Deputy commissioner of Income -Tax(E), Circle - 1, Bengaluru V. Bangalore Development Authority, Bengaluru

ITA 1969/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5526 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-06-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 08-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ANNAMALAI
• Assessee Lawyers: SURESH BATTINI
• Keywords: Depreciation; Charitable institution; Revenue expenditure; Capital expenditure
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NO S . 1970 & 1971/BANG/2018 ASSESSMENT YEAR S : 2013 - 14 & 2014 - 15 BANGALORE DEVELOPMENT AUTHORITY, T CHOWDAIAH ROAD, KUMARA PARK WEST, BENGALURU-560 020. PAN AAALB 0060D. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX (E), CIRCLE-1, BANGALORE. APPELLANT RESPONDENT & ITA NOS. 19 69 & 19 68 /BANG/2018 ASSESSMENT YEAR S : 2013 - 14 & 2014 - 15 THE DEPUTY COMMISSIONER OF INCOME-TAX (E), CIRCLE-1, BANGALORE. VS. BANGALORE DEVELOPMENT AUTHORITY, BENGALURU-560 020. PAN AAALB 0060D. APPELLANT RESPONDENT APPELLANT BY : SHRI S ANNAMALAI, ADVOCATE RESPONDENT BY : SHRI.SURESH BATTINI, CIT(DR) DATE OF HEARING : 03 .0 6 .2019 DATE OF PRONOUNCEMENT : 04. 0 6 .201 9 ITA NOS.1968 TO1971/BANG/2018 PAGE 2 OF 14 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THE APPEALS BY THE ASSESSEE AND REVENUE ARE AGAIN ST TWO ORDERS BOTH DATED 31.3.2018 OF CIT(APPEALS), BANGALORE-9, RELATING TO ASSESSMENT YEARS 2013-14 & 2014-15. 2. IN THE APPEALS BY THE ASSESSEE, IF GROUND NO.5 I N BOTH THE APPEALS (WHICH ARE IDENTICAL) ARE ADJUDICATED AND IF IT IS HELD THAT THE ASSESSEE IS NOT HIT BY THE PROVISO TO SEC.2(15) OF THE INCOME T AX ACT, 1961 (ACT), THEN SUCH ADJUDICATION WILL RENDER THE ADJUDICATION OF O THER GROUNDS IN ASSESSEE AS WELL AS REVENUES APPEALS ACADEMIC. GROUND NO.5 READS AS FOLLOWS:- 5. GROUND ON APPLICABILITY OF PROVISO TO SECTION 2(15) AND RELATED GROUNDS. (A) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLD ING THAT THE PROVISO TO SECTION 2(15) OF THE ACT IS APPLICABLE T O THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE . (B) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT CONSIDERING THAT THE APPELLANT FALLS WITHIN SEVERAL LIMBS OF CH ARITY AS DEFINED IN SECTION 2(15) OF THE ACT AND HENCE OUGHT NOT TO HAVE APPLIED THE PROVISO TO THE FACTS OF THE APPELL ANTS CASE. (C) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) IS NOT JUSTIFIED IN LAW IN NOT DELETING THE TOTAL INCOME B EFORE THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER A SU M OF RS.52,26,47,000 BEING SURPLUS AS PER INCOME AND EXPENDITURE ACCOUNT AFTER PRIOR PERIOD ADJUSTMENTS, TREATING AS TAXABLE INCOME BY THE LEARNED ASSESSING OFFICER BY INVOKING THE PROVISO TO SECTION 2(15) OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.1968 TO1971/BANG/2018 PAGE 3 OF 14 (D) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) IS NOT JUSTIFIED IN LAW IN NOT HOLDING THAT THE LEARNED AS SESSING OFFICER OUGHT NOT TO HAVE CONSIDERED THE STARTING P OINT OF COMPUTATION OF TOTAL INCOME AT RS. 1,72,37,000/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE. (E) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN LAW IN DENYING THE EXEMPTION AS A CHAR ITABLE INSTITUTION FOR THE REASON THAT APPELLANT IS CARRYI NG ON BUSINESS. THE INFERENCE DRAWN FOR HOLDING THAT THE APPELLANTS ARE DOING BUSINESS ARE PURELY ARBITRARY AND PURELY ON SUSPICION AND SURMISE DEVOID OF FACTUAL FOUNDATI ON. (F) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT NOT TO HAVE DENIED EXEMPTIONS FOR CHARITABLE PURPOS E AS THE APPELLANT DO NOT FALL UNDER SECOND PROVISO TO SECTI ON 2(15) OF THE ACT. (G) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE TAKEN INTO ACCOUNT THE SPEECH OF THE FINANC E MINISTER WHICH INDICATE THE OBJECT AND DRIFT OF THE AMENDMENT IN AS MUCH AS THAT GENUINE CHARITABLE TRU STS ARE NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT. (H) WITHOUT PREJUDICE THE AUTHORITIES BELOW OUGHT T O HAVE GRANTED EXEMPTION IN RESPECT OF THE OTHER LIMBS OF CHARITY BY APPLYING THE PRINCIPLES OF APPORTIONMENT AND OUGHT TO HAVE GRANTED PROPORTIONATE RELIEF IN RESPECT OF THE OTHE R LIMBS OF CHARITY BEING RELIEF TO THE POOR ETC. ON THE FACTS AND CIRCUMSTANCE OF THE CASE. (I) WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO APPRECIATE THAT THE APPELLAN T FALL UNDER FIRST TO FIFTH LIMB OF THE DEFINITION OF CHAR ITABLE PURPOSE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. AS FAR AS GROUND 5 RAISED BY THE ASSESSEE IS CONCERNED, THE ISSUE FOR CONSIDERATION IS AS TO WHETHER THE REVENUE AUTH ORITIES WERE JUSTIFIED IN ITA NOS.1968 TO1971/BANG/2018 PAGE 4 OF 14 COMING TO THE CONCLUSION THAT THE ASSESSEE DOES NOT EXIST FOR CHARITABLE PURPOSE AS IT WAS CARRYING ON ACTIVITIES WHICH WERE IN THE NATURE OF TRADE OR BUSINESS. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE AFORESAID ISSUE ARISES FOR CONSIDERATION ARE THAT THE ASSESSEE IS A STATUTORY BODY BY NAME BANGALORE DEVELOPMENT AUTHORITY, CONSTITUTED UNDER THE BANGALORE DEVELOPMENT AUTHORITY ACT, 1976 (BDA ACT). THE ASS ESSEE CLAIMED THE BENEFITS OF EXEMPTION UNDER SEC.11 OF THE ACT ON TH E GROUND THAT IT WAS EXISTING FOR CHARITABLE PURPOSE AS DEFINED IN SEC.2 (15) OF THE ACT. SECTION 2(15) OF THE ACT HAS BEEN AMENDED BY FINANCE ACT, 2 010 W.E.F. 01.04.2009 (I.E., W.E.F. ASSESSMENT YEAR 2009-10). IT IS NOT IN DISPUTE THAT THE OBJECTS OF THE ASSESSEE WOULD FALL WITHIN THE AMBIT OF ADV ANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY WHICH IS ONE OF THE PURPOSE S MENTIONED IN THE DEFINITION OF CHARITABLE PURPOSE U/S.2(15) OF THE A CT. AS STATED EARLIER, THE DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN SEC. 2(15) OF THE ACT WAS AMENDED BY THE FINANCE ACT, 2010, W.E.F. 1.4.2009. BY THE AFORESAID AMENDMENT, A PROVISO HAS BEEN INSERTED TO THE DEFIN ITION OF CHARITABLE PURPOSE IN SEC.2(15) OF THE ACT, WHICH READS AS FO LLOWS:- 2(15)CHARITABLE PURPOSE INCLUDES RELIEF OF THE P OOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLU DING 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: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F 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 A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY] ITA NOS.1968 TO1971/BANG/2018 PAGE 5 OF 14 4. THUS THE PROVISO TO SECTION 2(15) (SUPRA) LAYS D OWN THAT IF ANY CHARITABLE ORGANIZATION RECOGNIZED UNDER SECTION 12 A OF THE ACT (I)WERE TO CARRY OUT ANY ACTIVITY IN THE NATURE OF TRADE, COMM ERCE OR BUSINESS OR (II)WERE TO CARRY ON ANY ACTIVITY OF RENDERING SERV ICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. FOR A CESS OR FEE OR ANY OTH ER CONSIDERATION, THEN IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY, SUCH ACTIVITY SHALL NOT CONSTIT UTE ACTIVITY / ACTIVITIES OF CHARITABLE PURPOSE OR NATURE, DESPITE THE FACT THAT THE SAME ARE CARRIED OUT OR PERFORMED FOR THE ADVANCEMENT OF ANY OBJECT OF G ENERAL PUBLIC UTILITY. 5. THE AO WAS OF THE VIEW THAT THE ASSESSEES ACTIV ITIES ARE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT, INTRODUCED W.E .F. 01.04.2009 BY FINANCE ACT, 2010, CONSEQUENTLY HE DENIED THE ASSESSEE THE EXEMPTION CLAIMED UNDER SECTION 11 OF THE ACT AND BROUGHT TO TAX THE ASSESSEES INCOME FROM ASSESSMENT YEAR 2009-10 ONWARDS. THE AO, HAS LAID EMPHASIS ON THE FACT THAT THE OBJECTS OF THE ASSESSEE AS PER BDA AC T, WAS TO DEVELOP THE CITY OF BANGALORE AND AREAS ADJACENT THERETO. THE AO AFTER REFERRING TO THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE DERIVES INCOME FROM SELLING SEVERAL CA TEGORIES OF PROPERTIES TO THE PUBLIC. IN PARAGRAPH 5.12 & 5.13 OF THE ORD ER OF ASSESSMENT, HE HAS BROUGHT OUT THE VARIOUS CATEGORIES OF RECEIPTS OF T HE ASSESSEE AND HAS COME TO THE CONCLUSION IN PARAGRAPH 5.14 OF HIS ORD ER THAT THE ASSESSEE WAS CARRYING ON SYSTEMATIC AND REGULAR ACTIVITY OF ACQUISITION/PURCHASE OF LAND AND DEVELOPMENT OF THE SAME AS LAYOUT/SITES AN D CONSTRUCTION OF HOUSES AND SALE OF THE SAME TO THE GENERAL PUBLIC A ND PROVIDED MAINTENANCE/INFRASTRUCTURE FACILITIES IN LAYOUTS/HO USING SCHEMES. HE HAS OBSERVED THAT THE FOCUS OF THE ASSESSEE HAS BEEN MO RE ON SELLING SITES BY AUCTION TO THE HIGHEST BIDDER AND WAS NOT FOR PROVI DING AFFORDABLE HOUSING TO THE PUBLIC (VIDE PARAGRAPH 5.15 OF HIS ORDER). THIS IS THE MAIN REASON FOR ITA NOS.1968 TO1971/BANG/2018 PAGE 6 OF 14 THE AOS CONCLUSION THAT THE ASSESSEE WAS CARRYING ON BUSINESS AND THEREFORE WAS NOT EXISTING FOR CHARITABLE OBJECT AS LAID DOWN IN THE PROVISO TO SEC.2(15) OF THE ACT. THE AO HAS DRAWN THE FOLL OWING INFERENCES TO COME TO CONCLUSION AS ABOVE:- (I) THE ASSESSEE IS MAINLY ENGAGED IN DEVELOPMENT OF SI TES AND HOUSES AND SALE OF THE SAME TO GENERAL PUBLIC A T LARGE BY WAY OF COLLECTING CONSIDERATION AND IN RESPECT O F CORNER SITES AND FLATS, SALE TRANSACTIONS ARE DONE THROUGH AUCTION SALE WHEREIN HIGHEST BIDDER WILL ONLY GET THE ELIGI BILITY TO OWN THE SITES OR FLATS. (II) THE ASSESSEE IS GENERATING HUGE AMOUNT OF PROFITS Y EAR AFTER YEAR FROM SALE OF SITES AND FLATS INDICATING THAT THE ASSESSEE IS CARRYING OUT THE ACTIVITIES AS A BUSINE SS VENTURE RATHER THAN CHARITABLE ORGANIZATION. (III) THE ASSESSEE IS NOT APPLYING THE HUGE AMOUNT OF PRO FITS GENERATED FROM THE ACTIVITIES TOWARDS ANY CHARITABL E ACTIVITIES SUCH AS RELIEF OF POOR, EDUCATION, MEDIC AL RELIEF AND OTHER OBJECTS OF ADVANCEMENT OF THE GENERAL PUB LIC UTILITY AND SUCH SURPLUS IS BEING INVESTED IN FIXED DEPOSITS IN ORDER TO EARN INTEREST INCOME. (IV) THE ACTIVITIES OF THE ASSESSEE AND THE GENERATION O F PROFITS ON ACCOUNT OF THE SAME ARE AKIN TO THE ACTIVITIES C ARRIED ON BY REAL ESTATE COMPANIES, PROPERTY DEVELOPERS, INFRASTRUCTURE FIRMS ETC., AND THEREFORE, THE ACTIV ITIES OF THE ASSESSEE ARE SQUARELY FALL UNDER THE AMBIT OF ACTIV ITIES WHICH ARE IN THE NATURE OF TRADE, COMMERCE OR BUSIN ESS. ACCORDINGLY, THE ACTIVITIES OF THE ASSESSEE ARE HIT BY THE FIRST PROVISO BELOW SECTION 2(15). 6. THEREAFTER THE AO COMPUTED TOTAL INCOME OF THE A SSESSEE FOR THE TWO ASSESSMENT YEARS AS FOLLOWS: ITA NOS.1968 TO1971/BANG/2018 PAGE 7 OF 14 AY 2013-14 (AMOUNT IN RS.) COMPUTATION OF TOTAL INCOME SURPLUS AS PER I & E A/C AFTER PRIOR PERIOD ADJUSTMENTS 52,26,47,000 TOTAL INCOME BEFORE ADDITIONS 52,26,47,000 ADDITIONS: 1. INTEREST PAID TO KUIDFC TOWARDS TWO LEVEL GRADE SEPARATORS 1,27,26,991 2. INTEREST PAID TO KUIDFC TOWARDS 'GRADE SEPARATOR AT ANANDA RAO CIRCLE' 9,10,000 _ 3. INTEREST PAID TO KUIDFC TOWARDS '9 GRADE SEPARATOR, HENUR JUNCTION' 6,23,38,000 4. CURRENT YEAR CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENDITURE DUE TO CHANGE IN ACCOUNTING POLICY 213,92,70,000 5. DONATION DISALLOWED 58,00,000 8. PRIOR PERIOD EXPENSES DISALLOWED 7,58,01,000 0. CONVERSION OF LOAN INTO GRANT 1,06,00,000 0. LAND TRANSFER TO KPTCL 2,74,31,250 1. 'RECEIVABLE FROM BBMP 2,29,43,000 1. DEVPT. EXPENDITURE ON ARKAVATHY LAYOUT 2,69,09,000 2. HEALTH CESS PAYABLE 77,55,000 TOTAL 291,51,31,241 10. LESS: DEPRECIATION ON CURRENT YEAR CAPITAL EXPENDITURE DISALLOWED @ 10% (I.E.10 % OF 2139270000 = 213927000) 21,39,27,000 TOTAL TAXABLE INCOME 2701204240 (RUPEES TWO HUNDRED AND SEVENTY CRORES TWELVE LAKHS FOUR THOUSAND TWO HUNDRED AND FORTY ONLY) ITA NOS.1968 TO1971/BANG/2018 PAGE 8 OF 14 AY 2014-15: (AMOUNT IN RS.) COMPUTATION - OF TOTAL INCOME SURPLUS AS PER INCOME & EXPENDITURE A/C 1,72,37,000 TOTAL INCOME BEFORE ADDITIONS 1,72,37,000 ADDITIONS: 1. INTEREST PAID TO KUIDFC TOWARDS GRADE SEPARATORS AT ANANDA RAO CIRCLE AS PER PARA 6.1 2,23,000 2. INTEREST PAID TO KUIDFC TOWARDS 9 GRADE SEPARATOR AT HENNUR JUNCTION AS PER PARA 6.2 6,47,47,000 3. INTEREST PAID TO KUIDFC TOWARDS TWO LEVEL GRADE SEPARATORS AS PER PARA 6.3 1,32,05,000 4. INTEREST PAID TO KUIDFC TOWARDS NAGAVARA JUNCTION AS PER PARA 6.4 17,37,000 5. DONATION DISALLOWED AS PER PARA 6.5 3,89,00,000 6. PRIOR PERIOD EXPENSES DISALLOWED AS PER PARA 6.6 22,67,85,000 7. CURRENT YEAR CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENDITURE DUE-TO CHANGE IN ACCOUNTING 100,28,80,000 8. INTEREST ON FD WITH LOB OF RS.98,89,42,664 ADOPTED @ 8% P.A. AS PER PARA 8.00 7,91,15,000 9. CONVERSION OF LOAN INTO GRANT AS PER PARA 7.00 1,06,00,000 1 10 SUNDRY DEBTORS RECTIFICATION ENTRY PASSED IN F./ Y 2014-15 AS PER PARA 9 ABOVE 38,50,000 11. DEVPT. EXPENDITURE ON ARKAVATHY LAYOUT AS PER PARA 10 ABOVE 12,39,69,000 156,60,11,000 TOTAL 158,32,48,000 0. LESS: DEPRECIATION ON CURRENT YEAR CAPITAL EXPENDITURE DISALLOWED @ 10% (I.E.10 % OF RS. 100,28,80,000 = RS. 10,02,88,000) 10,02,88,000 TOTAL TAXABLE INCOME 148,29,60,000 (RUPEES ONE HUNDRED FORTY EIGHT CRORES TWENTY NINE LAKHS SIXTY THOUSAND ONLY) ITA NOS.1968 TO1971/BANG/2018 PAGE 9 OF 14 7. ON APPEAL BY THE ASSESSEE, THE CIT(A) UPHELD THE STAND TAKEN BY THE AO. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS RAISED GROUND NO.5 BEFORE THE TRIBUNAL. 9. AT THE TIME OF HEARING OF THE APPEAL, IT WAS AGR EED BY BOTH THE PARTIES THAT IDENTICAL ISSUE HAD COME UP FOR CONSID ERATION IN ASSESSEES OWN CASE FOR ASST. YEAR 2012-13 IN ITA NO.1104/BANG /2017 AND THIS TRIBUNAL VIDE ITS ORDER DATED 22/3/2019 HELD THAT T HE ASSESSEE IS ENTITLED TO THE BENEFIT OF SEC. 11 OF THE ACT AND THAT ITS ACTI VITIES CANNOT BE SAID TO FALL WITHIN THE AMBIT OF PROVISO TO SEC. 2(15) OF THE AC T. THE CONCLUSIONS OF THE TRIBUNAL CAN BE SUMMED UP AS FOLLOWS:- 1. IN PARAGRAPH 5.8.1, THE TRIBUNAL EXTRACTED THE OBJE CTS OF THE ASSESSEE AS PER SECTION 14 OF THE BDA ACT, 1976 , WHICH IS AS UNDER: 14. OBJECTS OF AUTHORITY:THE OBJECTS OF THE AUTHORITY SHALL BE TO PROMOTE AND SECURE THE DEVELO PMENT OF THE BANGALORE METROPOLITAN AREA AND FOR THAT PURP OSE THE AUTHORITY SHALL HAVE THE POWER TO ACQUIRE, HOLD , MANAGE AND DISPOSE OF MOVABLE AND IMMOVABLE PROPERT Y, WHETHER WITHIN OR OUTSIDE THE AREA UNDER ITS JURISD ICTION, TO CARRY OUT BUILDING, ENGINEERING AND OTHER OPERAT IONS AND GENERALLY TO DO ALL THINGS NECESSARY OF EXPEDIE NT FOR THE PURPOSE OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO. IN PARAGRAPH 5.8.2 THE TRIBUNAL CAME TO THE CONCLUS ION THAT THERE WERE FIVE LIMBS TO THE DEFINITION OF CHARITABLE PU RPOSE IN SEC.2(15) OF THE ACT, VIZ., (I) RELIEF OF THE POOR, (II) EDUCATION, (III) MEDICAL RELIEF, (IV) PRESERVATION OF ENVIRONMENT (I NCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND (V) PRESERVAT ION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST). THOUGH THE FIVE LIMBS ARE NOT SPECIFICALLY PROVIDED FOR IN SECTION 14 OF THE BDA ACT, THE OBJECTS ENUNCIATED INVOLVED PRESERVATION ITA NOS.1968 TO1971/BANG/2018 PAGE 10 OF 14 OF ENVIRONMENT, PRESERVATION OF WATER BODIES, PRESE RVATION OF FOREST AREAS, ETC., APPEARS TO HAVE MERIT; FOR IT I S A FACT THAT PLANNED URBAN DEVELOPMENT CANNOT TAKE PLACE OR BE DONE WITH OUT DUE CONSIDERATION BEING GIVEN TO THE PRESERVATION OF TH E ENVIRONMENT, WATER BODIES LIKE LAKES, STREAMS, ETC., AND FOREST AREAS. IN COMING TO THE ABOVE CONCLUSION, THE TRIBUNAL FOUND THAT FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE IT WAS EVIDENT THAT IT H AS EXPENDED AN AMOUNT OF RS.2095.24 LAKHS ON PLANTING OF ONE CRORE SEEDLINGS IN THE GREEN BELT AREA FOR IMPROVEMENT OF THE ENVIRONM ENT. THE ASSESSEE HAS EXPENDED A SUM OF RS.2997.42 LAKHS TOW ARDS DEVELOPMENT OF LAKES. THE TRIBUNAL THEREFORE HELD T HAT THE ASSESSEE CARRIED OUT THE ACTIVITY OF PRESERVATION O F ENVIRONMENT AND WATER BODIES AND THAT THE CONCLUSION OF THE REV ENUE AUTHORITIES THAT THESE ACTIVITIES WERE DONE ONLY TO ENHANCE THE COMMERCIAL VALUE OF THE LAYOUT DEVELOPED IS UNTENABLE. 2. THE TRIBUNAL HELD THAT ALLOTMENT OF SITES AND F LATS TO THE ECONOMICALLY WEAKER SECTIONS OF SOCIETY CONSTITUTES RELIEF FOR THE POOR AND THAT RELIEF TO THE POOR DOES NOT NECESSARI LY MEAN GIVING SOMETHING FREE OF COST TO THE POOR. IT ALSO INCLUD ES PROVIDING THEM THINGS AT A CONCESSIONAL RATE. THE TRIBUNAL ALSO E MBARKED UPON AN ENQUIRY AS TO WHETHER THE WORD POOR CAN MEAN ONLY THOSE WHO ARE BELOW THE OFFICIAL POVERTY LINE OR DOES IT INCL UDE ALL THOSE WHO ARE ECONOMICALLY WEAKER, BUT NOT NECESSARILY BELOW THE POVERTY LINE. THE TRIBUNAL CONCLUDED THAT IT IS NOT NECESSA RY THAT EDUCATIONAL / MEDICAL ASSISTANCE IS TO BE GIVEN FRE E ONLY TO THOSE BELOW THE POVERTY LINE. IT WILL SUFFICE IF EDUCATI ON / MEDICAL ASSISTANCE IS PROVIDED AT CONCESSIONAL RATES. THE TRIBUNAL ALSO HELD THAT THE RULES THAT GOVERN THE ALLOTMENT OF SI TES ARE SO FORMED IN ORDER TO FACILITATE THE ECONOMICALLY WEAKER SECT IONS OF SOCIETY TO PURCHASE THESE SITES. IN THE CASE OF CONSTRUCTION OF FLATS, IT WAS CLEAR FROM THE VERY SCHEME AND THE NAME THEREOF, TH AT THESE FLATS ARE MEANT ONLY FOR THE ECONOMICALLY WEAKER SECTIONS OF SOCIETY. 3. THE TRIBUNAL HELD THAT THE COMPLAINT OF THE REV ENUE AUTHORITIES THAT THE ASSESSEE WAS NOT APPLYING HUGE AMOUNT OF P ROFIT GENERATED FROM THE ACTIVITIES TOWARDS ANY CHARITABLE ACTIVITI ES SUCH AS RELIEF OF POOR, EDUCATION, MEDICAL RELIEF AND OTHER OBJECT S OF ADVANCEMENT OF GENERAL PUBLIC UTILITY AND SUCH SURP LUS IS BEING INVESTED IN FIXED DEPOSITS IN ORDER TO EARN INTERES T INCOME WAS ALSO ITA NOS.1968 TO1971/BANG/2018 PAGE 11 OF 14 NOT CORRECT IN AS MUCH AS THE ASSESSEE WAS CONSTRUC TING GRADE SEPARATORS, PRR BRIDGES ON FLYOVERS, CARRYING OUT R ENOVATION AND REMODELING WORKS, MAINTENANCE OF BBMP FACILITIES, D EVELOPMENT OF LAKES, ETC. THE TRIBUNAL ALSO HELD THAT OBJECT OF THE ASSESSEE WAS PLANNED URBAN DEVELOPMENT OF BANGALORE CITY AND NOT WITH THE PURPOSE OF PROFIT MAKING; I.E., THE ACTIVITY OF FORMATION OF LAYOUTS AND ALLOTMENT OF SITES IS ONLY CARRIED OUT WITH THE PRIMARY AND MAIN OBJECT TO ENSURE PLANNED DEVELOPMENT OF BA NGALORE CITY AND NOT WITH THE INTENTION TO MAKE PROFITS. IN COM ING TO THE ABOVE CONCLUSION, THE TRIBUNAL HAS REFERRED TO THE DECISI ON OF THE HONBLE APEX COURT IN THE CASE OF BARENDRA RAY AND OTHERS V S. ITO (1981) 129 ITR 295 WHEREIN IT WAS HELD ONE HAS TO S EE WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO MAKE PROFI T OR WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT CHARITABLE PURPOSES AND NOT PROFIT MAKING. THE TRIBUNAL ALSO R EFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S URAT ART SILK ORGANISATION VS. CIT (121 ITR 1), WHEREIN IT WAS HE LD THAT A CHARITABLE ORGANIZATION CANNOT BE EXPECTED TO BALAN CE ITS ACCOUNTS IN SUCH A MANNER THAT THE INCOME FOR THE YEAR MATCH ES EXACTLY WITH ITS EXPENDITURE. IT IS INEVITABLE THAT IN CARRYING ON THE ACTIVITIES, CERTAIN SURPLUS MAY ENSUE. THE EARNING OF SUCH SUR PLUS, IN ITSELF, WOULD NOT MEAN THAT THE ORGANIZATION EXISTED FOR PR OFIT. THE HONBLE APEX COURT WENT ON TO OBSERVE THAT EVERY AS SOCIATION REQUIRES FUNDS FOR EXPANDING THE RANGE OF ITS ACTIV ITIES (FOR EXAMPLE; AN EDUCATIONAL INSTITUTION MAY REQUIRE ADD ITIONAL INFRASTRUCTURE UNDER WHICH MORE CLASS ROOMS CAN BE SET UP / CREATED). IF PROFITS ARE GENERATED TO SUPPORT AND EXPAND THESE ACTIVITIES, THEN IT CANNOT, IN THE VIEW OF THE HON BLE APEX COURT, BE HELD THAT THERE IS A PROFIT MOTIVE INVOLVED TO DENY THE EXEMPTION. FROM THE ABOVE RATIO OF THE DECISION OF THE HONBLE APEX COURT, IT IS CLEAR THAT IT IS THE BASIC MOTIVE BEHIND THE ACT IVITY, WHICH IS IMPORTANT TO BE CONSIDERED; WHETHER IT IS ONE WITH PROFIT MOTIVE OR NOT. MERELY BECAUSE SURPLUS IS GENERATED FROM A PA RTICULAR ACTIVITY, IT CANNOT BE SAID THAT SUCH ACTIVITY IS IN THE NATU RE OF TRADE, COMMERCE OR BUSINESS. WHAT NEEDS TO BE SEEN IS, WH AT THE INTENT AND PURPOSE OF STARTING SUCH ACTIVITY IS. THE TRIB UNAL FOUND THAT BDAS EMBARKATION OF THE ACTIVITY OF SETTING UP OF RESIDENTIAL LAYOUTS, INCLUDING THE ACTIVITY OF SALE OF SITES AN D FLATS, IS DEFINITELY NOT WITH A VIEW TO EARN PROFIT, BUT TO ENSURE PLANN ED URBAN DEVELOPMENT AND ALSO TO ACCOMPLISH A SOCIAL OBJECTI VE OF PROVIDING ITA NOS.1968 TO1971/BANG/2018 PAGE 12 OF 14 AN OPPORTUNITY TO ECONOMICALLY WEAKER SECTIONS OF S OCIETY TO BE ABLE TO OWN A RESIDENCE ON THEIR OWN. THE TRIBUNAL ALSO HELD THAT THE PROCESS OF AUCTIONING OF CORNER SITES BY THE BD A WAS ONLY TO ENSURE THAT OFFICIALS DO NOT USE THEIR DISCRETION T O ALLOT CORNER SITES AND WAS THEREFORE AN ACTIVITY WHICH WILL ENSURE NO LOSS TO THE PUBLIC EXCHEQUER. 4. THE TRIBUNAL TOOK NOTE OF THE FACT THAT THE CON CERNED INCOME TAX AUTHORITIES HAVE RECOGNIZED THE ASSESSEE AS A P UBLIC CHARITABLE ORGANIZATION BY GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT SINCE 26.03.2003 AND THAT THE ASSESSEES OBJECTS CL AUSE, I.E., SECTION 14 OF THE BDA ACT HAS NOT UNDERGONE ANY CHANGE OR M ODIFICATION SINCE ITS ENACTMENT; WHICH IS WHAT MUST HAVE PROMPT ED THE INCOME TAX DEPARTMENT TO TAKE THE VIEW THAT IT WAS CHARITA BLE IN NATURE. THE TRIBUNAL TOOK NOTE OF THE FACT THAT AFTER THE I NTRODUCTION OF THE PROVISO TO SECTION 2(15) OF THE ACT THE INCOME TAX DEPARTMENT TOOK A VIEW THAT THE ACTIVITY OF BDA WAS IN THE N ATURE OF TRADE, COMMERCE OR BUSINESS AND CANCELLED THE REGISTRATION , GRANTED UNDER SECTION 12A OF THE ACT, VIDE ORDER DATED 08.11.2011 . THE ASSESSEES REGISTRATION UNDER SECTION 12A OF THE AC T HOWEVER STOOD RESTORED BY A DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER IN ITA NO.12/BANG/2012 DATED 10.04.2015. IN THIS PREVAILING FACTUAL MATRIX, THERE IS NO CHANGE IN TH E OBJECTS AND THE ONLY ISSUE WHICH APPARENTLY PROMPTS REVENUE TO TAKE THE VIEW IT HAS TAKEN, I.E., THAT THE ACTIVITY OF THE ASSESSEE IS HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT; IS THE FACT THAT THE A CTIVITY OF THE ASSESSEE HAS RESULTED IN HUGE SURPLUS OR PROFITS. IN OUR VIEW, THE FACT OF SURPLUS OR SHORTFALL IS NOT TO BE RECKONED AS THE TEST FOR APPLICABILITY OF THE PROVISO TO SECTION 2(15) OF TH E ACT; BUT RATHER, WHETHER THE ACTIVITY IS EMBARKED UPON SOLELY WITH T HE VIEW TO EARN PROFIT OR NOT; WHICH THE AO AND CIT(A) HAVE NOT DON E. 5. THE TRIBUNAL TOOK NOTE OF THE FACT THAT IN THE CASE OF SIMILAR URBAN DEVELOPMENT AUTHORITIES IN INDIA, SUCH AS THE ASSESSEE, THE REVENUE TOOK A SIMILAR STAND THAT THOSE URBAN DEVEL OPMENT AUTHORITIES CANNOT BE REGARDED AS EXISTING FOR CHA RITABLE PURPOSE AFTER INTRODUCTION OF THE PROVISO TO SEC.2(15) OF T HE ACT AND SUCH APPROACH HAS BEEN HELD TO BE INCORRECT BY THE VARIO US JUDICIAL FORUMS IN THE FOLLOWING CASES: ITA NOS.1968 TO1971/BANG/2018 PAGE 13 OF 14 (I) AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ACIT (EXEMPTIONS) (2017) 396 ITR 323 (GUJ.); (II) JAIPUR DEVELOPMENT AUTHORITY VS. CIT (2014) 52 TAXMANN.COM 25 (JAIPUR TRIB.) (III) HARIDWAR DEVELOPMENT AUTHORITY VS. CIT (2015) 57 TAXMANN.COM 6 (DELHI TRIB.) (IV) CIT VS. LUCKNOW DEVELOPMENT AUTHORITY (2013) 3 8 TAXMANN.COM 246 (ALLAHABAD) (V) CIT VS. JODHPUR DEVELOPMENT AUTHORITY (2017) 79 TAXMANN 361 (RAJ.). 6. THE TRIBUNAL ALSO HELD THAT THE AOS RELIANCE O N THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONCLUSION THAT THE ASS ESSEE DOES NOT EXIST FOR CHARITABLE PURPOSE WAS NOT CORRECT BECA USE THE ISSUE INVOLVED IN THOSE CASES WERE WITH REGARD TO CANCELL ATION OF REGISTRATION U/S.12A OF THE ACT. THE CASES REFERRED TO BY THE AO IN THIS REGARD WERE AS FOLLOWS: (I) JAMMU DEVELOPMENT AUTHORITY VS. UOI IN ITA NO.164/2012, CMA/2/2012 (J & K HIGH COURT); (II) PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORIT Y (103 TTJ 98) (ITAT CHANDIGARH); (III) INDORE DEVELOPMENT AUTHORITY ITA NO.366/IND /2008 (ITAT INDORE). (IV) IMPROVEMENT TRUST VS. CIT, BHATIRDA (41 TAXMAN N.COM 403) (ITAT AMRITSAR). 10. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUN AL, WE ARE OF THE VIEW THAT THE ASSESSEES ACTIVITIES HAVE TO BE REGARDED AS CHARITABLE IN NATURE. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE TRIBUNA L DECIDED THE AFORESAID ISSUE AND THE BASIS OF THE CONCLUSIONS IN AY 12-13 AND THE AY 13-14 & 14-15, WHICH ARE THE AYS IN THE PRESENT APP EALS, ARE IDENTICAL. THE CONCLUSIONS OF THE TRIBUNAL IN AY 12-13 WOULD T HEREFORE BE EQUALLY APPLICABLE TO AY 13-14 & 14-15 ALSO. THE ASSESSEE WOULD BE ENTITLED TO THE BENEFITS OF SEC. 11 OF THE ACT FOR AY 13-14 & 1 4-15. WE HOLD ITA NOS.1968 TO1971/BANG/2018 PAGE 14 OF 14 ACCORDINGLY AND ALLOW GROUND NO.5 IN BOTH THE ASSES SMENT YEARS. IN VIEW OF THE FINDINGS RENDERED AS ABOVE, THE OTHER GROUND S/ISSUES RAISED BY THE ASSESSEE IN THESE APPEALS AND THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL BECOME ACADEMIC IN NATURE AS THESE CONCLUSIO NS FLOW ONLY ON THE BASIS THAT THE ASSESSEE DOES NOT EXIST FOR CHARITA BLE PURPOSE, WHICH CONCLUSION HAS BEEN HELD BY US TO BE INCORRECT. TH E AO WILL THEREFORE COMPUTE TOTAL INCOME ON THE BASIS THAT THE ASSESSEE IS ENTITLED TO THE BENEFITS OF SEC.11 OF THE ACT AND IF DONE SO THERE WOULD BE NO INCOME WHICH CAN BE BROUGHT TO TAX. 11. IN THE RESULT, THE APPEALS BY THE ASSESSEE ARE ALLOWED WHILE THE APPEALS BY THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JUNE, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V. VASUDEVAN ) ACCOUN TANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 4 TH JUNE, 2019. / D ESAI S MURTHY / COPY TO: 1 . APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUA RD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.