MUMBAI METROPLITAN REGION DEVELOPMENT AUTHORITY, MUMBAI V. DDIT (E) -1(1), MUMBAI

ITA 4394/MUM/2019

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 2132 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 26-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAG VYAS
• Keywords: Maximum Marginal Rate; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 142(1); 234B; 37(1); 12A; 12AA; 250; 274; 143(2); 191; 113; 43; 48; 13; 119; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “D” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER ITA NOs. 4391, 4392,4393,4394 & 4395/MUM/2019 (A.Y: 2010-11, 2012-13, 2013-14, 2014-15 & 2015-16) ITA NOs. 34 & 35/MUM/2020 (A.Y: 2011-12) Mumbai Metropolitan Region Development Authority (MMRDA) Plot No. C-14 & C-15 Bandra Kurla Complex Bandra (E), Mumbai -400051 PAN: AAATM7106R v. DDIT (Exemption) – 1(1) Room No. 519, 5 th Floor Piramal Chambers Lalbaug, Mumbai – 400012 (Appellant) (Respondent) ITA NOs. 4986, 4987, 4988,4989,4990/MUM/2019 (A.Y: 2010-11, 2012-13, 2013-14, 2014-15, 2015-16) ITA NOs. 729/MUM/2020 (A.Y: 2011-12) DDIT (Exemption) – 2(1) Room No. 519, 5 th Floor Piramal Chambers Lalbaug, Mumbai – 400012 v. Mumbai Metropolitan Region Development Authority (MMRDA) Plot No. C-14 & C-15 Bandra Kurla Complex Bandra (E), Mumbai -400051 PAN: AAATM7106R (Appellant) (Respondent) Assessee by : Shri Saurabh Soparkar Shri Madhu Agarwal Shri Ronak Doshi Department by : Shri Parag Vyas Date of Hearing : 06.10.2021 Date of Pronouncement : 03.01.2022 2 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region O R D E R PER BENCH 1. All these appeals are filed by the assessee and revenue against different orders of the Learned Commissioner of Income Tax (Appeals)–3, Mumbai [hereinafter in short “Ld.CIT(A)”] for the A.Ys. 2010-11 to 2015-16. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeals for A.Y. 2010-11 in ITA.No. 4391/Mum/2019 and 44986/Mum/2019 being the lead appeal. 3. Brief facts of the case are that, assessee filed its return of income for A.Y. 2010-11 on 29 th September, 2010 along with the computation of income, Audited income and Expenditure Account and Balance Sheet disclosing ₹.NIL as total income. The return was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) issued and served on the assessee. In response Ld. AR of the assessee attended from time to time and filed the information as called for. 3 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 4. The brief background of the assessee company is, Mumbai Metropolitan Region Development Authority primarily known as MMRDA is a local authority created by the Govt. of Maharashtra by enacting MMRDA Act, 1974. Being the Local Authority in terms of MMRDA Act as well as within the meaning of Section 10(20) and 10(20A) of the Income- tax Act, 1961 it enjoyed the blanket exemption under the Income Tax Act up to the A.Y. 2002-03 as per the then provisions of Section 10(20) & 10(20A). The Finance Act, 2002 deleted the provision of Section 10(20A) along with other provisions and introduced a new definition of Local Authorities u/s. 10(20) wherein Panchayat, Municipality, Municipal Committee and District Boards and Cantonment Boards only are included. In view of the deletion of Section 10(20A) and insertion of new definition of local authority, the authorities like MMRDA were not part of the above definition and the tax authorities considered these authorities as taxable entities. 5. After the amendment, the assessee applied registration u/s 12A and got registered u/s. 12-AA with the DIT (E), Mumbai. Subsequently after being registered u/s. 12-AA of the Act, 1961. MMRDA filed its return of income first time for the relevant A.Y. 2003-04 along with Audited Income 4 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region & Expenditure A/c. and Balance Sheet claiming the status Code 10 of an artificial Juridical Person declaring a NIL total income by claiming exemption u/s. 11 of the IT Act, 1961. In the case of the assessee, the Assessing Officer had denied the Exemption u/s. 11 of the I.T. Act to the assessee for A. Y. 2004-05. In the Assessment Order dated 21.12.2006 passed u/s. 143(3) of the Act elaborate discussion was made. Assessing Officer has also referred the relevant case law i.e. Bombay High Court in the case of Madhav Prasad Nathuran Pandit v. Mohilal Ramchand Mahesee 30 Bom LR 186 AIR 1928 Bom 97, 108 I.C. 482 and Madras High Court in the case of R.Venugopala Reddiar v. Krishna Swamy Reddiar [AIR 1971 Mad 262] in the above said assessment order. 6. Similarly, for this assessment year under consideration Assessing Officer denied the exemption claimed u/s. 11 of the Act with the following observation: - “1) Within the meaning of preamble to the MMRDA Act, 1974, the handing over of ownership, control, management of the MMRDA hitherto belonging to the State Government is considered not to have created a lawful Trust within the meaning of term Trust used for the purpose of Section 11, 12, 12A, 12AA and 13 of the |. T. Act, 1961. 2) The MMRDA was created as a Local Authority within the meaning of term “person” for the purpose of Income-tax Act, 1961 and with effect from its inception to 2002. The MMRDA continues to be Local Authority in the eyes of law. It cannot be considered as a Public Trust or Charitable Trust or Trust of any other kind. 5 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region In view of the nature and activities being carried out by the authority as well as the legal status discussed in the foregoing paragraphs, its claim for Exemption u/s. 11 of the IT Act cannot be entertained. The Registration u/s 12AA has also been cancelled by DIT (Exemption) Mumbai in December 2011, Against the same the assessee has filed an appeal before Hon’ble ITAT, Mumbai which is yet to be decided. The assessee has claimed itself as a Local authority but it cannot be considered as Local! authority within the meaning of section 10(23) of the I. T. Act. Hence, its income from house property, interest, etc. are liable to income tax. In this context it is worthwhile to refer the Allahabad High Court decision in the case of U. P. State Road Transport Corporation vs. Commissioner of Income tax (2006) 286 ITR 350 (ALL.) wherein it has been held that the U. P. State Road Transport Corporation is not a Local Authority within the meaning of section 10(20) of the |. T. Act, 1961 and its income from house property, capital gains and business of supply of goods and services is not exempt to the extent provided in section 10(20) of the |. T. Act. While deciding the issue the decision delivered in the case of Calcutta State Transport Corporation vs. CIT 1996 (219 ITR 515) (SC) and CIT vs. U.P. Forest Corporation (1998) 230 ITR 945 (SC) were followed. In the said case the assessee for the A. Y. 1977-78 had claimed exemption u/s. 11 of the I. T. Act on the basis that the Corporation had been formed for the advancement of an object of general public utility not involving the carrying on any activity for profit. Reliance is also placed on the decision of the apex court in the case of Calcutta State Transport Corporation vs. CIT (1996) 219 ITR 525, wherein the apex court has held that the Calcutta State Transport Corporation, even if it is treated as an “Authority” within the meaning of article 12 of the Constitution of India it is not a local authority under section 10(20) of the Act as it is not a board or a body of port commissioners. The aforesaid view has again been reiterated by the apex court in the case of C/T vs. U.P. Forest Corporation (1998) 230 ITR 945 AIR 1998 SC 1125. In this context it is worthwhile to refer the judgment of Supreme Court of India delivered in the case of Adityapur Industrial Development Authority vs. Union of India & Others (2006) 2002 CTR (SC) 464 wherein it has been held that chargeability of income of the 6 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region authority for plant development of industrial areas and promotion of industries and matters appurtenant thereto in view of omission of section 10(20A) and insertion of explanation to section 10(20) enumerating only local authorities contemplated by section 10(20), assessee, an authority constituted under a state legislation for plant development of industrial area and promotion of industry cannot claim benefit of exemption under those provisions. The nature, constitution and activities of MMRDA is almost exactly the same of the cases referred herein above. Thus, the facts and the issues discussed in the judgments delivered herein above cases squarely covered. In view of the above facts the income of MMRDA is not exempt from tax.” 7. Further Assessing Officer issued show cause notice to the assessee why the definition to amended section 2(15) vide Finance Act, 2008 be applicable to the case of the assessee. 8. In response assessee filed the following detailed submissions before him: - “1. Section 12 (1) of the MMRDA ACT, stipulates the objects of the authority. We are filing herewith relevant portion of the Act for your ready reference. 2. The objects nowhere stipulate that the main or the sole object is development and sale of land and plots for commercial activities. it is further submitted that in course of fulfilling the objects of the entire regional development of Mumbai Metropolitan Region, under the Government Resolution, the assessee authority develops and sells certain plot of land under the directives of Government of Maharashtra (GOM). This fact is duly reflected in the accounts (reviewed by the C&AG) where the lease premium charged on long term lease of the developed land is credited to the account of the State Government and is reflected as the liability. It is not considered as the income of the assessee. 7 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 3. Non–applicability of the proviso to section 2(15) of the Act The proviso to sub-section 15 to Section 2 of the Act reads as under “Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or an activity of rendering any service in relation to a 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.) Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty- five lakh rupees] or less in the previous year,] b. In the above notice you have construed that the Development and sale of land falls within the above proviso. c. It is submitted that the aforesaid activity is nothing but it is furtherance of the main objects of the authority. The assessee authority is formed under the MMRDA Act and it is not a company and hence has no share capital and hence question of distributing any dividend does not arise. Further, the activities are not conducted with a view to earn profit. Further in order to pursue the activities as per objects, the assessee authority needs to have fund, which can be either be in the form of government grants or it can be by the GOM transferring land to the assessee but with an obligation that the proceeds are to be utilised for its objects. Further the proviso can apply if fees, cess etc are collected by the assessee for rendering services to the trade, commerce or business, However, in the present case, the assessee authority, under the directive of the GOM and as per its object of development of entire Mumbai Metropolitan region, is developing said land. Thus in substance the assessee is just pursuing its objects and hence, rendering no services to anyone. Without prejudice, even if services are held to be rendered, it is for the GOM and not for any trade, business or commerce. d. We rely on the decision of Hon, ITAT of Chandigarh in the case of Himachal Pradesh Environment protection and Pollution Control Board vs CIT (42 SOT 343) wherein it was held that 8 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region "In order to invoke second limb of proviso to s. 2(15), ‘rendering of service to trade, commerce or business’ must be such that it has a profit motive—Activities performed by the assessee are regulatory functions for the public good, and any collection of fees or charges in the course of discharging these regulatory functions cannot be viewed as a consideration for rendering these services—There is no substance in the CIT’s stand that the income earned by the assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business-——These are not the services with a profit motive— Assessee is admittedly pursuing the objects for which it was established and it cannot be said that its activities are not genuine” The facts of the aforesaid case are similar to the assessee’s case, the lease premiums received are in the course of discharging its objects and hence the proviso cannot be applied. It is submitted that having regards to the objects, functions and power of the assessee, it can be inferred that the assessee is formed to develop the infrastructure of Mumbai region under the directives of the GOM and that it is not formed with an object of conducting activities to earn profit. Thus, there is nothing in the MMRDA Act that it suggests that “profit motive” is the objective which is the pre- requisite for carting on “business”. 9. During assessment proceedings Assessing Officer observed that there was a survey conducted by ITO (TDS)-2(3), Mumbai on 10 th February, 2011. During the course of the survey it was found that assessee received lease premium against the property from different parties. In this regard assessee was asked to furnish details of lease premium. In response, Ld. AR of the assessee submitted as under: - “The Authority has auctioned land in Bandra Kurla Complex to the various companies and organizations which belongs to Maharashtra Government. Accordingly, whatever lease premium received from 9 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the parties in respect of such land has not been included in the income of the Authority as the same is payable to the Government of Maharashtra. In the books of accounts also, the Authority has given the said treatment as amount payable to the Government of Maharashtra. We are filing herewith details of lease premium received during the year. Further to above the Ld CIT (A) while passing order for A.Y 2009-10 has dealt the issue in para 7, where in lease premium was considered as liability payable to Government of Maharashtra and not taxable as income, the relevant portion of the order is reproduced as under “I have carefully considered the assessment order, submission of the appellant and the relevant case law cited by the appellant. On careful perusal of income I find that lease rental premium were received by the appellant on behalf of the Government of Maharashtra and the appellant was under an obligation to pay the same to Govt. of Maharashtra. I have considered the same and find that there is merit in the contention of the appellant. The AO has not appreciated the figure in the balance sheet and arrived at an erroneous conclusion that lease premium received were not recorded in the books of the appellant. As per the balance sheet submitted by the appellant before me at page no. 39 of the paper book, under the head Current Liabilities and provision — lease premium, the increase in amount payable to the Govt of Maharashtra rose to Rs. 83,03,18,46,534/from Rs. 81,69,94,05,175/- in the earlier year. This is only the lease premium received from Bandra Kurla Complex by the appellant. I therefore hold that the lease premium received by the appellant was ultimately payable to the Govt of Maharashtra only and therefore correctly recorded as liability in the books of the appellant.” 10. After considering the submissions of the assessee, Assessing Officer rejected the submissions made by the assessee and he added the lease premium of ₹.8,30,32,97,896/- to the total income of the assessee considering the fact that revenue was in appeal before ITAT against the order of the Ld.CIT(A). 10 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 11. Further Assessing Officer observed from the Audit Note III that assessee had deposited its surplus funds with the Public Sector Undertakings and the Government of Maharashtra as short term deposits. These term deposits have not been received by on due dates from the Government of Maharashtra / public sector undertakings. Further, no interest was provided on the following deposits for the current year amount to ₹.69.31 Crores. Details are as per the chart given below: - Sr. No. Name Deposit Amount Interest not accounted 1 Maharashtra Co. op. Cotton Growers Marketing Federation Ltd. 335.00 40.03 2. MKVDC 180.00 18.00 3. MSFC 40.00 5.14 4 Maharashtra Film Stage & Cultural Development Corporation 3.17 0.54 5 Government of Maharashtra (SPPL) 89.72 5.38 6 Maharashtra Jeevan Pradhikaran 2.44 0.22 12. Further Assessing Officer observed from the Audited Note IV that assessee has given loan of ₹.76.84 lakhs to MTDC on behalf of the Government of Maharashtra Directive. The MTDC has not refunded this amount till date including interest. Therefore, the interest for the current Financial Year of ₹.7 Lakhs is not provided for. Accordingly, assessee was asked to explain why the accrued and unaccounted interest of ₹.69.38 11 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region crores should not be added to the income for this assessment year. In response assessee filed following submissions: - “The authority has invested surplus amount of Rs 650.33 Cr. as short term deposit with public sector undertaking and Government of Maharashtra. However neither the deposit nor interest thereon has been received. Since there is no certainty of receiving the principal and interest, the same is not accounted for. Interest on loan amounting to ₹.0.07 Cr. given to MTDC an (Govt. of Maharashtra Corporation) is not accounted, as Principal and interest are outstanding from the inception and there is no certainty of receiving the amount. Further it is stated that when the receipt of income is doubtful or there is least probability of income to be recovered then it cannot be brought to tax. For the above proposition we rely of the following decision Godhra Electricity Co. Ltd Vs CIT — 225 ITR 746 wherein Hon. Supreme Court held that Section 5 of the Income-tax Act, 1961 - Income — Accrual of — Assessment years 1969-70 to 1972-73 — Assessee-company a licencee to generate and supply electricity to its consumers, from 1963 enhanced tariff - Suit was filed by consumers which was decreed against assessee ultimately — Supreme Court decided dispute in favour of assessee-company in 1969 — During pendency of litigations assessee though accounting for enhanced tariff could not recover same and even after decisions in its favour in view of Government's advice assessee was prevented from ealizing amounts in question - Ultimately, company was taken over by Government and later transferred to Electricity Board - Whether in above circumstances, since assessee was not able to collect enhanced charges, necessary entries made in its books of account represented only hypothetical income and it could not be brought to tax as it did not represent income which had really accrued even though assessee-company was following mercantile system of accounting UCO Bank vs CIT - 237 ITR 889 — herein Hon Supreme Court held that Section 5, read with sections 119 and 145, of the Income-tax Act, 1961 - Income — Accrual of — Assessment year 1981-82 — Whether 12 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region in view of CBDT circular, dated 9-10-1984, interest on a loan whose recovery is doubtful and which has not been recovered by assessee- bank for last three years but has been kept in a suspense account and has not been brought to profit and loss account of assessee, cannot be included in income of assessee. Further we state that even your predecessor had disallowed the same in A.Y 2008-09 and the same was deleted by Hon. CIT (A) vide order dated 19-07-2011. The relevant para of CIT (A) order is as under “I have duly considered the submission of the appellant's AR. | agree with the submission of the AR that when the principal amount has itself not been received, the assessee is justified in not accounting the accrued interest”. 13. After considering the submissions of the assessee, Assessing Officer rejected the submissions made by the assessee and proceeded to make the addition. Assessing Officer considered the fact that revenue was in appeal before ITAT against order of the Ld.CIT(A). 14. Aggrieved with the above order, assessee preferred appeal before Ld.CIT(A) and before Ld.CIT(A) assessee filed detailed submissions. After considering the detailed submissions of the assessee, Ld.CIT(A) upheld denial of exemption u/s 11 of the Act but on a new ground that activities of the assessee are not charitable in nature. (Pg. 24 -32 of CIT(A)'s Order) The Ld CIT(A) by relying on judicial decisions discussed in his order, wherein proviso to section 2(15) of the Act was invoked, held that the assessee's case come within the ambit of the proviso. (Pg. 32 -38 of 13 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region CIT(A)'s Order). Further, Ld CIT(A) held that the assessee is not agent of the state government (Pg. 46 -51 of CIT(A) Order) relying on the decision in the case of MIDC wherein the High court has held that the decision in the case of CIDCO was per incuriam. The Ld CIT(A) also held that the lease premium received by the assessee on behalf of state government shall be income of the assessee (Pg. 54 - 55 of CIT(A) Order). The Ld CIT(A) also denied the claim of expenses/losses incurred by the assessee even if section 11 was denied by holding that the assessee had not established the fulfillment of condition for claiming expenditure under section 37(1) of the Act. (Pg. 69 of CIT(A) Order). 15. Aggrieved assessee preferred appeal before ITAT raising following grounds in its appeal: - “GROUND 1: 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-3 [CIT(A)] erred in upholding the order passed by the Deputy director of Income Tax — 1(1), Mumbai (“the AO”) of denying the exemption to the Appellant u/s. 11 of the Act on the ground that the activities of the Appellant are not charitable in nature. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding the proviso to section 2(15) applies to the facts of the case and, hence, the Appellant is not eligible for exemption under section 11 of the Act. 3. The CIT(A) erred in holding that the amendment made to section 2(15) by the Finance Act, 2015 is prospective when the same was not relied on by the Appellant and further erred in holding that 14 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region section 11(4A) of the Act is applicable to the facts of the present case, without appreciating that same was not the basis of assessment and not part of appellate proceedings u/s.251 of the Act. 4. The Appellant prays that it be held that the Appellant is a valid Trust in terms of section 11 to 13 of the Act, its activities are charitable in nature and the proviso to section 2(15) is not applicable in the facts of the present case. Accordingly, the AO be directed to allow exemption u/s. 11 of the Act as claimed by the Appellant. GROUND II: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the Appellant is not an agent of the State Government while acting as “Special Planning Authority” as appointed by the State Government under the Maharashtra Regional and Town Planning Act, 1966. 2. The Appellant prays that on facts and in law it be held that the Appellant is an Agent of the State Government while acting as “Special Planning Authority” and hence it cannot be taxed/assessed on income, if any, which accrues or arises to the State Government or any receipts which Appellant receives for and on behalf of the State Government. GROUND III 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO of making addition on account of the lease premium received by the Appellant as income of the Appellant. 2. The Appellant prays that the lease premium received by the Appellant is liability payable to the State Government and cannot be taxed in the hands of the Appellant. GROUND IV: NON-DEDUCTION OF THE EXPENDITURE INCURRED TOWARDS THE OBJECTS WHILE COMPUTING THE INCOME UNDER THE ACT: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the AO of taxing the gross receipts without allowing the expenditure/loss incurred by the Appellant for the purposes of its objects/operations amounting to Rs.2292.03 crores (approx) on the ground that the Appellant had failed to produce documentary evidence that the expenditure is revenue in nature. 15 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 2. The CIT(A) erred in not appreciating that the expenses have been reflected in the accounts of the Appellant and no further notice was issued to the appellant during the appellate proceedings to submit documentary evidence or any further details and ignoring the fact that AO did not given any reason for disallowing said expenditure incurred by the Appellant; 3. The Appellant prays that expenses on object of Appellant as claimed in the Computation of Income be allowed as deduction, in case, exemption w/s.11 is not granted to the Appellant; GROUND V: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in passing appellate order which is perverse on facts and law; 2. the CIT(A) further erred in ignoring binding precedents in Appellant’s own case and not considering or dealing with other decisions cited and relied on by the Appellant; 3. The CIT(A) also erred in observing that Appellant had neither rebutted certain facts or substantiated its claim nor produced documentary evidences to support its various claim/contentions without appreciating that AO had himself not called for the same and he had himself not called up the Appellant in appellate proceedings to substantiate or produce documentary evidences. 4. Therefore, the Appellant prays that the order passed is bad- in-law and is required to be quashed. GROUND VI: DENIAL OF EXEMPTION U/S 1020 OF THE ACT BY HOLDING THAT THE APPELLANT IS NOT A LOCAL AUTHORITY: 1. On the facts and in the circumstances of the case, the AO erred not allowing the exemption U/s. 10(20) of the Act by holding that the Appellant is not a local authority. 2. He failed to appreciate and ought to have held that: As per section 3(3) of the Mumbai Metropolitan Region Development Act, 1974, the Appellant shall be deemed to be a local authority within the meaning of the term “Local Authority” as defined in the Bombay General Act, 1904. Also, section 17(2) of the MMRDA Act states that the Metropolitan Commissioner and the authority shall be deemed to be 16 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the Municipal commissioner and corporation respectively and shall exercise powers of the Municipal commissioner and corporation. 3. Therefore, the Appellant prays that the AO be directed to allow the exemption u/s 10(20) of the Act. GROUND VII: 1. On the facts and in the circumstances of the case and in law, the Appellant prays that the interest levied u/s 234B of the Act of Rs.221,43,96,216 be deleted. GROUND VIII: GENERAL The Appellant craves leave to add to, amends and / or alter the above ground of appeal at the time of hearing.” 16. At the time of hearing, assessee preferred to press only Ground No. 1, 2, 3 and 4, other grounds were not pressed. Accordingly, other grounds are dismissed as not pressed. 17. At the time of hearing Ld. AR of the assessee submitted detailed submissions and also filed written submissions, for the sake of brevity it is reproduced below: - “Ground No. I: Denial of Exemption u/s.11: The AO denied exemption u/s.11 on the ground that Appellant is not a valid trust by relying on his order for AY 2004-05. He further held that proviso to section 2(15) applies as the activity of the Appellant amounts to carrying on trade, commerce or business. The CIT(A) raised the followings issues at Pg. 25 of its orders and, concluded that the Appellant is not eligible for exemption under section 11 of the Act — a) Whether the activities of the Appellant could be considered as 'charitable purpose' within the meaning of section 2(15) of the Act? 17 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region b) Whether the activities of the Trust would be hit by 1 st and 2 nd proviso to section 2(15) of the Act as a result of which the activities cannot be regarded as 'charitable purpose'? c) Whether the amendment to section 2(15) made by the Finance Act 2015 w.e.f. 01/04/2016 would apply retrospectively for the impugned assessment year? d) Whether the activities of the Trust could be held as incidental for the attainment for the object of the Trust and applicability of section 11(4A) of the Act? The findings of the CIT(A) on the aforesaid questions and the submission of the Appellant with respect to each of the issues are discussed as under — a.) Whether Activities of the Appellant could be considered as 'charitable purpose'? Finding of the CIT(A): The CIT(A) held that the activities of the Appellant and providing of the infrastructure facility are in commercial manner with an object to earn / retain the profits and such cannot be regarded as 'advancement of any other object of general public utility' (pg. 27 of CIT(A) order). The CIT(A) inter alia refers to the decision of Jammu Development Authority v UOI (52 SOT 153) and the decision of MIDC (ITA 6552/Mum/2014). The CIT(A) further holds that in the various judicial decisions relied upon by the AR, the issue as to whether the activities of the Appellant are commercial or not, has not been considered and decided by the Courts and, therefore, the said decisions are distinguishable on facts. (Pg. 31-32 of CIT(A) order). Submission of the Appellant: 1. The Appellant submits that the issue of eligibility of exemption under section 11 has been concluded by the decision of the Tribunal from AY 2004-05 to 2008-09 (Pg. 194-219 of PB), for AY 2009-10 (Pg. 223-234 of PB) and High Court order for AY 2006-07 (Pg. 220- 222 of PB) in Appellant's own case. The Tribunal and the High Court have decided the same relying on the decision of Supreme Court in Gujarat Maritime Board (295 ITR 561) [(Pg. 1-6 of Legal Paper Book (`LPB')]. Therefore, the CIT (A) erred in holding that Appellant is not eligible for exemption under section 2(15) of the Act. 2. Further, the DIT(E) had withdrawn registration u/s.12AA on the alleged ground that activities of Appellant are not "charitable" in 18 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region view of the proviso to section 2(15) of the Act. The said order has been revered by the ITAT (Pg. 235 of FPB), thereby restoring registration u/s.12AA and Department appeal to Jurisdictional High Court has been dismissed (LPB Page 665 to 674). Thus, as of today, Appellant is duly registered as charitable trust u/s.12AA. 3. In Surat City Gymkhana (300 ITR 214) (SC) (Pg. 18 of LPB) the Supreme Court has held that registration of a trust u/s 12A once done is a fait accompli and the Assessing officer cannot make further enquiry into the objects of the trust. Therefore, the finding of the CIT(A) that the activities of the Appellant are not in the nature of advancement of general public utility is beyond his jurisdiction. 4. The CIT(A) is not justified in relying on the decisions of Jammu Development Authority v UOI (52 SOT 153) and the decision of MIDC (ITA 6552/Mum/2014) activities of the Appellant are not in the nature of advancement of general public utility. The first judgment deals with the situation of denial of the registration by the CIT as a charitable trust. Inasmuch as, this issue is settled in favour of the appellant by the judgment of the Honourable Bombay High Court, the seed judgement has no relevance. So far as the second order is concerned, the seed decision deals with the issue of applicability of the proviso and, hence the same is dealt with in the subsequent issue. b.) Whether the activities of the Trust would be hit by 1st and 2" proviso to section 2(15) of the Act? Finding of the CIT(A): The CIT(A) held that the Appellant is engaged in the systematic business of allotment of land on lease, providing of infrastructure facility etc. the allotment of land is not made to needy people at free of cost or subsidized rates. (Pg. 33 of the CIT(A) Order) the decisions relied on by the Appellant are all for a period prior to 01.04.2009. The CIT(A) thereafter referred to the decision in the case of Goa Industrial Development Corporation v CIT, Panaji wherein the Tribunal has referred to the earlier decision of the Tribunal in the case of Jalandhar Development Authority (supra). Therefore, the Appellant is hit by the Proviso to section 2(15) of the Act. Submission of the Appellant: 19 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region The Appellant submits that the activities of the Appellant are not in the nature of trade, commerce or business so as to come within the ambit of the proviso to section 2(15) of the Act. 2. The Appellant submits that the Appellant is an Authority which has been setup under a statue (MMRDA Act) and from the provisions of MMRDA Act, it is clear that the Appellant is not carrying on any activity in the nature of business. Reliance is placed on the following clauses of the MMRDA — a. As per the preamble of the MMRDA Act (Pg. 5 of PB), the Appellant has been established for the purpose of planning, co- ordination and supervision of the proper, orderly and rapid development of the areas in the Mumbai Metropolitan Region. b. Section 3 of the Act deals with the provision for establishment of the authority. (Pg. 7 of PB), c. Section 4 provides the composition of the Authority which inter a/ia include the Minister for Urban development, Minister for Housing, Mayor of Mumbai, etc. (Pg. 7 of PB), d. Section 12 deals with the powers and functions of the Authority. (Pg. 13 of PB) e. Section 20 provides that the property, funds and assets of the Appellant is to be held and applied for the purpose of the Appellant. (Pg. 19 of PB). 3. The Appellant may also refer to the MRTP Act under which the Appellant has been appointed as the 'Special Planning Authority' for the certain regions including the Bandra Kurla Complex. The relevant provisions of the MRTP Act are as under - a. The Preamble of the Act inter alia provides that the Act has been made for planning the development of various regions and with a view to ensure that the town planning schemes are made in the proper manner and their execution is made effective. (Pg. 46 of PB) b. Section 3 gives the power to the state government to notify the regions for the purpose of the Act. (Pg. 51 of PB) c. Section 40(1) provides that the State Government may notify any authority as specified therein to be a 'Special Planning Authority' for the purpose of the notified Area. (Pg. 75 of PB). The Appellant has been notified as 'Special Planning Authority' for the region of Bandra Kurla Complex under section 40(1)(c) of the MRTP Act. the 20 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region relevant notification dated 7 th March, 1977 is at Pg. 266-268 of the PB. d. Section 40(3) provides that the provision of chapter VI of the MRTP Act would apply to Special Planning Authority as the apply to a 'New Town Development Authority' appointed under the said Chapter. (Pg. 76 of PB) e. Section 113(3A) of the MRTP Act provides that the New town Development Authority appointed under the said section would Act as an agent of the State Government. (Pg.1 19 of PB). Section 113 (3A) being part of Chapter VI of the MRTP Act would equally apply to the 'Special Planning Authority' such as the Appellant. 4. The Appellant submits that considering the provisions of the MMRDA and the MRTP Act, it is clear that the activity of the Appellant cannot be regarded as trade, commerce or business. 5. The Appellant refers to the Finance Minister's speech (Para 180, Pg. 59 of LPB) and the CBDT Circular No. 11 of 2008 dated 19th December 2008 (Pg. 61 of LPB) to understand the scope of the proviso. The Finance Minister in its speech stated as under: - 180. "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organisations will not in any way be affected. The relevant para of the CBDT Circular No. 11 of 2008 is as under: - Para 3.2. In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 21 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 'charitable purpose' within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. For the above it is clear that only entities carrying on regular trade or business are to be excluded from the ambit of charity and genuine charitable organization would not be affected. The Circular further provide that where the object of 'general public utility' is only a mask or a device for carrying on the activity of trade, commerce or business would the proviso to section 2(15) be attracted. Therefore, the Appellant submits that the scope of the terms trade, commerce or business in the proviso to section 2(15) has to be understood with reference to the Finance Minister speech and the Circular. The said Circular has also been relied on by the Gujarat High Court in DIT(E) Vs. Sabarmati Ashram Gaushala Trust (LPB Page 62 onwards at pages 65 and 66) to decide the scope of the proviso to section 2(15) of the Act. Relevant extract is reproduced as under: - Para 6 The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term "Charitable purposes" and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of "charitable trust". However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application ofproviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Minister's speech in the Parliament. Relevant portion of which reads as under:- 'I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether any entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether 22 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to he regarded as "advancement of any other object of general public utility".' Para 7 In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under: — "3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' ie., the fourth limb of the definition of' charitable purpose' contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with non- members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the 23 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region object of ' general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." Para 8. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term 'charitable purpose' if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as 'charitable purpose'. Para 9 Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating 'surplus' is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The Tribunal took into account the objects of the Trust, which are as under Para 10. The Tribunal also noted that the objects were admittedly charitable in nature. The surplus generated was wholly secondary. It was, therefore, that the Tribunal held that the proviso to section 2 (15) of the Act would not apply. 6. The Appellant submits that the issue of applicability of proviso to section 2(15) of the cases of the authorities like the Appellant is covered in favour of the Appellant by series of decisions of the various High Courts. A Ahmedabad Urban Development Authority v. ACIT(E) (83 Pg. 82-106 of taxmann.com 78) (Guj. HC) (Pg. 103 of LPB) LPB 24 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Para 14 Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body - Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever the income is earned/received by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electricity, road, drainage, water etc. and even the entire control is with State Government and even accounts are also subjected to audit and there is no element of profiteering at all, the activities of the assessee cannot be said to be in the nature of trade, commerce and business and therefore, proviso to Section 2(1 5)of the Act shall not be applicable so far as assessee is concerned and therefore, the assessee is entitled to exemption under Section 11 of the Income Tax Act. Therefore, the question no.1 is to be held in favour of the assessee and against the revenue. Para 15. Now, so far as another question which is posed for the consideration of this Court i.e. whether while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assessee is collecting cess or fees which is regulatory in nature, the proviso to Section 2(15)of the Act shall not be applicable ......... 15.1 Applying the aforesaid decision to the facts of the case on hand and the object and purpose for which the assessee is established/constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. 15.2 Considering the aforesaid facts and circumstances of the case, we are of opinion that the learned Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assessee- AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are 25 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region therefore, answered in favour of the assessee and against the revenue. B CIT v. Jodhpur Development Authority (287 CTR 473) (Raj HC) Pg. 107-115 of (Pg. 1I3ofLPB) LPB Para 28 In the backdrop of settled position of law discussed hereinabove, adverting to the facts of the present case, indubitably, JDA is a statutory body constituted and established under the provisions of Section 3 of JDA Act with a main object to secure the integrated development of Jodhpur Region and for that purpose to discharge inter alia the functions of Urban Planning including preparation of Master Development Plan and Zonal Development Plans; formulation and sanction of the projects and schemes for the development of Jodhpur Region or any part thereof; execution of the project and schemes directly by itself or through a local authority or other agency; coordinating execution of projects or schemes for the development of Jodhpur Region supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme the expenses of which in whole or in part are to be met from Jodhpur Region Development Funds; preparing schemes and advising the concerned authorities, department and agencies in formulating and undertaking schemes for development of agriculture horticulture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicine, tourism and similar other activities; to prepare Master Plan for traffic control and management; devise policy and programmes of action for smooth flow of traffic and matters connected therewith; undertaking housing activity in Jodhpur Region etc., are essentially the functions, which promote the welfare of the general public. Of course, while discharging the said functions, the JDA also discharges function to acquire, hold, manage and dispose of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of Section 51 of the JDA Act, for the purpose of discharging the statutory functions, "The Jodhpur Region Development Fund" is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs 26 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of Section 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region. Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of Section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under Section 12A read with Section I2AA of the Act of 1961. As a matter of fact, it is not even the case of the Revenue that the object of general public utility sought to be achieved by constitution and establishment of the JDA as such, involve carrying on of any activity for profit and therefore, it is immaterial if some income is earned by ancillary and incidental activities, which as per the mandate of the relevant statute, is used for achieving or implementing such object. The genuineness of the activities of the IDA, which are regulated by the provisions of the JDA Act and the Rules made thereunder, cannot be doubted. Thus, the order passed by the ITAT holding the JDA, Jodhpur entitled for registration under Section 12A read with Section 12AA of the Act of 1961, does not suffer from any infirmity or illegality. C Tribune Trust v. CIT (390 ITR 547) (P&H) (Page 152 of LPB) Pg. 116-154 of LPB Para 82. Whether the mandate of the Act is followed by such a trust is a different matter. The facts in that regard are relevant in examining whether the activities of the trust of a given year entitled it to the benefit of the Income Tax Act. Mere profit making on account of certain incidental or ancillary activities of the trust do not disentitle it to the exemptions. The Trust constituted under the PTI Act is likely to make profit on account of its commercial or business activities such as when it acts pursuant to the power under section 28(2) (iii) by disposing off its lands. That, however, does not take it 27 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region out of the definition of 'charitable purpose' in Section 2(15). As we held earlier, trade, commerce and business in Section 2(15) must be such as to involve an element of profit. Profit, however, is not the predominant motive of such trusts. In our view considering the nature of the Act, selling of plots and premises by the trust is only incidental and ancillary to its main purpose which at the cost of repetition is "town improvement" in almost every respect. Even where the plots are developed and premises are constructed and sold at the market price, the activity is not commercial or business venture per se but one necessitated on account of the implementation of the provisions of the trust through statutory schemes. The main purpose of such schemes is driven by public requirements and not as a commercial venture per se. They are incidental to the main object of the trust. D. CIT v. Lucknow Development Authority (38 taxmann.com 246) (Alh) Pg. 168-175 of HC) (Pg. 174 of LPB) Para 26. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on noncommercial lines with no motive to earn profits, for fulfilment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature. 27. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). 28. There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 for the relevant assessment year. E CIT v. Hubli Dharwad Urban Development Authority (ITA No. Pg. 202-225 of 593/2015, order dated 20/02/2019) (Kar HC) (Pg. 221 of LPB) LPB 28 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Para 12. In view of aforesaid dicta what emerges is that the nature of activity of the respondent-assessee must be considered. As already noted, assesse is a statutory authority constituted under the provisions of KUDA 1987. In the circumstances, it is held that despite the insertion of the proviso, the assessee was entitled to continue the Certificate of Registration under Section 12A of the Act, as even though the cbjects of the assessee fall within the limit of any other object of general public utility, but, limit of any other object of general public utility, but, having regard to the aforesaid dicta, it is held that its activity is not for of a commercial nature for the purpose of earning profit, but being statutory body its objects are to ensure orderly development of urban areas of Hubballi Dharwad. In the circumstances, substantial question of law No.1 is answered against the Revenue. 13 As far as substantial question of law No.2 13 concerned, the same has been considered by a coordinate bench of this Court in the case of KIADB, wherein after referring to Section 12AA(3) of the Act, this Court has considered as to the circumstances under which the registration of an entity could be cancelled. In Paragraph 8, it has been held as under. Therefore, it is only if the activities of such trusts or institutions are not genuine or are not being carried out in accordance with the objects of the trust or institution, on being satisfied about the same the registration under Section 12A(1)(aa) of the Act could be cancelled and riot in any other circumstances. In the instant case, the registration of the respondent-entity was sought to be cancelled on the basis of the insertion of the proviso to sub-section (15) of Section 2 of the Act on the premise that the activity carried out by the respondent was purely trade and commerce and for a profit motive. But in the instant case of KIADB, it has been explained that the statutory authority therein was involved in the orderly development of industrial areas and hence, its activity was for the purpose of and in the nature of public utility service. The nature of the respondent-entity has been already discussed. Neither of the circumstances stated above apply insofar as the respondent assessee is concerned. Thus the Commissioner could not have cancelled the Registration Certificate vide order dated 28.11.2011. The Tribunal was therefore justified in setting aside the said order and by allowing assessee's appeal by placing reliance on the judgment of this Court in the case of KIADB referred to above. In the circumstances substantial question of law No.2 is also answered against the Revenue and in favour of the assessee by holding that the Tribunal was right in following the judgment of this Court in the case of KIADB, wherein it has been held that if either of the two 29 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region conditions stipulated under Section 12AA(3) exist then the registering authority is empowered to cancel the registration and not otherwise. Reliance is also placed on Tribune Trust v. CIT (390 ITR 547) (P&H) (Pg. 151 of LPB). Para 74. It cannot possibly be suggested that the Government of Punjab formed the trusts under the Punjab Town Improvement Act, 1922 because it wanted to carry on the business as colonizers or developers under the mask of the category "objects of general public utility". Further, the Tribunal in Bangalore Development Authority v. ACIT (176 ITD 833) at para 5.6.2 (Pg. 243 of LPB) has held as under - Para 5.6.2 (q) It is submitted that the amendment to Section 2(15) was carried out to tax entities wearing the mask of charity but in fact carrying on commercial activities. In the course of budget speech for 2009, Hon'ble Finance Minister observed "The memorandum explaining the provisions of Finance Bill is to a similar effect. While replying into a debate on the Finance Bill, the Finance Minister assured that genuine charitable institutions would not he brought within the ambit of Section 2(15). In the case of Jhansi Development Authority v. DCIT C-4 (123taxmann.com 247) Also, the Tribunal at para 78 (Pg. 529 of LPB) has held as under - "The Government realized need to curb the practice of business houses to claim exemption on the ground that they were carrying out of objects of general public utility and thereby making the benefit of exemption in respect of business carried out by them in the mask of charity and that is why they introduced first proviso to section 2(15) thereby excluding the institutions carrying on the object of the general public utility if their activities involves carrying on the activity of business trade or commerce or the services in relation to business trade or commerce for a cess or fee and even it was also clarified that application or the retention of such income from such activity will be immaterial." 7. The Appellant also relies on the following other decisions of the High Courts and the Tribunals to support the proposition of the Appellant. 1 Sabarmati Ashram Gaushala Trust Vs Asst DIT(E) (362 ITR 539) (Guj HC) 2 GS1 India v. DGIT(E)(360 ITR 138)(Del HC) 30 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 3 Moradabad Development Authority v. ACIT (E)(168 ITD 564 4 Bangalore Development Authority v. ACIT (176 ITD 833) 5 Hoshiarpur Improvement Trust v. ITO (155 ITD 570) 6 Gujarat Cricket Association v. JCIT (E) (101 taxmann.com 453) 7 Surat Urban Development Authority v. DCIT (E)(182 ITD 20) 8 Jhansi Development Authority v. DCIT, C-4 (123 taxmann.com 247) 9 DOT v Mumbai Rail Vikas Nigam Ltd. (ITA No. 2880/M/2019) 10 Belgaum Urban Development Authority v CIT 423 ITR 3738. Further, the Appellant has also submitted an elaborate chart drawing parallel between the MMRDA Act and the Acts pertaining to other development authorities considering which various High Courts have decided the issue in favour of the assessee. For ease of reference, on a sample basis, the Appellant has drawn parallel with: a. Ahmedabad Urban Development Authority (formed under Gujarat Town Planning and Development Act, 1976) [(reported in 396 ITR 323) (Guj)]; b. Jodhpur Development Authority (formed under The Jodhpur Development Authority Act, 2009 [(reported in 278 CTR 473) (Raj HC)]; c. Improvement Trust (formed under Urban Improvement Trust Act, 1959) [(reported in 287 CTR 473) (Raj HC)]; d. Tribune Trust (formed under The Punjab Towns Improvement Act, 1922) [(reported in 390 ITR 547) (P&H HG)] 9. The Appellant submits that the Act under which it is formed is pari-materia with the aforesaid Acts and therefore the decisions rendered by these High Courts also apply with full force to the Appellant. 10. The allegation of the AO and the CIT(A) that the land has been sold by the Appellant by way of an auction and allocated to the highest bidder, makes the activity of the Appellant in the nature of trade, Commerce or business is an incorrect conclusion of the Revenue Authorities. The Appellant submits that this issued is covered in favour of the Appellant by the decision of the Gujarat HG in the case of Ahmedabad Urban Development Authority v. ACIT(E) (83 taxmann.com 78) (Pg.89 of LPB) wherein it is held that merely because the land is sold by auction does not make the activity of the institution as business. The High Court as held as under - 31 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 7.10 It is further submitted by Shri Soparkar, learned Senior Advocate for the assessee that one another reason assigned by the learned Tribunal while holding that activities carried out by the assessee is in the nature of trade, commerce or business is that the assessee is selling lands by public auction. It is submitted that while holding so, learned ITAT has not properly appreciated the fact that sale of land by the assessee is in the mode to recover the cost of the scheme and is expressly prescribed under Section 40(3) (i) (a) (iv) r. w.s. 40(3) 0)) (b) of the Gujarat Town Planning Act. It is submitted that the lands are sold by public auction as mandated in catena of decisions of the Hon'ble Supreme Court as well as this Court and so as to avoid any allegation of favoritism and so as to get maximum amount, which is required to be used only to carry out the development in the Urban Development Area. It is submitted that while selling the lands by auction and that too as permitted under the provision of Town Planning Act there is no element of profitering but it is only for recovery of cost only. It is submitted that even the entire amount realized by selling the lands to the extent of 15% of the Urban Development Area, is required to be used by the assessee only to carry out the development work and other amenities/facilities to be provided like road, drainage, streetlight etc. It is submitted that therefore, the activities carried out by the assessee cannot be said to be profitering and/or in the nature of trade, commercial or business. In support of his above submission, he has relied upon the decision of the Division Bench of this Court in the case of Ahmedabad Green Belt Khedut Mandal v. State of Gujarat through Secretary 2001 (1) GLR 888 (paras 37 & 38). 7.11 It is submitted by Shri Soparkar, learned Senior Advocate for the assessee that by permitting the AUDA to sell the plots that is on element of profiter has been negatived by the Hon'ble Supreme Court in the case of Ahmedabad Municipal Corpn. v. Ahmedabad Green Belt Khedut Mandal [2014] 7 SCC 357. It is submitted that therefore, also the activities carried out by the assessee cannot be said to be in the nature of trade, commerce or business, which can take away the assessee from the purview of charitable institution/charitable purpose as per Section 2(15) of the Act ... 13. Applying the aforesaid decisions to the facts of the case on hand and with respect to the activities of the AUDA - Ahmedabad Urban Development Authority under the provisions of the Gujarat Town Planning Act by no stretch of imagination, it can be said that the activities of the assessee (AUDA) can be said to be in the nature of trade, commerce or business and/or its object and 32 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region purpose is profiteering. Merely because under the statutory provisions and to meet with the expenditure of Town Planning Scheme and/or providing various services under the Town Planning Scheme, such as road, drainage, electricity, water supply etc. if the assessee is permitted to sale the plots (land) to the extent of 15% of the total area under the Town Planning Scheme and while selling the said plots they are sold by holding the public auction, it cannot be said that activities of the assessee is profiteering, to be in the nature of trade, commerce and business Similar view is taken by the Punjab & Haryana High Court in Tribune Trust v. CIT (Pg. 116-154 of LPB). The Court at para 71 (Pg. 150 of LPB) held as under— Para 71 ........The Tribunal then dealt with the main contention of the revenue that the assessee was involved in the activities of developing and selling the residential and commercial units with the sole aim of making profits. The conclusions of the Tribunal in this regard are as follows; the profit on sale does not necessarily imply profit motive in the activities of the assessee. What is important is the motive or the predominant object of the activities. The bids are invited by the assessee who allots the plots to the highest bidders. This, however, is because it is not desirable for the State to subsidise its businesses. A bidding process ensures transparency in the functioning of the trusts and therefore, it does not make the bidding process a commercial venture. Further the bids are invited only in the context of commercial units. Under the Rules there is a formula on the basis of which the price is worked out. The revenue did not deny the same but alleged that the profit motive is embedded in this formula as shown by the adjustments for various charges. The Appellant further relies on para 48 of CIT(E) v. Yamuna Expressway Industrial Development Authority (395 ITR 18) (All HC) (Pg.190 of LPB) wherein the court has held as under - Para 48. In the context of Lucknow Development Authority (hereinafter referred to as "LDA") a statutory body constituted under UP. Urban Planning and Development Act, 1973 (hereinafter referred to as "UPUPD Act, 1973") in CIT v. Lucknow Development Authority, 2014 (2) AU I 578, a question arose whether it would be entitled for registration under Section 12A/12AA. On behalf of Revenue, it was argued that LDA is engaged in activities of acquiring land, developing plots, constructing residential as well as commercial places and selling thereto. Sales are also undertaken through auction process and 33 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region sold to highest bidder, to earn more and more profits. Said activities are trade in nature and liable to tax. Revenue sought to equate LDA with private colonizers and builder. On behalf of LDA various provisions of UPUPD Act, 1973 were placed. This Court held that expression 'general' under Section 2(15) means pertaining to whole class. Advancement of any object or purpose to benefit public or a section of public is distinguished from benefit to an individual or group of individuals. Expression "charitable purpose" would prima facie include all objects which promote welfare of general public. The Appellant also, relied on para 5.6.5 of Bangalore Development Authority v. ACIT (176 ITD 833) (Pg. 244 of LPB) wherein the court has held as under - Pam 5.6.5 One important issue that has prompted the AO to hold that the activity of sale of corner sites is commercial in nature is the sale of corner sites by the 'BDA' through the process of auction. In this regard, the learned AR submits that this is done as a policy and rule in order to ensure transparency in allotment of corner sites. It is a well known and accepted fact that corner sites have better value than other sites and are generally sought after. This rule was brought in to ensure that officials who are in- charge of allotment of sites, do not have any discretion in allotment of corner sites and hence the process of auction. The process of auctioning of corner sites in fact supports the stand that 'BDA' is an organization which does not have profit making as its objective and at the same time to ensure that the public exchequer is not deprived of its due revenues. 11. The CIT(A) also wrongly held that activities of Appellant like construction of flyovers, infrastructural facilities, etc. were performed in commercial manner with an intention to earn profits. He failed to appreciate that Appellant did not charge any fee for use of such flyover or generate any profits from the same and, therefore, there can be no question of the construction of the infrastructure facility being a commercial activity. 12. The Decisions relied on by the CIT(A) to decide the issue against the Appellant are dealt with here under - a. Goa Industrial Development Corporation v CIT - the Appellant submits that the said decision has been reversed by the HC in 421 ITR 676 (Pg. 657 LPB). Although the decision has been reversed on the ground that CIT has no jurisdiction to apply proviso to sec. 2(15) to cancel registration, none the less, the decision of the Tribunal has become non-est and, hence, cannot be relied upon. 34 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region b. Jalandhar Development Authority - the Appellant submits that the said case has been considered in Ahmedabad Urban Development Authority v ACIT 396 ITR 323 (Guj) @ Pg. 14, Jhansi Development Authority v. DCIT, C-4 (123 taxmann.com 247) and DCIT v Mumbai Rail Vikas Nigam Ltd. (ITA No. 2880/M/2019). In the case of, Gujarat Cricket Association v JCIT 101 Taxmann.com 453 (Ahd) @ para 37 (Pg. 314 of LPB) the Tribunal has held that the decision of Jalandhar Development Authority not a binding precedent as the contrary view in the case of 1-Joshiarpur has been considered and approved by the P & H HC. Further, the Tribunal in this has recorded a finding of fact that the assessee therein was purchasing land at low rates and selling the same at higher rates. Whereas in MMRDA's case, the assessee has not purchased the land and the land has been vested on the assessee by the Government. c. Jammu Development Authority - the Appellant submits that this decision deals with the case of registration of a authority unfed section 12A and not with respect to the applicability of proviso to section 2(15). Secondly, the Appellant submits that the said case the High Court has given a finding that the Assessee therein was not acting to advance any object concerning general public utility. (Pg. 15 of PB of adverse decision) Thirdly, this decision has been considered by the other High Courts in Ahmedabad Urban Development Authority v ACIT (supra) and tribune Trust vs. CIT(supra). The Rajasthan High Court in CIT v. Jodhpur Development Authority (supra) while distinguishing the decision of the Jammu Development Authority as held as under - Para 26 Coming to the decision of Jammu & Kashmir High Court in Jammu Development Authority's case (supra), relied upon by learned counsel for the Revenue, reveals that the appeal preferred by the Jammu Development Authority was dismissed by the court observing that there are findings of facts that the assessee-appellant has not been acting to advance any of the object concerning general public utility. Further while referring to first proviso to Section 2(15), the court has observed that "we find that no substantial question of law much less a substantial question of law would emerge from the impugned order of Income Tax Appellate Tribunal warranting admission of the appeal. "A bare perusal of the order reveals that the catena of decisions of the Hon'ble Supreme Court referred to hereinabove, interpreting the effect of first proviso in context of the main provision of Section 2(15), which defines 'charitable purpose', were not brought to the notice of the court and therefore, the said order passed by the court by merely recording its ipse dixit does not help the Revenue in any manner. 35 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Further, even Punjab and Haryana High Court in Tribune Trust v. CIT (390 ITR 347) (supra) while distinguishing the decision of the Jammu Development Authority as held as under: (Pg.152 of LPB) Para 84 Mr. Goel relied upon the judgment of the High Court of Jammu & Kashmir in Jammu Development Authority v. Union of India [IT Appeal No. 164 of 2012]. The Division Bench dismissed the appeal with the following order:- 1. The instant appeal under section 260-A of the Income-tax Act, 1961 (for brevity, the Act) is directed against order dated 14.062012 passed by the Income Tax Appellate Tribunal, Amritsar, upholding the order withdrawing the status of Charitable Institution given to the appellant-assessee under Section 12AA(1)(b)(i) of the Act. The Tribunal has reached a categorical conclusion that the assessee-Jammu Development Authority cannot be regarded as an institution or trust which may have been set up to achieve the objects enumerated under Section 2 of the Act particularly in view of the addition of first and second proviso made by the Finance Act, 2008 w.e.f 1. 04.2009 to Section 12AA of the Act. There are findings of fact that the assessee-appellant has not been acting to advance any of the object concerning general public utility. Even otherwise the proviso which has been added by the Finance Act, 2008 w.e.f 01. 04.2009 stipulates that the advancement of any other object of the general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade commerce or business or any activity of rendering any service in relation to any trade, commerce or business or a cess or fee of any other consideration. 2. We find that no question of law much less a substantial question of law would emerge from the impugned order of the Income Tax Appellate Tribunal warranting admission of the appeal. The appeal is wholly without merit and is thus liable to be dismissed. 3. For the reasons aforementioned, this appeal fails and same is dismissed along with connected application(s)." The judgment is of no assistance to the appellant for the Division Bench observed that there were findings of fact that the assessee/appellant had in that case not been acting to advance any object concerning general public utility. The judgment was, therefore, based on the facts of this case. It is obviously for this reason that the Division Bench held that no question of law much less a substantial question of law emerged from the order of the 36 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Tribunal. It is difficult to understand how this order can possibly be relied upon as laying down any law when Court itself records that the order impugned therein is based on the facts of that case. The dismissal of the Special Leave Petition filed against that order is, therefore, of no assistance to the Revenue either. The Appellant submits that merely because in one development authority like in Jammu, the High Court on facts held that said authority was not advancing objects, it cannot be implied that all other authorities also would not carry out their activities. Therefore, the Appellant submits that the decision of Jammu Development Authority is not applicable to the facts of the present case. d. MIDC v DIT (ITA No. 6552/M/2014) — the Appellant submits that this decision of the Tribunal is no longer good law as the Gujarat High Court in the identical authority i.e. GIDC (Pg. 155-167 of LPB) (reproduced below) has held that the activity of the authority does not come within the ambit of the proviso to section 2(15) of the Act. Similar view has been expressed by other High Courts which are enumerated below. Further, the reasoning given by the Tribunal in Para 27 of the decision that MIDC is carrying on business as it is selling land by way of an auction has been rejected by the High courts in Ahmedabad Urban Development Authority v. ACIT(E) (supra), Tribune Trust v. CIT (supra), etc. as submitted in detail in para 6 above. Therefore, the Appellant submits that the decision of the High Court will have a precedence over the decision of the Tribunal. e. CIT v. Gujarat Industrial Development Corporation (83 taxmann.com 366) (Guj HC) (Pg. 165 of LPB) Para 15. It cannot be said that the activities carried out by the assessee can be said to be for "advancement of any other object of general public utility". Considering the object and purpose for which the assessee has been established under the provisions of the Act and the activities carried out by the assessee, it cannot be said that the activities carried out by the assessee can be said to be either in the nature of trade, commerce or business, or rendering any services in relation to any trade, commerce or business for a Cess- or Fee or any other consideration so as to attract proviso to Section 2 [15] of the IT Act. 16. Identical question came to be considered by Division Bench of this Court in the case of Ahmedabad Urban Development Authority v. Asstt. CIT (Exemption) [2017] 83 taxmann.com 78 and other allied Tax Appeals, by which with respect to the Urban Development Authority established and constituted under the provisions of the 37 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Gujarat Town Planning & Urban Development Act, 1976, it is held that the activities carried out by the Ahmedabad Urban Development Authority cannot be said to be for commercial purpose and proviso to Section2 [15] of the IT Act shall not be applicable and that the said Ahmedabad Urban Development Authority shall be entitled to exemption under Section 11 of the Act. Division Bench of this Court also observed and held that merely because AUDA is charging fees and/or cess, the activities cannot be said to be in the nature of trade, commerce or business and consequently held that the proviso to Section 2 [15] of the Act shall not be applicable, and therefore, the assessee is entitled to exemption under Section 11 of the Act... 17. Applying the aforesaid decision to the facts of the case on hand and the objects and purpose for which the assessee- Corporation is established and constituted under the provisions of the Gujarat Industrial Development Act, 1962 and collection of fees or cess is incidental to the object and purpose of the Act, and even the case would not fall under the second part of proviso to Section 2 [15] of the IT Act. As the activities of the assessee is for advancement of any other object of general public utility, the same can be for "charitable purpose" and therefore, the assessee Corporation shall be entitled to exemption under Section 11 of the Act. No error has been committed by the learned Tribunal in holding so. We are in complete agreement with the view taken by the learned Tribunal. f. CIT(E) v. Yamuna Expressway Industrial Development Authority (395 ITR 18) (All HC) (Pg 191 of LPB, Para 51-71) Para 51. We would now examine in the light of above "definition" as explained by CBDT vide Circular dated 19 th December, 2008 and exposition of law, discussed above, whether an IDA constituted under a provincial enactment, on the subject of Industrial Development, would satisfy requirement of Section 2(15) of Act, 1961 and would not be disqualified by attracting proviso thereto. Pam 71. Entire discussion, if we summarize, can be placed in a small arena of judicial analysis, that is, a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for "charitable purposes" and seek registration under Section 12A(1) of Act. g. Karnataka Industrial Area Development Board v. ADIT(E)(121 taxmann.com 88) (Kar HC) (Pg. 200 of LPB) 38 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Para 7. We have considered the submissions made by learned counsel for the parties and have perused the records. Admittedly, the assessee is a statutory body, which is established and incorporated under section 5 of the KIAD Act. The assessee has been constituted to make provision for orderly establishment and development of Industries in suitable areas in the State of Karnataka. Section 6 of the KIAD Act deals with the constitution of the Board of the Assessee, which provides that the officers of the State Government, namely, the Secretary to the Government of Karnataka, Commerce and Industries, Department who shall ex-officio be the Chairman of the Board, the Secretary to the Government of Karnataka, Finance Department, the Secretary to Government, Housing and Urban Development Department, the Commissioner for Industrial Development and Director of Industries and Commerce, the Chairman and Managing Director, Karnataka State Industrial Investment and Development Corporation Limited, the Chairman, Karnataka State Pollution Control Board, the Director of Town Planning, the Managing Director, Karnataka State Small Industries Development Corporation Limited, the Managing Director, Karnataka State Financial Corporation, the Executive Member of the Board and two nominees of the Industrial Development Bank of India shall be the members of the Board of the assessee. Thus, the assessee is virtually controlled by the State Government. From perusal of section 13 of the Act, it is evident that the function of the Board is to promote and assist in the rapid and orderly establishment, growth and development of Industries and to provide industrial infrastructural facilities and amenity in the industrial areas. The Board of the assessee is also under the obligation to undertake schemes or programmes jointly with the Government or local or statutory authorities or on an agency basis as it considers necessary. Section 17 of the KIAD Act empowers the State Government to issue directions to the Board for carrying out the purposes of the Act which are binding on the Board. Section 18 of the Act mandates that all property, fund and other assets vesting in the Board shall be held and applied by it, subject to provisions and for the purpose of the Act. Thus, from the provisions of the Act, it is axiomatic that the Board of the assessee functions under all pervasive control of the State Government. The Board has been constituted to carry out the activities towards public purpose, namely, orderly establishment and development of Industries in suitable areas in the State. 8. The Tribunal, inter alia by taking into account the provisions of the Act, has held that the primary and dominant object of the assessee is not profit making. It has further been held that income side of income and expenditure account shows that the main component of income of the assessee is derived in the form of 39 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region interest of Rs. 131.17 crores and the interest of fixed deposits is Rs. 120.90 crores. Therefore, there is no profit element in earning income as interest. It has also been noticed that the income of the assessee comprises of repairs and maintenance, administrative expenses, water and electricity charges, special and other charges, depreciation. It has also been held by the Tribunal that the assessee has been established to promote rapid and orderly development of industries in the State and to assist in implementation of the policy of the Government within the purview of the KIAD Act, to facilitate in establishing infrastructure projects and to function on 'No Profit- No Loss' basis. It has also been held that the State Government acquires the land for the scheme of the assessee and hand over the same to the assessee after the acquisition for the development of the industrial area. The Tribunal has further held that the profit making is not the driving force or objective of the assessee. The Tribunal has therefore, recorded the conclusion that the assessee is engaged in the charitable activity through advancement of an object of general public utility and therefore, has concluded that the Proviso to section 2(15) of the Act is not applicable to the case of the assessee and has further held that the assessee is entitled to benefit of Section 11 u/ the Act. It has also been noticed that the Assessing officer has not disputed that the assessee fulfills the conditions, which is necessary for allowing the exemption of the deductions applicable under the Act except Proviso to Section 2(15) of the Act. Thus, the Tribunal has held that the Proviso to section 2(15) of the Act is not applicable to the case of the assessee. h. Without prejudice, the Appellant submits that, even if it is held that two non- jurisdictional High Court have taken different views, then also, the view in favour of the assessee ought to be adapted. (CIT v. Vegetable Products Ltd. (88 ITR 192) (SC). Similar view has been expressed by the Tribunal in Bangalore Development Authority v ACIT 176 ITD 833 at para 5.10.5, Pg. 248-249 of LPB and Jhansi Development Authority v DCIT 123 Taxmann.com 247 at para 56, Pg. 577 of LPB. c.) Whether the amendment to section 2(15) made by the Finance Act 2015 w.e.f. 01/04/2016 would apply retrospectively for the impugned assessment year? Finding of the CIT(A): The CIT(A) has held that the amendment to section 2(15) made by the Finance Act 2015 w.e.f. 01/04/2016 would apply prospectively and, hence, would not apply to the relevant year. (Pg. 38 of the CIT(A) Order) 40 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Submission of the Appellant: The Appellant submits that this issue is consequential to the above issue of applicability of the proviso to the Appellant. d.) Whether the activities of the Trust could be held as incidental for the attainment for the object of the Trust and applicability of section 11(4A) of the Act? Finding of the CIT(A): The activities of the Appellant which are in the nature of business, trade or commerce i.e. leasing, infrastructure development, etc. are not incidental to the main objects but are itself the main objects. Further, and in any case, as the Appellant has not prepared separate accounts under section 11 (4A) for such activity, the Appellant is not eligible for exemption under section 11 of the Act. Submission of the Appellant: The Appellant submits that it has already made its submission that the activities of the Appellant are not in the nature of trade, commerce or business. Further, as the Appellant is carrying on only one activity i.e development of MMR region, there is no question of maintaining any separate books of account. Appellant relies on observation of the Delhi High Court in GS1 India Vs. DIT(E) (LPB Page 69 onwards) Para 30 at Pages 79-80 of LPB The learned Special Counsel for the Revenue made certain submissions and relied upon certain which are dealt with in the later part of these submissions. The Appellant also submits that the Department cannot go beyond the CBDT Circular as well. Ground No. 2: The Appellant is as an agent of State Government while acting as Special Planning Authority Finding of the CIT(A): The CIT(A) simply relied on decision of Supreme Court in Adityapur Industrial Area Development Authority Vs UOI (153 Taxman 107) which was followed in case of Jammu Development Authority Vs. UOI (89 CCH 402) and referred to by the Bombay High Court in MIDC's case (ITA No. 10 of 2016) to hold that the Appellant cannot be regarded as the agent of the Government. (pg. 46 —51 of the CIT(A)'s Order) 41 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Submission of the Appellant: 1. The Appellant's case on agency is based on the provision of the MRTP Act. The Appellant has been notified as 'Special Planning Authority' for the region of Bandra Kurla Complex under section 40(l)(c) of the MRTP Act. The relevant notification dated 7 th March, 1977 is at Pg. 266-268 of the PB. It is clear from the notification that the Appellant has been appointed as 'Special Planning Authority' in place of City and Industrial Development Corporation of Maharashtra Ltd. 2. Section 40(3) provides that the provision of 'chapter VI' of the MRTP Act would apply to Special Planning Authority as the apply to a 'New Town Development Authority' appointed under the said Chapter. (Pg. 76 of PB). The same is also mentioned in para 2 of the notification dated 11111 April, 1977 (pg. 300 of FPB) 3. Section 113 (3A) of the MRTP Act provides that the New town Development Authority appointed under the said section would Act as an agent of the State Government. (Pg.119 of PB). Section 113(3A) being part of Chapter VI of the MRTP Act would equally apply to the 'Special Planning Authority' such as the Appellant. Therefore, the Appellant submits that while acting as the new town development authority, the Appellant is acting as an agent of the Government of Maharashtra and, therefore, the receipts/payments by the Appellant while acting as the 'special planning authority' is on behalf of the Government of Maharashtra and not appellant's own income / expense. 4. This issue is covered by the following decisions - a. City and Industrial Development Corporation (138 ITD 381)(TMum)(Pg. 347-364 of LPB), wherein the Mumbai Tribunal, following the decision in Percivial Joseph Pereira (Pg. 365-410 of LPB), has inter alia held CIDCO as an agent of State Government and, therefore, the receipts, etc. while acting as an agent is not chargeable to tax in the hands of the Appellant. The fact that the Appellant has been appointed in place of CIDCO leaves no doubt in the matter that the decision is applicable to the Appellant. The Tribunal in CIDCO's case also relied on article 289 of the Constitution to decide the issue in favour of the assessee therein. However, the Appellant in the present case, submits that the Appellant is relying only on the finding with respect to the agency to support its case. b. Percivial Joseph Pereira v the Land Acquisition Officer (ITA No. 1211/209) (Pg. 365-390 of LPB) & (LA No. 184/2010) (Pg. 391- 410 of LPB) - the issue before the High Court was whether CIDCO 42 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region was a necessary part in the land acquisition proceedings for acquisition of land at Navi Mumbai wherein CIDCO was appointed as "New Town Development Authority". The Single and the Division Bench of the Bombay High Court held that as per section 113(3A) of the MRTP Act, CIDCO is merely an agent of the state Government and, hence, once, the principal i.e. State Government is party to the land acquisition proceedings, CIDCO being an agent is not a necessary party. c. Tata Motors Limited Vs. Talathi of Village Chikhali and Others (Civil appeal No. 10187 of 2010) (Pg. 411 —431 of LPB) - the Supreme Court has held that an authority acting under section 113(3A) of the Act acts as an agent of the state Government. 5. The Appellant submits that CIT(A) failed to appreciate that the Appellant's claim of agency was not made on basis of Article 289 of the Constitution of India and, hence, the decision of Supreme Court in Adityapur Industrial Area Development Authority Vs UOI (supra), holding that the Authority therein was not a state and, hence, benefit of A. 289 of the Constitution would not be available is of no relevant. The Appellant's claim of being an agent of Government was based on the provision of the MRTP Act (Section 113(3A) r.ws. 40(1)(c) and 40(3)) and the Government Resolutions issued by the Government from time to time. 6. The Appellant further submits that the decision of the Bombay High court in the case of MIDC (ITA NO. 10 of 2016) is not applicable to the facts of the present case. The Appellant submits that the Question of law raised by MIDC in the said appeal is with respect to applicability of A. 289 of the Constitution of India. The High Court held that to the extent that the Tribunal has given a finding that CIDCO has given a finding that CIDCO is entitled to benefit of A. 289 of the Constitution of India, the same is contrary to the decision of the Apex Court in the case of Adityapur Industrial Area Development Authority Vs UOI (153 Taxman 107). However, there is no finding in the decision of the High Court with respect to CIDCO being agent of government of Maharashtra on the basis of section 113(3A) of the MRTP Act. Therefore, the Appellant submits that the decision of MIDC is not applicable on the facts of the present case. 7. The CIT(A) ignored the direct decision of Supreme Court in Tata Motors Limited Vs. Talathi of Village Chikhali and Others (supra) and the decisions of the High Court in Percival Joseph Pareira Vs. the Special Land Acquisition Officer(supra) wherein the courts have specifically held that an authority acting as per section 113(3A) of the MRTP Act is acting as an agent of state Government. 43 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 8. The learned Special Counsel for the Revenue made certain submissions and relied upon certain which are dealt with in the later part of these submissions. Ground No. 3: Lease premium not income of the Appellant: Finding of CIT(A): Appellant are without considering the decision of Apex Court, without stating as to which decision is being referred to by the CIT(A). (Pg. 52 — 55 of CIT(A)'s Order) Submission of the Appellant: 1. The Appellant submits that the activities of Appellant has remained same and in all the year up to assessment year 2008-09, the Department had accepted the stand that of the Appellant that lease premium is not income of the Appellant but a liability payable to the state Government. In fact, accounts of the Appellant are also subject to audit by C&AG of India and no adverse observations have been made in respect of lease premium reflected as liability payable to GOM. 2. In assessment year 2009-10, when AO first time added the same to income of the Appellant, the CIT(A) deleted addition and the Tribunal in Appellant's own case dismissed appeal filed by Department vide order dated April, 2019 (Pg. 223-234 of PB) Reliance is also placed in the case of MIDC v DCII (99 taxmann.com 5) (Pg. 619 - 648 of LPB) wherein, on the similar issue, the Tribunal has decided in favour of the assessee. Ground No. 4: Non-Deduction of the expenditure incurred towards the objects while computing the income under the Act. The AO while denying exemption u/s. 11 of the Act assessed the Appellant without deduction of any expenditure by the Appellant and thus taxed Appellant on gross basis. It is important to note that AO has not given any adverse finding on expenses or application but simply assessed Appellant on gross income by denying section 11 exemption. Finding of CIT(A): The CIT(A) has decided this issue against the Appellant at Page 69/70 of his order by holding that Appellant has failed to demonstrate that expenses are revenue in nature and failed to provide documentary evidence. 44 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Submissions of the Appellant: 1. If Ground No 1 is allowed and it is held that Appellant is entitled to exemption u/s. 11 of the Act engaged in charitable activities, the amount expended/incurred be allowed as application of income. Under the circumstances, if the ground number one is being allowed, the only prayer of the Appellant is to give a direction to the Assessing Officer to allow all payments made by the Appellant on the ground that it is application of income by a charitable institution. 2. If Ground No. II is allowed, and it is held that receipts received or earned by the Appellant is not assessable as Appellant own income as Appellant is agent of the State Government, the question of allowing related expenses also does not arise; This ground will not, therefore survive for adjudication. 3. If Ground No I & II both are decided against the Appellant and it is held that Appellant is an entity engaged in normal business activities then all expenses incurred/loss incurred by it be allowed u/s.37/28 as per law as the accounts are duly audited and AO has never denied/disputed the said expenses in his order. Without prejudice, expenses/loss u/s.37/28 be allowed subject to verification by the AO after giving proper opportunity to the Appellant. For completeness of record, the Appellant submits that, the learned special counsel, fairly, agreed to this proposition. 18. On the other hand, Ld. DR submitted with regard to ground no 1, that the profit motive is not essential for an activity to be treated as business activity. Therefore, even though Assessee is not carrying on its activity for a profit motive, the same would be irrelevant to decide as to whether the activity of the Assessee will be regarded as business activity or not. He relied on the decision of the Hon'ble Supreme Court in the case of National Co-operative Development Corporation v. Commissioner of Income Tax - 427 ITR 288 to submit that in the case of the Corporation, 45 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region was established under an Act, like the Assessee, the Hon'ble Supreme Court, held that "the fact that the Assessee-Corporation does not carry on business activity for profit motive is not material as profit making is not an essential ingredient on account of self-imposed" The Ld DR relied on above observation to submit that the profit motive is not relevant for determining whether an activity carried on by the Assessee is business or not. Reliance was further placed on the decisions of Trimala Tirupati Devasthnam vs. Management & ors. — AIR 1980 Supreme Court 604 and also P. Krishna Menon vs. CIT — 35 ITR 48 to substantiate the argument that one did not look at the profit motive to decide as to whether the activity is in the nature of business or not. The Ld DR, accordingly, submitted that the activity of the Assessee is commercial in nature and is, therefore, to be regarded as carrying on business activity. Hence, the proviso to section 2(15) of the Act is attracted and, the Assessee is not eligible for exemption under section 11 of the Act. 19. With regard to ground Nos. 2 and 3 on the issue, the Assessee acting as an agent of the Government of Maharashtra and lease premium not the income of the Assessee, Ld DR submitted as under: 46 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region (i) The Assessee is a separate entity and, therefore, the income of the Assessee cannot be regarded as income of the State. To substantiate this proposition, he relied on the decision of Andhra Pradesh State Road Transport Corporation vs. Income Tax Officer — 52 1TR 524. He further relied on Section 3 of the MMRDA Act (page- 7 of Factual Paper-book) and Section 126 of the MRTP Act (page- 134 of Factual Paper- book) to submit that the land is vested in the authority and, therefore, the authority cannot be an agent of this State. (ii) He further submitted that the decision of CIDCO is not applicable to the case of the Assessee. 20. With regard to ground No.4 - Allowability of expenditure while computing business income, Ld DR submitted that irrespective of the profit motive, once the activity of the Assessee is commercial in nature, it will have to be regarded as business activity and income of the Assessee will have to be computed under the head "Income from business and profession". He submitted that this issue may be remanded to the Assessing Officer for verification of the expenses.” 21. In the Rejoinder Ld. AR submitted as under: - “Ground No. 1: Eligibility of exemption under section 11 of the Act: 1. The Appellant submitted that, in the present case, one is concerned with interpretation of the term 'business' as referred to in the proviso to section 2(15) of the Act. To interpret such term, one has to see the context in which the proviso was inserted in the Act. The speech of the Finance Minister, Shri P. Chidambaram, on February 29, 2008 - Finance Bill 2008. - page no. 58 to 59, relevant page no. 59. 47 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region "180. "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose" Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organisations will not in any way be affected " 2. Further, CBDT Circular No. 11/2008 dated December 19,2008 - page no. 60 to 61 of LPI3, relevant page no. 61. "3.2 In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." 3. From the above, it is clear that only when a trust / institution which is carrying on an activity behind the 'mask' or 'device' to hide the true purpose, which is trade, commerce and business, such activity of the trust would be hit by the proviso to Section 2(15) of the Act. Therefore, the Appellant submits that the term 'business', as used in the proviso to Section 2(15) of the Act, has to be interpreted inconsonance with the Finance Minister's speech and CBDT Circular as extracted above. The decisions relied on by the Department's Representative are not in the context of Section 2(15) of the Act or the proviso inserted therein. These are general decisions on the meaning of scope of the term 'business' and, therefore, would not be relevant for deciding the scope of the proviso to Section 2(15) of the Act. In so far as the interpretation of Section 2(15) of the Act is concerned and particularly whether the activity of an assessee is 48 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region a 'mask' or 'device', the Appellant is relying on the following observations by various High Courts in cases similar to that of the Appellant to hold that once the activity cannot be regarded as a 'mask' or 'device' it cannot come within the proviso to Section 2(15) of the Act: i. Ahmedabad Urban Development Authority vs. ACIT(E) 120171 369 ITR 323 (Gujarat) - page no. 82 to 106 of LPB relevant page no.88 - "7.7 It is further submitted by Shri Soparkar, learned Senior Advocate for the assessee that assessee cannot be denied the benefit of being a charitable institution on the ground of that its objects involve "the carrying on of an activity in the nature of trade, commerce or business. It is submitted that even the circular issued by the CBDT dated 19.12.2008 also clarifies that the amendment to Section 2(15) is meant to cover only those commercial establishments who hide their real identity as a "mask" of charity." relevant page no. 102 - "12.8 Circular No. 11 of 2008 issued by the CBDT fell for consideration by the Delhi High Court in the case of G.S.I. India (supra). It is held that even as per the said circular, proviso to Section 2(15) of the Act is applicable to assessee, who are engaged in commercial activities i.e. carrying on business, trade or commerce, in the garb of public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business'. Thus, it is evident that introduction of proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities........ ii. Tribune Trust v. CIT [20171 390 ITR 547 (Punjab & Haryana) - page no. 116 to 154 of LPI3 - relevant page no. 151 "74. It cannot possibly be suggested that the Government of Punjab formed the trusts under the Punjab Town Improvement Act, 1922 because it wanted to carry on the business as colonizers or developers under the mask of the category "objects of general public utility." 49 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region iii. CIT(E) v. Yamuna Expressway Industrial Development Authority [2017] (395 ITR 18) (Allahabad) - page no.176 to 197 of LPB - relevant page no. 187 "36. Entities which carry on commercial activities will not be eligible for exemption under Section 11 or 10 (23C) of Act, 1961. Whether an entity is carrying on activities in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activities. It is said that an Assessee, if engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is "charitable purpose". In such a case, object of general public utility will be only a mask or a device to hide the true purpose, which is trade, commerce or business, or rendering of any service in relation to trade, commerce or business. In our view, each case would depend on its own facts and no generalization is possible." iv. Sabarmati Ashram Gaushala Trust vs Asst DIT(E) 120141 362 ITR 539 (Gujarat) - page no. 62 to 68 of LPB, relevant page no. 66. "8. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term' charitable purpose' if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose'. V. GS India vs. DGIT(E)[20141 360 ITR 138 (Delhi) - page no. 69 to 81 of LPB. relevant page no. 77 - "19. It is, evident from the Circular No. 11 of 2008 that the new proviso of Section 2(15) of the Act is applicable to the assessees who are engaged in commercial activities, i.e. carrying on business, trade or commerce, in the garb of "public utility" to avoid tax liability as it was noticed that object of "general public utility" was sometimes only a mask or device to hide the true purpose which was "trade, commerce or business." 50 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region relevant page no. 80 - "31 . ....... Question is whether the legislative intent is to exclude from definition of charitable purpose any activity which has the aim and object of providing services to trade, commerce or business. The matter is not free from doubt but there are good reasons to hold that the bar or probation is not with reference to activity of the beneficiary but the activity of the assessee under the residuary clause. The intent is to exclude an assessee who carries on business, trade or commerce to feed the charitable activities under the last limb. Application of income earned from business is no longer relevant and cannot help an assessee. Circular No. 11 of 2008 is to the said effect and does not promote contrary interpretation. The said circular clearly stipulates that the object of "general public utility" should not be a mask or a device to hide the true purpose, which is trade, commerce or business or rendering any service in relation to trade, commerce or business. Director General (Exemption) has not interpreted the first proviso in this manner in this case. Even in the case of Bureau of Indian Standards (supra) no such contention was raised. 7th proviso to Section 10(23C) of the Act supports our interpretation and the legislature has not omitted or suitably amended the said proviso to support the contrary interpretation. Even otherwise, the beneficiaries of GS 1 system are not confined or restricted to persons from trade, commerce or business. The beneficiaries are present everywhere and the advantages are permeating and universal and would include consumers, government, beneficiaries of PDS etc. 4. Similar view has been taken by various tribunals in the following decisions — a. Bangalore Development Authority v. ACIT [2019] 176 ITD 833 (Bangalore - Trib.) — page No 229 to 249 of LPB b. Hoshiarpur Improvement Trust v. ITO [2016] 155 LTD 570 (Amristar — Trib.) — page no. 250 to 274 of LPB c. Jhansi Development Authority v. DCIT, C-4 [2021] 123 taxmann.com 247 (Agra Trib.) page no. 473 to 581 of LPB d. DCIT (E)-2(1), Mumbai Railway Vikas Nigam Limited (ITA No.2880/Mum/19) (Mumbai Trib.) Page no. 582 to 618 of LPB — Relevant Page no. 598, 602, 607 5. From the aforesaid, it is clear that while interpreting the term business in the context of the proviso to section 2(15) of the Act, 51 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region general meaning of the business is not relevant as one has to consider the purpose for which the proviso was inserted. 6. Without prejudice, the Appellant submits that, in any case, it is not the case of the Appellant that merely because there is no profit motive, the Appellant should be regarded as not carrying on any business. Apart from absence of profit motive, the Appellant has submitted in detail that the activity of the Appellant, considered as a whole, can never be regarded as a business activity, as is clear from the submissions in paragraphs 3 to 10 at pages 9 to 18 above. Therefore, the Appellant submits that even de hors the profit motive, the activity of the Appellant cannot be regarded as being in the nature of business so as to be hit by the proviso to Section 2(15) of the Act. 7. The Appellant further submits that when the law was amended and the scope of charitable activity was reduced by inserting a proviso to section 2(15), the CBDT issued a circular which is referred to in paragraph 5 hereinabove. According to the said circular, only if, by wearing a mask of charity, commercial activities are being carried out, benefit of the status of a charitable institution would not be available. In other words what was sought to be covered by the amendment was, not a genuine institution carrying out charitable activities; but only those institutions which are carrying out commercial activities for the purpose of earning money but were claiming exemption from payment of tax under the pretext of being a charitable institution. Coming to the facts of the present case, as has held by other honourable high courts, an Area Development Authority created under a State Legislature, carrying on the activity of general public welfare like constructing roads, bridges, sewerage facility and another general public utility cannot be treated as one carrying out activities of commercial nature. The fact that the registration of the Appellant as a charitable institution is approved by the honourable High Court in its own case, goes to show that it is a charitable institution. To put it differently, it is not carrying on commercial activities by wearing a mask off a charity. Under the circumstances it is respectfully submitted that the approach of the Revenue to treat an entity enacted under the State Legislature as one wearing mask of charity, is wholly inappropriate and the Appellant be given the benefit of a charitable institution. The Appellant also submits that the Department cannot go beyond the CBDT Circular as well. Ground No. 2 & 3: Appellant acting as an agent of the Government of Maharashtra & lease Premium not the income of the Appellant: 52 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 1. The Appellant submits that the departmental representative has misunderstood the submissions of the Appellant. The Appellant reiterates that it is not the case of the Appellant that the income of the Appellant is not taxable under Article 289 of the Constitution of India on the ground that the Appellant is the 'State'. The Appellant submits that the case of the Appellant is that in carrying on the activity as 'Special Planning Authority', the Appellant is merely acting as an agent of the Government of Maharashtra and, therefore, income, if any, from such activity cannot be assessed to tax in the hands of the agent. The Appellant submits that the issue before the Hon'ble Supreme Court in the case of Andhra Pradesh State Road Transport corporation (supra) was whether the Corporation can be regarded as the State for the purpose of claiming benefit of Article 289 of the Constitution. It was, in that context, the Hon'ble Supreme Court has held that the Corporation cannot be regarded as the State. The issue as to when the Corporation is acting as an agent, the income can be assessed to tax in the hands of the agent was not before the Supreme Court. In fact, the finding of the Apex Court at page- 10 of the Additional Compilation of judgments and documents, on behalf of the Revenue, supports the case of the Appellant. The relevant observations of the Apex Court are as follows: "Reading the three causes together, one consideration emerges beyond all doubt and that is that the property as well as the income in respect of which exemption is claimed under clause (1) must be the property and income of the State, and so, the same question faces us again: is the income derived by the appellant from its transport activities the income of the State? if a trade or business is carried on by the State departmentally and income is derived from it, there would be no difficulty in holding that the said income is the income of the State. If a trade or business is carried on by a State through its agents appointed exclusively for that purpose, and the agents carry It on entirely on behalf of the State and not on their own account, there would be no difficulty in holding that the income made from such trade or business is the income of the State. But difficulties arise when we are dealing with trade or business carried on by a corporation established by a State by issuing a notification under the relevant provisions of the Act. The corporation, though statutory, has a personality of its own and this personality is distinct from that of the State or other share holders. It cannot be said that a shareholder owns the property of the corporation or carries on the business with which the corporation is concerned. The doctrine that a corporation has a separate legal entity of its own is so firmly rooted in our notions derived from common 53 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region law that it is hardly necessary to deal with it elaborately, and so, prima facie, the income derived by the appellant from its trading activity claimed by the State which is one of the shareholders of the corporation. cannot be claimed by the State which is one of the shareholders of the corporation. it may be that the statute under which a notification has been issued constituting the appellant corporation may provide expressly or by necessary implication that the income derived by the corporation from its trading activity would be the income of the State. The doctrine of the separate entity or personality of the corporation is always subject to the exceptions which statutes may create, and if there is a statutory provision which clearly indicates that despite the concept of the separate personality of the corporation, the trade carried on by it belongs to the shareholders who brought the corporation into existence and the income received from the said trade likewise belongs to them, that would be another matter. It would then be possible to hold that as a result of the specific statutory provisions the income received from the trade carried on by the corporation belongs to the shareholders who have constituted the said corporation, and su, we must look to the Act to determine whether the income in the present case can be said to be the income of the State of Andhra Pradesh." 2. From the above, it is clear that the Supreme Court accepts that, if by express provisions, the income of Corporation would be the income of the State, then the Corporation will not be chargeable to tax for such income. In the present case, the MRTP Act expressly provides for the Appellant to carry on the activity as a Special Planning Authority as an agent of the State Government. Therefore, the Appellant submits that the Appeal ought to be allowed by treating the activity of the Appellant being carrying on as an agent of the Government of Maharashtra 3. On an inquiry by the Hon'ble Bench, the Appellant clarified that for acting as an agent of the Government of Maharashtra, no specific remuneration has been received by the Appellant. Further, the expenses of the Appellant are also on behalf of the Government of Maharashtra, as the same have been incurred while carrying on its functions as 'Special Planning Authority' and, therefore, the same would be reduced from the receipts while carrying on the functions of the Government of Maharashtra as Special Planning Authority. Department's appeal: 54 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region At the outset, it is submitted that if the Appellant succeeds in Ground No.1 or 2 of its Appeal, the Department's appeal would become academic, and it will no longer be required to be adjudicated. Without prejudice, the Revenue had argued that loans were given to government or government entities and, therefore, it cannot be said that such loans have become bad or interest thereon is not recoverable by the Appellant and hence, the CIT (Appeals) was not justified in holding that the interest from such loans is not chargeable to tax. The Appellant submits that the Appellant has not received any receipt on such loans for number of years and, therefore, for the relevant year as well, no interest is anticipated on such loans. The Appellant has not even accrued interest in the books of the Appellant on such loans and, therefore, question of treating such interest as income of the Appellant on a notional basis does not arise, in fact attention is also invited to accounts Page 190 of Factual Paper book wherein Note III and IV clearly provide that principal itself has not been repaid on due dates. For MTDC, both principal and past interest has not been paid. These deposits were given years back and no repayment has happened and hence not accrued.” 22. Considered the rival submissions and material placed on record, we observe from the record that the assessee is still registered u/s 12AA of the Act and it is not revoked. Further the assessee is established under the MMRDA Act, 1974. As per which the assessee is established to function, activity of development as set out in the section 2 of the MMRDA Act and it is extended arm of the Government Maharashtra in the activity of development as set out in Section 12 to 16 of the Act. We also observe that the assessee is appointed as special planning authority for development of certain regions as per the government notification like Bandra Kurla Complex region etc. under the Maharashtra Region and 55 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Town Planning Act (MRTP Act). As per the section 113(3A) of the Act, it is acting as an agent of the Government of Maharashtra. By considering the above facts on record, Ld DIT(E) granted the registration u/s 12A on 22.07.2002. 23. Further we observe from the record that the Assessing Officer continue to disallow the claim of exemption u/s 11 from AY 2003-04 holding that the assessee is not a lawful trust within the meaning of the term Trust for the purpose of sections 11, 12 and 12A of the Act and its activities are not charitable. We observe from the record that Ld.CIT(A) and coordinate benches have decided the issue of allowing the exemption u/s 11 in favor of the assessee. The revenue filed appeal before the Hon’ble High Court for AY 2006-07, which was dismissed. In our considered view, the issue of exemption u/s 11 is settled in favor of the assessee. 24. Further, in the current AY, the Assessing Officer and Ld.CIT(A) denied the exemption u/s 11 by invoking the provisions of sec 2(15) of the Act to deny the exemption by raising issues on activity of the assessee amounts to carrying on trade, commerce or business. We observe from the record that in AY 2009-10, the Ld.DIT(E) had withdrawn the 56 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region registration granted u/s 12A of the Act on the ground that the assessee activities are not for the charitable purposes invoking the proviso to section 2(15) of the Act, the coordinate bench considered the above issue and adjudicated in favour of the Assessee. For the sake of clarity, it is reproduced below: “7. From the above facts of the case, wherein the objects are discussed and the fact that the DIT (E) has cancelled the registration granted only on the premise that the assessee’s charitable purpose is hit by the proviso to section 2(15) of the Act. We have gone through the objects and noticed that the entire objects are charitable in nature for the reason that the term charitable purpose as defined in the Act includes what has been specified therein and interalia the advancement of any other object of general public utility. The proviso was brought in by the legislature for the reason that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention, of the income from such activity. We find that this issue is covered by the decision of Hon’ble Jammu and Kashmir High Court in the case of Jammu Development Authority vs. Union of India and anothers in ITA NO. 164/2012 dated 07-11-2013. Even otherwise, on the aspect of the proviso to section 2(15) of the Act, Hon’ble Madras High Court in the case of Tamil Nadu Cricket Association vs. The Director Of Income Tax (2013) in 343 ITR 300 has decided this issue after elaborate discussion in regard to cancellation of registration granted u/s 12A of the Act by observing as under: - 22. We had already extracted in the preceding paragraph, the objects of the association. Going by the objects , we find that the trust falls under the head of "any other object of general public utility" and hence falls within the meaning of charitable purpose under Section 2(15) of the Act. Section 2(15) of the Act defines "charitable purpose" as it originally stood at the time of grant of registration as under:- 57 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region "'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." 23. Section 2(15) was amended under Finance Act, 2008, with effect form 1.4.2009 by substituting the following provision which reads s under: "2. Definitions. .... (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including waterheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other 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 carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity;) 24. Section 2(15) as it stood prior to 1983 defined 'charitable purpose' to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The phrase "not involving the carrying on of any activity for profit" was omitted from the Section by the Finance Act 1983, with effect from 01.04.1984, consequent on the amendment to Section 11, where under profits and gains of business in the case of charitable or religious trust and institutions would not be entitled to exemption under that Section, except in cases where the business fulfilled the conditions under Section 11 (4). The Section was once again amended by substitution in the year 2008 under the Finance Act, 2008, with effect from 01.04.2009, streamlining the definition of 'charitable purpose', considering the fact that taking advantage of the phrase 'advancement of any other object of general public utility', number of entities operating on commercial lines claimed exemption on their income either under Section 58 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 20(23c) or under Section 11 of the Act. Thus, to limit the scope of this expression, Section was amended in the year 2008 that the advancement of any other object of general public utility shall not be a charitable purpose, if the object involved the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Though the section as it stood prior to the substitution in 2008 contained no provision as in the proviso under the 2008 amendment, yet the Supreme Court held that that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in the decision reported in (1980) 121 ITR 1(Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if the dominant object or the primary object was charitable, the subsidiary object for the purpose of securing the fulfilment of the dominant object would not militate against its charitable character and the purpose would not be any the less charitable. The amendment in the year 2008 made a drastic amendment to deny the status of a charitable purpose to an institution with the object of general public utility, having any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration. 25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of 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 status of the institution will not be one for 'charitable purpose'. 26. The Central Board of Direct Taxes, in paragraph 3.2 pointed out to the scope of the circular as under:- " In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose, which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each 59 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." 27. Thus, the anxiety of the Parliament in introducing the proviso to Section 2(15) of the Act is only to check those institution, which attempt to gain exemption under the cloak of a trust. 28. Section 11 of the Act states that income from property held for religious or charitable purposes shall not be included in the total income of the previous year. Section 12 deals with income of trusts or institutions from contributions. Section 12A deals with making application for registration of the trust/association so that the said institution will have the benefit of exemption under Section 11 and 12 of the Act. 29. Section 12AA of the Act prescribes procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied himself about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an order in writing refusing to register the trust or institution. 30. Section 12AA(3) of the Act inserted with effect from 01.10.2004 under the Finance (No.2) Act, 2004 and the amendment inserted by Finance Act, 2010, with effect from 01.06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:- Provision inserted under Finance Act, 2004: Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the 60 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region activities of such 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. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 31. After amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows: "Section 12AA(3):- 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 as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such 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: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." 32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be. 33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. 61 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circumstances under which income of the trust is not to be included in the total income of the previous year of the person. So too, Section 12 of the Act on the income derived from property held for charitable or religious purposes. 34. Thus, when the assessee is in receipt of income from activities, which fits in with Sections 11 and 12 of the Act as well as from sources which do not fall strictly with the objects of the trust, would not go for cancellation of registration under Section 12AA of the Act on the sole ground that the assessee is in receipt of income which does not qualify for exemption straight away by itself. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of first proviso to Section 2(15) of the Act was only to curtail institution, which under the garb of 'general public utility', carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act. 36. In the decision reported in (2012) 343 ITR 23 (Bom) (Sinhagad Technical Education Society V. Commissioner of Income Tax (Central), Pune & Anr), the Bombay High Court held as follows: "As a result of the amendment, which has been brought about by the Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as it stood prior to its amendment by the Finance (No.2) Act, 1996. SubSection (3) was inserted into the provisions of Section 12AA by the Finance (No.2) Act, 2004 with effect from 1 October 2004. As it originally stood, under subsection (3), a power to cancel registration was conferred upon the Commissioner where a trust or an institution had been granted registration under clause (b) of subsection (1) 62 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region of Section 12AA. The Commissioner, after satisfying himself that the objects of the trust or an 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, was vested with the power to pass an order in writing cancelling the registration of such trust or institution. By the Finance Act of 2010, subsection (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996). As a result of the amendment, a regulatory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996. ........... power under Section 12AA(3) can be exercised by the Commissioner in respect of a trust registered prior to 1 June 2010. The mere fact that a part of the requisites for the action under Section 12AA (3) is drawn from a time prior to its passing namely registration as a charitable trust under Section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions." 37. As already pointed out earlier, the question as to whether the particular income of trust is eligible for exemption under Section 12 of the Act is a matter of assessment and this Court had pointed out in the decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai, as under:- " In order to avail the benefit of exemption under Section 11 of the Income Tax Act, 1961, a Trust can make an application to the Commissioner for registration under Section 12A of the Income Tax Act, 1961. On receipt of the said application for registration of a trust or institution, the Commissioner should satisfy himself about the genuineness of the activities of the trust or institution. In order to satisfy himself, the Commissioner may also make such enquiry as he may deem necessary in that behalf. In the event the Commissioner satisfies himself that the trust is entitled to registration keeping in mind 63 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1)(b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very same provision of section 12AA(b)(i) of the Income Tax Act, 1961 to go into the genuineness of the activities of the trust. However, the Commissioner is empowered to revoke the certificate in terms of Section 12AA(3) of the Income Tax Act, 1961. As Commissioner is empowered to revoke the certificate in terms of section 12AA(3) of the Income Tax Act, 1961. As per the said provision, in the event the Commissioner is satisfied subsequently i.e., after registration that the activities of such trust or institution are not genuine or not being carried out in accordance with the objects of the trust or the institution as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution." 38. After the grant of registration, if the Commissioner is satisfied subsequently that the activities of the institution are not genuine or they are not carried on in accordance with the trust/ institution, he could pass an order in writing cancelling the registration of such trust or institution. 39. Referring to Section 11 and 12A of the Act, this Court pointed out that the act of granting registration under Section 12AA(1) itself is a result of a satisfaction recorded by the Commissioner as regards the genuineness of the objects of the trust as well as the activities of the trust and once a satisfaction is arrived at by the Commissioner, the cancellation could only be in terms of Section 12AA(3) of the Income Tax Act, 1961. 40. This Court pointed out that the cancellation made in the case of assessee therein was not on the ground that the activities were not genuine, but the activities of the trust in publication and sale and spread of Sarvodaya Literature and Gandhian Ideologies was not the objects of the trust. This Court pointed out that the cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust; when the trust was registered with 64 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region definite objects, carrying on such activities would be in terms of the objects for which registration was granted. 41. Referring to Section 12AA of the Income Tax Act, 1961, this Court has held as under:- "9. Under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down under Section 12AA(3) of the Income Tax Act, 1961. Whether the income derived from such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the assessing officer to decide as to whether it should be assessed or exempted." 42. In the light of the law declared by this Court in the above said decision, we do not find that the scope of Section 12AA(3) of the Act is of any doubt for a fresh look. It is relevant herein to point out that in two other assessee's case, the Income Tax Appellate Tribunal, Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 and that of the Nagpur Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income-tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, considered the said decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of the Act. On appeal before the respective High Courts, the decision of the Income Tax Appellate Tribunal was confirmed. 43. Leaving that aside, there being no dispute raised by the Revenue as to the genuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3.2003, the same was made taking into consideration the objects of the institution fitting in with the definition of 'charitable purpose' defined under Section 2(150 of the Act and the substitution of the Section itself came only 2008, with effect from 01.04.2009. As rightly pointed out by the learned senior counsel appearing for the assessee, the circular clearly brings out the object of the amendment and the amended provision has no relevance to the case. The power regarding 65 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region cancellation, hence has to be seen with reference to the registration and the object satisfying the definition on 'charitable purpose', as it stood at the time of registration and not by the subsequent amendment to Section 2(15) of the Income Tax Act. 44. Learned Standing counsel appearing for the Revenue placed heavy reliance on the proviso to Section 12AA(3) of the Act and submitted that when the assessee has income received from conduct of the matches, which are commercial in nature, as had been found by the Income Tax Appellate Tribunal, the objects of the trust ceased to be charitable. He submitted that going by the definition of Section 2(15) of the Act, rightly, the Commissioner assumed jurisdiction under Section 12AA(3) of the Act to cancel the registration. He further pointed out that for the finding to be recorded that the activities of the trust are not genuine, one must necessarily look into the objects of the association; if the objects of the association reveal commercial nature in the conduct of matches, the association cannot be one for charitable purpose as defined under Section 2(15) of the Act. Thus, there could be no inhibition for the Commissioner to assume jurisdiction to issue show cause notice calling upon the assessee to state whether the association is genuine or not. He further submitted that on looking at the activities of the association, the Commissioner had rightly come to the conclusion that the assessee's registration was liable to be withdrawn. 45. We do not accept the submission of learned Standing counsel appearing for the Revenue. As rightly observed by learned Senior counsel appearing for the assessee, the Revenue granted registration under Section 12AA of the Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting the registration, if the registration is to be cancelled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider 66 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AA is bad and hence, to be cancelled. 46. It may be of relevance to note the language used in the definition "charitable purpose" in Section 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee's case falls within the phrase of the definition general public utility . In the decision reported in (2000) 246 ITR 188 in the case of Hiralal Bhagwati Vs. Commissioner of Income Tax, the Gujarat High court considered the said phrase in the context of Section 12AA registration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the objects of the trust as well as an empirical study of the past activities of the applicant; the Commissioner of Income-tax has to examine that it is really a charitable trust or institution eligible for registration; the object beneficial to a section of the public is an object of "general public utility". The Gujarat High Court held that to serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province; it is required to be noted that if a section of the public alone are given the benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public; it is not necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression "object of general public utility", however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utility; the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature. 47. The above said decision (2000) 246 ITR 188 - Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, the Revenue has not gone on 67 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region appeal as against this judgment. In the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, reference was made about this decision and the Apex Court pointed out that the Revenue did not challenge this case and it attained finality. 48. It is no doubt true that the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, was in the context of Section 10(23) of the Income Tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression "general public utility" would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. 49. As far as the unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, on which heavy reliance was placed by the Revenue, the said decision relates to the rejection of the registration at the threshold of the application filed for registration. So too the decision of the Apex court reported in 315 ITR 428 in the case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society, wherein, rejection was made on the threshold of application for registration made by the assessee. The decisions relied on is thus distinguishable and has no relevance to the facts of the present case. 50. As far as unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, while rejecting the appeal filed by the assessee on the rejection of 68 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region the application for registration, this Court observed that it was open for the assessee Society to renew its application as and when it expanded the objects of the Society and were approved by the competent Court. The rejection order passed by the Revenue was on the ground that the objects of the trust were not charitable in character. This decision also has no relevance to the case on hand. 51. As already noted in the preceding paragraphs, considering the provision under Section 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances under Section 12AA(3) of the Act and in the background of the definition relevant to the particular year of registration. As rightly pointed out by the assessee, Revenue does not allege anything against the genuineness of the objects of the assessee or its activities. It rests its order only on the ground of the assessee receiving income from holding of matches which according to the assessee were not held by it. Thus, as regards the question as to whether the particular income qualified under Section 11 of the Act or not is not the same as activity being genuine or not. In the circumstances, we do not agree with the view of the Income Tax Appellate Tribunal that the order passed by the Director of Income Tax (Exemptions) was in accordance with the provisions of the Income Tax Act, 1961. He viewed that the conduct of test matches and ODI are in the nature of commerce or business. Though the assessee claimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV Advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as 69 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under Section 2(15) of the Act. 53 On going through the materials, the Income Tax Appellate Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of Section 12AA(3) were satisfied. The Income Tax Appellate Tribunal agreed with the Director of Income Tax (Exemptions) that the expression 'subsidy from BCCI' was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast rights. The surplus from IPL Season-I worked out to 8.5% of the total receipts. It further held that 78% of the total receipt came out of advertisement revenue. 54. The Income Tax Appellate Tribunal pointed out that the physical aspect of the game was one in accordance with the objects of the assessee and the activities are genuine. However, the matches held were not in advancement of any specific object of general public utility. The pattern of receipt is commercial in character and the matches conducted are not in accordance with the objects of the Association. Thus, it rejected the assessee's case and held that both the conditions under Section 12AA(3) of the Act stood attracted. 55. As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Income Tax Appellate Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the Commissioner had satisfied himself about the objects of the trust and the genuineness of the activities 70 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region as falling within the meaning of 'charitable purpose', as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility.” 8. We have gone through the order of DIT(E) and could not find anything in the order which terms that the assessee was undertaking any activity which is not genuine or trust or institution is not genuine. We could not lay our hand on any material in the order of DIT(E) which explains that the assessee or its affairs are not being carry out in accordance with the object of the institution. Accordingly, we quash the order of DIT(E) and restore the registration of the Institution. This issue of assessee’s appeal is allowed. 9. Since, the registration is already allowed consequently no disallowance can be made in respect to interest income and leasing activity income i.e. the rent and other fees, because these falls under the objects of the assessee’s institution and hence on merits also the assessee has a case. Accordingly, we need not to elaborate on the merits of the case, since we have already allowed registration.” 25. Therefore, from the above decision of the coordinate bench, the assessee is continue to be duly registered as charitable trust u/s 12AA, this is due to subsequent development, hence the contention of the Ld.CIT(A) and Assessing Officer is not correct. In our considered view, the issue of applicability of section 2(15) of the Act is already considered by the ITAT and issue is well settle in favour of the assessee. The courts have held the activities of the assessee are charitable and we observe that the activities of the assessee, which acts on behalf of the Government of Maharashtra, irrespective of nature of transactions, the assessee acts on behalf of and as an agent of the State Government. The development 71 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region work and relevant activities in the line of development are carried by the assessee on behalf of the State Government and it is only an authority appointed under the MMRDA Act and MRTP Act to carry on the functions on behalf of State Government. All the revenues are belong to State Government and it is only an entity created to functions for the benefit of the common interest of people of the State. 26. We observe from the appellate order, Ld.CIT(A) opined that the allotment of land is not made to needy people at free of cost or subsidized rates, therefore assessee has not actually carried any charitable activities, in our view, the assessee entity is not created with the above object/motive rather to extend the facilities of development in the region as per the ‘GO’ of the State Government for the benefit of the region. The functions are carried on without any profit motive and also there is no clause in the trust deed which indicate that the profit or surplus earned are distributed to any stake holders. It clearly indicates that the institution is created for the purpose of facilitating the state government to achieve the development work in the state. As discussed earlier, the issue is already decided by the coordinate bench and it is brought to the notice of the authorities below, the lower authorities should refrain from racking up 72 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region such issues again and again. In our view, the issue is settled in favour of the assessee that the assessee is created for the Charitable purpose within the meaning of Section 11 and 2(15) of the Act. Accordingly, the grounds raised by the assessee in this regard are allowed. 27. The other issues raised by the Ld.CIT(A) are not adjudicated as not relevant considering the fact that these are raised in consonance with the section 2(15) of the Act, particularly when the issues are already settled in favor of the assessee by the coordinate bench. 28. With regard to other issues in the assessment order on non- deduction of the expenditure incurred towards the objects while computing the income under the Income Tax Act, this issue was already addressed by us in the earlier para that the assessee is eligible for deduction u/s 11, the income or loss of the assessee has to be determined as per section 11 of the Act, therefore, we are directing the Assessing Officer to determine the income or loss of the assessee as per law. 29. With regard to Department appeal, since we already adjudicated that the assessee is eligible for deduction under section 11 and Assessing Officer is directed to compute and determine the income or loss as per 73 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region section 11 of the Act, the department appeal becomes academic. Therefore, we dismiss the appeal filed by the revenue. 30. With regard to other Assessment Years, there are new grounds raised by the assessee and relevant facts brought to our notice by Ld AR in his submissions are as under: - “1. Disallowance of the Expenditure incurred towards furtherance of objects including work in progress: Ground No. IV of AY 2010-11 AY 2011-12 and Ground No. VI in AY 2012-13 2013 14 2014-15 and 2015-16 The Appellant submits that this ground is consequential to adjudication of Ground No. I in respect of claim of exemption u/s. 11. In case Ground No. I is decided against the assessee, expenditure incurred towards the furtherance of objects of the authority deserved to be allowed. In fact since Appellant hands over flyover/eastern freeway/etc free of cost, any expenditure incurred by Appellant including that of incremental WIP should be deductible expenditure. Reliance is placed on decision of Delhi High Court in CIT Vs. DTTDC (LPB Page 432 to 445). 2. Against CIT A Order not following precedence etc.: Ground V of AY 2010-11 Ground VII of AY 2012-13 Ground IX of AY 23-14 Ground IX of AY 2014-15 and Ground VII of AY 2015-16 This Ground is without prejudice to Ground No. I. The Appellant submits that the Id. CIT(A), being lower in tier of judicial hierarchy, ought to have followed the order of the Hon’ ble Tribunal for AY 2003-04 to 2009-10 allowing exemption u/s. 11 and not taxing the lease premium in the hands of the Appellant Assessee. The proposition that the lower judicial authority is bound to follow the order of the authority is supported by following decisions: a. UOI v. Kamalakshi Finance Corporation Ltd. (55 ELT 433(SC) b. Nestle India Ltd. v. DCCT (59 taxmann.com 109) (Guj HC) (Pg 23 of LPB). 74 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region c. Agarwal Warehousing & Leasing Ltd v. CIT (257 ITR 235) (MP HC) (Pg 40 of LPB). d. M/s. Cargo Handling Private Workers Pool v. DCIT, CCI (ITA 152 to 156/Vizag/2011) (Pg 43 of LPB). 3. Denial of Exemption u/s. 10(20) of the Act Holding that the appellant is not a Local Authority. 4. Denial of carry ' forward of Deficit if exemption u/s.11 is allowed. Ground IV of AY 2012-13 The Appellant in AY 2012-13 has claimed that the deficit i.e., excess of expenditure over the income to be carried forward for set off in the future years. This issue is squarely covered in favour of the Appellant by the decision of the Hon’ble Supreme Court in CIT(E) v. Subros Educational Society (96 taxmann.com 76) (Pg 649 of LPB). Therefore, the Appellant deserves the claim of deficit to be carried forward. 5. Addition on account of Infrastructure charges, Development Charges and Scrutiny fees. Ground IV and V of AY 2013-14 and Ground IV and V of AY 2014-15 The Appellant submits that AO during AY 2013-14 and AY 2014-15, has added the abovementioned charges to the income of the Appellant. Further, CIT(A) has simply upheld the decision of the ld. AO in line with lease premium without separate adjudication. The Appellant submits that the nature of these items of receipts and corresponding accounting treatment is pari-materia with that of the lease premium i.e. the same is received by the Appellant in its capacity as an agent of the State Government and the same is Liable to be paid to them, therefore it is shown as liability in the books of accounts of the Appellant. As such, such receipts cannot be held as income of the Appellant in the same line as that of lease premium. Reliance is also placed on Appellant’s arguments in support of Ground No. III on Lease Premium. Further, Your Honours may please appreciate that these receipts have always been accounted for in the same manner in all earlier years as well and the same have always been by the Department in all those earlier years. However, Ld. AO for the first time added the same to the income of the Appellant, despite of the fact that the activities of the Appellant always remained the same from the inception. 75 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region 6. Non allowance of Deemed application of Income: towards objects while computing income under the Act, Ground VIII of A.Y. 2013-14, ground VIII of A.Y. 2014-15 and Ground V of A.Y. 2015-16 The Appellant submits that this ground is consequential to adjudication of Ground No. 1 in respect of claim of exemption u/s. 11, In case Ground No. I is decided against the assessee, the Appellant deserves to be allowed the deemed application of income towards objects while computing income under the Act. 7. Levy of Interest u/s. 234B/234C/234D of the Act. This Ground is consequential in nature. Department’s Grounds of Appeal Sr. No A.Y. ITA No (Department) 1 2010-11 4986/Mum/2019 2 2011-12 729/Mum/2020 3 2012-13 4987/Mum/2019 4 2013-14 4988/Mum/2019 5 2014-15 4989/Mum/2019 6 2015-16 4990/Mum/2019 Regarding deletion of income added on account of notional interest on loans/deposits granted to PSUs/Municipalities etc.” 31. Considered the rival submissions and material placed on record, we observe from the submission that all the issues raised by the assessee and revenue are consequential to the decision in the ground no 1, we have already adjudicated in favor of the assessee, therefore all these issues raised have becomes academic and we direct Assessing Officer to assess the income of the assessee as per our direction in the para no 24 76 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region above. Accordingly, we allow the grounds raised by the assessee in this regard. 32. In the result, appeal filed by the assessee is partly allowed and revenue is dismissed. 33. Since the issues involved in the cross appeals filed by assessee and revenue for the AYs 2011-12 to AY 2015-16 are similar and the decision as adjudicated in the AY 2010-11 are applicable mutatis mutandis to AYs.2011-12 to 2015-16. Accordingly, the grounds raised by the assessee are partly allowed and revenue is dismissed. 34. In the result, all the appeals filed by the assessee are partly allowed and all the appeals filed by the revenue are dismissed. Order pronounced on 03.01.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 03.01.2022 Giridhar, Sr.PS 77 ITA NO. 4391 to 4395/MUM/2019 & other appeals Mumbai Metropolitan Region Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum