROFIT MOTIVE WAS INVOLVED. IT WAS KNOWN FACT THAT THE ASSESSEE WAS ACQUIRING THE LAND AT VERY LOW PRICES AND SELLI NG THE SAME LAND ON VERY HIGHER RATES AND WAS EARNING A PROFIT THEREFRO M. A NEW TREND HAD ALSO EMERGED THAT THE PUDA, I.E., THE ASSESSEE, HAD STARTED AUCTIONING 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, NO CHARITY WAS INVOLVED. RATHER THE ASSESSEE HAD CONVE RTED ITSELF INTO A BIG BUSINESSMAN. SIMILAR DEVELOPMENT/INFRASTRUCTURE/FAC ILITIES ARE PROVIDED BY PRIVATE DEVELOPERS THESE DAYS, THEN THEY WILL AL SO CLAIM THE STATUS OF A CHARITABLE INSTITUTION. IF ALL THE OBJECTS AND ACTIVITIES ACTUALLY CARRIED OUT BY THE ASSESSEE WERE ANALYSED AND KEPT IN JUXTAPOSITION WITH THE JU DICIAL PRONOUNCEMENTS, IT WAS CLEAR THAT ACTIVITIES OF THE ASSESSEE WERE MORE OF COMMERCIAL NATURE WITH PROFIT-ORIENTED INTENT; S O NO LENIENCY WAS TO BE SHOWN TO THE ASSESSEE. FURTHER, ALMOST IN EVERY ACTIVITY OF ASSESSEE, THER E WAS A SCENT OF COMMERCIALIZATION/PROFIT MOTIVE. IN THE CHARITABLE INSTITUTION, NO PROFIT MOTIVE IS INVOLVED AND THE SERVICE IS DONE MAINLY W ITH THE INTENT OF SOCIAL/ RELIGIOUS UPLIFTMENT OF THE MASSES IN GENER AL. ADMITTEDLY, THE ASSESSEE WAS DOING SOME ACTIVITIES LIKE HOUSING/INF RASTRUCTURE DEVELOPMENT AND THE PUBLIC WAS ALSO BENEFITTED BUT FOR THE SAME THE ASSESSEE HAD ALREADY CHARGED IN THE FORM OF HIDDEN COST. SINCE THE ASSESSEE WAS GENERATING INCOME, SO NO CHARITY WAS I NVOLVED. THE COMMISSIONER HAD RIGHTLY CONCLUDED THAT A CHARITABL E INSTITUTION PROVIDES SERVICES FOR CHARITABLE PURPOSES FREE OF C OST AND FOR NO GAIN AND ARE, FOR THE BENEFIT OF PUBLIC AT LARGE. THE ASSESSEE ACQUIRED LAND AT NOMINAL RATES AND AFTER DEVELOPING THE SAME, SOLD THE SAME LAND ON HIGH PROFIT WHICH COULD NOT BE SAID TO BE A CHARITABLE ACTIVITY. EVEN JUST FOR ARGUMENT SAKE, U NDER A SIMILAR SITUATION, IF REGISTRATION IS GRANTED THEN EVERY PR IVATE COLONIZER WOULD CLAIM CHARITY. THE FACILITIES WHICH WERE PROVIDED T O THE PLOT HOLDERS WERE INCIDENTAL TO THE COMMERCIAL ACTIVITY CARRIED OUT BY THE PUDA. CERTAIN FACILITIES LIKE PARKS, COMMUNITY CENTRE, SC HOOL WERE PROVIDED WHICH WERE NOT ONLY BASIC REQUIREMENTS, BUT ALSO A TOOL FOR ATTRACTING THE INVESTORS, WHEREIN THE HIDDEN COST OF THOSE FAC ILITIES WAS ALREADY INCLUDED IN THE PRICE OF THE PLOTS. IN THE ABSENCE OF THOSE FACILITIES, NORMALLY THE PURCHASER MIGHT NOT INVEST AND, THE PR ICES MIGHT BE LESS. 14 IN VIEW OF THOSE FACTS THE APPLICATION OF THE ASSES SEE HAD BEEN RIGHTLY REJECTED BY THE COMMISSIONER; THEREFORE, THE APPEAL OF THE ASSESSEE WAS TO BE DISMISSED. 22. FURTHER, THE AMRITSAR BENCH OF THE TRIBUNAL IN JAMMU DEVELOPMENT AUTHORITY (SUPRA) HELD AS UNDER : IN VIEW OF OMISSION OF SECTION 10(20A) BY THE FINANCE ACT, 2002, WITH EFFECT FROM 1-4-2003 AND ADDITION OF AN EXPLANATION IN SECTION 10(20) BY THE FINANCE ACT, 2002, WITH EFFECT FROM 1 -4-2003, THE ASSESSEE COULD NOT CLAIM ANY BENEFIT UNDER THOSE PROVISIONS AFTER 1-4-2003. THE ASSESSEE CLAIMED THAT ITS OBJECTS FALL UNDER THE PR OVISIONS OF SECTION 2(15) AND HAS COMPLIED WITH ALL THE ELIGIBILITY CRI TERIA FOR GRANT OF REGISTRATION UNDER SECTION 12A, WHICH WAS ALLOWED VIDE ORDER DATED 30- 9-2009. IT IS AT THIS JUNCTURE THAT THE FIRST PROVI SO WAS ADDED IN SECTION 2(15) BY THE FINANCE ACT, 2008, WITH EFFECT FROM 1- 4-2009. THEREFORE, AFTER INSERTION OF THE SAID PROVISO, ANY INSTITUTIO N CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS, ETC. SHALL NOT BE A CHARITABLE PURPOSE. THE MAIN OBJECT OF THE ASSESSEE IS TO PROMOTE AND SECURE THE DEVELOPMENT OF LOCAL AREA AND THERE IS N O CHARITABLE PURPOSE OR ANY ACTIVITY FOR GENERAL PUBLIC UTILITY. THE ACT IVITIES OF THE ASSESSEE ARE AIMED AT EARNING PROFIT. FURTHER PROFIT MAKING BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BY PRODUCT OF THE ASSESSEE. THER E IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPEND THE INCOME ON 'CH ARITABLE PURPOSE' ONLY. ALSO ON DISSOLUTION OF ASSESSEE ALL PROPERTIE S AND FUNDS WILL VEST IN THE GOVERNMENT. THERE IS NO RESTRICTION, HOW THE SA ME ARE TO BE UTILIZED BY THE GOVERNMENT. THERE ARE OTHER OBJECTS LIKE SAL E AND PURCHASE, WHICH MAKES THE ASSESSEE A COMMERCIAL ORGANIZATION. THEREFORE, THE OBJECTS PURSUED BY THE ASSESSEE CANNOT BE SAID TO B E A CHARITABLE IN NATURE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASS ESSEE WAS AN AUTHORITY ESTABLISHED WITH THE MOTIVE OF PROFIT AND ITS ACTIV ITIES WERE HIT BY SECTION 2(15), READ WITH FIRST AND SECOND PROVISOS THERETO. HENCE, THE ASSESSEE WAS NOT ENTITLED TO REGISTRATION AND THE SAME HAD BEEN RIGHTLY CANCELLED BY THE COMMISSIONER. 23. THE DECISION OF THE AMRITSAR BENCH OF TRIBUNAL HAS BEEN CONFIRMED BY HON'BLE HIGH COURT OF JAMMU & KASHMIR VIDE ORDER DATED 12.11.2013 IN ITA NO. 164/2012 WHEREIN IT HAS BEEN HELD THAT THE OBJECTS LIKE SALE AND PURCHASE OF PROPERTIES MA KES THE AUTHORITY, A COMMERCIAL ORGANIZATION AND IN ABSENCE OF ANY RES TRICTION ON APPLICATION OF ASSET FOR CHARITABLE PURPOSE IN THE EVENT OF DISSOLUTION OR WINDING UP, THE OBJECTS PURSUED BY T HE ASSESSEE CANNOT BE SAID TO BE A CHARITABLE IN NATURE. 15 24. IN VIEW THEREOF, WE FIND NO MERIT IN THE CLAIM OF REGISTRATION MADE BY THE ASSESSEE UNDER SECTION 12A OF THE ACT A ND WE UPHOLD THE ORDER OF COMMISSIONER OF INCOME TAX IN REFUSING TO GRANT REGISTRATION UNDER SECTION 12AA OF THE ACT. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH MAY,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR. ASSISTANT REGISTRAR ITAT,CH D.