Bhubaneswar Development Authority, Bhubaneswar V. CIT, Bhubaneswar

ITA 136/CTK/2009

• Counselvise Citation: 13622114 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-08-2011
• Assessment Year: misc
• Appeal Filed On: 20-03-2009
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: R KARARS; G NAIK
• Keywords: Charitable institution; Principle of natural justice; Condonation of delay; Capital expenditure
• Section: 10; 12A; 12AA

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 136/CTK /2009 BHUBANESWAR DEVELOPMENT AUTHORITY, AKASH SH OVA BUILDING, JAWAHARLAL NEHRU MARG, BHUBANEW AR 751 001 PAN: AAALB 0073 G VERSUS COMMISSIONER OF INCOME - TAX, BHUBANESWAR 751 007. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI G.NAIK AND R.KAR, ARS FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 08.08.2011 DATE OF PRONOUNCEMENT : 25.08.2011 ORDER SHRI K.S.S.PRASAD RAO, JM : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX DT. 28.11.2008 PASSED U/S.12AA, REFUSING REGISTRATION U/S.12A OF THE INCOME - TAX ACT,1961. 2. TH E ASSESSEE HAS RAISED THE FOLLOWING ISSUES IN ITS GROUNDS OF APPEAL. 1. THE ORDER U/S.12AA OF THE I.T.ACT IS AGAINST LAW, WEIGHT OF EVIDENCES AND PROBABILITIES OF THE CASE. 2. THE LEARNED CIT HAS MOST ARBITRARILY REJECTED THE APPLICATION FOR REGISTRATION BY DENYING THE FACT THAT THE OBJECTS OF THE AUTHORITY OF GENERAL PUBLIC UTILITY AND ACTIVITIES OF THE AUTHORITY ARE IN CONFORMITY WITH ITS OBJECTS ARE AS LAID DOWN BY THE GOVERNMENT OF ORISSA. 3. THE LEARNED CIT HAS MISINTERPRETED THE NOTIFICATIONS I SSUED FROM TIME TO TIME AND IN A HURRY HAS REJECTED THE APPLICATION FOR GRANT OF REGISTRATION. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE AND THEIR LEGAL IMPLICATIONS. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL S MADE AVA ILABLE TO THE TRIBUNAL N THE LIGHT OF RIVAL SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED ITA NO.136/CTK/2009 2 FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS A A LOCAL AUTHORITY AND FORMED UNDER THE ORISSA STATE GOVT. ENACTMENT, ORISSA DEVELOPMENT AUTHORITY ACT,1982 WHICH WAS NOTIFIED ON 31ST AUGUST, 1983 AND EFFECTIVE FROM 1ST SEPTEMBER1983. THE MAIN OBJECTS OF THE ASSESSEE ARE TO PLAN, DEVELOP AND IMPROVE THE CITY OF BHUBANESWAR AND ITS PERIPHERY. SINCE ITS INCEPTION, IT HAS BEEN ENGAGED IN CARRYING OUT ITS OBJECTS CONSISTENTLY AND IN A FRUITFUL MANNER AND CONTINUED SO FOR THE LAST 25 YEARS BY DOING MANY MORE DEVELOPMENT I IMPROVEMENT WORKS, SUCH AS, D EVELOPED A NUMBER OF HOUSING COLONIES FOR ALL INCOME GROUPS I N BHUBANESWAR, KHURDA AND JATNI, G ENERATED SELF EMPLOYME NT OPPORTUNITIES BY CONSTRUCTING MARKET COMPLEXES INSIDE THE BHUBANESWAR CITY AS WELL AS IN ITS NEIGHBORHOODS , S PREADING GREENERY AND MAKING BHUBANESWAR A BEAUTIFUL AND ENVIRONMENT FRIENDLY CITY BY DEVELOPING A NUMBER OF PARKS SUCH AS IND IRA GANDHI PARK, J AWAHARLAL NEH RU PARK, MAHATMA GANDHI PARK, BIJU PATNAIK PARK ETC. , C ONTINUOUSLY INVOLVED IN DEVELOPING INFRASTRUCTURE AND UNDERTAKING VARIOUS PROJECTS IN THIS REGARD INCLUDING WATER SUPPLY, DRAINAGE, SEWERAGE, TRANSPORTATION AND OTHER SEVERAL FACILITIES ET C. , P ROTECTED AND DEVELOPED ENVIRONMENT IN AND AROUND HERITAGE AREAS OF THE CITY. THE ASSESSEE IS AVAILING THE BENEFIT OF SECTION 10(20A) OF THE INCOME TAX ACT,1961. THE SAID CLAUSE WAS OMITTED BY FINANCE ACT,2002 W.E.F. 1 ST APRIL, 2003 RENDERING THE INCO ME OF THE ASSESSEE LIABLE TO TAX SNCE 2003 - 04. HENCE, THE ASSESSEE STARTED FILING OF RETURN UNDER THE JU RISDICTION OF THE ACIT, CIRCLE 1(1) , BHUBANESWAR . THE ASSESSEE APPLIED FOR REGISTRATION U /S . 12AA OF THE INCOME TAX ACT,1961 BEFORE THE LEARNED CIT ON 19 TH MAY2008. THE MATTER WAS FIXED FOR HEARING AND THE ASSESSEE APPEARED THROUGH ITS AUTHORIZED REPRESENTATIVE FOR PRESENTING THE EXPLANATION IN RESPECT OF THE OBJECTS AND ACTIVITIES OF THE AUTHORITY WHICH ARE COVERED UNDER THE DEFINITION OF CHARITABLE PURPOSE AS ENVISAGED UNDER SECTION 2(15) OF THE INCOME TAX ITA NO.136/CTK/2009 3 ACT,1961. WHILE REVIEWING THE MATTER, THE LEARNED CIT UNDER CERTAIN CONJECTURE AND SURMISES REJECTED THE APPLICATION FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT ON THE GROUND THAT THE ACTIVITIES OF TH E ASSESSEE ARE IN THE NATURE OF TRADING, COMMERCIAL OR BUSINESS. THEREFORE, THE PRESENT APPEAL IS FILED BY THE ASSESSEE FOR QUASHING THE SAID ORDER OF THE LEARNED CIT PASSED REJECTING THE REGISTRATION U/S.12AA OF THE I.T.ACT. 5. DURING THE COURSE OF HEA RING, THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED CONTENDING INTERALIA THAT THE OBJECT OF THE ASSESSEE FALLS WITHIN THE RESIDUARY CLAUSE AN OBJECT OF GENERAL PUBLIC UTILITY AS LAID DOWN IN SECTION 2(15) OF THE INCOME TAX ACT, 1961. THE BASIC OBJ ECTIVE OF THE ASSESSEE IS TO ENSURE PLANNED DEVELOPMENT OF THE AREAS UNDER ITS JURISDICTION. IN ORDER TO ACHIEVE THE OBJECTIVE, THE APPELLANT IS ENGAGED IN PREPARATION OF THE ACTIVITIES, SUCH AS, P REPARATION OF INTERIM DEVELOPMENT PLAN (AS PER SECTION 8 OF ODA ACT) , P REPARATION OF COMPREHENSIVE DEVELOPMENT PLAN (AS PER SECTION 9 OF ODA ACT) , P REPARATION OF ZONAL DEVELOPMENT PLAN (AS PER SECTION 10 OF ODA ACT) , M ODIFICATION TO DEVELOPMENT PLAN (AS PER SECTION 14 OF ODA ACT) , C ONTROLLING DEVELOPMENT WITHIN T HE CITY , P REPARATION OF THE TOWN PLANNING SCHEME (AS PER CHAPTER 6 OF THE ODI ACT) . ALL THESE ACTIV ITIES ARE NO DOUBT PUBLIC IN NATURE , THEREFORE, BY CARRYING OUT SUCH ACTIVITIES, THE ASSESSEE NOT ONLY CONTROLS DEVELOPMENT, BUT ALSO BRINGS GUIDED AND PLANN ED DEVELOPMENT TO IMPROVE THE QUALITY OF LIFE IN THE CITY. ACCORDINGLY, THE IMPUGNED ORDER OF THE LEARNED CIT CANCELING REGISTRATION U/S 12AA IS INCORRECT AND LIABLE TO BE QUASHED BY DIRECTING THE LEARNED CIT TO GRANT REGISTRATION TO THE ASSESSEE U/S.12A O F THE I.T.ACT,1961. HE FURTHER POI NTED OUT THAT THE LEARNED CIT HAS NOT APPRECIATED THE ACTIVITIES OF THE ASSESSEE IN SPENDING THE FUNDS COLLECTED BY IT FOR CARRYING OUT THE OBJECTS AS STATED SUPRA FOR THE DEVELOPMENT OF CITY ENVIRONMENT AND THEREBY G IVING GOOD DEVELOPED ITA NO.136/CTK/2009 4 ECOLOGICAL BALANCED ENVIRONMENTS TO THE INHABITANTS OF THE AREA COVERED BY ORISSA DEVELOPMENT AUTHORITY ACT. IN DOING SUCH ACTIVITIES THE ASSESSEE IS EXPENDING EXPENDITURES AND IT IS MEETING THAT EXPENDITURE BY FEES COLLECTED BY IT FOR GRANTING APPROVALS FOR THE PLANS ISSUED BY IT AS PER ORISSA DEVELOPMENT AUTHORITY ACT AND THE REMAINING BALANCE, IF ANY, FORMED A FUND AS PER THE PROVISIONS OF ORISSA DEVELOPMENT AUTHORITY ACT AND SPENDING THEM FOR THE PURPOSE FOR WHICH THOSE FUNDS WERE CONSTITUTED BY THE GOVERNMENT OF ORISSA. THEREFORE, THERE IS NO ELEMENT OF TRADING OR COMMERCIALITY OR BUSINESS IN THE ACTIVITIES CARRIED O N BY THE ASSESSEE. ALL OBJECTIVES ARE OF CHARITABLE OBLIGATION CAST ON IT BY THE GOVERNMENT OF ORISSA. THEREFORE, IT C ANNOT BE TERMED TO HAVE BEEN CARRYING ON TRADING, COMMERCIAL OR BUSINESS ACTIVITIES. THE LEARNED CIT(A) HAS NOT PROPERLY APPRECIATED THE PROVISIONS LAID DOWN BY THE ORISSA DEVELOPMENT AUTHORITY ACT AS WELL AS THE RELEVANT RULES FRAMED WHILE INCORPORATING THE ASSESSEE AND FOR ITS FUNCTIONING. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE LEARNED CIT IS NOT AT ALL JUSTIFIED IN LAW. THE LEARNED AR OF THE ASSESSEE THEREFORE, REQUESTED TO SET ASIDE THE ORDER OF THE LEARNED CIT AND DIRECT HIM TO GRANT REG ISTRATION U/S.12A OF THE I.T.ACT,1961. 6. CONTRARY TO THIS, THE LEARNED DR HAS VEMENTLY ARGUED CONTENDING INTER ALIA THAT AS CAN BE SEEN FROM THE ECONOMIC STATEMENT FURNISHED ALONG WITH THE APPLICATION FOR REGISTRATION BY THE ASSESSEE AS WELL AS THE INFORM ATION PLACED BY THE AS SESSEE BEFORE THE LEARNED CIT FOR CONSIDERING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S.12AA DISCLOSED THAT IT IS COLLECTING VERY HUGE AMOUNTS AND ACCUMULATED HUGE AMOUNTS AFTER RECURRING A MEAGER EXPENDITURE FOR CARRYIN G OUT ITS OBJECTIVES AND ALL THE ACTIVITIES STATED BY THE ASSESSEE BEFORE THE LEARNED CIT ARE NOTHING BUT ALL TRADING ACTIVITIES INVOLVING COMMERCIAL AND BUSINESS IN NATURE. THEREFORE, BY NO STRETCH OF IMAGINATION THEY CAN BE TERMED AS ACTIVITIES OF GENER AL PUBLIC ITA NO.136/CTK/2009 5 UTILITY AS ENVISAGED IN SECTION 2(15) OF THE I.T.ACT,1961. THEREFORE, THE LEARNED CIT IS RIGHT IN REJECTING THE APPLICATION OF THE ASSESSEE REFUSING GRANT OF REGISTRATION U/S.12A OF THE ACT. ACCORDINGLY, HE SOUGHT FOR UPHOLDING THE IMPUGNED ORDE R OF THE LEARNED CIT BY DISMISSING THE APPEAL OF THE ASSESSEE. 7. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDER PASSED BY THE LEARNED CIT, IT IS SEEN THAT THE LEARNED CIT HAS CONSIDERED THE FUNCTIONING OF THE ASSESSEE WHICH IS THERE FOR THE LAST 25 YEARS AVAIL ING EXEMPTION TILL 2003 IN WHICH YEAR THE APPLICABILITY OF SECTION 10(20A) OF THE I.T.ACT WAS OMITTED TO BE APPLIED TO THE ASSESSEE. THEREAFTER HE CONSIDERED THE ACTIVITIES OF THE ASSESSEE AS ENVISAGED IN THE ORISSA DEVELOPMENT AUTHORITY ACT,1982 WHICH IS W.E.F. SEPTEMBER, 1983. THEREAFTER HE CONSIDERED THE APPLICABILITY OF SECTION 2(15) OF THE I.T.ACT. THEREAFTER THE LEARNED CIT HAS EXAMINED THE AUDITED ACCOUNTS FILED BY THE ASSESSEE ALONG WITH THE APPLICATION FOR THE YEAR ENDING 31.3.2006 AND 31.3.2007 AN D FOUND 12,46,12,131 AND 12,69,30,988 IN THE RESPECTIVE YEARS AS INCOME AND IT HAS ONLY FURNISHED THE BALANCE SHEET BUT AND INCOME & EXPENDITURE ACCOUNTS OF BOTH THESE YEARS OMITTING TO FURNISH THE RECEIPT AN D EXPENDITURE ACCOUNT. FROM THE BALANCE SHEET, THE LEARNED CIT FOUND THAT THE ASSESSEE IS HAVING ASSETS IN EXCESS OF 332 CRORES AND 357 CORES RESPECTIVELY FOR ABOVE MENTIONED YEARS AND THERE ARE CAPITAL EXPENDITURE IN EXCESS OF 157 CRORES, LOANS AND ADVANCES N EXCESS OF 1256 CRORES ON THE ASSET S IDE AND LOANS IN EXCESS OF 64 CRORES, DEPOSIT TOWARDS COST OF CONSTRUCTION I N EXCESS OF 101 CRORES AND CURRENT LIABILITY AND PROVISIONS IN EXCESS OF 149 CORES ON THE LIABILITIES SIDE. AFTER CONSIDERING THE PROVISIONS OF SECTION 2(15) AS WELL AS SECTION 12A AN D ANALYZING THE ABOVE FACTS, THE LEARNED CIT FOUND THAT MANY OTHER RECEIPTS GO INTO THE GENERAL KITTY OF THE ASSESSEE AS RECEIPTS OF ITS ENTERPRISE AS WELL. AND ESSENTIALLY THE GENERAL PUBLICS ARE REQUIRED TO PAY THE COST OF PLANNING AND DEVELOPMENT ITA NO.136/CTK/2009 6 UNDERTAKEN BY THE ASSESSEE ON WAY OR THE OTHER AS THEY BECOME CUSTOMER/CONSUMER CITIZENS LIVING IN THE CITY. ACCORDINGLY, THE LEARNED CIT HAS COME TO THE CONCLUSION THAT THE ACTIVITIES OF THE ASSESSEE PALPABLY FALLING UNDER THE ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY, IS HIT BY THE PROVISO TO SECTION 2( 15) OF THE I.T.ACT AS THEY ARE CLEARLY IN THE NATURE OF TRADING, COMMERCIAL OR BUSINESS AND RENDERING SERVICES IN RELATION TO TRADING, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CON SIDERATION OR NATURE OF USE OR APPLICATION OR RETENTION OF INCOME FROM SUCH ACTIVITIES. ACCORDINGLY, HE REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S.12A. BUT THE LEARNED CIT HAS NOT EXAMINED THE PROVISIONS CONTAINED IN CHAPTER 8 OF THE ORI SSA DEVELOPMENT AUTHORITY ACT IN PARTICULAR SECTION 77 THEREOF WHICH MAKES AN ELABORATE STIPULATION REGARDING THE FUNCTIONS OF THE ASSESSEE WHICH INCLUDES ALL INGREDIENTS NEEDED FOR A COMMERCIAL VENTURE LIKE DEALING OF MONEY, BY NATURE OF DEPENDANTS, LEVYI NG OF FEES AND CHARGES, RAISING OF MONEY BY DISPOSAL OF LAND, BUILDING AND OTHER PROPERTIES ETC. HE FURTHER OBSERVE D THAT IN COURSE OF HEARING THE ASSESSEE WAS ASKED TO SUBMIT CATEGORICAL DETAILS OF TASKS CONDUCTED FOR GENERAL PUBLIC UTILITY FOR WHICH NO COST WAS TO BE OFF - LOADED TO THE GENERAL PUBLIC. BUT THE ASSESSEE WAS NOT ABLE TO FURNISH THESE INFORMATIONS. THEREFORE, THE LEARNED CIT HAS PASSED THE IMPUGNED ORDER REJECTING THE APPLICATION OF THE ASSESSEE. 8. SINCE THE ASSESSEE HAS NOT FURNISHED THE FU LL FINANCIAL STATEMENTS, SUCH AS RECEIPT AND PAYMENT ACCOUNT AND INCOME & EXPENDITURE ACCOUNTS AND NECESSARY INFORMATIONS WHICH CONSTITUTE THE DIFFERENT FUNDS SHOWN IN THE BALANCE SHEET AND THE WAY OF UTILIZATION OF THOSE FUNDS FOR GENERAL PUBLIC AS GENERA L PUBLIC UTILITY AND THE LEARNED CIT HAS NOT PROPERLY APPRECIATED THE ACTIVITIES OF THE ASSESSEE IN THE LIGHT OF CHAPTER 9 IN PARTICULAR SECTION 77 OF THE ORISSA DEVELOPMENT AUTHORITY ACT, THE ASSESSEE IS UNDER OBLIGATION TO ITA NO.136/CTK/2009 7 CARRY OUT ALL THESE OBJECT IVES WITH THE GRANTS RECEIVED FROM THE STATE GOVERNMENT AND OTHER AGENCIES AS WELL AS THE FEES/CHARGES IT IS COLLECTING BY GRANTING VARIOUS PERMISSION TO THE PUBLIC FOR WHICH IT IS EMPOWERED TO GRANT AND THE MARGIN THE ASSESSEE IS DERIVING BY DISPOSAL OF LAND, BUILDING AND OTHER PROPERTIES IS ALSO EXPECTED TO USE FOR THOSE PURPOSES ONLY UNDER THE ORISSA DEVELOPMENT AUTHORITY ACT MORE PARTICULARLY CHAPTER 8 THEREOF. THEREFORE , WE ARE OF THE CONSIDERED VIEW THAT , FOR THE DEFAULT ON THE PART OF THE ASSESSEE I N NOT GIVING COMPLETE FINANCIAL PARTICULARS AND THE LEARNED CIT HAS ALSO NOT EXAMINED THE PROVISIONS CONTAINED IN CHAPTER 8 PARTICULARLY SECTION 77 OF THE ORISSA DEVELOPMENT AUTHORITY ACT WHICH ENVISAGES THE OBLIGATION CAST ON THE ASSESSEE AS TO THE DISPOS AL OF THE FUNDS RECEIVED BY IT BY VARIOUS GRANTS FROM GOVERNMENT AS WELL AS COLLECTING THE FEES AND ACTIVITIES CARRIED ON BY THE ASSESSEE UNDER THE ORISSA DEVELOPMENT AUTHORITY ACT, WE FEEL IT TO BE A FIT CASE TO BE RESTORED TO THE LEARNED CIT FOR RECONSI DERATION OF THE APPLICATION OF THE ASSESSEE IN THE LIGHT OF THE PROVISIONS CONTAINED IN CHAPTER 8 OF THE ORISSA DEVELOPMENT AUTHORITY ACT IN MORE PARTICULAR SECTION 77 THEREOF AND ANALYZING THE FINANCIAL STATEMENTS OF THE ASSESSEE IN THE LIGHT OF THOSE PRO VISIONS AND PASS NECESSARY CONSEQUENTIAL ORDER AS PER LAW OFCOURSE STRICTLY FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 9. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS SOUGHT FOR PERMISSION TO MOVE NECESSARY PETITION BEFORE THE LEARNE D CIT FOR CONDONING THE DELAY FOR LATE FILING OF THE APPLICATION FOR REGISTRATION U/S.12A OF THE ACT AS THE LEARNED CIT IS NOW TO EXAMINE THE APPLICATION FOR REGISTRATION AFRESH. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES AND THE SCOPE OF RE - EXAMINATION /CONSIDERATION OF THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S.12A, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE MAY BE PERMITTED ITA NO.136/CTK/2009 8 TO MOVE NECESSARY APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPLICATION U/S.12A FOR REGISTRATION W.E.F. 1. 4.2003, IF IT MOVED SO BY THE ASSESSEE AND PASS NECESSARY ORDERS ACCORDINGLY. 10. WITH THE ABOVE DIRECTIONS, THE IMPUGNED ORDER OF THE LEARNED CIT IS SET ASIDE AND THE MATTER IS RESTORED TO HIS FILE FOR CONSIDERATION DE NOVO AND TO PASS NECESSARY CONSEQUE NTIAL ORDER AS PER LAW. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 25.08.20 11 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: BHUBANESWAR DEVELOPMENT AUTHORITY, AKASH SHOVA BUILDING, JAWAHARLAL NEHRU MARG, BHUBANEWAR 751 001 2. THE RESPONDENT: COMMISSIONER OF INCOM E - TAX, BHUBANESWAR 751 007. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.