The Improvement Trust, Bathinda V. The Asstt. Commissioner of Income-tax, Bathinda

ITA 242/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0588 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: Y K SUD
• Keywords: Business income; Charitable institution
• Section: 12AA; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JA LANDHAR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 242 & 243( ASR)/2014 ASSESSMENT YEAR: 2008-09 & 2010-11 IMPROVEMENT TRUST DR. MELA RAM ROAD, BATHINDA. PAN:AAATE1563E VS. ASST. CIT CIRCLE-I, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. Y.K.SUD (CA) RESPONDENT BY: SH. BHAWANI SHANKAR (DR) DATE OF HEARING: 24.06. 2016 DATE OF PRONOUNCEMENT: 30.06.2016 ORDER PER T. S. KAPOOR (AM): THESE TWO APPEALS FILED BY ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A), BATHINDA, BOTH DATED 21.0 2.2014 FOR ASST. YEARS 2008-09 & 2010-11. 2. FIRST OF ALL, WE TAKE UP APPEAL IN ITA NO.243(AS R)/2014 FOR THE A.Y. 2010-11. 3. THE GRIEVANCE OF THE ASESSEE IN THIS APPEAL IS RELATING TO THE ACTION OF LEARNED CIT(A), BY WHICH HE HAD NOT ALLOWED THE EXEMPTION U/S 11 OF THE I.T. ACT AND ALSO ASSESSED THE ASSESSEE AS AO P. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 2 4. THE LEARNED AR, AT THE OUTSET, SUBMITTED THAT TH E CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF TH E AMRITSAR BENCH OF THE TRIBUNAL IN THE ASSESSEES CASE PASSED IN ITA N O.416(ASR)/2013 FOR ASST YEAR: 2008-09, VIDE ORDER DATED 02.06.2016 IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 5. ON THE OTHER HAND, THE LD. DR HEAVILY PLACED HIS RELIANCE ON THE IMPUGNED ORDER. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE IN DISPUT E STANDS ALREADY ADJUDICATED IN FAVOUR OF THE ASSESSEE, VIDE OUR ORDER DATED 02 .06.2016, PASSED IN ITA NO.416(ASR)/2013, FOR THE ASSESSMENT YEAR 2008-09, IN THE CASE OF ASSESSEE AND THE RELEVANT FINDINGS GIVEN THEREIN ARE REPRODU CED HEREUNDER FOR THE SAKE OF CONVENIENCE: 6. ON CONSIDERING THE RIVAL CONTENTIONS IN THE LIG HT OF THE MATERIAL PLACED ON RECORD, WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF THE ITAT, AMRITSAR BENCH, IN THE CASE O F HOSHIARPUR IMPROVEMENT TRUST VS. INCOME TAX OFFICER, WARD-1, H OSHIARPUR, IN ITA NO.496(ASR)2013, FOR THE ASSESSMENT YEAR 2009-10, D ATED 10.09.2015, WHEREIN IT HAS BEEN HELD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THE BENEFIT OF SECTION 11 READ WITH SECTI ON 2(15) TO THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT CO VERED BY ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. THE RELEVA NT FINDINGS GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER ARE AS FOLLOWS: 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 14. BEFORE WE ADDRESS OURSELVES TO THE FACTS OF TH IS CASE, LET US ANALYSE THE RELEVANT LEGAL PROVISIONS. SECTION 2 (1 5), WHICH DEFINES CHARITABLE PURPOSES THOUGH IN AN INCLUSIVE RATHER THAN AN EXHAUSTIVE MANNER, HAD A RATHER QUIET EXISTENCE, UN AFFECTED BY THE FREQUENT AMENDMENTS TO THE INCOME TAX ACT 1961, TIL L 1 ST APRIL 1984. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 3 VIDE FINANCE ACT, 2013, AND WITH EFFECT FROM 1 ST APRIL 1984, THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY FOR PROF IT WERE DELETED FROM SECTION 2(15), AND, WITH THIS AME NDMENT, THIS DEFINITION WAS AS FOLLOWS: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY: 15. VIDE FINANCE ACT, 2008, THE WORDS PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST), WERE ADDED AND , ON A MORE RELEVANT NOTE, A NEW PROVISO (I.E. FIST PROVISO) WAS ADDED TO THIS P ROVISION, CARVING OUT AN EXCEPTION IN THE CASES OF ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL UTILITY, AND, BY THE IMMEDIATELY FOLLOWING FINANCE ACT 2009, THERE WAS YET ANOTHER PROVISO (I.E. SECOND PROVISO) INTRODUCED TO CARVE OUT AN EXCEPTION FROM THE EXCEPTION ITSELF. IN ESSENCE, THE EFFECT OF THESE PROVISOS WAS THAT EVEN WHEN AN ASSE SSEE WAS PURSUING A CHARITABLE PURPOSE IN THE EVENT OF ADV ANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY IT WOULD CEASE TO B E FOR CHARITABLE PURPOSES IF IT INVOLVES (A) CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; OR (B) RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR F EE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF NATURE OF USE OR APP LICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. HOWEVE R, THESE PROVISIONS ARE NOT TO APPLY WHEN THE ACTIVITIES ARE SUCH A MODEST SCALE THAT THE VALUE OF RECEIPTS IN RESPECT OF THE SAME ARE LESS THAN RS 25 LAKHS. THESE TWO PROVISOS, AS THEY STAND NOW , ARE AS FOLLOWS: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY; PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR. 16. EXPLAINING THE SCOPE OF THESE PROVISIONS, A COO RDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTION CONTROL BOARD VS CIT [(201 0) 9 ITR TRIB 204 (CHANDIGARH)], HAS OBSERVED AS FOLLOWS: ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 4 13. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT THE I NSERTION OF PROVISO TO S. 2(15) DOES NOT MEAN THAT IN CASE AN A SSESSEE IS TO RECEIVE ANY PAYMENT FOR ANYTHING DONE FOR TRADE, COMMERCE OR BUSINESS, THE ASSESSEE WILL BE HIT BY THE SAID P ROVISO. IT MAY BE RECALLED THAT ELABORATING THE SCOPE OF THIS AMENDMENT, CBDT, VIDE CIRCULAR NO. 11, DT. 19TH DEC., 2008 [(2 009) 221 CTR (ST) 1], HAS OBSERVED AS FOLLOWS : '3. THE NEWLY AMENDED S. 2(15) WILL APPLY ONLY TO T HE ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E., THE FOURTH LIMB OF DEFINITION OF CHARITABLE PURPOSE CONTAINED IN S. 2(15). HENCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMP TION UNDER S. 11 OR UNDER S. 10(23C) OF THE ACT, IF THEY CARRY ON COMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COM MERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DEC IDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF ACTIVITY. 3.1 THERE ARE INDUSTRY AND TRADE ASSOCIATIONS WHO CLAIM EXEMPTION FROM TAX UNDER S. 11 OR ON THE GROU ND THAT THEIR OBJECTS ARE FOR CHARITABLE PURPOSES AS T HESE ARE COVERED UNDER THE ANY OTHER OBJECT OF PUBLIC U TILITY. UNDER THE PRINCIPLE OF MUTUALITY, IF TRADING TAKES PLACE BETWEEN THE PERSONS WHO ARE ASSOCIATED TOGETHER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SO ME VENTURE OR OBJECT, AND IN THIS RESPECT HAVE NO DEAL INGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN THE SURPLU S RETURNED TO SUCH PERSONS IS NOT CHARGEABLE TO TAX. THEREFORE, WHERE INDUSTRY OR TRADE ASSOCIATIONS CLA IM BOTH TO BE CHARITABLE INSTITUTIONS AS WELL AS MUTUA L MEMBERS, THESE WOULD NOT FALL UNDER THE PURVIEW OF S. 2(15) OWING TO THE PRINCIPLE OF MUTUALITY. HOWEVER, IF SUCH ORGANIZATIONS HAVE DEALINGS WITH THE NON-MEMBE RS, THEIR CLAIM FOR CHARITABLE INSTITUTION WOULD NOW BE GOVERNED BY THE ADDITIONAL CONDITIONS STIPULATED IN PROVISO TO S. 2(15) . 3.2 IN THE FINAL ANALYSIS, WHETHER THE ASSESSEE HAS FOR ITS OBJECT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS A QUESTION OF FACT. IF S UCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONNECTION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS FOR CHARITA BLE PURPOSES. IN SUCH A CASE, THE OBJECT OF GENERAL PU BLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE TH E TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE IN RELATION TO TRADE, COMM ERCE ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 5 OR BUSINESS. EACH CASE WOULD, THEREFORE, HAVE TO BE DECIDED ON ITS OWN FACTS, AND GENERALIZATIONS ARE N OT POSSIBLE. AN ASSESSEE WHO CLAIMS THAT THEIR OBJECT IS CHARITABLE 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 RELATION TO ANY TRADE, COMMERCE O R BUSINESS . (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US) 14. AS THE ABOVE CBDT CIRCULAR, WHICH IS BINDING ON THE CIT UNDER S. 119(1)(A) OF THE ACT, APTLY PUTS IT, WHETH ER THE ASSESSEE HAS, AS ITS OBJECT, ADVANCEMENT OF ANY OTH ER OBJECT OF GENERAL PUBLIC UTILITY IS ESSENTIALLY A QUESTION OF TO BE DECIDED ON THE FACTS OF THE ASSESSEES OWN CASE AND WHERE OBJECT OF GENERAL PUBLIC ACTIVITY IS ONLY A MASK OR DEVICE TO HIDE THE TRUE PURPOSE OF TRADE, BUSINESS OR COMMERC E, OR RENDERING OF ANY SERVICE IN RELATION THERETO, THE A SSESSEE CANNOT BE SAID TO BE ENGAGED IN A CHARITABLE ACTIVI TY WITHIN MEANINGS OF S. 2(15) OF THE ACT. AS A COROLLARY TO THIS APPROACH ADOPTED BY TAX ADMINISTRATION, IN OUR CONSIDERED VI EW, IT CANNOT BE OPEN TO LEARNED CIT TO CONTEND THAT WHERE AN OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO H IDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THE RETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY IN CIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF GENE RAL PUBLIC UTILITY, THE CARRYING ON OF BONA FIDE ACTIVITIES I N FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC UTILITY WILL AL SO BE HIT BY THE PROVISO TO S. 2(15). 15. AS CBDT RIGHTLY PUTS IT, SWEEPING GENERALIZATI ONS ARE NOT POSSIBLE AND EACH CASE WILL HAVE TO DECIDED ON IT S FACTS. THE QUESTION THEN ARISES WHETHER ON THE PRESENT SET OF FACTS IT CAN BE SAID THAT THE ASSESSEE WAS ENGAGED IN TRADE, COM MERCE OR BUSINESS OR IN RENDERING OF A SERVICE TO TRADE, COM MERCE OR BUSINESS. 17. THEREFORE, AS THE LEGAL POSITION STANDS AS ON NOW, EVEN AFTER THE INSERTION OF THE ABOVE TWO PROVISOS, AS L ONG AS THE OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MA SK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATIO N THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PUREL Y INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTI VE OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONAFI DE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC U TILITY CANNOT BE HIT BY THE PROVISO TO S. 2(15). BY THE FINANCE ACT 2015, THESE TWO PROVISOS ALSO STAND SUBSTITUTED, WI TH EFFECT FROM 1 ST APRIL 2016, A NEW PROVISO TO SECTION 2(15). THIS N EW PROVISO IS AS FOLLOWS: ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 6 PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FRO M SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF AC TUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR A CTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT. OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UND ERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR 18. IT MAY BE NOTED THAT WHILE THE EARLIER PROVISO SIMPLY STATED THAT EXCLUSION FROM CHARITABLE PURPOSES WI LL COME INTO PLAY IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS , THE REQUIREMENT OF EXCLUSION CLAUSE EXTENDS EVEN TO SITUATIONS IN WHICH SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY . IN OTHER WORDS, THE EXCLUSION CLAUSE, BY PROVIS O TO SECTION 2 (15), WAS EARLIER TRIGGERED BY INVOLVEMENT IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS ETC BUT, POST FINANCE ACT 2015 AMENDMENT, IT WILL BE TRIGGERED EVEN IF SUCH AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC IS UNDERTAKEN IN THE COURS E OF CARRYING OUT SUCH ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY . 19. THIS SUBSTITUTION OF PROVISO TO SECTION 2(15), IN OUR CONSIDERED VIEW, MAY BE VIEWED AS REPRESENTING A PA RADIGM SHIFT IN THE SCOPE OF THE EXCLUSION CLAUSE. 20. THE PARADIGM SHIFT IS THIS. SO FAR AS THE SCOPE OF EARLIER PROVISOS IS CONCERNED, THE CBDT ITSELF HAS, DEALING WITH AN ASSESSEE PURSING THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBIC UTILITY , OBSERVED THAT IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN CONNECTION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS FOR CHARITA BLE PURPOSES BECAUSE IN SUCH A CASE, THE OBJECT OF GENERAL ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 7 PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSIN ESS OR RENDERING OF ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. THE ADVANCEMENT OF ANY OBJECTS OF GENERAL PUBLIC UTILITY AND ENGAGEMENT IN TRADE, COM MERCE AND BUSINESS ETC. WERE THUS SEEN AS MUTUALLY EXCLUSIVE IN THE SENSE THAT EITHER THE ASSESSEE WAS PURSUING THE OBJ ECTS OF GENERAL PUBLIC UTILITY OR PURSUING TRADE, COMMERCE OR BUSINESS ETC. IN THE GARB OF PURSING THE OBJECTS OF GENERAL PUBLIC UTILITY. AS THE CBDT CIRCULAR ITSELF DEMONSTRATES, THERE COU LD NOT HAVE BEEN ANY SITUATION IN WHICH THE ASSESSEE WAS PURSIN G THE OBJECTS OF GENERAL PUBLIC UTILITY AS ALSO ENGAGED I N TRADE, COMMERCE OF BUSINESS ETC. IN THE NEW PROVISO, HOWEV ER, EVEN WHEN THE ASSESSEE IS ENGAGED IN THE ACTIVITIES IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS ETC. AND SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IT IS EXCLUDED FROM THE SCOPE OF CHARITABLE PURPO SES ONLY WHEN THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INS TITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PR EVIOUS YEAR . IN OTHER WORDS, EVEN WHEN THE ACTIVITIES ARE IN THE COURSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY, BUT IN THE NATURE OF TRADE, COMMERCE OR BU SINESS ETC, THE PROVISO SEEKS TO EXCLUDE IT ONLY WHEN THE THRES HOLD LEVEL OF ACTIVITY IS NOT SATISFIED. WHETHER SUCH A STATUT ORY PROVISION STANDS THE LEGAL SCRUTINY OR NOT IS ANOTHER ASPECT OF THE MATTER, AND THAT IS NONE OF OUR CONCERN AT PRESENT ANYWAY, IT IS BEYOND DOUBT THAT THE NEW PROVISO, WITH EFFECT F ROM 1 ST APRIL 2016, SEEKS TO EXCLUDE, FROM THE SCOPE OF SEC TION 2(15), THE SITUATIONS IN WHICH EVEN IN THE COURSE OF PURSU ING ADVANCEMENT OF ANY OBJECTS OF GENERAL PUBLIC UTILIT Y WHEN ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS ETC IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , UNLESS, OF COURSE, THE ACTIVITY LEVEL REMAINS WI THIN THE THRESHOLD LIMIT I.E. RECEIPTS FROM SUCH ACTIVIT IES ARE LESS THAN TWENTY PERCENT OF TOTAL RECEIPTS OF THAT YEAR. 21. AS THE ABOVE PROVISIONS, WHICH, IN OUR HUMBLE UNDERSTANDING, SEEKS TO RESTRICT THE SCOPE OF SECTI ON 2(15) IS EFFECTIVE FROM THE ASSESSMENT YEAR 2016-17, IN OUR CONSIDERED VIEW, THESE PROVISIONS ARE ONLY PROSPECTIVE IN EFFE CT. AS A COROLLARY TO THIS LEGAL POSITION, IN OUR CONSIDERED VIEW, EVEN IF THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY , TILL THE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R 2016-17, THE ACTIVITIES WILL CONTINUE TO BE COVERED BY THE S COPE OF ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 8 SECTION 2 (15). AS WE HOLD SO, WE MAY ONLY REFER TO THE OBSERVATIONS OF A FIVE MEMBER BENCH OF HONBLE SUPR EME COURT, IN THE CASE OF CIT VS VATIKA TOWNSHIPS PVT LTD [(2014) 367 ITR 466 (SC)] , AS FOLLOWS: 31. OF THE VARIOUS RULES GUIDING HOW LEGISLATION HA S TO BE INTERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTION APPEARS, LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETROSPECTIVE OPERATION. T HE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOULD G OVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY T O THE EVENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND N OT TOMORROWS BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT E VERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY R ELYING ON THE EXISTING LAW AND SHOULD NOT FIND THAT HIS PL ANS HAVE BEEN RETROSPECTIVELY UPSET. THIS PRINCIPLE OF LAW IS KNOWN AS LEX PROSPICIT NON RESPICIT: LAW LOOKS FORW ARD NOT BACKWARD . . .. 33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE O F COMPLETENESS, THAT WHERE A BENEFIT IS CONFERRED BY LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONST RUCTION IS DIFFERENT. . 34. .. IN THE INSTANT CASE, THE PROVISO ADDED T O SECTION 113 OF THE ACT IS NOT BENEFICIAL TO THE ASSESSEE. O N THE CONTRARY, IT IS A PROVISION WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A CASE LIKE THIS, WE HAVE TO PROCEED WITH THE NORMAL RULE OF PRESUMPTION AGAINST RETROSPECTIVE OP ERATION. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW) 22. SINCE IN THE ORDERS OF THE AUTHORITIES BELOW, S OME REFERENCES HAVE BEEN MADE TO THE JUDICIAL PRECEDENTS AND THE C BDT INSTRUCTIONS IN THE CONTEXT OF THE LEGAL POSITION W HEN THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY FOR PROFIT [I.E. CBDT INSTRUCTION NO. 1024 DATED 7 TH NOVEMBER 1976 AND HONBLE SUPREME COURTS JUDGMENTS IN THE CASES OF LOK SHIKSHAN TRUS T VS CIT (SUPRA) INDIAN CHAMBER OF COMMERCE & ORS VS CIT (SUPRA)], I T MAY ALSO BE APPROPRIATE TO BRIEFLY DEAL WITH THE RELEVANT DEVEL OPMENTS. THE CBDT INSTRUCTION NO. 1024 DATED 7 TH NOVEMBER 1976 WAS ISSUED IN THE LIGHT OF THE TWO SUPREME COURT RULINGS REFERRED TO ABOVE AND IT STATED AS FOLLOWS: BOARD'S INSTRUCTION NO. 1024 DT. 7TH NOVEMBER, 1976 7 TH NOVEMBER 1976 ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 9 SEC. 2(15) OF THE IT ACT, 1961, DEFINES 'CHARITABLE PURPOSES' AS UNDER: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY NOT INVOLVING THE CARRYING O N OF ANY ACTIVITY FOR PROFIT. 2. IN THE DEFINITION OF 'CHARITABLE PURPOSE' THE EX PRESSION 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T' WAS ADDED IN THE 1961 ACT. THE SIGNIFICANCE OF THIS EXPRESSIO N HAS BEEN EXAMINED BY THE SUPREME COURT IN THE GREAT DETAIL I N THE CASES OF SOLE TRUSTEE, LOK SHIKSHANA TRUST VS. CIT (1975) 101 ITR 234 (SC) AND INDIAN CHAMBER OF COMMERCE VS. CIT (1975) 101 ITR 796 (SC) . COMMENTING ON THIS EXPRESSION, T HEIR LORDSHIPS, IN THE CASE OF THE INDIAN CHAMBER OF COM MERCE VS. CIT ETC., OBSERVED : 'NOTWITHSTANDING THE POSSIBILITY OF OBSCURITY AND O F DUAL MEANING WHEN THE EMPHASIS IS SHIFTED FROM 'ADVANCEMENT' TO 'OBJECT' USED IN S. 2(15), WE ARE CLEAR IN OUR MINDS THAT BY THE NEW DEFINITION THE BENEFIT OF EXCLUSION FROM TOTAL INCOME IS TAKEN AWAY WHERE IN ACCOMPLISHING A CHARITABLE PURPOSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIES FOR PROFIT.' THE SUPREME COURT EMPHASISED THAT IF IN THE ADVANCE MENT OF THE OBJECTS OF GENERAL PUBLIC UTILITY A TRUST RESOR TS TO CARRYING ON OF ANY ACTIVITY FOR PROFIT, THEM NECESSARILY S. 2(15) CANNOT CONFER EXEMPTION. IN LOK SHIKSHANA TRUST, THEIR LOR DSHIPS KHANNA, J. AND GUPTA, J. OBSERVED: 'ORDINARILY, PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CO NSISTS 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 ANY ACTIVITY FOR PROFIT ...' 3. THE TEST WHICH HAS BEEN LAID DOWN BY THE SUPREME COURT FOR DETERMINING WHETHER A PARTICULAR ACTIVITY OF GE NERAL PUBLIC UTILITY IS COVERED BY THE DEFINITION OF 'CHA RITABLE PURPOSE' OR NOT IS: (A) IS THE OBJECT OF THE ASSESS EE ONE OF GENERAL PUBLIC UTILITY? (B) DOES THE ADVANCEMENT OF THE OBJECT INVOLVE ACTIVITIES BRINGING IN MONEYS? (C) IF SO, A RE SUCH ACTIVITIES UNDERTAKEN, (I) FOR PROFIT, OR (II) WITH OUT PROFIT? IT WAS OBSERVED BY THE SUPREME COURT THAT IF (A) AND ( B) ARE ANSWERED AFFIRMATIVELY, AND CL. (I) IS ALSO ANSWERE D AFFIRMATIVELY, THE CLAIM FOR EXEMPTION COLLAPSES AN D THE BENEFIT OF S. 11 WILL NOT BE AVAILABLE TO THE ENTIR E INCOME. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 10 HOWEVER, IF SUCH ACTIVITY IS UNDERTAKEN WITHOUT PRO FIT MOTIVE, THE OBJECT WILL BE CHARITABLE PURPOSE WITHIN THE ME ANING OF S. 2(15). 4. THESE TWO DECISIONS OF THE SUPREME COURT MAY KIN DLY BE BROUGHT TO THE NOTICE OF THE OFFICERS WORKING IN YO UR CHARGE. YOU MAY ALSO KINDLY DIRECT THEM TO CARRY OUT A REVI EW OF THE COMPLETED CASES IN THE LIGHT OF THE PRONOUNCEMENT O F THE SUPREME COURT AND TAKE REMEDIAL ACTION WHEREVER CAL LED FOR AND FEASIBLE. A REPORT INDICATING THE RESULT OF THE REVIEW MAY PLEASE BE SENT TO THE BOARD BY 1ST JAN., 1977 WITHO UT FAIL. 23. HOWEVER, THE JUDICIAL VIEWS RELIED UPON IN THE ABOVE INSTRUCTIONS (I.E. VIEWS EXPRESSED IN INDIAN CHAMBE R OF COMMERCE DECISION AND THE MAJORITY VIEWS, EXPRESSED BY HONB LE JUSTICE KHANNA AND HONBLE JUSTICE GUPTA, IN THE CASE OF LO K SHIKSHAN TRUST) DID NOT MEET THE APPROVAL OF A LARGER BENCH OF HONBLE SUPREME COURT IN THE CASE OF CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION [(1980) 121 ITR 1 (SC)] . WHILE DOING SO, HONBLE JUSTICE BHAGWATI, IN HIS ORDER REPRESEN TING MAJORITY VIEWS, OBSERVED AS FOLLOWS: THERE IS, HOWEVER, ONE COMMENT WHICH IS NECESSARY T O BE MADE WHILST WE ARE ON THIS POINT AND THAT ARISES OU T OF CERTAIN OBSERVATIONS MADE BY THIS COURT IN SOLE TRU STEE, LOKA SHIKSHANA TRUST'S CASE (SUPRA) AS WELL AS INDIAN CH AMBER OF COMMERCE'S CASE (SUPRA). IT WAS SAID BY KHANNA J. I N SOLE TRUSTEE, LOKA SHIKSHANA TRUST'S CASE : '...IF THE A CTIVITY OF A TRUST CONSISTS OF CARRYING ON A BUSINESS AND THERE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICA TION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT.' AND TO THE SAME EFFECT, OBSERVED KRISHNA IYER J. IN INDIAN CHAMBER OF COMMERCE'S CASE (SUPRA) WHEN HE SAID : 'AN UNDERTAKING BY A BUSINESS ORGANISATION IS ORDIN ARILY ASSUMED TO BE FOR PROFIT UNLESS EXPRESSLY OR BY NEC ESSARY IMPLICATION OR BY ELOQUENT SURROUNDING CIRCUMSTANCE S THE MAKING OF PROFIT STANDS LOUDLY NEGATIVED...A PRAGMA TIC CONDITION, WRITTEN OR UNWRITTEN, PROVED BY A PROSCR IPTION OF PROFITS OR BY LONG YEARS OF INVARIABLE PRACTICE OR SPELT FROM SOME STRONG SURROUNDING CIRCUMSTANCES INDICATIVE OF ANTI- PROFIT MOTIVATION SUCH A CONDITION WILL NULLIFY FOR CHARITABLE PURPOSE.' NOW, WE ENTIRELY AGREE WITH THE LEARNED JUDGES WHO DECIDED THESE TWO CASES THAT ACTIVITY INVOLVED IN CARRYING OUT THE ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 11 CHARITABLE PURPOSE MUST NOT BE MOTIVATED BY A PROFI T OBJECTIVE BUT IT MUST BE UNDERTAKEN FOR THE PURPOSE OF ADVANC EMENT OR CARRYING OUT OF THE CHARITABLE PURPOSE. BUT WE FIND IT DIFFICULT TO ACCEPT THEIR THESIS THAT WHENEVER AN ACTIVITY IS CARRIED ON WHICH YIELDS PROFIT, THE INFERENCE MUST NECESSARILY BE DRAWN, IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY, THAT THE ACTIVITY IS FOR PROFIT AND THE CHARITABLE PURPOSE I NVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT. WE DO NOT TH INK THE COURT WOULD BE JUSTIFIED IN DRAWING ANY SUCH INFERE NCE MERELY BECAUSE THE ACTIVITY RESULTS IN PROFIT. IT IS IN OU R OPINION NOT AT ALL NECESSARY THAT THERE MUST BE A PROVISION IN THE CONSTITUTION OF THE TRUST OR INSTITUTION THAT THE A CTIVITY SHALL BE CARRIED ON NO PROFIT NO LOSS BASIS OR THAT PROFI T SHALL BE PROSCRIBED. EVEN IF THERE IS NO SUCH EXPRESS PROVIS ION, THE NATURE OF THE CHARITABLE PURPOSE, THE MANNER IN WHI CH THE ACTIVITY FOR ADVANCING THE CHARITABLE PURPOSE IS BE ING CARRIED ON AND THE SURROUNDING CIRCUMSTANCES MAY CLEARLY IN DICATE THAT THE ACTIVITY IS NOT PROPELLED BY A DOMINANT PR OFIT MOTIVE. WHAT IS NECESSARY TO BE CONSIDERED IS WHETHER HAVIN G REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS THE FORMER, THE PURPOS E WOULD NOT BE A CHARITABLE PURPOSE, BUT, IF IT IS THE LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOULD NOT BE LOST . (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW) 24. IT WAS IN THIS BACKDROP, AND SHORTLY AFTER THE ABOVE JUDGMENT WAS DELIVERED BY HONBLE SUPREME COURT WAS RENDERED , THAT THE WORDS NOT INVOLVING THE CARRYING ON ANY ACTIVITY F OR PROFIT WERE DROPPED FROM SECTION 2(15). 25. IN VIEW OF THE ABOVE DISCUSSIONS, THE RELIANCE PLACED BY THE AUTHORITIES BELOW ON THE CBDT INSTRUCTION NO. 1024 (SUPRA) AND ON HONBLE SUPREME COURT DECISIONS IN THE CASES OF IND IAN CHAMBER OF COMMERCE (SUPRA) AND LOK SHIKSHAN SANSTHAN (SUPRA) IS DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. THESE DECISIONS ARE NO LONGER GOOD LAW, THE RELEVANT PROVISION IN THE CONTEXT OF WHICH THE DECISIONS WERE GIVEN DOES NO LONGER EXIST ON THE STATUTE, AND THE JUDICIAL PRECEDENT, WHICH THE CBDT INSTRUCTION HAS INTERPRET ED, HAS ALREADY FADED INTO OBLIVION. 26. IT IS, HOWEVER, IMPORTANT TO BEAR IN MIND THE F ACT THAT, GOING BY THE CIRCULAR NO.372 DATED 8 TH DECEMBER 1983 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES EXPLAINING THE AMENDM ENTS MADE BY THE FINANCE ACT 1983, DROPPING OF THE WORDS NOT IN VOLVING THE CARRYING ON ANY ACTIVITY FOR PROFIT DID NOT REPRES ENT ANY PARADIGM SHIFT OR SUBSTANTIVE AMENDMENT IN LAW INASMUCH AS T HIS AMENDMENT WAS STATED TO BE ONLY CONSEQUENTIAL TO SIMILAR REST RICTION NOW PLACED UNDER SECTION 11 ITSELF. IT WAS EXPLAINED, IN THE A FORESAID CIRCULAR, AS FOLLOWS: ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 12 AMENDMENT OF THE DEFINITION OF 'CHARITABLE PURPOSE' SEC. 2(15) 8. UNDER S. 2(15) OF THE IT ACT, 'CHARITABLE PURPOS E' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND T HE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T. SEC. 3(A) OF THE FINANCE ACT HAS OMITTED THE WORDS 'NOT INVOLVIN G THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' FROM THE DE FINITION. THIS AMENDMENT IS CONSEQUENTIAL TO THE AMENDMENT MA DE IN S. 11 OF THE IT ACT BY S. 6(B) OF THE FINANCE ACT W HEREUNDER PROFITS AND GAINS OF BUSINESS IN THE CASE OF CHARIT ABLE OR RELIGIOUS TRUSTS AND INSTITUTIONS WILL NOT BE ENTIT LED TO EXEMPTION UNDER THAT SECTION EXCEPT IN CASES WHERE THE BUSINESS FULFILS THE CONDITIONS SPECIFIED IN S. 11( 4) OF THE ACT. THE AMENDMENT TAKES EFFECT FROM 1ST APRIL, 1984 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASST. YR. 198 4-85 AND SUBSEQUENT YEARS. 27. THE CORRESPONDING AMENDMENT WAS INSERTION OF SE CTION 11(4A). THIS SECTION, AS IT WAS ORIGINALLY INTRODUC ED, IS SET OUT BELOW, FOLLOWED BY CBDT CIRCULARS (SUPRA) EXPLANAT ION ABOUT THE NATURE OF THIS AMENDMENT: SECTION 11 (4A)- AS INSERTED BY THE FINANCE ACT 198 3 (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECT ION (3) OR SUB- SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INC OME, BEING PROFITS AND GAINS OF BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FO R PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRI NTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF I N THE OFFICIAL GAZETTE ; OR (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WH OLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAIN TAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINES S CBDT CIRCULAR DATED 8 TH DECEMBER 1983 EXPLAINING THE ABOVE AMENDMENT IN LAW- BUSINESS INCOME OF CHARITABLE AND RELIGIOUS TRUSTS AND INSTITUTIONS 19.1 THE FINANCE ACT HAS INSERTED A NEW SUB-S. (4A) IN S. 11 OF THE IT ACT TO PROVIDE THAT THE PROVISIONS OF SUB-S. (1) OF THAT SECTION ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 13 RELATING TO EXEMPTION OF INCOME DERIVED FROM PROPER TY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES; OR OF S UB-S. (2) THEREOF RELATING TO ACCUMULATION OF SETTING APART OF SUCH I NCOME FOR APPLICATION TO SUCH PURPOSES; OR THE CONNECTED PROV ISIONS OF SUB-SS. (3) AND 3(A) OF THE SAID SECTION WILL NOT APPLY IN RELATION TO PROFITS AND GAINS OF BUSINESS. THIS PROVISIONS WILL APPLY I RRESPECTIVE OF WHETHER THE PROFITS AND GAINS ARE DERIVED FROM A BU SINESS CARRIED ON BY THE TRUST OR INSTITUTION OR FROM A BUSINESS U NDERTAKING WHICH IS HELD IN TRUST FOR SUCH PURPOSES . AN EXEMPTION HAS, HOWEVER, BEEN MADE IN RELATION TO PROFITS AND GAINS OF BUSINESS I N THE FOLLOWING CASES: (A) WHERE THE BUSINESS IS CARRIED ON BY A TRUST WHO LLY FOR PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRINTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR THE BUSINESS IS OF A KIND NOTIFIED BY THE CENTRAL GOVER NMENT IN THIS BEHALF IN THE OFFICIAL GAZETTE; (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WH OLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION. 19.2 THE EXCEPTIONS MENTIONED UNDER (A) AND (B) ABO VE WILL NOT BE AVAILABLE UNLESS SEPARATE BOOKS OF ACCOUNT ARE MAIN TAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. I N CONSEQUENCE OF THE NEW PROVISIONS MADE IN SUB-S. (4A) OF S. 11, CL. (B B) OF S. 13(1) OF THE IT ACT (WHICH RESTRICTED THE EXEMPTION OF BUSINESS INCOME IN THE CASE OF CHARITABLE TRUSTS AND INSTITUTIONS FOR THE RELIE F OF THE POOR, EDUCATION OR MEDICAL RELIEF, ONLY IN CASES WHERE TH E BUSINESS IS CARRIED ON THE COURSE OF THE ACTUAL CARRYING OUT OF A PRIMARY PURPOSE OF THE TRUST OR INSTITUTION) HAS BEEN OMITTED. 19.3 IT IS RELEVANT TO NOTE THAT THE PROVISIONS OF NEW SUB-S. (4A) OF S.11 DO NOT OVERRIDE THE PROVISIONS OF S. 10 OF THE IT ACT, AND AS SUCH, PROFITS DERIVED BY ANY TRUST, INSTITUTION, AS SOCIATION, ETC. REFERRED TO IN CLS. (21), (22), (22A), (23), (23A), (23B) (23BB)AND (23BC) WILL CONTINUE TO BE EXEMPT FROM INCOME TAX. 19.4 THE FINANCE ACT HAS ALSO AMENDED S. 164 OF THE IT ACT TO CLARIFY THAT PROFITS AND GAINS OF BUSINESS WHICH AR E NOT EXEMPT UNDER S. 11 OF THE IT ACT WILL BE CHARGED TO INCOME -TAX AS IF SUCH PROFITS AND GAINS (INCLUDING ANY OTHER INCOME, IF A NY, WHICH IS ALSO NOT EXEMPT UNDER S. 11) WERE THE INCOME OF ANY ASSO CIATION OF PERSONS.A19.5 THE AFORESAID AMENDMENTS TAKE EFFECT FROM 1ST APRIL, 1984 AND WILL, ACCORDINGLY, APPLY IN RELATION TO TH E ASST. YR. 1984-85 AND SUBSEQUENT YEARS. [SECS. 6, 7 AND 37 OF THE FINANCE ACT] ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 14 28. HOWEVER, THE JUDICIAL INTERPRETATION ASSIGNED T O THE ABOVE AMENDMENT WAS NOT IN CONSONANCE WITH THE UNDERSTAND ING OF THE CBDT, AS REFLECTED IN THE ABOVE CIRCULAR, INASMUCH AS THIS LIMITATION DID NOT, AS PER HONBLE MADRAS HIGH COURT IN THE CA SE OF THANTHI TRUST VS CBDT [(1995) 213 ITR 639 (MAD)], APPLY TO THE INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST FOR CHAR ITABLE PURPOSES. TO THAT EXTENT, PARAGRAPH 13.1 OF THE ABOVE CIRCULA R WAS HELD TO INCONSISTENT WITH SECTION 11(4A). THIS UNCERTAINTY DID NOT LAST LONG AS THERE WAS YET ANOTHER AMENDMENT IN SECTION 11, A ND THE NEW SUB SECTION 4A WITH EFFECT FROM 1 ST APRIL 1992, WHICH WAS TO SUBSTITUTE FOR THE THEN EXISTING SUB SECTION 4A, PR OVIDED AS FOLLOWS: (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECT ION (3) OR SUB- SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INC OME OF A TRUST OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS THE CASE MAY BE, INS TITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TR UST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. 29. EXPLAINING THIS AMENDMENT IN LAW, THE CBDT CIRC ULAR NO. 621 DATED 19 TH DECEMBER 1991 [(1992 195 ITR (ST) 154], READ WITH CIRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(1993) 199 ITR (ST) 7] STATED AS FOLLOWS: CBDT CIRCULAR NO. 621 DATED 19 TH DECEMBER 1991 [(1992 195 ITR (ST) 154 @165 ] 15.8 IN ORDER TO BRING EXEMPTION OF CHARITABLE OR RELIGIOUS TRUSTS IN LINE WITH THE CORRESPONDING PROVISIONS IN SECTION 10(23C)(IV) OR (V) OF SUB-SECTION (4A) OF SECTION 11 HAS BEEN A MENDED TO PERMIT TRUST AND INSTITUTIONS TO CARRY OUT BUSINESS ACTIVI TIES IF THE BUSINESS ACTIVITIES ARE INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE. THE CHARITABLE OR RELIGIOUS TRUST WILL NO LONGER LOSE C OMPLETE EXEMPTION FROM INCOME-TAX. HOWEVER, THE PROFITS AND GAINS FRO M SUCH BUSINESS ACTIVITY WILL BE SUBJECTED TO TAX. CBDT CIRCULAR NO 642 DATED 15 TH DECEMBER 1992 [(1993) 199 ITR (ST) 7 @7 ] IN PARTIAL MODIFICATION TO PARA 15.8 (AS EXTRACTED ABOVE) OF THE CIRCULAR NO. 621, DT. 19TH DEC., 1991 ISSUED FROM F . NO. 133/389/91-TPL, IT IS CLARIFIED THAT ACCORDING TO T HE PROVISIONS OF SECTION 11(4A) OF THE INCOME-TAX ACT, AS AMENDED TH ROUGH THE FINANCE (NO. 2) ACT, 1991, WITH EFFECT FROM 1ST APR IL, 1992, PROFITS AND GAINS OF BUSINESS IN THE CASE OF A TRUST OR INS TITUTION WILL NOT BE LIABLE TO TAX IF THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. IN ADDITION, SEPARATE BOOKS OF ACCOUNT ARE TO BE MAINTAINED BY T HE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. INCOME OF ANY OTHER BUSINESS ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 15 WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OB JECTIVES OF THE TRUST OR INSTITUTION WILL NOT BE EXEMPT FROM TAX . 30. THE ABOVE DISCUSSIONS CLEARLY SHOW THAT SO FAR AS MAKING PROFITS FROM A BUSINESS ACTIVITY INCIDENTAL TO THE ATTAINMENT OF OBJECTIVES OF THE TRUST IS CONCERNED, THE LEGAL POS ITION ALWAYS WAS THAT, AS LONG AS SEPARATE BOOKS OF ACCOUNTS HAVE BE EN MAINTAINED BY THE ASSESSEE, THE SAME WERE EXEMPT FROM TAX UNDE R SECTION 11. THERE IS NO SUBSTANTIVE CHANGE IN LAW VIS--VIS THE LAW PREVAILING AS AT THE POINT OF TIME IN THE CONTEXT OF WHICH HONBL E SUPREME COURTS FIVE JUDGE BENCH HAD DELIVERED THE JUDGMENT IN THE CASE CIT VS SURAT ART SILK CLOTHES MANUFACTURERS ASSOCIATION (SUPRA). IN THE SAID CASE, THEIR LORDSHIPS HAD, INTER ALIA, HEL D, BY MAJORITY VIEW, THAT WHAT IS NECESSARY TO BE CONSIDERED IS WHETHER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKIN G OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS THE FOR MER, THE PURPOSE WOULD NOT BE A CHARITABLE PURPOSE, BUT, IF IT IS THE LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOU LD NOT BE LOST . OF COURSE, AS THE LAW WAS SO LAID DOWN, THE SCH OOL OF THOUGHT TO THE EFFECT HOWEVER, IF THE OBJECT OF THE TRUST IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND IT CARRI ED ON ANY ACTIVITY FOR PROFIT, IT IS EXCLUDED FROM THE AMBIT OF CHARITABLE PURPOSE DEFINED IN S. 2(15) WAS ARTICULATED IN THE SAID ORDER BUT THAT WAS PART OF THE MINORITY VIEW STATED BY JUSTIC E A P SEN, AS HE THEN WAS. HIS LORDSHIP DID PROCEED TO OBSERVE, AS I S THE STAND TAKEN BY THE AUTHORITIES BELOW, AS FOLLOWS: WITH RESPECT, I VENTURE TO SAY THAT IF AN OBJECT O F GENERAL PUBLIC UTILITY IS ENGAGED IN AN ACTIVITY FOR PROFIT, IT CE ASES TO BE A CHARITABLE PURPOSE AND, THEREFORE, THE INCOME IS NOT EXEMPT UN DER S. 11(1)(A). IN CASE OF A TRUST FALLING UNDER ANY OF THE FIRST T HREE HEADS OF CHARITY, VIZ., 'RELIEF OF THE POOR', 'EDUCATION' AN D 'MEDICAL RELIEF' IT MAY ENGAGE IN ANY ACTIVITY FOR PROFIT, AND THE PROF ITS WOULD NOT BE TAXABLE IF THEY WERE UTILIZED FOR THE PRIMARY OBJEC T OF THE TRUST. IN OTHER WORDS, THE BUSINESS CARRIED ON BY THEM IS INC IDENTAL OR ANCILLARY TO THE PRIMARY OBJECT, VIZ., RELIEF OF TH E POOR, EDUCATION AND MEDICAL RELIEF. TO ILLUSTRATE, A CHARITABLE HOSPITA L HOLDING BUILDINGS ON TRUST MAY RUN A NURSING HOME. THE PROFITS OF THE NURSING HOME OWNED AND RUN BY THE TRUST WILL BE EXEMPT UNDER S. 11(4), BECAUSE THE BUSINESS IS CARRIED ON BY THE TRUST IN THE COUR SE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PURPOSE OF THE TRUST. T HE CONCEPT OF 'PROFITS TO FEED THE CHARITY', THEREFORE, IS APPLIC ABLE ONLY TO THE FIRST THREE HEADS OF CHARITY AND NOT THE FOURTH. IT WOULD BE ILLOGICAL AND, INDEED, DIFFICULT TO APPLY THE SAME CONSIDERATION T O INSTITUTIONS WHICH ARE ESTABLISHED FOR CHARITABLE PURPOSES OF AN Y OBJECT OF GENERAL PUBLIC UTILITY. ANY PROFIT-MAKING ACTIVITY LINKED WITH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD BE TAXABLE. THE THEORY OF THE DOMINANT OR PRIMARY OBJECT OF THE TRUST CANNOT, THE REFORE, BE PROJECTED INTO THE FOURTH HEAD OF CHARITY, VIZ., 'A DVANCEMENT OF ANY ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 16 OTHER OBJECT OF GENERAL PUBLIC UTILITY', SO AS TO M AKE THE CARRYING ON OF A BUSINESS ACTIVITY MERELY ANCILLARY OR INCIDENT AL TO THE MAIN OBJECT. IN FACT, IF ANY OTHER VIEW WERE TO PREVAIL, IT WOUL D LEAD TO AN ALARMING RESULT DETRIMENTAL TO THE REVENUE. 31. CLEARLY, THEREFORE, SO FAR AS PRE INSERTION OF EXPLANATIONS TO SECTION 2 (15), I.E. PRIOR TO 1 ST 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 ACTIVITIES OF THE ASSESSEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WI TH 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 ASSES SING OFFICER FINDS THAT THE INCOME IS INCOME OF ANY OTHER BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE 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 AUT HORITIES THAT THE ACTIVITIES OF THE TRUSTS DO NOT SERVE THE OBJECTS O F THE GENERAL PUBLIC UTILITY BUT THE CASE IS CONFINED TO 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 A RE CARRIED OUT. THE REGISTRATION GRANTED TO THE ASSESSEE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WERE ADVANCEMENT OF OBJECTS OF GENER AL PUBLIC UTILITY, AND THERE IS NOTHING TO DEMONSTRATE ANY PARADIGM SH IFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY OF THE PROFIT MAKING BUT THAT DOES NOT OBLITERATE THE OVERALL OBJECTS OF GEN ERAL PUBLIC UTILITY. AS REGARDS THE MAINTENANCE OF THE SEPARATE BOOKS OF ACCOUNTS FOR THE BUSINESS ACTIVITIES PURSUED BY THE ASSESSEE TRU ST, SINCE ALL THE ACTIVITIES OF THE ASSESSEE TRUST ARE SAID TO BE OF THE BUSINESS NATURE, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE TR UST MEET THIS REQUIREMENT AS WELL. OF COURSE, WE WILL DEAL WITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF PROFIT MAKING AC TIVITIES A LITTLE LATER, BUT, SUFFICE TO SAY, THAT ON THE ADMITTED FA CTS OF THIS CASE, SO FAR PERIOD PRIOR TO 1 ST 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 1 ST 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 O NE, IN WHICH THE OBJECT OF GENERAL PUBLIC UTILITY WILL ONLY BE A M ASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COM MERCE, OR BUSINESS ETC [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DAT ED 19 TH ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 17 DECEMBER 2008 ISSUED AT THE POINT OF TIME WHEN FIRS T PROVISO TO SECTION 2(15) WAS INTRODUCED]; AND SECOND, IN WHI CH ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC AR E UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANC EMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , [INSERTION OF NEW PROVISO TO REPLACE FIRST AND SECOND PROVISO TO SECT ION 2(15)- EFFECTIVE 1 ST APRIL 2016 I.E. ASSESSMENT YEAR 2016-17]. AS FOR T HE FIRST CATEGORY, POST 1 ST 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 TH AT 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, FORM ATION OF TRUSTS CAN BE SAID TO A MASK OR DEVICE TO HIDE THE TRUE PURPOS E OF THE DOING BUSINESS. THE CASE OF THE REVENUE AT BEST IS THAT T HE 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 THE NATURE OF TRA DE, 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 1 ST APRIL 2016, I.E. ASSESSMENT YEAR 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HONBLE SUPREME COURT, IN THE C ASE OF VATIKA TOWNSHIP PVT LTD (SUPRA), THAT, FOLLOWING THE MAXIM LEX PROSPICIT NON RESPICI , THE LAW, PARTICULARLY WITH RESPECT TO A REQUIREME NT WHICH IS MORE ONEROUS ON THE ASSESSEE, CANNOT BE TR EATED AS RETROSPECTIVE IN EFFECT UNLESS IT IS SPECIFICALLY L EGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREFORE, THIS AMENDMENT CANN OT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFFECT. IN V IEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVISO TO SECT ION2(15) BUT BEFORE 1 ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRUST IN THE COURSE OF ACTUAL CARRYING OU T OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, THE BENEFIT OF SECTION 11 READ WITH SECTION 2 (15) CANN OT 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 CARRIE D OUT IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVELOPMENT OF CITIES A ND TOWNS IS AN OBJECT OF GENERAL PUBLIC UTILITY, AND THAT IS AN OB JECT CONSISTENTLY FOLLOWED BY THE ASSESSEE IN ALL ITS ACTIVITIES. FOR THIS SHORT REASON ALONE, THE STAND OF THE AUTHORITIES BELOW MUST BE H ELD TO BE UNSUSTAINABLE IN LAW. 33. WE MUST, HOWEVER, ALSO DEAL WITH THE FUNDAMENTA L ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS SO LD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTIAL AND COMMERCIAL LAN DS JUST TO EARN PROFIT ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 18 34. THIS PROFITEERING, AS LEARNED DEPARTMENTAL REPR ESENTATIVE PUTS IT, IS THE CORE ISSUE IN THESE APPEALS. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE MAY REPRODUCE THE FOLLOWIN G WRITTEN SUBMISSIONS FILED BY LEARNED DEPARTMENTAL REPRESENT ATIVES: A: IN ALL IMPROVEMENT TRUST CASES IT IS SUBMITTED THAT THE LEARNED COUNSEL NAMELY SHR I Y.K. SOOD, CA AND SHRI J.S. BHASHI, ADVOCATE HAVE ARGUED THESE APPEALS . MY COUNTER-SUBMISSIONS ARE AS UNDER :- IT IS SUBMITTED THAT THERE ARE TWO SITUATIONS I.E. A) WHERE THE ASSESSEES ARE RENDERING GENERAL PUBLIC UTILITY SERVICES AND IN RENDERING SUCH SERVICES AND DUE TO EXIGENCY OF RENDERING SUCH SERVICE SOME SURPLUS (NOT PROFIT) RESULTS SUCH ASSESSEE ARE NOT HIT BY THE PR OVISO TO SECTION 2(15) EVEN IF RENDERING OF SUCH SERVICES PA RTAKE THE CHARACTER OF TRADE, COMMERCE OR BUSINESS OR RENDERING SERVICES IN RELATION TO ANY TRADE COMMERC E OR BUSINESS. B) WHERE THE ASSESSEE HAVE THE OBJECTIVE OF RENDERING GENERAL PUBLIC UTILITY SERVICES BUT FOR DOING SO TH EY FIRST EARN INCOME BY ENGAGING THEMSELVES IN ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE AND THEN APPLY SUC H INCOME TO THE CHARITABLE OBJECTS. WHEREAS IN THE FORMER SITUATION, REGISTRATION UNDER SECTION 12AA WOULD BE ALLOWABLE AND ALSO THE EXEMPTION UNDE R SECTION 11 & 12 BUT FOR THE LATTER SITUATION, NO SU CH PRIVILEGE WOULD BE ALLOWED AS DOING OF TRADE, COMMERCE OR BUS INESS OR RENDERING ANY SERVICE IN RELATION TO TRADE COMMERCE OR BUSINESS NOT TREATED AS CHARITABLE ACTIVITIES WITH THE INSERTION OF PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. VIEWED IN THIS CONTEXT, IT IS SUBMITTED THAT OUT OF THE EIGHTEEN JUDGMENTS RELIED UPON BY SHRI Y.K. SOOD, CA THE JUD GEMENT AT S.NO.1 TO 5, 7, 10, 11,14, 15, 16, 17 & 18 FALLEN I N THE FORMER CATEGORY AND THE JUDGEMENT AT S. NO.9 HAD NOT BEEN PRESSED BY SHRI SOOD. THE JUDGEMENT AT S.NO.12 PERTAINS TO PRE- AMENDED PROVISIONS OF SECTION 2(15) AND IS THUS NOT APPLICABLE. AS REGARDS THE JUDGEMENT AT S.NO.6 & 1 3, THE SAME RUN COUNTER TO THE JUDGEMENT OF THE JURISDICTI ONAL TRIBUNALS ORDER IN THE CASE OF JAMMU DEVELOPMENT A UTHORITY WHICH HAS BEEN CONFIRMED BY THE J&K HIGH COURT AND THE SLP FILED BY THE ASSESSEE HAS ALSO BEEN DISMISSED BY TH E HONBLE SUPREME COURT. IT IS PERTINENT TO MENTION HERE IN THE CASE OF INDIA TRADE PROMOTION VS. DGIT (EXEMPTIONS), IT HAS BEEN EXPRESSLY MENTIONED: ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 19 45. TO BE CLEAR, OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS CARRIED ON AND IT GENERATES INCOME, THE FACT THAT SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES, WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOULD NONETHELESS NOT BE REGARDED BEIN G CARRIED ON FOR A CHARITABLE PURPOSE. THIS FINDING OF THE HONBLE DELHI HIGH COURT CLEARL Y SUPPORTS THE CAUSE OF THE REVENUE AS THE PRECISE NATURE OF T HE ACTIVITIES IS THE SAME AS ARTICULATED BY THE HONBL E DELHI HIGH COURT IN THE ABOVE PARAGRAPH. IT IS FURTHER SUBMIT TED THAT AT PARA 58, THE COURT HAS OBSERVED THAT THE PROVISIONS OF SECTION 2(15) NEED TO BE READ DOWN BUT SUCH READING HAS BEE N CONTEMPLATED IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE INCOME TAX AT, 1961 AND WHEN READ IN ITS TOTALITY, THE JUDGEMENT SUPPORT THE CASE OF THE REVENUE AS IT SQU ARELY SUPPORTS A CASE WHERE THE INTENTION IS TO DO CHARIT Y BY ACTIVITIES WHICH MAY EMBARK UPON ANY TRADE COMMERCE OR BUSINESS OR RENDERING ANY SERVICE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND NOT THAT INCOME ACCRUES DU E TO THE EXIGENCY OF UNDERTAKING GENERAL PUBLIC UTILITY ACTI VITIES. IT IS FURTHER SUBMITTED THE JUDGEMENT IN THE CASE O F CITY & IND. DEV. CORP. OF MAHARASHTRA VS. ACIT REPORTED AT S. NO.2 IS PROJECT SPECIFIC AND FURTHER IT HAS BEEN HELD BY TH E HONBLE TRIBUNAL MUMBAI C BENCH THAT ASSESSEE IS AN AGENT OF THE GOVERNMENT AND DOES NOT HOLD ANY INDEPENDENT ENTITY WHEREAS THE TRUSTS ARE A CORPORATE BODY AND HAVE PE RPETUAL SUCCESSION AND COMMON SEAL AND CAN SUE AND BE SUED IN ITS NAME AS PER SECTION 3 OF THE PUNJAB TOWN IMPROVEMEN T TRUST ACT, 1922. IN VIEW OF THIS DIFFERENCE ALSO, THE SA ID JUDGMENT IS NOT APPLICABLE TO THIS CASE. IT IS FURTHER SUBMITTED THAT THE TRUSTS DO NOT GET ANY GRANT IN AID FROM THE STATE GOVERNMENT. THE TRUSTS HAVE TO FIRST DO BUSINESS LIKE A BUILDER TO EARN MONEY I.E. IT PURCH ASES (ACQUIRES) PROPERTY AND DIVIDES THE SAME INTO PLOT OR BUILD THE SAME AND SELLS THE PLOT OR THE BUILDINGS WHICH IT R AISES BOTH BY WAY OF RESERVE PRICE (RESIDENTIAL BUILDINGS OR P LOTS) AND COMMERCIAL PLOTS OR COMMERCIAL BUILDINGS BY AUCTION . THERE IS ABSOLUTELY NO DOUBT THAT WHEN LAND OR BUILDINGS ARE PUT ON AUCTION BY THE TRUST, THE INTENT IS TO MAKE MAXIMUM PROFIT AND WHEN IT SELLS RESIDENTIAL PLOTS OR RESIDENTIAL BUILDINGS, IT SELLS THE SAME AT RESERVE PRICE. IT IS SUBMITTED T HAT RESERVE PRICE SO FIXED IS FIXED IN SUCH A MANNER A MAY TAKE WITHIN ITS SWEEP HUGE PROFIT A WOULD BE SEEN FROM THE ANNEXURE AT PAGE 9 OF THE PAPER BOOK FILED BY SHRI Z.S. BHASIN, ADVO CATE WHICH INCLUDES THE FOLLOWING : A) CONSERVANCY CHARGES FOR 5 YEARS @ 10 PERCENT PER MONTH PER ACRE. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 20 B) PROVISIONS FOR UNFORESEEN CHARGES @ 15% PER CENT OF TOTAL RESERVE PRICE A COMPUTED AS PER THE SAID ANNE XURE. THIS CLEARLY SHOWS THAT EVEN THE RESERVE PRICE AT W HICH RESIDENTIAL PLOTS OR BUILDINGS ARE SOLD, THERE IS H UGE ELEMENT OF PROFIT IN THE GARB OF CONSERVANCY CHARGES FOR FI VE YEARS @ 10% OF THE TOTAL RESERVE PRICE AND ALSO PROVISION F OR UNFORESEEN CHARGES @ 15% OF THE RESERVE PRICE SO DE TERMINED. IT IS PERTINENT TO MENTION HERE THAT ALL THE UNFORE SEEN CHARGES HAVE ALREADY BEEN CONTEMPLATED IN THE COMPUTATION O F RESERVE PRICE UNDER THE HEAD OVERHEAD CHARGES AT SUB-PARA (V) WHERE PROVISION FOR OTHER PUBLIC UTILITY HAS ALRE ADY BEEN CONSIDERED. IT IS FURTHER SUBMITTED THAT ALONG WITH COPY OF THE PUNJAB TOWN IMPROVEMENT (UTILISATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, SHRI BHASIN HAS APPENDED A REPORT DATE D 04.06.2015 WHICH IS IN GURMUKHI SCRIPT AND ITS ENGL ISH TRANSLATION AS UNDER :- IT IS WORTH MENTIONING HERE THAT IMPROVEMENT TRUST GETS NO GRANT FROM THE GOVERNMENT. TRUST GETS ITS INCOME F ROM SALE OF PLOTS/SHOPS/COMMERCIAL SITES ONLY. OTHER THAN T HIS, THE TRUST HAS NO OTHER ADDITIONAL SOURCE OF INCOME. TH E TRUST SPENDS THE INCOME GENERATED OUT OF THE SAID ACTIVIT IES ON THE PUBLIC UTILITY SERVICES. IT CLEARLY SHOWS THAT THERE IS ADMISSION THAT THE T RUST WITH THE INTENTION OF PROVIDING PUBLIC UTILITY SERVICES FIRST DOES BUSINESS OF PURCHASE AND SALE OF LANDED PROPERTY LI KE A BUILDER AND AFTER EARNING AS HUGE PROFIT S POSSIBLE I.E. BY PUTTING THE RESERVE PRICE AT A HIGH PITCHED FIGURE AND ALSO PUTTING THE COMMERCIAL PLOTS AND COMMERCIAL BUILDIN G ON AUCTION, IT SPENDS ON SUCH PUBLIC UTILITY SERVICES WHICH IS EMINENTLY HIT BY THE PROVISO TO SECTION 2(15) OF TH E INCOME TAX ACT, 1961. IT CLEARLY FALSIFIES THE CLAIM OF MR. B HASIN THAT TRUSTS HAVE INCOME FROM OTHER SOURCES AS CONTEMPLAT ED IN SECTION 68 OF THE ACT. THIS SHOWS THAT THE GOVERNM ENT DOES NOT GIVE TO TRUSTS WHAT IT ITSELF HAS ASSURED THE T RUSTS IN THE ACT. IT MAY FURTHER BE MENTIONED THAT TRUSTS ARE N OT AGENT OF THE STATE AS IF IT WERE SO, THERE WOULD NOT HAVE BE EN ANY PROVISION AS SECTION 70 IN THE ACT WHICH EMPOWERS T HE STATE GOVERNMENT TO ATTACH THE RENTS AND OTHER INCOME OF THE TRUST. AIT IS SUBMITTED THAT THE FACTUM OF THE TRUSTS MAKI NG EXORBITANT PROFIT IS BEST ELUCIDATED FROM THE WAY T HE IMPROVEMENT TRUST PATHANKOT HAS SOLD A PLOT OF LAND TO INCOME TAX DEPARTMENT. THE PRICE IT HAD INFORMED T O THE DEPARTMENT IN 2011 WAS RS.5,03,30,800/- BUT IN THE YEAR 2014, THE PRICE FOR THE SAME PLOT WAS INTIMATED AT RS.10,43,65,946/-. THUS IN A PERIOD OF THREE YEAR AND A HALF, ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 21 IT HAD MORE THAN DOUBLED THE PRICE OF ITS PLOT MEAS URING 60.35 MARLAS. AN AFFIDAVIT OF SHRI CHARAN DASS, AC IT, PATHANKOT IS ENCLOSED IN SUPPORT OF THIS FACT. IF THIS IS THE WAY THE TRUST DOES CHARITY BY WAY OF DEVELOPING CIT IES AND TOWN THEN CERTAINLY, IT AMOUNTS TO ROBBING PETER TO PAY PAUL AND SURELY SUCH AN ACTIVITY CANNOT BE CLOTHED AS CH ARITABLE ACTIVITY. IN VIEW OF ABOVE, IT IS PRAYED THAT THE APPEALS OF THE ASSESSEE BE DISMISSED B: IN THE CASE OF AMRITSAR IMPROVEMENT TRUST IT IS SUBMITTED THE ABOVE APPEALS HAVE BEEN RESTORE D BY THE HONBLE PUNJAB & HARYANA HIGH COURT TO THE TRIBUNAL VIDE ITS ORDER IN ITA NO.100 OF 2014 (O&M) DATED 06.08.2014 AS PER THE DIRECTIONS CONTAINED IN PARA 8 OF THE ORDER. IT IS SUBMITTED THAT THOUGH THE HONBLE PUNJAB & HA RYANA HIGH COURT HAS DIRECTED THE TRIBUNAL TO ADJUDICATE THE ISSUE REGARDING THE NATURE OF ACTIVITIES OF THE APPELLANT TRUST WHETHER THEY ARE IN THE NATURE OF CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT IN RESPECT OF A SSESSMENT YEARS IN QUESTION OR NOT, KEEPING IN VIEW THE ARGUM ENTS RAISED BY THE LEARNED COUNSEL FOR THE APPELLANT-ASS ESSEE. IT IS SUBMITTED THAT THE ACTIVITIES OF THE TRUST AR E NOT IN THE NATURE OF CHARITABLE FOR MULTIPLE REASONS, I.E. A. THE ASSESSEE TRUST IS ENGAGED IN THE SALE AND PU RCHASE OF PROPERTIES WITH A COMMERCIAL MOTIVE. FIRST, IT P URCHASES LANDED PROPERTIES INCLUDING PLOTS AND SELLS THE PLO T IN TWO CATEGORIES I.E. RESIDENTIAL AND COMMERCIAL. THE RE SIDENTIAL PLOTS ARE SOLD AT RESERVE PRICE WHICH IS FIXED BY I NCLUDING ABNORMAL PROFITS IN THE GARB OF : A) CONSERVANCY CHARGES FOR 5 YEARS @ 10% PER MONTH PER ACRE B) PROVISIONS OF UNFORESEEN CHARGES @ 15% PER CENT OF TOTAL RESERVE PRICE IS COMPUTED AS PER THE ANNEXURE TO TH E PUNJAB TOWN IMPROVEMENT (UTILISATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983 (COPY ALREADY SUBMITTED IN JALANDHAR IMPROVEMENT TRUSTS CASE IN ITA NO.402/ASR/2014). IT IS CLEAR THAT THE RESIDENTIAL PLOTS/BUILDINGS AR E SOLD WITH PROFIT MOTIVE AND THUS PARTAKE THE COMMERCIAL CHARA CTER THOUGH FOR THE ALLOTTEES THE SAME IS FOR RESIDENCE PURPOSES. THUS, IT IS CLEAR THAT THIS ACTIVITY IS COMMERCIAL ACTIVITY FOR THE ASSESSEE TRUST. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 22 THE TRUST SELLS THE PLOTS/BUILDINGS BY WAY OF OPEN AUCTION WITH A FIXED RESERVE PRICE AND TRIES TO GET AS MUCH AS PROFIT AS IS POSSIBLE AND IF THE BIDDERS DO RAISE THE BID BEYOND THE RESERVE PRICE, THE AUCTION IS CANCELLED. THUS, IT IS CLEAR THAT IN THIS ACTIVITY ALSO NO CHARITY IS INVOLVED. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGEMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF AN DHRA PRADESH STATE SEED CERTIFICATION AGENCY V CHIEF COMMISSIONER OF INCOME TAX & OTHERS REPORT 83 DTR 0 023 (COPY ENCLOSED FOR KIND PERUSAL). IN THIS JUDGEMEN T, THE HONBLE COURT HAS HELD :- THAT THE PETITIONER WAS ENGAGED IN CERTIFYING THE VARIETIES OF SEEDS GROWN BY THE CLIENTS WHO FINALLY CARRY OUT TRADE OR COMMERCE IN CERTIFIED SEEDS GROWN BY T HE CLIENTS WHO FINALLY CARRY OUT TRADE OR COMMERCE IN CERTIFIED SEEDS. THUS, PETITIONER HAD RENDERED ITS SERVICES NOT DIRECTLY TO FARMERS BUT WAS RENDERING ITS SERVICES DIRECTLY TO ITS CLIENTS/AGENTS WHO ARE ENG AGED IN TRADING OF THE CERTIFIED SEEDS WITH PROFIT MOTIV E. ACTIVITIES OF THE PETITIONER HAD NOT INDICTED INVOL VEMENT OF ANY CHARITABLE ACTIVITY OR ADVANCE OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. FUNCTIONING OF THE PETI TIONER WAS AKIN TO A CORPORATE PROFIT EARNING SERVICE PROV IDER. THE TRUST ALSO SELLS PLOTS AND BUILDING FOR COMMERC IAL PURPOSES TO PERSONS WHO DO BUSINESS FOR THEIR OWN G AIN AND LIKEWISE THE TRUST CANNOT BE SAID TO BE DOING ANY A CTIVITY OF CHARITABLE NAME AS ITS ACTIVITIES FALL, STRUCO SENS U, IN THE SAME DOMAIN AS THE ACTIVITIES OF THE ANDHRA PRADESH STATE SEED CERTIFICATE AGENCY (SUPRA) FALL. ITS ACTIVITY OF SELLING PLOT AND BUILDING FOR RESIDENCE TO PERSONS THOUGH F OR THE ALLOTTEE IT MAY NOT FOR COMMERCIAL PURPOSE BUT THE WAY THE TRUST FIXES ITS RESERVE PRICE AS DISCUSSED ABOVE, IT IS CLEAR THAT THE ACTIVITY IS COMMERCIAL IN NATURE FOR THE T RUST AND NOT CHARITABLE. IT IS FURTHER PERTINENT TO MENTION HERE THAT WHEN T HE TRUST FIXES THE RESERVE PRICE FOR RESIDENTIAL AS WELL COM MERCIAL PLOTS OR BUILDINGS, IT INCLUDES IN ITS COST ALL THE AMENITIES WHICH IT PROMISES TO THE PEOPLE INCLUDING ALL DEVEL OPMENT CHARGES LIKE ROADS, SEWERAGE, WATER SUPPLY, STORM W ATER DRAINAGE, STREET LIGHTING AND LOCAL DISTRIBUTION SY STEM AND UNJUSTIFIED COST AS PER ROUGH COST ESTIMATE OF PUNJ AB STATE ELECTRICITY BOARD AND ALSO PROVISION FOR LANDSCAPIN G AND FURTHER INCREASED BY OVERHEAD CHARGES AS MENTIONED AT PARA 2 & 3 OF THE ANNEXURE. THUS, IT IS CLEAR THAT THE TRUST PROVIDES NO AMENI TY WHICH IS THE SOLE CLAIM OF THE ASSESSEE TRUST. IT MAY BE SU BMITTED THAT ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 23 THIS ANNEXURE HAS ALREADY BEEN BROUGHT TO THE NOTIC E OF THE HONBLE BENCH IN THE CASE OF JALANDHAR IMPROVEMENT TRUST IN ITA NO.402/ASR/2014. NOW COMING TO THE TWO DECISIONS WHICH THE HONBLE B ENCH ASKED THE UNDERSIGNED TO COMMENT UPON. IT IS SUBMI TTED IN THE CASE OF STOCK EXCHANGE AHMEDABAD V ASSISTANT COMMISSIONER OF INCOME TAX REPORTED AT 74 ITD 0001, IT MAY BE SUBMITTED THAT AS DISCUSSED ABOVE, THERE IS NO E LEMENT OF CY PRESS INVOLVED IN THE ACTIVITIES OF THE TRUST. IT MAY BE MENTIONED HERE THAT THE MOST DISTINGUISHABLE FEATUR E IS THE TRUST IS IT IS RENDERING NO GENERAL PUBLIC UTILITY AS WHATEVER PUBLIC UTILITY SERVICE IT IS PROVIDING, IT FIRST RE COVERS ITS COST FROM THE BUYERS AS DISCUSSED ABOVE. FURTHER, IT IS SUBMITTED THAT THE DECISION IN THE CASE OF ITO VS. TRILOK TIR ATH VIDYAVATI CHUTTANI CHARITABLE TRUST OF CHANDIGARH B BENCH REPORTED AT 90 ITD 569 DOES NOT HOLD GOOD FOR TWO REASONS: THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE ABOV E ORDER HAD RESTORED THE ISSUE TO THE BENCH BEING WELL AWAR E OF THE FACT THAT THE TRUST HAD BEEN GRANTED REGISTRATION B Y THE BENCH. THE HIGH COURT CLEARLY DID NOT HOLD THAT ON CE THE REGISTRATION IS GRANTED, EXEMPTION UNDER SECTION 11 CANNOT BE DENIED TO THE ASSESSEE ON THE GROUND THAT IT WAS NO T A CHARITABLE INSTITUTION. IF THIS DECISION OF THE TR IBUNAL IS TO PREVAIL THEN RESTORATION OF THE ISSUE TO THE TRIBUN AL BY THE HIGH COURT WOULD BECOME REDUNDANT. IT IS SUBMITTED THAT SUBMISSIONS MADE IN THE CASE O F JALANDHAR IMPROVEMENT TRUST AND OTHER TRUST DURING THE COURSE OF HEARING OF TRUSTS CASES ARE ALSO PRESSED INTO SERVICE IN THESE APPEALS. IN VIEW OF THE ABOVE SUB MISSIONS, IT IS PRAYED THAT THE ISSUE MAY KINDLY BE DECIDED IN F AVOUR OF THE REVENUE. 35. WHILE DEALING WITH THE PROFIT MOTIVE ALLEGATION OF THE REVENUE AUTHORITIES, IT IS ESSENTIAL TO APPRECIATE THE DIFF ERENCE THAT PROFIT ON SALE DOES NOT ESSENTIALLY AND NECESSARILY IMPLY PRO FIT MOTIVE IN ACTIVITIES OF THE ASSESSEE TRUST. WHAT IS 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 COOR DINATE 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 LARG E. OF COURSE, IT IS IMPORTANT AS TO WHAT ARE THE ACTIVITI ES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORT ANT IS WHAT IS THE PREDOMINANT MOTIVATION FOR SUCH ACTIVIT IES. NO ACTIVITY, BY ITSELF, COULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TRIGGERED BY ECONOMIC GREED. THERE IS NO ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 24 DIFFERENCE IN WHAT A SOLDIER AND A MERCENARY DOES, BOTH USE BULLETS TO DEFEND THEIR INTERESTS, BUT WHILE A SOLD IER DOES IT OUT OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. THE ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTI ONS ARE SO MATERIALLY DIFFERENT THAT THE CHARACTER OF ACTIVITY IS ALTOGETHER CHANGED. CLEARLY, UNDERLYING MOTIVE AND TRIGGER FOR DOING WHAT A PERSON DOES IS, IS IMPORTANT FOR D ETERMINING WHETHER SUCH AN ACTION IS IN THE COURSE OF BUSINESS OR CHARITY. WHAT IS REALLY, THEREFORE, REQUIRED TO BE CAREFULLY EXAMINED, IN ORDER TO FIND WHETHER AN ACT OF THE IN STITUTION IS CHARITABLE OR NOT, IS NOT ONLY TO ASSESS THE WORK B EING DONE BY THE INSTITUTIONS, WHICH CLAIM TO BE PURSUING CHARIT ABLE ACTIVITIES, BUT ALSO THE ECONOMIC DYNAMICS AND MOTI VATIONS 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 THAT SINCE IT IS NOT A DESIRABLE STATE OF AFFAIRS FOR THE STATE TO SUBSIDIZE BUSINESSES, AND TO ENSURE HIGHEST DEGR EE OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSE TS, 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 FUNCT IONING OF THE IMPROVEMENT TRUST A COMMERCIAL VENTURE. IT IS ALSO IMPORTANT THAT THIS USE OF BIDDING PROCESS IS ONLY IN THE CONTEXT OF COMMERCIAL UNITS ETC. THE DEVELOPMENT OF COMMERCIAL AREAS IS I N 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 CA USE, IT IS NOT NECESSARY THAT THE BUSINESSMEN, BUYING SUCH UNITS, MUST ALSO BENEFIT. THE DENIAL OF ANY ADVANTAGE, AT THE COST O F GENERAL PUBLIC, TO THE BUSINESS ENTITIES BUYING THE COMMERCIAL AREA S, IN OUR CONSIDERED VIEW, DOES NOT AMOUNT TO AN DEFEATING AN OBJECT OF GENERAL PUBLIC UTILITY. IN THIS CONTEXT, IT IS IMP ORTANT TO UNDERSTAND THE BENEFIT FROM 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 THE SALE OF RESIDENTIAL UNIT S, 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 WO RKED OUT. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT A SPECT BUT HE ALLEGES PROFIT MOTIVE EMBEDDED IN THIS FORMULA AS S HOWN BY ADJUSTMENTS FOR (A) CONSERVANCY CHANGES FOR 5 YEARS @ 10% PER MONTH PER ACRE; AND (B) PROVISION FOR UNFORESEEN CH ARGES @ 15% OF TOTAL RESERVE PRICE. FIRSTLY, EVEN IF THIS ALLEGA TION ABOUT PRESENCE OF THE TWO ELEMENTS ONLY TO MAXIMIZE THE PROFIT BE TAK EN AS CORRECT, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THIS IS NOT THE PRESENCE OF ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 25 PROFIT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHA RITABLE CHARACTER OF THE ACTIVITIES BUT IT IS THE ABSENCE OF RESTRICTION S ON MAKING PROFITS WHICH VITIATES THE CHARITABLE CHARACTER OF THE ACTI VITIES. IN THE INDIAN CHAMBER OF COMMERCE (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND REFERRED TO IN CBDT IN STRUCTION NO. 1024 (SUPRA), IT HAS BEEN STATED THUS: ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE A CTIVITY OF A TRUST CONSISTS OF CARRYING ON OF A BUSINESS AND THE RE ARE NO RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICA TION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT. . THAT APART, MERE PRESENCE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJECT OF INCLUDING THESE TWO ITEMS IN THE FORMULA WAS PROFIT MAXIMISAT ION. 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 TRUST ARE RECOVERED FROM THE END BU YERS OF THE RESIDENTIAL UNITS OR LAND. THE ELEMENT OF CHARITY IS NOT IN GIVING AWAY THE RESIDENTIAL UNITS AT SUBSIDIZED OR LOW PRI CES BUT IN PURSING THE OBJECT OF ADVANCEMENT OF OBJECT OF GENERAL PUBL IC UTILITY IN PLANNED DEVELOPMENT OF THE ARE IN ACCORDANCE WITH T HE POLICIES OF THE STATE GOVERNMENT. 37. A LOT OF EMPHASIS HAS BEEN MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE FACT THAT NOTHING, OR VERY LI TTLE, HAS BEEN DONE BY THE TRUSTS FOR THE POOR PEOPLE BUT WHAT THIS ARG UMENT OVERLOOKS IS THAT THE ASSESSEE TRUST IS NOT GRANTED REGISTRATION UNDER SECTION 2 (15) FOR IMPLEMENTING POVERTY ALLEVIATION PROGRAMS OR DOING OTHER ACTS OF CHARITY BUT IT IS GRANTED REGISTRATION BEC AUSE WHAT IT IS PURSUING, BY FOLLOWING THE STATE GOVERNMENT POLICIE S FOR PLANNED DEVELOPMENT OF CITY, IS ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY. PURSUING AN OBJECT OF GENERAL PUBLIC UTILI TY DOES NOT NECESSARILY INVOLVE MORE NOTICEABLE DIRECT ACTS OF CHARITY DRIVEN BY COMPASSION AND BENEVOLENCE. THERE IS SO MUCH TO BE DONE BY THE GOVERNMENT AGENCIES, AS THESE ASSESSEE TRUSTS ARE P ERCEIVED TO BE, THAT NO MATTER WHAT THESE AGENCIES DO, THERE IS STI LL LOT LEFT TO BE DONE. JUST BECAUSE THESE AGENCIES COULD HAVE DONE M ORE, SUCH EXPECTATIONS, NO MATTER HOW LEGITIMATE, DO NOT OBLI TERATE THE WORK DONE BY THESE AGENCIES AND THE ROLE PLAYED BY THESE AGENCIES FOR PUBLIC GOOD IN FURTHERANCE OF ADVANCEMENT OF OBJECT S OF GENERAL PUBLIC UTILITY. 38. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO PO INTED OUT THAT THE ASSESSEE TRUSTS DO NOT GET ANY GRANT FROM THE STATE GOVERNMENT WHICH SHOWS THAT FIRST THEY MAKE PROFITS FROM LAND DEALS AND THEN USE THE INCOME SO EARNED FOR THE PUB LIC CAUSES STATED. IT IS FOR THIS REASON, ACCORDING TO THE LEA RNED DEPARTMENTAL REPRESENTATIVE, THAT THE ASSESSEE TRUST CANNOT BE S AID TO BE ANYTHING OTHER THAN A BUSINESS SIMPLICITOR. ON THE CONTRARY, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E, IT IS LIKE ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 26 ROBBING PETER TO PAY PAUL. WE ARE UNABLE TO SHARE THESE PERCEPTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. AN OBJE CT OF GENERAL PUBLIC UTILITY DOES NOT NECESSARILY REQUIRE THAT TH E ACTIVITIES OR THE BENEFICIARIES MUST BE FUNDED OR SUBSIDIZED BY THE S TATE. AS LONG AS BROADER PUBLIC CAUSE IS SERVED, WHETHER BY THE STAT E FUNDING OR BY EFFICIENT REGULATION OF THE AFFAIRS, IT IS AN OBJEC T OF GENERAL PUBLIC UTILITY. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT COSTS OF PROPER DEVELOPMENT OF AREA ARE ALSO COSTS INCIDENTAL TO TH E PLOTS AND UNITS SOLD BY THE ASSESSEE AND, THEREFORE, THESE TWO THIN GS SHOULD NOT BE SEEN IN ISOLATION. AS FOR THE SPECIFIC INSTANCE OF INORDINATE HIKE IN PRICES WITHIN A SHORT PERIOD OF THREE AND A HALF YE ARS, WE ARE UNABLE TO COMMENT UPON THE SAME AS FULL FACTS RELATING THE RETO ARE NOT ON RECORD. THAT ASPECT, HOWEVER, FOR THE DETAILED REAS ONS SET OUT ABOVE, DOES NOT AFFECT OUR CONCLUSION ANYWAY. 39. AS FOR THE DECISION OF THE COORDINATE BENCH IN THE CASE OF THE PUNJAB URBAN DEVELOPMENT AUTHORITY VS CIT [(2006) 1 03 TTJ 988 (CHANDIGARH)] , IT IS A CASE IN WHICH THERE IS NO MENTION ABOUT SELLING THE RESIDENTIAL UNITS AND PLOTS AT THE PRIC E ON THE BASIS OF A FORMULAE LAID DOWN BY THE STATUTE. IN THE PRESENT C ASE, THERE IS NO DISPUTE ON THIS ASPECT, AND THAT IS A CRUCIAL ASPEC T HAVING BEARING ON THE CONCLUSIONS. THERE WAS ALSO NO, AND COULD NO T HAVE BEEN ANY, OCCASION TO CONSIDER THE IMPACT, WHAT IS REFER RED TO AS KILL EFFECT, OF THE AMENDMENTS BY THE FINANCE ACT 2015. THE REVENUE, THUS, DERIVES NO ADVANTAGE FROM THIS JUDICIAL PRECE DENT. AS REGARDS THE DECISION OF THE COORDINATE BENCH IN THE CASE OF AMRITSAR IMPROVEMENT TRUST (SUPRA), ON WHICH SO MUCH RELIANCE HAS BEEN PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS ALREADY SET ASIDE BY HONBLE JURISDICTIONAL HIGH COURT. AS A MA TTER OF FACT, IN THE COURSE OF PROCEEDINGS BEFORE HONBLE HIGH COURT IN THE CASES OF OTHER IMPROVEMENT TRUSTS, LEARNED COUNSEL FOR THE R EVENUE HAS FAIRLY ACCEPTED THAT THE DECISIONS OF THE TRIBUNAL, FOLLOW ING THE AFORESAID DECISION, ARE REQUIRED TO BE SENT BACK TO THE TRIBU NAL FOR FRESH DETERMINATION ON THE SCOPE OF PROVISIONS OF SECTION 2 (15). THE REVENUE, THUS, DERIVES NO ADVANTAGE FROM THIS JUDIC IAL PRECEDENT EITHER. 40. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CO NSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DE CLINING THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) TO THE ASSESS EE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT COVERED BY ADVANCEM ENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. WE, THEREFORE, DI RECT 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. 41. IN THE RESULT, ITA NO. 496/ASR/ 2013 IS THUS AL LOWED IN THE TERMS INDICATED ABOVE. 7. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION O F THIS BENCH OF THE TRIBUNAL, DATED 10.09.2015, IN THE CASE OF HOSHI ARPUR IMPROVEMENT ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 27 TRUST VS. ITO (SUPRA), WHICH IS SQUARELY IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE, WE ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. AS REGARDS GROUND NO.5 TAKEN BY THE ASSESSEE WIT H REGARD TO THE ACTION OF THE LD. CIT(A) BY WHICH HE HAD CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF VALUATION OF CLOSING STOCK, WE HAVE ALREADY HELD THE INCOME OF THE ASSESSEE TO BE ELIGIBLE FOR EXEMP TION U/S 11 OF THE ACT AND THEREFORE, THE ADDITION SUSTAINED BY THE LD. CI T(A) HAS BECOME INFRUCTUOUS. THE ADDITION AS SUSTAINED HAS INCREASE D THE INCOME, WHICH AGAIN WILL BE EXEMPT U/S 11 AND THEREFORE, THIS AD DITION IS ALSO INFRUCTUOUS. 7. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE ITAT, AMRITSAR BENCH, IN ASSESSEES OWN CASE FOR THE ASST YEAR: 20 08-09, PASSED IN ITA NO.416(ASR)/2013, DATED 02.06.2016, THE PRESENT APP EAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 9. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA N O.242 (ASR)/2014 FOR THE ASSESSMENT YEAR 2008-09 WITH REGARD TO CONF IRMATION OF PENALTY BY THE LD. CIT(A), LEVIED BY THE A.O U/S 271A OF TH E ACT. 10. THE LEARNED AR SUBMITTED THAT THAT ASSESSING O FFICER HAD IMPOSED THE PENALTY FOR FAILURE TO KEEP AND MAINTAIN BOOKS OF ACCOUNTS AS PRESCRIBED U/S 44AA OF THE I.T. ACT. THE CONTENTION OF THE ASSESSEE BEFORE AO WAS THAT THE ASSESSEE FOLLOWED DOUBLE ENTRY SYST EM TO COMPUTE THE TOTAL INCOME AND THERE WAS NO FINANCIAL DISCREPANCY BUT THE CONTENTION WAS NOT ACCEPTED BY ASSESSING OFFICER. THEREFORE, N OT SATISFIED WITH THE REPLY OF THE ASSESSEE HE IMPOSED PENALTY U/S 271A, WHICH WAS UPHELD BY THE LD. CIT(A). 11. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 28 12. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT SI NCE IT HAS BEEN ACCEPTED THAT ASSESSEE WAS ELIGIBLE FOR EXEMPTION U /S 11 AND THEREFORE, THE PROFITS OF THE ASSESSEE ARE NOT TAXABLE AS PER THE PROVISIONS OF SECTION 28 ONWARDS. THE LEARNED AR FURTHER SUBMITTED THAT S ECTION 44AA IS APPLICABLE ONLY IF THE ASSESSEE IS IN BUSINESS OR P ROFESSION, WHEREAS THE EXEMPTION HAS BEEN GRANTED TO THE ASSESSEE U/S 11 O F THE ACT. THE ASSESSEE IS NOT DEEMED TO BE IN BUSINESS OR PROFESS ION AND RATHER IT IS DEEMED TO BE ENGAGED IN CHARITABLE ACTIVITY, THERE FORE, SECTION 44AA IS NOT APPLICABLE. 13. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT INITIALLY T HE ASSESSE WAS NOT GRANTED EXEMPTION U/S 11 OF THE ACT, HOWEVER, THE A SSESSEE HAS SINCE BEEN GRANTED EXEMPTION U/S.11 FOR ASST. YEAR: 2008- 09, VIDE TRIBUNAL ORDER IN ITA NO. 416 DATED 02.06.2016, THEREFORE, I T IS OBVIOUS THAT ASSESSEE TRUST IS NOT ENGAGED IN THE BUSINESS OR PR OFESSION AND RATHER, IT IS ENGAGED IN THE CHARITABLE ACTIVITIES. THEREFORE, THE PROVISIONS OF SECTION 44AA WILL NOT APPLY AND IN CONSEQUENCE, THE PENALTY IMPOSED AND CONFIRMED BY LEARNED CIT(A) U/S 271A WILL NOT SURV IVE. 15. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, WHEN THE QUANTUM HAS BEEN DELETED IN ASSESSEES OWN CASE FOR THE ASST. YEAR: ITA NO.24 2 & 243 (ASR)/2014 ASST. YEAR: 2008-09 & 2010-11 29 2008-09, THE LEVY OF PENALTY DOES NOT SURVIVE. ACCO RDINGLY, THE PENALTY LEVIED AND CONFIRMED IS CANCELLED. 16. IN THE RESULT, THE APPEAL IN ITAT NO.242(ASR)/2 013 FILED BY ASSESSEE IS ALLOWED. 17. IN THE NUTSHELL, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:30.06.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER