Muzaffarnagar Development Aughority, Muzaffarnagar V. CIT, Muzaffarnagar

ITA 4042/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8171 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-02-2010
• Assessment Year: misc
• Appeal Filed On: 05-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: LAKSHMISH KANT
• Keywords: Charitable institution; Set aside
• Section: 12A; 12AA; 251; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `E NEW DELHI BEFORE SHRI A.D. JAIN AND SHRI B.P. JAIN ITA NO. 4042(DEL)2009 ASSESSMENT YEAR: MUZAFFARNAGAR DEVELOPMENT AUTHORITY(MDA) COMMISS IONER OF I. TAX, 1133, SOUTH CIVIL LINES, MUZAFFARNAGAR(UP), V. MU ZAFFARNAGAR(UP). PIN 251 002. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI LAKSHMISH KANT, CA RESPONDENT BY: SHRI G.S. SAHOTA, SR. DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 7 .7.2009 PASSED BY THE LEARNED CIT, MUZAFFARNAGAR, U/S 12 AA(3) OF THE INCOME TAX ACT. THE GROUNDS TAKEN ARE AS FOLLOWS:- HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT HAS ERRED BOTH IN LAW AND ON FACTS: 1. IN CANCELLING THE REGISTRATION UNDER SECTION 12 AA( 3) OF THE INCOME TAX ACT, 1961 BY APPLYING THE INCORRECT REAS ONING. 2. IN HOLDING THAT THE SECTION 12 AA OF THE INCOME TAX ACT, 1961 IS FOR THE PROCEDURE FOR REGISTRATION FOR TRUST/SOC IETY OR INSTITUTION ONLY AND THEREFORE SECTION 12 AA FOR RE GISTRATION IS NOT APPLICABLE ON THE APPELLANT-MDA. ITA 4042(DEL)09 2 3. IN HOLDING THAT SINCE THE APPELLANT IS A STATE GOVE RNMENT AUTHORITY AND IS NOT A TRUST/SOCIETY OR INSTITUTION AND THEREFORE IT IS NOT ENTITLED FOR REGISTRATION UNDER SECTION 1 2A/12AA OF THE ACT. 4. IN HOLDING THAT THE ACTIVITIES OF THE APPELLANT ARE NOT CHARITABLE. 5. IN CANCELLING THE REGISTRATION UNDER SECTION 12AA(3 ) OF THE INCOME TAX ACT, 1961 BY IGNORING THE FACTS THAT THE ISSUE OF REGISTRATION TO SIMILAR DEVELOPMENT AUTHORITIES IS ALSO COVERED BY THE ORDERS PASSED BY HONBLE ITAT- DELHI BENCH A ND THE OTHER BENCHES. 6. IN HOLDING THE CASE OF THE APPELLANT AS NOT FIT CAS E FOR CONTINUANCE OF REGISTRATION U/S 12 AA OF THE INCOME TAX ACT, 1961. 7. IN ANY VIEW OF THE MATTER AND IN ANY CASE, THE IMPU GNED ORDER DATED 07.07.2009 IS BAD IN LAW AND IS AGAINST THE F ACTS AND CIRCUMSTANCES OF THE CASE. 8. THE ASSESSEE PRAYS TO BE ALLOWED THE PERMISSION TO SUBMIT FURTHER EVIDENCE/JUDGMENTS/WRITTEN SUBMISSIONS AT T HE TIME OF HEARING BEFORE THE HONBLE BENCH OF ITAT. 2. BY VIRTUE OF THE IMPUGNED ORDER, THE LEARNED CIT WITHDREW THE REGISTRATION ALREADY GRANTED TO THE ASSESSEE, OBSER VING, INTER ALIA, THAT THE ASSESSEE MUZAFFARNAGAR DEVELOPMENT AUTHORITY (MDA FOR SHORT ) IS ONLY UTTAR PRADESH GOVERNMENT AUTHORITY; THAT ITS ACTIVI TIES ARE ALSO NOT CHARITABLE PER SE, AS IT SELLS LAND ON COMMERCIAL R ATE TO EARN PROFIT FROM IT AND FOLLOWS COMMERCIAL ACCOUNTING PRINCIPLES IN ORDER O NLY TO IMPLEMENT THE STATE GOVERNMENT OR CENTRAL GOVERNMENT POLICIES FOR THE GENERAL POPULATION; THAT THE MDA IS NEITHER A TRUST NOR A S OCIETY, NOR AN INSTITUTION ITA 4042(DEL)09 3 (TSI); THAT A GOVERNMENT CONTROLLED AUTHORITY WHICH CAME INTO EXISTENCE BY A GOVERNMENT NOTIFICATION; THAT ALL ITS OFFICERS AN STAFF ARE UTTAR PRADESH STATE GOVERNMENT EMPLOYEES; AND THAT SECTION 12 AA OF THE I.T. ACT IS FOR THE PROCEDURE FOR REGISTRATION FOR TRUSTS/SOCIETIES /INSTITUTIONS AND IT IS NOT APPLICABLE ON THE MDA. 3. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COUN SEL FOR THE ASSESSEE HAS REITERATED THE STAND TAKEN BY THE ASSESSEE BEFO RE THE LD. CIT. IT HAS BEEN CONTENDED THAT THE OBJECT OF THE CREATION OF THE MD A IS TO MAKE SYSTEMATIC PLANNING AND DEVELOPMENT OF THE AREA UNDER ITS JURI SDICTION; THAT TO ACHIEVE SUCH OBJECTS, THE MDA PERFORMS THE ACTIVITIES OF MA KING THE MASTER PLAN BY EARMARKING THE AGRICULTURAL, COMMERCIAL, INDUSTRIAL AND RESIDENTIAL AREA OF THE CITY, TO MAKE RULES OF CONSTRUCTION IN ALL AREA S AND TO ENSURE PROPER DEVELOPMENT OF ROADS AND PARKS, SEWERAGE LINES, ELE CTRIC POLES IN RESIDENTIAL COLONIES AND SECTORS; THAT SOMETIMES, THE MDA ITSE LF UNDERTAKES THE ACTIVITIES OF BUILDING ROADS, SEWERAGE LINES AND DE VELOPMENT OF PARK, ETC. IN APPROVED COLONIES FOR THE PLANNED AND SYSTEMATIC DE VELOPMENT OF THE CITY; THAT THE LOCAL AUTHORITIES WERE TREATING THEIR INCO ME AS EXEMPT U/S 10(20 A) OF THE ACT TILL THIS SECTION EXISTED IN THE INCOME TAX ACT, I.E., TILL 31.3.2003; THAT AFTER THE OMISSION OF SECTION 10(20 A) FROM TH E ACT, THE UTTAR PRADESH HOUSING DEPARTMENT ITSELF ACCEPTED THE TAXABILITY AND INSTRUCTED THE ITA 4042(DEL)09 4 PRINCIPAL OFFICERS OF ALL THE AUTHORITIES TO ACT IN ACCORDANCE WITH THE PROVISIONS OF THE I.T. ACT; THAT SECTION 10(20 A) O F THE ACT WAS CONCERNED ABOUT SPECIFIC ACTIVITIES, WHEREAS SECTION 12 AA TA LKS ABOUT THE GENERAL ACTIVITIES TO BE EXAMINED; THAT TILL SECTION 10(20 A) WAS THERE ON THE STATUTE, THE AUTHORITIES NEVER APPLIED FOR REGISTRATION U/S 12 AA; THAT AFTER OMISSION OF SECTION 10(20 A) THEREOF, IT IS BEING CONSIDERED THAT THE EXISTING ACTIVITIES ARE CONCERNED BY THE PROVISIONS OF SECTION 12 AA; T HAT THE PROVISIONS OF SECTIONS 10(20 A) AND 12 AA NEVER OVERLAPPED EACH O THER; AND THAT THE REGISTRATION ALREADY GRANTED HAS WRONGLY BEEN WITHD RAWN. RELYING ON MORMUGAO PORT TRUST V. CIT, [2007] 109 ITD 303 (P ANAJI), IT HAS BEEN CONTENDED THAT SECTION 12 A OF THE ACT DOES NOT MA KE ANY DISTINCTION BETWEEN A TRUST OR AN INSTITUTION CREATED BY A PRIVATE INDIVIDUAL OR BY THE GOVERNMENT AND THAT THERE IS NO REQUIREMENT UNDER T HE ACT THAT AN INSTITUTION CONSTITUTED FOR ADVANCEMENT OF ANY OBJE CT OF GENERAL PUBLIC UTILITY MUST BE REGISTERED AS A TRUST TO BE ENTITLED TO REG ISTRATION UNDER SECTION 12A OF THE ACT. RELIANCE HAS BEEN PLACED ON CIT V. G UJARAT MARITIME BOARD [2008] 166 TAXMAN 58(SC), FOR THE PROPOSITION THAT A STATUTORY AUTHORITY CREATED UNDER THE PROVISIONS OF A STATUTE IS ENTI TLED TO THE STATUS OF A CHARITABLE INSTITUTION U/S 11 OF THE I.T. ACT AND IS ENTITLED TO BE REGISTERED AS A CHARITABLE TRUST. FOR THE PROPOSITION THAT THE DEVELOPMENT AUTHORITIES ITA 4042(DEL)09 5 SITUATED UNDER THE UTTAR PRADESH URBAN PLANNING AND DEVELOPMENT ACT, 1973 ARE ELIGIBLE FOR REGISTRATION U/S 12AA OF THE I.T. ACT AND THAT ACCORDINGLY, REGISTRATION TO SUCH DEVELOPMENT AUTHO RITIES IS TO BE ALLOWED, RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS :- 1. KHURJA DEVELOPMENT AUTHORITY (ITA NO. 1851(DEL)20 09 ORDER DATED 14.07.2009); 2. SAHARANPUR DEVELOPMENT AUTHORITY (ITA NO. 5008(DE L)2007 ORDER DATED 20.06.2008); 3. ALIGARH DEVELOPMENT AUTHORITY (ITA NO. 168(AG.)/D EL/2007 ORDER DATED 30.05.2008); 4. HAPUR PILKHUWA DEVELOPMENT AUTHORITY (ITA NO. 2735/DEL/2006 ORDER DATED 15.05.2007); 5. GHAZIABAD DEVELOPMENT AUTHORITY (ITA NO. 2903/DEL /2006 ORDER DATED 31.01.2007); 6. U.P. AWAS EVAM VIKAS PARISHAD; 7. LUCKNOW DEVELOPMENT AUTHORITY; 8. KANPUR DEVELOPMENT AUTHORITY; 9. AYODHYA-FAIZABAD DEVELOPMENT AUTHORITY; AND 10. UNNAO-SHUKLAGANJ DEVELOPMENT AUTHORITY (ITA NO. 6 86, 690, 696, 703 & 736/LUC/2003 ORDER DATED 25.07.2005). 4. THE LEARNED DR, ON THE OTHER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN REITERATED, AS HELD BY THE LD. CIT, THAT THE ASSESSEE, MDA, IS A STATE GOVERNMENT AUTHORITY AND IS NOT EITHER A TRUST OR A ITA 4042(DEL)09 6 SOCIETY OR AN INSTITUTION AND THEREFORE, THE PROVIS IONS OF SECTION 12 AA OF THE ACT ARE NOT APPLICABLE TO IT. THE LEARNED DR MAINT AINS THAT THE REGISTRATION, IN THESE FACTS AND CIRCUMSTANCES, HAS RIGHTLY BEEN WITHDRAWN BY VIRTUE OF THE IMPUGNED ORDER. 5. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE MATTER IS SQU ARELY COVERED BY, INTER ALIA, M/S. KHURJA DEVELOPMENT AUTHORITY, BULANDSHAHR V. CIT, MEERUT (SUPRA), (COPY AT PAGES 21 TO 26 OF THE ASSESSEES PAPER BOO K). IN THAT CASE, HOLDING THAT SINCE THE TRIBUNAL, IN A SIMILAR CASE OF A LO CAL AREA DEVELOPMENT AUTHORITY, HAS HELD THAT TO BE ELIGIBLE FOR REGISTR ATION, THE MATTER NEEDED TO BE SET ASIDE TO THE FILE OF THE CIT TO DECIDE IT AF RESH IN ACCORDANCE WITH LAW AND KEEPING IN VIEW THE JUDICIAL PRECEDENTS ON THIS ISSUE, THE TRIBUNAL RELIED ON THE TRIBUNAL DECISION DATED 25.7.2005 IN ITA NO. 1690(LUCK) OF 2003 FOR ASSESSMENT YEAR 2003-04, IN THE CASE OF U.P. AWAS EVAM VIKAS PARISHAD WHEREIN, IT HAS BEEN HELD AS FOLLOWS:- 39. FROM THE PERUSAL OF THE OBJECTS OF THE PARISHAD, WE FIND THAT THE OBJECTS OF THE PARISHAD WERE TO FRAME AND EXECUTE THE HOUSING AND IMPROVEMENT SCHEMES AND OTHER PROJECTS, TO PLAN AND COORDINATE VARIOUS HOUSING ACTIVITIES IN THE STATE AND TO ENSURE EXPEDITIOUS AND EFFICIENT IMPLEMENTATION OF HOUSING AND IMPROVEMENT SCHEMES IN THE STATE. AS REGARDS THE OTHER AUTHORITIES BEFORE US, WE HAVE PERUSED THE ITA 4042(DEL)09 7 UPUPD ACT, 1973. SECTION 4 OF THE SAID ACT PROVIDES THAT STATE GOVERNMENT MAY, BY NOTIFICATION IN THE GAZETTE CONSTITUTE FOR THE PURPOSES OF THIS ACT, AN AUTHORITY TO BE CALLED THE DEVELOPMENT AUTHORITY FOR ANY DEVELOPMENT AREA. THE AUTHORITIES BEFORE US HAVE BEEN CONSTITUTED BY THE GOVERNMENT UNDER THIS SECTION. SECTION 7 OF THE SAID ACT HAS ALSO PROVIDED FOR THE OBJECTS OF THESE AUTHORITIES AS MENTIONED ABOVE IN PARA 27. 40. SECTION 17(1) OF THIS ACT PROVIDES AS UNDER : IF IN THE OPINION OF STATE GOVERNMENT, ANY LAND IS REQUIRED FOR THE PURPOSE OF DEVELOPMENT OR FOR ANY OTHER PURPOSES UNDER THIS ACT, THE STATE GOVERNMENT MAY ACQUIRE SUCH LAND UNDER THE PROVISIONS OF LAND ACQUISITION ACT, 1894. 41. NEEDLESS TO SAY THAT AS PER CLAUSE 4 OF AND ACQUISITION ACT, THE LAND COULD BE ACQUIRED ONLY FOR PUBLIC PURPOSES. SECTION 57 OF THE SAID ACT ALSO PROVIDES THAT AUTHORITIES COULD MAKE ITS BYE- LAWS WITH THE APPROVAL OF THE STATE GOVERNMENT. SECTION 58 PROVIDES THAT IN CASE OF DISSOLUTION OF THE AUTHORITY, ALL THE PROPERTIES, FUNDS AND DUES WHICH ARE VESTED IN OR REALIZABLE BY THE AUTHORITY, SHALL VEST IN OR TO BE REALIZABLE BY THE STATE GOVERNMENT. VARIOUS SECTIONS OF THE SAID ACT MAKE IT ABUNDANTLY CLEAR THAT THE ACTIVITIES OF THE AUTHORITIES WERE AIMED AT PUBLIC PURPOSES AND NOT PERSONAL ONE. WE, THEREFORE, HAVE NO HESITATION IN HOLDING THAT THE ACTIVITIES OF THE ASSESSEE BEFORE US ARE FOR ADVANCEMENT OF GENERAL PUBLIC UTILITY AND THE LD. CIT WAS NOT JUSTIFIED IN REFUSING REGISTRATION UNDER SECTION 12-AA OF THE ACT. 42. WE ALSO FIND THAT THE LD. DR HAS PLEADED THAT THE PROVISIONS OF SECTION 36(1)(XII) WERE BROUGHT ON THE STATUTE TO MEET THE DIFFICULTIES DUE TO DELETION OF THE PROVISIONS OF SECTION 10(20A) OF TH E ITA 4042(DEL)09 8 ACT. ADMITTEDLY, SECTION 36(1)(XII) FALLS UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS. AS THE ASSESSEES BEFORE US WERE NOT CARRYING ON ANY BUSINESS, THE QUESTION OF APPLYING THE PROVISIONS O F SECTION 36(1)(XII) DOES NOT ARISE. FOR THE SAKE OF REPETITION, WE MAY MENTION THAT UNLESS THE AUTHORITIES WERE PURSUING THE OBJECTS OF GENERAL PUBLIC UTILITY, NO LAND COULD BE ACQUIRED BY STATE GOVERNMENT FOR THEM. 43. WE MAY ALSO OBSERVE THAT GRANTING REGISTRATION UNDER SECTION 12-AA OF THE ACT DOES NOT GIVE BLANKET EXEMPTION TO THE ASSESSEES UNDER SECTION 11 OF THE ACT. THE INSTITUTION MAY BE REGISTERED UNDER SECTION 12-AA OF THE ACT STILL THEY MAY NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11. WHILE DISPOSING OFF THE APPLICATION UNDER SECTION 12-A, THE LD. CIT HAS TO EXAMINE ONLY TWO ASPECTS NAMELY, GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND OBJECT OF THE INSTITUTION. F ROM THE PERUSAL OF VARIOUS DOCUMENTS ON RECORD, THERE IS NO DISPUTE THAT THE ACTIVITIES OF THE ASSESSEES BEFORE US WERE GENUINE AND OBJECT OF THE ASSESSEES WAS IN CONSONANCE WITH ITS CREATION. EVEN ON THESE TWO GROUNDS, THE LD. CIT WAS NOT JUSTIFIED IN REFUSING REGISTRATION UNDER SECTION 12-A OF THE ACT . THE LD. CIT COULD NOT TAKE SHELTER OF ANY OTHER OUTER SOURCE FOR REFUSING REGISTRATION UNDER SECTION 12-A OF THE ACT. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MARKET COMMITTEE (SUPRA) HAS OBSERVED AS UNDER:- 16. THE PROVISIONS OF SECTION 12-AA QUOTED ABOVE ARE RELEVANT AND IMPORTANT. AS PER THE ABOVE PROVISION, THE LD. CIT ON THE BASIS OF INFORMATION PLACED BY THE ASSESSEE OR OTHER INFORMATION GATHERED BY HIM HAS TO RECORD HIS SATISFACTION ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OF INSTITUTION (IN THE PRESENT CASE, BOARD OR ITA 4042(DEL)09 9 COMMITTEES) AND, THEREAFTER PASS AN ORDER IN WRITING REGISTERING THE INSTITUTION IF HE IS SATISF IED ABOUT THE OBJECTS OF THE TRUST OF INSTITUTION AND GENUINENESS OF ITS ACTIVITIES. IN THE PRESENT APPEALS, CIT HAS NOT BROUGHT ANY MATERIAL NOR RECORDED ANY FINDING TO HOLD THAT ACTIVITIES OF ASSESSEES WERE NOT GENUINE. IN OUR OPINION, IT IS NOT EASY, IN CASE OF STATUTORY BODY, LIKE MARKET BOARD OR MARKET COMMITTEE CONTROLLED BY GOVERNMENTS TO HOLD, THAT ACTIVITIES OF SUCH BODIES ARE NOT GENUINE. WE ARE, THEREFORE, UNABLE TO AGREE THAT THESE CASES WERE NOT FIT CASES FOR RECORDING SATISFACTION AS REQUIRED UNDER SECTION 12-AA OF THE INCOME-TAX ACT. ABOUT OBJECT OF THE INSTITUTIONS, WE HAVE ALREADY HELD THAT THOSE ARE GENUINE AND ARE OF CHARITABLE NATURE. THE OTHER OBJECTIONS HAVE BEEN RAISED BY THE REVENUE IN THE IMPUGNED ORDERS AND DURING THE COURSE OF ARGUMENTS BEFORE US LIKE THE COMMITTEES AND BOARDS BEING MANAGED BY PUBLIC SERVANTS, COLLECTION OF FINES BY COMMITTEE, NO VOLUNTARY CONTRIBUTION BY OUTSIDERS ETC. WE DO NOT FIND ANY SUBSTANCE IN THESE OBJECTIONS. AT THE STAGE OF REGISTRATION, THE LEARNED COMMISSIONER HAS ONLY TO RECORD HIS SATISFACTION ABOUT THE GENUINENESS OF ACTIVITIES OF THE INSTITUTION AND ITS CHARITABLE PURPOSES. THE ABOVE CONDITIONS ARE NOT SHOWN TO BE NOT SATISFIED IN THESE CASES. WE, THEREFORE, DO NOT SEE ANY HURDLE IN THEIR CLAIM RELATING TO REGISTRATION UNDER SECTION 12-AA OF INCOME-TAX ACT. 44. FOR THE REASONS STATED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEES ARE ENTITLED TO REGISTRATIO N UNDER SECTION 12-AA OF THE ACT. WE, THEREFORE, DIRECT THE LD. CIT TO REGISTER ALL THE AUTHORITIES IN APPEAL BEFORE US UNDER SECTION 12-AA OF THE ACT. 6. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING M/ S. KHURJA DEVELOPMENT AUTHORITY (SUPRA) AND U.P. AWAS EVAM VIKAS PARISHAD ITA 4042(DEL)09 10 CITED THEREIN, SINCE THE TRIBUNAL, IN SIMILAR CASES OF LOCAL DEVELOPMENT AUTHORITIES, HAS HELD THAT TO BE ELIGIBLE FOR REGIS TRATION, THE MATTER AT HAND IS REMITTED TO THE FILE OF THE LD. CIT TO DECIDE IT DE NOVO IN ACCORDANCE WITH LAW, KEEPING IN VIEW THE JUDICIAL PRECEDENTS ON THE ISSUE. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.02.2010. SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01.02.2010 *RM COPY FORWARDED TO: 1. MUZAFFARNAGAR DEVELOPMENT AUTHORITY(MDA) 1133, SOUTH CIVIL LINES, MUZAFFARNAGAR(UP), PIN 251 002. 2. CIT, MUZAFFARNAGAR(UP). 3. ITO 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR