DCIT, C-1, (Exemptions), Chandigarh V. Gurdaspur Improvement Trust, Gurdaspur

ITA 1312/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5286 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER I.T.A. NO. 1312/CHD/2017 ASSESSMENT YEAR: 2012-13 ASSESSEE BY : NONE REVENUE BY : SMT. CHANDERKANTA DATE OF HEARING : 08/01/2018 DATE OF PRONOUNCEMENT : 31/01/2018 ORDER PER ANNAPURNA GUPTA, A.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSA R DATED 03.05.2017 FOR A. Y. 2012-13 2. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE AS SESSEE IS A BODY CORPORATE, CREATED AND INCORPORATED U/S 3 OF THE PUNJAB TOWN IMPROVEMENT ACT 1922 WITH THE MAIN OBJECT OF MAKING IMPROVEMENT AND EXPANSIO N OF THE TOWNS. THE OBJECT COVERED IMPROVEMENT OF BUILDINGS UNFIT FOR HUMAN H ABITATION, PROVIDING STREET, HOUSING SCHEME, RE-HOUSING OF DISPLACED RESIDENT HO USE OWNER, PROVIDING DRINKING WATER, PROVISION OF DRAIN, PROVISION OF FACILITIES FOR COMMUNICATIONS. THE ASSESSEE TRUST HAD BEEN GRANTED REGISTRATION AS A CHARITABLE TRUST U/S 12 AA OF THE INCOME TAX ACT, 1961 VIDE ORDER DATED 29 TH MARCH, 2011. ACCORDINGLY THE ASSESSEE HAD CLAIMED THE ENTIRE INCOME FOR THE IMPUGNED ASSESSME NT YEAR AS EXEMPT UNDER THE DY. C. I. T., CIRCLE-1(EXEMPTIONS), CHANDIGARH. VS. GURDASPUR IMPROVEMENT TRUST, HANUMAN CHOWK, GURDASPUR, (PUNJAB) (PAN: AAALG0202A) (APPELLANT) (RESPONDENT) 2 PROVISIONS OF SECTION 11OF THE ACT AND HAD FILED TH E INCOME TAX RETURN FOR THE IMPUGNED YEAR SHOWING NIL INCOME. THE ASSESSING OFF ICER NOTED DURING ASSESSMENT PROCEEDINGS, THAT THE ASSESSEE WAS CARRY ING ON THE BUSINESS OF SALE & PURCHASE OF RESIDENTIAL HOUSES, CONSTRUCTION OF MUL TISTORIED HOUSES, SALE OF RESIDENTIAL PLOTS AND COMMERCIAL PLOTS BY AUCTION I N A FREQUENT AND SYSTEMATIC MANNER AND HAD EARNED HUGE NET PROFIT OF RS. 2,70,2 5,647/- DURING THE YEAR UNDER CONSIDERATION. HE THEREFORE HELD THAT THE ASSESSEE WAS INDULGING IN ACTIVITIES IN THE NATURE OF TRADE, COMMERCE AND BUSINESS, WHICH DID N OT FALL WITHIN THE MEANING OF WORDS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL P UBLIC UTILITY U/S 2(15) OF THE ACT, WHICH DEFINES CHARITABLE PURPOSE. ACCORDINGLY THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTION U/ S 11 OF THE ACT AND THAT THE NET PROFIT EARNED BY IT WAS LIABLE TO BE TREATED AS TAX ABLE INCOME OF THE ASSESSEE. AN ADDITION OF RS. 2,70,25,647/- WAS THEREFORE MADE TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE SAME THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEAL), WHO ALLOWED THE ASSESSEES APPEAL AND DELETED THE ADDITION MADE HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR EXEMPTIO N U/S 11 OF THE ACT READ WITH SECTION 2(15) OF THE ACT, IN VIEW OF THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT CHANDIGARH VS. IMPROVEMENT TRUST MO GA IN ITA NO. 147 OF 2016, AND THE DECISION OF THE ITAT, AMRITSAR BENCH IN TH E CONSOLIDATED ORDER DATED 10.09.2015 IN THE CASES OF 1. HOSHIARPUR IMPROVEMEN T TRUST, 2. PATHANKOT IMPROVEMENT TRUST, 3. IMPROVEMENT TRUST,MOGA 4 IMPR OVEMENT TRUST, . BATHINDA 5. JALANDHAR IMPROVEMENT TRUST AND AMRITSAR IMPROVE MENT TRUST. 4. AGGRIEVED BY THE SAME THE REVENUE HAS COME UP IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE ASSESSEE ELIGIBLE FOR EXEMPTION U/S 11 WHEREAS THE ASSESSEE WAS NOT ACTUAL CARRYING ON ACTIVITIES FOR THE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE TRUE INTENT AND PURPOSE BEHIND THE AMENDMENT IN SECTION 2(15) BROUGHT IN W.E.F. 01.04.2009 AND WHI CH WAS ALSO CLEARLY EXPLAINED IN CBDT CIRCULAR NO. 11 DATED 19.12.2008 BY PROVIDING THAT 'AN ASSESSEE WHO CLAIMS THAT THEIR OBJECT IS 'CHARITABL E PURPOSE' WITHIN THE MEANING OF S. 2(15) WOULD BE WELL ADVISED TO ESCHEW ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER ING OF ANY SERVICE IN 3 RELATION TO ANY TRADE, COMMERCE OR BUSINESS.' 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE INTENT OF AMENDMENT IN 2(15) BY RELYING ON THE OBJECTS OF THE ASSESSEE EVEN WHEN THE SAID AMENDMEN T HAD REFOCUSED THE SECTION'S APPLICABILITY ON THE BASIS OF ACTIVITIES OF ENTITIES. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE STRINGENT IMPORT OF THE PROVISO WHEREIN EVEN ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY AC TIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMME RCE OR BUSINESS HAVE BEEN SPECIFICALLY PRECLUDED FROM THE AMBIT OF EXEMPTION CLAUSES. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE ASSESSEE ELIGIBLE FOR EXEMPTION U/S 11 BY HOLDING THAT BUSINESS ACTIVITIES BEING CARRIED ON BY THE ASSESSE E WERE INCIDENTAL TO THE ATTAINMENT OF OBJECTS WHICH PREDOMINANTLY WERE FOR TOWN IMPROVEMENT WHEREAS THE ASSESSEE HAD NOT BEEN ABLE TO DEMONSTRA TE DURING THE COURSE OF PROCEEDINGS THAT ANY SUCH ACTIVITY WAS CARRIED O N. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN HOLDING THE BUSINESS ACTIVITIES AS INCIDENTA L EVEN AS THE ACCOUNTS OF THE ENTITY REVEAL THAT THIS (SALE/PURCHASE OF PROPE RTIES ON COMMERCIAL LINES) HAS BECOME THE PREDOMINANT ACTIVITY TO THE DETRIMENT OF THE MAIN MANDATE OF THE IMPROVEMENT TRUSTS NAMELY TOWN IMPRO VEMENT 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN IGNORING THE INTENTION AND PURPOSE BEHIND TH E OMISSION OF SECTION 10(20A) W.E.F. 04.04.2003 WHICH EARLIER HAS EXPRESS LY PROVIDED EXEMPTION TO STATUARY AUTHORITIES CONSTITUTED FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FO R THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOW N AND VILLAGES, OR BOTH. 8. THAT THE APPELLANT CRAVES TO LEAVE, ADD OR AMEND TH E GROUNDS OF APPEAL ON OR BEFORE THE APPEAL HEARD AND DISPOSED OFF. 5. DURING THE COURSE OF HEARING BEFORE US LD. DR, A T THE OUTSET FAIRLY ADMITTED THAT THE ISSUE IN THE PRESENT CASE WAS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT CHANDIGARH VS. IMPROVEMENT TRUST MOGA (SUPRA) 6. IN VIEW OF THE ABOVE WE FIND NO REASON TO INTERF ERE IN THE ORDER OF LD. CIT(APPEAL).WE HAVE ALSO GONE THROUGH THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF IMPROVEMENT TRUST MOGA (SUPRA) AND WE FIND THAT THE HONBLE HIGH COURT AFTER TAKING NOTE OF THE FACT THAT THE A SSESSEE WAS FORMED UNDER THE PUNJAB TOWN AND IMPROVEMENT ACT,1922, FOR THE IMPRO VEMENT OF TOWNS HAS CATEGORICALLY HELD THAT THE SYSTEMATIC DEVELOPMENT OF CERTAIN AREAS UNDERTAKEN BY 4 IT BY VIRTUE OF THE PUNJAB TOWN IMPROVEMENT ACT 192 2 QUALIFIED AS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE HON'BLE HIGH COURT AFTER REFERRING TO THE RELEVANT SECTION OF THE PUNJAB TOW N IMPROVEMENT ACT, 1922, UNDER WHICH THE ASSESSEE WAS CREATED, HELD THAT TO FALL W ITHIN THE AMBIT OF THE WORDS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SO AS TO QUALIFY AS THE CHARITABLE PURPOSE, IT WAS SUFFICIENT IF IT WAS INV OLVED IN ANY SUCH ACTIVITIES AND IT WAS NOT NECESSARY FOR IT TO BE INVOLVED IN IMPLEMEN TING POVERTY ALLEVIATION PROGRAMMES OR IN OTHER ACTS OF CHARITY TO QUALIFY A S SUCH. THE HON'BLE HIGH COURT HELD THAT IT IS NOT POSSIBLE THAT THE GOVERNMENT OF PUNJAB FORMED THE TRUST UNDER THE PUNJAB TOWN IMPROVEMENT ACT,1922, BECAUSE IT WA NTED TO CARRY ON BUSINESS AS COLONIZERS AND DEVELOPERS UNDER THE MASK OF THE CAT EGORY OBJECTS OF GENERAL PUBLIC UTILITY. THE HON'BLE HIGH COURT FURTHER HEL D THAT THE POWER OF THE ASSESSEE TO DISPOSE OFF LAND HAD BEEN CONFERRED O UNDER THE PUNJAB TOWN IMPROVEMENT ACT, 1922 ,IN THE DISCHARGE OF ITS STATUTORY DUTY U NDER THE ACT AND WAS NOT AN ABSOLUTE AND INDEPENDENT POWER AND THE PURPOSE OF T HE SAME WAS FURTHERANCE OF AND IN RELATION TO THE SCHEME IN CHAPTER IV OF THE ACT. THE HON'BLE COURT HELD THAT THIS ACT OF DISPOSING OFF THE LAND WAS CLEARLY NOT THE PREDOMINANT ACTIVITY OF THE ASSESSEE AND THE PROFIT MADE FROM IT WAS CLEARLY NO T ITS PREDOMINANT MOTIVE. THE HON'BLE HIGH COURT POINTED OUT THAT THE PREDOMINANT ACTIVITIES AND PURPOSE FOR THE ESTABLISHMENT OF THE ASSESSEE WAS TOWN IMPROVEMENT AND WHICH WAS COMMUNICATED IN EVERY SECTION OF CHAPTER 4 OF THE A CT. FOR THE ABOVE REASONS THE HON'BLE HIGH COURT HELD THAT THE ASSESSEE QUALIFIED FOR EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT. 7. IN THE PRESENT CASE ALSO WE FIND THE FACTS TO BE IDENTICAL TO THAT IN MOGA IMPROVEMENT TRUST (SUPRA), THE ASSESSEE IN THE PRES ENT CASE HAVING BEEN CONSTITUTED UNDER THE PUNJAB TOWN IMPROVEMENT, ACT, 1922, FOR THE PURPOSE OF IMPROVEMENT OF TOWNS AND WITH IDENTICAL OBJECTS AS LAID DOWN IN THE CASE OF MOGA IMPROVEMENT TRUST(SUPRA).NO DISTINGUISHING FAC TS WERE BROUGHT TO OUR NOTICE BY THE LD.DR THE DECISION RENDERED IN THE C ASE OF MOGA IMPROVEMENT TRUST (SUPRA) WILL THEREFORE SQUARELY APPLY IN THE PRESENT CASE ALSO AS RIGHTLY DONE BY THE LD. CIT(APPEAL).THE ORDER OF THE LD. CIT(APP EAL) IS THEREFORE UPHELD 5 DELETING THE ADDITION MADE OF RS. 2,70,25,647/-. TH E GROUNDS OF APPEAL RAISED BY REVENUE ARE THEREFORE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIALMEMBER ACCOUNTNAT MEMBER DATED : 31/01/2018 GP/SRPS/ COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR