Patiala Improvement Trust, Patiala V. ITO, Patiala

ITA 305/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8464 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Charitable institution
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.305/CHD/2013 (ASSESSMENT YEAR : 2009-10) ITA NO.1182/CHD/2013 (ASSESSMENT YEAR : 2010-11) AND ITA NO.874/CHD/2014 (ASSESSMENT YEAR : 2009-10) THE PATIALA IMPROVEMENT TRUST, VS. THE INCOME TAX OFFICER , CHOTTI BARADARI, PATIALA. WARD-1, PATIALA. PAN: AAAJI0034L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI Y.K.SUD RESPONDENT BY : SHRI MANOJ MISHRA, CIT DR DATE OF HEARING : 18.01.2016 DATE OF PRONOUNCEMENT : 15.02.2016 O R D E R PER RANO JAIN, A.M . : THE APPEALS FILED BY THE ASSESSEE IN ITA NO.305/CHD/2013 & ITA NO.1182/CHD/2013 ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA, DATED 16.1.2013 AND 17.10.2013 FOR ASSESSMENT YEARS 2009-10 AND 2010-11 2 RESPECTIVELY AND THE APPEAL OF THE ASSESSEE IN ITA NO.874/CHD/2014 IS DIRECTED AGAINST THE ORDER OF LE ARNED COMMISSIONER OF INCOME TAX (APPEALS), PATIALA DATED 30.7.2014 FOR ASSESSMENT YEAR 2009-10. 2. WE WILL FIRST TAKE UP THE APPEAL OF THE ASSESS EE IN ITA NO.305/CHD/2013. ITA NO.305/CHD/2013 : 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS DOING THE BUSINESS OF PLANNING, DEVELOP MENT AND IMPROVEMENT OF CITY. DURING THE ASSESSMENT PROCEEDINGS CITING VARIOUS INSTANCES WHICH POINT TO WARDS THE FACT THAT THE ASSESSEE IS ACTUALLY ENGAGED IN T HE BUSINESS ACTIVITIES, THE ASSESSING OFFICER REFERRED TO THE AMENDED PROVISIONS OF SECTION 2(15) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT) AND HELD THAT THE BU SINESS IS NOT ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE A CT. 4. BEFORE THE LEARNED CIT (APPEALS) DETAILED SUBMISSIONS WERE MADE, WHICH DID NOT FIND FAVOUR WI TH HIM AND THE APPEAL OF THE ASSESSEE WAS DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS COME IN APPEAL BEFORE U S, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LEARNED CIT (A) HAS ERRED IN DISALLOWI NG EXEMPTION U/S 11 OF THE I.T. ACT. ON THE BASIS THAT THE APPELLANT HAS NOT FOLLOWED ITS 3 OBJECTIVES IN LETTER & SPIRIT WITHOUT SPECIFYING ANY BASIS THAT OBJECTIVE OF THE APPELLAN T FALLS IN THE PROVISO TO SEC. 2(15) OF THE I.T. ACT. I.E. APPELLANT IS CARRYING ON ACTIVIT Y IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. 2. THAT THE LEARNED CIT (A) HAS ERRED IN HOLDING TH AT APPELLANT IS ENGAGED IN AN ACTIVITY IN THE NATURE OF TRADE COMMERCE & BUSINESS JUST ON THE BASIS THAT THERE IS VIOLATION OF RULES & FORFEITURE AMOUNT HAS NOT BEEN SHOWN AS INCOME WHICH IS FACTUALLY INCORRECT, OTHERWISE ALSO JUST ON THESE BASIS, HOLDING THAT ACTIVITY IS TRADE, COMMERCE & BUSINESS IS AGAINST LAW. HENCE RELIEF BE ALLOWED. 3. THAT THE LEARNED CIT (A) HAS ERRED IN HOLDING TH AT MAIN ACTIVITY IS SAME AS IN THE CASE OF ANY REAL ESTATE DEVELOPERS WITHOUT GOING INTO MERITS WHETHER OBJECTIVE ARE BUSINESS. FURTHER CIT (A) HAS ERRED IN HOLDING THE ACTIVITY AS TRADE, COMMERCE BUSINESS ON THE BASIS OF ACTIVITIES FOR ADVANCEMENT OF OBJECTIVE RATHER ON THE OBJECTS OF TRUST WHICH ARE COVERED BY THE DEFINITION OF CHARITABLE AS PER I.T. ACT. THAT LEARNED CIT (A) HAS ERRED IN DISALLOWING CLAIM U/S 11 OF TH E I.T. ACT. 4 THAT THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.974000/- WHENTHERE WAS NO INCOME AS PLOT WAS RESTORED TO THE APPLICANT ON FUL L PAYMENT OF AMOUNT. HENCE RELIEF BE ALLOWED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD DELETE OR MODIFY ANY GROUND OF APPEAL BEFORE THE SAME IS HEARD OR DISPOSED OFF. 4 6. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE ORDER OF THE I.T.A.T., CHANDIGA RH BENCH IN THE CASE OF THE IMPROVEMENT TRUST, SANGRU R VS. ITO, IN ITA NO.987/CHD/2014, DATED 14.12.2015. 7. THE LEARNED D.R., THOUGH VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED CIT (APPEALS), HE ADMITTED TO THE FACT THAT THE ACTIVITIES OF THE ASS ESSEE AND THAT OF THE IMPROVEMENT TRUST, SANGRUR ARE SIMILAR AND FOR SIMILAR REASON IN BOTH THE CASES THE DISALLOWAN CE HAS BEEN MADE. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER IN THE CASE OF THE IMPROVE MENT TRUST, SANGRUR (SUPRA), WE OBSERVE THAT THE FINDING S ARE RECORDED AT PARA 9 ONWARDS, IN FOLLOWING WORDS : 9. WE FIND THAT IN THE CASE OF HOSHIARPUR IMPROVEME NT TRUST VS. ITO, ITA NO. 496/ASR/2013 RELIED UPON BY THE ASSESSEE, THE ASSESSEE WAS AN IMPROVEMENT TRUST CONST ITUTED UNDER THE PUNJAB TOWN IMPROVEMENT ACT (PTIA), 1922, BY THE GOVERNMENT OF PUNJAB WITH THE PRINCIPAL OBJECTIVE OF BRINGING ABOUT IMPROVEMENT IN TOWNS BY THE MEANS SET OUT UNDE R SECTION 22 TO 26 OF THE PITA. THE HONBLE AMRITSAR BEN CH IN THE IMPUGNED CASE DEALT WITH THE ISSUE WHETHER THE MANN ER IN WHICH THE ASSESSEE TRUST WAS CONDUCTING ITS ACTIVITIE S CONSTITUTED ADVANCEMENT OF GENERAL PUBLIC UTILITY AS S ET OUT IN SECTION 2(15) AND FURTHER WHETHER THE WORK CEASED TO BE FOR CHARITABLE PURPOSE DUE TO THE FIRST PROVISO TO SECTIO N 2(15) 5 WHICH LAYS DOWN THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPO SE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATUR E OF TRADE, COMMERCE OR BUSINESS, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE INCOME FROM SUCH ACT IVITY. AS A COROLLARY THE HONBLE BENCH ADJUDICATED UPON THE ISSUE WHETHER THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMP TION U/S 11 READ WITH SECTION 2(15) OF THE INCOME TAX ACT. SINCE IN THE PRESENT CASE THE ASSESSEE TRUST IS ALSO AN IMPROVEMENT TRUST FORMED UNDER THE PUNJAB TOWN IMPROVEMENT ACT 1922 FOR THE PURPOSE OF IMPROVEMENT OF THE CITIES AND THE ISSUE BEFORE US IS THE CLAIM OF EXEMP TION U/S 11 READ WITH SECTION 2(15) OF THE ACT, WE FIND THAT THE CASE OF HOSHIARPUR IMPROVEMENT TRUST IS IDENTICAL TO THE ASSES SEES CASE AND THE RATIO PROPOUNDED THEREIN WOULD SQUARELY APPLY TO THE ASSESSEES CASE. ADVERTING TO THE DECISION IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST(SUPRA) WE FIND THAT THE HONBLE BENCH INTERPRETED THE PROVISION OF SECTION 2 (15) IN DETAIL AND HELD AT PARA 17 OF ITS ORDER THAT WHERE ACTIVITIES IN THE NAT URE OF TRADE/ COMMERCE/BUSINESS ARE INCIDENTAL TO THE MAIN OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY, THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED. THE RELEVANT PARA 17 OF THE OR DER, IS REPRODUCED HEREUNDER: 17. AS LONG AS THE OBJECT OF GENERAL PUBLIC UTILITY I S NOT MERELY A MASK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVI CES ARE BEING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONAFIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC UTI LITY CANNOT BE HIT BY THE PROVISO TO S. 2(15) THEREAFTER THE HONBLE BENCH APPLIED THE AFORESTATED PROPOSITION TO THE FACTS OF THE CASE AND HELD THAT T HE PRIMARY OBJECTIVE OF THE ASSESSEE TRUST WAS ADVANCEMENT OF GENERAL PUBLIC UTILITY AND THE ACTIVITIES IN THE NATURE OF BU SINESS CARRIED OUT BY IT WERE PRIMARILY TO SERVE THIS PURPOS E. THE HONBLE BENCH HELD THAT THE PROFIT MADE BY THE ASSESSE E TRUST 6 DID NOT OBLITERATE THE OVERALL OBJECT OF ADVANCEMENT O F GENERAL PUBLIC UTILITY. THUS IT HELD AT PARA 31 & 32 OF ITS O RDER THAT THE BUSINESS ACTIVITIES CARRIED OUT BY THE ASSESSEE TRUS T WERE NOT COVERED UNDER THE PROVISO TO SECTION 2(15) AND THE A SSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE AC T. THE RELEVANT PARA 31 & 32 OF THE ORDER ARE REPRODUCED AS FOLLOWS: 31. CLEARLY, THEREFORE, SO FAR AS PRE INSERTION OF EXPLANATIONS TO SECTION 2 (15), I.E. PRIOR TO 1ST APRIL 2009, IS CONCERNED, THE STAND TAKEN BY THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. ASSUMING THAT ALL THE ALLEGATIONS OF THE ASSESSING OFFICER, WITH RESPECT TO PRESENCE TO PROFIT MOTIVE IN ACTIVITIES OF THE ASSES SEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WITH T HE LARGER AND PREDOMINANT OBJECTIVE OF GENERAL PUBLIC U TILITY. IT IS ONLY WHEN, TO USE THE WORDS OF THE CBDT CIRCULA R CITED EARLIER IN THIS ORDER AND THE BENEFICIAL IMPACT OF WHICH HAS THE BINDING FORCE ON THE FIELD AUTHORITIES UNDER SECTION 119 OF THE ACT, THE ASSESSING OFFICER FINDS THAT THE INCOME IS INCOME OF ANY OTHER BUSINESS WHICH I S NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR INSTITUTION THAT THE SUCH AN INCOME WILL NOT BE EXEMPT FROM TAX. THERE IS NO FINDING TO THAT EFFECT BY ANY OF THE AUTHORITY BELOW. IN ANY CASE, IT IS NOT EVEN THE CASE OF REVENUE AUTHORITIES THAT THE ACTIVITIES OF THE TRU STS DO NOT SERVE THE OBJECTS OF THE GENERAL PUBLIC UTILITY BU T 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 ASSESS EE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WE RE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, AND THERE IS NOTHING TO DEMONSTRATE ANY PARADIGM SHIFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY OF TH E PROFIT MAKING BUT THAT DOES NOT OBLITERATE THE OVERA LL OBJECTS OF GENERAL PUBLIC UTILITY. AS REGARDS THE MAINTENANCE OF THE SEPARATE BOOKS OF ACCOUNTS FOR T HE BUSINESS ACTIVITIES PURSUED BY THE ASSESSEE TRUST, SI NCE ALL THE ACTIVITIES OF THE ASSESSEE TRUST ARE SAID TO BE O F THE BUSINESS NATURE, THE BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE TRUST MEET THIS REQUIREMENT AS WELL. OF COURSE, WE WILL DEAL WITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF PROFIT MAKING ACTIVITIES A LITTLE LATE R, BUT, SUFFICE TO SAY, THAT ON THE ADMITTED FACTS OF THIS CA SE, SO FAR PERIOD PRIOR TO 1ST APRIL 2009 IS CONCERNED AND FOR THE REASONS SET OUT ABOVE, THE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) COULD NOT HAVE BEEN DECLINED AT ALL. 32. TURNING ONCE AGAIN TO THE AMENDMENTS BROUGHT ON THE STATUE WITH EFFECT FROM 1ST APRIL 2009, WE HAVE TO UNDERSTAND THAT THERE ARE THE TWO MUTUALLY EXCLUSIVE SITUATIONS IN WHICH BUSINESS ACTIVITIES ARE CARRIED OUT BY THE ASSESSE TRUST ONE, IN WHICH THE OBJECT OF GEN ERAL PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HID E THE 7 TRUE PURPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS ET C [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DATED 19TH DECEMBER 2008 ISSUED AT THE POINT OF TIME WHEN FIRST PROVISO TO SECTION 2(15) WAS INTRODUCED]; AND SECON D, IN WHICH ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUA L CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY, [INSERTION OF NEW PROVISO TO REPLACE FIRST AND SECOND PROVISO TO SECTION 2(15)- EFFECTIVE 1ST APRIL 2016 I.E. ASSESSMENT YEAR 2016- 17]. AS FOR THE FI RST CATEGORY, POST 1ST APRIL 2009 AMENDMENT, THIS CATEGORY CANNOT BE TREATED AS COVERED BY SECTION 2(15) BUT TH EN THATS NOT THE CASE BEFORE US. IT IS NOT, AND IT CANNO T BE, THE CASE THAT THE GOVERNMENT FORMED THESE TRUSTS BY LEGISLATING THE PUNJAB TOWNS IMPROVEMENT ACT 1922 BECAUSE IT WANTED TO CARRY ON THE BUSINESS AS COLONIZ ER OR DEVELOPER. THEREFORE, BY NO STRETCH OF LOGIC, FORMATI ON OF TRUSTS CAN BE SAID TO A MASK OR DEVICE TO HIDE T HE TRUE PURPOSE OF THE DOING BUSINESS. THE CASE OF THE REVEN UE AT BEST IS THAT THE MANNER IN WHICH THE ACTIVITIES ARE CARRIED OUT IS OF A PROFIT SEEKING ENTITY THAT A BUSINESS INH ERENTLY IS. IN OTHER WORDS, THUS, THE CASE OF THE REVENUE IS THAT THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE AND BUSINESS ARE CARRIED OUT FOR ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY. THIS SITUATION AT BEST FALLS IN T HE SECOND CATEGORY. HOWEVER, THESE CASES, FOR THE DETAILED REASONS SET OUT ABOVE, THE EXCLUSION OF THESE CASES F ROM SECTION 2(15) IS ONLY EFFECTIVE 1ST APRIL 2016, I.E. ASSESSMENT YEAR 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HONBLE SUPREME COURT, IN THE CASE OF VATIKA TOWNSHIP PVT LTD (SUPRA), THAT, FOLLOWING THE MAXIM LEX PROSPICIT NON RESPICI, THE LAW, PARTICULARLY WITH RESPECT TO A REQUIREMENT WHICH IS MORE ONEROUS ON T HE ASSESSEE, CANNOT BE TREATED AS RETROSPECTIVE IN EFFE CT UNLESS IT IS SPECIFICALLY LEGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREFORE, THIS AMENDMENT CANNOT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFFECT . IN VIEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVISO TO SECTION2(15) BUT BEFORE 1ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRUST IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY, THE BENEFIT OF SEC TION 11 READ WITH SECTION 2 (15) CANNOT BE DECLINED. NOTHING, THEREFORE, TURNS ON THE ASSESSEE CARRYING OUT, EVEN I F THAT BE ACTUALLY SO, ACTIVITIES IN THE NATURE OF TRADE, COMM ERCE OR BUSINESS ETC AS LONG AS THESE ACTIVITIES ARE CARRI ED OUT IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVELOPMENT OF CITIES AND TOWNS IS AN OBJECT OF GENE RAL PUBLIC UTILITY, AND THAT IS AN OBJECT CONSISTENTLY FOLLO WED BY THE ASSESSEE IN ALL ITS ACTIVITIES. FOR THIS SHORT R EASON ALONE, THE STAND OF THE AUTHORITIES BELOW MUST BE HELD T O BE UNSUSTAINABLE IN LAW. 8 THE HONBLE BENCH FURTHER HELD AT PARA 33, 35 AND 36, OF ITS ORDER THAT PROFIT MAKING WAS NOT THE MAIN OBJECT OF THE ASSESSEE TRUST. 33. WE MUST, HOWEVER, ALSO DEAL WITH THE FUNDAMENTAL ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSESSE E HAS SOLD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTIAL AND COMMERCIAL LANDS JUST TO EARN PROFIT 35. WHILE DEALING WITH THE PROFIT MOTIVE ALLEGATION OF THE REVENUE AUTHORITIES, IT IS ESSENTIAL TO APPRECIATE THE DIFFERENCE THAT PROFIT ON SALE DOES NOT ESSENTIALLY AN D NECESSARILY IMPLY PROFIT MOTIVE IN ACTIVITIES OF THE ASSESSEE TRUST. WHAT I S IMPORTANT IS THE MOTIVE OR PREDOMINANT OBJECT OF THE ACTIVITIES. AS WE DO SO, WE MAY ONLY MAKE A NOTE OF THE FOLLOWING OBSERVATIONS MADE BY A COORDINATE BENCH DECISION IN THE CASE OF DEVKI DE VI FOUNDATION VS DIT [(2015) 56 TAXMANN.COM 56 (DELHI)]: 29THE SOUL OF CHARITY IS BENEVOLENCE AND GENEROSITY TOWARDS OTHERS AND THE COMMUNITY AT LARGE. OF COURSE, IT IS IMPORTANT AS TO W HAT ARE THE ACTIVITIES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORTANT IS WHAT IS THE PREDOMINANT MOTIVATION FOR SUCH ACTIVITIES. NO ACTIVITY, BY ITSELF, C OULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TRIGGERED BY ECONOMIC GREED. THERE IS NO DIFFERENCE IN WHAT A SOLDIER AND A MERCENARY DOES, BOTH USE BULLETS T O DEFEND THEIR INTERESTS, BUT WHILE A SOLDIER DOES IT OU T OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. TH E ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTIO NS 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 IMPORTAN T FOR DETERMINING 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 INSTITUTION IS CHARITABLE OR NOT, IS NOT ONLY TO AS SESS THE WORK BEING DONE BY THE INSTITUTIONS, WHICH CLAIM T O BE PURSUING CHARITABLE ACTIVITIES, BUT ALSO THE ECONOMI C DYNAMICS AND MOTIVATIONS OF SUCH ACTIVITIES. 36. LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE COMMERCIAL PLOTS AND UNITS ARE AUCTIONED O FF 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 SU BSIDIZE BUSINESSES, AND TO ENSURE HIGHEST DEGREE OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSET S, COMPETITIVE BIDDING FOR COMMERCIAL UNITS IS A SAFE OPTI ON, AND THAT THE USE OF BIDDING PROCESS IS JUSTIFIED FO R THE LARGER CAUSES. THE BIDDING PROCESS ENSURES TRANSPARE NCY IN FUNCTIONING OF THE IMPROVEMENT TRUSTS AND THAT, BY ITSELF, DOES NOT MAKE THE FUNCTIONING OF THE IMPROVEM ENT TRUST A COMMERCIAL VENTURE. IT IS ALSO IMPORTANT THAT THI S USE OF BIDDING PROCESS IS ONLY IN THE CONTEXT OF COMMERCIAL UNITS ETC. THE DEVELOPMENT OF COMMERCIAL 9 AREAS IS IN THE INTEREST OF PLANNED GROWTH OF AN ARE A AND WHEN SUCH COMMERCIAL AREAS DEVELOP, ALL THE STAKEHOLDERS IN THE DEVELOPMENT OF THAT AREA BENEFIT. IN ORDER OF THIS BENEFIT TO THE COMMON CAUSE, IT IS NOT NECESSARY THAT THE BUSINESSMEN, BUYING SUCH UNITS, MUST ALSO BENEFIT. THE DENIAL OF ANY ADVANTAGE, AT THE COST OF GENERAL PUBLIC, TO THE BUSINESS ENTITIES BUYING THE COMMERCIAL AREAS, IN OUR CONSIDERED VIEW, DOES NOT AMOUNT TO AN DEFEATING AN OBJECT OF GENERAL PUBLIC UT ILITY. IN THIS CONTEXT, IT IS IMPORTANT TO UNDERSTAND THE BEN EFIT 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 FO R THE SALE OF RESIDENTIAL UNITS, IT IS AN ADMITTED POSITION THAT IN TERMS OF THE PUNJAB TOWN IMPROVEMENT (UTILIZATION OF LAND AND ALLOTMENT OF PLOTS) RULES, 1983, THERE IS A FORMULAE ON THE BASIS OF WHICH THE PRICE IS WORKED O UT. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT ASPECT BUT HE ALLEGES PROFIT MOTIVE EMBEDDED IN THIS FORMULA AS SHOWN BY ADJUSTMENTS FOR (A) CONSERVANCY CHANGES FOR 5 YEARS @ 10% PER MONTH PER ACRE; AND (B) PROVISION FOR UNFORESEEN CHARGES @ 15% OF TOTAL RESE RVE PRICE. FIRSTLY, EVEN IF THIS ALLEGATION ABOUT PRESENCE OF THE TWO ELEMENTS ONLY TO MAXIMIZE THE PROFIT BE TAKEN AS CORRECT, IT IS IMPORTANT TO BEAR IN MIND THE FACT THA T THIS IS NOT THE PRESENCE OF PROFIT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHARITABLE CHARACTER OF THE ACTIVITIES BUT IT IS THE ABSENCE OF RESTRICTIONS ON MAKING PROFITS WHICH VITIA TES THE CHARITABLE CHARACTER OF THE ACTIVITIES. IN THE INDIA N CHAMBER OF COMMERCE (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND REFERRED TO IN CBD T INSTRUCTION NO. 1024 (SUPRA), IT HAS BEEN STATED THUS : ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDENT OF BUS INESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CONSISTS OF C ARRYING ON OF A BUSINESS AND THERE ARE NO RESTRICTIONS ON IT S MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT.. THAT APART, MERE PRESEN CE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJ ECT OF INCLUDING THESE TWO ITEMS IN THE FORMULA WAS PROFI T MAXIMISATION. THE INCLUSION FOR PROVISION FOR UNFORESE EN CHARGES, IN OUR UNDERSTANDING, IS A FAIR AND CONSERVA TIVE APPROACH TO ENSURE THAT THE COSTS INCURRED BY THE ASSESSEE TRUST ARE RECOVERED FROM THE END BUYERS OF THE RESIDENTIAL UNITS OR LAND. THE ELEMENT OF CHARITY IS NOT IN GIVING AWAY THE RESIDENTIAL UNITS AT SUBSIDIZED OR LOW PRICES BUT IN PURSING THE OBJECT OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY IN PLANNED DEVELOPMENT OF THE AR E IN ACCORDANCE WITH THE POLICIES OF THE STATE GOVERNMENT. 10 THEREAFTER THE HONBLE BENCH CONCLUDED AT PARA 40 OF THE ORDER THAT THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EX EMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT, AS FOLLOWS : 40. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THE BENEFIT OF SECTION 11 RE AD WITH SECTION 2(15) TO THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT COVERED BY ADVANCEMENT OF AN Y OBJECT OF GENERAL PUBLIC UTILITY. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF EXEMPT ION OF RS 65,20,690. THE ASSESSE GETS THE RELIEF ACCORDING LY. GRIEVANCES OF THE ASSESSEE ARE UPHELD. SINCE AS STATED ABOVE THE FACTS IN THE PRESENT CASE ARE IDENTCIAL TO THAT IN THE CASE OF HOSHIARPUR IMPROVEMEN T TRUST (SUPRA), RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT THE ASSESSEE TRUST IS CARRYING OUT CHARITABLE ACTIVITY OF ADVANCEMENT OF PUBLIC UTILITY AND THE BUSINESS ACTIVITY CARRIED OUT BY IT ARE INCIDENTAL TO THE ATTAINMENT OF ITS MAI N OBJECT AND THUS THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED I N THE ASSESSEES CASE. WE THEREFORE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE INCOME TAX A CT, 1961, AND THE SURPLUS OF RS. 3,36,90,540/- EARNED BY THE ASSESSEE CANNOT BE SUBJECTED TO TAX AS INCOME OF TH E ASSESSEE. 9. RELYING ON THE ORDER OF THE AMRITSAR BENCH IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. ITO, ITA NO.496/ASR/2013, THE APPEAL WAS DECIDED IN FAVOUR O F THE ASSESSEE. SINCE NO DISTINGUISHING FACTS WERE BROUG HT TO OUR NOTICE DURING THE COURSE OF HEARING, RESPECTFUL LY FOLLOWING THE ORDER OF THE COORDINATE BENCH, WE ALL OW THE APPEAL OF THE ASSESSEE. 10. SINCE THE ASSESSEE IS HELD TO BE ELIGIBLE TO G ET EXEMPTION UNDER SECTION 11 OF THE ACT, ALL OTHER IS SUES RAISED IN APPEAL BECOME INFRUCTUOUS. 11 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.1182/CHD/2013 : 12. IT IS RELEVANT TO OBSERVE HERE THAT THE ISSUE IN THIS APPEAL IS SIMILAR TO THE ISSUE RAISED BY THE ASSESSEE IN ITA NO.305/CHD/2013 AND THE FINDINGS GIVEN IN IT A NO305/CHD/2013 SHALL APPLY TO THIS CASE ALSO WITH E QUAL FORCE. ITA NO.874/CHD/2014 : 13. THIS IS AN APPEAL AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR ASSE SSMENT YEAR 2009-10 IN THE BACKGROUND OF THE FACTS NARRATE D IN ITA NO.305/CHD/2013. SINCE WE HAVE DELETED THE ADD ITION IN QUANTUM PROCEEDINGS, THE PENALTY DOES NOT SURVIV E. 14. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12