M/s Muzaffarnagar Development Authority (MDA), Muzaffarnagar V. CIT, Muzaffarnagar

ITA 4231/DEL/2013

• Counselvise Citation: 423120114 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-11-2014
• Assessment Year: misc
• Appeal Filed On: 11-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN P RASAD
• Assessee Lawyers: LAKSHMISH KANT
• Keywords: Charitable institution; Opportunity of being heard; Cancellation of registration
• Section: 12; 12A; 12AA

Judgement Text

I.T.A. NO.: 4231/DEL/2013 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI E BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM AND C. M. GARG JM ] I.T.A. NO .: 4231/DEL/2013 ASSESSMENT YEAR: NOT SPECIFIED MUZAFFARNAGAR DEVELOPMENT AUTHORITY .APPELLANT 1133, SOUTH CIVIL LINES, MUZA FFARNAGAR 251 002 [PAN: AALM0437D] VS. COMMISSIONER OF INCOME TAX, MUZAFFARNAGAR . RESPONDENT APPEARANCES BY: LAKSHMISH KANT , FOR THE APPELLANT GUNJAN PRASAD , FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF ORDER DATED 16 TH MAY 2013 PASSED BY THE LEARNED COMMISSIONER, REJECTING REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOWS: 1. HAVING REG ARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED, BOTH IN LAW AND ON FACTS (I) IN REJECTING THE REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 BY APPLYING THE INCORRECT REASONING. (II) IN HOLDING THAT THE OBJECTIVES /ACTIVITIES OF THE APPELLANT ARE NOT CHARITABLE IN NATURE. (III) IN NOT APPRECIATING THE FACT THAT THE APPELLANT AUTHORITY HAS BEEN CREATED WITH THE OBJECT OF GENERAL PUBLIC UTILITY WHICH IS A CHARITABLE OBJECT WITHIN THE MEANING OF SECTION 2(15) OF THE I NCOME TAX ACT, 1961. (IV) IN CONCLUDING THAT THE ACTIVITIES OF ADVANCEMENT OF THE OBJECT OF GENERAL PUBLIC UTILITY BY THE APPELLANT AUTHORITY ARE UNDERTAKEN/CARRIED ON IN A TOTALLY BUSINESS/COMMERCIAL NATURE AND HENCE THE AUTHORITY IS NOT ENTITLED FOR REG ISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 1961. I.T.A. NO.: 4231/DEL/2013 PAGE 2 OF 11 (V) IN HOLDING THAT THE APPELLANT IS NEITHER A TRUST/SOCIETY OR INSTITUTION AND THEREFORE THE PROVISIONS OF SECTION 11 AND 12/12A ARE NOT APPLICABLE ON THE APPELLANT AUTHORITY. (VI) IN HOLDING THE CASE OF THE APPELLANT AS NOT FIT CASE FOR CONTINUANCE OF REGISTRATION UNDER SECTION 12A/12AA OF THE INCOME TAX ACT, 1961. (VII) IN REJECTING THE REGISTRATION UNDER SECTION 12/12AA OF THE INCOME TAX ACT, 1961 BY IGNORING THE FACTS THAT THE ISSUE OF REGISTR ATION TO SIMILAR DEVELOPMENT AUTHORITIES IS ALSO COVERED BY THE ORDERS PASSED BY HONBLE ITAT - DELHI BENCH AND THE OTHER BENCHES. 2. THE LEARNED COMMISSIONER OF INCOME TAX HAS BROUGHT ON RECORD NO NEW FACTS AND HAS IGNORED THE DIRECTIONS GIVEN BY THE HONB LE INCOME TAX APPELLATE TRIBUNAL DELHI VIDE ITS ORDER DATED 20.05.2011 IN ITA NO.5798/DEL/2010. HENCE, THE REJECTION OF THE APPELLANTS REGISTRATION UNDER SECTION 12A OF INCOME TAX ACT, 1961 IS UNCALLED FOR. 3. THE LEARNED COMMISSIONER OF INCOME TAX HA S GROSSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT IS DOING THE ACTIVITIES FOR A CESS OR FEE. THE FINDINGS ARE PATENTLY WRONG, EXPOSE THE GROSS IGNORANCE, DELIBERATE LEGAL MALICE AND BIAS AGAINST THE APPELLANT. THE LEARNED COMMISSIONER OF INCOME TAX HAS FAILED TO APPRECIATE THAT THE APPELLANT AUTHORITY WAS CONSTITUTED BY UTTAR PRADESH URBAN PLANNING & DEVELOPMENT ACT, 1973 SOLELY FOR OBJECTS OF SYSTEMATIC PLANNING AND DEVELOPMENT OF THE CITY/AREAS FALLING UNDER ITS JURISDICTION AND NOT FOR ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE RECEIPTS FROM ALL THE SOURCES ARE UTILISED EXCLUSIVELY IN ACHIEVING THE OBJECTS OF THE APPELLANT. 4. IN ANY VIEW OF THE MATTER AND IN ANY CASE, THE IMPUGNED ORDER DATED 16.05.2013 IS BAD IN LAW AND IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE ASSESSEE PRAYS TO BE ALLOWED THE PERMISSION TO SUBMIT FURTHER EVIDENCE/JUDGEMENTS/WRITTEN SUBMISSIONS AT THE TIME OF HEARING BEFORE THE HONBLE BENCH OF ITAT. 3. THIS IS FOURTH ROUND OF PROCEEDINGS BEFORE THIS TRIBUNAL. THE LAST TIME, A COORDINATE BENCH HAD AN OCCASION TO DEAL WITH THIS MATTER WAS IN THE ORDER DATED 20 TH MAY 2011 WHEREBY THE MATTER WAS REMITTED TO FILE OF THE LEARNED COMMISSIONER YET AGAIN TO COMPLY WITH THE DIRECTIO NS ISSUED BY THE ITAT IN TWO EARLIER ORDERS EXTRACTED THEREIN. THE ASSESSEE IS BEFORE US YET AGAIN AND IS AGGRIEVED THAT THE LEARNED COMMISSIONER HAS NOT COMPLIED WITH THE DIRECTIONS OF THE TRIBUNAL. 4. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE AS SESSEE WAS ALL ALONG EXTENDED EXEMPTION FORM INCOME TAX UNDER SECTION 10(20A) OF THE ACT, AND WHEN SECTION 10(20A) WAS TAKEN OFF THE STATUTE, THE ASSESSEE MOVED AN I.T.A. NO.: 4231/DEL/2013 PAGE 3 OF 11 APPLICATION, TO THE LEARNED COMMISSIONER, FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF TH E ACT. THIS REGISTRATION APPLICATION, WHICH WAS DATED 31 ST MARCH 2003, WAS ACCEPTED AND THE REGISTRATION UNDER SECTION 12 AA WAS GRANTED TO THE ASSESSEE ON 30 TH APRIL 2008, BUT, ON THE SAME VERY DAY ON WHICH THE SAID REGISTRATION WAS GRANTED, THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE REGISTRATION SO GRANTED NOT BE WITHDRAWN AS, ACCORDING TO THIS SHOW CAUSE NOTICE, THE ASSESSEE WAS CONDUCTING WORK ON COMMERCIAL LINE FOR PROFIT PURPOSES. THE SUBMISSIONS OF THE ASSESSEE DID NOT SATISFY THE COMMISSIONER, AND, ACCORDINGLY, COMMISSIONER CANCELLED THE REGISTRATION. WHEN THIS CANCELLATION WAS CHALLENGED BEFORE A COORDINATE BENCH OF THIS TRIBUNAL, THE MATTER WAS REMITTED TO THE FILE OF THE COMMISSIONER WITH THE FOLLOWING OBSERVATIONS: WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE BYE LAWS AND REGULATIONS NOW PRODUCED BEFORE US ARE A MATTER OF PUBLIC RECORD. THE ORDER UNDER APPEAL DOES NOT SHOW THAT THE LEARNED COMMISSIONER REQUIRED THE A SSESSEE, A DEVELOPMENT AUTHORITY, TO PRODUCE THESE BYE LAWS AND REGULATIONS. THE ASSESSEE DID NOT HAVE ANY OPPORTUNITY IN THIS REGARD. HOWEVER, SINCE THE BYE LAWS AND REGULATIONS HAVE NOW BEEN PRODUCED BEFORE US, THE ISSUE OF GRANT/CONTINUATION OF REGISTRA TION TO THE ASSESSEE, A DEVELOPMENT AUTHORITY UNDER SEC. 12AA OF THE ACT, REQUIRES TO BE RE - EXAMINED IN THE LIGHT OF THESE BYE LAWS AND REGULATIONS. IT IS ONLY THEREAFTER, THAT THE DECISION WITH REGARD TO THE ASSESSEE SHALL BE POSSIBLE. THEREFORE, IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE TO THE FILE OF THE LEARNED COMMISSIONER, TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW ON CONSIDERING THE BYE LAWS AND REGULATIONS GOVERNING THE ASSESSEE , A DEVELOPMENT AUTHORITY, AS PRODUCED BEFORE US. 5. IN PURSUANCE OF THE AFORESAID DIRECTIONS, THE MATER WAS CONSIDERED AGAIN BY THE LEARNED COMMISSIONER. LEARNED COMMISSIONER, HOWEVER, WAS OF THE VIEW THAT THE ASSESSEE IS ONLY A UTTAR PRADESH STATE GOV ERNMENT AUTHORITY, THAT ITS ACTIVITIES ARE ALSO NOT CHARITABLE PER SE AS IT SELLS LAND ON COMMERCIAL RATES TO EARN PROFITS AND THAT SECTION 12 AA OF THE INCOME TAX ACT, 1961 IS ONLY FOR THE PROCEDURE OF REGISTRATION TO TRUSTS, SOCIETIES, INSTITUTIONS AND IT IS NOT APPLICABLE FOR STATE GOVERNMENT AUTHORITIES LIKE THE ASSESSEE. THE ASSESSEE WAS BACK BEFORE THE TRIBUNAL BUT TO MEET THE SAME FATE I.E. BEING SENT BACK TO THE COMMISSIONER. L EARNED COMMISSIONER THUS DECIDED THE MATTER AGAIN BUT REACHED THE SAME C ONCLUSION. THE ASSESSEE WAS YET AGAIN IN APPEAL BEFORE THIS TRIBUNAL. DISPOSING OF THE SAID APPEAL, VIDE ORDER DATED 1 ST FEBRUARY 2010, A COORDINATE BENCH OF THIS TRIBUNAL, INTER ALIA , OBSERVED AS FOLLOWS: HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE LI GHT OF THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE MATTER IS SQUARELY COVERED BY, INTER ALIA, M/S. KHURJA DEVELOPMENT AUTHORITY, BULANDSHAHR V. CIT, MEERUT (SUPRA), (COPY AT PAGES 21 TO 26 OF THE ASSESSEES PAPER BOOK). IN THAT CASE, HOLDING THAT SINCE THE TRIBUNAL, IN A SIMILAR CASE OF A LOCAL AREA DEVELOPMENT AUTHORITY, HAS HELD THAT TO BE ELIGIBLE FOR REGISTRATION, THE MATTER NEEDED TO BE SET ASIDE TO THE FILE OF THE CIT TO DECIDE IT AFRESH IN ACCORDANCE WITH LAW AND KEEPING IN VIEW THE JUDICIAL I.T.A. NO.: 4231/DEL/2013 PAGE 4 OF 11 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. 5. THE COORDINATE BENCH THEN EXTENSIVELY QUOTED FROM THE AFORE SAID DECISION IN THE CASE OF U.P. AWAS EVAM VIKAS PARISHAD. IT WAS NOTED THAT, AS HELD IN THE SAID DECISION, THE REVENUES OBJECTIONS LIKE THE COMMITTEES AND BOARDS BEING MANAGED BY PUBLIC SERVANTS, COLLECTION OF FINES BY THE COMMITTEE, NO VOLUNTARY CONT RIBUTIONS BY OUTSIDERS WERE WITHOUT SUBSTANCES, AND THAT AT THE STAGE OF THE REGISTRATION, THE LEARNED COMMISSIONER HAS TO ONLY RECORD HIS SATISFACTION ABOUT GENUINENESS OF ACTIVITIES OF THE INSTITUTION AND ITS CHARITABLE PURPOSES. IN THE SAID DECISION, IT WAS ALSO HELD THAT SINCE THE ABOVE CONDITIONS ARE NOT SHOWN TO BE NOT SATISFIED IN THESE CASES, THERE ARE NO HURDLES IN THE REGISTRATION UNDER SECTION 12AA. IT WAS IN THIS BACKDROP THAT THE COORDINATE BENCH YET AGAIN SENT THE MATTER BACK TO THE LE ARNED COMMISSIONER WITH THE FOLLOWING DIRECTIONS: IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING M/S. KHURJA DEVELOPMENT AUTHORITY (SUPRA) AND U.P. AWAS EVAM VIKAS PARISHAD CITED THEREIN, SINCE THE TRIBUNAL, IN SIMILAR CASES OF LOCAL DEVELOPMENT AUTHORI TIES, HAS HELD THAT TO BE ELIGIBLE FOR REGISTRATION, 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. 6. LEARNED COMMISSIONER DID NOT YIELD TO THE LEGAL POSITION EXPLAINED BY THE COORDINATE BENCH. HE AGAIN REITERATED HIS STAND, AND, IN SUPPORT OF HIS REITERATING THE SAID STAND, SET OUT THE FOLLOWING REASONS: THE LEARNED ITAT VIDE HIS ORDER ITA NO. 4042(DEL) 2009 DATED 01.02.2010 REMITTED THE FILE TO THIS OFFICE TO DECIDE REGISTRATION ISSUE U/S. 12AA OF THE I.T. ACT IN ACCORDANCE WITH LAW. THE SECTION 12AA (PROCEDURE FOR REGISTRATION) OF THE I.T. ACT CLEARLY STATES THAT AFTER SATISFYING HIMSELF (COMMISSIONER OF INCOME TAX) ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES COMMISSIONER OF INCOME - TAX SHALL PASS ON ORDER OF GRANTING OR REFUSING THE REGISTRATION ON AS PER LAW. THE ASSESSEE (MDA) WAS GIVEN AN OPPORTUNITY VIDE NOTICE DATED 27.04.2010, HEARING DATE FIXED ON 13.05.2010 (NONE ATTENDED) AND SUBSEQUENT DATES I.E. 21.05.2010, 16.06.2010, 05.07.2010 (NONE ATTENDED) AND 31.08.2010. HOWEVER, MUZAFFARNAGAR DEVELOPMENT AUTHORITY FAILED TO FURNISH COPIES OF THE BYE - LAWS AS REQUIRED FOR ESTABLISHING CHA RITABLE ACTIVITIES CONDUCTED BY THE MDA ACCORDANCE WITH THE BYE LAWS OF THE DEVELOPMENT AUTHORITY. XXX XXXX XXXX DUE TO THE REASONS, FACTS & REASONABLE OPPORTUNITIES GIVEN TO THE MDA, THE MDA IS NOT FOUND TO BE FIT CASE FOR REGISTRATION U/S .12AA. AS I AM OF THE VIEW THE MDA IS A STATE GOVERNMENT AUTHORITY AND IT IS NOT A TRUST/SOCIETY OR INSTITUTION, THE REGISTRATION ALREADY CANCELLED VIDE ORDER DATED 07. 07.2009 WILL REMAIN EFFECTIVE. I.T.A. NO.: 4231/DEL/2013 PAGE 5 OF 11 7. THE ASSESSEE WAS AGAIN IN APPEAL BEFORE THE TRIB UNAL, AND YET AGAIN THE MATTER WAS REMITTED BACK TO THE LEARNED COMMISSIONER. THE REASONS ASSIGNED BY THE COORDINATE BENCH, VIDE ORDER DATED 20 TH MAY 2011, FOR REMITTING THE MATTER BACK TO THE COMMISSIONER WERE AS FOLLOWS: .WE FAIL TO UNDERSTAND IN WHA T SENSE LEARNED COMMISSIONER HAS COMPLIED WITH THE DIRECTIONS GIVEN IN THE TWO ORDERS REFERRED BY US. IN THE ORDER PASSED IN ITA NO.4042/DE/09, ITAT HAS POINTED OUT TEN ORDERS, WHERE SIMILAR AUTHORITIES WERE HELD AS ELIGIBLE FOR REGISTRATION UNDER SEC. 12A A. LEARNED COMMISSIONER OUGHT TO HAVE MADE A REFERENCE TO THOSE ORDERS AS WELL AS THE ORDER OF THE ITAT. HE SHOULD COME OUT WITH PLAUSIBLE REASONS, AS TO HOW THE CASE OF ASSESSEE IS DISTINGUISHABLE FROM THOSE CASES. LEARNED COMMISSIONER INSTEAD OF DOING TH AT EXERCISE DID NOT BOTHER TO MAKE A REFERENCE OF THE PREVIOUS HISTORY. HE FAILED TO POINT OUT AS TO WHY THE CASE OF THE ASSESSEE CANNOT BE TREATED AT PAR WITH THE CASE OF KHURJA DEVELOPMENT AUTHORITY AND OTHER AUTHORITIES. THERE IS FAILURE ON THE PART OF THE LEARNED COMMISSIONER TO CONSIDER ALL THESE ASPECTS IN A LOGICAL WAY. ON THE OTHER HAND, HE HAS REFERRED IN ACTION AT THE END OF THE ASSESSEE IN SUBMITTING THE COPIES OF BYE LAWS AND OTHER DETAILS. WE CONFRONTED THE LEARNED COUNSEL FOR THE ASSESSEE AS TO WHY THE ASSESSEE FAIL TO SUBMIT THESE DETAILS AS OBSERVED BY THE LEARNED COMMISSIONER IN PARAGRAPH 3 OF THE IMPUGNED ORDER. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT COPIES OF THE BYE LAWS WERE SUBMITTED TO THE LEARNED COMMISSIONER IN THE O RIGINAL ROUND OF LITIGATION. IN OUR OPINION, ASSESSEE SHOULD HAVE FILED THESE DETAILS IN THE FRESH ROUND OF LITIGATION. THERE IS CONTRIBUTORY NEGLIGENCE AT BOTH ENDS. WE WOULD HAVE IMPOSED A COST UPON THE ASSESSEE FOR ITS IN ACTION, BUT AFTER HAVING A GLAN CE OVER THE ORDER OF THE LEARNED COMMISSIONER, WE DESIST FROM VISITING THE ASSESSEE WITH COST. TAKING INTO CONSIDERATION ALL THESE ASPECTS, WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER FOR RE - ADJUDICATION. WE DIRECT THE LEARNED COMMISSIONER TO COMPL Y WITH THE DIRECTIONS ISSUED BY THE ITAT IN ITS TWO EARLIER ORDERS EXTRACTED SUPRA. THE ASSESSEE IS DIRECTED TO CO - OPERATE WITH THE LEARNED COMMISSIONER. 8. THE UNDERLYING OPTIMISM OF THE COORDINATE BENCH, THAT BY SO SETTING ASIDE THE MATTER TO THE FILE OF THE LEARNED COMMISSIONER THE DISPUTE WILL FINALLY SEE FINALITY, SEEMS TO BE , WITH THE BENEFIT OF HINDSIGHT, CLEARLY MISPLACED. YET AGAIN, LEARNED COMMISSIONER HAS REITERATED THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA(3). WHILE DOING SO, LEAR NED COMMISSIONER OBSERVED THAT, THE ORDERS PASSED BY THE LEARNED ITAT LUCKNOW BENCH IN THE CASE OF UP AWAS EVAM VIKAS PARISHAD, LUCKNOW AS ALSO IN THE CASE OTHER CASES, COMMONLY HEARD AND DECIDED VIZ. LUCKNOW DEVELOPMENT AUTHORITY, LUCKNOW, KANPUR DEVELOP MENT AUTHORITY, KANPUR, HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE APPEALS ARE PENDING BEFORE HONBLE HIGH COURT AGAINST THE SAME . HE THEN SET OUT ELABORATE ARGUMENTS IN SUPPORT, AND FINALLY JUSTIFIED THE REJECTION ON THE BASIS OF FOLLOWING REASONI NG: THE CONTENTIONS MADE BY THE LEARNED COUNSEL WERE CONSIDERED AND EXAMINED IN THE LIGHT OF RELEVANT PROVISIONS OF THE ACT AND ALSO THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED COUNSEL AND RELEVANT PARTS QUOTED IN WRITTEN SUBMISSIONS AS REPRODU CED ABOVE. AS I.T.A. NO.: 4231/DEL/2013 PAGE 6 OF 11 HAS BEEN DISCUSSED ABOVE IN DETAIL, THE OBJECTS OF THE AUTHORITY CANNOT BE REGARDED AS CHARITABLE. WITH EFFECT FROM 1/4/2003 THE INCOME OF LOCAL AUTHORITIES IS NO LONGER EXEMPT U/S 10(20A) OF THE I.T. ACT, 1961 WHICH IS OMITTED THERE FROM A ND HENCE THE ISSUE OF SEEKING REGISTRATION U/S 12A OF THE I.T. ACT, 1961 CAME. FARTHER, THE OBJECT OF FORMING AN AUTHORITY UNDER THE U.P. URBAN DEVELOPMENT ACT, 1973 WAS TO ENSURE PLANNED DEVELOPMENT OF THE GIVEN AREA AND THERE IS NOTHING IN THE CONSTITUT ION OF THE AUTHORITY TO SUGGEST IF IT IS FORMED FOR ANY CHARITABLE PURPOSES. THE ISSUE FURTHER REQUIRED CONSIDERATION AS TO WHETHER THE AUTHORITY WAS CONSTITUTED TO PROVIDE ANY CHARITY TO THE PUBLIC AT LARGE OR IT WAS MEANT FOR SPECIFYING THE NEEDS FOR HO USING ACCOMMODATION FOR THE PEOPLE OF CONCERNED AREA. THE AUTHORITY DID NOT FURNISH ANY DOCUMENTATION OR MATERIAL IN SUPPORT TO THE CONTENTION IF IT COULD BE TERMED AS A CHARITABLE INSTITUTION OR IF IT HAS WORKED ON THE BASIS OF NO PROFIT MOTIVE. IN VIEW OF FOREGOING DISCUSSION, IT IS EVIDENT THAT THE AUTHORITY WAS ESTABLISHED PREDOMINANTLY FOR COMMERCIAL PURPOSES AND NOT FOR MEETING OUT THE CHARITABLE OBJECTS. THE INCOME FROM THE AUTHORITY IS THUS NOT EXEMPT U/S 12 OF THE I.T. ACT, 1961 AND THE BASIC LA W RELATING TO EXEMPTION U/S 11 IS IN RESPECT OF PROPERTY HELD UNDER TRUST FOR WHICH THE SATISFACTION OF COMMISSIONER OF INCOME - TAX IS REQUIRED ABOUT THE GENUINENESS OF ACTIVITIES S ALSO THEIR CHARITABLE NATURE. IT IS NOT IN RESPECT OF INCOME FROM ANY PART ICULAR ACTIVITY. IF THE REASONING AS GIVEN BY THE AUTHORITY IS FOLLOWED, THEN THE INCOME OF EVEN PRIVATE UTILITY COMPANIES LIKE BSE, TATA POWER AND INFRASTRUCTURE DEVELOPMENT, FINANCE CORPORATIONS, LIKE IDFC MAY ALSO QUALIFY FOR EXEMPTION ON DOING ACTIVIT IES OF GENERAL PUBLIC UTILITY WHICH IS HOWEVER AGAINST THE CLEAR PROVISIONS OF THE STATUTE. RELIANCE IS FURTHER PLACED IN THE CASE OF SAFDURJUNG ENCLAVE EDUCATIONAL SOCIETY VS. MUNICIPAL CORPORATION DELHI (9192) 3 SCC 390, WHEREIN THE HONBLE SUPREME COU RT HAS HELD THAT ACTIVITIES BEING RUN ON COMMERCIAL LINES DO NOT FALL WITHIN THE AMBIT OF CHARITABLE OBJECT. THE OBJECTIVE CLAUSES OF THE AUTHORITY AS DISCUSSED ABOVE ARE IN THE NATURE OF BUSINESS WITH A VIEW TO EARN PROFITS AS HAS BEEN DISCUSSED IN DETAI L ABOVE. THE ACTIVITIES OF MUZAFFARNAGAR DEVELOPMENT AUTHORITY ARE NOT CHARITABLE IN NATURE NOR AN ADVANCEMENT OF GENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2(15) OF THE I.T. ACT, 1961 AS HAS ELABORATELY BEEN DISCUSSED ABOVE. INCOME - TAX IS REQU IRED ABOUT THE GENUINENESS OF ACTIVITIES AS ALSO THEIR CHARITABLE NATURE. IT IS NOT IN RESPECT OF INCOME FROM ANY PARTICULAR ACTIVITY. IF THE REASONING AS GIVEN BY THE AUTHORITY IS FOLLOWED, THEN THE INCOME OF EVEN PRIVATE UTILITY COMPANIES LIKE BSE, TAT A POWER AND INFRASTRUCTURE DEVELOPMENT, FINANCE CORPORATIONS, LIKE IDFC MAY ALSO QUALITY FOR EXEMPTION ON DOING ACTIVITIES OF GENERAL PUBLIC UTILITY WHICH IS HOWEVER AGAINST THE CLEAR PROVISIONS OF THE STATUTE. RELIANCE IS FURTHER PLACED IN THE CASE OF SAF DURJUNG ENCLAVE EDUCATIONAL SOCIETY VS. MUNICIPAL CORPORATION DELHI (9192) 3 SCC 390, WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT ACTIVITIES BEING RUN ON COMMERCIAL LINES DO NOT FALL WITHIN THE AMBIT OF CHARITABLE OBJECT. THE OBJECTIVE CLAUSES OF THE AUTHORITY AS DISCUSSED ABOVE ARE IN THE NATURE OF BUSINESS WITH A VIEW TO EARN PROFITS AS HAS BEEN DISCUSSED IN DETAIL ABOVE. THE ACTIVITIES OF MUZAFFARNAGAR DEVELOPMENT AUTHORITY ARE NOT CHARITABLE IN NATURE NOR AN ADVANCEMENT OF GENERAL PUBLIC UTILITY W ITHIN THE MEANING OF SECTION 2(15) OF THE I.T. ACT, 1961 AS HAS ELABORATELY BEEN DISCUSSED ABOVE. 9. THE ASSESSEE IS NOT SATISFIED AND IS IN YET AGAIN IN APPEAL BEFORE US. I.T.A. NO.: 4231/DEL/2013 PAGE 7 OF 11 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY C ONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 11. WE FIND THAT THE LEARNED COMMISSIONER HAS DECLINED TO FOLLOW OUR EARLIER DIRECTIONS TO FOLLOW THE ORDERS OF THE COORDINATE BENCHES ON THIS ISSUE, ON THE GROUND THAT THE REVENUE AUTHORITIES HAVE NOT ACCEPTED THOSE DECISIONS AND WAS IN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THOSE ORDERS. IN OUR CONSIDERED VIEW, SUCH AN APPROACH ADOPTED BY THE LEARNED COMMISSIONER IS A CONSCIOUS DEFIANCE OF THE LAW AND IT CONSTITUTE S UNACCEPT ABLE DISREGARD TO THE JUDICIAL ORDERS. IF LEARNED COMMISSIONER WAS NOT HAPPY WITH OUR DIRECTIONS, IT WAS OPEN TO HIM TO TAKE UP THE MATTER IN APPEAL BEFORE HONBLE COURTS ABOVE BUT THAT CANNOT BE A GROUND ENOUGH NOT TO FOLLOW THE SAID DIRECTIONS . WHEN A RE FERENCE WAS MADE BY US TO ANOTHER ORDER PASSED BY THE COORDINATE BENCH, WHICH IS EXTENSIVELY REPRODUCED AND CONCURRED WITH, OPE RATIVE PORTION OF SUCH AN ORDER PASSED BY THE COORDINATE BENCH SO REPRODUCED, WAS ALSO AN INTEGRAL PART OF OUR ORDER. IT WAS NOT OPEN TO THE LEARNED COMMISSIONER TO ACT IN DEFIANCE OF OUR ORDERS. YET, INSTEAD OF TAKING UP THE MATTER IN APPEAL BEFORE HONBLE HIGH COURT, LEARNED COMMISSIONER HAS CHOSEN NOT TO FOLLOW OUR DIRECTIONS. SUCH AN APPROACH TO ANY JUDICIAL ORDER IS UNACCEPTABL E AND WE ARE DEEPLY ANGUISHED TO TAKE NOTE OF SUCH A CONDU CT BY THE LEARNED COMMISSIONER, PARTICULARLY AS IT IS FOURTH ROUND OF PROCEEDINGS, IN THIS CASE, BEFORE THE TRIBUNAL. 12. THE QUESTION OF DUE DEFERENCE TO JUDICIAL ORDERS APART, EVEN ON MERITS, TH E GRIEVANCE OF THE ASSESSEE DESERVES TO BE UPHELD. 13. THE SHORT QUESTION THAT IS REALLY REQUIRED TO BE ADJUDICATED, ON MERITS OF THIS CASE, IS WHETHER OR NOT THE LEARNED COMMISSIONER WAS RIGHT IN EXERCISING HIS POWERS UNDER SECTION 12AA(3), IN WITHDRAWI NG THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA . WHILE GROUNDS OF APPEAL ARE NOT HAPPILY WORDED INASMUCH AS THESE GROUNDS DO NOT BRING TO LIGHT THE CORRECT CONTROVERSY AND REFER TO REJECTION OF REGISTRATION UNDER SECTION 12A, THERE IS LITTL E DISPUTE, AS EVIDENT FROM THE ORDER DATED 1 ST FEBRUARY 2010 PASSED BY THE TRIBUNAL IN THE FIRST ROUND OF PROCEEDINGS, THAT THE ISSUE IN APPEAL IS WITH RESPECT TO GRIEVANCE OF THE ASSESSEE AGAINST THE ORDER DATED 7.7.2009 PASSED BY THE LEARNED CIT, MUZAFF ARNAGAR, U/S 12AA(3) OF THE INCOME TAX ACT AND THE APPEAL EFFECT PROCEEDINGS IN CONNECTION WITH THE SAME. IT IS IN THIS BACKDROP THAT WE HAVE REPHRASED THE ISSUE REQUIRING OUR ADJUDICATION AND PUT IT TO THE PARTIES. 14. SECTION 12 AA(3), FOR READY REFERE NCE, IS REPRODUCED BELOW: I.T.A. NO.: 4231/DEL/2013 PAGE 8 OF 11 WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB - SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A, AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF S UCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED 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 15. A PLAIN RE ADING OF THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT IT IS SINE QUA NON FOR EXERCISE OF POWERS UNDER SECTION 12AA(3) THAT EITHER (A) THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE ; OR (B) THE COMMISSION ER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION . CLEARLY, THERE CANNOT BE ANY OTHER REASON, SUSTAINABLE IN LAW, FOR CANCELLING THE REGISTRATION UNDER SECTION 12AA(3). 16. AS WE DEAL WITH THE STATUTORY PROVISIONS REGARDING WITHDRAWAL OF REGISTRATION UNDER SECTION 12 AA(3) BY THE COMMISSIONER, IT IS ALSO USEFUL TO TAKE A LOOK AT THE STATUTORY PROVISIONS OF REGARDING GRANT OF REGISTRATION UNDER SECTION 12 AA(1) BY THE COMMISSIONER. THIS STATUTORY PROVISION IS AS FOLLOWS: (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB - SECTION (1) OF SECTION 12A, SHALL (A) CALL FOR S UCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS 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 TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER IN WRITING RE FUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLICANT : PROVIDED THAT NO ORDER UNDER SUB - CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. 17. IT IS TH US CLEAR THAT BEFORE THE GRANTING REGISTRATION UNDER SECTION 12 AA(1), (A) COMMISSIONER IS REQUIRED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION, AND (B) COMMISSIONER IS REQUIRED TO SATISFY HIMSELF I.T.A. NO.: 4231/DEL/2013 PAGE 9 OF 11 ABOUT THE GENUINENESS OF ITS ACTIVITIE S . WHEN WE COMPARE THESE TWO PRE CONDITIONS FOR EXERCISE OF POWERS UNDER SECTION 12 AA(1), WITH THE PRECONDITIONS FOR EXERCISE OF THE POWERS UNDER SECTION 12AA (3) AS SET OUT EARLIER IN THIS ORDER, WE FIND THAT WHILE COMMISSIONER CAN EXAMINE THE OBJECTS OF THE TRUST OR THE INSTITUTION, AT THE POINT OF TIME WHEN REGISTRATION IS BEING GRANTED, THE COMMISSIONER HAS NO SUCH POWERS AT THE POINT OF TIME WHEN HE SEEKS TO EXERCISE THE POWERS OF CANCELLING REGISTRATION UNDER SECTION 12 AA(3). SO FAR AS OBJECTS OF THE TRUST OR THE INSTITUTION ARE CONCERNED, HE CAN CANCEL THE REGISTRATION ONLY IN A SITUATION IN WHICH, AS MENTIONED IN SECTION 12AA(3), HE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR THE INSTITUTION . AS A COROLLARY TO THIS LEGAL POSITION, IT IS NOT OPEN TO THE COMMISSIONER TO REVISIT HIS DECISION AS TO WHETHER THE OBJECTS OF THE TRUST OF THE INSTITUTION ARE CHARITABLE OR NOT. AS LONG AS ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION, AS THESE OBJECTS EXISTED AT THE POINT OF TIME WHEN REGISTRATION GRANTED, IT CANNOT BE OPEN TO THE COMMISSIONER TO FAULT THE ASSESSEE SO FAR AS OBJECTS OF THE TRUST OR THE INSTITUTION ARE CONCERNED, AND, ON THAT BASIS, CANCEL THE REGISTRATION GRANTED UNDER SECTION 12 AA(1). THE WORDS USED IN SECTION 12AA(3) ARE FREE FROM ANY DOUBT OR AMBIGUITY, AND, AS HELD BY HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF W ELHAM BOYS SCHOOL SOCIETY VS CBDT [(2006) 285 IR 74], THE ONLY POWER UNDER WHICH A COMMISSIONER CAN CANCEL THE REGISTRATION IS POWER UNDER SECTION 12AA(3) AND VALIDITY OF A AN ORDER CANCELLING THE REGISTRATION IS TO BE EXAMINED ON THE TOUCHSTONE OF LEGAL P ROVISIONS SET OUT THEREIN. 16. LET US NOW REVERT TO THE FACTS OF THIS CASE. 17. THE ORDER TRIGGERING THIS LITIGATION BEFORE US IS THE ORDER DATED 4 TH JUNE 2008 IN RESPECT OF WHICH THE MATTER HAS BEEN REMITTED TO THE FILE OF THE LEARNED COMMISSIONER ON TH REE OCCASIONS, BY THE COORDINATE BENCHES, SO FAR. BY WAY OF THIS ORDER, THE REGISTRATION GRANTED TO THE ASSESSEE HAS BEEN CANCELLED BY THE LEARNED COMMISSIONER. THE SUBSEQUENT ORDERS PASSED BY THE LEARNED COMMISSIONER, AS A RESULT OF THE DIRECTIONS OF TH IS TRIBUNAL, ALSO CAN ONLY PERTAIN TO THE CANCELLATION OF REGISTRATION. IN THIS LIGHT, WHEN WE EXAMINE THE REASONS SET OUT IN THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER, RELEVANT EXTRACTS FROM WHICH ARE REPRODUCED IN PARAGRAPH 8 ABOVE, WE FIND THAT THE REASONS FOR THE REITERATING THE SAME STAND, I.E. CANCELLATION OF REGISTRATION, ARE WHOLLY IRRELEVANT SO FAR AS THE PROVISIONS OF SECTION 12AA(3) ARE CONCERNED. WHILE LEARNED COMMISSIONER HAS, ON THE BASIS OF ELABORATE REASONING SET OUT IN THE IMPU GNED ORDER , CONCLUDED THAT, THE OBJECTIVE CLAUSES OF TH E AUTHORITY.. ARE IN THE NATURE OF BUSINESS WITH A VIEW TO EARN PROFITS AND THAT THE I.T.A. NO.: 4231/DEL/2013 PAGE 10 OF 11 ACTIVITIES OF MUZAFFARNAGAR DEVELOPMENT AUTHORITY ARE NOT CHARITABLE IN NATURE NOR ADVANCEMENT OF GENERAL PUBLIC UTILITY WITHIN THE MEANINGS OF SECTION 2(15) OF THE INCOME TAX ACT , NONE OF THESE REASONS, EVEN IF CORRECT, CAN BE LEGALLY SUSTAINABLE BASIS FOR EXERCISE OF POWERS UNDER SECTION 12AA(3). THE ONLY OCCASION TO EXAMINE WHETHER OR NOT THE OBJECTS ARE CHARIT ABLE IS WHEN THE REGISTRATION IS GRANTED IS WHEN EXAMINING THE APPLICATION OF REGISTRATION UNDER SECTION 12AA(1) AND ONCE NO ADVERSE INFERENCE IS DRAWN, VIS - - VIS THE OBJECTS, AT THAT STAGE , THAT ASPECT OF THE MATTER CAN NOT BE EXAMINED AGAIN IN THE COURSE OF EXERCISE OF POWERS UNDER SECTION 12AA(3). 18. CLEARLY, THEREFORE, THE VERY FOUNDATION OF IMPUGNED ORDER IS WHOLLY UNSUSTAINABLE IN LAW. 19. IN ANY EVENT, THE QUESTION AS TO WHETHER AN ACTIVITY OF THE KIND, AS CARRIED ON BY THE ASSESSEE, IS A CHARI TABLE ACTIVITY OR AN ACTIVITY OF GENERAL PUBLIC UTILITY IS NOW COVERED BY HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT DATED 16 TH SEPTEMBER 2013, IN THE CASES OF CIT VS LUCKNOW DEVELOPMENT AUTHORITY (ITA NO. 149 OF 2009 AND 60 OF 2010), CIT VS UP HOUSING & DEVELOPMENT BOARD (ITA NO. 114 OF 2010) AND CIT VS AYODHYA FAIZABAD DEVELOPMENT AUTHORITY (ITA NO. 4 OF 2011 AN 31 O 2010) , WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA , HELD THAT MERE SELLING SOME PRODUCT AT PROFIT (AS HAS BEEN THE ALLEGATION OF THE REVEN UE) WILL NOT IPSO FACTO HIT THE ASSESSEE BY APPLYING PROVISO TO SECTION 2(15) AND DENY EXEMPTION AVAILABLE UNDER SECTION 11, THAT THE INTENTION OF THE TRUSTEES AND THE MANNER IN WHICH ACTIVITIES OF THE CHARITABLE INSTITUTION ARE UNDERTAKEN ARE HIGHLY RE LEVANT TO DECIDE THE ISSUE OF APPLICABILITY OF PROVISO TO SECTION 2(15), AND THAT THE PROVISO TO SECTION 2(15) IS NOT APPLICABLE TO THE FACTS OF AND CIRCUMSTANCES OF THE CASE. LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY ACCEPTS THAT THE FACTS AND CIRCUM STANCES OF THESE CASES ARE IN PARI MATERIA WITH THE FACTS OF THE CASE BEFORE US AND THAT THE ONLY REASON FOR LEARNED COMMISSIONERS WITHDRAWAL OF REGISTRATION IS HIS RELIANCE ON APPLICABILITY OF PROVISO TO SECTION 2(15) WHICH HAS BEEN SPECIFICALLY REJECTED BY HONBLE JURISDICTIONAL HIGH COURT, EVEN THOUGH LEARNED DEPARTMENTAL REPRESENTATIVE RELIES UPON THE ORDER OF THE LEARNED COMMISSIONER. WE ARE, THEREFORE, UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THE OBJECTIONS OF THE REVENUE AUTHORITIES. THE OBJECT S OF THE ASSESSEE INSTITUTION, IN THE LIGHT OF THE LAW LAID DOWN BY HONBLE JURISDICT IONAL HIGH COURT, ARE CHARITABLE OBJECT OF GENERAL PUBLIC UTILITY. THERE IS ALSO NO DISPUTE ABOUT GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE. FOR THESE REASONS ALSO, THE STAND OF THE LEARNED COMMISSIONER CANNOT MERIT OUR APPROVAL. I.T.A. NO.: 4231/DEL/2013 PAGE 11 OF 11 20. FOR THE REASONS SET OUT ABOVE, IN OUR CONSIDERED VIEW, LEARNED COMMISSIONER WAS IN ERROR IN INVOKING HIS POWERS UNDER SECTION 12AA (3) TO CANCEL THE REGISTRATION GRANTED TO THE ASSESSEE . IN EFFECT, T HE CANCELLATION ORDER DATED 4 TH JUNE 2008, AND ALL SUBSEQUENT ORDERS, INCLUDING THE IMPUGNED ORDER DATED 16 TH MAY 2013, GIVING EFFECT TO OUR DIRECTIONS STAND QUASHED, AND REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA STANDS RESTORED . THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 21. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 12 TH DAY OF JANUARY, 2015. SD/XX SD/XX C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI , THE 12 TH DAY OF JANUARY, 2015. COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI