INDORE DEVLOPMENT AUTHORITY, V. THE CIT -I,

ITA 366/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2753 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2010
• Assessment Year: misc
• Appeal Filed On: 01-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRISH DAVE CCIT
• Assessee Lawyers: P M CHOUDHARY
• Keywords: Business income; Charitable institution; Opportunity of being heard; Rule of consistency; Source of fund; Cost of acquisition; Condonation of delay; Revised return; TDS; Set aside
• Section: 80G; 12A; 12AA; 10B; 195; 12; 90; 11; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.366/IND/2008 UNDER SECTION 12AA OF THE IT ACT INDORE DEVELOPMENT AUTHORITY, IDA BUILDING, 7, RACE COURSE ROAD, INDORE (PAN AAAJI 0103) .APPELLANT VS COMMISSIONER OF INCOME TAX-I, INDORE .RESPONDENT APPELLANT BY : SHRI P.M. CHOUDHARY, ADV. & SHRI ANIL KAMAL GARG, CA RESPONDENT BY : SHRI GIRISH DAVE, CCIT, DR O R D E R PER JOGINDER SINGH THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER D ATED 27.6.2008 OF THE LD. COMMISSIONER OF INCOME TAX-1, INDORE ON THE FOLLOWI NG GROUNDS: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX- I, INDORE GROSSLY ERRED, BOTH ON MERITS AND IN LAW, IN REJECTING THE APPLICATION OF THE APPELLANT FILED ON 27.12.2007 FOR GRANT OF REGISTRATION TO IT UNDER SECTION 12AA OF THE IT 2 ACT, 1961, BY HOLDING THAT THE APPELLANT WAS NOT ENTITLED FOR GRANT OF SUCH REGISTRATION. 2. THAT, THE LD. CIT GROSSLY ERRED IN NOT CONSIDERING THE MATERIAL FACT THAT THE APPELLANT AUTHORITY WAS FULLY ELIGIBLE FOR GRANT OF REGISTRATION U/S 12AA OF THE IT ACT, 1961, AS IT BEING ELIGIBLE HAD MADE A VALID APPLICATION FOR REGISTRATION AFTER COMPLYING WITH ALL THE CONDITIONS AS CONTEMPLATED U/S 12AA OF THE IT ACT, 1961. 3.A) THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT GROSSLY ERRED IN HOLDING THAT THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA FILED BY THE APPELLANT AUTHORITY ON 27.12.2007 WAS INVALID FOR THE ONLY REASON THAT SUCH APPLICATION WAS SIGNED BY THE CHIEF EXECUTIVE OFFICER (CEO) AND NOT BY THE CHAIRMAN OF THE APPELLANT AUTHORITY. B) THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT GROSSLY ERRED IN NOT CONSIDERING THE MATERIAL FACT THAT THE APPLICATION SIGNED BY CHAIRMAN OF THE APPELLANT AUTHORITY HAVING BEEN FURNISHED SUBSEQUENTLY WOULD RELATE BACK TO THE DATE OF THE ORIGINAL APPLICATION. 4.A) THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT GROSSLY ERRED IN REJECTING THE APPLICATION OF THE AUTHORITY ON VARIOUS IRRELEVANT GROUNDS WITHOUT CONSIDERING THE PROVISIONS OF THE LAW THAT AT THE TIME OF GRANT OF REGISTRATION U/S 12AA, LD. CIT HAS TO BE SATISFIED ONLY ABOUT THE OBJECTS OF THE APPLICATION AND GENUINENESS OF ITS ACTIVITIES. B) THAT, THE LD. CIT GROSSLY ERRED IN LAW IN ENQUIRING INTO APPLICATION OF INCOME OF THE APPELLANT AUTHORITY FOR THE PURPOSE OF GRANT OF REGISTRATION U/S 12AA OF THE IT ACT, 1961 AND ALSO ERRED IN FORMING AN ADVERSE VIEW AGAINST THE APPELLANT AUTHORITY ON THE BASIS OF SUCH ENQUIRIES. 3 C) THAT, THE LD. CIT GROSSLY ERRED IN LAW IN ENQUIRING INTO SOURCES OF THE INCOME OF THE APPELLANT AUTHORITY FOR THE PURPOSE OF GRANT OF REGISTRATION U/S 12AA OF THE IT ACT, 1961 AND ALSO ERRED IN FORMING AN ADVERSE VIEW AGAINST THE APPELLANT AUTHORITY ON THE BASIS OF SUCH ENQUIRIES. D) THAT, THE LD. CIT ALSO GROSSLY ERRED IN LAW I N ENQUIRING INTO MODES OF INVESTMENTS MADE BY THE APPELLANT AUTHORITY FOR THE PURPOSE OF GRANT OF REGISTRATION U/S 12AA OF THE IT ACT, 1961 AND ALSO ERRED IN FORMING AN ADVERSE VIEW AGAINST THE APPELLANT AUTHORITY ON THE BASIS OF SUCH ENQUIRIES. E) THAT, THE LD CIT GROSSLY ERRED IN HOLDING THA T THE ACTIVITIES OF THE APPELLANT AUTHORITY ARE OF COMMERCIAL NATURE WITH PROFIT MOTIVE AND NOT IN THE NATURE OF CHARITY. F) THAT, THE LD. CIT GROSSLY ERRED IN NOT CONSIDERING THE MATERIAL FACT THAT ALL THE ACTIVITIES CARRIED ON BY THE APPELLANT AUTHORITY WAS EITHER FOR, OR INCIDENTAL TO, ATTAINMENT OF ITS OBJECTIVES AND THEREFORE NO ADVERSE INFERENCE SHOULD HAVE BEEN DRAWN ON THE BASIS OF CERTAIN SALES TRANSACTIONS ENTERED INTO BY IT WITH RELIANCE INDUSTRIES LIMITED. 5. THAT, WITHOUT PREJUDICE TO THE ABOVE, THE CIT GROSSLY ERRED IN HOLDING THAT DECISION OF THE APEX COURT RENDERED IN THE CASE OF ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS. UNION OF INDIA & ORS., REPORTED IN 283 ITR 97 (SC) SQUARELY APPLIES TO THE ISSUES IN QUESTION OF TAXABILITY OF INCOME OF THE APPELLANT AUTHORITY. 6. THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT GROSSLY ERRED IN NOT CONSIDERING THE MATERIAL FACT THAT THE APPELLANT BEING A STATUTORY AUTHORITY WAS CARRYING ON ITS ACTIVITIES FOR CHARITABLE PURPOSES, AS DEFINED UNDER CLAUSE (15) OF SEC. 2 OF THE IT ACT, 1961 4 AND, THEREFORE, IT WAS ELIGIBLE FOR GRANT OF REGISTRATION U/S 12AA. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I P.M. CHOUDHARY ALONG WITH SHRI ANIL KAMAL GARG, LD. COUNSEL FOR THE ASSE SSEE AND SHRI GIRISH DAVE, LD. CCIT, DR. WE FIND THAT THE GROUNDS RAISED BY TH E ASSESSEE ARE ARGUMENTATIVE IN NATURE, THEREFORE, THESE ARE SUMMA RIZED AS UNDER:- 1. WHETHER THE LD. CIT IS CORRECT IN TREATING APPLICATION SIGNED BY CEO AS INVALID ON THE GROUND THAT THE CEO WAS NOT COMPETENT TO SIGN THE APPLICATION FOR REGISTRATION. AND FURTHER WHETHER THE LD. CIT IS ALSO RIGHT IN COMING INTO CONCLUSION THAT THE FRESH APPLICATION DULY SIGNED BY CHAIRMAN OF IDA FILED ON 19/06/2008 DOES NOT CURE THE DEFECT (IF ANY) IN THE ORIGINAL APPLICATION AND SUCH FILING OF FRESH APPLICATION WOULD NOT RELATE BACK TO THE DATE OF ORIGINAL APPLICATION? (RELEVANT GROUNDS ON THIS ISSUE FROM ABOVE ARE GROUND NOS. 3(A) & 3 (B)) . 2. WHETHER THE LD. CIT IS JUSTIFIED IN REJECTING THE APPLICATION OF THE IDA FOR REGISTRATION U/S 12A /12AA ON THE GROUND THAT THE IDA IS NOT ENTITLED TO SUCH REGISTRATION AND ALSO WHETHER THE ACTIVITIES OF THE ASSESSEE ARE IN CONFORMITY WITH THE OBJECTS FOR ADVANCEMENT OF THE OBJECTS OF THE GENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2 (15) OF THE IT ACT 5 AND WHETHER THE LD. CIT IS CORRECT IN COMING TO A CONCLUSION THAT THE IDA IS A COMMERCIAL ORGANIZATION ESTABLISHED WITH PROFIT MOTIVE AND ONLY SUPPOSED TO INQUIRE ABOUT THE GENUINENESS OF ACTIVITIES OF OBJECTS OF THE ASSESSEE AFTER PLACING RELIANCE UPON THE DECISION IN 283 ITR 97 (SC)? ( RELEVANT GROUNDS ON THIS ISSUE GROUND NOS. 1, 2, 4(A), 4(B), 4(C), 4(D), 4(E), 4(F), 5 & 6) 3. NOW, WE SHALL TAKE UP THE SUMMARIZED GROUND NO.1 REGARDING THE VALIDITY OF APPLICATION WHICH WAS SIGNED BY THE CHI EF EXECUTIVE OFFICER (HEREINAFTER REFERRED TO AS CEO) OF THE ASSESSEE AUTHORITY. THE SUBMISSION MADE BY LD. COUNSEL FOR THE ASSESSEE IS THAT THE LD . CIT HAS TREATED THE APPELLANTS APPLICATION FOR REGISTRATION UNDER SECT ION 12A/12AA AS INVALID BECAUSE THE SAME WAS SIGNED BY THE CEO OF THE IDA. ACCORDING TO THE LD. CIT, THE CEO, NOT BEING THE HEAD OF THE INSTITUTION AND NOT BEING THE PERSON AT THE HELM OF THE AFFAIRS OF THE IDA, IS NOT COMPE TENT TO SIGN APPLICATION ON FORM 10A FOR REGISTRATION UNDER SECTION 12A/12AA. I N THIS RESPECT, THE CONTENTION OF THE APPELLANT IS TWO FOLD. FIRSTLY, I N THE ABSENCE OF ANY SPECIFIC REQUIREMENT OF LAW REGARDING SIGNING OF APPLICATION U/S 12A/12AA BY CHAIRMAN, THE CEO WHO IS THE PRINCIPLE OFFICER, BEI NG STATUTORILY APPOINTED SECRETARY OF IDA, IS COMPETENT TO SIGN AND FILE AN APPLICATION FOR REGISTRATION U/S 12A/12AA ON BEHALF OF IDA AND HENC E SUCH APPLICATION 6 SIGNED BY CEO CANNOT BE TREATED AS INVALID. THE CEO APPOINTED UNDER SECTION 46 OF THE MADHYA PRADESH NAGAR TATHA GRAM N IVESH ADHINIYAM, 1973, BEING THE SECRETARY OF THE IDA, IS THE PRINCI PAL OFFICER OF THE IDA WITHIN THE MEANING OF SECTION 2(35) OF THE INCOME-T AX ACT, 1961 AND AS SUCH CEO IS COMPETENT TO FILE AN APPLICATION U/S 1 2A/12AA OF THE ACT FOR AND ON BEHALF OF IDA. 4. ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. COUNS EL FOR THE ASSESSEE THAT ASSUMING FOR THE SAKE OF ARGUMENT THAT THE CEO IS N OT COMPETENT TO SIGN APPLICATION U/S 12A/12AA, SUCH DEFECT REGARDING IMP ROPER SIGNING IS MERELY A PROCEDURAL/TECHNICAL DEFECT WHICH STANDS C URED WITH THE FILING OF FRESH APPLICATION, WHICH RELATES BACK TO THE DATE O F ORIGINAL APPLICATION (REFER PAGE 265 OF PAPER BOOK). MR. CHOUDHARY EXPLAINED TH E POSITION OF THE CHIEF EXECUTIVE OFFICER IN THE CASE OF THE ASSESSEE BY SU BMITTING THAT IDA IS A STATUTORY AUTHORITY ESTABLISHED UNDER THE PROVISION S OF MP NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973. CHAPTER VII OF THE ADH INIYAM CONTAINS ALL PROVISIONS REGARDING ESTABLISHMENT, ADMINISTRATION AND OTHER PROVISIONS REGARDING FUNCTIONS OF SUCH AUTHORITIES ESTABLISHED UNDER THE ACT. IT ALSO CONTAINS APPOINTMENT OF THE CHAIRMAN AND OTHER MEMB ERS OF THE BOARD GOVERNING THE AUTHORITY. IT WAS EXPLAINED THAT SECT ION 46 OF THE ACT PROVIDES THAT EVERY TOWN AND COUNTRY DEVELOPMENT AU THORITY SHALL HAVE A CHIEF EXECUTIVE OFFICER, WHO SHALL ACT AS THE SECRE TARY OF THE AUTHORITY. 7 THE CEO IS APPOINTED BY THE STATE GOVT. U/S 46(2) F ROM AMONGST THE MEMBERS OF DEVELOPMENT AUTHORITY SERVICES BELONGING TO STATE CADRE OR FROM AMONGST THE MEMBERS OF THE STATE TECHNICAL/ADM INISTRATIVE SERVICES. IT WAS SPECIFICALLY POINTED OUT THAT THE CEO SO APP OINTED BY STATE GOVT. IS THE MEMBER SECRETARY OF THE AUTHORITY (IDA) BY VIRT UE OF SECTION 40(H) OF THE SAID ACT. SINCE, THE CEO OF IDA IS A STATUTORIL Y APPOINTED SECRETARY OF IDA, HE IS THE PRINCIPLE OFFICER OF IDA AS DEFINE D IN SECTION 2(35) OF THE IT ACT, 1961. THE QUESTION, THEREFORE, REQUIRED TO BE CONSIDERED IS WHETHER THE APPLICATION FOR REGISTRATION SIGNED BY THE CEO OF IDA COULD BE HELD TO BE INVALID. AS ALREADY STATED ABOVE, IDA IS A LOCAL AUTHORITY FOR ALL PURPOSES, EXCEPT FOR EXEMPTION U/S 10(20). A STRONG PLEA WAS RAISED THAT EVEN THE DEPARTMENT HAS ASSESSED IDA, AS LOCAL AUTHORITY. IN THE CONTEXT OF POSITION OF CEO QUA IDA, IT WAS SUBMITTED THAT A REFERENCE MAY BE MADE TO THE PROVISIONS OF SECTION 12A/12AA ACCORDING TO WHICH, THE PERSON IN RECEIPT OF INCOME OF THE ASSES SEE AUTHORITY IS REQUIRED TO MAKE AN APPLICATION FOR REGISTRATION. THE MODE O F MAKING AN APPLICATION IS DULY PRESCRIBED IN RULE 17A ACCORDING TO WHICH A N APPLICATION FOR REGISTRATION SHALL BE MADE IN FORM 10A. NEITHER THE PROVISIONS OF SECTION 12A/12AA NOR RULE 17A LAY DOWN/PRESCRIBE ANY MODE O F SIGNING THE APPLICATION. UNDER THE CIRCUMSTANCES, ONE MAY REFER TO THE PROVISIONS REGARDING SIGNING OF THE RETURN UNDER SECTION 140 O F THE IT ACT. ACCORDING 8 TO SUB-CLAUSE (D) OF THE SAID SECTION, A RETURN OF INCOME IN CASE OF LOCAL AUTHORITY IS TO BE SIGNED AND VERIFIED BY THE PRINC IPAL OFFICER THEREOF. SIMILARLY, ACCORDING TO SUB-CLAUSE (E) A RETURN IN CASE OF ANY OTHER ASSOCIATION IS REQUIRED TO BE SIGNED BY ANY MEMBER OF THE ASSOCIATION OR THE PRINCIPAL OFFICER THEREOF AND THE RETURN IN CASE OF ANY OTHER PERSON NOT FALLING IN THE ABOVE CLAUSES, IS REQUIRED TO BE SIG NED BY THAT PERSON OR BY SOME PERSON COMPETENT TO ACT ON HIS BEHALF. IN THE INSTANT CASE, THE CEO, WHO IS THE PRINCIPAL OFFICER BEING THE SECRETARY OF THE IDA, IS COMPETENT TO SIGN THE RETURNS ON BEHALF OF THE IDA AND HAS ACTUA LLY FILED RETURNS ON BEHALF OF IDA WHICH HAVE DULY BEEN ACCEPTED BY DEPARTMENT AND IDA HAS BEEN ASSESSED ON THE BASIS OF SUCH RETURNS. UNDER THE CI RCUMSTANCES, IF AN APPLICATION UNDER SECTION 12A/12AA IS SIGNED BY A P ERSON WHO IS COMPETENT TO SIGN THE RETURN OF SUCH AUTHORITY, IT CANNOT BE TREATED AS INVALID. THEREFORE, WITH THIS POSITION, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT HAS CLEARLY COMMITTED AN ERROR IN TREA TING THE APPLICATION SIGNED BY CEO AS INVALID. MOREOVER, ALTHOUGH IT WAS NOT RE QUIRED, BUT THE CHAIRMAN OF THE IDA HAD SPECIFICALLY AUTHORIZED THE CEO TO TAKE ALL NECESSARY/APPROPRIATE STEPS TOWARDS FILING OF APPLI CATION FOR REGISTRATION UNDER SECTION 12A/12AA WHICH WOULD NATURALLY INCLUD E SIGNING OF THE PRESCRIBED FORM . (REFER COPY OF NOTE SHEET REGARDING SUCH AUTHORIZAT ION FILED AT PAGE NO. 264 OF THE COMPILATION). THUS, THE ORDER OF CIT DISMISSING APPLICATION AS INVALID ON THIS GROUND DESERVES TO B E SET ASIDE. IT WAS PLEADED 9 THAT THE APPLICATION SO FILED WOULD NATURALLY RELAT ES BACK TO THE DATE OF THE ORIGINAL APPLICATION. IN SUPPORT OF THE ABOVE CONTE NTION, RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS: M.P. STATE AGRO INDUSTRIES DEVELOPMENT CORPORATION LIMITED VS. CIT REPORTED IN (1995) 53 TTJ (IND) 26 2. = (82) TAXMAN PAGE 85 . CITVS. MASONEILAN (I) LTD. REPORTED IN (2000) 242 ITR PAGE 569. CIT LUCKNOW VS. RUDRABILAS KISAN SAHAKARI CHINI M ILLS REPORTED IN 145 TAXMAN PAGE 497 . CIT VS. HOPE TEXTILES LIMITED, 287 ITR PAGE 321 (M. P.). PRIME SECURITIES LTD. VS. VARINDER MEHTA, CIT(INV.) CIRCLE- I(1) REPORTED IN (2009) 182 TAXMAN PAGE 221 (BOM). IT WAS FURTHER SUBMITTED THAT EVEN WITH REGARD TO S IGNING OF RETURN, ALTHOUGH THE COURTS IN ABOVE DECISIONS HAVE HELD THAT SIGNING OF RETURN IN THE MANNER PRESCRIBED BY SECTION 140 IS MANDATORY BUT THE COUR TS ARE OF THE VIEW THAT AFTER INSERTION OF SUB-SECTION (9) IN SECTION 139, THE DE FECT REGARDING NON-SIGNING OF THE RETURN BY PROPER PERSON MAKES THE RETURN A DEFE CTIVE RETURN AND THE RETURN CAN BE TREATED AS INVALID ONLY IF THE DEFECT IS NO T CURED WITHIN SPECIFIED TIME EVEN AFTER GRATING OPPORTUNITY TO CURE THE SAME. TH E IMPUGNED ORDER OF CIT, THEREFORE, DESERVES TO BE SET ASIDE ON THIS ISSUE. 10 5. ON THE OTHER HAND, MR. GIRISH DAVE, THE LD. CCIT , DR STRONGLY DEFENDED THE IMPUGNED ORDER AND SUBMITTED THAT THERE ARE TWO ASPECTS FOR CONSIDERATION OF THE BENCH ON THIS ISSUE, (1) FIRST BEING THE ARGUMENT CANVASSED BY LD COUNSEL TH AT NEITHER THE SUBSTANTIVE NOR THE PROCEDURAL PROVISIO NS REQUIRE SIGNING OF THE APPLICATION FOR THE GRANT OF REGISTR ATION UNDER SECTION 12AA, AND (2) SECOND BEING THAT THERE IS NO PRESCRIPTION FOR SIG NING BY ANY SPECIFIC PERSON ON THE FORM PRESCRIBED FOR THIS PURPOSE. CONSEQUENTLY, IT IS ARGUED THAT EQUIVALENT PROVISIO NS CONTAINED IN SECTION 140 OF THE ACT SHOULD APPLY. AN ALTERNATE SUBMISSION IS MADE THAT SECOND PROVISO TO CLAUSE (A) OF SUB-SECTION (1) OF SECTION 12A READ W ITH SUB- SECTION (2) TO SECTION 12A AS INSERTED BY THE FINAN CE ACT, 2007 PROVIDES WITH EFFECT FROM 1/06/2007 THAT WHERE AN APPLICATION IS MADE ON OR AFTER 1/06/2007, THE PROV ISIONS OF SECTION 11 AND 12 SHALL APPLY IN RELATION TO THE IN COME OF SUCH TRUST OR INSTITUTION FROM THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE FINANCIAL YEAR IN WHICH S UCH APPLICATION IS MADE. IN VIEW OF THESE PROVISIONS IT IS ARGUED THAT SINCE ORIGINAL APPLICATION IS MADE ON 27/12/20 07, SO 11 REGISTRATION CAN BE GRANTED FOR THE FINANCIAL YEAR 2007-08 RELEVANT FOR THE ASSESSMENT YEAR 2008-09 AND THE RE VISED APPLICATION FILED ON 17/06/2008 SHOULD BE TREATED A S TO HAVE BEEN FILED ON 27/12/2007. THIS ARGUMENT IS BASED ON THE PREMISE THAT DEFECT, IF ANY, IN THE ORIGINAL APPLIC ATION WHICH IS FILED IN TIME, STANDS CURED FROM THE DATE OF ORI GINAL APPLICATION. 6. OUR ATTENTION WAS INVITED TO THE SUBMISSIONS DAT ED 18 TH JUNE 2008 ADDRESSED TO THE CIT, WHICH ARE FILED IN ITS C OMPILATION AT PAGES FROM 241 TO 256, THE ASSESSEE EXPLAINED TH E CIRCUMSTANCES UNDER WHICH FORM NO 10A WAS SIGNED BY THE CEO AND THE DUTIES AND AUTHORITY OF THE CEO TO SIGN DECLARATION UNDER SECTION 13 (1) (C) AND (D). IT WA S EXPLAINED THAT IN PARA 2.2 (AVAILABLE AT PAGES 241 TO 245 OF THE COMPILATION) OF THE SAID LETTER THAT IT HAS NOWHERE BEEN STATED IN THE PROVISIONS CONTAINED IN SECTION 12A READ WIT H RULE 17A THAT BY WHOM IT SHOULD BE SIGNED AND THEREFORE IT WAS ARGUED THAT REFERENCE MUST BE DRAWN FROM SIMILAR PR OVISIONS IN THE ACT. IN THIS BACKGROUND, IT WAS ARGUED THAT SECTION 140 (D) SHOULD BE THE GUIDING PROVISION. AS PER SEC TION 140 AND 115WD, A PRINCIPAL OFFICER IS REQUIRED TO SIGN AND VERIFY 12 THE RETURN AND SO THE CEO OF THE APPELLANT-AUTHORIT Y WOULD BE THE RIGHT PERSON TO SIGN THE FORM NO 10A. IT IS ALSO POINTED OUT THAT ALL THE RETURNS HAVE BEEN FILED BY THE CEO IN THE PAST AND COGNIZANCE OF THESE RETURNS HAS BEEN D ULY TAKEN BY THE DEPARTMENT. IT IS FURTHER ARGUED THAT IT HAS, ON BEING OBJECTED BY THE CIT, FILED FRESH FORM NO 10A AFTER GETTING IT SIGNED BY THE CHAIRMAN OF THE APPELLANT-AUTHORITY AND IN VIEW OF THE DECISION OF THIS HONBLE TRIBUNAL, IN THE CASE OF M P STATE AGRO INDUSTRIES LTD VS. ACIT, THIS IS A CURABLE IRR EGULARITY AND ONCE CURED, THE DATE OF FILING OF REVISED FORM NO 10A, WOULD RELATE BACK TO THE DATE OF FILING OF ORIGINAL APPLICATION. THUS, THE PERIOD FOR THE GRANT OF REGISTRATION WOUL D BE RECKONED FROM THE DATE OF FILING OF THE ORIGINAL AP PLICATION. THE RESPONDENT LD. CIT HAS CONSIDERED THIS ISSUE AT PAGES 1 TO 4 OF THE ORDER. THE CONTENTION THAT THE CEO WAS DULY AUTHORIZED AS PER THE NOTE-SHEET SUBMITTED BY AND O N BEHALF OF THE APPELLANT-AUTHORITY HAS DULY BEEN CONSIDERED BY THE LD. CIT AND FOUND THE EXPLANATION INCORRECT. THE LD . CIT HAS SOUGHT TO DISTINGUISH THE CASE CITED BY THE APPELLA NT- AUTHORITY WITH THE FACTS OF THE PRESENT CASE AND HE LD THAT THE 13 APPELLANT-AUTHORITY HAS NOT ADDUCED ANY EVIDENCE AS REGARDS THE AUTHORITY GIVEN TO THE CEO, OR ANYTHING EXPLAIN ED TO LD. CIT IN THE RELEVANT ACT CONCERNING THE DUTIES AND RESPONSIBILITIES OF THE CEO. IT WAS SUBMITTED THAT SUBSEQUENT TO THE DECISION IN THE CASE OF M P STATE AGRO INDUSTRIES LTD (SUPRA), HONBLE H IGH OF MADHYA PRADESH HAD AN OCCASION TO CONSIDER THIS ISS UE IN THE CASE OF KHIALDAS & SONS VS. CIT REPORTED IN [19 97] 94 TAXMAN 394 (MP) AND AFFIRMED THE DECISION OF HONBL E TRIBUNAL IN THE CASE BY HOLDING THAT UNDER SECTION 140, IT IS FOR THE ASSESSEE TO SIGN AND VERIFY THE RETURN. HON BLE COURT FURTHER HELD THAT SECTION 140 CLEARLY CONTEMPLATES THAT ALL CATEGORIES OF RETURNS HAVE TO BE DULY SIGNED AND VE RIFIED BY A PERSON AND IF IT IS NOT DULY SIGNED AND VERIFIED TH EN IT CANNOT BE TREATED TO BE A RETURN IN THE EYES OF LAW. THAT BEING THE POSITION, IF RETURN IS FILED WITHOUT SIGNATURE AND VERIFICATION, IT WILL HAVE TO BE AN INVALID RETURN. HONBLE COURT ALSO MADE ITS OBSERVATIONS IN THE CONTEXT OF SECTION 292B AND HELD THAT ONLY MINOR DEFECT DOES NOT MILITATE AGAINST THE INT ENT AND PURPOSE OF THE ACT. 14 IN THIS REGARD, OUR ATTENTION WAS INVITED TO THE DE CISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF NATIO NAL INSURANCE CO LTD VS. CIT REPORTED IN [1994] 72 TAX MAN 161 (CAL) AND OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SIR KESHAB CHANDRA MANDAL REPORTED IN [(1950) 1 8 ITR 569 (SC). 7. IT WAS FURTHER SUBMITTED THAT A FINDING OF FACT HAS BEEN RECORDED BY THE LD. CIT THAT THE ASSESSEE HAS NOT F URNISHED ANY EVIDENCE THAT THE CEO IS THE PRINCIPAL OFFICER OF THE AUTHORITY. MENTIONING OF SECTIONS 38, 40, 46 AND 4 7 OF THE ADHINIYAM IN ITS SUBMISSIONS AVAILABLE AT PAGES FRO M 243 - 244 OF THE COMPILATION MAY NOT HELP THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT EVEN SECTION 38 DOES NOT COM E TO THE AID OF THE AUTHORITYS CLAIM. SECTION 40 OF THE ADH INIYAM PROVIDES THE CONSTITUTION OF THE AUTHORITY WHEREIN THE CEO IS SAID TO BE MEMBER-SECRETARY. IN THIS SECTION, CHAIR MAN APPEARS TO BE THE PRINCIPAL OFFICER. SECTION 46 MAK ES THE CEO AS SECRETARY WHO SHALL BE APPOINTED FROM AMONGS T THE MEMBERS OF THE DEVELOPMENT AUTHORITY SERVICES BELON GING TO THE STATE CADRE FROM AMONG THE MEMBERS OF THE ST ATE TECHNICAL/ADMINISTRATIVE SERVICES, IF NECESSARY. SE CTION 47 15 ALSO DOES NOT HELP THE CASE OF THE AUTHORITY. HOWEV ER, IF ONE LOOKS AT PAGES 87, 90, 91, 93, 94, 95, 96, 97 OF TH E COMPILATION, IT WOULD REVEAL THAT ONLY REFERENCE TO THE CEO IS AVAILABLE AT PAGE 98 AND IN RESPECT OF ALL OTHER REFERENCES, IT IS EITHER DIRECTOR, TOWN PLANNING OR SECRETARY T O STATE GOVERNMENT, OR CHAIRMAN OF THE AUTHORITY, OR THE AU THORITY ITSELF. ONLY AT PAGE 98, REFERENCE TO CEO IS MADE. THIS ALSO EXPLAINS THE POSITION OF CEO AS NOT BEING THE PRINC IPAL OFFICER OF THE APPELLANT-AUTHORITY. THE ARGUMENT THAT CEO HAS FILED RETURNS IN THE PAST AND THOSE RETURNS HAVE BEEN ACTED UPON IS NO ARGUMENT A S ONE INVALID ACTION ACTED UPON CANNOT VALIDATE INVALIDIT Y. 8. THE LD. CCIT/DR EXPLAINED AS TO WHO CAN FILE THE APPLICATION UNDER SECTION 12A? CRUCIAL ASPECT OF THE MATTER IS THAT SECTION 12A BE GINS WITH THE PHRASE THE PROVISIONS OF SECTION 11 AND SECTIO N 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLOWING CONDITIONS ARE FULFILLED, NAME LY:- (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTIT UTION IN THE 16 PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER-------------. THEREFORE AT THE THRESHOLD STAGE ITSELF THERE IS A REQUIREMENT THAT SUCH A PERSON CAN CLAIM EXEMPTION ONLY WHEN TH E RECIPIENT OF THE INCOME MAKES AN APPLICATION TO THE COMMISSIONER. EVEN IF THE RULES MADE THERE UNDER DO NOT PROVIDE WHO SHOULD SIGN THE APPLICATION, IT IS EVID ENT FROM THE SUBSTANTIVE PROVISIONS THAT THE PERSON RECIPIEN T OF THE INCOME ALONE CAN MAKE SUCH APPLICATION IF IT HAS TO CLAIM EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. IF A PERSON OTHER THAN THE SAID PERSON FILES APPLICATION FOR RE GISTRATION UNDER SECTION 12A, IT SHALL BE INFIRM AND INVALID I N LAW. IF ONE LOOKS AT THE PROVISIONS OF THE ADHINIYAM WHICH FACT HAS BEEN DEMONSTRATED CLEARLY BY THE REVENUE BY POINTIN G OUT RELEVANT PROVISIONS OF THE ADHINIYAM, THE RULES FRA MED THERE UNDER AS WELL VARIOUS FORMS PRESCRIBED UNDER THE ADHINIYAM, IT IS THE CHAIRMAN OF THE AUTHORITY AL ONE WHO CAN BE SAID TO BE THE PERSON IN RECEIPT OF INCOME. THEREFORE ANY APPLICATION FILED BY A PERSON OTHER THAN THE CH AIRMAN OF THE AUTHORITY WOULD SUFFER FROM ILLEGALITY AND NOT IRREGULARITY. THIS CIRCUMSTANCE CAN NOT BE EQUATED WITH THE 17 FILING OF THE RETURNS AND CONSEQUENT ASSESSMENTS CO MPLETED BY THE ASSESSING OFFICER. THE DEFECT OF THIS NATURE CAN NOT BE CURED AND THE REVISED APPLICATION FILED ON 17/06/20 08 CAN NOT TAKE EFFECT FROM THE DATE OF ORIGINAL APPLICATI ON FILED ON 27/12/2007. IT WAS SUBMITTED THAT THE ASSESSEE AUTHORITY FILED A REVISED FROM ON 19 TH JUNE 2008 DULY SIGNED BY THE CHAIRMAN OF THE AUTHORITY AND THIS DATE WOULD FALL IN THE FINANCIAL YEAR 2008- 09 AND WITH THIS RECKONING, IT WOULD ENABLE THE AUT HORITY TO CLAIM REGISTRATION IN RELATION TO ASSESSMENT YEAR 2 009-10. IN VIEW OF THE AMENDMENT IN THE DEFINITION OF CHARITA BLE PURPOSE, IN CLAUSE (15) OF SECTION (2) OF THE ACT, IT WOULD NOT BE ENTITLED TO EXEMPTION SOUGHT FOR BY IT, EVEN IF REGISTRATION IS GRANTED TO IT. FURTHER, THE ALTERNATE CONTENTION IS OTHERWISE NOT ADMISSIBLE FOR THE REASON THAT THE AMENDMENT IN THIS REGARD HA S BEEN BROUGHT FOR DIFFERENT REASONS AND A PERSON COMING T O THE ALTAR OF JUSTICE CAN NOT BE ALLOWED TO TAKE ADVANTA GE OF HIS OWN WRONG. THE AMENDMENTS WERE INSERTED FOR REMEDYI NG CERTAIN MISCHIEF AND TO HARMONIZE THESE PROVISIONS AND NOT TO BENEFIT THOSE PERSONS WHO WISH TO TAKE ADVANTAGE OF 18 UNINTENDED IMPLICATIONS. EVEN OTHERWISE AS ALREADY SUBMITTED, THE REVISED APPLICATION SHOULD TAKE EFFE CT FROM THE DATE WHEN IT WAS FILED AND NOT FROM THE DATE OF ORIGINAL APPLICATION. 9. DURING THE COURSE OF THE ARGUMENTS, THE LD. CCIT /DR POSED A QUESTION TO HIMSELF, WHETHER THE QUANTUM OF INCOM E BE PERMITTED TO BE THE DETERMINATIVE FACTOR FOR THE ST ATUS OF THE APPELLANT-AUTHORITY? IN RESPONSE TO THE AFOREMENTIONED SELF RAISED QUEST ION, THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE ASS ESSEE AUTHORITY IS IN EXISTENCE SINCE MAY 1977. IT WAS EN JOYING EXEMPTION FROM INCOME TAX UNDER SECTION 10(20A) OF THE I T ACT, 1961 ON ITS INCOME. CLAUSE (20A) OF SECTION 10 WAS OMITTED FROM THE STATUTE BY THE FINANCE ACT, 2002 W ITH EFFECT FROM 1 ST APRIL 2003 RELATABLE TO ASSESSMENT YEAR 2003- 04. FROM THE SAID ASSESSMENT YEAR, THAT IS, 2003-04 ONWARDS, IT STARTED FILING ITS RETURNS OF INCOME AND PAID TA XES ON THE INCOME RETURNED FOR THESE YEARS. ASSESSMENTS FOR AS SESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006-07 HAVE AL READY BEEN COMPLETED WHICH ARE PLACED IN THE PAPER BOOK F ILED BY THE DEPARTMENT. THE APPELLANT-AUTHORITY FILED APPEA LS FOR 19 THESE YEARS AND LD. CIT(APPEALS) HAVE AFTER HEARING THE APPELLANT-AUTHORITY PASSED APPELLATE ORDERS IN RESP ECT OF ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06. THE ASSESSMENT YEAR-WISE POSITION OF STATUS CLAIMED, IN COME RETURNED, STATUS IN WHICH ASSESSMENT MADE, NATURE A ND AMOUNT OF ADDITION MADE TO THE RETURNED INCOME, INC OME ASSESSED, DATE OF ASSESSMENT ORDER AND REVISED INCO ME CONSEQUENT TO APPELLATE ORDER OF THE LD CIT(APPEAL) IS GIVEN AT PAGE OF (5) OF THE IMPUGNED ORDER UNDER SECTIO N 12AA OF THE ACT PASSED BY THE RESPONDENT. IT SHALL BE INTERESTING TO FIND THAT THE APPELLANT- AUTHORITY PREFERRED APPLICATION UNDER SECTION 12AA OF THE ACT ONLY AFTER A NOTICE UNDER SECTION 210(3) WAS ISSUED TO I T FOR DEPOSIT OF ADVANCE TAX ON 11 TH DECEMBER 2007 ON THE BASIS OF CALCULATION OF ITS LIABILITY TOWARDS ADVANCE TAX INDICATED IN THE SAID NOTICE AND ON THE BASIS OF INFORMATION WHEREBY THE DEPARTMENT CAME TO NOTE THAT IT HAD SOLD A COMM ERCIAL PLOT IN A PRIME LOCATION ADJACENT TO SAYAJI HOTEL F OR A CONSIDERATION OF ABOUT RS 270 CRORES. THE APPELLAN T- AUTHORITY REPLIED TO THE NOTICE ON 14 TH DECEMBER 2007 OBJECTING TO THE NOTICE AND FILED FORM NO 28B ON TH E SAME 20 DATE ESTIMATING ITS INCOME AT RS 2, 78, 00, 000/- A ND TAX PAYABLE THEREON AT RS 93, 92, 570/-. IN THIS ESTIMA TE, IT INDICATED ITS LIABILITY TOWARDS TAX AT RS 63, 92, 5 70/- AFTER DEDUCTING RS 30, 00, 000/- TOWARDS PREPAID TAXES, S UCH AS TDS AND FURTHER REDUCTION OF RS 40, 00, 000/- PAID BY WAY OF ADVANCE TAX. THE BALANCE LIABILITY WAS SHOWN AT RS 23, 92, 570/- AS AGAINST THE DEMAND OF RS 90, 88, 06, 2 87/- WORKED OUT BY THE DEPARTMENT. IT ALSO INFORMED THE DEPARTMENT THAT IT IS EXAMINING THE POSSIBILITY OF REGISTRATION UNDER SECTION 12AA OF THE ACT. IT WAS ONLY ON 27 TH DECEMBER 2007 THAT THE APPELLANT- AUTHORITY CHOSE TO FILE AN APPLICATION UNDER SECTIO N 12AA OF THE ACT. IN ITS EXPLANATION, IT HAS STATED THAT IT WAS UNDER THE BONAFIDE IGNORANCE OF THE POSSIBLE FALL OUT OF THE OMISSION OF CLAUSE (20A) OF SECTION 10. IT HAS FURTHER STATED T HAT THERE WAS BONAFIDE IGNORANCE OF OTHER SECTIONS 11AND 12 A ND THEREFORE THE NECESSITY OF MAKING AN APPLICATION FO R REGISTRATION UNDER SECTION 12A WAS NEVER FELT. ONE WOULD WONDER AS TO THE CORRECTNESS AND TRUTHFUL NESS OF THIS EXPLANATION AS FROM THE CONDUCT OF THE APPELLA NT- AUTHORITY, IT IS CLEAR THAT FROM ASSESSMENT YEAR 20 03-04 21 ONWARDS, IT STARTED FILING ITS RETURN OF INCOME AND IT WAS THIS PERIOD WHEN THE EFFECT OF THE OMISSION OF CLAUSE (2 0A) OF SECTION 10 COMMENCED. IT WAS ALSO CLEAR FROM THE AMENDMENTS THAT CERTAIN AUTHORITY WHICH WAS CLAIMIN G EXEMPTION UNDER THE SAID CLAUSE WERE INCLUDED IN TH E AMENDED CLAUSE (20) OF SECTION 10 BY THE SAME FINAN CE ACT WITH EFFECT FROM 1 ST APRIL 2003. KNOWING FULLY WELL THAT WITH THE AMENDMENT IN LAW B Y THE FINANCE ACT, 2007, IT WAS NOT OPEN FOR IT TO MAKE A N APPLICATION UNDER CLAUSE 12A (1) (A), IT SOUGHT TO MAKE SUCH AN APPLICATION UNDER CLAUSE (AA) OF THE SAID SECTIO N THOUGH IT KNEW THAT THIS PROVISION WOULD ALLOW IT AN EXEMPTIO N ONLY FOR ONE ASSESSMENT YEAR, THAT IS, ASSESSMENT YEAR 2 008-09. FROM THE NEXT ASSESSMENT YEAR 2009-10, SECTION 2(15 ) HAS FURTHER BEEN AMENDED SO AS TO EXCLUDE SUCH ENTITIES WHO ARE ENGAGED IN TRADE, COMMERCE OR BUSINESS FROM EXEMPTI ON UNDER SECTION 11OF THE ACT. 10. AT PAGE 231 OF ITS COMPILATION, THE APPELLANT-A UTHORITY HAS ENCLOSED A COPY OF THE LETTER DATED 3 RD JUNE 2008 ADDRESSED TO THE RESPONDENT-CIT. IN THIS LETTER, INTER ALIA, IT HAS SOUGHT TO EXPLAIN THE REASONS FOR THE DELAY IN FILING APPL ICATION FOR 22 REGISTRATION UNDER SECTION 12AA AND EXCERPTS FROM P ARA 2.2 OF THIS LETTER IS REPRODUCED HEREUNDER: IT WAS ONLY AFTER A SERIOUS THOUGHT GIVEN TO THE ISSUE THAT THE APPLICANT-AUTHORITY CAME OUT OF THE AFORESAID BONAFIDE IGNORANCE OF THE RELEVANT LEGAL PROVISIONS AND THIS TRANSFORMATION AROSE AFTER AN OPINION IN THAT BEHALF WAS SOUGHT FROM OUR PRESENT REPRESENTATIVE SHRI ANIL GARG, FCA. HE, AFTER GOING THROUGH THE JUDICIAL PRONOUNCEMENTS FROM VARIOUS BENCHES OF INCOME-TAX APPELLATE TRIBUNALS AND ALSO AUTHORITATIVE DECISIONS FROM HIGHER JUDICIARY I.E. FROM THE HON HIGH COURTS AND THE APEX COURT, APPRISED THIS APPLICANT-AUTHORITY OF THE CORRECT LEGAL POSITION ABOUT THE ELIGIBILITY OF EXEMPTION U/SS 11AND 12, AS AFORESAID. IT WAS ON RECEIPT OF SUCH AN OPINION THAT THE SUBJECT APPLICATION WAS SUBMITTED ON 27-12-2007. IT WAS FURTHER SUBMITTED THAT THERE IS NO EVIDENCE LED FOR SUCH A SITUATION EXISTING NOR HAS IT BEEN AFFIRMED BY ANY RESPONSIBLE /AUTHORIZED PERSON. IT IS A FACT THAT A FTER WITHDRAWAL OF EXEMPTION IN CLAUSE (20) AND (20A) BY THE AMENDMENTS BROUGHT OUT BY THE FINANCE ACT, 2002, A NUMBER OF SUCH ENTITIES MADE APPLICATION FOR THE GR ANT OF REGISTRATION UNDER SECTION 12AA ON THE BASIS OF SOM E STATEMENT MADE BY THE THEN FINANCE MINISTER BUT WER E DENIED REGISTRATION BY THE DEPARTMENT, APPEALS FILE D BY SUCH ENTITIES BEFORE VARIOUS BENCHES OF THE HONBLE TRIB UNAL DECIDED SUCH APPEALS ON THE MERITS OF THE MATTER. T HEREFORE 23 TO ARGUE THAT THE APPELLANT-AUTHORITY WAS IGNORANT OF THE EFFECT OF CHANGES BY THE FINANCE ACT, 2002 IS UNBEL IEVABLE. IN FACT, APPELLANT-AUTHORITY IS UNDER THE GUIDANCE, INSTRUCTIONS AND ADVICE OF A CHARTERED ACCOUNTANT F ROM SO MANY YEARS AND IT IS RATHER UNBELIEVABLE THAT IT IS ONLY AFTER THE ISSUE OF NOTICE UNDER SECTION 210(3) OF THE ACT FOR THE PAYMENT OF ADVANCE TAX THAT THE APPELLANT-AUTHORITY WOKE FROM SLUMBER. MOREOVER, SHRI ANIL GARG C.A HAS ALSO BEEN ADVISING THE APPELLANT-AUTHORITY MUCH BEFORE THE FI LING OF APPLICATION ON 26-12-2007. THIS FACT CAN BE NOTICED FROM HIS APPEARANCE BEFORE LD. CIT(A) IN RELATION TO APPELLA TE PROCEEDINGS FOR ASSESSMENT YEAR 2003-04 ONWARDS. SH RI GARG WAS AWARE OF THE FACT THAT IN THE PAST, THE AP PELLANT- AUTHORITY WAS CLAIMING EXEMPTION UNDER CLAUSE (20) OF SECTION 10 AS CAN BE NOTICED FROM ORDERS OF LD. CIT (A). THUS, THIS EXPLANATION IS COMPLETELY UNTRUE. IN FAC T, BY SUCH A CONDUCT THE APPELLANT-AUTHORITY CANNOT BE SAID TO BE COMING WITH CLEAN HANDS BEFORE THIS HONORABLE FORUM . HOW CAN A RESPONSIBLE ORGANIZATION OF THIS NATURE THAT IS ENTRUSTED WITH THE DEVELOPMENT OF A VAST CITY PLEAD THAT IT W AS IGNORANT OF LAW, PARTICULARLY WHEN IT WAS ENJOYING EXEMPTION UNDER SECTION 10(20A) AND THAT EXEMPTION WAS WITHDRAWN. 24 CONSEQUENT TO THIS AMENDMENT, THE APPELLANT-AUTHORI TY STARTED FILING RETURNS OF INCOME FOR SUCCEEDING YEA RS AND PAID TAXES THEREON. IT WAS ONLY WHEN THE LIABILITY INCREASED TO A SUBSTANTIAL EXTENT THAT IT SOUGHT TO OBJECT FO R THE IMPOSITION AND ATTEMPTED TO SEEK EXEMPTION BY FILIN G APPLICATION FOR REGISTRATION UNDER SECTION 12AA. SU CH AN ACTION ON ITS PART SUGGESTS THAT TILL THE EXTENT OF INCOME WAS UP TO A PARTICULAR LEVEL, IT NEVER THOUGHT THAT IT CAN CLAIM EXEMPTION OR SHOULD FILE AN APPLICATION UNDER SECTI ON 12AA, BUT WHEN INCOME ROSE TO A SUBSTANTIALLY HIGH LEVEL WITH THE SALE OF BIG CHUNK OF LAND ON A PURELY COMMERCIAL BA SIS, IT WAS REMINDED OF EXEMPTION WHICH IT MAY LIKE TO CLAI M. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES ON THE ISSUE OF VALIDITY OF SIGNING OF APPLIC ATION FOR GRANT OF REGISTRATION U/S 12A/12AA OF THE ACT BY THE CEO. WE HAVE ALSO PE RUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE APP ELLANT INDORE DEVELOPMENT AUTHORITY (HEREINAFTER REFERRED TO AS IDA) IS A S TATUTORY AUTHORITY ESTABLISHED BY THE GOVERNMENT OF MP IN EXERCISE OF ITS POWERS C ONFERRED UNDER SECTION 38(1) OF THE MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1 973( ACT NO. 23 OF 1973) VIDE NOTIFICATION NO. 1668XXXII-77, W.E.F. 13 TH MAY, 1977 FOR THE AREA COMPRISED WITHIN THE INDORE PLANN ING AREA AS SPECIFIED IN THE 25 PRIOR NOTIFICATION ISSUED BY TOWN & COUNTRY PLANNIN G DEPARTMENT AS REFERRED TO IN THE ABOVE NOTIFICATION (COPY OF NOTIFICATION REGARDING ESTABLISHMENT OF THE AUTHORITY HAS ALREADY BEEN FILED IN THE PAPER BOOK COMPILATION AT PAGE NO. 4 ANNEXURE A-1.02). THE IDA APPLIED FOR A REGISTRATION U/S 12A/12AA OF THE IT ACT, 1961 VIDE ITS APPLICATION FILED IN PRESCRIBED FORM 10A ON 26/12/2 007, BEFORE THE COMMISSIONER OF INCOME TAX-1, INDORE. THE APPLICATI ON FOR REGISTRATION WAS FILED IN VIEW OF THE FACT THAT THE APPELLANT CAME T O KNOW THAT THE CHIEF MINISTERS OF SOME OF THE STATES HAD REQUESTED THE THEN FINANC E MINISTER, GOVT. OF INDIA TO WITHDRAW THE AMENDMENT REGARDING WITHDRAWAL OF EXEM PTION TO DEVELOPMENT AUTHORITIES WHOSE INCOME WAS EXEMPTED AS LOCAL AUTH ORITIES TILL AY 2002-03. BUT THE FINANCE MINISTER IN HIS LETTER ADDRESSED TO THE CHIEF MINISTER, UP HAD ADVISED THAT SUCH AUTHORITIES COULD CLAIM EXEMPTION U/S 11 OF THE ACT. THE APPLICATION WAS, THEREFORE, FILED ON THE GROUND TH AT THE IDA IS ENTITLED TO REGISTRATION AS A CHARITABLE INSTITUTION AS THE OBJ ECTS FOR WHICH IT HAS BEEN ESTABLISHED UNDER THE PROVISIONS OF NAGAR TATHA GRA M NIVESH ADHINIYAM, FALL WITH THE WIDER CONNOTATION OF EXPRESSION THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND CONSTITUTE CHARITABLE PURPOSE AS DEFINED IN SE CTION 2(15) AND CONSEQUENTLY ACTIVITIES OF IDA CONSTITUT E ACTIVITIES FOR CHARITABLE PURPOSE AS DEFINED IN THE SAID SECTION FOR WHICH OU R ATTENTION WAS DRAWN TO DOCUMENTS SR. NOS. 1 TO 3 & PAGE NOS. 4 TO 99 OF THE PAPER BO OK 26 COMPILATION COPIES OF APPLICATION IN FORM 10A ALO NG WITH THE PAPERS AND DOCUMENTS FILED BEFORE THE CIT . THE ASSESSEE FILED THE FOLLOWING DOCUMENTS BEFORE THE LD. CIT ALONG WITH THE APPLICATION: I) COPY OF BARE ACT OF THE MADHYA PRADESH TATHA GRAM NIVESH ADHINIYAM, 1973 I.E. THE ACT UNDER WHICH TH E AUTHORITY WAS CONSTITUTED. II) COPY OF NOTIFICATION REGARDING ESTABLISHMENT OF THE AUTHORITY. III) LIST OF MEMBERS OF THE BOARD OF THE AUTHORITY. IV) DECLARATIONS U/S 13 (1)(C) & 13 (1) (D) OF THE IT A CT. V) A NOTE ON THE ACTIVITIES OF THE AUTHORITY. VI) A NOTE ON ADMISSIBILITY OF THE APPLICATION AND ELIG IBILITY OF IDA TO GET REGISTRATION U/S 12A / 12AA. IN THE NOTE APPENDED TO THE APPLICATION, THE APPELL ANT ENUMERATED VARIOUS ACTIVITIES UNDERTAKEN BY IT FOR THE DEVELOPMENT OF THE PLANNING AREA WITHIN ITS JURISDI CTION SO AS TO SHOW THAT THE OBJECT OF THE ESTABLISHMENT OF THE AUTHORITY IS THAT OF ADVANCEMENT OF THE OBJECT OF GENERAL PUBLIC UTILITY, WHICH FALLS WITHIN THE DEFINITION OF THE WORD CHAR ITABLE PURPOSE AS SCRIBED TO IN SECTION 2(15). IT WAS ALS O EMPHASIZED THAT THE AUTHORITY BEING A STATUTORY AUTHORITY THER E CANNOT BE ANY DOUBT ABOUT THE GENUINENESS OF ITS ACTIVITY. (REFER PAGE NO. 8 TO 13 AND PAGE NO. 14 TO 30 OF THE COMPILATIO N) 12. THE AFORESAID APPLICATION ALONG WITH ANNEXURES/ DOCUMENTS WAS FOLLOWED BY LETTER DATED 24.3.2008 (PAGE NO. 223 OF COMPILATION ) AND A FURTHER LETTER DATED 28/04/2008 REQUESTING THE LD C IT TO DISPOSE OFF THE APPLICATION AT AN EARLY DATE IN LIGHT OF THE LATEST DECISION OF THE APEX COURT 27 IN THE CASE OF CIT VS GUJRAT MARITIME BOARD REPORTED IN (2008) 21 4 CTR (SC) 81 (REFER PAGE NO 224 TO 226 OF THE COMPILATION). 1) THE APPELLANT RECEIVED NOTICE DATED 30/05/2008 FROM THE OFFICE OF LD. CIT REQUIRING TO EXPLAIN CERTAIN POINTS (REFER PAGE NO 227 & 228 OF COMPILATION). 2) THE ABOVE LETTER WAS REPLIED BY THE APPELLANT VIDE REPLY DATED 03/06/2008 POINT WISE REPLY GIVEN TO THE QUERY LETT ER (REFER PAGE NO. 230 TO 240 OF COMPILATION). COPY OF AUDITED FINANCIAL STATEMENTS AND COPY OF AUDIT REPORT IN PRESCRIBED F ORM NO. 10B FOR LAST THREE FINANCIAL YEARS WERE ALSO SUBMIT TED ALONG WITH THE LETTER ( REFER PAGE NO. 100 TO 210 & 211 TO 222 OF OUR COMPILATION). 3) THEREAFTER, A SECOND QUERY VIDE LETTER DATED 13.6.2 008 WAS ISSUED BY LD. CIT ASKING THE ASSESSEE TO SUBMIT ITS REPLY ON VARIOUS QUERIES AGAIN AND ALSO SIGNING OF APPLICATION IN FO RM NO.10A BY CEO ALONG WITH QUESTION OF DELAY IN FILING THE APPL ICATION WAS RAISED (REFER PAGE 229 OF COMPILATION). IN RESPONSE TO THE SAME, THE ASSESSEE FILED A DETAILED REPLY DATED 18.6.2008 AND EXPLAINED THAT CEO BEING THE PRINCIPAL OFFICER OF THE AUTHORITY IS COMPETENT TO FILED APPLICATION FOR REGISTRATION U/S 12AA.COPY OF NOTE SHEET AUTHORIZING CEO TO TAKE ACTION FOR REGIS TRATION U/S 12A / 12AA FILED WITH THE REPLY (REFER PAGE NO. 264 OF COMPILATION) . ALSO EXPLAINED THAT NO RETROSPECTIVE BENEFIT IS CLAIMED AND IN VIEW OF THE AMENDED PROVISIONS OF SE CTION 12AA AND THE APPLICANT, IF REGISTERED, WOULD QUALIFY FOR EXEMPTION ONLY W.E.F. AY 2008-09 AND NOT PRIOR TO THAT . OTHE R POINTS ALSO REPLIED IN DETAILS . (REFER PAGE NO 241 TO 256 OF COMPILATION ). ALONG WITH THIS LETTER , A FRESH APPLICATION IN FOR M 10A DULY 28 SIGNED BY THE CHAIRMAN OF THE IDA WAS ALSO FILED ( REFER PAGE NO. 265 OF COMPILATION) TO AVOID ANY TECHNICAL CONTROVERSY WITH THE SUBMISSION THAT THE DEFECT, IF ANY, WOULD STAND CURED AND WOULD RELATE BACK TO THE DATE OF ORIGINAL APPLICATI ON. RELIANCE WAS PLACED ON THE DECISION OF ITAT, INDORE BENCH I N THE CASE OF MP STATE AGRO INDUSTRIES LTD VS CIT REPORTED IN (1 995) 53 TTJ (IND) 262 (REFER PAGE NO. 243 OF COMPILATION) . 4) VIDE LETTER DATED 24/06/2008, CERTAIN FURTHER INFOR MATION WAS FURNISHED BY APPELLANT IN CONSEQUENCE OF THE QUERIE S MADE DURING THE COURSE OF THE HEARING ON 19/06/2008. THE SAID L ETTER WAS FOLLOWED BY ADDITIONAL SUBMISSION DATED 26/06/2008 (REFER PAGE NO. 257 TO 261 & 262 TO 263). 13. THE LD. CIT, INDORE VIDE IMPUGNED ORDER DATED 2 7.6.2008 REFUSED REGISTRATION U/S 12A/12AA TO THE ASSESSEE MAINLY ON THE FOLLOWING GROUNDS: (I) ACCORDING TO LD. CIT APPLICATION SIGNED BY CEO WAS INVALID IN LAW BECAUSE CEO, NOT BEING THE HEAD OF THE INSTITUTION AT THE HELM OF THE AFFAIRS OF THE INSTITUTION, WAS NOT COMPETENT TO SIGN THE FORM NO. 10A I.E. APPLICATION FOR REGISTRATION U/S 12A/12AA. (RELEVANT OBSERVATION AND FINDINGS ON THIS ISSUE FROM PAGE NO. 1 TO 4 OF THE IMPUGNED ORDER). (II) ON MERITS, LD. CIT CAME TO THE CONCLUSION THAT SINCE THE ACTIVITIES OF IDA ARE CONDUCTED IN A COMMERCIAL MANNER WITH PRIME INTENTION OF EARNING PROFITS, IDA IS ESSENTIALLY A BUSINESS ORGANIZATION CREATED BY NOTIFICATION AND ITS ACTIVITIES CANNOT BE SAID TO BE THE ACTIVITIES TOWA RDS THE OBJECT OF ADVANCEMENT OF THE GENERAL PUBLIC UTILITY. 29 14. IF THE TOTALITY OF THE FACTS ARE ANALYSED, WE H AVE FOUND THAT THE LD. CIT TREATED THE APPLICATION FOR REGISTRATION AS INV ALID BECAUSE THE SAME WAS SIGNED BY CEO OF THE ASSESSEE. ACCORDING TO THE LD. CIT, THE CEO, NOT BEING THE HEAD OF THE INSTITUTION AND ALSO NOT BEIN G THE PERSON AT THE HELM OF THE AFFAIRS OF THE IDA IS NOT COMPETENT TO SIGN APP LICATION ON FORM NO.10A FOR GETTING REGISTRATION U/S 12A/12AA OF THE ACT. I N THIS RESPECT, THE CONTENTION OF THE APPELLANT IS TWO FOLD. FIRSTLY, T HE APPELLANT DESIRES TO CONTEND THAT IN ABSENCE OF ANY SPECIFIC REQUIREMENT OF LAW REGARDING SIGNING OF APPLICATION U/S 12A/12AA BY CHAIRMAN, THE CEO WH O IS THE PRINCIPLE OFFICER, BEING STATUTORILY APPOINTED SECRETARY OF I DA, IS COMPETENT TO SIGN AND FILE AN APPLICATION FOR REGISTRATION U/S 12A/12 AA ON BEHALF OF IDA AND HENCE SUCH APPLICATION SIGNED BY CEO CANNOT BE TREA TED AS INVALID. CHIEF EXECUTIVE OFFICER, APPOINTED UNDER SECTION 46 OF TH E MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973, BEING THE SECRET ARY OF THE IDA, IS THE PRINCIPAL OFFICER OF THE IDA WITHIN THE MEANING O F SECTION 2(35) OF THE INCOME-TAX ACT, 1961 AND AS SUCH CEO IS COMPETENT T O FILE AN APPLICATION 12A/12AA FOR AND ON BEHALF OF IDA. ALTERNATIVELY, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT ASSUMING FOR THE SAKE OF ARGUMENT THAT THE CEO IS NOT COMPETENT TO SIGN APPLICATION U/S 12A/12AA, SUCH DEFECT REGARDING IMPROPER SIGNING IS MERELY A PROCEDURAL/ 30 TECHNICAL DEFECT WHICH STANDS CURED WITH THE FILING OF FRESH APPLICATION, WHICH RELATES BACK TO THE DATE OF ORIGINAL APPLICAT ION. POSITION OF CEO QUA IDA WAS EXPLAINED AS UNDER: AS STATED EARLIER, IDA IS A STATUTORY AUTHORITY EST ABLISHED UNDER THE PROVISIONS OF MP NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973. CHAPTER VII OF THE ADHINIYAM CONTAINS ALL PROVISIONS REGARDING ESTABLISHMENT, ADMINISTRATION AND OTHER PROVISIONS REGARDING FUNCT ION OF SUCH AUTHORITIES ESTABLISHED UNDER THE ACT. IT ALSO CONTAINS APPOINT MENT OF THE CHAIRMAN AND OTHER MEMBERS OF THE BOARD GOVERNING THE AUTHORITY. SECTION 46 OF THE ACT PROVIDES THAT EVERY TOWN AND COUNTRY DEVELOPMENT AU THORITY SHALL HAVE A CHIEF EXECUTIVE OFFICER, WHO SHALL ACT AS THE SECRE TARY OF THE AUTHORITY. THE CEO IS APPOINTED BY THE STATE GOVT. U/S 46(2) F ROM AMONGST THE MEMBERS OF DEVELOPMENT AUTHORITY SERVICE BELONGING TO STATE CADRE OR FROM AMONGST THE MEMBERS OF THE STATE TECHNICAL/ADM INISTRATIVE SERVICES. IT WOULD ALSO BE PERTINENT TO NOTE THAT AND THE CEO SO APPOINTED BY STATE GOVT. IS THE MEMBER SECRETARY OF THE AUTHORITY (IDA ) BY VIRTUE OF SECTION 40(H) OF THE SAID ACT. SINCE, THE CEO OF IDA IS A S TATUTORILY APPOINTED SECRETARY OF IDA, HE IS A PRINCIPLE OFFICER OF ID A AS DEFINED IN SECTION 2(35) OF THE IT ACT, 1961. THE QUESTION, THEREFORE, REQUIRED TO BE CONSIDERED IS WHETHER THE APPLICATION FOR REGISTRATION SIGNED BY THE PRINCIPLE OFFICER' OF IDA COULD BE HELD TO BE INVALID. AS ALREADY STAT ED ABOVE, IDA IS A LOCAL AUTHORITY FOR ALL PURPOSES, EXCEPT FOR EXEMPTION U/ S 10(20). ADMITTEDLY, EVEN DEPARTMENT HAS ASSESSED IDA, AS LOCAL AUTHORIT Y. IN THE CONTEXT OF POSITION OF CEO QUA IDA, A REF ERENCE MAY BE MADE TO THE PROVISIONS OF SECTION 12A/12AA ACCORDING TO WHI CH, THE PERSON IN RECEIPT OF INCOME IS REQUIRED TO MAKE AN APPLICATIO N FOR REGISTRATION. THE MODE OF MAKING AN APPLICATION IS DULY PRESCRIBED IN RULE 17A ACCORDING TO 31 WHICH AN APPLICATION FOR REGISTRATION SHALL BE MADE IN FORM 10A. NEITHER THE PROVISIONS OF SECTION 12A/12AA NOR RULE 17A LAY DOW N/PRESCRIBE ANY MODE OF SIGNING THE APPLICATION. UNDER THE CIRCUMSTANCES , ONE MAY REFER TO THE PROVISIONS REGARDING SIGNING OF THE RETURN ENJOINED UNDER SECTION 140 OF THE IT ACT. ACCORDING TO SUB-CLAUSE (D) OF THE SAID SEC TION, A RETURN OF INCOME IN CASE OF LOCAL AUTHORITY IS TO BE SIGNED AND VERI FIED BY THE PRINCIPAL OFFICER THEREOF. SIMILARLY, ACCORDING TO SUB-CLAUSE (E) A R ETURN IN CASE OF ANY OTHER ASSOCIATION IS REQUIRED TO BE SIGNED BY ANY MEMBER OF THE ASSOCIATION OR THE PRINCIPAL OFFICER THEREOF. AND, RETURN IN CASE OF A NY OTHER PERSON NOT FALLING IN THE ABOVE CLAUSES, IS REQUIRED TO BE SIGNED BY T HAT PERSON OR BY SOME PERSON COMPETENT TO ACT ON HIS BEHALF. IN THE INSTA NT CASE, THE CEO, WHO IS THE PRINCIPAL OFFICER BEING THE SECRETARY OF THE ID A, IS COMPETENT TO SIGN THE RETURNS ON BEHALF OF THE IDA AND HAS ACTUALLY FILED RETURNS ON BEHALF OF IDA WHICH HAVE DULY BEEN ACCEPTED BY DEPARTMENT AND IDA HAS BEEN ASSESSED ON THE BASIS OF SUCH RETURNS. UNDER THE CIRCUMSTANC ES, IF AN APPLICATION UNDER SECTION 12A/12AA IS SIGNED BY A PERSON WHO IS COMPETENT TO SIGN THE RETURN OF SUCH AUTHORITY, CANNOT BE TREATED AS INVA LID. WITH THIS LEGAL POSITION, IT WAS ARGUED THAT THE LD . CIT HAS CLEARLY COMMITTED AN ERROR IN TREATING THE APPLICATION SIGNED BY CEO AS INVALID. MOREOVER, THE CHAIRMAN OF THE IDA HAD SPECIFICALLY AUTHORIZED THE CEO TO TAKE ALL NECESSARY/ APPROPRIATE STEPS TOWARDS APPLICATION FO R REGISTRATION UNDER SECTION 12A/12AA WHICH WOULD NATURALLY INCLUDE SIGN ING OF THE PRESCRIBED FORM . (REFER COPY OF NOTE SHEET REGARDING SUCH AUTHORIZ ATION FILED AT PAGE NO. 264 OF THE COMPILATION). THUS, THE ORDER OF LD. CIT DISMISSING APPLICATION AS INVALID ON THIS GROUND DESERVES TO B E SET ASIDE. IN THE ALTERNATIVE, IT IS SUBMITTED THAT ASSUMING W ITHOUT ADMITTING THAT THE CEO WAS NOT COMPETENT TO SIGN THE APPLICATION FOR R EGISTRATION, SUCH A DEFECT IN SIGNING THE APPLICATION, IN ABSENCE OF AN Y STATUTORY PROVISION 32 PRESCRIBING THE MODE FOR SIGNING SUCH APPLICATION, WOULD ONLY BE A PROCEDURAL/ TECHNICAL AND A CURABLE DEFECT, WHICH STANDS CURED IMMEDIATELY ON FILING A FRESH APPLICATION DULY SIGNED BY PROPE R PERSON (CHAIRMAN IN THIS CASE) ( REFER PAGE NO. 265 OF THE COMPILATION) . IN THE INSTANT CASE, ALTHOUGH THE APPELLANT, DURING THE COURSE OF PROCEE DINGS, HAS FILED SUCH APPLICATION DULY SIGNED BY CHAIRMAN OF IDA, THE LD. CIT HAS TREATED THE APPLICATION FILED DE-NOVO ON 19-06-2009. THE FRESH APPLICATION HAS BEEN FILED TO AVOID ANY C ONTROVERSY ON THE ISSUE BUT WITHOUT PREJUDICE TO THE CONTENTION THAT APPLIC ATION ORIGINALLY FILED IS PROPER SINCE, THE APPLICANT HAS FILED ANOTHER APPLI CATION DULY SIGNED BY THE CHAIRMAN OF THE IDA, ACCORDING TO THE APPLICANT, TH E DEFECT, IF ANY, REGARDING SIGNATURE STANDS CURED. THE APPLICATION S O FILED WOULD NATURALLY RELATE BACK TO THE DATE OF THE ORIGINAL APPLICATION . 15. WE WOULD LIKE TO ANALYSE THE ISSUE WITH THE HEL P OF CERTAIN CASES. IN THE CASE OF M.P. AGRO INDUSTRIES DEVELOPMENT CORPN. LTD . VS. CIT(SUPRA), THERE WAS A DEFECT REGARDING SIGNING OF REVISED RETURN. I T WAS HELD TO BE CURABLE DEFECT BY THE BENCH BY FURTHER HOLDING THAT FILING OF SUCH RETURN GOES TO CURE THE IRREGULARITY AND WOULD RELATE BACK TO THE DATE ON W HICH THE RETURNS WERE ORIGINALLY FILED (PAGES 197 TO 201, RELEVANT OBSERV ATION IN PARA 8 & 13 OF THE ORDER 53 TTJ (IND) 262: 82 TAXMAN 85). IN THE CAS E OF CIT VS. MASSONEILAN (I) LTD. (SUPRA) AND CITVS. RUDRA VILAS KISAN SAHAK ARI CHINI MILLS (SUPRA), THE RETURNS WERE SIGNED BY THE AGENT OF THE SOCIETY, TH E SAME WAS TREATED AS VALID RETURN BY PLACING RELIANCE UPON THE DEFINITION OF T HE WORD PRINCIPAL OFFICER IN SEC. 2(35). IN ANOTHER CASE OF CITVS. HOPE TEXTILE S LTD. (287 ITR 321) (MP), 33 WHEREIN IN THE LIGHT OF RULE 45 R.W.S. 140 OF THE A CT, IT WAS HELD TO BE DIRECTORY AND NOT MANDATORY, THEREFORE, THE HONBLE JURISDICT IONAL HIGH COURT AFFIRMED THE DECISION OF THE TRIBUNAL IN REMANDING THE CASE TO LD. CIT FOR GIVING OPPORTUNITY TO THE ASSESSEE TO SIGN MEMO OF APPEAL IN CONFIRMATION WITH RULE 45 R.W.S. 140. THE HONBLE COURT HELD THAT SUCH REQ UIREMENT IS ONLY DIRECTORY REQUIRING GRANT OF AN OPPORTUNITY TO GET PROPER SIG NATURE. IN VIEW OF THIS FACT, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION OF THE LD. CIT THAT SIGNING OF APPLICATION ONLY BY THE CHAIRMAN IS MANDATORY ESPEC IALLY WHEN IT WAS DULY SIGNED BY THE CEO OF THE ASSESSEE WHO IS ALSO MEMBE R SECRETARY TO INDORE DEVELOPMENT AUTHORITY (IN SHORT IDA). EVEN OTHERWIS E, THE RETURNS FILED BY IDA AND DULY SIGNED BY THE CEO WERE ACCEPTED WITHOU T RAISING ANY OBJECTION, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E APPLICATION FOR GRANT OF REGISTRATION U/S 12A/12AA CANNOT BE SAID TO BE INVA LID. IT IS PERTINENT TO MENTION HERE THAT INSTEAD OF GRANTING AN OPPORTUNIT Y TO CURE THE DEFECT, THE LD. CIT DID NOT TAKE ON RECORD THE DULY SIGNED APPLICAT ION BY THE CHAIRMAN FROM THE DATE OF ORIGINAL APPLICATION. THUS, THE DECISIO N OF THE CIT IS CONTRARY TO RATIO LAID DOWN BY HONBLE JURISDICTIONAL HIGH COUR T IN CIT VS. HOPE TEXTILES LTD. (SUPRA). EVEN OTHERWISE, THE LD. CIT OUGHT TO HAVE TREATED THE FRESH APPLICATION AS VALID WHEN THE DEFECT, IF ANY, WAS C URED BY THE ASSESSEE. IN ORDER THAT A PERSON CAN BE SAID TO BE A PRINCIPAL OFFICE R AS DEFIED U/S 2 (35) (B), TWO INGREDIENTS MUST BE SATISFIED (I) THAT HE MUST BE A PERSON CONNECTED WITH THE MANAGEMENT OR ADMINISTRATION WITH THE ASSESSEE AND (II) THE ITO MUST HAVE 34 SERVED UPON HIM A NOTICE OF HIS INTENTION FOR TREAT ING HIM AS PRINCIPAL OFFICER. THE SATISFACTION OF ANY OF TWO CONDITIONS OR INGRED IENTS WILL NOT ATTRACT THIS CLAUSE. IN THE PRESENT APPEAL, SINCE THE DEPARTMENT ACCEPTED THE RETURNS/OTHER DOCUMENTS, SIGNED BY THE CEO, THEREFORE, THE DEPART MENT IS NOT PERMITTED TO TAKE A REVERSE STAND ON THE APPLICATION FILED FOR G ETTING REGISTRATION U/S 12A/12AA. IF THE SCHEME OF THE ACT OF THE IDA IS AN ALYSED, THE FIRST PART OF THE ACT RELATES TO APPOINTMENT OF PLANNING AUTHORITIES. CHAPTER TWO CONTAINING SEC. 3 CONTEMPLATES APPOINTMENT OF AN OFFICER TO BE A DI RECTOR, TOWN & COUNTRY DEVELOPMENT PLANNING AND SEC. 46 PROVIDES THAT EVER Y TOWN & COUNTRY DEVELOPMENT AUTHORITY SHALL HAVE A CEO WHO SHALL AC T AS SECRETARY OF SUCH AUTHORITY. 16. AS PER SEC. 140, SIGNING AND VERIFICATION OF RE TURN IS MANDATORY, THEREFORE, IF A RETURN IS FILED WITHOUT SIGNATURE A ND VERIFICATION, IT WILL HAVE TO BE TREATED AS AN INVALID RETURN AS WAS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN KHAILDAS & SONS VS. CIT (225 ITR 960) (MP). THE HO NBLE ALLAHABAD HIGH COURT IN DHAMPUR SUGAR MILLS LTD. VS. CIT(90 ITR 2 36) EVEN WENT TO THE EXTENT THAT RETURN IN APPLICABLE FORM IS NOT INVALI D WHEREAS THE HONBLE CALCUTTA HIGH COURT IN NATIONAL INSURANCE CO. LTD. VS. CIT( 72 TAXMAN 161) HELD THAT NON-REMOVAL OF DEFECT WITHIN TIME ALLOWED WILL INVA LIDED SUCH RETURN. THE HONBLE P & H HIGH COURT IN HIND SAMACHAR LTD. VS. UNION OF INDIA (169 TAXMAN 302) HELD THAT WHERE RETURN OF INCOME FILED BY THE COMPANY AND IS 35 SIGNED AND VERIFIED BY THE PERSON OTHER THAN AUTHOR IZED SHALL BE TREATED AS DEFECTIVE WHICH SHALL BE AMENABLE TO THE PROVISIONS OF SEC. 292B AND SEC. 139(9). THE ASSESSING AUTHORITY IN SUCH CIRCUMSTANC ES SHALL PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO RECTIFY THE DEFECT U /S 139(9) BEFORE TREATING THE SAME TO BE INVALID AND NON-EST. IN THE PRESENT APPE AL, EVEN AN APPLICATION DULY SIGNED BY THE CHAIRMAN WAS FILED BY THE ASSESSEE, T HEREFORE, ON THIS GROUND, IT CAN BE SAID THAT IN VIEW OF THE RATIO LAID DOWN IN THE AFORESAID DECISION, THOUGH ON VALIDITY OF RETURN, THE LD. CIT IS NOT JUSTIFIE D TO REJECT THE APPLICATION. THE HONBLE APEX COURT IN THE CASE OF NARENDRA KR. J. M ODI VS. CIT(105 ITR 109) (SC) CLEARLY HELD THAT RETURN OF HUF CAN BE SIGNED BY JUNIOR MEMBER. THE HONBLE CALCUTTA HIGH COURT IN SRI SRI SRIDHAR JIEW VS. ITO (63 ITR 192) HELD THAT THE CONCEPT OF A HINDU DEITY IS SUCH THAT IT M UST BE TAKEN THAT THE SIGNATURE OF THE SHEBAIT IS THE SIGNATURE OF THE DEITY ITSELF . EVEN OTHERWISE, THERE IS NO SPECIFIC REQUIREMENT UNDER THE ACT FOR SIGNING THE APPLICATION U/S 12A/12AA THAT IT CAN ONLY BE SIGNED BY THE CHAIRMAN. SINCE T HE CEO, BEING STATUTORILY APPOINTED SECRETARY OF THE IDA, IS A PRINCIPAL OFF ICER, THEREFORE, VERY MUCH COMPETENT TO SIGN AND FILE AN APPLICATION FOR REGIS TRATION U/S 12A/12AA ON BEHALF OF THE IDA, HENCE, SUCH APPLICATION, SIGNED BY THE CEO, CANNOT BE TREATED AS INVALID. CEO, APPOINTED U/S 46 OF MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1993, BEING THE SECRETARY OF THE IDA, IS THE PRINCIPAL OFFICER OF THE IDA WITHIN THE MEANING OF SEC. 2 (35 ) OF THE I.T. ACT, 1962 AND AS SUCH, CEO IS COMPETENT TO SIGN AN APPLICATION FOR A ND ON BEHALF OF IDA. WE 36 HAVE ALREADY DISCUSSED THE POSITION OF CEO QUA IDA IN PARA NO.14 (SUPRA) OF THIS ORDER WHEREIN CEO IS APPOINTED BY STATE GOVT. U/S 46(2) FROM AMONGST THE MEMBERS OF DEVELOPMENT AUTHORITY SERVICES BELONGING TO STATE CADRE OR FROM AMONGST THE MEMBERS OF THE STATE TECHNICAL/ADMINIST RATIVE SERVICES AND SUCH CEO IS APPOINTED BY VIRTUE OF SEC. 40 (H) OF THE SA ID ACT. SINCE CEO IS STATUTORILY APPOINTED SECRETARY OF IDA, HE IS A PR INCIPAL OFFICER, THE REQUIREMENT OF SEC. 2(35) OF THE I.T. ACT IS FULFIL LED. EVEN OTHERWISE, THE DEPARTMENT HAS ASSESSED IDA AS LOCAL AUTHORITY EXCE PT FOR EXEMPTION U/S 10(20) OF THE ACT. THE MODE OF MAKING AN APPLICATION IS PR ESCRIBED IN RULE 17A, ACCORDING TO WHICH, AN APPLICATION FOR REGISTRATION SHALL BE MADE IN FORM 10A. SECTION 12A/12AA DOES NOT PRESCRIBE ANY MODE OF SIG NING THE APPLICATION. UNDER THESE CIRCUMSTANCES, ONE MAY REFER TO THE PRO VISIONS FOR SIGNING OF RETURN ENJOINED U/S 140 OF THE ACT. AS MENTIONED EARLIER, THE RETURNS SIGNED BY THE CEO WERE DULY ASSESSED AND ACCEPTED BY THE DEPARTME NT, THEREFORE, FOR SIGNING APPLICATION U/S 12A/12AA BY A PERSON/AUTHORITY WHO IS COMPETENT TO SIGN A RETURN OF SUCH AUTHORITY CANNOT BE SAID TO BE INVAL ID. MOREOVER, THE CHAIRMAN OF IDA HAS SPECIFICALLY AUTHORIZED THE CEO TO TAKE NEC ESSARY/APPROPRIATE STEPS TOWARDS APPLICATION FOR REGISTRATION U/S 12A/12AA W HICH WOULD NATURALLY INCLUDE SIGNING OF PRESCRIBED FORM (REFER COPY OF N OTE-SHEET FOR SUCH AUTHORIZATION PAGE 264 OF COMPILATION), THEREFORE, THE ORDER OF THE LD. CIT DISMISSING THE APPLICATION AS INVALID, ON THIS GROU ND, IS NOT JUSTIFIED. DURING HEARING, AN ALTERNATIVE PLEA WAS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE THAT 37 FOR CURABLE DEFECT, IF ANY, A DULY SIGNED APPLICATI ON BY THE CHAIRMAN (PAGE 265 OF THE COMPILATION) WAS FILED BY THE ASSESSEE DURIN G THE COURSE OF PROCEEDINGS ITSELF, THEREFORE, THE DEFECT WAS CURED AND SUCH AP PLICATION SHOULD HAVE BEEN TREATED AS DATE BACK TO THE ORIGINAL APPLICATION, T HEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 17. NOW, WE SHALL TAKE UP THE NEXT GROUND WHICH REL ATES TO DENYING REGISTRATION U/S 12A/12AA. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE ARE THAT SINCE THE EXEMPTION UNDER SS. 10(20)/10(20A) O F THE ACT STANDS WITHDRAWN W.E.F. FROM AY 2003-04, THE APPELLANT HAS FLIED AN APPLICATION U/S 12A/12AA OF THE IT ACT FOR REGISTRATION AS A CHARITABLE INSTITU TION. THE IDA IS A SUCCESSOR TO THE INDORE IMPROVEMENT TRUST WHICH WAS ESTABLISHED UNDER THE TOWN IMPROVEMENT TRUST ACT, WHICH HAS BEEN REPEALED WITH THE COMING INTO FORCE OF THE MP NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973 BY V IRTUE OF SECTION 87. THUS, THERE IS A STATUTORY LEGAL OBLIGATION UPON TH E AUTHORITY CONSTITUTED/ESTABLISHED UNDER THE SAID PROVISION TO CARRY ON THE ACTIVITIES IN ACCORDANCE WITH ACT. THE REGISTRATION, IF ALLOWED, WOULD ENTITLE THE APPELLANT TO CLAIM EXEMPTION UNDER SS. 11 & 12 IN RESPECT OF ITS INCOME SUBJECT TO THE CONDITIONS OF THE SAID SECTION. SECTION 12A PROVIDE S THAT PROVISIONS OF SEC.11&12 WILL NOT APPLY UNLESS THE PERSON IN RECEI PT OF INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTIT UTION AND SUCH TRUST OR INSTITUTION IS REGISTERED U/S 12AA. SECTION 12AA LAYS DOWN PROC EDURE FOR REGISTRATION AND 38 REQUIRES THE LD. CIT TO EXAMINE THE GENUINENESS OF THE ACTIVITIES OF THE TRUST /INSTITUTION AND ITS OBJECTS. THE INSTITUTION IS TH US REQUIRED TO SATISFY THAT ITS ACTIVITIES ARE WHOLLY FOR CHARITABLE OR RELIGIOUS P URPOSES. 18. IT WAS EXPLAINED THAT THE EXPRESSION CHARITABL E PURPOSE HAS BEEN DEFINED IN SECTION 2(15) WHICH IS AS UNDER: - ( 15 ) 55 CHARITABLE PURPOSE 56 INCLUDES RELIEF OF THE POOR, EDUCATION 56 , MEDICAL RELIEF, 57 [ PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, ] AND THE ADVANCEMENT OF ANY OTHER 56 OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY 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 FROM SUCH ACTIVITY; ] THE APPELLANT SUBMITTED THAT THE EXPRESSION ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY' HAS BEEN SUBJECT MATTER OF JUDICIAL DEBATE IN MANY JUDICIAL PRONOUNCEMENTS AND THE HONBLE COURTS HAVE INTERPRE TED THE SAID EXPRESSION IN THE WIDEST MANNER. ANY OBJECT THAT PROMOTES SOCI AL/ GENERAL WELFARE AS AGAINST WELFARE/GAIN TO A PARTICULAR PERSON CARRYIN G ON THE ACTIVITY HAS BEEN CONSIDERED AS AN OBJECT THAT ADVANCES OBJECTS OF GE NERAL PUBLIC UTILITY. RECENTLY STATUTORY AUTHORITIES WHO ARE CREATED FOR GENERAL WELFARE AS A WHOLE HAVE ALSO BEEN HELD TO BE ELIGIBLE FOR REGISTRATION U/S 12A/12AA. IN THE CONTEXT OF THE SAID DECISIONS FOR CONSIDERING THE Q UESTION WHETHER IDA IS ENTITLED TO REGISTRATION OR NOT , IT IS NECESSARY T O FIND OUT THE OBJECT OF ITS 39 ACTIVITIES I.E. WHETHER ITS ACTIVITIES ARE AIMED AT GENERAL PUBLIC UTILITY OR NOT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE OBJECT OF ANY INSTITUTION CAN BE FOUND ONLY FROM THE DOCUMENT UNDER WHICH IT IS CREATED / ESTABLISHED. IN CASE OF ANY STATUTORY AUTHORITY, THE LEGISLATION UNDER WHICH SUCH AUTHORITY HAS BEEN ESTABLISHED/CREATED WOULD DETERMINE THE OB JECT OF ACTIVITIES OF SUCH AUTHORITY. IN THE INSTANT CASE, SINCE THE IDA HAS B EEN ESTABLISHED BY GOVT. OF MP IN EXERCISE OF ITS POWERS UNDER THE PROVISIONS O F MP NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973, THE OBJECT OF THAT ADHINIYA M WOULD DETERMINE THE OBJECT OF ACTIVITIES OF IDA. SCHEME OF THE SAID ACT WAS EXPLAINED AS UNDER: (1) THE IDA IS A STATUTORY AUTHORITY ESTABLISHED/CREATE D BY THE GOVERNMENT OF MADHYA PRADESH IN EXERCISE OF ITS POW ERS UNDER SECTION 38 OF THE MADHYA PRADESH NAGAR TATHA GRAM N IVESH ADHINIYAM, 1973. ACCORDING TO THE APPLICANT, THE OB JECT OF ESTABLISHMENT OF THE IDA IS ADVANCEMENT OF THE CAUS ES OF GENERAL PUBLIC UTILITY. IN THIS RESPECT, THE APPELL ANT HAS ALREADY PLACED ON RECORD A DETAILED NOTE ON THE VARIOUS ACT IVITIES UNDERTAKEN BY IT IDA (REFER PAGE NO. 8 TO 13) ALONG WITH A DETAILED NOTE ON THE ADMISSIBILITY OF ITS CLAIM REG ARDING GRANT OF REGISTRATION UNDER SECTION 12A/12AA ( REFER PAGE NO. 14 TO 30) . FOR DETERMINING THE OBJECT FOR WHICH THE INSTITUT ION HAS BEEN ESTABLISHED/CREATED, A REFERENCE WAS MADE TO T HE 40 PREAMBLE OF THE STATUTE WHICH HAS BEEN REPRODUCED AT P AGE NO. 14 OF THE COMPILATI ON ( ALSO GIVEN AT TOP OF THE PAGE NO. 31 OF THE COMPILATION ) . THE ACT NAMELY, THE MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM HAS BEEN ENACTED BY THE STATE OF MADHYA PRADESH FOR MAKING A PROVISION FOR PLANNING AND DEVELOPMENT AND USE OF LAND; TO MAKE BETTER PRO VISIONS FOR PREPARATION OF DEVELOPMENT PLANS AND ZONING PLANS W ITH A VIEW TO ENSURING THAT TOWN PLANNING SCHEMES ARE MADE IN PROPER MANNER AND THEIR EXECUTION IS MADE EFFECTIVE, TO CO NSTITUTE TOWN AND COUNTRY PLANNING AUTHORITY FOR PROPER IMPLEMENTATION OF TOWN AND COUNTRY DEVELOPMENT PLAN , TO PROVIDE FOR THE DEVELOPMENT AND ADMINISTRATION OF S PECIAL AREA DEVELOPMENT AUTHORITY, TO MAKE A PROVISION FOR CO MPULSORY ACQUISITION OF LAND REQUIRED FOR THE PURPOSE OF THE DEVELOPMENT PLANS AND FOR PURPOSE CONNECTED WITH THE MATTERS AF ORESAID. (2) A PERUSAL OF THE PREAMBLE OF THE ACT, THUS, WOULD G O TO SHOW THAT THE ACT HAS BEEN ENACTED BY THE LEGISLATURE OF THE STATE OF MADHYA PRADESH TO SECURE PLANNED, SYSTEMATIC AND OV ERALL DEVELOPMENT OF DIFFERENT AREAS WITHIN THE STATE BY SPECIFYING THE LAND USE WITH THE HELP OF PREPARATION OF REGION AL, ZONING AND OTHER PLANS. THE FIRST PART OF THE ACT CONTEMPL ATES CONSTITUTING TOWN PLANNING AUTHORITIES, WHO ARE ENT RUSTED WITH 41 THE DUTY TO PREPARE DEVELOPMENT PLANS FOR THE RESPE CTIVE ARES WITHIN THEIR JURISDICTION, DETERMINATION AND SPECIF ICATION OF THE LAND USE FOR DIFFERENT PURPOSES IN THE SAID AREAS A ND OTHER PART OF THE ACT CONTEMPLATES ESTABLISHMENT OF THE TOWN A ND COUNTRY DEVELOPMENT AUTHORITIES FOR DIFFERENT AREAS , WHO ARE UNDER A DUTY TO IMPLEMENT THE PLANS PREPARED BY THE PLANNING AUTHORITY APPOINTED UNDER THE ACT BY PREPARING SCHE MES FOR DEVELOPMENT OF THE AREA. THE VERY OBJECT OF THE ST ATUE IS THUS, SECURING PLANNED, SYSTEMATIC AND OVERALL DEVELOPMEN T OF VARIOUS AREAS OF THE STATE BY PREPARATION OF PLANS AND THEN IMPLEMENTING THROUGH THE DEVELOPMENT AUTHORITIES. T HE PROVISIONS OF THE ACT, IF ANALYZED, IN THE LIGHT OF THE PREAMBLE OF THE STATUTE, IT WOULD BE CLEAR THAT THE ACT HAS BEEN ENACTED IN PURSUANCE OF THE DIRECTIVE PRINCIPLES OF THE STATE POLICY AS ENSHRINED IN ARTICLE 38 AND 39 OF THE CONSTITUTION OF INDIA WHICH REQUIRES STATE TO STRIVE TO PROMOTE THE WELFA RE OF PEOPLE. (3) THE DIRECTIVE PRINCIPLES OF STATE POLICY CONTEMPLAT E A WELFARE STATE. THIS ACT HAS BEEN LEGISLATED BY THE LEGISLAT URE OF THE STATE OF MADHYA PRADESH IN EXERCISE OF ITS LEGISLATIVE PO WER AVAILABLE TO IT UNDER ENTRY NO.5 OF LIST II OF THE SEVENTH SCHEDULE TO THE CONSTITUTION OF INDIA. THE OBJECT O F THE 42 ENACTMENT IS TO SECURE PLANNED AND SYSTEMATIC DEVEL OPMENT OF THE AREAS. FROM THE PREAMBLE OF THE STATUTE OR EVEN FROM THE READING OF THE PROVISIONS OF THE ACT, NO ONE CAN SA Y THAT THE INTENTION OF THE STATE OF MADHYA PRADESH IN LEGISLA TING THIS LAW IS TO CARRY ON THE REAL ESTATE BUSINESS LIKE A PRIV ATE BUILDER. IN ANY EVENT SURPLUS ARISING TO VARIOUS AUTHORITIES CO NSTITUTED UNDER THE LEGISLATION IS NECESSARILY REQUIRED TO BE DEPLOYED FOR ITS OBJECTS ONLY AND NO PART OF THE SURPLUS CAN BE DISTRIBUTED TO ANY PERSON OR AGENCY BY WAY OF PROFIT OR DIVIDEND. THE LD. COUNSEL FOR THE ASSESSEE TOOK US TO THE PROVISIONS OF THE ACT OF THE IDA BY EXPLAINING THE RELEVANT SECTION, WHICH W ILL BE DISCUSSED WHILE DISPOSING OF THE ISSUE. IT WAS FURT HER SUBMITTED THAT THE ANALYSIS OF THE ACT AND THE PROVISIONS REG ARDING CONSTITUTION OF THE TOWN AND COUNTRY DEVELOPMENT AU THORITY WOULD ENABLE THIS HONBLE TRIBUNAL TO APPRECIATE TH E OBJECT OF THE LEGISLATION AND THE OBJECT WITH WHICH THE AUTHO RITY HAS BEEN ESTABLISHED. IT WOULD BE CLEAR THAT THE OBJECT OF T HE LEGISLATION IS ONLY ADVANCEMENT OF GENERAL PUBLIC UTILITY. THE ACT AIMS AT WELFARE OF THE PUBLIC AS A WHOLE BY PLANNED DEVELOP MENT OF CITIES, TOWNS ETC, BY ALLOCATING LAND FOR VARIOUS P URPOSES. 43 19. IT WAS SUBMITTED THAT THE AIM OF THE ASSESSEE I S TO DETERMINE THE LAND USE FOR OVERALL DEVELOPMENT IN THE INTEREST OF GENE RAL PUBLIC. THE OBJECT OF LEGISLATION IS NOT TO CARRY ON ANY ACTIVITY IN THE NATURE OF REAL ESTATE BUSINESS AS ALLEGED BY LD. CIT IN ORDER REFUSING TO GRANT RE GISTRATION. IN THIS RESPECT, IT IS SUBMITTED THAT WHENEVER A STATUTORY AUTHORITY IS APPOINTED, BY VIRTUE OF PROVISIONS OF LAW, THE OBJECT OF ACTIVITIES OF SUCH AUTHORITY CAN ONLY BE APPRECIATED BY FINDING OUT THE OBJECT OF THE LEGISL ATION UNDER WHICH IT HAS BEEN CREATED. THE ABOVE ANALYSIS OF THE ENTIRE SCHE ME WOULD GO TO SHOW THAT THE STATE OF MADHYA PRADESH FOR PURPOSE OF SECURING THE PLANNED AND SYSTEMATIC DEVELOPMENT OF THE AREAS WITHIN THE STAT E HAS ENACTED THE LAW FOR ESTABLISHMENT OF THE AUTHORITIES LIKE DIRECTOR TOWN AND COUNTRY PLANNING WHO ARE OBLIGED TO PREPARE THE DEVELOPMENT PLANS FO R THE ENTIRE STATE NAMELY THE REGIONAL PLANS, DEVELOPMENT PLANS, ZONIN G PLANS, ETC. AND THE ACT FURTHER CONTEMPLATES AND PROVIDES FOR ESTABLISHING AUTHORITIES LIKE IDA FOR IMPLEMENTATION OF SUCH PLANS PREPARED BY THE TOWN A ND COUNTRY PLANNING DEPARTMENT WITHIN THE AREA NOTIFIED FOR ITS PURPOSE . IT WOULD BE CLEAR FROM THE ANALYSIS OF THE ENTIRE SCHEME OF THE ACT THAT T HERE IS NO PROFIT MOTIVE BEHIND CREATION OF SUCH AUTHORITIES AND THE DOMINAN T OBJECT OR PURPOSE OF ESTABLISHMENT OF SUCH AUTHORITIES IS THE IMPLEMENTA TION AND EXECUTION OF THE PLANS PREPARED BY TOWN AND COUNTRY PLANNING DEPARTM ENT AND REGULATION OF THE LAND USE SO THAT THE LAND WITHIN THE STATE IS N OT USED CONTRARY TO THE LAND USE DECLARED IN THE PLANS. IN ABSENCE OF ANY PROFIT MOTIVE, THE STATUTORY 44 AUTHORITY IDA IS, THEREFORE, ENTITLED TO REGISTRATI ON UNDER SECTION 12A OF THE IT ACT AS ITS OBJECTS FALL WITHIN THE DEFINITION OF THE CHARITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF THE IT ACT. 20. IT WAS SUBMITTED THAT THE FACT THAT THE IDA IS NOT ESTABLISHED WITH PROFIT MOTIVE FINDS SUPPORT ALSO FROM THE FACT THAT ITS INCOME UP TO AY 2002-03 QUALIFIED FOR EXEMPTION UNDER SECTION 10(20 ) AS A LOCAL AUTHORITY. HAD THE IDA BEEN A PRIVATE ORGANIZATION OR A COMMER CIAL ORGANIZATION, AS ALLEGED BY CIT, ITS INCOME WOULD NOT HAVE QUALIFIED FOR EXEMPTION UNDER SECTION 10(20)/10(20A). MERELY BECAUSE THE IDA IS E XCLUDED FROM THE AMBIT OF DEFINITION OF THE EXPRESSION LOCAL AUTHORITY B Y VIRTUE OF EXPLANATION INSERTED UNDER SECTION 10(20)/10(20A), THE IDA DOES NOT BECOME A COMMERCIAL ORGANIZATION. THE STATUTORY STATUS OF ID A FOR ALL OTHER PURPOSES EXCEPT SECTION 10(20) STILL IS THAT OF A LOCAL AUTH ORITY, BEING A SUCCESSOR OF THE IMPROVEMENT TRUST WHICH WAS IN EXISTENCE PRIOR TO THE ESTABLISHMENT OF THE IDA. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A NUMBER OF JUDICIAL PRONOUNCEMENTS THE APEX COURT HAS LAID DOWN THE TES T FOR DETERMINING WHETHER THE OBJECT OF AN INSTITUTION ARE FOR CHARIT ABLE PURPOSE AS DEFINED IN SECTION SEC.2(15) OF THE ACT . THE COURTS HAVE INTE RPRETED THE EXPRESSION ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY IN THE CONTEXT OF STATUTORY AUTHORITIES. IT HAS ALSO BEEN HELD THAT WHERE THE P REDOMINANT OBJECT IS TO 45 CARRY OUT CHARITABLE PURPOSE AND NOT TO EARN PROFIT , IT WOULD NOT LOSS ITS CHARITABLE CHARACTER MERELY BECAUSE SOME PROFIT ARI SES FROM THE ACTIVITY. THE FOLLOWING CASES WERE RELIED UPON: - (I) DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. GUJARAT MARITIME BOARD REPORTED IN 295 ITR PAGE 561 = (2008 ) 214 CTR (SC) PAGE 81 = (2008) 166 TAXMAN PAGE 58 (REFER PAGE NO. 1 TO 5 OF JUDGMENT COMPILATION BOOK, IN SH ORT JCB). IT WAS PLEADED THAT THEIR LORDSHIPS, WHILE CONSIDE RING THE SIMILAR CASE OF GUJARAT MARITIME BOARD ESTABLIS HED UNDER THE PROVISIONS OF GUJARAT MARITIME BOARD ACT, 1981, HAVE HELD THAT THE BOARD HAS BEEN ESTABLISHED FOR PREDOMINANT PURPOSE OF DEVELOPMENT OF MINOR PORTS WITHIN THE STATE OF GUJA RAT WITH NO PROFIT MOTIVE MANAGEMENT AND CONTROL OF THE BOARD IS ESSENTIAL WITH THE GOVERNMENT AND IT IS UNDER A LEG AL OBLIGATION TO APPLY THE INCOME ARISING TO IT DIRECTLY AND SUBS TANTIALLY FROM BUSINESS HELD UNDER TRUST FOR DEVELOPMENT OF THE MI NOR PORTS. THE APEX COURT ALSO AT PARA 9 OBSERVED THAT SECTIO N 10(20) AND SECTION 11 OF THE ACT OPERATE IN TOTALLY DIFFER ENT SCHEMES AND EVEN IF THE BOARD HAS CEASED TO BE A LOCAL AUTH ORITY IT IS NOT PRECLUDED FROM CLAIMING EXEMPTION UNDER S. 11(1) OF THE ACT. THE APEX COURT, THEREFORE HELD THAT THE BOARD WAS E NTITLED TO 46 REGISTRATION UNDER SECTION 12A AS A CHARITABLE INST ITUTION. FOR ASCERTAINING THE OBJECTS OF THE GUJARAT MARITIME BO ARD, A STATUTORY AUTHORITY AND FOR DETERMINING WHETHER THE OBJECTS CAN BE SAID TO ADVANCE THE OBJECTS OF GENERAL PUBLIC UT ILITY, THEIR LORDSHIPS OF THE SUPREME COURT HAVE ANALYZED THE PR EAMBLE OF THE STATUTE UNDER WHICH THE BOARD WAS ESTABLISHED A ND AFTER ANALYZING THE PROVISIONS OF THE ACT, UNDER WHICH TH E MARITIME BOARD WAS ESTABLISHED. THEIR LORDSHIPS HAVE HELD THAT THERE IS NO PROFIT M OTIVE BEHIND ESTABLISHMENT OF THE MARITIME BOARD AND SINCE THE B OARD IS UNDER LEGAL OBLIGATION TO APPLY ITS INCOME TOWARDS THE PURPOSE FOR WHICH IT IS CREATED, NAMELY, THE DEVELOPMENT OF PORTS, THE OBJECTS CONSTITUTED OBJECTS OF ADVANCEMENT OF GENER AL PUBLIC UTILITY, ENTITLING THE BOARD TO REGISTRATION UNDER SECTION 12AA. THEIR LORDSHIPS HAVE, WITH APPROVAL, REFERRED TO TH E EARLIER DECISIONS RENDERED IN THE CASE OF CIT VS. AHMEDABAD RANA CASTE ASSOCIATION REPORTED IN 140 ITR PAGE 1, THE D ECISION IN THE CASE OF CIT VS. ANDHRA CHAMBER OF COMMERCE 55 I TR PAGE 722 AND THE DECISION IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION 121 ITR PA GE 1. ACCORDING TO THEIR LORDSHIPS, THE EXPRESSION ANY O THER OBJECT OF GENERAL PUBLIC UTILITY IS OF THE WIDEST CONNOTA TION AND THE 47 WORD GENERAL IN THE SAID EXPRESSION MEANS PERTAI NING TO THE WHOLE CLASS THEREFORE, THE ADVANCEMENT OF THE OBJE CT OF BENEFIT TO THE PUBLIC OR A SECTION OF PUBLIC AS DISTINGUISH ED FROM THE BENEFIT TO AN INDIVIDUAL OR GROUP OF INDIVIDUALS WO ULD BE A CHARITABLE PURPOSE. THEIR LORDSHIPS HAVE FURTHER HE LD THAT THE SAID EXPRESSION WOULD PRIMA FACIE INCLUDE ALL OBJEC TS WHICH PROMOTE WELFARE OF THE PUBLIC AND IT CANNOT BE SAID THAT A PURPOSE WOULD CEASE TO BE CHARITABLE EVEN IF THE PU BLIC WELFARE IS INTENDED TO BE SERVED. IF THE PRIMARY PURPOSE AN D DOMINANT OBJECTS ARE TO PROMOTE WELFARE OF THE GENERAL PUBLI C, THE PURPOSE WOULD BE CHARITABLE PURPOSE. IT HAS FURTHER BEEN HELD WHEN AN OBJECT IS TO PROMOTE OR PROTECT THE INTERES T OF A PARTICULAR TRADE OR INDUSTRY, THAT OBJECT BECOMES A N OBJECT OF PUBLIC UTILITY BUT NOT SO IF IT SEEKS TO PROMOTE THE INTEREST OF THOSE WHO PROMOTE OR CONDUCT THE SAID TRADE OR I NDUSTRY. THEIR LORDSHIPS AFTER APPLYING THE RATIO OF THE EAR LIER DECISIONS AND IN PARTICULAR THE RATIO OF DECISION IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPN (SUPRA) CAME TO THE CONCLUSION THAT THE GUJARAT MARITIME BOARD WAS ESTA BLISHED FOR THE DOMINANT PURPOSE OF DEVELOPMENT OF MINOR PORTS WITHIN THE STATE OF GUJARAT, THE MANAGEMENT AND CONTROL OF BOA RD IS ESSENTIAL WITH THE GOVERNMENT AND THERE IS NO PROFI T MOTIVE. 48 THE INCOME OF THE BOARD IS DEPLOYED FOR THE DEVELOP MENT OF THE PORTS IN INDIA AND HENCE ACCORDING TO THEIR LORDSHI PS, THE BOARD WAS ENTITLED TO REGISTRATION AS A CHARITABLE INSTITUTION. 21. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASS ESSEE THAT THE DECISION OF THE SUPREME COURT SQUARELY APPLIES TO THE CASE O N HAND. AN ANALYSIS OF THE PREAMBLE AND OTHER PROVISIONS OF THE ACT CLEARL Y SHOWS THAT THE OBJECT OF ENACTMENT IS TO PROMOTE THE WELFARE OF GENERAL PUBL IC AND THERE IS NO OBJECT TO PROMOTE OR PROTECT INTEREST OF ANY PARTICULAR TR ADE OR INDUSTRY. THERE IS NO PROVISION FROM WHICH IT CAN BE HELD THAT THE OBJECT OF THE ACT AND THE OBJECT OF THE ACTIVITY CARRIED ON BY THE IDA IS TO PROMOTE THE INTEREST OF THOSE WHO CONDUCT THE ACTIVITY. THE ACTIVITY IS CARRIED ON BY THE AUTHORITY, NAMELY, IDA AS AN INSTRUMENTALITY OF THE STATE. THE IDA IS AN A UTHORITY/INSTRUMENTALITY OF THE STATE WITHIN THE MEANING OF ARTICLE 12 OF THE C ONSTITUTION OF INDIA. THE PROVISIONS WOULD GO TO SHOW THAT THE INCOME OF THE AUTHORITY OR PROFIT DERIVED FROM THE ACTIVITIES (IF ANY) IS AGAIN TO BE UTILIZED FOR THE PURPOSE OF PUBLIC WELFARE AND NOTHING ELSE. THE PROFIT IS NOT DIVIDED, DISTRIBUTED OR SHARED BY ANY PRIVATE INDIVIDUALS OR ENTITIES. IT I S AGAIN DEPLOYED FOR THE PURPOSE OF OBJECT OF THE DEVELOPMENT OF THE AREAS. THE FACT THAT THE FUNDS/PROFITS REMAIN WITH THE AUTHORITY AND ARE NOT HANDED OVER/DISTRIBUTED TO ANY ONE WHO CONDUCTS THE ACTIVITY, IS FURTHER CL EAR FROM THE PROVISION REGARDING DISSOLUTION OF THE AUTHORITY. IN CASE THE AUTHORITY IS DISSOLVED, ALL 49 ASSETS AND LIABILITIES OF THE AUTHORITY SHALL VEST IN THE MUNICIPALITY OF THE AREA CONCERNED. REFERENCE IN THIS RESPECT MAY BE MA DE TO THE PROVISIONS OF SECTION 76. NEEDLESS TO SAY THAT THE MUNICIPALITY I S A LOCAL AUTHORITY. FURTHER ALIKE THE GUJARAT MARITIME BOARD, THE MANAGEMENT AN D CONTROL OF THE IDA IS ALSO WITH THE STATE GOVERNMENT. 22. THE FOLLOWING CASES WERE ALSO RELIED UPON: - (I) CIT VS. ANDHRA PRADESH STATE ROAD TRANSPORT CO RPORATION 159 ITR PAGE 1 (SC) (II) CITVS. AHMEDABAD RANA CASTE ASSOCIATION 140 ITR PAG E 1 (SC) (III) CITVS. BAR COUNCIL OF MAHARASTHRA 130 ITR PAGE 128 (SC). (IV) ADDITIONAL CITVS. SURAT ART SILK CLOTH MANUFACTURER S ASSOCIATION 121 ITR PAGE 1 (SC) (V) CITVS. ANDHRA CHAMBER OF COMMERCE 55 ITR PAGE 722 ( SC) (VII) M.P. MADHYAM VS. CIT(2004) 89 TTJ (IND) 770 IN THE ABOVE DECISION, THE HON'BLE JURISDICTIONAL I TAT, INDORE BENCH FOLLOWING THE DECISION OF THE APEX COURT IN THE CAS E OF CIT VS. SURAT ART AND SILK ASSOCIATION (1980) 121 ITR 1 (SC) HELD THA T WHEN THE PREDOMINANT OBJECT IS TO CARRY OUT CHARITABLE PURPOSE AND NOT T O EARN PROFIT, IT WOULD NOT LOSE ITS CHARITABLE CHARACTER MERELY BECAUSE SOME P ROFIT ARISES FROM THE ACTIVITY. 50 (VIII) HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTION CONTROL BOARD VS. CIT(2009) TTJ (CHD) 98 THE LD. ADVOCATE EXPLAINED THAT THE FOLLOWING CASES ARE ALSO IN FAVOUR OF THE ASSESSEE: - (I) CITVS. IMPROVEMENT TRUST, MOGA (2008) 15 DTR (P & H) 217 (II) LUCKNOW DEVELOPMENT AUTHORITY VS. ITO (TECH.) (LUCK) UNREPORTED JUDGMENT COPY. (III) IMPROVEMENT TRUST VS. CIT(2007) 12 SOT PAGE 307 (DEL.) (IV) MORMUGAO PORT TRUST VS. CIT(2007) 112 TTJ (PANAJI) 681. KRISHI UPAJ MANDI SAMITIS CONSTITUTED UNDER THE STATUTORY PROVISIONS HAVE BEEN HELD TO BE ENTITLED TO REGISTRATION UNDER SECTION 12A BY THE JURISDICTIONAL HIGH COURT AND THE JURISDICTIONAL ITAT. (I) CIT VS. KRISHI UPAJ MANDI SAMITI 170 TAXMAN PAGE 51 5 (MP-INDORE BENCH OF THE HIGH COURT OF MADHYA PRADES H), (REFER PAGE NO. 107 TO 110 OF JCB) AFTER ANALYZING THE PREAMBLE OF THE STATUTE UNDER WHICH THE KRISHI UPAJ MANDI SAMITIS ARE ESTABLISHED, HELD THAT THE OBJECT OF MANDI SAMITI IS BENEVOLENT AND AS SUCH IT IS ENTITLED TO REGISTRATI ON UNDER SECTION 12A/12AA. THEIR LORDSHIPS HAVE IN PARA 4 OB SERVED, THAT MERELY BECAUSE MANDI SAMITI IS CHARGING FEES I T DOES NOT MILITATE AGAINST THE ALTRUISTIC PURPOSE FOR WHICH T HE MANDIS ARE ESTABLISHED. 51 (II) DECISION OF M.P. HIGH COURT, JABALPUR BENCH (MAIN S EAT) OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF CI T VS. KRISHI UPAJ MANDI SAMITI REPORTED IN (2008) 11 ITJ PAGE 553 (MP) = 218 CTR PAGE 512 (REFER PAGE NO. 111 TO 124 OF JCB) THEIR LORDSHIPS HAVE FOLLOWED THE EARLIER DECISION IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, MORE NA AS ALSO THE DECISION OF THE APEX COURT IN THE CASE OF GUJAR AT MARITIME BOARD (SUPRA). THEIR LORDSHIPS IN PARA 15 OF THE JU DGEMENT HAVE REFERRED TO THE TESTS LAID DOWN BY THE CONSTIT UTION BENCH OF THE APEX COURT IN THE CASE OF ADLL. CIT VS. SURA T ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) AND HAVE HE LD THAT THE TEST WHICH HAS NOW TO BE APPLIED IS WHETHER THE PRE DOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARRYING OUT OBJ ECT OF GENERAL PUBLIC UTILITY IS TO SUB-SERVE THE CHARITABLE PURPO SE OR TO EARN PROFIT. WHERE PROFIT MAKING IS DOMINANT OBJECT OF T HE ACTIVITY, THE PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTI LITY WOULD CEASE TO BE CHARITABLE PURPOSE. BUT WHERE THE PREDO MINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT CHARITABLE PURPOSE AND NOT TO EARN PROFIT IT WOULD NOT LOOSE ITS CHARACTERS OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM SUCH ACTIVITY. 23. IT WAS SUBMITTED THAT THEIR LORDSHIPS HAVE ALSO REFERRED TO THE RECENT JUDGMENT OF THE APEX COURT IN THE CASE OF GUJARAT M ERITIME BOARD AND THE TESTS LAID DOWN THEREIN AND IN PARA 20 THEIR LORDSH IPS HAVE APPLIED THE RATIO OF THESE DECISIONS AND HAVE COME TO THE CONCLUSION ON THE BASIS OF THE ANALYSIS OF THE SCHEME OF THE ACT UNDER WHICH THE K RISHI UPAJ MANDI SAMITIS HAVE BEEN ESTABLISHED, THAT WHEN THE SCHEME OF THE ACT CLEARLY REVEALS AND EVIDENCE THAT THE SAMITIES ARE ESTABLIS HED FOR MARKETING AND 52 PROTECTING THE INTEREST OF THE AGRICULTURAL PRODUCE RS THERE CAN BE NO SCINTILLA OF DOUBT THAT IT IS ESTABLISHED FOR CHARITABLE PURP OSE. (III) CITVS. KRISHI UPAJ MANDI SAMITI, MORENA AND OTHERS (2008) 215 CTR (MP) PAGE 54, (GWALIOR BENCH OF THE MP HIGH COURT) (REFER PAGE NO. 125 TO 134 OF JCB) (IV) CIT VS. AGRICULTURAL AND MARKET COMMITTEE HINGANGHA T (291) ITR PAGE 419 (REFER PAGE NO. 135 TO 144 OF JC B) (V) KRISHI UPAJ MANDI SAMITI, SEHORE VS CIT(2007) 9 ITJ PAGE 325 ITAT, INDORE BENCH. ITAT, INDORE BENCH, INDORE HAS ALSO FOLLOWED THE ABOVE DECISIONS AND HELD THAT KRI SHI UPAJ MANDI SAMITIES ARE ENTITLED TO REGISTRATION UNDER S ECTION 12A/12AA. (VI) CIT VS. KRISHI UPAJ MANDI SAMITI, KHARGONE (20 09) 13 ITJ PAGE 504 (MP), INDORE BENCH OF M.P. HIGH COURT. 24. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE IMPUGNED ORDER PASSED BY LD. CIT IS EXAMINED IN THE LIGHT OF THESE PRINCIPLES LAID DOWN BY THE JUDICIAL PRONOUNCEMENT , IT WOULD BE CLEAR THAT THE ORDER SUFFERS FROM THE VICE BEING AFFECTED BY IRRELEVANT CONSIDERATIONS RA THER THAN DECIDING THE APPLICATIONS ACCORDING TO RATIO OF THESE DECISIONS. THE LD. CIT HAS NOT AT ALL APPLIED ITS MIND TO THE OBJECT OF LEGISLATION UNDER WHICH IDA HAS BEEN ESTABLISHED BUT LAID UNNECESSARY STRESS UPON THE FACT THAT THE IDA SELLS DEVELOPED PLOTS OF LAND AT PREVAILING MARKET VALUE AS IF SELL OF REAL ESTATE IS THE ONLY ACTIVITY CARRIED ON BY IDA. THE CIT HAS COMPLETELY LOST SIGHT OF THE FACT THAT APART FROM DEVELOPMENT & SELL OF D EVELOPED LAND ETC IDA AS A 53 PART OF ITS OF DEVELOPMENT OF THE PLANNING AREA WIT HIN ITS JURISDICTION, CARRIES ON MANY OTHER PROJECTS FOR THE OVERALL DEVELOPMENT OF THE ENTIRE AREA. THE DETAILS OF SUCH ACTIVITIES HAVE ALREADY BEEN PLACED ON RECO RD BY THE APPELLANT. 25. A QUERY WAS RAISED BY THE BENCH REGARDING THE A CTIVITIES OF THE ASSESSEE, THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE SAME AS UNDER: I) CONSTRUCTION OF BRIDGES AND SUCH CONSTRUCTION HA S EVEN BEEN MADE AT PLACES WHERE THE IDA HAS NOT DEVELOPED ANY PROPERTY FOR SALE SUCH AS JUNI INDORE BRIDGE, MANAK BAG BRID GE, KESAR BAG BRIDGE, CHHAWNI BRIDGE, LAL BAG BRIDGE, KARBALA BRIDGE, BHAGIRATHPURA TO SUKHLIYA BRIDGE ETC. AND THEREFORE , IT CANNOT BE SAID THAT THE CONSTRUCTION OF ROADS AND BRIDGES WAS AIMED TO INCREASE THE VALUE OF THE PROPERTIES HELD BY THE ID A. II) CONSTRUCTION OF ROADS IN AREAS WHICH HAS NO LINK OR NEXUS WITH THE SCHEMES OF THE IDA SUCH AS (A) ROAD FROM SHIVA JI STATUTE TO BY-PASS (B) MR 9 (C) BRTS FROM RAJEEV GANDHI SQUARE TO DEWAS NAKA (D) WESTERN RING ROAD FOR DHAR ROAD TO AIRPORT ETC.. SUCH ROADS HAVE BEEN CONSTRUCTED UNDER JNNURM SCHEM E AND THE IDA HAS CONTRIBUTED CRORES OF RUPEES IN CONSTRU CTION OF SUCH ROADS. III) DEVELOPMENT, MAINTENANCE AND IMPROVEMENT OF TR AFFIC CIRCLES SUCH AS AT LIG SQUARE, LASUDIYA SQUARE, MUSAKHEDI S QUARE, NAVLAKHA SQUARE, ASHARAM BAPU SQUARE, CHOITHRAM SQU ARE AND OTHERS. 54 IV) REHABILITATION OF POORS AND SLUMS VARIOUS SLU M INHIBITERS OF RIVERS BLANKS SUCH AS PIPLYAPALA TALAB, KHAN NADI H AVE BEEN REHABILITATED IN HOUSES CONSTRUCTED AT SCHEME NO. 1 03, 140, 114 PART-II, 94 & 104 OF IDA FOR A VERY VERY NOMINA L PRICE WITHIN THE REACH OF WEAKER SECTION UNDER 'VALMIKI A MBEDKAR AAWAS YOJNA'. IT HAS UNDERTAKEN PROJECT TO REHABILI TATE MORE THAN 86,000 SLUMS IN INDORE. V) THE IDA IS ALSO CONSTRUCTING OPD AT M.Y. HOSPITA L. IT IS ALSO UNDERTAKING PROJECT OF RENOVATION OF M.Y. HOSPITAL AND ROBERT NURSING HOME. SUCH HOSPITALS ARE GOVERNMENT HOSPITA LS AND WHERE POOR AND A COMMON MAN IS GETTING MEDICAL FACI LITIES. VI) ACTIVITIES OF PLANTATION IN THE WHOLE CITY OF I NDORE AND IT IS NOT RESTRICTED ONLY TO THE SCHEMES OF THE IDA. MORE THA N 43,000 TREES HAVE BEEN PLANTED SO FAR. THE PROJECT OF DEVELOPMENT OF REGIONAL PARK ON 150 ACRES LAND HAVING COST OF MORE THAN 50 CRORES IS UNDER PR OGRESS. IN ANY CASE, SUCH DEVELOPMENT OF PARK WILL NOT IMPROVE PRICE OF THE PROPERTIES HELD BY THE IDA. VII) ACTIVITIES OF PRESERVATION OF HERITAGE AND CUL TURE GRANTING AID FOR 'ANANT CHATURDARSHI JHANKI' TO WORKERS OF CLOSE D TEXTILE MILLS OF INDORE, IT HAS ALSO ESTABLISHED STATUES OF NATIONAL HEROES AND DIVINE HISTORICAL PERSONALITIES SUCH AS SHAHID CHANDRASHEKHAR AZAD, RANI AVANTIBAI, CHANDRAGUPTA M OURYA ETC. VIII) A PROJECT OF OLD AGE HOMES FOR OLD AGED PERSO NS IS ALSO UNDER PROGRESS. 55 IT WAS POINTED OUT THAT THE SALE PROCEEDS OF COMMER CIAL PLOT SOLD TO RELIANCE INDUSTRIES FOR SUBSTANTIAL AMOUNT HAVE ALS O BEEN MAINLY DEPLOYED FOR ABOVE ACTIVITIES. 26. THE BENCH DIRECTED THE LD. COUNSEL FOR THE ASSE SSEE TO DIFFERENTIATE THE ACTIVITIES OF THE ASSESSEE AS FROM A PRIVATE COLONI ZER, THESE WERE EXPLAINED AS UNDER : SNO. PARTICULARS QUA A PRIVATE COLONIZER QUA IDA 1 CONSTITUTION MAY BE A SOLE PROPRIETORSHIP FIRM, PARTNERSHIP FIRM, AOP OR A COMPANY A STATUTORY AUTHORITY CONSTITUTED UNDER AN ENACTMENT OF THE STATE 2 PRE-DOMINANT OBJECT IS TO MAKE MAXIMUM PROFIT BY SELLING ITS PROPERTIES IS TO IMPLEMENT PROPOSAL FOR PLANNING AND DEVELOPMENT OF NOTIFIED AREA. IT IS INSTRUMENTAL TO ACHIEVE THE OBJECTS OF THE STATE TO MAKE BETTER PROVISION FOR PLANNING AND DEVELOPMENT AND USE OF LAND WITH NO PROFIT MOTIVE. IN THREE YEARS, EARLIER TO THE YEAR OF APPLICATION FOR REGISTRATION I.E. F.Y. 2004- 05 TO F.Y. 2006-07, IT HAS UTILIZED ITS ENTIRE FUNDS FOR ITS ACTIVITIES AND A VERY MEAGER SURPLUS WAS GENERATED [REFER PAGE NO. 235 OF COMPILATION] . EVEN, 56 THE SURPLUS ACCRUING DURING THE F.Y. 2007-08, WHICH IS MAINLY ATTRIBUTABLE TO SALE OF PROPERTY AT A HANDSOME PRICE TO RELIANCE INDUSTRIES, HAS BEEN UTILIZED FOR PUBLIC UTILITY PURPOSES DURING THE SUBSEQUENT YEARS. 3 SOCIAL OBJECTS HAS NO SOCIAL OBJECT TO PROVIDE FOR INFRASTRUCTURE FACILITIES NEEDED BY A COMMON MAN. HAS MANY OBJECTS FOR DEVELOPMENT OF INFRASTRUCTURE FACILITIES AND AMENITIES SUCH AS CONSTRUCTION OF ROADS AND BRIDGES, DEVELOPMENT OF LAND FOR PLAYGROUNDS, PARKS, AIRPORTS, RAILWAY STATIONS; IMPROVEMENT OF ENVIRONMENT, PROVISION FOR AMENITIES SUCH AS ROADS, DRAINS, SEWAGE LINES, STADIUM, PARKS EVEN IN THE NON-PLANNING AREAS, UNDERTAKING REHABILITATION PROGRAMME FOR SLUM PEOPLE ETC. 4 ULTIMATE USE OF THE SURPLUS FROM ACTIVITIES IT IS TAKEN AWAY BY THE PERSON/S WHO OWN THE ENTITY CARRYING ON COLONIZING ACTIVITIES NO PERSON IS HAVING ANY VESTED INTEREST IN THE SURPLUS OF THE IDA. ITS SURPLUS CANNOT BE DISTRIBUTED BUT IT HAS TO BE REDEPLOYED FOR ITS CORE 57 ACTIVITIES. 5 ACCOUNTABILITY TO THE PUBLIC PRIVATE COLONIZER IS AT LIBERTY TO PURCHASE OR SALE ITS PROPERTY FROM/TO ANY PERSON OF HIS CHOICE IDA HAS TO FOLLOW THE SET RULES AND PROCEDURES FOR ACQUISITION/SALE OF ITS PROPERTY. SUCH ACTIVITIES ARE CARRIED ON ONLY BY WIDE PUBLICITY IN NEWSPAPERS AND EACH AND EVERY ACTIVITY IS VERY TRANSPARENT AND ACCORDING TO PRESCRIBED POLICIES, RULES AND REGULATIONS 6 CONSTITUTION OF THE MANAGEMENT BOARD THE MANAGEMENT OF A PRIVATE COLONIZER IS CONSTITUTED ACCORDING TO CHOICE OF THE OWNERS. THE BOARD OF THE IDA IS STATUTORILY REQUIRED TO BE CONSTITUTED IN ACCORDANCE WITH SECTION 40. IT IS CONSISTING OF PUBLIC SERVANTS LIKE A CHAIRMAN NOMINATED BY STATE GOVERNMENT, COLLECTOR, MUNICIPAL COMMISSIONER, HEADS OF VARIOUS PUBLIC AMENITY DEPARTMENTS ETC.. ALL THE DECISIONS ARE TAKEN BY SUCH BOARD ONLY. THE TERM OF OFFICE OF THE MEMBERS OF THE BOARD IS AT PLEASURE OF STATE GOVERNMENT UNDER S. 42(2) 58 7 CONTROL OF THE STATE A PRIVATE COLONIZER IS NOT ACCOUNTABLE TO STATE GOVERNMENT. IDA UNDER S. 52 IS BOUND BY THE DIRECTIONS GIVEN BY THE STATE GOVERNMENT FROM TIME TO TIME. UNDER S. 24 THE OVERALL CONTROL OF DEVELOPMENT AND USE OF LAND IN THE STATE SHALL VEST IN THE STATE GOVERNMENT ONLY. THUS THE LAND OWNED BY THE IDA IS UNDER THE CONTROL OF STATE GOVERNMENT ONLY UNDER S. 76BB, THE STATE GOVERNMENT CAN ENQUIRE INTO THE CONSTITUTION, WORKING AND FINANCIAL CONDITIONS OF A DEVELOPMENT AUTHORITY. 8 ACQUISITION OF LAND A PRIVATE COLONIZER IS NOT AUTHORIZED TO COMPULSORILY ACQUIRE ANY LAND FOR CARRYING ON ITS ACTIVITIES. IT IS FOR THE REASON THAT LAND IS NOT USED BY HIM FOR PUBLIC CAUSE BUT FOR SERVING HIS OWN INTEREST OF MAKING PROFIT. IDA UNDER S. 55 IS ENTITLED TO ACQUIRE LAND FOR PUBLIC PURPOSES. IF THE OBJECT IS NOT TO SERVE THE PUBLIC THAN IDA CANNOT ACQUIRE ANY LAND. FURTHER, IF THE LAND IS NOT USED FOR THE PURPOSE IT WAS ACQUIRED THEN IT HAS BEEN TO BE RETURNED TO PREVIOUS OWNER. 9 PRICE FOR PURCHASE/ ACQUISITION OF LAND A PRIVATE COLONIZER CAN BUY LAND FOR ANY PRICE AS IS NEGOTIATED BETWEEN HIM UNDER S. 56, IDA CAN ACQUIRE THE LAND ONLY AT THE RATES PRESCRIBED AS PER 59 AND THE SELLER. THE RULES OF LAND ACQUISITION ACT, 1894. SUCH PRICE IS DETERMINED BY THE COLLECTOR AND IT IS SUBJECT TO UPWARD REVISION BY THE COURTS FROM TIME TO TIME. 10 SALE OF PROPERTY A PRIVATE COLONIZER WOULD ALWAYS ATTEMPT TO SALE HIS PROPERTY FOR MAXIMUM PRICE. THERE IS NO RESTRICTION FOR A PRIVATE COLONIZER TO SALE A PLOT TO A PERSON WHO IS ALREADY OWNING MORE THAN ONE PLOT. IDA CAN DISPOSE OF ITS PROPERTY ONLY IN ACCORDANCE WITH THE RULES FRAMED BY STATE GOVERNMENT AS PER SECTION 50 OF THE ACT. IDA SALES PROPERTY TO POOR SECTION OF THE SOCIETY AT CONCESSIONAL / SUBSIDIZED RATE BY WAY OF LOTTERY OR ANY OTHER PRESCRIBED PROCEDURE. IT ALSO PROVIDES PLOTS TO HOUSING SOCIETIES FOR ALLOTMENT OF THE SAME TO THEIR REGISTERED MEMBERS AT NOMINAL PRICE. IT PROVIDES LAND FOR EDUCATIONAL INSTITUTION, HOSPITAL, STADIUM AT NOMINAL PRICE. HOWEVER, TO WHOM WHO CAN AFFORD TO PAY A HIGHER PRICE IT MAKES SALES OF PLOTS BY WAY OF TENDERS, WITH AN AIM TO GENERATE RESOURCES FOR ITS ACTIVITIES, 60 FROM THOSE WHO ARE ABLE TO PAY SO THE BENEFIT CAN BE PASSED ON TO WEAKER SECTION OF THE SOCIETY BY WAY OF PROVIDING PLOTS AT SUBSIDIZED RATES. THE SALE OF PROPERTY TO RELIANCE INDUSTRIES, A VERY BIG AND RICH COMPANY WITH AMPLE OF FUNDS [AS REFERRED TO BY CITAT PAGE NO. 27 OF HER ORDER] IS AN EXAMPLE OF POLICY OF IDA TO FETCH MORE PRICE FROM AFFLUENT CLASS FOR SUBSIDIZING LOW PRICE TO POOR PEOPLE. THE IDA CANNOT SALE PLOT TO A PERSON WHO IS ALREADY HAVING A PLOT IN THE CITY. 11 CONTROL ON PROCURING SERVICES REQUIRED FOR ACTIVITIES A PRIVATE COLONIZER CAN GET ITS ACTIVITIES PERFORMED BY ANY AGENCY WITHOUT ANY RESTRICTION AS REGARD TO CALLING THE TENDERS. IDA CANNOT AWARD CONTACT FOR CARRYING ON ITS CONSTRUCTION ACTIVITIES WITHOUT CALLING FOR TENDERS. 12 STATUTORY COMPLIANCE IN CONSTRUCTION ACTIVITIES MANY TIMES BUT NOT PRIVATE COLONIZER MAKE VIOLATION OF VARIOUS PERMISSIONS AND APPROVALS AS REGARD TO SANCTION OF MAP, PERMISSIBLE BUILT-UP AREA ETC. WITH A MOTIVE TO IDA BEING A PUBLIC BODY CANNOT MAKE EVEN A SLIGHTS VARIATION FROM ITS PLANS AND APPROVED MAPS. 61 MAXIMIZE THEIR PROFIT 13 AUDIT BY LOCAL FUND AUDITORS NOT APPLICABLE EACH AND EVERY IN FLOW AND OUT FLOW OF FUNDS OF IDA IS PRE-VOUCHED BY LOCAL FUND AUDITORS OF THE GOVERNMENT. 14 APPOINTMENT AND TERMINATION OF STAFF NO BINDING IT HAS TO BE STRICTLY IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE STATE GOVERNMENT UNDER S. 80. EVERY MEMBER AND OFFICER OF THE AUTHORITY IS DEEMED TO BE A PUBLIC SERVANT WITHIN THE MEANING OF SECTION 21 OF THE INDIAN PENAL CODE, 1860 15 UTILIZATION OF THE FUNDS A PRIVATE COLONIZER CAN UTILIZE THE FUNDS IN ANY MANNER OF HIS CHOICE. IDA CAN UTILIZE ITS FUND ONLY FOR THE OBJECTS FOR WHICH IT HAS BEEN ESTABLISHED. 16 INVESTMENT OF THE FUNDS A PRIVATE COLONIZER CAN INVEST HIS SURPLUS FUND IN ANY MANNER HE LIKES. HE CAN INVEST FUNDS EVEN IN SHARES OF PRIVATE COMPANIES. IDA HAS TO MAKE INVESTMENT OF ITS SURPLUS FUNDS, IF ANY, ONLY IN THE GOVERNMENT SECURITIES AND FIXED DEPOSIT WITH SCHEDULED BANKS. 17 STATUS OF INCOME- TAX EXEMPTIONS INCOME OF A PRIVATE COLONIZER WAS NOT EXEMPTED EVEN UP TILL A.Y. 2002-03. SUCH EXEMPTION INCOME OF THE IDA WAS EXEMPTED UNDER S. 10(20)/ 10(20A) UP TILL A.Y. 2002- 62 WAS NOT GRANTED AS THE ACTIVITIES OF COLONIZERS WERE NOT CONSIDERED TO BE FOR PUBLIC PURPOSES. 03. 18 RECOVERY OF DUES A PRIVATE COLONIZER CANNOT RECOVER HIS DUES AS ARREAR OF LAND REVENUE. IDA CAN RECOVER ITS ARREAR AS LAND REVENUE UNDER S. 63-A. SUCH A RIGHT IS CONFERRED TO IT ONLY BECAUSE IT IS CARRYING ON OBJECTS OF THE STATE. 19 DISTRIBUTION OF FUNDS ON DISSOLUTION ON DISSOLUTION OF THE ENTITY, THE OWNERS TAKE AWAY ENTIRE FUNDS GENERATED BY THEM FROM THE ACTIVITIES IN CASE OF DISSOLUTION, THE ENTIRE FUNDS OF IDA WOULD VEST WITH THE LOCAL MUNICIPAL CORPORATION ONLY 27. THE ASSESSEE WAS DIRECTED TO PRODUCE THE RELEVA NT RECORD OF RATES OF ACQUISITION OF LANDS FROM THE LANDOWNERS/FARMERS AND THE RATES AT WHICH THESE LANDS WERE SOLD/ALLOTTED TO VARIOUS PERSONS, THE ASSESSEE DELIBERATELY AND REASONS BEST KNOWN TO IT DID NOT FURNISH SUCH DE TAILS INSPITE OF OPPORTUNITIES PROVIDED TO THE ASSESSEE . ON THE OBJECTS AND GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE, FOLLOWING CASES WER E RELIED UPON BY MR. CHOUDHARY: CITVS. RED ROSE SCHOOL (2007) 212 CTR (ALL.) PAGE 394 SANJIVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DI T (EXEMPTION) (2006) 285 ITR 327 (KAR) 63 PUJYA SHRI UMESH MUNI, JHABUA VS. CIT, UJJAIN (2008 ) 10 ITJ PAGE 30 (ITAT-IND) MAHAKOSHAL SHAHEED SMARAK TRUST VS. CIT(1983)140 I TR PAGE 795 (MP) SHRI HARIDEVJI GAUSHALA TRUST VS. CIT(2009) 12 ITJ 263 (AGRA- TRIBUNAL) ACHARYA SEWA NIYAS UTTARANCHAL VS. CIT(2006) 105 T TJ (DEL.) 761 ST. DON BOSCO EDUCATIONAL SOCIETY VS. CIT(20 04) 84 TTJ (LUCKNOW) 805 AGGARWAL MITRA MANDAL TRUST VS. DIRECTOR OF I NCOME-TAX (EXEMPTION) (2007) 109 TTJ (DEL.) 128 DREAM LAND EDUCATIONAL TRUST VS. CIT(2007) 109 TT J (ASR) 850. DHARMA SANSTHAPAK SANGH (NIYAS) VS. CIT(2008) 118 TTJ (DEL.) 823 MODERN DEFENCE SHIKSHAN SANSTHAN VS. CIT(2007) 108 TTJ (JD) 732 SHIYA DAWOODI BOHRA JAMAT, NEEMUCH VS. CIT(2007) 9 ITJ 409 (IND TRI.) DIT VS. GARDEN CITY EDUCATIONAL TRUST (2009) [28 D TR (KAR) 139] H.P. E.P. & P.C.B. VS. CIT(2009) [125 TTJ (CHD) 9 8] ADL. CIT VS. VATSALYA SENIOR SECONDARY SCHOOL (201 0) [130 TTJ/INDORE/UO/27] 28. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEN DED THAT THE DECISION IN THE CASE OF ADITYAPUR INDUSTRIAL AREA D EVELOPMENT AUTHORITY VS. UOI & OTHERS (2006) 283 ITR 97 (SC) IS NOT A BI NDING PRECEDENT IN THE PRESENT MATTER RATHER THE DECISION IN CIT VS. G UJARAT MARITIME BOARD (295 ITR 561) (SC) IS APPLICABLE. 64 29. ON THE OTHER HAND, THE LD. CCIT, DR SHRI GIRIS H DAVE STRONGLY DEFENDED THE IMPUGNED ORDER AND EXPLAINED THE FACTS OF THE CASE, THE PROVISIONS OF THE ADHINIYAM, RULES FRAMED THEREUNDE R AS WELL AS VARIOUS FORMS PRESCRIBED UNDER THE ADHINIYAM. MR. DAVE TOOK US TO VARIOUS PARAS OF THE IMPUGNED ORDER ALONG WITH SEC. 10 CLAU SE (20A) OF THE ACT. CIRCULAR NO.8 OF 2002 DATED 27.8.2002 REPORTED IN 2 58 ITR (STATUTE) 13 AND THE PROVISIONS OF SEC. 80G WAS ALSO EXPLAINED A LONG WITH SEC. 11 AND 12 OF THE I.T. ACT. OUR ATTENTION WAS SPECIFICA LLY INVITED TO FROM NO.3CB WHEREIN IT WAS POINTED OUT THAT THE ASSESSEE AUTHORITY HAS ADMITTED THAT IT IS ENGAGED IN CARRYING IN BUSINESS ALONG WITH OBSERVATION MADE BY THE LEARNED CIT IN THE IMPUGNED ORDER FOR SEC. 12AA. IT WAS DULY EXPLAINED BY MR. DAVE THAT AT THE TIME OF GRAN TING OF REGISTRATION U/S 12AA, THE LD. CIT IS VERY MUCH EMPOWERED TO MAKE NE CESSARY ENQUIRIES. IT WAS SPECIFICALLY POINTED OUT THAT THE ASSESSEE DID NOT RESPOND TO THE QUERY MADE BY THE BENCH FOR THE TRAN SACTIONS OF SALE OF PLOT TO RELIANCE INDUSTRIES AND EMPHATICALLY ASSERT ED THAT THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEAL. PLACING OF RELIANCE IN THE CASE OF ADITYPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS. UOI (SUPR A) BY LD. CIT WAS STRONGLY DEFENDED. IT WAS FURTHER POINTED OUT THAT THE FACTS IN THE CASE OF PUNJAB URBAN DEVELOPMENT AUTHORITY AND JALANDHAR DE VELOPMENT AUTHORITY ARE DIRECTLY APPLICABLE TO THE FACTS OF T HE PRESENT APPEAL. 65 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON TH E FILE. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE PROVISIONS OF SEC. 12A OF THE ACT WHICH PRESCRIBES CERTAIN CONDITIONS FOR APPLICABILITY OF SEC. 11 & 12 WHICH ARE TO BE FULFILLED: 91 12A. 92 [(1)] 93 THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLO WING CONDITIONS ARE FULFILLED, NAMELY: ( A ) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN A PPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRESCRIBED FORM 94 AND IN THE PRESCRIBED MANNER TO THE 95 [***] COMMISSIONER BEFORE THE 1ST DAY OF JULY, 1973 , OR BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION, 96 [WHICHEVER IS LATER AND SUCH TRUST OR INSTITUTION I S REGISTERED UNDER SECTION 12AA ] : 97 [ PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IS MADE AFTER THE EXPIRY OF THE PERIOD AFORESAID, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUST OR INSTITUTION, ( I ) FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION IF THE 98 [***] COMMISSIONER IS, FOR REASONS TO BE RECORDED I N WRITING, SATISFIED THAT THE PERSON IN RECEIPT OF THE INCOME WAS PREVENTED F ROM MAKING THE APPLICATION BEFORE THE EXPIRY OF THE PERIOD 99 AFORESAID FOR SUFFICIENT REASONS; ( II ) FROM THE 1ST DAY OF THE FINANCIAL YEAR IN WHICH T HE APPLICATION IS MADE, IF THE 1 [***] COMMISSIONER IS NOT SO SATISFIED:] 2 [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IN RELATION TO ANY APPLICATION MADE ON OR AFTER THE 1ST DAY OF JUN E, 2007;] 2 [( AA ) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN A PPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION ON OR AFTER THE 1ST DAY OF JUN E, 2007 IN THE PRESCRIBED FORM 3 AND MANNER TO THE COMMISSIONER AND SUCH TRUST OR INSTIT UTION IS REGISTERED UNDER SECTION 12AA ;] ( B ) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUTIO N AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO 4 [THE PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX IN ANY PREVIOUS YEAR], THE ACCOUNTS OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES ALONG WITH THE RETU RN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRE SCRIBED FORM 5 DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED.] ( C ) 6 [***] 7 [(2) WHERE AN APPLICATION HAS BEEN MADE ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUS T OR 66 INSTITUTION FROM THE ASSESSMENT YEAR IMMEDIATELY FO LLOWING THE FINANCIAL YEAR IN WHICH SUCH APPLICATION IS MADE.] SEC. 12AA IS A PROCEDURAL SEC. WHICH PRESCRIBES ABO UT PROCEDURE FOR REGISTRATION WHICH IS ALSO REPRODUCED HEREUNDER: 12AA. (1) THE 9 [***] COMMISSIONER, ON RECEIPT OF AN APPLICATION FO R REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE ( A ) 7 [OR CLAUSE ( AA ) OF SUB-SECTION (1)] OF SECTION 12A , SHALL ( A ) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE T RUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND ( B ) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE ( I ) SHALL PASS AN ORDER IN WRITING REGISTERING THE TR UST OR INSTITUTION; ( II ) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER I N WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE ( II ) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. 10 [(1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF CO MMISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE ( B ) OF SUB-SECTION (1) BEFORE THE 1ST DAY OF JUNE, 19 99, SHALL STAND TRANSFERRED ON THAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY.] (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE ( B ) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE ( A ) 11 [OR CLAUSE ( AA ) OF SUB-SECTION (1)] OF SECTION 12A .] 12 [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE ( B ) OF SUB- SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SA TISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD.] IN THE LIGHT OF THE AFORESAID PROVISIONS OF THE ACT , WE ARE FRAMING CERTAIN QUESTIONS AND DELIBERATE UPON THEM: 67 31. WHETHER THE QUANTUM OF INCOME BE PERMITTED TO B E THE DETERMINATIVE FACTOR FOR THE STATUS OF THE APPELLANT-AUTHORITY? THE ASSESSEE AUTHORITY IS IN EXISTENCE SINCE MAY 19 77. IT WAS ENJOYING EXEMPTION FROM INCOME TAX UNDER SECTION 10(20A) OF THE I T ACT, 1961 ON ITS INCOME. CLAUSE (20A) OF SECTION 10 WAS OMITTED FROM THE STATUTE BY THE FINANCE ACT, 2002 WITH EFFECT FROM 1 ST APRIL 2003 RELATABLE TO ASSESSMENT YEAR 2003-04. FROM THE SAID ASSESSMENT YEAR, THAT IS, 2003-04 ONW ARDS, IT STARTED FILING ITS RETURNS OF INCOME AND PAID TAXES ON THE INCOME RETU RNED FOR THOSE YEARS. ASSESSMENTS FOR ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006-07 HAVE ALREADY BEEN COMPLETED WHICH ARE PLACED IN THE PAPER BOOK FILED BY THE DEPARTMENT. THE APPELLANT-AUTHORITY FILED APPEALS F OR THESE YEARS AND LD. CIT(APPEALS) HAVE AFTER HEARING THE APPELLANT-AUTHO RITY PASSED APPELLATE ORDERS IN RESPECT OF ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06. THE ASSESSMENT YEAR-WISE POSITION OF STATUS CLAIMED, INCOME RETURN ED, STATUS IN WHICH ASSESSMENT MADE, NATURE AND AMOUNT OF ADDITION MADE TO THE RETURNED INCOME, INCOME ASSESSED, DATE OF ASSESSMENT ORDER AND REVIS ED INCOME CONSEQUENT TO APPELLATE ORDER OF THE LD. CIT(APPEAL) IS GIVEN AT PAGE OF 5 OF THE IMPUGNED ORDER UNDER SECTION 12AA OF THE ACT PASSED BY THE R ESPONDENT. IT IS INTERESTING TO NOTE THAT THE APPELLANT-AUTHOR ITY PREFERRED APPLICATION UNDER SECTION 12AA OF THE ACT ONLY AFTER A NOTICE UNDER S ECTION 210(3) WAS ISSUED TO IT FOR DEPOSIT OF ADVANCE TAX ON 11 TH DECEMBER 2007 ON THE BASIS OF CALCULATION OF 68 ITS LIABILITY TOWARDS ADVANCE TAX INDICATED IN THE SAID NOTICE AND ON THE BASIS OF INFORMATION WHEREBY THE DEPARTMENT CAME TO KNOW THA T THE ASSESSEE HAD HAD SOLD A COMMERCIAL PLOT IN A PRIME LOCATION ADJACENT TO SAYAJI HOTEL FOR A CONSIDERATION OF ABOUT RS 270 CRORES. A NOTICE WAS ISSUED TO THE ASSESSEE WHICH WAS REPLIED BY THE IDA ON 14 TH DECEMBER 2007 OBJECTING TO THE NOTICE AND FILED FORM NO 28B ON THE SAME DATE ESTIMATING I TS INCOME AT RS 2, 78, 00, 000/- AND TAX PAYABLE THEREON AT RS 93, 92, 570/-. IN THIS ESTIMATE, IT INDICATED ITS LIABILITY TOWARDS TAX AT RS 63, 92, 570/- AFTER DEDUCTING RS 30, 00, 000/- TOWARDS PREPAID TAXES, SUCH AS TDS AND FURTHER REDU CTION OF RS 40, 00, 000/- PAID BY WAY OF ADVANCE TAX. THE BALANCE LIABILITY W AS SHOWN AT RS 23, 92, 570/- AS AGAINST THE DEMAND OF RS 90, 88, 06, 287/- WORKE D OUT BY THE DEPARTMENT. THE ASSESSEE AUTHORITY CHOSE TO FILE AN APPLICATION U/S 12AA OF THE ACT ON 27.12.2007 AND BEFORE THAT, MIGHT BE EXAMINING THE POSSIBILITY OF REGISTRATION. IT WAS EXPLAINED BEFORE THE LD. CIT THAT THE ASSESSEE AUTHORITY WAS UNDER THE BONAFIDE IGNORANCE OF THE POSSIBLE FALL OUT OF THE OMISSION OF CLAUSE (20A) OF SECTION 10. IT HAS FURTHER STATED THAT THERE WAS BO NAFIDE IGNORANCE OF OTHER SECTIONS 11AND 12 AND THEREFORE THE NECESSITY OF MA KING AN APPLICATION FOR REGISTRATION UNDER SECTION 12A WAS NEVER FELT. 32. ONE WOULD WONDER AS TO THE CORRECTNESS AND TRUT HFULNESS OF THIS EXPLANATION AS FROM THE CONDUCT OF THE APPELLANT-AU THORITY, IT IS CLEAR THAT FROM ASSESSMENT YEAR 2003-04 ONWARDS, IT STARTED FILING ITS RETURN OF INCOME AND IT 69 WAS THIS PERIOD WHEN THE EFFECT OF THE OMISSION OF CLAUSE (20A) OF SECTION 10 COMMENCED. IT WAS ALSO CLEAR FROM THE AMENDMENTS TH AT CERTAIN AUTHORITY WHICH WAS CLAIMING EXEMPTION UNDER THE SAID CLAUSE WERE I NCLUDED IN THE AMENDED CLAUSE (20) OF SECTION 10 BY THE SAME FINANCE ACT W ITH EFFECT FROM 1 ST APRIL 2003. KNOWING FULLY WELL THAT WITH THE AMENDMENT IN LAW B Y THE FINANCE ACT, 2007, IT WAS NOT OPEN FOR IT TO MAKE AN APPLICATION UNDER CL AUSE 12A (1) (A), IT SOUGHT TO MAKE SUCH AN APPLICATION UNDER CLAUSE (AA) OF THE S AID SECTION THOUGH IT KNEW THAT THIS PROVISION WOULD ALLOW IT AN EXEMPTION ONL Y FOR ONE ASSESSMENT YEAR, THAT IS, ASSESSMENT YEAR 2008-09. FROM THE NEXT ASS ESSMENT YEAR 2009-10, SECTION 2(15) HAS FURTHER BEEN AMENDED SO AS TO EXC LUDE SUCH ENTITIES WHO ARE ENGAGED IN TRADE, COMMERCE OR BUSINESS FROM EXEMPTI ON UNDER SECTION 11OF THE ACT. AT PAGE 231 OF ITS COMPILATION, THE APPELLANT-AUTHO RITY HAS ENCLOSED A COPY OF THE LETTER DATED 3 RD JUNE 2008 ADDRESSED TO THE RESPONDENT-CIT. IN THIS LETTER, INTER ALIA, IT HAS SOUGHT TO EXPLAIN THE REASONS FO R THE DELAY IN FILING APPLICATION FOR REGISTRATION UNDER SECTION 12AA. THE EXCERPTS F ROM PARA 2.2 OF THIS LETTER ARE REPRODUCED HEREUNDER: IT WAS ONLY AFTER A SERIOUS THOUGHT GIVEN TO THE I SSUE THAT THE APPLICANT-AUTHORITY CAME OUT OF THE AFORESAID BONAFIDE IGNORANCE OF THE RELEVANT LEGAL PROVISIONS AND THIS TRANSFORMATION AROSE AFTER AN OPINION IN THAT BEHALF WAS SOUGHT FROM OUR PRESENT REPRESENTATIVE SHRI ANI L GARG, FCA. HE, AFTER GOING THROUGH THE JUDICIAL 70 PRONOUNCEMENTS FROM VARIOUS BENCHES OF INCOME-TAX APPELLATE TRIBUNALS AND ALSO AUTHORITATIVE DECISION S FROM HIGHER JUDICIARY I.E. FROM THE HON HIGH COURTS AND THE APEX COURT, APPRISED THIS APPLICANT-AUTHORITY OF TH E CORRECT LEGAL POSITION ABOUT THE ELIGIBILITY OF EXE MPTION U/SS 11AND 12, AS AFORESAID. IT WAS ON RECEIPT OF S UCH AN OPINION THAT THE SUBJECT APPLICATION WAS SUBMITTED ON 27- 12-2007. 33. THERE IS NO EVIDENCE LED FOR SUCH A SITUATION E XISTING NOR HAS IT BEEN AFFIRMED BY ANY RESPONSIBLE /AUTHORIZED PERSON. IT IS A FACT THAT AFTER WITHDRAWAL OF EXEMPTION IN CLAUSE (20) AND (20A) BY THE AMENDM ENTS BROUGHT OUT BY THE FINANCE ACT, 2002, A NUMBER OF SUCH ENTITIES MADE A PPLICATION FOR THE GRANT OF REGISTRATION UNDER SECTION 12AA ON THE BASIS OF SOM E STATEMENT MADE BY THE THEN FINANCE MINISTER BUT WERE DENIED REGISTRATION BY THE DEPARTMENT, APPEALS FILED BY SUCH ENTITIES BEFORE VARIOUS BENCHES OF TH E HONBLE TRIBUNAL DECIDED SUCH APPEALS ON THE MERITS OF THE MATTER. THEREFORE TO ARGUE THAT THE APPELLANT- AUTHORITY WAS IGNORANT OF THE EFFECT OF CHANGES BY THE FINANCE ACT, 2002 IS UNBELIEVABLE. IN FACT, APPELLANT-AUTHORITY IS UNDE R THE GUIDANCE, INSTRUCTIONS AND ADVICE OF A CHARTERED ACCOUNTANT FROM SO MANY YEARS AND IT IS RATHER UNBELIEVABLE THAT IT IS ONLY AFTER THE ISSUE OF NOT ICE UNDER SECTION 210(3) OF THE ACT FOR THE PAYMENT OF ADVANCE TAX THAT THE APPELLA NT-AUTHORITY WOKE FROM SLUMBER. MOREOVER, ONE CHARTERED ACCOUNTANT, NAMELY , SHRI ANIL GARG, HAS ALSO BEEN ADVISING THE APPELLANT-AUTHORITY MUCH BEF ORE THE FILING OF APPLICATION ON 26-12-2007. THIS FACT CAN BE NOTICED FROM HIS AP PEARANCE BEFORE CIT(A) IN RELATION TO APPELLATE PROCEEDINGS FOR ASSESSMENT YE AR 2003-04 ONWARDS. SHRI 71 GARG WAS AWARE OF THE FACT THAT IN THE PAST, THE AP PELLANT-AUTHORITY WAS CLAIMING EXEMPTION UNDER CLAUSE (20) OF SECTION 10 AS CAN BE NOTICED FROM ORDERS OF LD. CIT(A). THUS, THIS EXPLANATION IS COMPLETELY UNTRUE . IN FACT, BY SUCH A CONDUCT THE APPELLANT-AUTHORITY CANNOT BE SAID TO BE COMING WITH CLEAN HANDS BEFORE THIS HONORABLE FORUM. HOW CAN A RESPONSIBLE ORGANIZATION OF THIS NATURE THAT IS ENTRUSTED WITH THE DEVELOPMENT OF A VAST CITY PLEAD THAT IT WAS IGNORANT OF LAW, PARTICULARLY WHEN IT WAS ENJOYING EXEMPTION UNDER S ECTION 10(20A) AND THAT EXEMPTION WAS WITHDRAWN. CONSEQUENT TO THIS AMENDME NT, THE APPELLANT- AUTHORITY STARTED FILING RETURNS OF INCOME FOR SUCC EEDING YEARS AND PAID TAXES THEREON. IT WAS ONLY WHEN THE LIABILITY INCREASED T O A SUBSTANTIAL EXTENT THAT IT SOUGHT TO OBJECT FOR THE IMPOSITION AND ATTEMPTED T O SEEK EXEMPTION BY FILING APPLICATION FOR REGISTRATION UNDER SECTION 12AA. SU CH AN ACTION ON ITS PART SUGGESTS THAT TILL THE EXTENT OF INCOME WAS UP TO A PARTICULAR LEVEL, IT NEVER THOUGHT THAT IT CAN CLAIM EXEMPTION OR SHOULD FILE AN APPLICATION UNDER SECTION 12AA, BUT WHEN INCOME ROSE TO A SUBSTANTIALLY HIGH LEVEL WITH THE SALE OF BIG CHUNK OF LAND ON A PURELY COMMERCIAL BASIS, IT WAS REMINDED OF EXEMPTION WHICH IT MAY LIKE TO CLAIM. 34. WHETHER THE RELEVANT LAW SHOULD BE CONSTRUED A S A WHOLE OR IN PIECEMEAL AS IS BEING SOUGHT TO BE CANVASSED ON THE PART OF THE APPELLANT- AUTHORITY AND THE LAW AS AMENDED BY THE FINANCE ACT , 2002 WITH EFFECT 72 FROM 01 APRIL 2003 MAKES THE ISSUE CLEAR AS TO DISE NTITLING THE APPELLANT- AUTHORITY FROM CLAIMING EXEMPTION UNDER THE INCOME TAX ACT, 1961? IT IS ESSENTIAL TO KNOW THE BACKGROUND FOR THE AMEN DMENTS INTRODUCED IN THE RELEVANT LAW. IN HIS BUDGET SPEECH, THE HONBLE FIN ANCE MINISTER WHILE INTRODUCING THE AMENDMENT IN SECTION 10(20), IN PAR A 177 EXPLAINED: SIR, SOME OF THE EXEMPTIONS AND DEDUCTIONS CURRENTLY PROVIDED IN THE INCOME TAX ACT HAVE BECOME REDUNDANT AND ARE NOT IN HARMONY WITH THE MODERATE TAX REGIME THAT WE HAVE IN INDIA. THE ADVISORY GROUP ON TAX POLICY AND TAX ADMINISTRATION FOR 10 TH PLAN HAS RECOMMENDED DELETION OF A NUMBER OF SUCH EXEMPTIONS. I HAVE CAREFULLY EXAMINED EACH RECOMMENDATION OF THE GROUP AND I HAVE COME TO THE CONCLUSION THAT SOME OF THESE EXEMPTIONS ARE INDEED UNNECESSARY. I, THEREFORE, PROPOSE TO WITHDRAW OR DISCONTINUE THE EXEMPTIONS WHICH ARE NOT REQUIRED ANY LONGER. IN THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL. 2002, IN CLAUSE 4(1), 4(M), 4(Y), CLAUSES 150, 152, AND 153, WE FIND THAT A NUMBER OF SUCH EXEMPTIONS HAVE BEEN WITHDRAWN AND MANY MORE S UCH ORGANIZATIONS HAVE BEEN BROUGHT UNDER THE TAX NET. ALL THESE CLAUSES H AVE BEEN INCORPORATED UNDER THE CHAPTER WIDENING OF TAX BASE. THUS THE LEGISL ATIVE INTENT IS VERY CLEAR THAT SUCH AUTHORITIES ARE TO BE BROUGHT IN TO THE TAX NET. CBDT CONSEQUENTLY ISSUED A CIRCULAR NO 8 OF 2002, DATED 28 TH AUGUST, 2002 EXPLAINING IT FURTHER IN PARA NO 12 UNDER THE HEADI NG INCOME OF CERTAIN AUTHORITIES TO BECOME TAXABLE. 73 IN PARA 12.1, IT HAS BEEN STATED THAT UNDER THE EX ISTING PROVISIONS CONTAINED IN CLAUSE (20) OF SECTION 10, THE INCOME OF THE LOCAL AUTHORITY CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, CAPITAL GAINS, INCOME FROM OTHER SOURCES OR FROM THE TRADE OR BUSINESS CARRIED ON BY IT WHICH ACCRUES OR ARISES FROM THE SUPPLY OF A COMMODITY OR SERVICE WITHIN IT S JURISDICTIONAL AREA OR FROM SUPPLY OF WATER OR ELECTRICITY WITHIN OR OUTSIDE IT S OWN JURISDICTIONAL AREA IS EXEMPT FROM PAYMENT OF INCOME-TAX. IN PARA 12.2, IT IS STATED THAT THROUGH FINANCE ACT , 2002 THIS EXEMPTION HAS BEEN RESTRICTED TO THE PANCHAYATS AND MUNICIPALITIES AS REFERRED TO IN ARTICLES 243(D) AND 243(P) (E) OF THE CONSTITUTION OF INDIA RESPECT IVELY, MUNICIPAL COMMITTEES AND DISTRICT BOARDS LEGALLY ENTITLED TO OR ENTRUSTE D BY THE GOVERNMENT WITH THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND AND CANTONMENT BOARD AS DEFINED UNDER SECTION 3 OF THE CANTONMENT ACT, 1924 . THESE ENTITIES ARE INCLUDED IN CLAUSE (20) OF SECTION 10 BY WAY OF AN EXPLANATION INSERTED BY THE FINANCE ACT, 2002 WITH EFFECT FROM 1 ST APRIL 2003 AS THESE WERE GETTING EXEMPTION ALONG WITH OTHER LOCAL AUTHORITIES LIKE U RBAN IMPROVEMENT TRUSTS, DEVELOPMENT AUTHORITIES, AGRICULTURAL MARKETING SOC IETIES AND AGRICULTURAL MARKET BOARDS ETC., UNDER CLAUSE (20A) OF SECTION 1 0 WHICH WAS OMITTED FROM THE STATUTE BY THE FINANCE ACT, 2002 WITH EFFECT FR OM 1 ST APRIL 2003. PARA 12.3 STATES THAT EXEMPTION UNDER CLAUSE 20 OF SECTION WOULD, THEREFORE , NOT TO BE AVAILABLE TO AGRICULTURAL MARKETING SOCIE TIES AND AGRICULTURAL MARKET 74 BOARDS, ETC., DESPITE THE FACT THAT THEY MAY BE DEE MED TO BE TREATED AS LOCAL AUTHORITIES UNDER ANY OTHER CENTRAL OR STATE LEGISL ATION. EXEMPTION UNDER THIS CLAUSE WOULD NOT BE AVAILABLE TO PORT TRUSTS ALSO. 35. CLAUSE (20A) OF SECTION 10 AS IT STOOD PRIOR TO ITS OMISSION BY THE FINANCE ACT 2002 IS REPRODUCED AS UNDER: ANY INCOME OF AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENACTED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES OR FOR BOTH. IN ORDER TO SECURE THE BENEFIT THAT THESE AUTHORITI ES WERE ENJOYING AND TO ENSURE THAT THESE ENTITIES GET FUNDS, AMENDMENT WAS INSERT ED IN SUB-CLAUSE (VI) OF SUB- SECTION(2) OF SECTION 80G TO PROVIDE THAT THE SUMS REFERRED TO IN SUB-SECTION(1) OF SECTION 80G WOULD ALSO INCLUDE AS UNDER: (VI) AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENACTED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVEL OPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES OR FOR BO TH. PRIOR TO ITS SUBSTITUTION, SUB-CLAUSE (VI) READ AS UNDER: (VI) ANY AUTHORITY REFERRED TO IN CLAUSE (20A) OF SECTION 10. 75 36. IT MAY BE SEEN THAT SOME OF THE AUTHORITIES LIK E PANCHAYATS, MUNICIPALITY, MUNICIPAL COMMITTEE AND DISTRICT BOARDS, CANTONMENT BOARD WERE INCLUDED IN CLAUSE (20) OF SECTION 10 WHICH WERE OTHERWISE CLAI MING EXEMPTION UNDER CLAUSE (20A) OF SECTION 10 AND THOSE ENGAGED IN DEV ELOPMENTAL WORK FOR CITIES, TOWNS AND VILLAGES WERE BROUGHT IN SECTION 80G. CIRCULAR NO 8 OF 2002 DATED 27 TH AUGUST 2002: (2002) 258 ITR (ST.) 13 EXPLAINS THE OBJECT OF THIS OMISSION AS UNDER: 13. INCOME OF CERTAIN HOUSING BOARDS, ETC., TO BEC OME TAXABLE- 13.1 UNDER THE EXISTING PROVISIONS CONTAINED IN CLAUSE (20A) OF SE CTION 10, INCOME OF THE HOUSING BOARDS OR OTHER STATUTORY AUTHORITIES SET U P FOR THE PURPOSE OF DEALING WITH OR SATISFYING THE NEED FOR HOUSING ACCOMMODATI ONS OR FOR THE PURPOSE OF PLANNING, 5-DEVELOPMENT OR IMPROVEMENT OF CITIES, T OWNS AND VILLAGES IS EXEMPT FROM PAYMENT OF INCOME-TAX. 13.2 THROUGH THE FINANCE ACT 2002, CLAUSE (20A) OF SECTION 10 HAS BEEN DELETED SO AS TO WITHDRAW EXEMPTION AVAILABLE TO THE ABOVE MENTIONED BODIES. THE INCOME OF HOUSING BOARDS OF THE STATES AND OF DEVEL OPMENT AUTHORITIES WOULD THEREFORE, ALSO BECOMES TAXABLE. (EMPHASIS SU PPLIED) 13.3 UNDER SECTION 80G, DONATION MADE TO HOUSING AU THORITIES, ETC., REFERRED TO IN CLAUSE (20A) OF SECTION 10 IS ELIGIBLE FOR 50% D EDUCTION FROM TOTAL INCOME IN THE HANDS OF THE DONORS. SINCE CLAUSE (20A) OF SECT ION 10 HAS BEEN DELETED, 76 DONATION TO THE HOUSING AUTHORITIES, ETC., WOULD NO T BE ELIGIBLE FOR DEDUCTION IN THE HANDS OF DONORS AND THIS MAY RESULT IN DRYING U P OF DONATIONS. TO CONTINUE THE INCENTIVE TO DONATION MADE TO HOUSING AUTHORITI ES, ETC., SECTION 80G HAS BEEN AMENDED SO AS TO PROVIDE THAT 50% OF THE SUM PAID B Y AN ASSESSEE TO AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENACTED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH, SHALL BE DEDUCTED FROM THE TOTAL INCOM E OF SUCH ASSESSEE. 13.4 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL, ACCORDINGLY, APPLY TO THE ASSESSMENT YEAR 2003-04 A ND SUBSEQUENT ASSESSMENT YEARS. 37. THE ISSUE IS WHETHER THE APPELLANT-AUTHORITY IS PERMITTED TO SEEK REGISTRATION ONLY FOR ONE YEAR AND TO DRAW ADVANTAG E OF ITS OWN GROSS NEGLIGENCE AND IGNORE THE SCHEME OF THE ACT. THE LEGISLATURES INTENTION IS CLEAR THAT THESE ENTITIES ARE NOT ENTITLED TO EXEMPTION FROM TAX ON THEIR TOTAL INCOME FOR AND FROM ASSESSMENT YEAR 2003-04 ONWARDS AND THE COMPREHENSI VE LEGISLATION BROUGHT OUT BY CHANGES IN CLAUSES (20) AND (20A) OF SECTION S 10 AND CORRESPONDING INSERTION OF SUB-CLAUSE (VI) IN SUB-SECTION (2) OF SECTION 80G REFLECTS THAT INTENTION. 77 A PRESS NOTE WAS ALSO RELEASED BY THE CENTRAL GOVER NMENT ON 13 JUNE 2007 UNDER THE TITLE TAX RULES PROVIDING TAX EXEMPTION TO CHARITABLE AND RELIGIOUS ENTITIES MODIFIED, AND THE SAME IS REPRODUCED AS U NDER: SECTIONS 11 AND 12 OF THE INCOME-TAX ACT, 1961 PROVIDE FOR EXEMPTION OF INCOME OF CHARITABLE AND RELIGIOUS ENTITIES. IN ORDER TO AVAIL SUCH EXEMPTIO N, THE ENTITY IS REQUIRED TO MAKE AN APPLICATION FOR REGISTRATION UNDER SECTION 12A IN FORM NO 10A TO THE COMMISSIONER OF INCOME-TAX. PRIOR TO 1 ST JUNE 2007, THE APPLICATION HAD TO BE MADE BY THE ENTITY WITHIN ONE YEAR FROM THE DATE OF ITS CREATION/ESTABLISHMENT AND THE COMMISSIONER HAD DISCRETION TO CONDONE THE DELAY IF THE APPLICATION WAS FILED BELATEDLY. HOWEVER, THE FINANCE ACT, 2007 HAS REMOVED THE REQUIREMENT OF FILING THE APPLICATION FOR REGISTRATION BY THE ENTITY WITHIN O NE YEAR AND HAS ALSO REMOVED THE POWER VESTED WITH THE COMMISSIONER FOR CONDONATION OF DELAY IN RESPECT OF ANY APPLICATION MADE ON OR AFTER 1 ST DAY OF JUNE 2007. A NEW CLAUSE (AA) TO SUB-SECTION (1) OF SECTION 12A OF THE INCOME-TAX ACT, 1961 HAS BEEN INSERTED IN THIS REGARD. CONSEQUENT TO THIS, IN ORDER TO HARMONIZE EXISTING RULE 17A AND THE FORM NO 10A APPENDIX II TO THE SAID RULE WITH THE NEW PROVISION, NOTIFICATION HAS BEEN ISSUED ON 30 TH MAY 2007 AMENDING THIS RULE AND FORM TO ENABLE FILING OF APPLICATION FOR REGISTRATION BY CHARITABLE AND RELIGIOUS ENTITIES O N OR AFTER THE 1 ST DAY OF JUNE, 2007. 38. FROM THE ABOVE, IT WOULD BE SEEN THAT THESE CHA NGES WERE NECESSITATED TO REDRESS THE MISCHIEF/ INCONVENIENCE CAUSED TO CHARI TABLE TRUSTS/ INSTITUTIONS DUE TO VARYING DECISIONS BY THE LD. CITS WITH THE EXERC ISE OF THE DISCRETION VESTED IN THEM TO CONDONE THE DELAY IN THE FILING OF APPLICAT IONS FOR THE GRANT OF 78 REGISTRATION. THESE CHANGES WERE MADE TO WITHDRAW T HE DISCRETIONARY POWER OF THE CITS AND TO AVOID THE COMPULSION OF SUCH ENTITI ES OF FILING APPLICATIONS WITHIN ONE YEAR. THE PURPOSE OF THE AMENDMENTS WOUL D GET DEFEATED IF SUCH AN ABUSE OF THE LAW IS PERMITTED. IT IS THEREFORE SUBM ITTED THAT A PURPOSIVE CONSTRUCTION OF THE PROVISIONS MUST BE PREFERRED TH AN WHAT IS BEING SOUGHT TO BE CANVASSED BY THE APPELLANT-AUTHORITY. IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE LEGI SLATURE HAVING FELT THE NEED OF PROVIDING EXEMPTION TO AGRICULTURAL PRODUCE MARKETI NG COMMITTEES AND BOARDS, INSERTED CLAUSE (26AAB) IN SECTION 10 BY TH E FINANCE ACT, 2008 WITH EFFECT FROM 1 ST APRIL 2009 TO PROVIDE SUCH EXEMPTION AND DEVELOPME NT AUTHORITIES WERE STILL KEPT OUT OF SUCH EXEMPTED CA TEGORY OF PERSONS. THE INTENTION OF THE LEGISLATURE IS CLEAR FROM AMEN DMENT WHEREBY CLAUSE (15) OF SECTION (2) IS SUBSTITUTED BY THE FINANCE ACT, 2008 WITH EFFECT FROM 1 ST APRIL 2009 PROVIDING THAT THE ADVANCEMENT OF ANY OTHER OB JECT OF 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 BUSINE SS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 79 ON A CONJOINT READING OF ALL THESE PROVISIONS, IT B ECOMES CLEAR THAT BECAUSE OF DOMINANT PURPOSE BEING CARRYING ON OF BUSINESS, THE DEVELOPMENT AUTHORITIES ARE NOT CONSIDERED TO BE PERSONS INVOLVED IN CHARIT ABLE ACTIVITIES. 39. WHETHER THE ACTIVITIES OF THE APPELLANT-AUTHORI TY FITS IN TO THE OVER-ALL SCHEME OF THE PROVISIONS RELATING TO CHARITABLE INS TITUTIONS CONTAINED IN THE INCOME-TAX ACT, 1961? HERE WE ARE NOT CONCERNED WITH THE ASSESSMENTS IN R ELATION TO THOSE YEARS WHEN IT ENJOYED EXEMPTION UNDER CLAUSE (20A) OF SECTION 10 OF THE ACT. WE ARE CONCERNED WITH THE ACTIVITIES NOTICED DURING COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 A FTER IT LOST THE EXEMPTION WITH THE DELETION OF CLAUSE (20A) OF SECTION 10 OF THE ACT AND WHETHER IT HAD ANY EFFECT ON THE DECISION BY THE RESPONDENT IN THE REF USAL TO GRANT THE REGISTRATION AND THE ACTIVITIES THE RELEVANT LEGISLATION PERMITS TO THE APPELLANT-AUTHORITY THAT THE SCOPE, POWER AND LEVEL OF AUTHORITY IT ENJOYS U NDER THE RELEVANT STATUTE. 40. ASSESSMENT PROCEEDINGS AND ITS EFFECT ON DECISI ON: (I) CLAIM UNDER CLAUSE (20) OF SECTION 10 : THE APPELLANT-AUTHORITY CLAIMED EXEMPTION UNDER CLA USE (20) OF SECTION 10 OF THE ACT, AS CAN BE SEEN FROM THE ORDER OF LD. CIT(A ) FOR THE ASSESSMENT YEARS 2003-04 2004-05 AND NOT UNDER CLAUSE (20A) OF SECTI ON 10 OF THE ACT. THE LEARNED CIT(A) HAS CONFIRMED ADDITIONS MADE BY THE ASSESSING OFFICER ON A 80 NUMBER OF ISSUES ON THE GROUND THAT PROPER RECORDS AND BASIS OF ACCOUNTING ARE FOUND TO BE LACKING. SIMILARLY, ADDITIONS MADE TO T HE TOTAL INCOME IN RELATION TO THE ASSESSMENT YEAR 2005-06 HAVE BEEN CONFIRMED BY THE LEARNED CIT(A) ON SIMILAR BASIS. (II) FILING OF AUDIT REPORTS UNDER SECTION 44AB : THE APPELLANT-AUTHORITY HAS FILED COPIES OF ITS ACC OUNTS FOR THE YEAR ENDING ON 31 ST MARCH, 2005, 31 ST MARCH, 2006 AND 31 ST MARCH, 2007 ALONG WITH ITS APPLICATION IN FORM 10A FOR THE GRANT OF REGISTRATI ON UNDER SECTION12AA OF THE ACT. IT HAS ENCLOSED COPIES OF THE AUDIT REPORTS IN FORM NO 3CB UNDER RULE 6G (1) (B) READ WITH SECTION44AB OF THE ACT FOR THESE YEARS. RULE 6G FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: 6G. (1) THE REPORT OF AUDIT OF THE ACCOUNTS OF A P ERSON REQUIRED TO BE FURNISHED UNDER SECTION 44AB SHALL- (A) IN THE CASE OF A PERSON WHO CARRIES ON BUSINESS OR PROFESSION AND WHO IS REQUIRED BY OR UNDER ANY OTHER LAW TO GET HIS ACCOUNTS AUDITED, BE IN FORM N O 3CA; (B) IN THE CASE OF A PERSON WHO CARRIES ON BUSINESS OR PROFESSION , BUT NOT BEING A PERSON REFERRED TO IN CLAUSE (A), BE IN FORM NO 3CB. FROM THE FILING OF FORM NO 3CB FOR ALL THE AFORESAI D YEARS, IT IS ADMITTED BY THE APPELLANT-AUTHORITY THAT IT IS ENGAGED IN CARRYING ON OF BUSINESS. THIS FACT IS FURTHER CONFIRMED IN COLUMNS (8) AND (17) OF FORM N O 3CD FOR ALL THESE YEARS. 81 WHETHER THIS CARRYING ON OF BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE APPELLANT-AUTHORITY WOULD BE DISC USSED SEPARATELY. (III) FILING OF THE REPORTS OF AUDIT OF THE ACCOUNT S IN FORM NO 10B: APPELLANT-AUTHORITY HAS ALSO FILED AUDIT REPORTS IN RESPECT OF THE YEARS ENDING ON 31 ST MARCH 2005, 31 ST MARCH 2006, AND 31ST MARCH 2007 IN FORM NOS 10B UNDER RULE 17B READ WITH SECTION 12A (B) OF THE ACT . IT CAN BE SEEN FROM THE INFORMATION AVAILABLE IN THESE FORMS THAT EXCEPT IN FORMATION IN COLUMNS (1) AND (3), IN EVERY OTHER COLUMN, THE REMARKS ARE NO T REQUIRED, NOT APPLICABLE, NO OR NOT NOTICED. INFORMATION IN COLUMN (1) IS THE FIGURE OF TOTAL EXPENDITURE INCURRED DURING THE YEAR AND COLU MN (3) PROVIDES THE NET PROFIT EARNED AFTER THE PAYMENT OF TAX WHICH HAS BEEN CARR IED OVER TO THE BALANCE SHEET OF THAT YEAR. (IV) OBSERVATIONS IN THE ORDER UNDER SECTION12AA : THE FACTUAL ASPECTS NOTICED FROM THE ABOVE DOCUMENT S HAVE BEEN GONE THROUGH BY THE RESPONDENT AND CERTAIN CONCLUSIONS HAVE BEEN DRAWN THERE FROM. FROM THIS, IT BECOMES EVIDENT THAT APPELLANT-AUTHORITY I S MORE A BUSINESS ORGANIZATION THAN A CHARITABLE INSTITUTION. THIS INFERENCE CAN A LSO BE DRAWN FROM A STUDY OF THE ANNUAL ACCOUNTS OF VARIOUS YEARS PRODUCED BEFOR E THE RESPONDENT AND THE RESPONDENT CANNOT PUT BLINKERS WHEN THESE FACTS AND CIRCUMSTANCES ARE EXISTENT IN THE CASE OF THE APPELLANT-AUTHORITY. IN FACT, TH E RESPONDENT CANNOT IGNORE THESE 82 FACTS WHILE MAKING DECISION ON THE APPLICATION FOR THE GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. 41. SCOPE OF AUTHORITY AND COMPETENCE OF THE APPELL ANT-AUTHORITY IN THE RELEVANT LEGISLATION: IN THIS REGARD, IT WOULD BE PREFERABLE TO PERUSE TH E SCHEME OF THE ACT, THAT IS, MADHYA PRADESH NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973. IN FACT, A BRIEF SUMMARY OF THE ACT IS DISCUSSED BY HONBLE SUPREME COURT IN ITS DECISION IN THE CASE OF CHAIRMAN, INDORE VIKAS PRADHIKARAN, PET ITIONER V. M/S. PURE INDUSTRIAL COCK & CHEM. LTD. & ORS., RESPONDENT, REPORTED IN 2007-(094)-AIR -2458 SC. I N THE OBJECT OF THIS LAW, IT IS STATED TO BE, AN ACT FOR PLANNING AND DEVELOPMENT AND USE OF LAND; TO MAKE BETTER PROVISION FOR THE PREPARATION OF DEVELOPMENT PLANS AND ZONING PLANS WITH A VIEW TO ENSURING TOWN PLANNING SCHEMES ARE MADE IN A PROPER MANNER AND THEIR EXECUTION IS MADE EFFECTIVE , TO CONSTITUTE TOWN AND COUNTRY PLANNING AUTHORITY FOR PROPER IMPLEMENTATION OF TOWN AND COUNTRY DEVELOPMENT PLAN, TO PROVIDE FOR THE DEVELOPMENT AND ADMINISTRATION OF SPECIAL AREAS THROUGH SPECIAL AREA DEVELOPMENT AUTHORITY, TO MAKE PROVISION FOR THE COMPULSORY ACQUISITION OF LAND REQUIRED FOR THE PURPOSE OF THE DEVELOPMENT PLANS AND FOR PURPOSES CONNECTED WITH THE MATTERS AFORESAID. 83 WITH THE PROMULGATION OF THIS ACT, THE MADHYA PRADE SH TOWN PLANNING ACT, 1948 AND THE MADHYA PRADESH TOWN IMPROVEMENT TRUST ACT, 1960 WERE REPEALED. THE ACT IS DIVIDED INTO SEVERAL CHAPTERS. IT PROCEE DS ON THE BASIS THAT STEPS ARE REQUIRED TO BE TAKEN BEFORE A TOWN PLANNING SCHEME IS GIVEN EFFECT TO. THE STATE GOVERNMENT IS IN OVERALL CONTROL OF THE MATTER RELA TING TO TOWN AND COUNTRY PLANNING. THE DIRECTOR OF TOWN AND COUNTRY PLANNING, HOWEVER, SUBJECT TO THE CONTROL AND SUPERVISION OF THE STATE, EXERCISES SUCH STATUT ORY POWERS WHICH ARE CONFERRED UPON HIM. A STATE IS DIVIDED INTO SEVERAL REGIONS. A REGIONAL PLAN IS FINALIZED WHEREUPON RESTRICTIONS ON USE OF LAND OR DEVELOPMENT THEREOF CAN BE IMPOSED. SUCH REGIONAL PLAN IS SUBJECT TO REVIEW. CHAPTER IV OF THE ACT PROVIDES FOR CARVING OUT PLAN NING AREAS AND PREPARATION OF DEVELOPMENT PLANS. DEVELOPMENT PLANS ARE REQUIRE D TO BE PREPARED AND FINALIZED ONLY IN RELATION TO THE PLANNING AREAS. A N AREA, HOWEVER, WHICH IS NOTIFIED, CAN BE SUB-DIVIDED INTO PLANNING AREAS AN D NON-PLANNING AREAS. CHAPTER V OF THE ACT DEALS WITH THE PREPARATION, FI NALIZATION, REVIEW AND MODIFICATIONS OF THE ZONAL PLAN WHEREWITH WE ARE NO T CONCERNED MUCH IN THESE APPEALS. 84 CHAPTER VI OF THE ACT PROVIDES FOR CONTROL OF DEVEL OPMENT AND USE OF LAND. IN TERMS OF SECTION 24 OF THE ACT, THE DIRECTOR IS TO CONTROL LAND USE. PREPARATION OF DEVELOPMENT PLAN, PROHIBITION OF DEVELOPMENT WITHOU T PERMISSION AND MATTERS CONNECTED THEREWITH AND INCIDENTALS THERETO ARE ALS O DEALT WITH IN CHAPTER VI. CHAPTER VII OF THE ACT, HOWEVER, PROVIDES FOR SHIFT OF CONTROL IN RESPECT OF LAND USE AND DEVELOPMENT FOR THE HANDS OF THE DIRECTOR A ND, CONSEQUENTLY OF THE STATE TO THE TOWN AND COUNTRY DEVELOPMENT AUTHORITY . SECTION 38(1) OF THE SAID ACT PROVIDES THAT THE STA TE GOVERNMENT MAY, BY NOTIFICATION, ESTABLISH A TOWN AND COUNTRY DEVELOPM ENT AUTHORITY BY SUCH NAME AND FOR SUCH AREA AS MAY BE SPECIFIED IN THE N OTIFICATION AND SUB-SECTION (2) THEREOF ENVISAGES THAT THE DUTY OF IMPLEMENTING THE PROPOSAL IN THE DEVELOPMENT PLAN, PREPARING ONE OR MORE TOWN DEVELO PMENT SCHEMES AND ACQUISITION AND DEVELOPMENT OF LAND FOR THE PURPOSE OF EXPANSION OR IMPROVEMENT OF THE AREA SPECIFIED IN THE NOTIFICATI ON UNDER SUB-SECTION (1) SHALL, SUBJECT TO THE PROVISIONS OF THIS ACT VEST IN THE T OWN & COUNTRY DEVELOPMENT AUTHORITY ESTABLISHED FOR THE SAID AREA. BY VIRTUE OF THE ENABLING PROVISION IN SECTION 38 OF THE ADHINIYAM, THE STATE GOVERNMENT, BY NOTIFICATION NO 1688-XXXXII DATED 9 TH MAY 1977 ESTABLISHED INDORE NAGAR TATHA VIKAS PRADHIKARI FOR THE COMPRIS ED AREA WITHIN THE INDORE PLANNING AREA AS SPECIFIED IN THE FORMER TOWN AND C OUNTRY PLANNING 85 DEPARTMENTS NOTIFICATION NO 515-F. 1-20-XXXII-74, D ATED THE 13 TH FEBRUARY, 1974 AND THIS PRADHIKARI WAS TO BE KNOWN AS INDORE VIKAS PRADHIKARI. SECTION 85 OF THE 1973 ACT PROVIDES FOR RULE MAKING POWER. THE STATE OF MADHYA PRADESH IN EXERCISE OF ITS POWE R CONFERRED UPON IT UNDER SECTIONS 58 AND 85 OF THE 1973 ACT MADE RULES KNOWN AS 'MADHYA PRADESH NAGAR TATHA GRAM NIVESH VIKASIT BHOOMIYO, GRIHO, BH AVANO TATHA ANYA SANRACHNAON KA VYAYAN NIYAM, 1975'. RULES 3, 4, 5, 19 AND 20 OF THE 1975 RULES WHICH AR E MATERIAL FOR OUR PURPOSE READ AS UNDER: '3. NO GOVERNMENT LAND VESTED IN OR MANAGED BY THE AUTHORITY SHALL BE TRANSFERRED EXCEPT WITH THE GENERAL OR SPECIAL SANC TION OF THE STATE GOVERNMENT GIVEN IN THAT BEHALF. 4. ALL OTHER LAND (HEREINAFTER CALLED THE 'AUTHORIT Y LAND') SHALL BE TRANSFERRED IN ACCORDANCE WITH THE FOLLOWING RULES. 5. TRANSFER OF THE AUTHORITY LAND SHALL BE AS UNDER : (A) BY DIRECT NEGOTIATION WITH THE PARTY; OR (B) BY PUBLIC AUCTION; OR (C) BY INVITING TENDERS; OR 86 (D) UNDER CONCESSIONAL TERMS. 19. THE AUTHORITY MAY WITH THE PREVIOUS APPROVAL OF THE STATE GOVERNMENT LEASE OUT ON CONCESSIONAL TERMS ANY LAND TO ANY PUB LIC INSTITUTION OR BODY REGISTERED UNDER ANY LAW FOR THE TIME BEING IN FORC E. 20. ORDINARILY, NO LEASE ON CONCESSIONAL TERMS SHAL L BE ALLOWED FOR THE PURPOSES OF OTHER THAN CHARITABLE PURPOSES SUCH AS FOR HOSPI TAL EDUCATIONAL INSTITUTIONS AND ORPHANAGES.' THE STATE IN TERMS OF THE PROVISIONS OF THE 1973 AC T AND THE 1975 RULES IS A STATUTORY AUTHORITY. ITS JURISDICTION TO OVERSEE FU NCTIONS OF THE AUTHORITIES OF THE BOARD AS ALSO POWER TO ISSUE DIRECTIONS ARE CIRCUMS CRIBED BY THE PROVISIONS CONTAINED IN SECTIONS 72 AND 73 OF THE 1973 ACT. 42. THE ACT ENVISAGES THE FOLLOWING STEPS WHICH ARE REQUIRED TO BE COMPLIED WITH: (A) CONSTITUTION OF A PLANNING AREA BY NOTIFICATION UNDER SECTION 13. (B) COMPLIANCE OF THE DETAILED PROCEDURE SET OUT UN DER SECTIONS 14 TO 19, LEADING TO SANCTION OF THE DEVELOPMENT PLAN UNDER S ECTION 19. THE SAID PROCEDURE ENVISAGES COMPLIANCE OF PRINCIPLES OF NAT URAL JUSTICE. (C) SECTION 38 PROVIDES FOR ESTABLISHMENT OF A TOWN AND COUNTRY DEVELOPMENT AUTHORITY, BY NOTIFICATION 'FOR SUCH AREAS AS MAY B E SPECIFIED IN THE 87 NOTIFICATION'. UNDER SUB-SECTION (2) THEREOF, DUTIE S OF IMPLEMENTATION OF THE DEVELOPMENT PLAN AND PREPARATION OF THE TOWN DEVELO PMENT SCHEME HAVE BEEN CAST ON THE TOWN AND COUNTRY DEVELOPMENT AUTHORITY. (D) THE TOWN DEVELOPMENT SCHEME IS TO BE PREPARED U PON FOLLOWING THE PROCEDURE SET OUT UNDER SECTION 50. THE SAID SCHEME CAN BE PREPARED ONLY WHEN THERE EXISTS A DEVELOPMENT PLAN, PREPARED IN ACCORD ANCE WITH THE PROCEDURE PRESCRIBED UNDER THE ACT AS ENVISAGED UNDER SECTION S 14 TO 19 AND AFTER NOTIFICATION UNDER SECTION 38(1). IN THIS REGARD, R EFERENCE MAY BE ALSO BE MADE TO SECTION 2(U) OF THE ACT, WHICH DESCRIBES A TOWN DEVELOPMENT SCHEME TO MEAN A SCHEME PREPARED FOR IMPLEMENTATION OF THE PROVISI ONS OF THE DEVELOPMENT PLAN. 43. SOME SIGNIFICANT FACTS WHICH EMERGE FROM A SCAN NING OF THESE PROVISIONS OF THE RELEVANT ACT ARE: 1. THE AUTHORITY IS CONSTITUTED AS A BODY CORPORATE WI TH A PERPETUAL SUCCESSION, COMMON SEAL AND WITH POWER TO ACQUIRE A ND HOLD PROPERTY. 2. IT CAN SUE AND BE SUED IN ITS OWN NAME. 3. IT HAS ITS OWN FUND AND AN ANNUAL BUDGET. 4. IT CAN BORROW MONEY IN ITS OWN NAME FROM STATE GOVE RNMENT OR OPEN MARKET. 88 5. IT IS THE DIRECTOR WHO IS OVERALL EMPOWERED TO ADMI NISTER THE ACT AND CONTROL THE VARIOUS AUTHORITIES SET UP BY VIRTUE OF ENABLING POWER CONFERRED UNDER SECTION 38 OF THE ACT 6. THE DECISION OF THE AUTHORITY IS SUBJECT TO MODERAT ION, REVIEW AND SUBSTITUTION BY THE DECISION OF THE STATE GOVERNMEN T. 7. IT IS SUBJECT TO SUPERINTENDENCE AND CONTROL OF THE STATE GOVERNMENT. 8. IT CAN GRANT PERMISSION TO OTHERS TO DEVELOP ITS OW N LAND. 9. THE AUTHORITY CAN INCUR PECUNIARY LOSS ON ACCOUNT O F ACTS OF OMISSION OR COMMISSION BY ITS OFFICERS, SERVANTS OR OTHER PE RSONS INCLUDING CHAIRMAN AND STATE GOVERNMENT CAN ORDER SUCH PERSON TO MAKE GOOD SUCH OF THE LOSS AS WELL IN ADDITION TO RECOVERY, I T MAY INITIATE ANY OTHER ACTION AGAINST SUCH PERSON AS IT MAY DEEM FIT . 10. AUTHORITY LAND CAN BE TRANSFERRED BY WAY OF DIRECT NEGOTIATIONS WITH THE PARTY, PUBLIC AUCTION, INVITING TENDERS OR UNDE R CONCESSIONAL TERMS. 44. IN THIS SCENARIO, THE ISSUE ARISES WHETHER THE APPELLANT-AUTHORITY BEING A MERE IMPLEMENTING AUTHORITY CAN BE TREATED AS AN IN STITUTION THOUGH IT IS A BODY CORPORATE WITH A PERPETUAL SUCCESSION, COMMON SEAL AND WITH POWER TO ACQUIRE AND HOLD PROPERTY, IT CAN SUE AND BE SUED IN ITS OW N NAME, IT HAS ITS OWN FUND AND AN ANNUAL BUDGET AND IT CAN BORROW MONEY IN ITS OWN NAME FROM STATE GOVERNMENT OR OPEN MARKET BUT THE OVERALL CONTROL L IES EITHER WITH THE DIRECTOR 89 OF TOWN AND COUNTRY PLANNING APPOINTED UNDER THE AC T AND WITH THE STATE GOVERNMENT IN TERMS OF SECTIONS 72 TO 76 CONTAINED IN CHAPTER IX OF THE ACT. IN A WAY, THE APPELLANT-AUTHORITY SUB SERVES THE FUNCT IONS AS AN AGENCY ONLY ON BEHALF OF THE STATE GOVERNMENT UNDER ITS SUPERVISIO N AND CONTROL WHICH IS EXERCISED EITHER THROUGH THE DIRECTOR OF TOWN PLANN ING OR DIRECTLY. THE RELEVANT PROVISIONS WITH REGARD TO THE APPOINTMENT OF CHIEF EXECUTIVE OFFICERS CONTAINED IN CHAPTER IX A AND CONTROL OVER THEM EXERCISED BY THE STATE GOVERNMENT ALSO CONFIRMS THIS CONCLUSION. IN RESERVE BANK OF INDIA VS. PEERLESS GENERAL FINAN CE AND INVESTMENT CO. LTD. [(1987) 1 SCC 424] THIS COURT STATED: '... IF A STATUTE IS LOOKED AT, IN THE CONTEXT OF I TS ENACTMENT, WITH THE GLASSES OF THE STATUTE-MAKER, PROVIDED BY SUCH CONTEXT, ITS SC HEME, THE SECTIONS, CLAUSES, PHRASES AND WORDS MAY TAKE COLOR AND APPEAR DIFFERE NT THAN WHEN THE STATUTE IS LOOKED AT WITHOUT THE GLASSES PROVIDED BY THE CONTE XT. WITH THESE GLASSES WE MUST LOOK AT THE ACT AS A WHOLE AND DISCOVER WHAT E ACH SECTION, EACH CLAUSE, EACH PHRASE AND EACH WORD IS MEANT AND DESIGNED TO SAY AS TO FIT INTO THE SCHEME OF THE ENTIRE ACT. ...' 45. WHETHER LD. CIT CAN MAKE ENQUIRY AT THE TIME OF GRANT OF REGISTRATION UNDER SECTION 12AA: 90 IT HAS BEEN HELD BY HONBLE HIGH COURT OF MADHYA PR ADESH IN THE CASE OF SHRI SARAFA ASSOCIATION V CIT REPORTED IN (2007) 163 TAX MAN 228 (MP) THAT ENQUIRIES CAN BE MADE BY THE CIT. SIMILAR VIEW IS E XPRESSED BY HONBLE HIGH COURT OF DELHI AS WELL BY THE DELHI BENCH OF ITAT I N THE CASE OF KIRTICHAND TARAWATI CHARITABLE TRUST AND IN THE CASE OF ARYAN EDUCATIONAL SOCIETY V CIT REPORTED IN (1999) 105 TAXMAN 686 9DEL) AND (2006) 281 ITR (AT) 72 (DEL) RESPECTIVELY. 46. WHETHER THE CONTENTION THAT THE PROFITS EARNED BY THE APPELLANT- AUTHORITY IS PLOUGHED BACK SHALL ALONE BE THE DECIS IVE FACTOR IN HOLDING THAT THE LAW OF CHARITIES IS APPLICABLE TO THE APPELLANT -AUTHORITY, IS ACCEPTABLE IN LAW AND ON FACTS? AS COULD BE SEEN THAT THE PROFIT AFTER THE PAYMENT OF TAX IS CARRIED OVER TO THE BALANCE SHEET OF THAT YEAR WHICH INCREASES THE RESE RVE AND SURPLUS OF THE APPELLANT-AUTHORITY. IT IS NOT ACCUMULATING OR SETT ING APART ANY SPECIFIC FUND FOR ITS OBJECTIVES AND THE REASON ASCERTAINABLE FROM FO RM NO 10B IS THAT SURPLUS IS LESS THAN 15%. SINCE IT IS CARRYING ON BUSINESS, TH E SURPLUS MAY ALWAYS BE LESS THAN 15%. FURTHER, THERE IS NO YEAR-WISE SEGREGATIO N AVAILABLE IN RESPECT OF RESERVE AND SURPLUS. IT IS INDEED SURPRISING THAT THE APPELLANT FAILED T O SATISFY THE QUERY MADE BY HONBLE BENCH IN CONNECTION WITH CERTAIN FACTS RELATING TO THE PARTICULAR TRANSACTION OF THE SALE OF PLOT O F LAND TO RELIANCE INDUSTRIES LIMITED WHICH HONBLE REQUIRED IT TO PLA CE BEFORE THEM. 91 SOME INSTITUTIONS INCLUDING A FUNERAL HOUSE OR AN A NIMAL WELFARE ORGANIZATION OR A SUPERBAZAR CHARGES LARGE SUMS AND MAKES HUGE PROF ITS. IT IS TRUE THAT THEY RENDER SERVICES OF GENERAL PUBLIC UTILITY. TAKE ANO THER EXAMPLE OF A BLOOD BANK WHICH COLLECTS BLOOD ON PAYMENT AND SUPPLIES BLOOD FOR A HIGHER PRICE THEREBY MAKING PROFIT. UNDOUBTEDLY, THE BLOOD BANK MAY BE S AID TO BE A GENERAL PUBLIC UTILITY BUT IF IT ADVANCES ITS PUBLIC UTILITY BY SA LE OF BLOOD AS AN ACTIVITY FOR (MAKING) PROFIT, IT IS DIFFICULT TO CALL ITS PURPOS E CHARITABLE. IT IS JUST BLOOD BUSINESS. SO IS THE SITUATION IN THE CASE OF THE AP PELLANT-AUTHORITY, IT IS JUST LAND BUSINESS AS CAN BE SEEN FROM ITS ACCOUNTS AS WELL. 47. WHETHER RELIANCE BY THE APPELLANT-AUTHORITY, BE ING PLACED ON CERTAIN DECISIONS PURPORTEDLY RENDERED IN SIMILAR CASES NEE D TO BE FOLLOWED? NOW, WE SHALL BRIEFLY DEAL WITH THE CASES RELIED UP ON BY THE LD. COUNSEL FOR THE ASSESSEE. IN SO FAR AS THE CASES OF MARKET COMM ITTEES AND AGRICULTURE PRODUCE MARKETING COMMITTEES ARE CONCERNED, THE RAT IO OF THESE CASES IS DISTINGUISHABLE IN THE SENSE THAT THE CONTEXT IS EN TIRELY DIFFERENT. THE ACT UNDER WHICH THESE ENTITIES ARE ESTABLISHED AND THE PURPOSE FOR WHICH ESTABLISHED CANNOT BE EQUATED WITH THE OBJECT AND P URPOSE OF THE APPELLANT- AUTHORITY. THIS WOULD BE EVIDENT FROM A COMPARISON OF RELEVANT STATUTES ESTABLISHING AN AGRICULTURE PRODUCE MARKETING COMMI TTEE AND THE APPELLANT- AUTHORITY. IN FACT, THE LAW HAS BEEN AMENDED WITH T HE INSERTION OF CLAUSE 26AAB IN SECTION 10 OF THE ACT, WHEREBY EXEMPTION E ARLIER AVAILABLE TO 92 AGRICULTURE PRODUCE MARKET COMMITTEES HAS BEEN REST ORED BY THE FINANCE ACT, 2008 WITH EFFECT FROM 1/04/2009. IN SO FAR AS DECISIONS IN THE CASES OF UP AWAS & VI KAS PARISHAD AND OTHERS (2007) 162 TAXMAN 173 (LUCKNOW) IS CONCERNED, THE I SSUE WAS DECIDED IN FAVOUR OF THE APPELLANTS BY HOLDING THAT THE LAND W AS BEING ACQUIRED BY THE STATE GOVERNMENT ONLY FOR PUBLIC PURPOSES AND THAT IN CASE OF DISSOLUTION OF THE AUTHORITY, ALL THE PROPERTIES, FUNDS AND DUES W HICH WERE VESTED IN OR REALIZABLE BY THE AUTHORITY, SHALL VEST IN OR TO BE REALIZABLE BY THE STATE GOVERNMENT. THERE WAS NO CONSIDERATION OF THE ISSUE AS TO WHAT WOULD BE A PUBLIC PURPOSE. IT IS NOT NECESSARY THAT EVERY ACQU ISITION CAN BE HELD TO BE A PUBLIC PURPOSE. THE AFFECTED PERSON CAN ALWAYS CHAL LENGE SUCH A DECISION IN ANY COURT OF LAW AND THEREFORE SUCH A CONSIDERATION , IN HUMBLE SUBMISSION COULD NOT BE A RELEVANT CONSIDERATION FOR HOLDING T HAT THE ENTITY IS A CHARITABLE INSTITUTION INVOLVED IN THE ADVANCEMENT OF AN OBJECT OF GENERAL UTILITY. THE DECISION IN THE CASE OF IMPROVEMENT TRUST (2007 ) 12 SOT 307 (DEL), IS ALSO DISTINGUISHABLE AS THE DECISION IS IN THE CONT EXT OF AN ALTOGETHER DIFFERENT STATUTE AND THE ACTIVITIES CARRIED OUT WERE ALSO DI FFERENT. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE ST RONGLY PLACED RELIANCE UPON THE DECISION IN DIT VS. GARDEN CITY EDUCATIONA L TRUST (2009) 28 DTR (KAR) 139. WE ARE OF THE VIEW THAT IN THIS CASE, TH ERE WAS NO FINDING OF THE 93 LD. CIT THAT THE ASSESSEE DID NOT COMPLY WITH ANY O F THE PROCEDURAL REQUIREMENTS FOR REGISTRATION AND THE ASSESSEE WAS IMPARTING EDUCATION FOR CHARITABLE PURPOSES AND THERE IS A FINDING THAT IT WAS NOT THE CASE THAT THE ACTIVITIES WERE NOT OF CHARITABLE NATURE, THEREFORE , THIS JUDICIAL PRONOUNCEMENT MAY NOT HELP THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED REL IANCE UPON THE DECISION IN HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTI ON CONTROL BOARD VS. CIT(2009) 125 TTJ (CHD) 98 BY FURTHER POINTING OUT THAT ONE OF US (JUDICIAL MEMBER) IS SIGNATORY TO THE ORDER. WE ARE MAKING IT CLEAR THAT WHILE RENDERING THIS DECISION, IT HAS BEEN OBSERVED AS UN DER: WHERE AN OBJECT OF GENERAL PUBLIC UTILITY IS NOT A MERE MASK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICE S ARE RENDERED AS PURELY INCIDENTAL TO OR AS SUB SUBSERVIENT TO BE MAIN OBJECT OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONA FIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECT IS NOT HIT BY THE PROVIS O TO SEC. 2 (15). FURTHER, THERE IS A FINDING THAT THE ACTIVITIES OF THE ASSESSEE WERE GENUINE AND PRESERVATION OF ENVIRONMENT HAS SPECIFICALLY BEEN I NCLUDED IN CHARITABLE PURPOSES IN THE ACT ITSELF AND SINCE THE HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTION BOARD IS ACTIVELY ENGAGED IN PROTECTING THE FOREST/ENVIRONMENT, THEREFORE, IN THAT SITUATION, T HE CHANDIGARH BENCH IN THE AFORESAID CASE DECIDED IN FAVOUR OF THE ASSESSEE. H OWEVER, IN THE CASE OF THE 94 PRESENT ASSESSEE, SOME OBJECTS/ACTIVITIES, THOUGH H AVE BEEN MENTIONED, BUT PRACTICALLY THE ASSESSEE IS NOT DOING ANY CHARITY A ND IS WORKING LIKE A BUSINESSMAN WITH THE INTENTION TO EARN MAXIMUM PROF IT IN A COMMERCIAL MANNER. 48. THIS APPEAL WAS FIXED AND RE-FIXED ON VARIOUS DATES FOR CLARIFICATION. ON 5.3.2010 THE LD. COUNSEL FOR THE ASSESSEE WAS DIRECTED TO PRODUCE THE RELEVANT MATERIAL TO SUBSTANTIATE ITS S UBMISSION WHICH WERE CLAIMED AT PAGE 42 OF THE WRITTEN SYNOPSIS TO WHICH ON 29.3.2010 THE LD. COUNSEL FOR THE ASSESSEE FILED ALMOST 20 DOCUMENTS WHEREIN DETAILS OF PRODUCTIVE WORK IN PUBLIC TRUST WERE FILED. THE DE TAILS ARE VERY LENGTHY WHICH ARE SUMMARIZED AS UNDER :- [DETAILS OF UNPRODUCTIVE WORK IN PUBLIC TRUST] SR. NO. PARTICULARS PAGE NO. REMARKS 1. AUDITED A/CS. FOR F.Y. 2008-09 270-287 NOT RELEVANT SINCE FOR & FROMA.Y.2009-10, THE DEFINITION OF THE TERM CHARITABLE PURPOSE IN SECTION SEC.2 (15) IS AMENDED. SINCE, IDA IS ENGAGED IN BUSINESS ACTIVITIES, IT IS NOT ENTITLED FOR EXEMPTION UNDER THE AMENDED LAW FOR & FROM THE SAID ASSESSMENT YEAR. 2. ALLOCATION OF TATAL EXP. F.Y. 2008-09 288-290 3. DETAILS OF EXP. F.Y. 2008-09 291-293 4. LEDGER A/CS. OF CITY ENVIRONMENT & DEVELOPMENT F.Y. 2008-09 294-312 5. JUNI INDORE ROB WORK*** PHOTOGRAPHS NOS. 188, 190, 193 OF AMERICAN COLOR LAB PAGE NO. 313-315 IMPORTANT NOTE PAGE NO. 316. 313-323 CONTRACTOR M/S. ARVIND TECHNO-ENGINEERS PVT. LTD. DELHI. 95 6. M.Y.HOSPITAL OPD BUILDING*** (HOSPITAL BELONGS TO THE STATE GOVT.) PHOTOGRAPHS NOS. 123-126 BY AMERICAN COLOR LAB PAGE NO. 324-325 PAGE NO. 326 A.YR. 2009-10 3.96 CRORES A.YR. 2010-11 4.19 CRORES - A.YR. 2008-09 1.90 CRORES 10.05 CRORES 324-337 M/S. R.K.PATEL & CO., INDORE 7. BRIDGE EXTENSION & NEW BRIDGE ON KHAN RIVER*** PHOTOGRAPHS PAGE NO. 338 PAGE NO. 339- 338-353 CONTRACTOR M/S. K.G.GUPTA, INDORE 8. GANGOUR GHAT ON KHAN RIVER*** NO PHOTOGRAPHS PAGE NO. 354 A.YR. 2008-09 0.17 CRORES A.YR. 2009-10 0.12 CRORES A.YR. 2010-11 0.59 CRORES 0.88 CRORES 354-361 CONTRACTOR M/S. PARSHWA BUILDERS, INDORE 9. SUSPENSION BRIDGE*** PHOTOGRAPHS SR. NO. 175 PAGE NO. 362 PAGE NO. 363 A.YR. 2009-10 0.30 CRORES A.YR. 2010-11 0.25 CRORES 0.55 CRORES 362-368 M/S. RAMDIN ULTRATECH PVT.LTD., INDORE 10. BHAGIRATHPURA TO SUKHLIYA ROAD BRIDGE*** NO PHOTOGRAPHS PAGE NO. 369 A.YR. 2010-11 1.09 CRORES 369-373 CONTRACTOR: SUNIL CHAUDHARY, INDORE 11. KESHARBAGH ROB WORK*** PHOTOGRAPHS SR. NO. 180, 182 OF AMERICAN COLOR LAB PAGE NO. 374-376 PAGE NO. 377 374-382 CONTRACTOR M/S. ARVIND TECHNO-ENGINEERS PVT. LTD. DELHI. 96 A.YR. 2008-09 2.40 CRORES A.YR. 2009-10 7.06 CRORES 9.46 CRORES 12. BRTS 14.05 KM. CORRIDOR*** PHOTOGRAPHS SR. NOS. 7,22,25,28,31,34, 10,13,16,19 PAGE NO. 383-394 AMERICAN COLOR LAB PAGE NO. 395 UNDER JNNURM PLAN A .YR. 2007-08 0.32 CRORES A.YR. 2008-09 18.82 CRORES A.YR. 2009-10 10.49 CRORES A.YR. 2010-11 16.97 CRORES 46.60 CRORES 383-409 M/S. NIRAJ PRATIBHA JV, MUMBAI 13. BRTS 06.50 KM. CORRIDOR*** PHOTOGRAPHS PAGE NO. 410-414 PAGE NO. 415 410-423 M/S. NIRAJ CEMENT STRICTURES PVT. LTD., MUMBAI 14. BRTS 04.75 KM. CORRIDOR*** PHOTOGRAPHS PAGE NO. 424-427 PAGE NO. 428 UNDER JNNRUM PLAN 30% IS CONTRIBUTED FROM OWN SOURCES A.YR. 2007-08 0.08 CRORES A.YR. 2008-09 2.34 CRORES A.YR. 2009-10 3.26 CRORES A.YR. 2010-11 3.11 CRORES 8.79 CRORES 424-439 M/S. NIRAJ CEMENT STRICTURES PVT. LTD., MUMBAI 15. WESTERN RING ROAD*** A.YR. 2009-10 (NO FURTHER DETAILS) 440-441 16. BUILDING FOR OLD AGED HOMES*** PHOTOGRAPHS SR. NO. 207 PAGE NO. 442 AMERICAN COLOR LAB PAGE NO. 443 A.YR. 2008-09 0.76 CRORES A.YR. 2009-10 0.18 CRORES 0.94 CRORES 442-450 M/S. ADITI BUILDERS, INDORE 97 17. BUILDING FOR SLUMS INHABITANTS*** PHOTOGRAPHS SR. NO. 54, 48 AMERICAN COLOR LAB PAGE NO. 451-452 PAGE NO. 453 A.YR. 2006-07 1.34 CRORES A.YR. 2007-08 4.07 CRORES A.YR. 2008-09 1.19 CRORES 6.60 CRORES 451-456 NO WORK ORDER ISSUED TO M/S.DHARAM DAS TIRATH DAS CONSTRUCTION PVT.LTD., INDORE. 18. BUILDING FOR SLUMS INHABITANTS***-JNNRUM PLAN PHOTOGRAPHS SR. NO. 43 AMERICAN COLOR LAB - PAGE NO. 457 PAGE NO. 458 JNNRUM PLAN A.YR. 2007-08 0.09 CRORES A.YR. 2008-09 2.00 CRORES 2.09 CRORES 457-470 M/S.DHARAM DAS TIRATH DAS CONSTRUCTION PVT.LTD., INDORE. M/S. TIRATH DAS SHUKAB DAS CONSTRUCTION PVT.LTD., INDORE ASHUTOSH SHARMA 11, MENON COLONY, INDORE 19. PIPLIYAPALA REGIONAL PARK DEVELOPMENT WORK*** PHOTOGRAPHS PAGE NO. 480-487 PAGE 488 A.YR. 2008-09 2.81 CRORES A.YR. 2009-10 25.12 CRORES A.YR. 2010-11 16.49 CRORES 44.42 CRORES 480-533 20. CONSTITUENCY WISE DETAILS OF NON-PLAN EXP.(UNPRODUCTIVE WORK) A.YR. 2009-10 A.YR. 2010-11 534 NOTE:- IN RESPECT OF ALL THE WORKS INCLUDED ABOVE AND MARK ED WITH (***), IT IS NOTICED THAT THERE ARE REMARKS BY THE APPELLANT IN HINDI WHICH WHEN TRANSLATED IN ENGLISH WOULD MEAN THAT THERE WILL BE NO INCOME TO THE AUTHORITY FRO M THIS WORK. IF THE ABOVE DETAILS ARE ANALYSED FOLLOWING FACTS A RE EMERGING: - 98 IN ALL, TOTAL EXPENDITURE IN RESPECT OF THE WORKS I NCLUDED IN THE COMPILATION FOR THE ASSESSMENT YEAR 2008-09 AGGREGA TES TO RS 36.47 CRORES ONLY. THE PURPOSE OF FILING THESE PAPERS CAN BE LIKENED W ITH THE CONDUCT OF A BUSINESSMAN WHO AFTER GIVING DONATION OF SOME AMOUN T OR SPENDING ON SOME PHILANTHROPIC PURPOSE, CLAIMS THAT HE SHOULD B E TREATED AS A CHARITABLE ORGANIZATION & HIS ENTIRE INCOME SHOULD THEREFORE BE EXEMPT FROM TAX. THIS CONDUCT BECOMES MORE OBVIOUS WHEN EACH & EVERY WORK INCLUDED IN THIS COMPILATION IS QUALIFIED ON BEHALF OF & BY APPELLANT WITH NARRATION IN HINDI WHICH WHEN TRANSLATED IN ENGLISH WOULD MEA N THAT FROM THIS WORK, NO INCOME WOULD GENERATE TO THE AUTHORITY. AL L THE 20 DOCUMENTS FORMING PART OF THE COMPILATION ITSELF ARE INTERES TINGLY MARKED WITH THE TITLE UNPRODUCTIVE WORK AND THUS CONVEY THE REAL INTENTION OF THE APPELLANT THAT IT IS PRIMARILY ENGAGED IN BUSINESS ACTIVITIES WITH PROFIT MOTIVE. FOR SOME OF THESE WORKS GRANT-IN-AID IS RECEIVED EI THER FROM THE CENTRAL OR THE STATE GOVERNMENT. ALL THESE WORKS ARE EXECUT ED BY THE CONTRACTORS AND NOT BY THE AUTHORITY. THESE FACTS GO AGAINST ANY AVOWED OBJECT OF CHARITY . THE APPELLANT HAS SOUGHT TO FURNISH THIS BULKY INFO RMATION IN SUPPORT OF ITS CLAIM THAT IT IS ENGAGED IN ACTIVITIES WHICH MA Y FALL WITHIN THE AMBIT OF THE TERM OBJECT OF GENERAL PUBLIC UTILITY, BUT HA S FAILED TO FURNISH ANY INFORMATION REQUIRED BY HONBLE BENCH IN RESPECT OF THE IMPUGNED PLOT SOLD TO THE RELIANCE INDUSTRIES LTD. IT IS PERTINEN T TO MENTION HERE THAT ON EARLIER OCCASION ALSO THE BENCH DIRECTED THE ASSESS EE TO FURNISH THE DETAILS OF COST OF ACQUISITION OF THE SAID PLOT PAID BY THE AUTHORITY TO THE ORIGINAL OWNER(S), THE PURPOSE FOR WHICH IT WAS E ARMARKED IN THE MASTER PLAN OF THE CITY AT THE TIME OF ACQUISITIO N, WHETHER ANY CHANGE WAS MADE IN THE STATED PURPOSE SUBSEQUENTLY AND I F SO WHEN. THE ASSESSEE WAS ALSO DIRECTED TO FURNISH THE DETAILS O F COST OF ACQUISITION OF LAND FROM THE FARMERS AT-LEAST IN THE RECENT PAST, COST OF DEVELOPMENT CHARGES INCURRED BY THE ASSESSEE AND AT WHAT RATE, AFTER DEVELOPMENT WAS SOLD. THE ASSESSEE PERHAPS DELIBERATELY OR REASONS BEST KNOWN TO IT DID 99 NOT FURNISHED THESE DETAILS, THEREFORE, THIS PROVES THE MALA-FIDE INTENTION OF THE ASSESSEE. 49. THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CAS E OF PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORITY (2006) 156 TAXMA N 37 (CHD) WHEREIN ONE OF US (JUDICIAL MEMBER) IS SIGNATORY TO THE ORDER, IDENTICALLY, DELIBERATED UPON THE ISSUE. THE RELEVANT PORTION OF THE ORDER IS REP RODUCED HEREUNDER: 5. BEFORE COMING TO ANY CONCLUSION, WE ARE SUPPOSED TO SEE THE MEANING OF THE WORD CHARITABLE PURPOSE WHIC H HAS BEEN DEFINED IN SECTION 2(15) OF THE ACT WHICH INCLUD ES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. A STRONG CONTENTION WA S RAISED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE/PUDA IS ALSO EXECUTING THE DEVELOPMENT OF FOLLOWING WORKS/INFRASTRUCTURES : A) DEVELOPMENT OF REHRI MARKET. B) WATER SUPPLY & SEWERAGE. C) DEVELOPMENT OF SPORTS COMPLEXES. D) BRIDGES. E) BUS QUEUE SHELTERS. F) BUS STANDS. G) SWIMMING POLLS H) COMMUNITY CENTRES I) PUBLIC TOILETS J) DEVELOPMENT OF PARKS. K) CREMATION GROUNDS. L) CONSTRUCTION OF SCHOOLS ETC. IF THE PURPOSE OF THE ACT, WHICH IS AVAILABLE AT PAGE 13 OF THE PAPER BOOK OF THE ASSESSEE AND TO WH ICH OUR ATTENTION WAS ALSO DRAWN, IT SPEAKS ABOUT VARIOUS AMENITIES AND UTILITIES AS HAS BEEN MENTIONED IN SECTION 2 (B) OF THE SAID ACT. THE LD. COUNSEL FOR THE ASSESSEE DURING AR GUMENT TOOK A STRONG PLEA THAT ON IDENTICAL FACTS REGISTRATION UN DER SECTION 12A OF THE ACT WAS ACCORDED TO PATIALA URBAN PLAN NING & DEVELOPMENT AUTHORITY, PATIALA VIDE ORDER UNDER S ECTION 12AA OF THE ACT DATED 28.9.2005 BY THE COMMISSIONER OF INCOME TAX, PATIALA, THE OBJECTS OF WHICH ARE IDENT ICAL TO THE PRESENT ASSESSEE. IF THE ACT UNDER WHICH THE ASSE SSEE WAS CONSTITUTED IS ANALYSED, IT INCLUDES THE STATE OF PUNJAB EXCLUDING PATIALA. SHRI AJAY VOHRA CONTENDED THAT IT CAN BE SAID THAT PATRIALA AUTHORITY IS PART OF THE STATE A ND WHEN REGISTRATION HAS BEEN GRANTED TO PATIALA AUTHORITY, THEN NO TWO YARD STICKS SHOULD BE ADOPTED. AT THE OUTSET, WE ARE OF THE 100 VIEW THAT WE ARE NOT AGREE WITH THE CONTENTION OF T HE LD COUNSEL BECAUSE IF THE INTENTION OF CREATING PATIALA AUTH ORITY WAS THE SAME THEN THERE WAS NO NEED OF ITS CREATION AS THE SAME OBJECTS WOULD HAVE BEEN FULFILLED BY THE BIGGER UNIT I.E. T HE ASSESSEE. AT THE SAME TIME, RESJUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS. WE DO NOT WANT TO COMMENT AS WHY AND HOW THE REGISTRATION WAS GRANTED TO PATIALA AUTHORITY AS TH E SAME IS NOT PENDING BEFORE US FOR ADJUDICATION. RELIANCE CAN BE PLACED UPON THE DECISION PRONOUNCED BY THE HON'BLE APEX CO URT IN THE CASE OF DISTRIBUTORS (BARODA) PRIVATE. LTD. VS. UOI & OTHERS WHEREIN THE HON'BLE APEX COURT HELD THAT IT IS A LMOST AS IMPORTANT THAT THE LAW SHOULD BE SETTLED PERMANENTL Y AS THAT IT SHOULD BE SETTLED CORRECTLY BUT THERE MAY BE CIRCUM STANCES WHERE PUBLIC INTEREST DEMANDS THAT THE PREVIOUS DEC ISION BE REVIEWED AND RE-CONSIDERED. THE DOCTRINE OF STARE DECISES SHOULD NOT DETER THE COURT FROM OVERRULING AN EARLI ER DECISION, IF IT IS SATISFIED THAT SUCH DECISION IS MANIFESTLY WRONG OR PRECEDES UPON A MISTAKEN ASSUMPTION IN REGARD TO THE EXISTENCE OR CONTINUATION OF A STATUTORY PROVISION OR IS CONTRARY TO ANOTHER DECISION OF THE COURT. HOWEVER, TWO VI EWS REASONABLY MAY BE POSSIBLE. PERPETUATION OF ERROR IS NOT A HEROISM. HOWEVER, WE MAKE IT CLEAR THAT THIS O BSERVATION OF OURS SHOULD NOT BE TREATED TO BEAR ANY AFFECT I N THE CASE OF PATIALA AUTHORITY. AT THE SAME TIME, THE ORDER PASSED BY A LOWER AUTHORITY IS NOT BINDING ON THE TRIBUNAL. HOWEVER, IT MAY BE A GOOD ARGUABLE POINT BY THE PARTIES, THIS ISSUE REQUIRES DELIBERATION FROM A DIFFERENT ANGLE WHETHER THE ASSESSEE WAS CONSTITUTED TO PROVIDE ANY CHARITY TO THE PUBLIC AT LARGE OR TO SATISFY THE NEEDS FOR HOUSING ACCOMMODATION FOR THE PEOPLE OF PUNJAB AND ALSO PLANNING AND DEVELOPM ENT OF THE CITIES, TOWNS AND VILLAGES OR WHETHER THE DEVELOPME NT IN SUCH A WAY IS OF CHARITABLE NATURE. A PLEA WAS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE THAT FUNDS ARE PROVIDED BY THE PUNJAB GOVT. OR GENERATED BY THE ASSESSEE ITSELF. TO GENERATE ITS FUNDS FOR CARRYING OUT ITS OBJECTS, THE ASSESSEE IS ACQUIRING LANDS , DEVELOPING THEM AND SELLING THE PLOTS TO THE GENERAL PUBLIC WHO APP LIES FOR THE SAME. EVEN THE ECONOMICALLY WEAKER STRATA OF THE SOCIETY IS GENERALLY APPLYING. IT IS NOT THE CASE THAT THE ASSESSEE IS ALLOTTING HOUSES TO THE POOR MASSES FREE OF COST. THE HON'BLE APEX CO URT IN THE CASE OF CITVS. THANTHI TRUST (247 ITR 785) HAS DELIBERATED UPON THE ISSUE OF CHARITABLE PURPOSES WHEREIN THE FOUNDER OF A D AILY NEWSPAPER CREATED A TRUST IN MARCH, 1954 AND THE OBJECTS OF T HE TRUST WERE ORIGINALLY TO ESTABLISH NEWSPAPER AS AN ORGAN OF ED UCATED PUBLIC OPINION FOR THE TAMIL READING PUBLIC. IN JULY, 195 7, A SUPPLEMENTARY DEED MAKING THE TRUST IRREVOCABLE AND ANOTHER SUPP LEMENTARY DEED FOR ESTABLISHING AND RUNNING A SCHOOL/COLLEGE FOR T EACHING JOURNALISM WERE ADDED. THE QUESTION BEFORE THE HON 'BLE COURT WAS WHETHER THE INCOME OF THE TRUST WAS EXEMPT FROM INC OME TAX DURING THE RELEVANT PERIOD. THE HON'BLE APEX COURT WHILE COMING TO A PARTICULAR CONCLUSION REVERSED THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS AND HELD THAT THE TRUST DID NOT FAL L WITHIN THE 101 PROVISIONS OF SECTION 11(4A), AS IT THEN STOOD, AND WAS NOT ENTITLED TO EXEMPTION FROM TAX. THE HON'BLE APEX COURT ALSO CONSIDERED VARIOUS JUDI CIAL PRONOUNCEMENTS WHICH WERE REFERRED TO IT BY THE RESPECTIVE COUNSELS AS ARE AVAILABLE IN THE SAID ORDER SPECIAL LY AT PAGE 787. HOWEVER, THERE IS A MAJOR SHIFT IN THE LAW WITH RE GARD TO INSTITUTIONS WHO ARE CLAIMING CHARITIES. THIS IS A WELL KNOW N FACT THAT IN SOME OF THE SITUATIONS THE PROVISIONS OF LAW IS MISUSED IN THE NAMES OF CHARITIES. IF AN EXPANDED/BROADER LATITUDE IS EXTE NDED TO THE WORD CHARITY, THEN THERE ARE SO MANY INSTITUTIONS/D EPARTMENTS WHO WILL TRY TO COME UNDER THE UMBRELLA OF THIS PROV ISIONS TO MISUSE THE PROVISION. THEREFORE, FOR THE BROAD DEVELOPMENT OF THE NATION/SOCIETY, A STRICT AND POSITIVE VIGIL IS RE QUIRED SO THAT THE PROVISION CAN BE SAVED FROM ITS MISUSE IN ANY M ANNER. WE ARE AWARE THAT NO ACTIVITY CAN BE CARRIED ON EFFICIENT LY, PROPERLY UNLESS AND UNTIL IT IS CARRIED OUT ON BUSINESS PRINCIPLE B UT IT DOES NOT MEAN THAT THE PROVISION IS MISUSED IN ANY MANNER UND ER THE GARB OF CHARITY AND ANY INSTITUTION IS ALLOWED TO BECOME R ICHER AND RICHER UNDER THE GARB OF CHARITY BY MAKING IT A NON-TAX PAYABLE ORGANIZATION. IN THE CASE OF SURAT ART SILK CLOT H MANUFACTURES ASSOCIATION AND BAR COUNCIL OF MAHARASHTRA CASES, IT WAS HELD THAT WHAT IS PREDOMINANT OBJECT OF THE ACTIVITY WHETH ER R IT IS TO CARRY OUT A CHARITABLE PURPOSE AND NOT TO EARN PROFIT THE PURPOSE SHOULD BE THAT IT SHOULD NOT LOOSE ITS CHARITABLE CHARACTE R ---------. THE MAJOR THRUST OF THE LD. COUNSEL FOR THE ASSESS EE IS THAT PUDA IS OF GENERAL PUBLIC UTILITY AS IT SATISFIES T HE NEED FOR HOUSING ACCOMMODATION FOR THE SECTION OF THE PEOPLE OF STAT E OF PUNJAB AND IS ALSO DOING PLANNING AND DEVELOPMENT OF THE CITIES, TOWNS AND VILLAGES. WE ARE NOT AGREE WITH THE ARGUMENT OF T HE LD COUNSEL BECAUSE A CHARITABLE INSTITUTION PROVIDES SERVICE S FOR CHARITABLE PURPOSES FREE OF COST AND NOT FOR A GAIN. IN THE PRESENT SCENARIO, THE SIMILAR ACTIVITIES ARE PERFORMED BY BIG COLONIZ ERS/DEVELOPERS WHO ARE EARNING A HUGE PROFIT. IF THIS REGISTRATION IS GRANTED, THEN WE WILL OPEN A PANDORA BOX AND ANYBODY WILL CLAIM THE EXEMPTION FROM TAX. IF THE ACCOUNTS OF THE ASSESSEE ARE ANALYSED, IT HAS TURNED INTO A HUGE PROFIT MAKING AGENCY FOR WHICH IT IS TAKING MO NEY FROM THE GENERAL PUBLIC. IN SUCH A SITUATION, WE ARE OF TH E VIEW THAT NO CHARITY IS INVOLVED AND IF ANY INSTITUTION OF PUBL IC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED/DEVELOPED, T HE ASSESSEE IS CHARGING THE COST OF IT FROM THE PUBLIC AT LARGE OR THE MONEY IS COMING FROM THE COFFER OF THE GOVT. IT CAN BE SAID THAT OBJECTS/ACTIVITIES OF THE ASSES SEE ARE MORE OF COMMERCIALIZED NATURE AND WE DO NOT FIND ANY CHARIT Y IN IT. AT THE SAME TIME, IF THESE FACILITIES ARE NOT PROVIDED, TH EN NOBODY WILL PURCHASE A PLOT. IT CAN BE SAID THAT IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAM E AND THE HIDDEN COST IS ALREADY ADDED, SO NO CHARITY IS INVO LVED. AT BEST, THE ASSESSEE CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS. IT CAN BE SAID THAT IT IS THE D UTY OF THE GOVT. TO CREATE/PROVIDE ALL THESE FACILITIES TO PUBLIC AT LA RGE, WHICH IS BEING DONE THROUGH THIS AGENCY IN A PARTICULAR AREA. AT THE SAME TIME, THE FUNDS WHICH ARE PROVIDED TO THE ASSESSEE BY THE GOVT. IS AGAIN A 102 PUBLIC MONEY OR GENERATED FROM THE PUBLIC ITSELF, S O WHERE IS THE CHARITY? IF THE ACTIVITIES OF THE ASSESSEE AND THE ARGUMENTS OF BOTH THE LD COUNSELS ARE PUT IN A JUXTA POSITION, IT CAN BE SAID THAT THE OBJECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHARI TABLE, BUT ACTUALLY ARE OF PURELY COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS A KNOWN FACT THAT THE ASSESSEE IS ACQUIRING THE LAND AT VERY LOW PRICES AND SELLING THE SAME LAND ON VERY HIGHER RATES AND IS EARNING A PROFIT THEREFROM. A NEW TREND HAS ALSO E MERGED THAT PUDA, I.E. THE ASSESSEE HAS STARTED AUCTIONING THE PLOTS BY WAY OF BIDDING AT THE MARKET RATE AND SOMETIMES MORE THAN THAT AND CHARGING INTEREST ON BELATED PAYMENTS. IN SUCH A S ITUATION, WE ARE OF THE VIEW THAT NO CHARITY IS INVOLVED. RATHER THE A SSESSEE HAS CONVERTED ITSELF INTO A BIG BUSINESSMAN. SIMILAR DEVELOPMENT/INFRASTRUCTURE/FACILITIES ARE PROVIDED BY BIG DEVELOPERS THESE DAYS, THEN THEY WILL ALSO CLAIM THE STATUS O F A CHARITABLE INSTITUTION. DURING ARGUMENT THE LD COUNSEL RELIED UPON THE DEC ISION OF THE HON'BLE APEX COURT PRONOUNCED IN THE CASE OF A DLDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION (121 ITR 1) (SC) WHERE THE ASSESSEE WAS INCORPORATED UNDER THE COMPA NIES ACT WHEREIN THE DOMINANT OR THE PRIMARY PURPOSE OF THE ASSESSEE WAS TO PROMOTE COMMERCE AND TRADE IN ART SILK YARN, RAW SILK, COTTON YARN, ART SILK CLOTH, SILK CLOTH AND COTTON CLOTH A S SET OUT IN CLAUSE (A) AND THE OBJECT SPECIFIED IN CLAUSES (B) TO (E) AND THE OBJECT WAS FOUND TO BE PUBLIC UTILITY NOT INVOLVING THE CARRY ING ON OF ANY ACTIVITY FOR PROFIT WITHIN THE MEANING OF SECTION 2 (15), THE ASSESSEE WAS HELD TO BE ENTITLED FOR EXEMPTION UNDER SECTION 11 (1)(A) OF THE ACT. HOWEVER, HON'BLE JUSTICE SEN PASSED A DISSE NTING ORDER BUT IN THE PRESENT CASE THERE IS A PROFIT MOTIVE OF THE ASSESSEE, SO WILL NOT HELP IN ANY MANNER. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE H ON'BLE APEX COURT PRONOUNCED IN THE CASE OF CIT VS. ANDHR A PRADESH ROAD TRANSPORT CORPORATION WHEREIN THE OBJECT OF T HE ASSESSEE WAS DEVELOPMENT OF ROADS, IMPROVING FACILITIES FOR ROAD TRANSPORT AND PROVIDING EFFICIENT AND ECONOMICAL SYSTEM OF ROAD T RANSPORT SERVICE, THE ENTIRE CAPITAL WAS PROVIDED BY THE STATE GOVT . AND THE PROFITS WERE UTILIZED FOR PROVIDING AMENITIES TO THE P ASSENGERS AND WELFARE OF LABOUR AND APPROVED EXPANSION PROGRAM AN D THE REMAINDER TO BE MADE OVER TO THE STATE GOVT. FOR RO AD DEVELOPMENT, IT WAS HELD TO BE OF CHARITABLE PURPOSES AND THUS INCO ME WAS EXEMPTED BUT IT IS NOT SO IN THE CASE OF THE PRESENT ASSESSE E. THE HON'BLE APEX COURT IN THE CASE OF CIT VS. BAR COUNCIL OF MAHARA SHTRA (130 ITR 28) (SC) WHERE THE PRIMARY/DOMINANT PURPOSE WAS FOR THE ADVANCEMENT OF OBJECT OF PUBLIC UTILITY, IT WAS HE LD TO BE ENTITLED TO EXEMPTION. THE LD. COUNSEL FOR THE ASSESSEE, DURING ARGUMENT RAISED A PLEA THAT TOTALITY OF CIRCUMSTANCES HAS TO BE SEEN SPECIALLY THAT ALL MONEY GOES WITH THE STATE GOVT. AND NOT IN PRIVATE HANDS, THE PRICES ARE FIXED AND THE ASSESSEE IS NOT A COMMERCIAL ORGA NIZATION AND THE PREDOMINANT ACTIVITY OF THE ASSESSEE IS TO DEVELOP INFRASTRUCTURE AND CONTENDED THAT RULE OF CONSISTENCY HAS TO BE SE EN FOR WHICH RELIANCE WAS PLACED UPON THE DECISIONS PRONOUNCED IN 249 ITR 219, 103 257 ITR 59, 130 ITR 186 AND ALSO THE DECISION IN TH E CASE OF CIT VS. UNITED VANASPATI LTD. (2004) 88 ITD 313 (CHD.). WE ARE OF THE VIEW THAT PRINCIPLES OF RESJUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS. HOWEVER, WE ARE AGREE WITH THE LD COU NSEL TO THE EXTENT THAT EQUALLY IMPORTANT IS THE RULE OF CONSIS TENCY. WE ARE OF THE VIEW THAT CONSISTENCY HAS TO BE SEEN IN TOTALITY O F CIRCUMSTANCES WHICH DEPENDS UPON FACTS OF EACH CASE IN THE LIGHT OF PRIMARY OBJECT AND REAL ACTIVITIES DONE BY THE ASSESSEE, SO THES E JUDICIAL PRONOUNCEMENTS IN OUR HUMBLE OPINION IS NOT GO ING TO HELP THE ASSESSEE. THE HON'BLE HIGH COURT OF DELHI IN THE C ASE OF DAULAT RAM PUBLIC TRUST VS. CIT 244 ITR 514 (DELHI) W HEREIN ON SCRUTINY OF OBJECTS OF THE ASSESSEE TRUST, THERE WA S NO DEFINED DOMINANT CHARITABLE PURPOSE IN THE TRUST DEED TO WHICH THE SAID OBJECTS WOULD SERVE AS ANCILLARY OBJECTS AND WHICH WERE MEANT TO FEED THE DOMINANT PURPOSE. CLAUSE 2 1 OF THE TRUST DEED EMPOWERED THE CHAIRMAN OF THE TRUST TO SPEND THE FUNDS OF THE TRUST FOR THE PURCHASE OF IMMOVABLE PROPERTY AND SI NCE NO PART OF THE INCOME OF THE TRUST WAS APPLIED ON ANY SPECIFIC CHARITABLE PURPOSES, THE EXEMPTION UNDER SECTION 11 OF THE ACT WAS DENIED. THE HON'BLE COURT RELIED UPON VARIOUS JUDICIAL PRON OUNCEMENTS WHICH ARE AVAILABLE AT PAGE 515 OF THE SAID ORDE R AND THEN CAME TO A PARTICULAR CONCLUSION. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, WE ARE SUPPOSED TO SEE THE PREDOMIN ANT OBJECT OF THE ASSESSEE. IF ALL THE OBJECTS AND ACTIVITIES AC TUALLY CARRIED OUT BY THE ASSESSEE ARE ANALYSED AND KEPT IN JUXTA POSITIO N WITH THE AFORESAID JUDICIAL PRONOUNCEMENTS, WE ARE OF THE V IEW THAT ACTIVITIES OF THE ASSESSEE ARE MORE OF COMMERCIAL NATURE W ITH PROFIT ORIENTED INTENT, SO NO LENIENCY SHOULD BE SHOWN TO THE ASSESSEE. THE DEPARTMENT MAY ALSO GET SUPPORT FROM THE DECISION O F THE HON'BLE PATNA HIGH COURT AS PRONOUNCED IN THE CASE OF BIHA R STATE FOREST DEVELOPMENT CORPORATION VS. (224 ITR 757) WHERE THE GOVT. COMPANY WAS FORMED FOR PROMOTION AND DEVELOPMENT OF FORESTRY. THE ASSESSEE CORPORATION PERMITTED UNDER MEMORANDUM OF ASSOCIATION TO ENGAGE IN COMMERCIAL ACTIVITIES AND THERE WAS NO RESTRICTION ON APPLICATION OF MONEY, THE CORPORATIO N WAS NOT HELD TO BE A CHARITABLE TRUST AND CONSEQUENTLY NOT ENTITLE D TO EXEMPTION. SIMILAR IS THE CASE IN THE PRESENT APPEAL OF THE AS SESSEE. DURING ARGUMENTS, THE LD. COUNSEL FOR THE ASSESSEE INVITE D OUR ATTENTION TO THE CASE OF MAHARSHTRA HOUSING & AREA DEVELOPMENT A UTHORITY WHEREIN REGISTRATION WAS GRANTED. THE LD CIT DR C ONTENDED THAT IN THE CASE OF MARKET COMMITTEE, THE OWNERSHIP REMAINS WITH THE COMMITTEE BUT IN THE CASE OF THE ASSESSEE IT GOE S TO INDIVIDUAL AND THE LD CIT WAS NOT SATISFIED WITH THE EXPLANATION O F THE ASSESSEE. LIKEWISE, IN THE JUDICIAL PRONOUNCEMENTS IN 165 CTR 446 AS RELIED BY THE ASSESSEE, IT CAN BE SAID THAT IT IS A RE LIGIOUS TRUST, SO NOT APPLICABLE TO THE PRESENT FACTS AS THE ASSESSEE IS AUCTIONING THE PLOTS ON HUGE PROFITS AND EVEN THE HON'BLE COURTS ARE INT ERVENING TO ENHANCE COMPENSATION ON PETITIONS FILED BY LAND OWN ERS. HOWEVER, IF THE ARGUMENT OF THE ASSESSEE IS ANALYSED ON POIN T OF GENERAL PUBLIC UTILITY, STILL IT CAN BE SAID THAT COMMERCIAL ANGLE WITH PROFIT MOTIVE IS INVOLVED WHICH HAS BECOME PREDOMINANT OBJECT OF THE ASSESSEE. EVEN IF THIS ISSUE IS ANALYSED AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT APPLICATION OF INCOME IS NOT THE CR ITERIA IN THE LIGHT OF THE DECISION OF HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT(1990) 185 ITR 634 (ALL.), 104 STILL WE ARE OF THE VIEW THAT IF THE OBJECTS AND REAL SITUATION IS ANALYSED, THE OBJECTS ARE NOT OF CHARITABLE NATUR E. ALMOST IN EVERY ACTIVITY THERE IS A SCENT OF COMMERCIALIZATION/PRO FIT MOTIVE BUT IN THE CHARITABLE INSTITUTION NO PROFIT MOTIVE IS INVO LVED AND THE SERVICE IS DONE MAINLY WITH THE INTENT OF SOCIAL/RELIGIOUS UPLIFTMENT OF THE MASSES IN GENERAL. ADMITTEDLY, THE ASSESSEE IS D OING SOME ACTIVITIES LIKE HOUSING/INFRASTRUCTURE DEVELOPMENT AND THE PU BLIC IS ALSO BENEFITED BUT FOR THE SAME THE ASSESSEE HAS ALREADY CHARGED IN THE FROM OF HIDDEN COST. RATHER THE ASSESSEE IS GENE RATING INCOME, SO NO CHARITY IS INVOLVED. WE ARE AGREE WITH THE CONCLUSION OF THE LD CIT, AS CONTENDED BY LD. CIT DR, THAT A CHAR ITABLE INSTITUTION PROVIDES SERVICES FOR CHARITABLE PURPOSES FREE OF COST AND FOR NO GAIN AND ARE FOR THE BENEFIT OF PUBLIC AT LARG E. AS WE HAVE DISCUSSED IN THE PRECEDING PARA, THE ASSESSEE ACQU IRES LAND AT NOMINAL RATES AND AFTER DEVELOPING THE SAME, THE SAME LAND ON HIGH PROFIT WHICH CANNOT BE SAID TO BE A CHA RITABLE ACTIVITY. EVEN JUST FOR ARGUMENT SAKE, UNDER THE PRESENT FACT S, IF REGISTRATION IS GRANTED THEN EVERY PRIVATE COLONIZER WILL CLAIM CHA RITY. THE FACILITIES WHICH ARE PROVIDED TO THE PLOT HOLDERS A RE INCIDENTAL TO THE COMMERCIAL ACTIVITY CARRIED OUT BY THE PUDA AND IF CERTAIN FACILITIES LIKE PARKS, COMMUNITY CENTER SCHOOL ARE PROVIDED I S NOT ONLY BASIC REQUIREMENT, RATHER A TOOL OF ATTRACTING THE INVEST ORS WHEREIN THE HIDDEN COST OF THESE FACILITIES IS ALREADY INCLUDED . IN THE ABSENCE OF THESE FACILITIES, NORMALLY THE PURCHASER MAY NOT I NVEST AND THE PRICES MAY BE LESS. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS , WE ARE OF THE VIEW THAT THE APPLICATION OF THE ASSESSE E HAS BEEN RIGHTLY REJECTED BY LD CIT. THE STAND OF THE LD CI T IS UPHELD. APPEAL OF THE ASSESSEE IS THEREFORE DISMISSED. 50. IN THE AFORESAID CASE, THE CHANDIGARH BENCH OF THE TRIBUNAL ON IDENTICAL FACTS HAS CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENT S AND ULTIMATELY DECIDED THE ISSUE IN FAVOUR OF THE REVENUE. LIKEWISE, THE AMRIT SAR BENCH OF THE TRIBUNAL IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY VS. CIT (ITA NO.562/ASR/2008) PLACED RELIANCE UPON THE AFORESAID DECISION OF THE CHANDIGARH BENCH IN THE CASE OF PUDA AND ALSO CONSIDERED VARIOUS OTHER DECISIONS LIKE GUJARAT MARITIME BOARD (295 ITR 561) (SC), CITVS. MARKET COMMITTEE ( 294 ITR 563) (P & H), CIT VS. IMPROVEMENT TRUST (308 ITR 361 (P & H) AND CIT VS. MARKET COMMITTEE (294 ITR 563) AND ULTIMATELY, DECIDED THE ISSUE IN FAVOUR OF THE 105 REVENUE. THE HONBLE P & H HIGH COURT IN THE CASE O F MARKET COMMITTEE (SUPRA) HELD: THE SOURCES OF INCOME OF A MARKET COMMITTEE ARE STATUTORILY DEFINED UNDER SECTIONS 10 AND 23 OF THE MARKETS ACT. THE MANNER OF UTILIZATION OF THE FUNDS OF THE MARKET COMMITTEES, NAMELY, THE MARKET COMMITTEE FUND, HAS BEEN STATUTORILY EXPRESSED IN SECTION 28 OF THE MARKETS ACT. THE OBLIGATIONS DISCHARGED BY A MARKET COMMITTEE INCLUDE THE REGULATION OF PURCHASE, SALE, STORAGE AND PROCESSING OF AGRICULTURAL PRODUCED, WITH THE INTENTION OF BENEFITTING THE PRODUCERS, AS WELL AS THE CONSUMERS OF AGRICULTURAL PRODUCTS. A MARKET COMMITTEE IS OBLIGED TO PROVIDE CONVENIENCES FOR PERSONS VISITING A MARKET AREA, LIKE PROVIDING FOR SHELTER, SHADE AND PARKING FACILITIES. A MARKET COMMITTEE IS ALSO OBLIGED TO LOOK AFTER THE SAFETY, HEALTH AND CONVENIENCE OF PERSONS VISITING THE MARKET AREA. A MARKET COMMITTEE IS ALSO OBLIGED TO CONSTRUCT AND REPAIR LINK ROADS, APPROACH ROADS, CULVERT AND BRIDGES ETC. ONE OF THE MANY SPECIFIED ACTIVITIES OF A MARKET COMMITTEE IS TO EXTEND LOANS TO FINANCIALLY WEAK COMMUNITIES, AS WELL AS IN THE REPAYMENT OF SUCH LOANS AND THE INTEREST THEREON. THE ACTIVITIES OF THE MARKET COMMITTEE WERE NON- PROFIT ORIENTED. THE ACTIVITIES OF THE MARKET COMMITTEE SPECIALLY IN VIEW OF THE PROVISIONS OF THE MARKETS ACT, STATUTORILY DELINEATING THE ACTIVITIES, DUTIES AND RESPONSIBILITIES OF A MARKET COMMITTEE, ARE CERTAINLY ACTIVITIES WHICH FELL WITHIN THE FRAMEWORK OF THROUGH WORDS .. ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, CONTAINED IN THE DEFINITION OF THE TERM PUBLIC PURPOSE IN SECTION 2(15). THUS, THE MARKET COMMITTEE IN QUESTION WAS A CHARITABLE TRUST U/S 11. THE LD. COUNSEL FOR THE ASSESSEE MAINLY RELIED UPON THE DECISION IN GUJARAT MARITIME BOARD (SUPRA), THEREFORE, WE ARE REPRODUCI NG HEREUNDER THE RELEVANT PORTION OF THE ORDER: 106 14. WE HAVE PERUSED NUMBER OF DECISIONS OF THIS CO URT WHICH HAVE INTERPRETED THE WORDS, IN SECTION 2(15), NAMEL Y, ANY OTHER OBJECT OF GENERALLY PUBLIC UTILITY. FROM THE SAID DECISIONS IT EMERGES THAT THE SAID EXPRESSION IS OF THE WIDEST C ONNOTATION. THE WORD GENERAL IN THE SAID EXPRESSION MEANS PER TAINING TO A WHOLE CLASS. THEREFORE ADVANCEMENT OF ANY OBJECT OF BENEFIT TO THE PUBLIC OR A SECTION OF THE PUBLIC AS DISTINGUIS HED FROM BENEFIT TO AN INDIVIDUAL OR A GROUP OF INDIVIDUALS WOULD BE A CHARITABLE PURPOSE CITV. AHMEDABAD RANA CASTE ASSOCIATION (1983) 140 ITR 1 (SC). THE SAID EXPRESSION WOULD PRIMA FA CIE INCLUDE ALL OBJECTS WHICH PROM OTE THE WELFARE OF THE GENER AL PUBLIC. IT CANNOT BE SAID THAT A PURPOSE WOULD CEASE TO BE CHA RITABLE EVEN IF PUBLIC WELFARE IS INTENDED TO BE SERVED. IF THE PRIMARY PURPOSE AND THE PREDOMINANT OBJECT ARE TO PROMOTE THE WELFA RE OF THE GENERAL PUBLIC THE PURPOSE WOULD BE CHARITABLE PURP OSE. WHEN AN OBJECT IS TO PROMOTE THE INTEREST OF A PARTICULA R TRADE OR INDUSTRY THAT OBJECT BECOMES AN OBJECT OF PUBLIC UT ILITY, BUT NOT SO, IF IT SEEKS TO PROMOTE THE INTEREST OF THOSE WH O CONDUCT THE SAID TRADE OR INDUSTRY CIT V. ANDHRA CHAMBER OF CO MMERCE (1965) 55 ITR 722 (SC). IF THE PRIMARY OR PREDOMIN ANT OBJECT OF AN INSTITUTION IS CHARITABLE, ANY OTHER OBJECT WHIC H MIGHT NOT BE CHARITABLE BUT WHICH IS ANCILLARY OR INCIDENTAL TO THE DOMINANT PURPOSE, WOULD NOT PREVENT THE INSTITUTION FROM BEI NG A VALID CHARITY ADDL. CIT V. SURAT ART SILK CLOTH MFRS. ASSOCIATION (1980) 121 ITR 1 (SC) 15. THE PRESENT CASE IN OUR VIEW IS SQUARELY COVER ED BY THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V. ANDH RA PRADESH STATE ROAD TRANSPORT CORPN. (1986) 159 ITR 1 IN WHI CH IT HAS BEEN HELD THAT SINCE THE CORPORATION WAS ESTABLISHE D FOR THE PUIRPOSE OF PROVIDING EFFICIENT TRANSPORT SYSTEM, H AVING NO PROFIT MOTIVE, THOUGH IT EARNS INCOME IN THE PROCESS, IT I S NOT LIABLE TO INCOMETAX. 16. APPLYING THE RATIO OF THE SAID JUDGMENT IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPN. (SUPRA), WE FIND THAT, IN THE PRESENT CASAE, GUJARAT MARITIME BOARD IS ESTABLISHED FOR THE PREDOMINANT PURPOSE OF DEVELOPMENT OF MINOR PORTS WITHIN THE STATE OF GUJQAARAT, THE MANAGEMENT AND C ONTROL OF THE BOARD IS ESSENTIALLY WITH THE STATE GOVERNMENT AND THERE IS NO PROFIT MOTIVE, AS INDICATED BY THE PROVISIONS OF SE CTIONS 73, 74 AND 75 OF THE 1981 ACT. THE INCOME EARNED BY THE B OARD IS DEPLOYED FOR THE DEVELOPMENT OF MINOR PORTS IN INDI A. IN THE CIRCUMSTANCES, IN OUR VIEW, THE JUDGMENT OF THIS CO URT IN ANDHRA PRADESH STATE ROAD TRANSPORT CORPNS CASE (SUPRA) S QUARELY APPLIES TO THE FACTS OF THE PRESENT CASE. 17. BEFORE CONCLUDING WE MAY MENTION THAT UNDER TH E SCHEME OF SECTION 11(1) OF THE 1961 ACT, THE SOURCE OF INC OME MUST BE HELD UNDER TRUST OR UNDER OTHER LEGAL OBLIGATION. APPLYING THE SAID TEST IT IS CLEAR THAT GUJARAT MARITIME BOARD I S UNDER LEGAL 107 OBLIGATION TO APPLY THE INCOME WHICH ARISES DIRECTL Y AND SUBSTANTIALLY FROM THE BUSINESS HELD UNDER TRUST FO R THE DEVELOPMENT OF MINOR PORT IN THE STATE OF GUJARAT. THEREFORE, THEY ARE ENTITLED TO BE REGISTERED AS CHARITABLE T RUST UNDER SECTION 12A OF THE 1961 ACT. 18. FOR THE AFORESTATED REASONS, WE SEE NO INFIRMI TY IN THE IMPUGNED JUDGMENTS OF THE HIGH COURT AND TRIBUNAL A ND CONSEQUENTLY CIVIL APPEAL STAND DISMISSED WITH NO O RDER AS TO COSTS. THE HONBLE APEX COURT IN THE CASE OF CIT VS. SURA T ART SILK CLOTH MANUFACTURES ASSOCIATION (1980) 121 ITR 1 HELD AS U NDER: THE TRUE MEANING OF THE LAST TEN WORDS IN S. 2(15), VIZ, NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT, IS THAT WHEN THE PURPOSE OF A TRUST OR INSTITUTION IS THE ADVANCEMENT OF AN OBJEC T OF GENERAL PUBLIC UTILITY, IT IS THAT OBJECT OF GEN ERAL PUBLIC UTILITY AND NOT ITS ACCOMPLISHMENT OR CARRYING OUT WHICH MUST NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. SO LONG AS THE PURPO SE DOES NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FO R PROFIT, THE REQUIREMENT OF THE DEFINITION WOULD BE MET AND IT IS IMMATERIAL HOW THE MONIES FOR ACHIEVING OR IMPLEMENTING SUCH PURPOSE ARE FOUND, WHETHER BY CARRYING ON AN ACTIVITY FOR PROFI T OR NOT. 51. IF THE AFORESAID OBSERVATION OF THE HONBLE APE X COURT IS ANALYSED THEN BUSINESS INCOME OF THE ASSESSEE INSTITUTION BECAME ENTITLED TO EXEMPTION BECAUSE SUCH BUSINESS WAS CARRIED ON TO ADVANCE AN OBJECT OF GENERAL PUBLIC UTILITY NOTWITHSTANDING THE WORDS NOT INVOLVING THE CARRY ING ON OF ANY ACTIVITY FOR PROFIT. IN SECTION 2(15) THE SAID DECISION RES ULTED IN THE AMENDMENT TO SECTION 2(15) & 11 BY FINANCE ACT, 1983 W.E.F. 1 ST APRIL A1984 AND THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT OMITTED BY FINANCE ACT, 1983 W.E.F. 1.4.1984 IN SECTION 2(15) AND PROF ITS AND GAINS FROM BUSINESS 108 OR PROFESSION WERE MADE EXPRESSLY TAXABLE THROUGH I NSERTION OF SUB-SECTION (4A) IN SECTION 11. THEREFORE, THE CASE OF THE ASSESSEE IS NOT ON SOUND FOOTING BECAUSE OF AMENDMENT. THE HONBLE APEX COURT IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION (SUPRA) FURTHER HELD (HEAD NOTE): THE INCOME AND PROPERTY OF THE ASSESSEE WERE LIABLE TO BE APPLIED SOLELY AND EXCLUSIVELY FOR THE PROMOTION OF THE OBJECTS SET OUT IN THE MEMORANDUM AND NO PART OF SUCH INCOME OR PROPERTY COULD BE DISTRIBUTED AMONGST THE MEMBERS IN ANY FORM OR UTILISED FOR THEIR BENEFIT EITHER DURING ITS OPERATION EXISTENCE OR ON ITS WINDING UP OR DISSOLUTION. THE ASSESSEES INCOME WAS DERIVED PRIMARILY FROM TWO SOURCES; (I) AN ANNUAL SUBSCRIPTION COLLECTED FROM ITS MEMBERS AT THE RATE OF 3 PER POWERLOOM, IN REGARD TO WHICH IT WAS CONCEDED BY THE DEPARTMENT THAT IT WAS EXEMPT FROM TAX; AND (II) COMMISSION OF A CERTAIN PERCENTAGE OF THE VALUE OF LICENSES FOR IMPORT FOR FOREIGN YARN AND QUOTAS FOR PURCHASE OR INDIGENOUS YARN OBTAINED BY THE ASSESSEE FOR ITS MEMBERS. THIS COMMISSION WAS CREDITED SEPARATELY IN A BUILDING ACCOUNT AND OUT OF THIS AMOUNT THE ASSESSEE CONSTRUCTED A BUILDING. THE TRIBUNAL HELD THAT THE PRIMARY PURPOSE FOR WHICH THE ASSESSEE WAS ESTABLISHED WAS TO PROMOTE COMMERCE AND TRADE IN ART SILK, SILK YARN AND CLOTH AS SET OUT I N CLAUSE (A) AND THE OTHER OBJECTS IN CLAUSES (B) TO (E) WERE MERELY SUBSIDIARY OBJECTS; THAT THE PRIMARY PURPOSE WAS PLAINLY ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND DID NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT, 1961, BECAUSE WHATEVER ACTIVITY WAS CARRIED ON BY THE ASSESSEE IN FULFILLMENT OF THE PRIMARY PURPOSE WAS FOR ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AND NOT FOR PROFIT ; AND THAT, THEREFORE, THE ASSESSEES INCOME WAS EXEMPT FROM UNDER SECTION 11(1). 109 52. IF THE AFORESAID DECISION FROM THE HONBLE APEX COURT IS KEPT IN JUXTA- POSITION WITH THE FACTS OF THE PRESENT APPEAL, IT C AN BE SAID THAT THE AFORESAID DECISION IS DISTINGUISHABLE ON FACTS BECAUSE THE OB JECTS FOR WHICH THE ASSESSEE WAS FORMED MAY APPEAR TO BE OF GENERAL PUBLIC UTILI TY WHEREAS IN THE CASE OF THE ASSESSEE, IT IS PURELY A COMMERCIAL ORGANIZATION AN D THERE IS NO RESTRICTION AS TO HOW ITS INCOME IS TO BE UTILISED. CONSIDERING THE P RINCIPLE SET OUT BY THE HONBLE APEX COURT, WE FIND THAT THE ASSESSEE IS A COMMERCIAL ORGANIZATION JUST LIKE ANY BUSINESS FIRM ENGAGED IN ANY REAL ESTATE B USINESS. FURTHER, IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS. CIT(101 ITR 796) (SC), THE HONBLE APEX COURT HELD AS UNDER: THAT THE ACTIVITIES OF THE CHAMBER BEING ACTIVITIE S CARRIED ON FOR PROFIT, IN THE ABSENCE OF ANY RESTRICTION IN ITS MEMORANDUM AND ARTICLES OF ASSOCIATION AGAINST THE MAKING OF PROFIT FROM THOSE ACTIVITIES, THE INCOME OF CHAMBER FROM THOSE ACTIVITIES WAS LIABLE TO INCOME-TAX. SECTION 2(15) MUST BE INTERPRETED ACCORDING TO THE LANGUAGE USED THEREIN AND AGAINST THE BACKGROUND OF INDIAN LIFE. BY DEFINITION IN SECTION 2(15) THE BENEFIT OF EXCLUSION FROM TOTAL INCOME IS TAKEN AWAY WHEN IN ACCOMPLISHING A CHARITABLE PURPOSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIES FOR PROFIT. COMMERCIAL EDUCATION ACTIVITY AND PRIVATE COACHING INSTITUTES ARE THEREFORE NOT COVERED WITHIN THE PROVISIONS OF SEC. 2 (15) FO R WHICH RELIANCE CAN BE 110 PLACED IN CIT VS. NATIONAL INSTITUTE OF AERONAUTIC AL ENGG. EDUCATION SOCIETY (2009) 184 TAXMAN 264 (UTTARAKHAND) AND BIH AR INSTITUTE OF MINING AND MINING SURVEYING VS. CIT(1994) 208 ITR 608 (PAT ). EVEN OTHERWISE, THE ONUS ON THE ASSESSEE TO PROVE THAT THE OBJECTS ARE OF CHARITABLE NATURE AS WAS HELD BY HONBLE APEX COURT IN INDIAN CHAMBER OF COM MERCE VS CIT(101 ITR 796) (SC). THE WORD GENERAL PUBLIC UTILITY TH OUGH VERY WIDE, WOULD EXCLUDE OBJECTS OF PRIVATE GAIN, SUCH AS AN UNDERTA KING FOR COMMERCIAL PROFIT THOUGH ALL THE SAME IT WOULD SERVE GENERAL PUBLIC U TILITY [ALL INDIA SPINNERS ASSOCIATION VS. CIT (1994) 12 ITR 482) (PC)]. THE RATIO LAID DOWN IN FOLLOWING CASES FURTHER FORTIFIES THE CASE OF THE R EVENUE: A. CITVS. INDIAN SUGAR MILLS ASSOCIATION (97 ITR 486) (SC), THE INCOME OF A TRADE UNION, HOWEVER, EXEMPT U/S 10(24) . B. MADRAS HOTEL ASSOCIATION VS. CIT(111 ITR 241) (MAD) , AN ASSOCIATION OF HOTEL PROPRIETORS FORMED FOR PROCURI NG ARTICLES ON PERMIT AND SUPPLY THEM TO ITS MEMBERS AND PROTEC TING THE INTEREST OF ITS MEMBERS. C. BANGALORE RACE CLUB VS. CIT(77 ITR 435) (MYS). D. CRICKET ASSOCIATION OF BANGAL VS. CIT(37 ITR 277) ( CAL). E. SOUTH INDIAN ATHLETIC ASSOCIATION VS. CIT( 107 ITR 108) (MAD). 111 F. CITVS. ANDHRA PRADESH RIDING CLUB (168 ITR 393) (AP ). G. DELHI STOCK ASSOCIATION VS. CIT(91 TAXMAN 273) (SC ). H. CITVS. ERNAKULAM DISTRICT CEMENT ASSOCIATION (253 I TR 198) (KER). I. HYDERABAD RACE CLUB VS. CIT(153 ITR 521) (AP) (FB). J. CIT VS. KAMLA TOWN TRUST (84 TAXMAN 248) (SC). 52. TO SUM UP, IF THE TOTALITY OF FACTS/CASE-LAWS A S NARRATED ABOVE AND THE ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSEL A RE KEPT IN JUXTA-POSITION AND ANALYSED, IN OUR HUMBLE OPINION , THE ASSESSEE IS N OT ENGAGED IN ACTIVITIES OF RELIEF TO POOR, EDUCATION, MEDICAL RELIEF AND/OR AD VANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY AS DEFINED IN SEC. 2(15) OF THE ACT. RATHER THE ASSESSEE IS ACTUALLY NOT CARRYING OUT ANY ACTIVITY OF ADVANC EMENT OF OBJECTS OF GENERAL PUBLIC UTILITY WHICH CAN BE CONSIDERED TO BE CHARI TABLE RATHER THE PRIMARY OBJECT OF THE ASSESSEE IS TO EARN PROFIT ONLY. IN O THER WORDS, THE PURPOSE OF THE ASSESSEE IS NOT AN ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY RATHER THE ACTIVITIES INVOLVE ACTIVITY OF PROFIT, THEREFORE, T HESE CANNOT FALL WITHIN THE PURVIEW OF SEC. 2(15) RATHER THE ASSESSEE IS ENGAGE D IN ACTIVE BUSINESS AND THERE IS NO RESTRICTION IN ITS OBJECTS OF MAKING PROFIT. THERE IS A POSSIBILITY THAT AT THE TIME OF CREATION OF THESE AUTHORITIES LIKE THE PRES ENT ASSESSEE I.E. INDORE DEVELOPMENT AUTHORITY, PUNJAB URBAN DEVELOPMENT AUT HORITY, JALANDHAR 112 URBAN DEVELOPMENT AUTHORITY OR LIKE ANY OTHER MAY B E PIOUS BUT ULTIMATELY, THESE AUTHORITIES TURNED INTO A COMMERCIAL ORGANIZA TION WITH THE SOLE INTENTION TO EARN MAXIMUM PROFIT EVEN AT THE COST OF POOR FAR MERS WHOSE LANDS ARE ACQUIRED, FOR NAMESAKE CONSIDERED TO BE BACKBONE OF THIS GREAT COUNTRY, ARE PAID NEGLIGIBLE AMOUNT AS COMPENSATION AND AFTER I NCURRING DEVELOPMENT COST, THE SAME LAND IS SOLD AT COMMERCIAL RATES. THE HELP LESS FARMERS SOMETIMES HAVE NO MEANS OF EVEN LIVELIHOOD. FURTHER, THE PROFIT MO TIVE OF THE ASSESSEE IS NOT INCIDENTAL TO THE OBJECTS OF THE ASSESSEE AUTHORITY RATHER THERE IS A SYSTEMATIC COMMERCIAL ACTIVITY WITH THE INTENTION TO EARN MAXI MUM PROFIT. IT IS NOT THE CASE THAT THE ASSESSEE, AFTER EARNING HUGE PROFIT FROM S UCH COMMERCIAL ACTIVITIES, IS SPENDING SUCH PROFIT ON CHARITABLE ACTIVITIES RATHE R THERE IS NO OBLIGATION ON THE ASSESSEE TO SPEND ITS EARNINGS FOR CHARITABLE PURPO SES. THESE AUTHORITIES HAVE BECOME A GREAT SOURCE OF EARNING INCOME IN ITSELF A ND THE ASSESSEE AUTHORITY IS NO EXCEPTION TO IT. IT IS COMMON KNOWLEDGE/FACT TH AT THE ASSESSEE AUTHORITY IS SELLING THE DEVELOPED PLOTS ON AUCTION TO THE HIGHE ST BIDDER AND ONE SUCH EXAMPLE IS SALE TO RELIANCE NEAR SAYAJI HOTEL AS AS SERTED BY THE LEARNED CCIT DR WHICH WAS NOT CONTROVERTED BY THE ASSESSEE. NOW A DAYS BECAUSE OF THIS TREND OF AUCTION, IT HAS BECOME VERY DIFFICULT FOR A COMMON MAN TO PURCHASE A PLOT FOR SHELTER FROM THE ASSESSEE AUTHORITY. AS F AR AS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE IDA IS PROVIDING ROADS, SCHOOLS, PARKS, CLUBS, ETC., THESE FACILITIES ARE PROVIDED BY PRIVATE BUIL DERS RATHER THESE HAVE BECOME A SOURCE OF ATTRACTION FOR GETTING MAXIMUM APPLICATIO N THAT TOO ON A HIGH 113 PREMIUM. EVEN WHEN APPLICATIONS ARE INVITED BY THE ASSESSEE AUTHORITY, LACS OF PEOPLE ARE APPLYING AND THE COST OF THE APPLICATION FORM WHICH MAY BE IN THOUSAND/THOUSANDS, IS NEVER RETURNED TO THE APPLIC ANTS WHO DO NOT GET THE PLOTS. EVEN THE SECURITY/ADVANCE MONEY TAKEN WITH THE APPL ICATION FORMS IS RETURNED AFTER A LONG TIME WITHOUT INTEREST TO THE PERSONS N OT GETTING PLOTS, RESULTING INTO HUGE PROFIT TO THE ASSESSEE AUTHORITY AND LOSS THE PUBLIC AT LARGE. IN SUCH A SITUATION, WHAT CHARITY THE ASSESSEE IS DOING IS NO T KNOWN/BEYOND IMAGINATION. IF REGISTRATION IS GRANTED TO THE ASSESSEE, IT WILL OPEN A PANDORA BOX WHEREIN EVERY COLONIZER/BUILDER WILL ASK FOR REGISTRATION U NDER SECTION 12AA OF THE ACT, WHICH WOULD BE VERY MUCH INDIFFERENCE TO THE INTENT ION OF THE LEGISLATURE. IN FACT, THE ASSESSEE AUTHORITY IS WORKING ON COMMERCI AL PATTERN LIKE A BIG BUSINESSMAN. EVEN OTHERWISE, IF SOME PLOTS ARE RESE RVED FOR ECONOMICALLY WEAKER SECTIONS OF THE SOCIETY, FIRSTLY, THERE IS N O PARAMETER THAT THESE ARE ACTUALLY ALLOTTED TO SUCH POOR PERSONS AND SECONDLY , THE HIDDEN COST IS ALREADY ADDED TO SUCH PLOTS. IT IS PERTINENT TO MENTION HER E THAT THE LEGISLATURE IN THEIR WISDOM AMENDED SEC. 2(15) THROUGH THE FINANCE ACT, 2008 IN THE CASE OF TRADE ASSOCIATION CLAIMING BOTH TO BE CHARITABLE INSTITUT ION AND MUTUAL ORGANIZATION BY ADDING A PROVISO WHICH STATES THAT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE P URPOSES IF IT INVOLVES THE CARRYING ON OF (A) ANY ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS OR (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE 114 OF HUGE OR APPLICATION OR RETENTION OR THE INCOME F ROM SUCH ACTIVITY. BY CIRCULAR NO.11 OF 2008 DATED 19.12.2008, IT HAS BEEN FURTHER CLARIFIED WHETHER THE ASSESSEE HAS FOR ITS OBJECT, THE ADVANCEMENT OF AN Y OTHER OBJECTS OF GENERAL PUBLIC UTILITY IS A QUESTION OF FACT. IF SUCH ASSE SSEE ENGAGES IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITL ED TO CLAIM THAT ITS OBJECTS ARE OF CHARITABLE PURPOSES. IN SUCH A CASE, THE OBJECTS OF GENERAL PUBLIC UTILITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPO SE WHICH IS TRADE, COMMERCE OR BUSINESS OR THE RENDERING OF ANY SERVICE IN RELA TION TO SUCH TRADE, COMMERCE OR BUSINESS. EACH CASE WOULD, THEREFORE, BE DECIDED ON ITS OWN FACTS AND NO GENERALIZATION IS POSSIBLE, THEREFORE, ANY MISUSE W AS INTENDED TO BE REMOVED BY THIS CIRCULAR. THE VERY CONCEPT OF CHARITY DENOTES ALTRUISTIC TH OUGHT AND ACTION. IT OBJECTS MUST NECESSARILY BE TO BENEFIT O THERS RATHER THAN ONES SELF. THE ACTION WHICH FOLLOWS FROM CHARITABLE THIN KING IS ALWAYS DIRECTED AS BENEFIT TO OTHERS. IT IS THIS DIRECTION OF THOUG HT AND EFFORTS AND NOT THE RESULT WHAT IS DONE IN TERM OF FINANCIALLY MEASURAB LE GAIN WHICH DETERMINES THAT IT IS CHARITABLE [QUOTED FROM SOLE TRUSTEE LOK SHIKSHAN TRUST VS. CIT(101 ITR 234) (SC)]. SINCE THE MAIN PREDOMIN ANT OBJECT OF THE ASSESSEE IS PROFIT MAKING, THEREFORE, WE FIND NO INFIRMITY I N THE IMPUGNED ORDER IN DENYING REGISTRATION U/S 12A/12AA OF THE ACT TO THE ASSESSEE. THUS, ON THIS ISSUE, WE AFFIRM THE STAND TAKEN BY THE LD. FIRST A PPELLATE AUTHORITY. 115 BEFORE PART WITH, WE RECORD OUR APPRECIATIONS TO S HRI P.M. CHOUDHARI ALONG WITH SHRI ANIL KAMAL GARG, LD. COUNSELS FOR T HE ASSESSEE AND MR. GIRISH DAVE, LD. CCIT, DR FOR PROPERLY ASSISTING THE BENCH BY THEIR VALUABLE, TEMPTING AND USEFUL ARGUMENTS. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JULY, 2010. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH JULY, 2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE FIT FOR PUBLICATION SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER