DCIT, Chandigarh V. M/s Patiala Improvement Trust, Patiala

ITA 177/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9933 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 177/CHD/2016 ASSESSMENT YEAR: 2011-12 THE DCIT, VS M/S PATIALA IMPROVEME NT TRUST, CIRCLE-1 (EXEMPTIONS), CHHOTI BARADARI, SECTOR 17-E, PATIALA. CHANDIGARH. PAN NO. AAAJI0034L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ MISHRA RESPONDENT BY : SHRI Y.K.SUD DATE OF HEARING : 25.05.2016 DATE OF PRONOUNCEMENT : 13.06.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) PATIALA DATED 09.12.2 015 FOR ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUND S : I ) THAT THE ORDER OF LD. CIT(A) IS DEFECTIVE BOTH IN L AW AND FACTS OF THE CASE. 2) THAT THE ORDER OF LD. CIT(A) IS BAD IN LAW AS THE AMENDMENT IN SECTION 2(15) IS EFFECTIVE W.E.F. 01.04.2009 AND TH E ASSESSMENT IN THE CASE HAS BEEN COMPLETED CONSIDERING THE ACTI VITIES OF ASSESSEE WHICH ARE NOT 'ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY. 2 3) THAT THE ORDER OF LD. CIT(A) IS BAD IN LAW BY I GNORING THE RATIO LAID IN THE CASES OF PUDA AND JDA (TO THE EXTENT IM PROVEMENT TRUSTS CARRY OUT LAND DEVELOPMENT IN A SIMILAR MANN ER AS DEVELOPMENT AUTHORITIES DO. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN ARTIFICIAL JUDICIAL PERSON HAVING INCOME FROM PLANN ING AND DEVELOPMENT OF CITIES AND SAME WAS SHOWN AS 'INCOME FROM OTHER SOURCES'. THE ASSESSEE HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA OF THE INCO ME TAX ACT. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, ASSESSING OFFICER OBSERVED THAT ASSESSEE IS CARRYIN G ON BUSINESS OF SALE AND PURCHASE OF RESIDENTIAL HOUSES , CONSTRUCTION AND MULTI-STOREYED HOUSES, SALE OF RESIDENTIAL PLOTS AND COMMERCIAL PLOTS BY AUCTION A ND EARNED NET PROFIT OF RS. 48.04 CR DURING THE YEAR U NDER CONSIDERATION, WHICH IS IN THE NATURE OF TRADE, COM MERCE AND BUSINESS BUT DOES NOT FALL WITHIN THE MEANING O F WORDS THE ADVANCEMENT OF ANY OTHER OBJECT OF PUBLI C UTILITY UNDER SECTION 2(15) OF THE INCOME TAX ACT. HOWEVER, THE ASSESSEE HAS STATED THAT IT IS NOT CAR RYING ON ANY BUSINESS ACTIVITY BUT THE OBJECT OF THE ASSE SSEE IS PLANNING, DEVELOPMENT AND IMPROVEMENT OF CITY. 2(I) THE ASSESSING OFFICER OBSERVED THAT CONTENTION OF THE ASSESSEE IS NOT CORRECT IN VIEW OF OMISSION OF SECTION 10(20A) OF THE INCOME TAX ACT BY FINANCE AC T, 2002 W.E.F. 01.04.2003, AMENDMENT OF SECTION 2(15) OF THE INCOME TAX ACT BY THE FINANCE ACT, 2008 AND 201 0 3 W.E.F. 01.04.2009 I.E. ASSESSMENT YEAR 2009-10 AND ALSO IN VIEW OF THE FACT THAT BUSINESS ACTIVITIES CARRIE D ON FOR SALE OF RESIDENTIAL PLOTS/HOUSES AND COMMERCIAL PLOTS/AUCTIONS ETC. AND HUGE FEES HAVE BEEN CHARGED FROM THE CUSTOMERS. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE ALSO RECEIVED WATER SEWERAGE INCOME, MISCELLANEOUS AND INTEREST INCOME ON ACCOUN T OF LATE CONSTRUCTION FEES FROM THE PURCHASERS WHO H AD NOT MADE CONSTRUCTION WITHIN THE PRESCRIBED TIME. THE ASSESSING OFFICER, AFTER DETAILED INVESTIGATION FOU ND THAT ASSESSEE IS NOT ENTITLED FOR BENEFIT OF SECTION 11 AND 12 OF THE INCOME TAX ACT IN VIEW OF AMENDED PROVISIONS OF SECTION 2(15) OF THE INCOME TAX ACT. 3. THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE LD . CIT(APPEALS) AND CONTENDED THAT ISSUE IS COVERED BY ORDER OF ITAT AMRITSAR BENCH IN THE CASE OF HOSHIAR PUR IMPROVEMENT TRUST VS ITO DATED 10.09.2015. THE LD. CIT(APPEALS) FOLLOWING THE SAME, ALLOWED THE APPEAL OF THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET CONTENDED THAT SIMILAR ISSUE WAS CONSIDERED BY ITAT CHANDIGARH BENCH IN THE CASE OF SAME ASSESSEE FOR ASSESSMENT YEARS 2009-10 AND 2010-11 AND APPEALS OF THE ASSESSEE HAVE BEEN ALLOWED VIDE ORDER DATED 15.02.2016 IN ITA 305/2013 AND 1182/2013, COPY OF ORDER IS PLACED ON RECORD IN WHICH THE IDENTICAL I SSUE IS 4 CONSIDERED AND DECIDED IN PARA 8 TO 11 AS UNDER : 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE ORDER IN THE CASE OF THE IMPROVEMENT TRUST, SANGRUR (SUPRA), WE OBSERVE THAT THE FINDINGS ARE RECORDED AT PARA 9 ONWARDS, IN FOLLOWING WORDS : 9. WE FIND THAT IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. ITO, ITA NO. 496/ASR/2013 RELIED UPON BY THE ASSESSEE, THE ASSESSEE WAS AN IMPROVEMENT TRUST CONSTITUTED UNDER THE PUNJAB TOWN IMPROVEMENT ACT (PTIA), 1922, BY THE GOVERNMENT OF PUNJAB WITH THE PRINCIPAL OBJECTIVE OF BRINGING ABOUT IMPROVEMENT IN TOWNS BY THE MEANS SET OUT UNDER SECTION 22 TO 26 OF THE PITA. THE HONBLE AMRITSAR BENCH IN THE IMPUGNED CASE DEALT WITH THE ISSUE WHETHER THE MANNER IN WHICH THE ASSESSEE TRUST WAS CONDUCTING ITS ACTIVITIES CONSTITUTED ADVANCEMENT OF GENERAL PUBLIC UTILITY AS SET OUT IN SECTION 2(15) AND FURTHER WHETHER THE WORK CEASED TO BE FOR CHARITABLE PURPOSE DUE TO THE FIRST PROVISO TO SECTION 2(15) WH ICH LAYS DOWN THAT THE ADVANCEMENT OF ANY OTHER OBJEC T 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, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE IN COME FROM SUCH ACTIVITY. AS A COROLLARY THE HONBLE BENCH ADJUDICATED UPON THE ISSUE WHETHER THE ASSESSEE TRU ST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE INCOME TAX ACT. SINCE IN THE PRESENT CASE THE ASSESSEE TRUST IS ALS O AN IMPROVEMENT TRUST FORMED UNDER THE PUNJAB TOWN IMPROVEMENT ACT 1922 FOR THE PURPOSE OF IMPROVEMENT OF THE CITIES AND THE ISSUE BEFORE US IS THE CLAIM O F EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT, WE FIND THAT THE CASE OF HOSHIARPUR IMPROVEMENT TRUST I S 5 IDENTICAL TO THE ASSESSEES CASE AND THE RATIO PROPOUNDED THEREIN WOULD SQUARELY APPLY TO THE ASSESSEES CASE. ADVERTING TO THE DECISION IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST(SUPRA) WE FIND THAT THE HONBLE BENCH INTERPRETED THE PROVISION OF SECTION 2 (15) IN DETAIL AND HELD AT PARA 17 OF ITS ORDER THAT WHERE ACTIVITIES IN THE NATURE OF TRADE/ COMMERCE/BUSINESS ARE INCIDENTAL TO THE MAIN OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY, THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED. THE RELEVANT PAR A 17 OF THE ORDER, IS REPRODUCED HEREUNDER: 17. AS LONG AS THE OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIV E OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONAFIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVE S OF GENERAL PUBLIC UTILITY CANNOT BE HIT BY THE PROVISO TO S. 2(15) THEREAFTER THE HONBLE BENCH APPLIED THE AFORESTATED PROPOSITION TO THE FACTS OF THE CASE AND HELD THAT T HE PRIMARY OBJECTIVE OF THE ASSESSEE TRUST WAS ADVANCEM ENT OF GENERAL PUBLIC UTILITY AND THE ACTIVITIES IN THE NA TURE OF BUSINESS CARRIED OUT BY IT WERE PRIMARILY TO SERVE TH IS PURPOSE. THE HONBLE BENCH HELD THAT THE PROFIT MADE BY THE ASSESSEE TRUST DID NOT OBLITERATE THE OVERALL OBJE CT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THUS IT HELD AT PARA 31 & 32 OF ITS ORDER THAT THE BUSINESS ACTIVITI ES CARRIED OUT BY THE ASSESSEE TRUST WERE NOT COVERED UNDER THE PROVISO TO SECTION 2(15) AND THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE ACT. THE RELEVANT PARA 31 & 32 OF THE ORDER ARE REPRODUCED AS FOLLOWS: 31. CLEARLY, THEREFORE, SO FAR AS PRE INSERTION OF EXPLANATIONS TO SECTION 2 (15), I.E. PRIOR TO 1ST APRIL 2009, IS CONCERNED, THE STAND TAKEN BY THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. ASSUMING THAT ALL THE ALLEGATIONS OF THE ASSESSING OFFICER, WITH RESPECT TO PRESENCE TO PROFIT MOTIVE IN 6 ACTIVITIES OF THE ASSESSEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WITH THE LARGER AND PREDOMINANT OBJECTIVE OF GENERAL PUBLIC UTILITY. IT IS ONLY WHEN, TO USE THE WORDS OF THE CBDT CIRCULAR CITED EARLIER IN THIS ORDER AND THE BENEFICIAL IMPACT OF WHICH HAS THE BINDING FORCE ON THE FIELD AUTHORITIES UNDER SECTION 119 OF THE ACT, THE ASSESSING OFFICER FINDS THAT THE INCOME IS INCOME OF ANY OTHER BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR INSTITUTION THAT THE SUCH AN INCOME WILL NOT BE EXEMPT FROM TAX. THERE IS NO FINDING TO THAT EFFECT BY ANY OF THE AUTHORITY BELOW. IN ANY CASE, IT IS NOT EVEN THE CASE OF REVENUE AUTHORITIES THAT THE ACTIVITIES OF THE TRUSTS DO NOT SERVE THE OBJECTS OF THE GENERAL PUBLIC UTILITY BUT THE CASE IS CONFINED T O THE STAND THAT THESE ACTIVITIES HAVE BEEN CARRIED OUT IN SUCH A MANNER AS TO MAKE PROFIT AND NO ACTIVITIES DIRECTLY OF ANY GENERAL PUBLIC UTILITY ARE CARRIED OUT. THE REGISTRATION GRANTED TO THE ASSESSEE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WERE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, AND THERE IS NOTHING TO DEMONSTRATE ANY PARADIGM SHIFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY OF THE PROFIT MAKING BUT THAT DOES NOT OBLITERATE THE OVERALL OBJECTS OF GENERAL PUBLIC UTILITY. AS REGARDS THE MAINTENANCE OF THE SEPARATE BOOKS OF ACCOUNTS FOR THE BUSINESS ACTIVITIES PURSUED BY THE ASSESSEE TRUST, SINCE ALL THE ACTIVITIES OF THE ASSESSEE TRUST ARE SAID TO BE OF THE BUSINESS NATURE, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE TRUST MEET THIS REQUIREMENT AS WELL. OF COURSE, WE WILL DEAL WITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF PROFIT MAKING ACTIVITIES A LITTLE LATER, BUT, SUFFICE TO SAY, THAT ON THE ADMITTED FACTS OF THIS CASE, SO FAR PERIOD PRIOR TO 1ST APRIL 2009 IS CONCERNED AND FOR THE REASONS SET OUT ABOVE, THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) COULD NOT HAVE BEEN DECLINED AT ALL. 32. TURNING ONCE AGAIN TO THE AMENDMENTS BROUGHT ON THE STATUE WITH EFFECT FROM 1ST APRIL 2009, WE HAVE TO UNDERSTAND THAT THERE ARE THE TWO MUTUALLY EXCLUSIVE SITUATIONS IN WHICH BUSINESS ACTIVITIES ARE CARRIED OUT BY THE ASSESSE TRUST ONE, IN WHICH THE OBJECT OF GENERAL PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS ETC [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DATED 19TH DECEMBER 2008 ISSUED AT THE POINT OF TIME WHEN FIRST PROVISO TO SECTION 2(15) WAS INTRODUCED]; AND SECOND, IN WHICH ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, 7 [INSERTION OF NEW PROVISO TO REPLACE FIRST AND SECOND PROVISO TO SECTION 2(15)- EFFECTIVE 1ST APRIL 2016 I.E. ASSESSMENT YEAR 2016- 17]. AS FOR THE FIRST CATEGORY, POST 1ST APRIL 2009 AMENDMENT, THIS CATEGORY CANNOT BE TREATED AS COVERED BY SECTION 2(15) BUT THEN THATS NOT THE CASE BEFORE US. IT IS NOT, AND IT CANNOT BE, THE CASE THAT THE GOVERNMENT FORMED THESE TRUSTS BY LEGISLATING THE PUNJAB TOWNS IMPROVEMENT ACT 1922 BECAUSE IT WANTED TO CARRY ON THE BUSINESS AS COLONIZER OR DEVELOPER. THEREFORE, BY NO STRETCH OF LOGIC, FORMATION OF TRUSTS CAN BE SAID TO A MASK OR DEVICE TO HIDE THE TRUE PURPOSE OF THE DOING BUSINESS. THE CASE OF THE REVENUE AT BEST IS THAT THE MANNER IN WHICH THE ACTIVITIES ARE CARRIED OUT IS OF A PROFIT SEEKING ENTITY THAT A BUSINESS INHERENTLY IS. IN OTHER WORDS, THUS, THE CASE OF THE REVENUE IS THAT THE ACTIVITIES IN TH E NATURE OF TRADE, COMMERCE AND BUSINESS ARE CARRIED OUT FOR ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY. THIS SITUATION AT BEST FALLS IN THE SECOND CATEGORY. HOWEVER, THESE CASES, FOR THE DETAILED REASONS SET OUT ABOVE, THE EXCLUSION OF THESE CASES FROM SECTION 2(15) IS ONLY EFFECTIVE 1ST APRIL 2016, I.E. ASSESSMENT YEAR 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HONBLE SUPREME COURT, IN THE CASE OF VATIKA TOWNSHIP PVT LTD (SUPRA), THAT, FOLLOWING THE MAXIM LEX PROSPICIT NON RESPICI, THE LAW, PARTICULARLY WITH RESPECT TO A REQUIREMENT WHICH IS MORE ONEROUS ON THE ASSESSEE, CANNOT BE TREATED AS RETROSPECTIVE IN EFFECT UNLESS IT IS SPECIFICALLY LEGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREFORE, THIS AMENDMENT CANNOT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFFECT. IN VIEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVISO TO SECTION2(15) BUT BEFORE 1ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRUST IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, THE BENEFIT OF SECTION 11 READ WITH SECTION 2 (15) CANNOT BE DECLINED. NOTHING, THEREFORE, TURNS ON THE ASSESSEE CARRYING OUT, EVEN IF THAT BE ACTUALLY SO, ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC AS LONG AS THESE ACTIVITIES ARE CARRIED OUT IN THE COURSE O F ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVELOPMENT OF CITIES AND TOWNS IS AN OBJECT OF GENERAL PUBLIC UTILITY, AND THAT IS AN OBJECT CONSISTENTLY FOLLOWED BY THE ASSESSEE IN ALL ITS ACTIVITIES. FOR THIS SHORT REASON ALONE, THE STAND OF THE AUTHORITIES BELOW MUST BE HELD TO BE UNSUSTAINABLE IN LAW. 8 THE HONBLE BENCH FURTHER HELD AT PARA 33, 35 AND 36, OF ITS ORDER THAT PROFIT MAKING WAS NOT THE MAIN OBJECT OF THE ASSESSEE TRUST. 33. WE MUST, HOWEVER, ALSO DEAL WITH THE FUNDAMENTAL ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSESSE E HAS SOLD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTIAL AND COMMERCIAL LANDS JUST TO EARN PROFIT 35. WHILE DEALING WITH THE PROFIT MOTIVE ALLEGATION OF THE REVENUE AUTHORITIES, IT IS ESSENTIAL TO APPRECIATE T HE DIFFERENCE THAT PROFIT ON SALE DOES NOT ESSENTIALLY AN D NECESSARILY IMPLY PROFIT MOTIVE IN ACTIVITIES OF THE ASSESSEE TRUST. WHAT I S IMPORTANT IS THE MOTIVE OR PREDOMINANT OBJECT OF THE ACTIVITIES. AS WE DO SO, WE MAY ONLY MAKE A NOTE OF THE FOLLOWING OBSERVATIONS MADE BY A COORDINATE BENCH DECISION IN THE CASE OF DEVKI DEVI FOUNDATION VS DIT [(2015) 56 TAXMANN.COM 56 (DELHI)]: 29THE SOUL OF CHARITY IS BENEVOLENCE AND GENEROSITY TOWARDS OTHERS AND THE COMMUNITY AT LARGE. OF COURSE, IT IS IMPORTANT AS TO WHAT ARE THE ACTIVITIES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORTANT IS WHAT IS THE PREDOMINANT MOTIVATION FOR SUCH ACTIVITIES. NO ACTIVIT Y, BY ITSELF, COULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TRIGGERED BY ECONOMIC GREED. THERE IS NO DIFFERENCE IN WHAT A SOLDIER AND A MERCENARY DOES , BOTH USE BULLETS TO DEFEND THEIR INTERESTS, BUT WHILE A SOLDIER DOES IT OUT OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. THE ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTIONS ARE SO MATERIALLY DIFFEREN T THAT THE CHARACTER OF ACTIVITY IS ALTOGETHER CHANGED . CLEARLY, UNDERLYING MOTIVE AND TRIGGER FOR DOING WHAT A PERSON DOES IS, IS IMPORTANT FOR DETERMINING WHETHER SUCH AN ACTION IS IN THE COURSE OF BUSINESS OR CHAR ITY. WHAT IS REALLY, THEREFORE, REQUIRED TO BE CAREFULLY EXAMINED, IN ORDER TO FIND WHETHER AN ACT OF THE INSTITUTION IS CHARITABLE OR NOT, IS NOT ONLY TO ASSESS THE WORK BEING DONE BY THE INSTITUTIONS, WHICH CLAIM TO BE PURSUING CHARITABLE ACTIVITIES, BUT ALSO THE ECONOMIC DYNAMICS AND MOTIVATIONS OF SUCH ACTIVITIES. 36. LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE COMMERCIAL PLOTS AND UNITS ARE AUCTIONED OFF WHICH SHOWS THAT THE IDEA IS TO MAKE MAXIMUM PROFITS BUT WHAT HE CLEARLY OVERLOOKS IS THE FACT THA T SINCE IT IS NOT A DESIRABLE STATE OF AFFAIRS FOR THE S TATE TO SUBSIDIZE BUSINESSES, AND TO ENSURE HIGHEST DEGRE E OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSETS, COMPETITIVE BIDDING FOR COMMERCIAL UNITS IS A SAFE OPTION, AND THAT THE USE OF BIDDING PROCESS IS JUSTIFIED FOR THE LARGER CAUSES. THE BIDDING PROCESS ENSURES TRANSPARENCY IN FUNCTIONING OF THE IMPROVEMENT TRUSTS AND THAT, BY ITSELF, DOES NOT MAKE THE FUNCTIONING OF THE IMPROVEMENT TRUST A COMMERCIAL 9 VENTURE. IT IS ALSO IMPORTANT THAT THIS USE OF BIDDING PROCESS IS ONLY IN THE CONTEXT OF COMMERCIAL UNITS ET C. THE DEVELOPMENT OF COMMERCIAL AREAS IS IN THE INTEREST OF PLANNED GROWTH OF AN AREA AND WHEN SUCH COMMERCIAL AREAS DEVELOP, ALL THE STAKEHOLDERS IN THE DEVELOPMENT OF THAT AREA BENEFIT. IN ORDER OF THIS BENEFIT TO THE COMMON CAUSE, IT IS NOT NECESSARY TH AT THE BUSINESSMEN, BUYING SUCH UNITS, MUST ALSO BENEFIT. THE DENIAL OF ANY ADVANTAGE, AT THE COST OF GENERAL PUBLIC, TO THE BUSINESS ENTITIES BUYING THE COMMERCIAL AREAS, IN OUR CONSIDERED VIEW, DOES NOT AMOUNT TO AN DEFEATING AN OBJECT OF GENERAL PUBLIC UTILITY. IN THIS CONTEXT, IT IS IMPORTANT TO UNDERSTAND THE BENEFIT FRO M DEVELOPING COMMERCIAL AREAS, WHICH IS FOR PUBLIC GOOD, AND BENEFIT TO THE BUSINESS PERSONS IN BUYING THESE UNITS FROM THE ASSESSEE TRUST, WHICH CAN ONLY BE FOR THE GOOD OF BENEFIT OF THESE ENTREPRENEURS. AS FOR T HE SALE OF RESIDENTIAL UNITS, IT IS AN ADMITTED POSITION THAT IN TERMS OF THE PUNJAB TOWN IMPROVEMENT (UTILIZATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, THERE IS A FORMULAE ON THE BASIS OF WHICH THE PRICE IS WORKED OU T. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT ASPECT BUT HE ALLEGES PROFIT MOTIVE EMBEDDED IN THIS FORMULA AS SHOWN BY ADJUSTMENTS FOR (A) CONSERVANCY CHANGES FOR 5 YEARS @ 10% PER MONTH PER ACRE; AND (B) PROVISION FOR UNFORESEEN CHARGES @ 15% OF TOTAL RESERVE PRICE. FIRSTLY, EVEN IF THIS ALLEGATION ABOUT PRESENCE OF THE TWO ELEMENTS ONL Y TO MAXIMIZE THE PROFIT BE TAKEN AS CORRECT, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THIS IS NOT THE PRESENCE OF PROFIT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHARITABLE CHARACTER OF THE ACTIVITIES BUT IT I S THE ABSENCE OF RESTRICTIONS ON MAKING PROFITS WHICH VITIATES THE CHARITABLE CHARACTER OF THE ACTIVITIES. IN THE INDIAN CHAMBER OF COMMERCE (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND REFERRED T O IN CBDT INSTRUCTION NO. 1024 (SUPRA), IT HAS BEEN STATED THUS: ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CONS ISTS OF CARRYING ON OF A BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE T RUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT.. T HAT APART, MERE PRESENCE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJECT OF INCLUDING THESE TWO ITE MS IN THE FORMULA WAS PROFIT MAXIMISATION. THE INCLUSION FOR PROVISION FOR UNFORESEEN CHARGES, IN OUR UNDERSTANDING, IS A FAIR AND CONSERVATIVE APPROACH TO ENSURE THAT THE COSTS INCURRED BY THE ASSESSEE TRUS T ARE RECOVERED FROM THE END BUYERS OF THE RESIDENTIAL UNITS OR LAND. THE ELEMENT OF CHARITY IS NOT IN GIVIN G AWAY THE RESIDENTIAL UNITS AT SUBSIDIZED OR LOW PRICE S BUT IN PURSING THE OBJECT OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY IN PLANNED DEVELOPMENT OF THE ARE 10 IN ACCORDANCE WITH THE POLICIES OF THE STATE GOVERNMENT. THEREAFTER THE HONBLE BENCH CONCLUDED AT PARA 40 OF T HE ORDER THAT THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT, A S FOLLOWS : 40. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THE BENEFIT OF SECTION 11 RE AD WITH SECTION 2(15) TO THE ASSESSEE, AND IN HOLDING THAT T HE ASSESSEE TRUST WAS NOT COVERED BY ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF EXEMPTION OF RS 65,20,690. THE ASSESSE GETS THE RELIEF ACCORDINGLY. GRIEVANCES OF THE ASSESSEE ARE UPHELD. SINCE AS STATED ABOVE THE FACTS IN THE PRESENT CASE ARE IDENTCIAL TO THAT IN THE CASE OF HOSHIARPUR IMPROVEMEN T TRUST (SUPRA), RESPECTFULLY FOLLOWING THE SAME WE HOLD THA T THE ASSESSEE TRUST IS CARRYING OUT CHARITABLE ACTIVIT Y OF ADVANCEMENT OF PUBLIC UTILITY AND THE BUSINESS ACTIV ITY CARRIED OUT BY IT ARE INCIDENTAL TO THE ATTAINMENT OF ITS MAIN OBJECT AND THUS THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED IN THE ASSESSEES CASE. WE THEREFORE HOLD THAT THE ASS ESSEE IS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE INCOME TA X ACT, 1961, AND THE SURPLUS OF RS. 3,36,90,540/- EARNED BY THE ASSESSEE CANNOT BE SUBJECTED TO TAX AS INCOME OF TH E ASSESSEE. 9. RELYING ON THE ORDER OF THE AMRITSAR BENCH IN T HE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. ITO, ITA NO.496/ASR/2013, THE APPEAL WAS DECIDED IN FAVOUR O F THE ASSESSEE. SINCE NO DISTINGUISHING FACTS WERE B ROUGHT TO OUR NOTICE DURING THE COURSE OF HEARING, RESPECT FULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH, WE ALL OW THE APPEAL OF THE ASSESSEE. 10. SINCE THE ASSESSEE IS HELD TO BE ELIGIBLE TO GET EXEMPTION UNDER SECTION 11 OF THE ACT, ALL OTHER IS SUES RAISED IN APPEAL BECOME INFRUCTUOUS. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. 11 5. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF SAME ASSESSEE FOR PRECEDING ASSESSMENT YEARS 2009-10 AND 2010-11 DATED 15.02.2016 (SUPRA) IN WHICH THE TRIBUNAL, FOLLOWING THE DECISION IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST HAS ALLOWED THE APPEAL OF THE ASSESSEE AND DIRECTED THAT ASSESSEE WILL BE ELI GIBLE TO GET EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT. 6. FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(APPEALS) IN DECIDING THE IDENT ICAL ISSUE IN FAVOUR OF THE ASSESSEE. 7. THE DEPARTMENTAL APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (BHAVNESH SA INI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH JUNE,2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD