Srinagar Development Authoity, Srinagar V. The Commissioner of Income tax, Jammu

ITA 444/ASR/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0484 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2016
• Assessment Year: misc
• Appeal Filed On: 22-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Assessee Lawyers: UPENDER BHATT
• Keywords: Gift; Charitable institution; Opportunity of being heard; Rule of consistency; Benefit of exemption
• Section: 12A; 12AA; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.444(ASR)/2010 ASSESSMENT YEAR: PAN: SRINAGAR DEVELOPMENT AUTHORITY VS. THE COMMISSIONE R OF INCOME TAX, SRINAGAR (J&K). JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. UPENDER BHATT, CA RESPONDENT BY: SH. S.S. KANWAL, DR DATE OF HEARING: 05/05/2016 DATE OF PRONOUNCEMENT: 25/07/2016 ORDER PER A.D. JAIN, JM: THIS IS THE ASSESSEES APPEAL AGAINST THE ACTION OF THE LD. CIT, JAMMU, IN REJECTING THE ASSESSEES APPLICATION FOR REGISTRATION UNDER SECTION 12AA(B)(II) OF THE INCOME TAX ACT, 1961. 2. THIS APPEAL WAS DISMISSED FOR NON-PROSECUTION VI DE ORDER DATED 29.11.2012, AS NONE HAD APPEARED ON BEHALF OF THE A SSESSEE, DESPITE THE RPAD NOTICE ISSUED TO THE ASSESSEE HAVING NOT RETUR NED UNSERVED, NOR ANY APPLICATION FOR ADJOURNMENT HAVING BEEN FILED. IT WAS RESTORED IN SITU VIDE ORDER DATED 05.02.2016, PASSED IN M.A.NO.60(AS R)/2014. THIS IS HOW THE APPEAL IS AGAIN BEFORE US. ITA NO.444(ASR)/2010 2 3. THE APPLICATION FILED BY THE DEPARTMENT FOR ADJO URNMENT STANDS WITHDRAWN. 4. THE LD. CIT(A) WHILE REFUSING REGISTRATION TO TH E ASSESSEE, HAS HELD AS FOLLOWS: 3.1. AFTER METICULOUSLY GOING THROUGH THE FACTUAL MATRIX OF THE CASE, WITH REFERENCE TO THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND THE REPORT OF THE ASSESSING OFFICE R, IT WOULD BE APPROPRIATE TO GO THROUGH THE RELEVANT PROVISION S OF THE ACT, WHICH PRESCRIBES THE PROCEDURE FOR REGISTRATION OF TRUST, WHERE THE APPLICATION FOR REGISTRATION IS RECEIVED BY THE COMMISSIONER OF INCOME U/S 12A(L)(A)(AA). UNDER THI S PROCEDURE, THE COMMISSIONER WILL CALL FOR SUCH DOCU MENTS OR INFORMATION AS MAY BE NECESSARY TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS AC TIVITIES. SECTION 2(15) OF THE INCOME TAX ACT, 1961 DEFINES ' CHARITABLE PURPOSE' TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. AS PER FINANCE ACT, 2008, W.E.F. 01.04.2009, A FOLL OWING . PROVISO HAS BEEN ADDED BELOW THE SAID SECTION, WHIC H READS AS UNDER:- PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY THE MATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE LM RELATION TO A MY TRADE, COMMERCE OR BUSI NESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIV E OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY '. FURTHER, AS PER THE FINANCE ACT, 2010, AFTER THE FI RST PROVISO, PROVISO-2 HAS BEEN INSERTED AND SHALL BE D EEMED TO HAVE BEEN INSERTED WITH EFFECT FROM THE 1ST DAY OF APRIL, 2009, NAMELY; 'PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS -FROM THE ACTIVITIE S REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR' 3.2. PRIOR TO INSERTION OF THESE PROVISOS, CERTAIN BODIES WERE TREATED CHARITABLE' ON THE GROUND OF ADVANCEMENT O F OBJECT OF GENERAL PUBLIC UTILITY, HOWEVER, AFTER THE INSERTIO N OF THE ABOVE ITA NO.444(ASR)/2010 3 PROVISOS THE ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF:- A. ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS; B. ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS; C. FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IR RESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF INCOME FROM SUCH ACTIVITY. THUS, HENCE BEFORE THE INSERTION OF THE ABOVE PROVI SO, THE INSTITUTIONS/ TRUSTS/ SOCIETIES WHICH WERE GIVEN RE GISTRATION U/S. 12A OF THE ACT CONSIDERING THEM UNDER THE HEAD 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', WERE ELIGIBLE FOR EXEMPTION FROM TAX U/S 11 OF THE I.T. ACT, 1961, IF THEY WERE NOT INVOLVED IN ANY SUCH COMMERC IAL ACTIVITIES AS BROUGHT OUT ABOVE (A)(B) AND (C). HOW EVER, IN CASE THEY ARE INVOLVED IN SUCH COMMERCIAL ACTIVITIES, AN D IF THE AGGREGATE VALUE OF THE RECEIPT FROM THE ACTIVITIES REFERRED TO IN THE 1ST PROVISO IS MORE THAN RUPEES TEN LAKHS IN TH E PREVIOUS YEAR, THEY SHALL NOT BE ELIGIBLE TO CONTINUE WITH R EGISTRATION U/S 12A AND THE SAME IS REQUIRED TO BE WITHDRAWN. H ERE IT MAY BE MENTIONED THAT IF ANY INSTITUTION/ SOCIETY O R ASSOCIATION IS CARRYING ON ANY ACTIVITY IN THE NATU RE OF TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IT WOULD LOOSE THE STATUS OF CHARITA BLE ORGANIZATION IRRESPECTIVE OF THE NATURE OF USE, OR APPLICATION OR RETENTION OF ' COME FROM SUCH ACTIVITY. 4.1 THE FACTS OF THE CASE UNDER CONSIDERATION ARE T HAT SRINAGAR DEVELOPMENT AUTHORITY WAS' ESTABLISHED VID E JAMMU AND KASHMIR DEVELOPMENT ACT, 1970 AND IT CAME INTO EFFECT FROM 31.10.1970, AS PER DIE SAID ACT, THE OBJECT OF THE AUTHORITY IS TO PROMOTE AND SECURE THE DEVELOPMENT OF THE LOCAL AREA FOR WHICH IT IS CONSTITUTED ACCORDING TO PLAN AND FOR THAT PURPOSE THE AUTHORITY SHALL HAVE THE POWER TO ACQUIRE, HOLD, MANAGE AND DISPOSE OFF LAND AND OTHER PROPERT Y, TO CARRY OUT BUILDING, ENGINEERING AND OTHER OPERATION S, TO EXECUTE WORKS IN CONNECTION WITH SUPPLY OF WATER AN D ELECTRICITY, DISPOSAL OF SEWERAGE AND OTHER SERVICE S AND AMENITIES AND GENERALLY TO DO ANYTHING NECESSARY OR EXPEDIENT FOR PURPOSES OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO. THE AUTHORITY IS A BODY CORPORA TE HAVING ITA NO.444(ASR)/2010 4 PERPETUAL SUCCESSION AND A COMMON SEAL WITH POWER T O ACQUIRE, HOLD AND DISPOSE OF PROPERTIES, BOTH MOVAB LE AND IMMOVABLE, TO CONTRACT, AND BY THE SAID NAME SUE OR TO BE SUED 'THE AUTHORITY CONSISTS OF A CHAIRMAN, VICE-C HAIRMAN AND SEVEN OTHER MEMBERS APPOINTED BY THE STATE GOVE RNMENT. THE AUTHORITY IS RESPONSIBLE FOR THE PLANNED DEVELO PMENT OF THE CITY INCLUDING PREPARATION OF THE MASTER PLAN O F THE AREA (P) THE STATE GOVERNMENT IS AUTHORIZED TO ENTRUST T HE AUTHORITY FROM TIME TO TIME WITH ANY WORK CONNECTE D WITH PLANNED DEVELOPMENT AND MATTERS CONNECTED THERETO. SECTION- 19 (CHAPTER-VLL) OF THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 OBLIGES THE AUTHORITY TO MAINTAIN ITS OWN FUND TO WHICH SHALL BE CREDITED MONEYS RECEIVED BY THE AUTHORITY FROM THE CENTRAL OR STATE GOVERNMENT BY WAY OF GRANTS, LOANS , ADVANCES OR OTHERWISE, ALL FEES, RENTS, CHARGES, LE VIES AND FINES RECEIVED BY THE AUTHORITY UNDER THE ACT, ALL MONEYS RECEIVED BY THE AUTHORITY FROM DISPOSAL OF ITS MOVA BLE OR IMMOVABLE ASSETS AND ALL MONEYS RECEIVED BY THE AUT HORITY BY WAY OF LOAN FROM FINANCIAL AND OTHER INSTITUTION S AND DEBENTURES FLOATED FOR THE EXECUTION OF A SCHEME OR SCHEMES OF THE AUTHORITY DULY APPROVED BY THE STATE GOVERNM ENT . UNLESS THE STATE GOVERNMENT OTHERWISE, DIRECTS, ALL MONEYS RECEIVED BY THE AUTHORITY SHALL BE CREDITED TO ITS FUNDS WHICH SHALL BE KEPT WITH THE JAMMU AND KASHMIR BANK OR AN Y OTHER BANK APPROVED BY THE STATE GOVERNMENT. TILL THE FINANCIAL YEAR 2002-03, THE INCOME OF SUCH AUTHORITIES WERE EXEMPT UNDER SECTION 10(20A) OF THE INCOME TAX ACT, 1961. HOWEVER, IN VIEW OF OMISSION OF SEC. 10(20A) OF THE I.T. ACT, 1961 AN EXPLANATION WAS ADDED TO SECTION 10(20 ), WHICH IS REPRODUCED AS UNDER:- EXPLANATION:- FOR THE PURPOSE OF THIS CLAUSE, THE EXPRESSION LOCAL AUTHORITY' MEANS- I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTIC LE 243 OF THE CONSTITUTION; OR II) MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF A RTICLE 243P OF THE CONSTITUTION, OR III) MUNICIPAL COMMITTEE AND DISTRICT BOARD, LEGALLY ENT ITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTRO L OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND; OR IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENTS ACT, 1924 (2 OF 1924). ITA NO.444(ASR)/2010 5 IT WOULD THUS BE SEEN THAT THE INCOME OF A LOCAL AU THORITY CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY, CAPITAL GAINS OR 'INCOME FROM OTHER SOURCES OR F ROM A TRADE OR BUSINESS CARRIED ON BY IT WAS EARLIER EXCLUDED I N COMPUTING THE TOTAL INCOME OF THE AUTHORITY OF A PREVIOUS YEA R HOWEVER, IN VIEW OF THE AMENDMENT, WITH EFFECT FROM APRIL 1, 2003, THE EXPLANATION 'LOCAL AUTHORITY WAS DEFINED TO INCLUD E ONLY THE AUTHORITIES ENUMERATED IN THE EXPLANATION, WHICH DO ES NOT INCLUDE AN AUTHORITY SUCH AS THE SRINAGAR DEVELOPME NT AUTHORITY. AT THE SAME TIME SECTION 10(20A) WHICH T O INCOME OF AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY L AW ENACTED FOR .THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNIN G, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VIL LAGES, * WHICH BEFORE THE AMENDMENT WAS NOT INCLUDED IN COMP UTING THE TOTAL INCOME, WAS OMITTED. CONSEQUENTLY, THE BE NEFIT CONFERRED BY CLAUSE (20A) ON SUCH AN AUTHORITY WAS TAKEN AWAY THUS, IN VIEW OF THE FACT THAT SECTION 10(20A) WAS OMITTED AND AN EXPLANATION WAS ADDED TO SECTION 10( 20) OF THE INCOME TAX ACT, 1961 ENUMERATING THE AUTHORITIE S CONTEMPLATED BY SECTION 10(20), THE ASSESSEE I.E. S RINAGAR DEVELOPMENT AUTHORITY COULD NOT CLAIM ANY BENEFIT U NDER THOSE PROVISIONS AFTER APRIL 1, 2003S SUCH, THE ASSESSEE WAS LIABLE TO FILE THEIR INCOME TAX RETURNS FROM A. Y. 2003-04 ONWARDS WHICH THE ABOVE AUTHORITY HAS FAILED TO FIL E FROM THE ASSESSMENT YEAR 2003-04 AND ITS INCOME HAS ONLY BEE N CHARGED TO TAX BY RESORTING TO THE PROVISIONS OF SE CTION 147/148 OF THE INCOME TAX ACT, 1961. 4.3. THE BENEFIT CONFERRED BY SECTION 10(20A) OF TH E INCOME TAX ACT, 1961 ON THE ASSESSEE UP TO ASSESSMENT YEAR 200 2-03 HAS BEEN EXPRESSLY TAKEN AWAY AND THE EXPLANATION A DDED TO SECTION 10(20) ENUMERATES THE 'LOCAL AUTHORITY WHI CH DO NOT COVER THE ASSESSEE AUTHORITY. NOW,[THE ASSESSEE I.E . SRINAGAR DEVELOPMENT AUTHORITY HAS CLAIMED THAT ITS OBJECTS FALLS UNDER THE PROVISIONS OF SECTION 2(15) OF THE I T. ACT, 19 61 AND HAS COMPLIED WITH ALL THE ELIGIBILITY CRITERIA FOR GRAN T OF REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 196. THE F ACTS AS ENUMERATED ABOVE, CLEARLY ESTABLISHES THAT THE ASSE SSEE HAS GENERATED INCOME BY WAY OF DISPOSING OFF THE DEVELO PED LANDS AND THE LANDS ARE SOLD WITH DEFINITE MOTIVE OF PROFIT AND THERE IS NO CHARITABLE PURPOSE' OR ANY ACTIVIT Y FOR PUBLIC UTILITY, WHICH IS THE PRIMARY REQUIREMENT OF SECTIO N 2(15) OF THE INCOME TAX ACT, 1961. THE ACTIVITIES OF THE ASSESSE E ARE AIMED AT EARNING PROFIT AS IT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. FURTHER PROFIT MAKING BY THE ITA NO.444(ASR)/2010 6 ASSESSEE IS NOT MERE INCIDENTAL OR BY PRODUCT OF TH E ACTIVITY OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSE SSEE IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AN D ALSO THERE IS NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPO SE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSEE N OT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AN D THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPENT ON 'CHARITABLE PURPOSE ONLY. AS PER CLAUSE 53 OF THE JAMMU & KASHMIR DEVELOPMENT ACT RELATING TO . DISSOLUTION OF THE AU THORITY IT IS PROVIDED THAT : (1) WHERE THE GOVERNMENT IS SATISFIED THAT THE PURP OSES FOR WHICH THE AUTHORITY WAS ESTABLISHED UNDER THIS ACT HAVE B EEN SUBSTANTIALLY ACHIEVED OR THAT THERE ARE GOOD GROUN DS WHICH RENDER THE CONTINUED EXISTENCE OF THE AUTHORITY UNNECESSAR Y, THE GOVERNMENT GAZETTEE, DECLARE THAT THE AUTHORITY SHA LL BE DISSOLVED WITH EFFECT FROM SUCH E AS MAY BE SPECIFIED IN THE NOTIFICATION, AND THE AUTHORITY SHALL BE DEEMED TO BE DISSOLVED ACCOR DINGLY. (2) FROM THE SAID DATE- A) ALL PROPERTIES, FUNDS AND DUES WHICH ARE VESTED IN, OR REALIZABLE BY, THE AUTHORITY SHALL VEST IN, OR BE REALIZABLE B Y, THE GOVERNMENT; B) ALL NAZUL LANDS PLACED AT THE DISPOSAL OF THE G OVERNMENT, C) ALL LIABILITIES WHICH ARE ENFORCEABLE AGAINST T HE AUTHORITY SHALL BE ENFORCEABLE AGAINST THE GOVERNMENT; AND F OR THE PURPOSE OF CARRYING OUT BY THE AUTHORITY AND FOR THE PURPOSE O F REALIZING PROPERTIES, FUNDS AND DUES REFERRED TO IN CLAUSE (A ) THE FUNCTIONS OF THE AUTHORITY SHALL BE DISCHARGED BY THE. GOVERNMEN T' 4,4.2 FROM THE SAID CLAUSE, IT REVEALS THAT ON DISS OLUTION / WINDING UP OF THE AUTHORITY ALL THE ASSETS AS WELL AS LIABILITIES WILL BE TRANSFERRED TO THE GOVERNMENT AND THERE IS NO RESTRICTION AS TO HOW THE SAME ARE TO BE UTILIZED B Y THE GOVERNMENT. 0 FURTHER, A PERUSAL OF THE OBJECTS AS PER SECTION 6 ALSO REVEALS THAT THE OBJECTS WITH WHICH THE AUTH ORITY WAS SET UP MAY APPEAR TO BE OF GENERAL PUBLIC UTILITY F OR DEVELOPMENT OF THE AREA BUT THEN THERE ARE OTHER OB JECTS LIKE SALE AND PURCHASE OF LAND AND PROPERTY, WHICH MAKE THE AUTHORITY A COMMERCIAL ORGANIZATION: THEREFORE, THE OBJECTS PURSUED BY THE AUTHORITY CANNOT BE SAID TO BE CHARI TABLE IN ITA NO.444(ASR)/2010 7 VIEW OF THE FACTS THAT THE AUTHORITY BEING A COMMER CIAL ORGANIZATION WITH NO RESTRICTION AS TO THE APPLICAT ION OF THE ASSETS ON DISSOLUTION/ WINDING UP FOR CHARITABLE PU RPOSES. IN ORDER TO FIND OUT WHETHER AN ORGANIZATION IS A CHAR ITABLE ONE, TESTS HAVE BEEN LAID DOWN BY HON'BLE SUPREME COURT IN THE CASES OF CIT V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1979) 121 ITR AND CIT V/S ANDHRA PRADESH STATE ROA D TRANSPORT CORPORATION (1986) 159 ITR-1, IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION IT HAS BE EN HELD 'SINCE THE INCOME AND PROPERTY OF THE ASSESSEE WERE ABLE TO BE APPLIED SOLELY AND EXCLUSIVELY FOR THE PROMOTION OF THE OBJECTS SET OUT IN THE MEMORANDUM AND NO PART OF SUCH INCOME OR PRO PERTY COULD BE DISTRIBUTED AMONGST THE MEMBERS IN ANY FORM OR U TILIZED FOR THEIR BENEFIT EITHER DURING ITS OPERATIONAL EXISTENCE OR ON ITS WINDING UP OR DISSOLUTION AS SUCH THE OBJECT WAS A CHARITABLE ONE . 4..4.3.AS HAS BEEN STATED ABOVE, IN CASE OF SRINAGA R DEVELOPMENT AUTHORITY, BEING DISSOLVED OR WOUND UP, THE GOVERNMENT WHICH HAS SET UP THE AUTHORITY, BY VIRTU E OF PROVISIONS OF SECTION 53 OF THE JAMMU AND KASHMIR DEVELOPMENT ACT, HAS THE EXCLUSIVE RIGHT OVER THE P ROPERTIES LEFT OVER THEREOF WITH NO RESTRICTION AS REGARDS TH E UTILIZATION OF THE LEFT OVER PROPERTIES FOR CHARITABLE PURPOSES. T HUS, THE AUTHORITY FAIL THE TEST LAID DOWN BY THE HON'BLE SU PREME COURT IN THE ABOVE CASE AND THEREFORE, CANNOT BE TERMED A S A CHARITABLE ORGANIZATION. 4.4.4. SIMILARLY, IN THE CASE OF ANDHRA PRADESH STA TE ROAD TRANSPORT CORPORATION, IT HAS BEEN HELD BY THE HON BLE SUPREME COURT ' THE ACTIVITY OF ASSESSEE WAS NOT CA RRIED ON WITH THE OBJECT OF MAKING PROFIT .AND THE AMOUNT L EFT OVER AFTER UTILIZATION FOR THE PURPOSE SET OUT IN SECTIO N IS OF THE R..T.C. ACT AS AMENDED WAS TO BE MADE OVER THE STAT E GOVERNMENT FOR THE PURPOSE OF ROAD DEVELOPMENT AND THE AMOUNTS HANDED OVER TO THE STATE GOVERNMENT DID NOT BECOME PART OF THE GENERAL REVENUE OF THE STATE BUT WAS IM PRESSED WITH A OBLIGATION THAT IT SHOULD BE UTILIZED ONLY F OR THE PURPOSE FOR WHICH IT WAS ENTRUSTED, NAMELY ROAD DEVELOPMENT , WHICH WAS AN OBJECT OF PUBLIC UTILITY. AGAIN IT MAY BE APPRECIATED THAT THE THAT! THE SRIN AGAR DEVELOPMENT AUTHORITY DOES NOT GUALIFY THE ABOVE TE ST LAID DOWN BY THE HON'BLE SUPREME COURT IN VIEW OF THE FA CT THAT PROPERTIES LEFT OVER TO THE GOVERNMENT AS PER THE P ROVISIONS OF SECTION 53 OF THE J & K DEVELOPMENT ACT, WILL BECO ME A PART OF ITA NO.444(ASR)/2010 8 GENERAL REVENUE OF THE STATE AND THE STATE GOVERNME NT IS NOT UNDER ANY OBLIGATION TO UTILIZE THE SAME FOR THE PU RPOSE FOR WHICH THE AUTHORITY WAS SET UP I.E. DEVELOPMENT OF A PARTICULAR AREA. THUS AGAIN SRINAGAR DEVELOPMENT AU THORITY DOES NOT FULFILL THE CONDITIONS REQUIRED FOR CLAIMI NG THE STATUS OF CHARITABLE ORGANIZATION OR IN OTHER WORDS THE OB JECTS CANNOT BE TERMED AS CHARITABLE ALTHOUGH THEY APPEAR TO BE OF A GENERAL PUBLIC UTILITY BUT WHEN PUT TO TEST AS PER THE CONDITIONS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASES MENTIONED ABOVE THEY FAIL TO QUALIFY THE SAME. 4.5.1. IT IS PERTINENT TO MENTION HERE THAT M/S. PA TNITOP DEVELOPMENT AUTHORITY, KUD DISTRICT UDHAMPUR HAD AL SO SOUGHT REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961, BUT THEIR APPLICATION WAS REJECTED TRY THE THEN COMMISS IONER OF INCOME TAX, J&K, JAMMU VIDE HIS ORDER DATED 28-06-2 007. IT IS PERTINENT TO MENTION THAT SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH, AMRITSAR IN THE CASE OF M/S JALANDHAR DEVELOPMENT A UTHORITY V/S COMMISSIONER OF INCOME TAX -2, JALANDHAR IN WHI CH CASE, THE COMMISSIONER OF INCOME TAX HAD REJECTED. THE AP PLICATION FILED BY THE ASSESSEE HOLDING THAT THE OBJECT OF JA LANDHAR DEVELOPMENT AUTHORITY IS PROFIT MAKING AND AS SUCH, IS NOT ENTITLED FOR REGISTRATION U/S 12AA OF THE INCOME TA X ACT, 196L. THE HONBLE TRIBUNAL UPHELD THE DECISION OF THE COM MISSIONER OF INCOME TAX IN INCOME TAX ACT, 1961 NO.562(ASR)/ 208 DATED(12062009?IHE HONBLE ITAT AMRITSAR HAS ALSO CONSIDERED THE CASES OF ADDL. CIT VS, SURAT ART SIL K CLOTH MANUFACTURERS ASSOCIATION ( 1980) 121 ITR 1 AND CIT VS. ANDHRA PRADESH STATE TRANSPORT CORPORATION ( 1986 ) 159 ITR 1 ( SC ) WHILE DECIDING THE CASE IN FAVOUR OF THE R EVENUE. IT IS ALSO OBSERVED THAT THE HONBLE APEX COURT IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS, CIT REPORTED IN 101 ITR 796 HAS HELD AS UNDER ;- THAT THE ACTIVITIES OF THE CHAMBER BEING ACTIVITIES CARRIED ON FOR PROFIT, IN THE ABSENCE OF ANY RESTRICTION I M I TS MEMORANDUM AND ARTICLES OF ASSOCIATION AGAINST THE MAKING OF PROFIT FROM THOSE ACTIVITIES, THE INCOME OF CHA MBER FROM THOSE ACTIVITIES WAS LIABLE TO INCOME-TAX. SEC. 2(15) MUST BE INTERPRETED ACCORDING TO THE LAN GUAGE USED THEREIN AND AGAINST THE BACKGROUND OF INDIAN LIFE. BY DEFINITION IN S. 2(15') THE BENEFIT OF INCLUSION FROM, TOTAL INCOME IS TAKEN AWAY WHEN IN ACCOMPLISHING A CHARIT ABLE PURPOSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIE S FOR PROFIT.' ITA NO.444(ASR)/2010 9 HONBLE JURISDICTIONAL ITAT, AMRITSAR FURTHER RELIE D UPON THE DECISION OF THE HONBLE ITAT, CHANDIGARH IN THE CAS E OF PUNJAB URBAN PLANNING & DEVELOPMENT AUTHORITY (PUPA) VS CIT(SUPRA), WHEREIN IT HAS BEEN HELD: ' PLEA THAT ON IDENTICAL FACTS REGISTRATION UNDER S .12A WAS, ACCORDED TO PATIALA URBAN PLANNING AND BEVEHOPMENT AUTHORITY BY THE CIT HAS NO SUBSTANCE, IF THE INTEN TION OF CREATING PATIALA AUTHORITY WAS THE SAME THEN THERE WAS NO NEED OF ITS CREATION, AS THE SAME OBJECTS WOULD HAV E BEEN, FULFILLED BY THE BIGGER UNIT, I.E, THE ASSESSEE . A T THE SAME TIME, RES JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS. FURTHER, THE ORDER PASSED BY A LOWER AUTHORITY IS N OT BINDING ON, THE TRIBUNAL. IT IS A WELL-FEN-KNOWN, FACT THAT IN, SOME OF THE S ITUATIONS THE PROVISIONS OF LAW ARE MISUSED IN THE NAMES OF CHARI TIES, IF AN EXPANDED /BROADER LATITUDES IS EXTENDED TO THE WOR D CHARITY, THEN THERE ARE SO MANY INSTITUTIONS / DEPARTMENTS W HO WILL TRY TO COME UNDER THE UMBRELLA OF THIS PROVISION TO MISUSE THE PROVISION. THEREFORE, FOR THE BROAD DEVELOPMENT OF THE NATION/SOCIETY, A STRICT AND POSITIVE VIGIL IS REQU IRED SO THAT THE PROVISION CAN BE SAVED FROM ITS MISUSE IN ANY M ANNER. NO ACTIVITY CAN BE CARRIED ON EFFICIENTLY, PROPERLY UN LESS AND UNTIL IT IS CARRIED OUT ON BUSINESS PRINCIPLE * BUT IT DO ES NOT MEAN THAT THE PROVISION IS MISUSED IN ANY MANNER UNDER T HE GRAB OF CHARITY AND ANY INSTITUTION, BE ALLOWED TO BECOME R ICHER AND RICHER UNDER THE GRAB OF CHARITY BY MAKING IT A NON TAX PAYABLE ORGANIZATION. A CHARITABLE INSTITUTION PROV IDES SERVICES FOR CHARITABLE PURPOSES FREE OF COST AND N OT FOR A GAIN, IN THE PRESENT SCENARIO, SIMILAR ACTIVITIES ARE PER FORMED BY BIG COLONIZERS/DEVELOPERS WHO ARE EARNING A HUGE PROFIT , IF THIS REGISTRATION IS GRANTED, THEN ANYBODY WILL CLAIM TH E EXEMPTION FROM TAX. IF THE ACCOUNTS OF THE ASSESSEE ARE ANALY ZED, IT HAS TURNED INTO A HUGE PROFIT MAKING AGENCY FROM WHICH IT IS TAKING MONEY FROM, THE GENERAL PUBLIC, IF ANY INSTI TUTION OF PUBLIC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTERS A RE CREATED/DEVELOPED, THE ASSESSEE IS CHARGING THE COS T OF IT FROM THE PUBLIC AT LARGE AND THE MONEY IS COMING FR OM THE COFFER OF THE GOVERNMENT. IT CAN BE SAID THAT OBJEC TS / ACTIVITIES OF THE ASSESSEE ARE MORE OF COMMERCIALIZ ED NATURE AND NO CHARITY IS INVOLVED IN IT. AT THE TIME. IF T HESE FACILITIES ARE NOT PROVIDED, THEN NOBODY WILL PURCHASE A PLOT. IT CA. BE SAID THAT IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDE N COST IS ALREADY ADDED, SO NO CHARITY IS INVOLVED. AT BES T, THE ITA NO.444(ASR)/2010 10 ASSESSEE CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS, IT CAN BE SAID THAT HE DUT Y OF THE GOVERNMENT TO CREATE/PROVIDE ALL THESE FACILITIES T O PUBLIC E, WHICH IS BEING DONE THROUGH AN AGENCY IN A PARTICUL AR AREA. AT THE SAME TIME THE FUNDS WHICH ARE PROVIDED TO TH E ASSESSEE BY THE GOVERNMENT IS AGAIN A PUBLIC MONEY OR GENERATED FROM PUBLIC ITSELF..IN VIEW OF THESE FAC TS, THE ASSESSEE'S ACTIVITIES NOT BEING OF CHARITABLE NATUR E, THE APPLICATION FOR REGISTRATION UNDER SEC.2A HAS BEEN RIGHTLY REJECTED BY CTT-ASSTT. CIT VS. THANTHI TRUST (200L) L65 CTR (SC) 681: (200L) 247 ITR. 725 (SC) AND BIHAR STATE FORES T DEVELOPMENT CORPORATION VS. CIT (1997) 224 ITR 757 (PAT) RELIED ON; ADDL. CLT' VS. SURAT ART SLLFE CLOTH MAN UFACTURERS ASSOCIATION (1979 13 CTR (SC) 378 (1980) 121 ITR. 1 (SC), CIT 52 VS. ANDHRA PRADESH STATE ROAD TRANSPORT CORPORAT ION ( 1925 ) 52 CTR (SC) J-5: ( 1986 ) 159 ITR-1 (SC) AND NEW LIFE IN CHRIST EVANGELISTIC ASSOCIATION (NLC) VS. C IT ( 2001 ) T55 CTR (MAD) 440 (2000) 240 ITR 532 (MAD) DISTINGUISHED.' 4.5.2. THE OBJECT WITH WHICH THE ASSESSEE WAS FORME D MAY APPEAR TO BE A GENERAL PUBLIC UTILITY, BUT THEN THE RE WERE OTHER OBJECTS AS WELL WHICH MAKE THE ASSESSEE A COMMERCIA L ORGANIZATION. CONSIDERING THE PRINCIPLE SET OUT IN THE ABOVE DECISION, WE FIND THAT THE ASSESSEE IS A COMMERCIAL ORGANIZATION JUST LIKE ANY BUSINESS FIRM ENGAGED M THE REAL ESTATE BUSINESS. IT CAN BE SAID THAT THE AUTHORITY HAVE THE POWER TO ACQUIRE, HOLD, MANAGE AND DISPOSE OFF LAND AND OTHER PROPERTY, TO CARRY OUT BUILDING, ENGINEERING AND OTHER OPERATIONS, TO EXECUTE WORKS IN CONNECTION WITH SUP PLY OF WATER AND ELECTRICITY, DISPOSAL OF SEWERAGE AND OTH ER SERVICES AND AMENITIES AND GENERALLY TO DO ANYTHING NECESSAR Y OR EXPEDIENT FOR PURPOSES OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO, IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDE N COST IS ALREADY ADDED, SO NO CHARITY IS INVOLVED. AT BES T, THE ASSESSEE CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS. IT CAN BE SAID THAT IT IS THE DUTY OF THE IMMINENT TO CREATE/ PROVIDE ALL THESE FACILITIES TO PUBLIC LARGE, WHICH IS BEING DONE THROUGH ITS AGENCY IN A PARTIC ULAR AREA. AT THE SAME TIME, THE FUNDS WHICH ARE PROVIDED TO T HE ASSESSEE BY THE GOVERNMENT IS AGAIN A PUBLIC MONEY OR GENERATED PUBLIC ITSELF. THE OBJECTS OF THE ASSESSE E, THOUGH CLAIMED TO BE CHARITABLE, BUT ACTUALLY ARE OF PUREL Y COMMERCIAL NATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS KNOWN FACT THAT THE ASSESSEE IS ACQUIRING THE LAND AT VERY LOW PRIC ES AND SELLING THE SAME ON VERY HIGHER RATES AND IS EARNIN G AS PROFIT ITA NO.444(ASR)/2010 11 THERE FROM. A NEW TREND HAS ALSO EMERGED THAT THE A SSESSEE IS AUCTIONING THE PLOTS BY WAY OF BIDDING AT THE MARKE T RATE AND SOMETIMES MORE THAN THAT IS CHARGING INTEREST ON BE LATED PAYMENTS. IN SUCH A SITUATION, NO CHARITY IS INVOLV ED. RATHER THE ASSESSEE HAS CONVERTED ITSELF INTO A BIG BUSINE SSMAN. SIMILAR DEVELOPMENT/ INFRASTRUCTURE/ FACILITIES ARE ALSO PROVIDED BY PRIVATE DEVELOPERS THESE DAYS, THEN THE Y WILL ALSO CLAIM THE STATUS OF A CHARITABLE INSTITUTION THE FA CILITIES WHICH ARE PROVIDED TO THE PLOT HOLDERS ARE INCIDENTAL TO THE COMMERCIAL ACTIVITY CARRIED OUT BY THE ASSESSEE AND IF CERTAIN FACILITIES LIKE PARKS, COMMUNITY CENTER, SCHOOL ARE PROVIDED, IT IS NOT ONLY BASIS REQUIREMENT, RATHER A TOOL ATTRAC TING THE INVESTORS WHEREIN THE HIDDEN COST OF THESE FACILITI ES IS ALREADY INCLUDED. IN THE ABSENCE OF THESE FACILITIES, NORMA LLY THE PURCHASER MAY NOT INVEST AND THE PRICES MAY BE LESS . IN VIEW OF THESE FACTS, THE ASSESSEES ACTIVITIES NOT BEING OF CHARITABLE NATURE, THE APPLICATION OF REGISTRATION UNDER SECTI ON 12A DOES NOT QUALIFY FOR REGISTRATION AND SAME IS REJECTED. IN OTHER WORDS, THE PURPOSE OF THE AUTHORITY IS NOT AN ADVAN CEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY AND THE ACTIVI TY OF THE ASSESSEE INVOLVE CARRYING ON ACTIVITY FOR PROFIT AN D THE ACTIVITIES OF THE ASSESSEE CANNOT BE SAID TO FALL W ITHIN THE PURVIEW OF SECTION 2(15) OF THE ACT. THE ACTIVITIES OF THE ASSESSEE IS TO CARRY ON BUSINESS AND THERE IS NO RE STRICTION IN ITS OBJECT OF MAKING PROFIT THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE IS NOT ENGAGED IN THE ACTIVITY OF THE PROFITS AND AS SUCH, THE ASSESSEE IS NOT ENTITLED FOR REGISTRAT ION UNDER SECTION 12A OF THE ACT. FURTHER PROFIT MAKING BY TH E ASSESSEE IS NOT MERE INCIDENTAL OR BY PRODUCT OF THE ACTIVIT Y OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSESSEE S IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AN D ALSO THERE IS NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPO SE OF CHARITABLE ACTIVITIES AND PROFIT OF THE ASSESSEE NO T USED FOR CHARITABLE PURPOSES UNDER THE TERMS OF THE OBJECT C LAUSE OF NOTIFICATION UNDER WHICH IT WAS FORMED AND, THERE I S NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPENT ON CHARITABLE PURPOSE. HENCE THE CONTENTION OF THE ASSESSEE IS N OT ACCEPTED AND APPLICANT IS THUS NOT ENTITLED TO REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961, THEREFORE, THE SAME IS RE JECTED. 5.1. SO FAR AS THE ARGUMENT OF THE COUNSEL OF THE A SSESSEE THAT:- 'THAT THE JAMMU DEVELOPMENT AUTHORITY HAS ALREADY B EEN GRANTED RECOGNITION U/S JL2AHDY YOUR GOOD OFFICES AFTER PERUSING THOROUGHLY THE OBJECTIVES OF THE AUTHORITY AS PER THE ITA NO.444(ASR)/2010 12 ENACTMENT. IN THE REGISTRATION CERTIFICATE BEARING NO.CIT/J&K/2009-10/5211-13 DATED 30 TH SEPTEMBER, 2009 VIDE PARA 3, YOUR GOOD OFFICE HAS ALREADY GIVEN THE FOLLOWING CONCLUSION: 3.AFTER PERUSING THE SAID ACT OF 1970,1 AM SATISFI ED THAT THE INSTRUMENT DOES NOT EXIST FOR ANY TRADE, COMMERCE O R BUSINESS IS CONCERNED, ATTENTION IS INVITED TO THE FIVE MEMBER BENCH OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF A. DISTRIBUTORS (BARODA) P. LTD. V/S UNION OF INDIA AN D ORS. REPORTED AT 155 ITR 120 (SC) WHEREIN WHILE REVERS ING THE ORDER OF THREE MEMBER BENCH, THE HONBLE COURT RULE D: WE HAVE GIVEN OUR MOST ANXIOUS CONSIDERATION TO THI S QUESTION, PARTICULARLY SINCE ONE OF US, NAMELY, P.N . BHAGWATI J. WAS A PARTY TO THE DECISION IN CLOTH TRADERS CA SE.. WE ARE COMPELLED TO REACH THE CONCLUSION THAT CLOTH TR ADERS CASE MUST BE REGARDED AS WRONGLY DECIDED. THE VIEW TAKEN IN THAT CASE MUST BE HELD TO BE ERRONEOUS AND IT MUST BE CORRECTED. TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY IT IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. IN THIS, WE DERIVE COMFORT AND STRENGTH FROM THE WISE AND INSPIRING WORDS OF JUSTICE BRONSON IN PIERCE V. DELAMETER (A.M.Y, AT PAGE 18): A JUDGE OUGHT TO BE WISE ENOUGH TO KNOW THAT HE IS FA LLIBLE AND, THEREFORE, EVER READY TO LEARN; GREAT AND HONEST EN OUGH TO DISCARD ALL MERE PRIDE OF OPINION AND FOLLOW WHEREV ER IT MAY LEAD: AND COURAGEOUS ENOUGH TO ACKNOWLEDGE HIS ERRO RS. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT ON MERI TS AS WELL AS ON FACTS, THERE IS NO ROOM TO BLITHE ARGUMENTS P UT FORTH ON BEHALF OF THE ASSESSEE AUTHORITY. IT IS THE SETTLED LEGAL POSITION THAT IF A WORD OR AN EXPRESSION HAS BEEN JUDICIALLY DEFINED BY THE COURT THEN IT SHOULD BE PRESUMED THAT THE LEGIS LATURE WAS WELL AWARE OF SUCH MEANING WHILE ENACTING AN ENACTM ENT AND CONSEQUENTLY, SUCH WORD OR EXPRESSION M THE __ENT S HOULD BE UNDERSTOOD IN THE SAME SENSE IN WHICH IT WAS JUDICI ALLY DEFINED. IT IS PERTINENT TO MENTION THAT THE COUNSEL FOR THE APPLICANT HAS RELIED UPON CASE LAWS IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1979) 13 ~CTR (SC) 378: (1980) 121 ITR 1 (SC), CIT 52 VS. ANDHRA PRADE SH STATE ROAD TRANSPORT CORPORATION (1986) BUT THE SAME HAVE BEEN DECIDED ON THE PROVISIONS OF INCOME-TAX ACT 1961 WI THOUT THE AMENDMENT IN SECTION 2(15) REGARDING DEFINITION OF CHARITABLE PURPOSE AS DISCUSSED ABOVE. MOREOVER ON MERITS ALSO THE CASES ARE DISTINGUISHABLE AS HELD BY THE HONBLE IT AT, AMRITSAR. EVEN THE OTHER CASES INCLUDING THE CASES OF CIT VS. ITA NO.444(ASR)/2010 13 MOGA IMPROVEMENT TRUST ( 2008 ) ITA NO. 489 OF 2007 (P & H ) AND GUJRAT MARITIME BOARD ( 2007) 295 ITR 561 ( SC ) ARE PRIMA FACIE DISTINGUISHABLE AS DISCUSSED IN THE BOD Y OF THIS ORDER. 5.2. ON A CURSORY LOOK AT THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL UNDER WHICH THE PROV ISIONS OF SECTION 10 (20A) WERE OMITTED AND THE DEFINITION OF THE TERM CHARITABLE PURPOSES AMENDED, IT BECOMES ABUNDANTL Y CLEAR THAT THE LEGISLATURE CLARIFIED ITS INTENTION. AT TH IS STAGE, IT WOULD NOT BE OUT OF PLACE TO CONSIDER THE HEYDONS RULE ALSO KNOWN AS THE MISCHIEF RULE' WHICH DEALS WITH ASCER TAINING THE CORRECT INTENTION OF THE LEGISLATURE BY LOOKING INTO THE MISCHIEF THAT WAS SOUGHT TO BE REMEDIED BY THE LEGI SLATURE. THIS RULE BASICALLY COMPRISES FOUR THINGS TO BE CON SIDERED; A) WHAT WAS THE COMMON LAW BEFORE THE MAKING OF THE ACT; B) WHAT WAS THE MISCHIEF AND DEFECT F OR WHICH THE COMMON LAW DID NOT PROVIDE. C) WHAT REMEDY THE PARLIAMENT HAS APPOINTED TO CURE THE DEFECT; AND D) THE TRUE REASONS OF THE REMEDY. THIS RULE CONTEMPLATES IN CONSIDERING THE POSITION PREVAILING ANTERIOR TO THE AMENDMENT, WHICH WAS INTENDED TO BE RECTIFIED BY WAY OF AMENDMENT OR INSERTION OF A SECTION AND T HEN CONSIDERING THE AMENDMENT AS OVERRULING THE HITHERT O LEGAL POSITION. IF A PARTICULAR PROVISION IS ENACTED FOR GETTING RID OF THE EXISTING LAW, AS IT IS OR INTERPRETED BY THE CO URTS, THE NEW AMENDMENT WOULD BE CONSTRUED AS SUPERSEDING THE EAR LIER PREVALENT VIEW WHICH WAS CONSIDERED BY THE LEGISLAT URE AS MISCHIEVOUS. THE MISCHIEF RULE HAS BEEN REPEATEDLY APPROVED BY SEVERAL COURTS IN THE COUNTRY INCLUDING THE HON BLE APEX COURT IN THE CASE OF CIT V/S SHAHZADA NAND & SONS ( 1966) 60 ITR 392 (SC). COMING BACK TO OUR CASE AND APPLYI NG THE MISCHIEF RULE, WE OBSERVE THAT THROUGH FINANCE ACT, 2002 CLAUSE (20A) OF SECTION 10 HAS BEEN O AS TO WITHDRA W EXEMPTION AVAILABLE TO THE DEVELOPMENT AUTHORITIES SO AS TO THE INTENTION OF THE LEGISLATURE THAT THEIR INCOME BECOMES TAXABLE. IT HAS BEEN NOTICED THAT ENTITIES OPERATIN G ON COMMERCIAL LINES ARE NOW CLAIMING EXEMPTION ON THEI R INCOME BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 11 OF THE ACT ON THE GROUND THAT THEY ARE CHARITABLE INSTITUTIONS, T HIS IS BASED ON THE ARGUMENT THAT THEY ARE ENGAGED IN THE ADVAN CEMENT ITA NO.444(ASR)/2010 14 OF AN OBJECT OF GENERAL PUBLIC UTILITY' AS IS INCLU DED IN THE FOURTH LIMB OF THE CURRENT DEFINITION OF CHARITABL E PURPOSE. SUCH A CLAIM, WHEN MADE IN RESPECT OF AN ACTIVITY C ARRIED OUT ON COMMERCIAL LINES IS CONTRARY TO THE INTENTION OF THE PROVISIONS. WITH A VIEW TO LIMITING THE SCOPE OF TH E PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, SUB SECTION (15) OF SECTION 2 HAS BEEN AMENDED TO PROVI DE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 6. IN VIEWS OF THE FOREGOING DISCUSSION, I AM SATI SFIED THAT SRINAGAR DEVELOPMENT AUTHORITY IS AN AUTHORITY ESTABLISHED WITH THE MOTIVE OF PROFIT CONSTITUTED U NDER THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 AND THAT THE ACTIVITIES OF SUCH AUTHORITY ARE HIT BY SUB-SECTION 15 OF SECTION 2 OF THE INCOME TAX ACT, 1961, THEREFORE, I AM SATI SFIED THAT THE APPLICANT AUTHORITY IS NOT ENTITLED TO REGISTRATION AS REQUESTED FOR AND SAME IS REFUSED IN TERMS OF PROVISIONS OF S ECTION 12AA(L)(B)(II) OF THE INCOME TAX ACT, 1961. 5. ON BEHALF OF THE ASSESSEE, THE FOLLOWING WRITTEN SUBMISSIONS HAVE BEEN RAISED BEFORE US. THE LD. COUNSEL FOR THE ASSE SSEE HAS REITERATED THESE SUBMISSIONS: THE ABOVE MENTIONED APPEAL HAS BEEN FIXED BY THE H ON BENCH TO BE HEARD ON 05.05.2016 AS INSTRUCTED BY MY CLIENTS, 1 WOULD LIKE MAKE THE FOLLOWING SUBMISSIONS FOR YOU R KIND CONSIDERATIONS:- THE ASSESSEE HAS TAKEN FIVE GROUNDS OF APPEAL BUT A LL THE GROUNDS RELATE TO GRANT OF EXEMPTION U/S 12A , HENC E A SINGLE SUBMISSION IS BEING MADE COVERING ALL THE GROUNDS. IT IS HUMBLY SUBMITTED THAT THE ASSESSEE HAD APPLIE D FOR GRANT OF REGISTRATION U/S 12AA OF THE INCOME TAX AC T 1.961 TO WORTHY CIT JAMMU & KASHMIR WHICH HAS BEEN REJECTED AND HENCE THE APPEAL BEFORE THIS HONORABLE TRIBUNAL. BE FORE PROCEEDING WITH THE SUBMISSIONS IT IS IMPORTANT TO MENTION ITA NO.444(ASR)/2010 15 THAT ANOTHER AUTHORITY WHICH IS THE CREATION OF THE SAME LEGISLATURE VIZ JAMMU DEVELOPMENT AUTHORITY HAD BEE N GRANTED EXEMPTION BY THE WORTHY CIT J & K WHICH WA S WITHDRAWN AND AS PER THE AVAILABLE INFORMATION JDA HAD FILED APPEALS BEFORE THIS BENCH , HON HIGH COURT OF J I K WHICH HAVE NOT BEEN CONSIDERED AND ACCORDINGLY REGISTRATI ON HAS NOT BEEN GRANTED TO JAMMU DEVELOPMENT AUTHORITY. IN VIEW OF THE ABOVE THE ASSESSEE SUBMITS BEFORE TH IS HONORABLE BENCH THAT THE FOLLOWING FACTS NEED TO BE CONSIDERED WHILE DECIDING THE APPEAL OF THE ASSESSE E . A) THAT, AFTER THE WITHDRAWAL OF EXEMPTION U/S 10(2 0) FROM THE ASSESSMENT YEAR 2003-04 VARIOUS DEVELOPMEN T AUTHORITIES APPLIED FOR REGISTRATION U/S 12AA OF TH E INCOME TAX ACT 1961. WHEREAS SOME OF THE ASSESSEE HAVE BEEN GRANTED REGISTRATION U/S 12AA VARIOUS OTHERS HAVE BEEN DENI ED. THE ITAT DELHI BENCH 'C' VIDE ITS ORDER DATED 25.0 7.2014 HAS ALLOWED THE APPEAL OF HARIDWAR DEVELOPMENT AUTHORIT Y FOR GRANT OF THE REGISTRATION U/S 12AA IN ADDITION THE FOLLOWING ARE THE DEVELOPMENT AUTHORITIES WHICH HAVE BEEN GRA NTED REGISTRATION BY DIFFERENT BENCHES OF THE INCOME TAX APPELLATE TRIBUNAL (ITAT ) & HAVE HELD THAT ACTIVITIES OF THE SE AUTHORITIES ARE FOR ADVANCEMENT OF GENERAL PUBLIC UTILITY AS GI VEN IN SUB SECTION 15 OF SECTION 2 OF THE ACT. IN SUPPORT OF ABOVE THE RELIANCE IS PLACED ON THE F OLLOWING DECISIONS OF THE VARIOUS ITATS: I) ALIGARH DEVELOPMENT AUTHORITY-ITA NO. 168(AG)/DE L/2007, ORDER DATED 30.05.2008. II) U.P AWAS EVAM VIKAS PARISHAD- ITA NO. 1690 (LUCK)/2003 FOR A. Y. 2003-04 DT: 25.07.2005. III) LUCKNOW DEVELOPMENT AUTHORITY, LUCKNOW BENCH. ITA 3056/D/12, 3013/D/13 & 6058/D/12 4. KANPUR DEVELOPMENT AUTHORITY, LUCKNOW BENCH. 5. KHURJA DEVELOPMENT AUTHORITY-ITA NO. 1851 (DEL) 2009 ORDER DT: 14.07.2009. 6. SAHARANPUR DEVELOPMENT AUTHORITY- ITA NO. 5008 (DE L) 2007 ORDER DATED 20.06.2008. ITA NO.444(ASR)/2010 16 7. HAPUR PILKHUWA DEVELOPMENT AUTHORITY- ITA NO. 2735/DEL/2006, ORDER DATED 15.05.2007. 8. GHAZIABAD DEVELOPMENT AUTHORITY- ITA NO. 2903 ( DEL) 2006 ORDER DATED 31.01.2007. 9. AYODHYA FAIZABAD DEVELOPMENT AUTHORITY. 10. UNNAO- SHUKLAGANJ DEVELOPMENT AUTHORITY ITA HO . 686,690,696,703AND 736 (LUCK)/2003 FOR A.Y. 2003-04 DT: 25.07.2005. 10. MUZZAFARNAGAR DEVELOPMENT AUTHORITY DECIDED BY ITAT , DELHI E' BENCH ON 01.02.2010 THE LATEST ORDER ON THE ISSUE. FURTHER TO ABOVE THIS HONORABLE BENCH HAS ALSO ALLO WED THE APPEALS OF VARIOUS IMPROVEMENT TRUSTS AND THUS THESE IMPROVEMENT TRUSTS WERE GRANTED REGISTRATION U/S 12AA . WE ARE REPRODUCING THE FINDINGS OF THE HON PUNJAB & HARYANA HIGH COURT WHICH HAS REPRODUCED THE FINDING S OF THIS HONBLE BENCH. 1. THE FINDING RECORDED BY THE TRIBUNAL IS AS HEREU NDER : 'A PERUSAL OF THE ABOVE S. 22 OF THE TOWN IMPROVEME NT TRUST ACT, 1922, SHOWS THAT IT EMPOWERS THE TRUST, WHEN T HE CONDITIONS PRESCRIBED IN THE SAID ARE PREVAILING, T O FRAME A GENERAL IMPROVEMENT SCHEME FOR THE PUBLIC UTILITY O F A LOCAL AREA OR PART THEREOF. IT IS IN PURSUANCE OF THIS PR OVISION. THAT THE ASSESSEE IS UNDISPUTEDLY CARRYING ON ITS ACTIVI TIES. SECS TO 26 OF THE SAID ACT PROVIDED FOR STREET SCHEMES, DEV ELOPMENT AND MANSION SCHEME, HOUSING ACCOMMODATION SCHEMES A ND HOUSING SCHEME HE ACTIVITIES OF THE ASSESSEE TRUST ARE ALSO IN CONSONANCE WITH THESE STATUTORY SCHEMES. IT IS EVID ENT FROM THIS THAT THE OBJECT OF THE ASSESSEE TRUST T - PROV IDE BENEFIT TO THE PUBLIC WITH ITS LOCAL LIMITS, RATHER THAN TO IT SELF FHIS APART, IT IS ON RECORD, THAT THE SAME LEARNED CIT AS WHO H AS PASSED THE IMPUGNED ORDER, HAS, ON SIMILAR FACTS AND CIRCU MSTANCES, GRANTED REGISTRATION : THE IMPROVEMENT TRUST, JALAN DHAR, VIDE ORDER DT. 12TH/13TH APRIL, 2006. HOLDING THAT THE A CTIVITIES OF THAT TRUST WERE WITH AN OBJECT OF GENERAL PUBLIC U TILITY'. SIMILARLY, REGISTRATION WAS ALSO GRANTED TO THE IMP ROVEMENT TRUST, SANGRUR AND THE IMPROVEMENT TRUST, PATIALA.' ITA NO.444(ASR)/2010 17 3. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES AND PERUSED THE RECORD. 4. LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. GUJARAT MARITIME BOARD (2008) 214 CTR (SC) 81 : (2007) 295 ITR 561 (SC), WHEREIN THE QUESTION FOR CONSIDER ATION WAS THE MEANING TO BE ASSIGNED TO EXPRESSION 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' IN S. 2(15) OF THE ACT. IT WAS HELD THAT THE SAID EXPRESSION INCLUDES ALL OBJECTS WHICH PROMOTE WELFARE OF GENERAL PUBLIC. GUJARAT MARITIME BOARD, FOR DEVELOP MENT OF MINOR PORTS IN THE STATE OF GUJARAT, WAS HELD TO BE CHARITABLE INSTITUTION. 5. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO A DIVISION BENCH JUDGMENT OF THIS COUR T IN THE CASE OF CIT VS. MARKET COMMITTEE, DHARIWAL (2007) 2 94 ITR 563 (P&H). IT WAS HELD THAT EVEN IF ASSESSEE WAS NO T A TRUST, IF ITS OBJECTIVE WAS TO PROMOTE GENERAL PUBLIC INTE REST, S. 2(15) OF THE ACT WAS ATTRACTED AND THE ASSESSEE IS ENTITL ED TO REGISTRATION UNDER S. 12A OF THE ACT. 6 IT IS NOT THE CASE OF THE APPELLANT CIT THAT THE ASSESSEE IS NOT CARRYING ON ACTIVITIES OF GENERAL WELFARE COVER ED BY THE EXPRESSION 'ANY OTHER OBJECT OF GENERAL PUBLIC UTIL ITY' IN S. 2(15) OF THE ACT. 7. IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CASE GUJRAT MARTITIME BOARD (SUPRA) AND T HE DIVISION BENCH JUDGMENT OF THIS COURT IN THE CASE OF MARKET COMMITTEE (SUPRA), WE ARE OF THE VIEW THAT THE QUESTION SOUGH T TO BE RAISED IS COVERED AGAINST THE REVENUE. 8. THE APPEAL IS ACCORDINGLY DISMISSED.' IT IS SUBMITTED BEFORE THIS HONORABLE BENCH THAT TH E FACTS OF HARIDWAR DEVELOPMENT AUTHORITY ARE SIMILAR TO THAT OF SRINAGAR DEVELOPMENT,. AUTHORITY. WE ARE ACCORDINGL Y REPRODUCING THE OBSERVATIONS OF HONORABLE BENCH HER EUNDER FOR A READY REFERENCE ( COPY OF THE JUDGMENT IS ALS O ENCLOSED) 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE.THE FIRST PROVISO TO SECTION TAK ES OUT AN ACTIVITY FROM THE AMBIT OF CHARITY OBJECT IF THE SAME IS ITA NO.444(ASR)/2010 18 IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. SECTI ON 2(15) READS AS UNDER: '2. (15) 'CHARITABLE PURPOSE INCLUDES RELIEF OF T HE POOR, EDUCATION, MEDICAL RELIEF PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILD LIFE) 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 O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, 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, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION, 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 ACTIVI TIES REFERRED TO THEREIN IS TWENTY FIVE LAKH RUPEES OR L ESS IN THE PREVIOUS YEAR. 7.1 THE ASSESSEE WAS SET UP AS PER U.P. GOVT. G.O . DATED 04/06/1986 UNDER UTTAR PRADESH NAGAR YOJNA EVAM VIKAS ADHINIYAM 1973 (BASED ON DELHI DEVELOPMENT ACT 1957) WITH AN OBJECTIVE OF DEVELOPM ENT OF HARDWAR, PAURI, TEHRI AND PART OF DEHRADUN AND A LL DEVELOPMENT SCHEMES AS WELL AS BEAUTIFICATION OF TH E DISTRICT CAME UNDER ITS PURVIEW. IN THE OBJECTS, IT IS, INTER ALIA, MENTIONED THAT THE EXISTING LOCAL BODIE S AND OTHER AUTHORITIES INSPITE OF THEIR BEST EFFORTS HAD NOT BEEN ABLE TO COPE WITH THE PROBLEMS OF TOWN PLANNIN G AND URBAN DEVELOPMENT AND, THEREFORE, TO TACKLE THE SAME RESOLUTELY THE STATE GOVERNMENT CONSIDERED IT ADVISABLE THAT IN SUCH DEVELOPING AREAS. DEVELOPMEN T AUTHORITIES PATTERNED ON.THE DELHI DEVELOPMENT AUTHORITY BE ESTABLISHED. THE ENTIRE ACTIVITIES ARE CONTROLLED/ ADMINISTERED THROUGH VARIOUS GOVERNMENT ORDERS AND NOTIFICATIONS. 7.2. IT IS NOTICEABLE THAT IN SECTION 2(15) PRESERV ATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST HAVE BEEN BROUGHT WITHIN THE DEFINITION OF CHARITABLE PURPOSE. IN O UR ITA NO.444(ASR)/2010 19 OPINION, THE SUBMISSION OF THE ASSESSEE THAT DEVELOPMENT OF THE DISTRICT BY PROVIDING HOUSING, R OADS, DEVELOPMENT AND MAINTENANCE OF PARKS (BOOST TO ENVIRONMENT) PLANTATION OF TREES (AGAIN PERTAINING TO ENVIRONMENT), PROVIDING SEWERAGE SYSTEM ( CLEAN AND HEALTHY ENVIRONMENT) ARE ALL OBJECTS FOR THE WELFAR E OF THE PEOPLE OF THE DISTRICT; AS ALSO THESE ARE OBJEC TS OF GENERAL PUBLIC UTILITY. HOWEVER, SINCE THESE ARE TH E OBJECTS OF GENERAL PUBLICITY UTILITY AND THE BOOST TO ENVIRONMENT IS ONLY INCIDENTAL TO THE ACTIVITY UNDE RTAKEN BY THE ASSESSEE, THEREFORE, THE ACTIVITY CARRIED OU T BY ASSESSEE COMES WITHIN THE LAST LIMB OF SECTION 2( 1 5) VIZ. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND, THEREFORE, IT IS TO BE EXAMINED WHETHER THE SA ME DOES NOT INVOLVE THE CARRYING ON OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS OR CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR REDUCTION OF THE INCOME FROM SUCH AC TIVITY. 7.3. IN THIS REGARD, WE WOULD FIRST REFER TO THE V ARIOUS SECTIONS DEALING WITH ACTIVITY UNDERTAKEN BY THE ASSESSEE. AS PER SECTION 3 OF THE U P. URBAN PLANNI NG & DEVELOPMENT ACT, 1973, FIRST OF ALL THE STATE HAS T O FORM AN LION THAT ANY AREA WITHIN THE STATE REQUIRES TO BE DEVELOPED ACCORDING TO N AND ON FORMATION OF SUCH OPINION, IT IS TO NOTIFY IN THE GAZETTE THE AREA AS A DEVELOPMENT AREA. THEREUPON, THE STATE WILL CONSTIT UTE AN AUTHORITY TO BE CALLED THE DEVELOPMENT AUTHORITY IN RESPECT OF THAT DEVELOPMENT AREA PER SECTION 4 OF T HE SAID ACT. 7.4. THE OBJECTS OF THE AUTHORITY ARE CONTAINED IN SECTION 7 AND FOR CARRYING OUT ITS OBJECTS OF DEVELOPMENT, IT HAS BEEN VESTED WITH THE POWER: I) TO ACQUIRE, HOLD, MANAGE AND DISPOSE OF LAND AND OTHER PROPERTY; II) TO CARRY OUT BUILDING, ENGINEERING, MINING AND OTHER OPERATIONS; III) TO EXECUTE WORKS IN CONNECTION WITH THE SUPPLY OF WATER AND ELECTRICITY, TO DISPOSE OF SEWAGE AND TO PROVIDE AND MAINTAIN OTHER SERVICES AND AMENITIES; AND ITA NO.444(ASR)/2010 20 IV) GENERALLY TO DO ANYTHING NECESSARY OR EXPEDIENT FOR PURPOSE OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO. 7.5 SECTION 14 OF THE ACT GIVES EXCLUSIVE RIGHT TO THE DEVELOPMENT AUTHORITY FOR DEVELOPMENT OF LAND IN RESPECT OF AREA WHICH HAS BEEN DECLARED AS DEVELOPMENT AREA U/S 3. AFTER SUCH DECLARATION NO DEVELOPMENT OF LAND SHALL BE UNDERTAKEN OR CARRIED OUT OR CONTINUED IN THAT AREA BY ANY PERSON OR BODY (INCLUDING A DEPARTMENT OF GOVERNMENT), UNLESS PERMISSION OF SUCH DEVELOPMENT AHS BEEN OBTAINED IN WRITING FROM THE VICE CHAIRMAN IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT. 7.6. FURTHER, THE DEVELOPMENT HAS TO BE CARRIED OU T AS PER THE PLANS. SECTION 18 OF THE ACT REQUIRES THE S TATE GOVERNMENT TO ACQUIRE THE LAND AND TRANSFER THE SAM E TO THE DEVELOPMENT AUTHORITY. THE AUTHORITY IS NOT ENT ITLED TO GIFT THE LAND BUT TO DISPOSE OF THE LAND BY WAY OF SALE, EXCHANGE OR LEASE OR BY THE CREATION OF ANY EASEMENT, RIGHT OR PRIVILEGE OR OTHERWISE. 7.7. SECTION 20 DEALS WITH THE FUND OF THE AUTHORIT Y', WHICH IS REPRODUCED HEREUNDER: '20. FUND OF THE AUTHORITY - (I) THE AUTHORITY SHAL L HAVE AND MAINTAIN ITS OWN FUND TO WHICH SHALL HE CREDITED - (A) ALL MONEYS RECEIVED BY THE AUTHORITY FROM THE STAGE GOVERNMENT BY WAY OF GRANTS, LOANS, ADVANCES OR OTHERWISE; B) ALL MONEYS BORROWED BY THE AUTHORITY FROM SOURCES OTHER THAN THE STATE GOVERNMENT BY WAY OF LOANS OR DEBENTURES; C) ALL FEES. TOLLS AND CHARGES RECEIVED BY THE AUTHORITY UNDER THIS ACT; D) A11 MONEYS RECEIVED BY THE AUTHORITY FROM THE DISPOSAL OF LADS, BUILDINGS AND OTHER PROPERTIES, MOVABLE AND IMMOVABLE: AND E) ALL MONEYS RECEIVED BY THE AUTHORITY BY WAY OF RENTS AND PROFITS OR IN ANY OTHER MANNER OR FROM ANY OTHER SOURCE. F) THE FUND SHALL BE APPLIED TOWARDS MEETING THE EXPENSES INCURRED BY THE AUTHORITY IN THE ADMINISTRATION OF THIS ACT AND FOR NO OTHER PURPOSES. ITA NO.444(ASR)/2010 21 7.8. ALL THESE PROVISIONS IN THE ACT LEAD TO INESCAPABLE CONCLUSION THAT STATE GOVT, CONSTITUTED DEVELOPMENT AUTHORITY FOR THE WELFARE OF PEOPLE AND NOT WITH ANY PROFIT MOTIVE. 7.9. NOW, WE WILL EXAMINE THE PROVISO TO SECTION 2 (15) WITH REFERENCE TO HOVE BROAD SCHEME OF THE ACT. FRO M THE ABOVE IT IS EVIDENT THAT THE MAIN OBJECT OF THE ASSESSEE IS DEVELOPMENT OF THE AREA AS PER THE MAND ATE OF U.P. URBAN PLANNING & DEVELOPMENT ACT, 1973. THE ACTIVITY UNDERTAKEN BY THE AUTHORITY COMES WITHIN T HE OBJECT OF GENERAL PUBLIC UTILITY BUT IT CANNOT BE C ONCLUDED THAT IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF MADE. COMMERCE OR BUSINESS. UNLESS THE ACTIVITY UNDERTAKEN BY THE ASSESSEE COMES WITHIN TH E AMBIT OF TRADE, COMMERCE OR BUSINESS, THE PROVISO W OULD NOT GET ATTRACT. 7.10. HONBLE SUPREME COURT IN THE CASE OF CIT VS. GUJARAT MARITIME HOARD 295 1TR 561 HAS HELD THAT WHERE THE ASSESSEE WAS UNDER A LEGAL OBLIGATION TO APPLY ITS INCOME WHICH WAS DIRECTLY AND SUBSTANTIAL LY FROM THE BUSINESS HELD UNDER TRUST FOR THE DEVELOPM ENT OF MINOR PORTS IN THE STATE OF GUJARAT THEN IT DOES NOT INVOLVE ANY PROFIT MOTIVE AND ASSESSEE WAS ENTITLED OR REGISTRATION U/S 12A. THE HONBLE SUPREME COURT POINTED OUT THAT THE INCOME EARNED BY THE PORT WAS DEPLOYED FOR THE DEVELOPMENT OF MINOR PORTS N THE S TATE OF GUJARAT. HONBLE SUPREME COURT TOOK NOTE OF THE FACT THAT U/S 73 OF THE GUJARAT MARITIME BOARD ACT 1981, ALL MONEYS RECEIVED BY OR ON BEHALF OF THE BOARD WERE T O BE CREDITED TO A FUND CALLED THE GENERAL ACCOUNT /THE MINOR PORTS AND UNDER SECTION 74, DETAILED GUIDELINES AS NOTED AT PAGE ; 64 OF THE REPORT, WERE THERE. THE MODE OF DEALING WITH DEFICIT OR SURPLUS AS CONTEMPLATED U/S 75 OF THE SAID ACT. CONSIDERING ALL THESE SECTIONS, TH E HONBIE SUPREME COURT HELD THAT THERE COULD NOT BE SAID TO BE ANY PROFIT MOTIVE. UNLESS THERE WAS A PROFIT MOTIVE, IT CANNOT BE SAID THAT AN ENTITY WAS CARRYI NG ON ANY TRADE, COMMERCE OR BUSINESS. 7.11 WE FURTHER FIND THAT IN CASE OF KRISHI UTPADA N MANDI SAMITY (SUPRA), THE HONBLE ALLAHABAD HIGH COURT, WHILE DEALING WITH THE PROVISO TO SECTION 2 (15), INTER ALIA, OBSERVED THAT MAIN OBJECT IS TO BE CONS IDERED ITA NO.444(ASR)/2010 22 AND INCIDENTALLY IF SOME PROFIT IS MADE AND THE SAI D PROFIT IS USED FOR CHARITABLE PURPOSE THE SAID TRUS T/ INSTITUTION DOES NOT CEASE TO BE ESTABLISHED FOR CHARITABLE PURPOSE. 7.12. WE FURTHER FIND THAT IN THE CASE OF MUZAFFAMA GAR DEVELOPMENT AUTHORITY (SUPRA), THE ITA T FOLLOWING THE DECISIONS IN THE CASE OF U P. AVAS EVAM VIKAS PARIS HAD (SUPRA); AND M/S KHURJA DEVELOPMENT AUTHORITY VS. C IT (SUPRA), ALLOWED THE ASSESSEES APPEAL. 7.13. FURTHER IN THE CASE OF SABARMATI ASHRAM GAUSHALA TRUST VS. ADIT (E) (SUPRA), WE FIND THAT TRIBUNAL HAS HELD THAT PROFIT MOTIVE IS MUST FOR HO LDING AN ACTIVITY TO BE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. 7.14 SINCE THE DECISION OF HONBLE ALLAHABAD HIGH COURT IS IN THE CASE OF U P. AVAS EVAM VIKAS PARISH AD (SUPRA) IS APPLICABLE TO THE FACTS OF THE CASE, THE REFORE, WE DO NOT FIND ANY REASON TO REFER TO THE DECISIONS RELIED UPON BY THE ID. CIT IN THE CASES OF PUNJAB URBAN PLANNING & DEVELOPMENT AUTHORITY (SUPRA) & JALANDHA R DEVELOPMENT AUTHORITY (SUPRA). IT IS PERTINENT TO NOTE THAT ID. CIT HAS GRANTED REGISTRATION U/S 12AA FROM 20- 1-2009. 7.15 IN VIEW OF ABOVE DISCUSSION WE HOLD THAT ASSESSEE-AUTHORITY HAS BEEN CREATED WITH THE OBJECT OF GENERAL PUBLIC UTILITY WHICH IS A CHARITABLE OBJECT WITHIN THE MEANING OF SECTION 2(15) AND THE PROVISO TO SEC TION 2( 15) IS NOT APPLICABLE BECAUSE ASSESSEE-AUTHORITY IS NOT CARRYING OUT ACTIVITY WITH ANY PROFIT MOTIVE BU T THE PREDOMINANT OBJECT IS WELFARE OF PEOPLE AT LARGE. 8. 8. IN THE RESULT, THE GROUNDS RAISED BY ASSESSEE ARE ALLOWED AND THE REGISTRATION IS RESTORED HEREWI TH FOR READY REFERENCE):- BASED ON THE QUOTED JUDGMENT OF HON PUNJAB & HARYANA HIGH COURT & HARD-WAR DEVELOPMENT AUTHORITY, THE FOLLOWING POINTS NEED TO BE CONSIDERED WHILE DECIDING THE APPEAL OF SRINAGAR DEVELOPMENT AUTHORITY : ITA NO.444(ASR)/2010 23 1. SRINAGAR DEVELOPMENT AUTHORITY HAS BEEN CREATED BY THE STATE LEGISLATURE AND THE LEGISLATURES AND THE OBJECTS OF THE AUTHORITY ARE: THE OBJECTS OF THE AUTHORITY SHALL BE TO PROMOTE A ND SECURE THE DEVELOPMENT OF THE LOCAL AREA FOR WHICH IT IS C ONSTITUTED, ACCORDING TO PLAN AND FOR THAT PURPOSE THE AUTHORIT Y SHALL HAVE THE POWER TO ACQUIRE, HOLD, MANAGE AND DISPOSE OF LAND AND OTHER PROPERTY, TO CARRY OUT BUILDING, ENGINEER ING AND OTHER OPERATIONS, TO EXECUTE WORKS IN CONNECTION WI TH SUPPLY OF WATER AND ELECTRICITY, DISPOSAL OF SEWERAGE AND OTHER SERVICES AND AMENITIES AND GENERALLY TO DO ANYTHING NECESSARY OR EXPEDIENT FOR PURPOSE- OF SUCH DEVELOP MENT AND FOR PURPOSES INCIDENTAL THERETO; ( COPY OF THE ACT IS ENCLOSED HEREWITH FOR READY RE FERENCE) FOR ACHIEVING THE OBJECTIVE THE ACT FURTHER PROVIDE S THAT: 1. THE GOVERNMENT MAY, BY NOTIFICATIONS MAY BE AGRE ED UPON BETWEEN THE GOVERNMENT AND THE AUTHORITY PLACE AT T HE DISPOSAL OF THE AUTHORITY ALL OR ALL DEVELOPED AND UNDEVELOPED LANDS* IN THE ZONE XI R THE LOCAL AREA VESTED IN THE GOVERNMENT (KNOWN AND HEREINAFTE R REFERRED TO AS 'NAZUL LAND' FOR THE PURPOSE OF DEVE LOPMENT IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. 2. NO DEVELOPMENT OF ANY NAZUL LAND SHALL BE UNDERT AKEN OR CARRIER OUT EXCEPT BY OR UNDER THE CONTROL SUPER VISION OF THE AUTHORITY AFTER SUCH LAND HAS BEEN PLACED AT THE DI SPOSAL OF THE AUTHORITY UNDER SUB-SECTION 3. AFTER ANY SUCH NAZUL LAND HAS BEEN DEVELOPED, B Y UNDER THE CONTROL AND SUPERVISION OF, THE AUTHORITY , IT SHALL BE DEALT WITH BY THE AUTHORITY IN ACCORDANCE WITH RULE S MADE AND DIRECTIONS GIVEN BY THE GOVERNMENT IN THIS BEHA LF. 4. IF ANY NAZUL LAND PLACED AT THE DISPOSAL OF THE AUTHORITY UNDER SUB SECTION (I) IS REQUIRED AT ANY TIME THERE AFTER BY THE GOVERNMENT, THE AUTHORITY SHALL, BY NOTIFICATION IN THE GOVERNMENT GAZETTE, PLACE IT AT THE DISPOSAL OF THE GOVERNMENT UPON SUCH TERMS AND CONDITIONS AS MAY BE AGREED UPON BETWEEN THE GOVERNMENT AND THE AUTHORIT Y. THE FOLLOWING UNDISPUTED FACTS EMERGE FROM THE ACT AS DISCUSSED ABOVE. ITA NO.444(ASR)/2010 24 I) THAT THE NAZOOL LAND AND ASSETS ON IT BELONGS TO THE J & K GOVT. II) THAT S.D.A AS & WHEN ASKED WILL DEVELOP THE LAND ETC AS PER THE DIRECTION OF THE J & K GOVT. III) AFTER THE DEVELOPMENT THE LAND WILL BE DEALT B Y THE S.D.A IN THE MANNER AS DIRECTED BY THE J & K GOVT. IV) THE MOST IMPORTANT POINT TO BE NOTED IS THAT TH AT THE GOVT. CAN RECLAIM THE LAND ETC ANY TIME AS & WHEN IT DECIDES BY WAY OF NOTIFICATION. V) DISSOLUTION OF THE AUTHORITY: 1) WHERE THE GOVERNMENT IS SATISFIED THAT THE PURPOSES FOR WHICH THE AUTHORITY WAS AUTHORITY WAS ESTABLISHED UNDER THE ACT HAVE BEEN SUBSTANTIALLY ACHIEVED OR THAT THERE ARE GOOOD GROUNDS WHICH RENDER THE CONTINUED EXISTENCE OF THE AUTHOR UNNECESSARY, THE GOVERNMENT GAZETTE, DECLARE THAT THE AUTHORITY SHALL BE DISSOLVED WITH EFFECT FROM SUCH DATE AS M BE SPECIFIED IN THE NOTIFICATION, AND THE AUTHORITY SHALL DEEMED TO BE DISSOLVED ACCORDINGLY. 2) FROM THE SAID DATE:- A) ALL PROPERTIES, FUNDS AND DUES WHICH ARE VESTED IN, REALIZABLE BY, THE AUTHORITY SHALL VEST IN, OR BE REALISABLE BY THE GOVERNMENT; B) ALL NAZUL LANDS SHALL BE PLACED AT THE DISPOSAL OF THE GOVERNMENT; C) ALL LIABILITIES WHICH ARE ENFORCEABLE AGAINST THE GOVERNMENT; AND D) FOR THE PURPOSE OF CARRYING OUT BY THE AUTHORITY AND FOR THE PURPOSE OF REALISING PROPERTIES, FUNDS AND DUES REFERRED TO IN CLAUSE. E) THE FUNCTIONS OF THE AUTHORITY SHALL BE DISCHARG ED BY THE GOVERNMENT. VI) FROM THE ABOVE IT IS AMPLE CLEAR THAT IT AUTHO RITY IS IMPLEMENTING THE DEVELOPMENT AGENDA OF THE GOVT WHI CH IS OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. PROFIT MOTO : THE AUTHORITY IS NOT FOR EARNING OF ANY PROFIT BUT IS IMPLEMENTING THE DEVELOPMENT PROGRAM OF THE JAMMU & KASHMIR GOVT AS DIRECTED AND AS PER THE TERMS & CONDITIONS AS SET BY THE GOVT. ITA NO.444(ASR)/2010 25 THERE IS NO CAPITAL, NO RESERVES AND NO PROVISION FOR DECLARATION OF A KIND OF DIVIDEND OR DISTRIBUTI ON OF PROFITS. CLAUSE/ SEC 19 DEALS WITH THE FUND OF T HE AUTHORITY WHICH IS REPRODUCED HERE AND PROVIDES THAT: THE AUTHORITY SHALL HAVE AND MAINTAIN ITS OWN FUND TO WHICH SHALL BE CREDITED: A) ALL MONEYS RECEIVED BY THE AUTHORITY FROM THE CENTRAL OR STATE GOVERNMENT BY WAY OF GRANTS, LOANS , ADVANCES OR OTHERWISE; B) ALL MONEY BORROWED BY THE AUTHORITY FROM SOURCE OTHER THAN THE GOVERNMENT BY WAY OF LOANS OR DEBENTURES; C) ALL FEES AND CHARGES RECEIVED BY THE AUTHORITY UNDER THIS ACT; D) ALL MONEY RECEIVED BY THE AUTHORITY FROM THE DISPOSAL OF LANDS, BUILDINGS AND OTHER PROPERTIES, MOVABLE AND IMMOVABLE; AND E) ALL MONEYS RECEIVED BY THE AUTHORITY BY WAY OF RENTS AND PROFITS OR IN ANY OTHER MANNER OR FROM AN Y OTHER SOURCE; 2) THE FUNDS SHALL BE APPLIED TOWARDS MEETING THE EXPENSES INCURRED BY THE AUTHORITY IN THE ADMINISTRATION OF THIS ACT AND FOR NO OTHER PURPOSE IT IS IMPORTANT TO MENTION THAT THE LD. CIT HAS REJECTED THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT ON THE BASIS THAT AUTHORITY HAS A PROFIT MOTIVE WITHOUT ADDUCING ANY EVIDENCE TO PROVE THAT THE APPELLANT WAS PURSUING ANY OBJECT WHICH WAS NOT CHARITABLE PURPOSE OR THAT THE PROPERTY AND FUNDS O F THE APPELLANT ARE NOT BEING APPLIED IN MEETING THE CHARITABLE OBJECTIVES. THE LD. CIT IGNORED THE FACTS THAT AS PER THE PROVI SIONS OF THE ACT THE FUNDS CAN BE APPLIED ONLY FOR THE ADMINISTRATION OF THIS ACT AND FOR NO OTHER PURPOSE . 6. POST PASSING OF THE IMPUGNED ORDER, DATED 28.09. 2010, THIS BENCH VIDE ORDER DATED 14.06.2012, PASSED IN ITA NO. 30(A SR)/2011, IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY VS. C.I.T. JAM MU, DECIDED THE MATTER IN FAVOUR OF THE DEPARTMENT, AS FOLLOWS: ITA NO.444(ASR)/2010 26 3. THE BRIEF FACTS IN THIS CASE ARE THAT REGISTRATI ON UNDER SECTION 12A READ WITH SECTION 12AA OF THE ACT, WAS GRANTED TO THE ASSESSEE ON 30.09.2009 AS PER CERTAIN CONDITIONS AS ENVISAGED IN THE SAID ORDER. A SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE UNDER SECTION 12AA(3) OF THE ACT ON 14.10.2010. FOR THE S AKE OF CLARITY THE SAID SHOW CAUSE NOTICE IS REPRODUCED AS UNDER: PLEASE REFER TO THIS OFFICE ORDER UNDER SECTION 12 A READ WITH SECTION 12AA OF THE INCOME-TAX ACT, 1961 ISSUED UND ER NO. CIT/J&K/2009-10/5211-13 DATED 30.09.2009 UNDER WHIC H REGISTRATION WAS GRANTED TO JAMMU DEVELOPMENT AUTH ORITY, JAMMU W.E.F. 01.04.2008 SUBJECT TO SATISFACTION OF CONDITIONS ENUMERATED BELOW THE SAID ORDER AND ENTERED AT SERI AL NO.56 OF THE REGISTER MAINTAINED IN THIS OFFICE. 2.1.YOUR ATTENTION IS INVITED TO THE PROVISIONS OF SUB-SECTION (15) OF SECTION -2 OF THE INCOME TAX ACT, 1961 WHIC H DEFINES CHARITABLE PURPOSE TO INCLUDE RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. AS PER FINANCE ACT, 2008 W.E.F. 01. 04.2009, A FOLLOWING PROVISO HAS BEEN ADDED BELOW THE SAID SEC TION, WHICH READS AS UNDER: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F 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 RENTENTION OF THE INCOME FROM SUCH ACTIVITY. FURTHER, AS PER THE FINANCE ACT, 2010 AFTER THE FIR ST PROVISO, PROVISO-2 HAS BEEN INSERTED AND SHALL BE DEEMED TO HAVE BEEN INSERTED WITH EFFECT FROM THE IST DAY OF APRIL, 200 9, NAMELY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVI TIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN T HE PREVIOUS YEAR. ITA NO.444(ASR)/2010 27 PRIOR TO INSERTION OF THESE PROVISO, CERTAIN BODIES HAVE BEEN TREATED CHARITABLE ON THE GROUND OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. HOWEVER, AFTER THE INSERTIO N OF THE ABOVE PROVISO, THE ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSES, IF IT INVOLVES THE CARRYING ON OF: A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; B) ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMER OR BUSINESS; C) FOR CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESP ECTIVE OF THE NATURE OF USE OR APPLICATION OF RETENTION OF INCOME FROM SUCH ACTIVITY. 2.2 THUS, THE NEWLY INSERTED 2 ND PROVISO TO SECTION 2(15) W.E.F. 01.04.2009 (ASSESSMENT YEAR 2009-10 AND ONWA RDS) PROVIDES THAT THE PROVISIONS OF THE IST PROVISO TO SECTION 2(15) SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEI PTS FROM THE ACTIVITIES REFERRED TO IN THE IST PROVISO IS RS.10, 00,000/- OR LESS IN THE PREVIOUS YEAR. HOWEVER, AFTER GOING THROUGH THE RETURNS OF INCOME FILED BY JAMMU DEVELOPMENT AUTHORITY, IT IS OBSERVED THAT THE AGGREGATE VALUE OF THE RECEIPTS FROM THE A CTIVITIES REFERRED TO IN THE IST PROVISO IS MORE THAN THE PR ESCRIBED LIMIT, AS SUCH, IT SHALL NOT BE ENTITLED TO THE BENEFIT OF EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961. IT HAS BEEN NOTICED THAT JAMMU DEVELOPMENT AUTHORITY IS OPERATING ON COMMERCIAL LI NES AND BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 11 OF THE ACT ON THE GROUND THAT IT IS CHARITABLE INSTITUTION. THIS IS B ASED ON THE ARGUMENT THAT JAMMU DEVELOPMENT AUTHORITY IS ENGAGE D IN THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AS IS INCLUDED IN THE FOURTH LIMB OF THE CURRENT DEFINITI ON OF CHARITABLE PURPOSE. SUCH A CLAIM, WHEN MADE IN RE SPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES IS CONT RARY TO THE INTENTION OF THE PROVISIONS. WITH A VIEW TO LIMITIN G THE SCOPE OF THE PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY, SUB SECTION (15) OF SECTION 2 HAS BEEN AME NDED TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR ITA NO.444(ASR)/2010 28 BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N 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. 3. IN VIEW OF THE ABOVE, I AM SATISFIED THAT JAMMU DEVELOPMENT AUTHORITY IS A AUTHORITY ESTABLISHED WI TH THE MOTIVE OF PROFIT CONSTITUTED UNDER THE JAMMU & KASH MIR DEVELOPMENT ACT, 1970 AND THAT THE ACTIVITIES OF SU CH AUTHORITY ARE HIT BY SUB-SECTION 15 OF SECTION 2 OF THE INCOM E TAX ACT, 1961, THEREFORE, I AM SATISFIED THAT THE APPLICANT AUTHORITY IS NOT ENTITLED TO REGISTRATION IN TERMS OF PROVISIONS OF SECTION 12AA(1)(1)(II) OF THE INCOME TAX ACT, 1961. THEREFO RE, IN TERMS OF THE PROVISIONS OF SECTION 12AA(3) WHICH PROVIDES THAT WHERE A TRUST HAS BEEN GRANTED REGISTRATION U/S 12AA(1)(B ) AND SUBSEQUENTLY THE COMMISSIONER OF INCOME TAX IS SATI SFIED THAT THE ACTIVITIES OF SUCH TRUST ARE NOT GENUINE OR AR E NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST, HE SHALL AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEA RD TO IT, CANCEL THE REGISTRATION BY PASSING AN ORDER IN WRIT ING. 4. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE THE UNDERSIGNED AT AYAKAR BHAWAN, RAILHEAD COMPLEX, PAN AMA CHOWK, JAMMU ON 29.10.2010 AT 11.30AM/PM AND SHOW C AUSE WHY AN ORDER CANCELING THE REGISTRATION GRANTED TO JAMMU DEVELOPMENT AUTHORITY SHOULD NOT BE MADE U/S 12AA(3 ) OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL Y OURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUG H AN AUTHORIZED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WR ITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFO RE ANY SUCH ORDER MADE U/S 12AA(3) OF THE INCOME TAX ACT, 1961. 4. THE ASSESSEE VIDE LETTER DATED 10.11.2010 SUBMIT TED THAT THE ABOVE SUBJECT SHOW CAUSE NOTICE IS NOT TENABLE, WHICH IS REPRODUCED BY THE LD. CIT VIDE PARA 2 AT PAGES 4 TO 15 OF HIS ORDER. THE LD. CIT BEFORE CANCELLING THE REGISTRAT ION OF THE ASSESSEE REPRODUCED THE PROVISIONS AND CONDITIONS IN SECTION 12AA(3) OF THE ACT AND THEN THE PROVISO INTRODUCED BY FINANCE ACT,2008 W.E.F. 01.04.2009 IN SECTION 2(15) OF THE ACT ALONG WITH 2 ND PROVISO TO SECTION 2(15) BY THE FINANCE ACT, 2010 ITA NO.444(ASR)/2010 29 W.E.F. I.4.2009. IT WAS OBSERVED BY THE LD. CIT TH AT PRIOR TO INSERTION OF THESE PROVISOS CERTAIN BODIES WERE TRE ATED CHARITABLE ON THE GROUND OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. HOWEVER, AFTER THE INSERTION OF TH E ABOVE PROVISOS THE ADVANCEMENT OF OTHER OBJECT OF GENER AL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF : A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS. C) FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, I RRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION O F INCOME FROM SUCH ACTIVITY. 4.1. THEREFORE, BEFORE INSERTION OF THE ABOVE PROVI SO, THE INSTITUTIONS/TRUSTS/SOCIETIES WHICH WERE GIVEN REGI STRATION U/S 12A OF THE ACT CONSIDERING THEM UNDER THE HEAD ADV ANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, WERE ELIGIBLE FOR EXEMPTION FROM TAX U/S 11 OF THE ACT, IF THEY WERE NOT INVOLVED IN ANY SUCH COMMERCIAL ACTIVITIES AS BROUGHT OUT I N (A) (B) AND (C). HOWEVER, IN CASE, THEY ARE INVOLVED IN SUCH C OMMERCIAL ACTIVITIES AND IF THE AGGREGATE VALUE OF THE RECEIP T FROM THE ACTIVITIES REFERRED TO IN THE IST PROVISO IS MORE T HAN RUPEES TEN LAKHS IN THE PREVIOUS YEAR, THEY SHALL NOT BE ELIGI BLE TO CONTINUE WITH REGISTRATION U/S 12A AND THE SAME IS REQUIRED TO BE WITHDRAWN. IT WAS OBSERVED BY THE LD. CIT THAT IF A NY INSTITUTION IS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATI ON, IT WOULD LOOSE THE STATUS OF CHARITABLE ORGANIZATION IRRESPE CTIVE OF THE NATURE OF USE, OR APPLICATION OR RETENTION OF INCOM E FROM SUCH ACTIVITY. 4.2. THE FACT OF THE PRESENT CASE AS OBSERVED BY T HE LD. CIT IN PARA 4.1. ARE THAT JAMMU DEVELOPMENT AUTHORITY W AS ESTABLISHED VIDE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 AND IT CAME INTO EFFECT FROM 31.10.1970. AS PER THE SAID ACT, THE OBJECT OF THE AUTHORITY IS TO PROMOTE AND SECURE TH E DEVELOPMENT OF THE LOCAL AREA FOR WHICH IT IS CONST ITUTED ACCORDING TO PLAN AND FOR THAT PURPOSE THE AUTHORIT Y SHALL HAVE ITA NO.444(ASR)/2010 30 THE POWER TO ACQUIRE HOLD, MANAGE AND DISPOSE OFF L AND AND OTHER PROPERTY, TO CARRYING OUT BUILDING, ENGINEERI NG AND OTHER OPERATIONS, TO EXECUTE WORKS IN CONNECTION WITH SUP PLY OF WATER AND ELECTRICITY, DISPOSAL OF SEWERAGE AND OTHER SER VICES AND AMENITIES AND GENERALLY TO DO ANYTHING NECESSARY OR EXPEDIENT FOR PURPOSES SUCH DEVELOPMENT AND FOR THE PURPOSE S INCIDENTAL THERETO. THE AUTHORITY IS A BODY CORPORATE HAVING P ERPETUAL SUCCESSION AND A COMMON SEAL WITH POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTIES, BOTH MOVABLE AND IMMOVABLE T O CONTRACT, AND BY THE SAID NAME SUE OR TO BE SUED. THE AUTHORI TY CONSISTS OF A CHAIRMAN, VICE CHAIRMAN AND SEVEN OTHER MEMBE RS APPOINTED BY THE STATE GOVERNMENT. THE AUTHORITY IS RESPONSIBLE FOR THE PLANNED DEVELOPMENT OF THE CITY INCLUDING PREPARATION OF THE MASTER PLAN OF THE AREA. THE STA TE GOVERNMENT IS AUTHORIZED TO ENTRUST THE AUTHORITY F ROM TIME TO TIME WITH ANY WORK CONNECTED WITH PLANNED DEVELOPME NT AND MATTERS CONNECTED THERETO. SECTION 19(CHAPTER-VII) OF THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 OBLIGES THE AUTHORITY TO MAINTAIN ITS OWN FUND TO WHICH SHALL B E CREDITED MONEYS RECEIVED BY THE AUTHORITY FROM THE CENTRAL O R STATE GOVERNMENT BY WAY OF GRANTS, LOANS, ADVANCES OR OTH ERWISE, ALL FEES, RENTS, CHARGES, LEVIES AND FINES RECEIVED BY THE AUTHORITY UNDER THE ACT, ALL MONEYS RECEIVED BY THE AUTHORITY FROM DISPOSAL OF ITS MOVABLE AND IMMOVABLE ASSETS AND AL L MONEYS RECEIVED BY THE AUTHORITY BY WAY OF LOAN FROM FINAN CIAL AND OTHER INSTITUTIONS AND DEBENTURES FLOATED FOR THE E XECUTION OF A SCHEME OR SCHEMES OF THE AUTHORITY DULY APPROVED BY THE STATE GOVERNMENT. UNLESS THE STATE GOVERNMENT OTHERWISE, DIRECTS ALL MONEYS RECEIVED BY THE AUTHORITY SHALL BE CREDI TED TO ITS FUNDS WHICH SHALL BE KEPT WITH THE JAMMU& KASHMIR B ANK OR ANY OTHER BANK APPROVED BY THE STATE GOVERNMENT. 4.3. THE LD. CIT IN PARA 4.2. OF HIS ORDER OBSERVED THAT TILL THE FINANCIAL YEAR 2002-03, THE INCOME OF SUCH AUTH ORITIES WERE EXEMPT U/S 10(20A) OF THE ACT. HOWEVER, IN VIEW OF OMISSION OF SECTION 10(20A) OF THE ACT AN EXPLANATION WAS ADDED TO SECTION 10(20), WHICH IS REPRODUCED AS UNDER: EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE, THE E XPRESSION LOCAL AUTHORITY MEANS I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTICLE 243 OF THE CONSTITUTION; OR ITA NO.444(ASR)/2010 31 II) MUNICIPALITY AS REFERRED TO IN CLAUSE (3) OF ARTICL E 243P OF THE CONSTITUTION; OR III) MUNICIPAL COMMITTEE AND DISTRICT BOARD, LEGALLY ENT ITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTRO L OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND; OF IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENTS ACT, 1924 (2 OF 1924). IT WOULD THUS BE SEEN THAT THE INCOME OF A LOCAL AU THORITY CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPE RTY, CAPITAL GAINS OR INCOME FROM OTHER SOURCES OR F ROM A TRADE OR BUSINESS CARRIED ON BY IT WAS EARLIER EXCL UDED IN COMPUTING THE TOTAL INCOME OF THE AUTHORITY OF A PR EVIOUS YEAR. HOWEVER, IN VIEW OF THE AMENDMENT WITH EFFECT FROM APRIL 1, 2003, THE EXPLANATION LOCAL AUTHORITY WAS DEFINED TO INCLUDE ONLY THE AUTHORITIES ENUMERATED IN THE EXP LANATION, WHICH DOES NOT INCLUDE AN AUTHORITY SUCH AS THE JAM MU DEVELOPMENT AUTHORITY. AT THE SAME TIME SECTION 10( 20A) WHICH RELATED TO INCOME OF AN AUTHORITY CONSTITUTED IN IN DIA BY OR UNDER ANY LAW ENACTED FOR THE PURPOSE OF DEALING WI TH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FO R THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, WHICH BEFORE THE AMENDMENT WAS NOT INCLUDED IN COMPUTING THE TOTAL INCOME, WAS OMITTED . CONSEQUENTLY, THE BENEFIT CONFERRED BY CLAUSE (20A) ON SUCH AN AUTHORITY WAS TAKEN AWAY. THUS, IN VIEW OF THE FACT THAT SECTION 10(20A) WAS OMITTED AND AN EXPLANATION WAS ADDED TO SECTION 10(20)A) OF THE ACT, ENUMERATING THE LOCAL AUTHORI TIES CONTEMPLATED BY SECTION 10(20), THE ASSESSEE I.E. J AMMU DEVELOPMENT AUTHORITY COULD NOT CLAIM ANY BENEFIT U NDER THOSE PROVISIONS AFTER APRIL 1, 2003. THE BENEFIT CONFERR ED BY SECTION 10(20)A) OF THE ACT ON THE ASSESSEE UPTO THE A.Y. 2 002-03 HAS BEEN EXPRESSLY TAKEN AWAY AND THE EXPLANATION ADDED TO SECTION 10(20) ENUMERATES THE LOCAL AUTHORITY WHICH DO NO T COVER THE AUTHORITY. THE ASSESSEE I.E. JAMMU DEVELOPMENT AUTHORITY SUBSEQUENTLY CLAIMED THAT ITS OBJECTS FALLS UNDER T HE PROVISIONS OF SECTION 2(15) OF THE ACT AND HAS COMPLIED WITH A LL THE ELIGIBILITY CRITERIA FOR GRANT OF REGISTRATION U/S 12A OF THE ACT, WHICH WAS ALLOWED VIDE ORDER DATED 30.09.2009 SUBJE CT TO FULFILLMENT OF CERTAIN CONDITIONS. ON EXAMINATION O F THE FACTS AS ENUMERATED ABOVE WITH REFERENCE TO THE AMENDMENT M ADE TO ITA NO.444(ASR)/2010 32 THE PROVISIONS OF SUB SECTION (15) OF SECTION 2 OF THE ACT WHICH DEFINES CHARITABLE PURPOSES TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY. 4.4. REFERRING TO INSERTION OF THE IST AND 2 ND PROVISO TO SECTION 2(15) OF THE ACT, THE LD. CIT AFTER GOING THROUGH T HE OBJECTS OF THE AUTHORITY AS ENVISAGED U/S 6, IT WAS OBSERVED T HAT THE OBJECT OF THE AUTHORITY IS TO PROMOTE AND SECURE THE DEVEL OPMENT OF THE LOCAL AREA. THE ASSESSEE HAS GENERATED INCOME BY WA Y OF DISPOSING OFF THE DEVELOPED LANDS AND THE LANDS AR E SOLD WITH DEFINITE MOTIVE OF PROFIT AND THERE IS NO CHARITAB LE PURPOSE OR ANY ACTIVITY FOR PUBLIC UTILITY, WHICH IS THE PRIMA RY REQUIREMENT OF SECTION 2(15) OF THE ACT. THE ACTIVITIES OF THE ASSESSEE ARE AIMED AT EARNING PROFIT AS IT IS CARRYING ON ACTIVI TY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. FURTHER PROFIT MAKI NG BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BY PRODUCT OF TH E ACTIVITY OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSE SSEE IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AN D ALSO THERE IS NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPO SE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSEE N OT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT A ND THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPENT ON CHARITABLE PURPOSE ONLY. THE LD. CIT REFERRED TO CLAUSE 53 OF THE JAMMU & KASHMIR DEVELOPMENT ACT RELATING TO DISSOLUTION OF THE AUTHORITY. THE SAID CLAUSE IS REPRODUCED IN PARA 4. 4 OF CITS ORDER AT PAGE-21 WHERE IT HAS BEEN DECLARED THAT SU CH AUTHORITY SHALL BE DISSOLVED W.E.F. SUCH DATE AS MAY BE SPECI FIED IN THE NOTIFICATION AND TALL THE PROPERTIES, FUNDS AND DUE S ETC. SHALL VEST IN THE GOVERNMENT AND FOR THE PURPOSE OF REALI ZING THE PROPERTIES, FUNDS AND DUES, FUNCTIONS OF THE AUTHOR ITY SHALL BE DISCHARGED B THE GOVERNMENT. IT WAS INTERPRETED BY THE LD. CIT THAT ALL ASSETS AND LIABILITIES AS PER CLAUSE 53 OF JAMMU & KASHMIR DEVELOPMENT ACT, WILL BE TRANSFERRED TO T HE GOVERNMENT AND THERE IS NO RESTRICTION AS TO HOW TH E SAME ARE UTILIZED BY THE GOVERNMENT. ON PERUSAL OF THE OBJEC TS AS PER CLAUSE 6 IT REVEALS THAT OBJECTS WITH WHICH THE AUT HORITY WAS SET UP MAY APPEAR TO BE OF GENERAL PUBLIC UTILITY FOR D EVELOPMENT OF THE AREA BUT THEN THERE ARE OTHER OBJECTS LIKE SAL E AND PURCHASE OF LAND AND PROPERTY WHICH MAKE THE AUTHORITY A COM MERCIAL ORGANIZATION. THEREFORE, THE OBJECTS PURSUED BY THE AUTHORITY ITA NO.444(ASR)/2010 33 CANNOT BE SAID TO BE CHARITABLE IN VIEW OF THE FACT THAT THE AUTHORITY BEING A COMMERCIAL ORGANIZATION WITH NO RESTRICTION AS TO THE APPLICATION OF THE ASSETS ON DISSOLUTION OR WINDING UP OF FOR CHARITABLE PURPOSES. IN ORDER TO FIND OUT WH ETHER N ORGANIZATION IS A CHARITABLE ONE, TESTS HAVE BEEN L AID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SU RAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1997) 121 ITR AND CIT VS. ANDHRA PRADESH STATE ROAD TRANSPORT CORP. (1986) 15 9 ITR 1. IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURERS A SSOCIATION, IT WAS HELD AS UNDER: SINCE THE INCOME AND PROPERTY OF THE ASSESSEE WERE LIABLE TO BE APPLIED SOLELY AND EXCLUSIVELY FOR THE PROMOTION OF THE OBJECTS SET OUT IN THE MEMORANDUM AND NO PART OF SUCH INCOME OR PROPERTY COULD BE DISTRIB UTED AMONGST THE MEMBERS IN ANY FORM OR UTILIZED FOR THE IR BENEFIT EITHER DURING ITS OPERATIONAL EXISTENCE OR ON ITS WINDING UP OR DISSOLUTION AS SUCH THE OBJECT WAS A CHARITABLE ONE. 4.5. THEREFORE, VIDE PARA 4.6, THE LD. CIT OBSERVED THAT ON BEING DISSOLVED OR WOUND UP, THE GOVERNMENT WHICH HAS SET UP THE AUTHORITY, BY VIRTUE OF PROVISIONS OF SECTION 5 3 OF THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970, HAS THE EXCL USIVE RIGHT OVER THE PROPERTIES LEFT OVER THEREOF WITH NO RESTRICTION AS REGARDS THE UTILIZATION OF THE LEFT OVER PROPERTIES FOR CHARITABLE PURPOSES. THUS, THE AUTHORITY FAILED THE TEST LAID DOWN BY THE HONBLE SUPREME COURT IN THE ABOVE CASE AND THEREFO RE, CANNOT BE TERMED AS A CHARITABLE ORGANIZATION WITHIN THE M EANING OF SECTION 2(15) OF THE ACT. SIMILARLY, IN THE CASE OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION, IT WAS HE LD BY THE HONBLE SUPREME COURT AS UNDER: THE ACTIVITY OF ASSESSEE WAS NOT CARRIED ON WITH T HE OBJECT OF MAKING PROFIT AND THE AMOUNT LEFT OVER AFTER UTILI ZATION FOR THE PURPOSE SET OUT IN SECTION 13 OF THE R.T.C. ACT AS AMENDED WAS TO BE MADE OVER THE STATE GOVERNMENT FOR THE PURPOS E OF ROAD DEVELOPMENT AND THE AMOUNTS HANDED OVER TO THE STAT E GOVERNMENT DID NOT BECOME PART OF THE GENERAL REVEN UE OF THE STATE BUT WAS IMPRESSED WITH AN OBLIGATION THAT I T SHOULD BE ITA NO.444(ASR)/2010 34 UTILIZED ONLY FOR THE PURPOSE FOR WHICH IT WAS ENTR USTED, NAMELY ROAD DEVELOPMENT, WHICH WAS AN OBJECT OF PUBLIC UTI LITY. 4.6. THE ASSESSEE DOES NOT QUALIFY BY THE TEST LAI D DOWN BY THE HONBLE SUPREME COURT IN VIEW OF THE FACT THAT PROPERTIES LEFT OVER TO THE GOVERNMENT AS PER THE PROVISIONS O F SECTION 53 OF THE J & K DEVELOPMENT ACT, 1970 WILL BECOME A PA RT OF GENERAL REVENUE OF THE STATE AND THE STATE GOVERNME NT IS NOT UNDER ANY OBLIGATION TO UTILIZE THE SAME FOR THE PU RPOSE FOR WHICH THE AUTHORITY WAS SET UP. THEREFORE, THE AS SESSEE DOES NOT FULFIL THE CONDITIONS REQUIRED FOR CLAIMING THE STATUS OF CHARITABLE ORGANIZATION AS ENVISAGED UNDER THE FOUR TH LIMB OF THE DEFINITION OF CHARITABLE PURPOSES CONTAINED IN SECTION 2(15) OR IN OTHER WORDS THE OBJECTS CANNOT BE TERMED AS CHARITABLE ALTHOUGH THEY APPEAR TO BE OF A GENERAL PUBLIC UTIL ITY BUT WERE PUT TO TEST AS PER THE CONDITIONS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASES MENTIONED HEREINABOVE, T HEY FAIL TO QUALIFY THE SAME. 4.7. VIDE PARA 4.9 OF THE LD. CITS ORDER, IT WAS O BSERVED THAT THE ITAT, AMRITSAR BENCH, AMRITSAR, IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY VS. CIT-2, JALANDHA R, HAD REJECTED THE APPLICATION FILED BY THE ASSESSEE HOLD ING THAT THE OBJECT OF JALANDHAR DEVELOPMENT AUTHORITY IS PROFIT MAKING AND AS SUCH S NOT ENTITLED FOR REGISTRATION U/S 12A A OF THE ACT AND UPHELD THE DECISION OF THE LD. CIT-2, JALANDHAR . THE ITAT, AMRITSAR BENCH, IN THE SAID CASE OF JALANDHAR DEVEL OPMENT AUTHORITY HAS ALSO CONSIDERED THE CASES OF ADDL. CI T VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1, WHILE DECIDING THE CASE IN FAVOUR OF THE REVENUE. THE LD. CIT, REFERRED TO THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF INDIAN CHAMBER OF COMMERCE VS. CIT REPORTED IN 101 ITR WHEREIN IT HAS BEEN HELD AS UNDER: THAT THE ACTIVITIES OF THE CHAMBER BEING ACTIVITIE S CARRIED ON FOR PROFIT, IN THE ABSENCE OF ANY RESTRICTION IN IT S MEMORANDUM AND ARTICLES OF ASSOCIATION AGAINST THE MAKING OF P ROFIT FROM THOSE ACTIVITIES, THE INCOME OF CHAMBER FROM THOSE ACTIVITIES WAS LIABLE TO INCOME TAX. ITA NO.444(ASR)/2010 35 SECTION 2(15) MUST BE INTERPRETED ACCORDING TO THE LANGUAGE USED THEREIN AND AGAINST THE BACKGROUND OF INDIA LI FE. BY DEFINITION IN SECTION 2(15) THE BENEFIT OF EXCLUSIO N FROM TOTAL INCOME IS TAKEN AWAY WHEN IN ACCOMPLISHING A CHARIT ABLE PURPOSE THE INSTITUTION ENGAGES ITSELF IN ACTIVITIE S FOR PROFIT. 4.8. THE ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY RELIED UPON THE DECISION OF THE ITAT CHADIGARH BENCH, IN THE CASE OF PUNJAB URBAN PLANNI NG & DEVELOPMENT AUTHORITY VS. CIT. THE ITAT IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY FURTHER HELD AS UND ER: IT IS A WELL KNOWN FACT THAT IN SOME OF THE SITUAT IONS THE PROVISIONS OF LAW ARE MISUSED IN THE NAMES OF CHARI TIES. IF AN EXPANDED /BROADER LATITUDE IS EXTENDED TO TH E WORD CHARITY, THEN THERE ARE SO MANY INSTITUTIONS / DEPA RTMENTS WHO WILL TRY TO COME UNDER THE UMBRELLA OF THIS PRO VISION TO MISUSE THE PROVISION. THEREFORE, FOR THE BROA D DEVELOPMENT OF THE NATION / SOCIETY, A STRICT AND P OSITIVE VIGIL IS REQUIRED SO THAT THE PROVISION CAN BE SAVE D FROM ITS MISUSE IN ANY MANNER. NO ACTIVITY CAN BE CARRI ED ON EFFICIENTLY, PROPERLY UNLESS AND UNTIL IT IS CARRIE D OUT ON BUSINESS PRINCIPLE BUT IT DOES NOT MEAN THAT THE PR OVISION IS MISUSED IN ANY MANNER UNDER THE GRAB OF CHARITY AND ANY INSTITUTION BE ALLOWED TO BECOME RICHER AND RIC HER UNDER THE GRAB OF CHARITY BY MAKING IT A NON-TAX PA YABLE ORGANIZATION. A CHARITABLE INSTITUTION PROVIDES SE RVICES FOR CHARITABLE PURPOSES FREE OF COST AND NOT FOR A GAIN. IN THE PRESENT SCENARIO, SIMILAR ACTIVITIES ARE PERFOR MED BY BIG COLONIZERS/DEVELOPERS WHO ARE EARNING A HUGE PR OFIT. IF THIS REGISTRATION IS GRANTED, THEN ANYBODY WILL CLAIM THE EXEMPTION FROM TAX. IF THE ACCOUNTS OF THE ASSESS EE ARE ANALYSED, IT HAS TURNED INTO A HUGE PROFIT-MAKING A GENCY FOR WHICH IT IS TAKING MONEY FROM THE GENERAL PUBLI C. IF ANY INSTITUTION OF PUBLIC IMPORTANCE LIKE SCHOOLS, COMMUNITY CENTERS ARE CREATED /DEVELOPED, THE ASSES SEE IS CHARGING THE COST OF IT FROM THE PUBLIC AT LARGE AND THE MONEY IS COMING FROM THE COFFER OF THE GOVERNMENT. IT CAN BE SAID THAT OBJECTS/ACTIVITIES OF THE ASSESSEE ARE MORE OF COMMERCIALIZED NATURE AND NO CHARITY IS ITA NO.444(ASR)/2010 36 INVOLVED IN IT. AT THE TIME, IF THESE FACILITIES ARE NOT PROVIDED, THEN NOBODY WILL PURCHASE A PLOT. IT CAN BE SAID THAT IT IS A MEANS OF ATTRACTING THE PEOPLE SO THAT MAXIMUM PEOPLE MAY APPLY FOR THE SAME AND THE HIDDE N COST IS ALREADY ADDED, SO NO CHARITY IS INVOLVED. AT BEST, THE ASSESSEE CAN BE SAID TO BE AN AUTHORITY CREATED TO HELP IT TO ACHIEVE CERTAIN OBJECTS. IT CAN BE SAID THAT IT IS THE DUTY OF THE GOVERNMENT TO CREATE / PROVIDE ALL THESE FACILITIES TO PUBLIC LARGE, WHICH IS BEING DONE THR OUGH IS AGENCY IN A PARTICULAR AREA. AT THE SAME TIME, THE FUNDS WHICH ARE PROVIDED TO THE ASSESSEE BY THE GOVERNMEN T IS AGAIN A PUBLIC MONEY OR GENERATED FROM PUBLIC ITSEL F. THE OBJECTS OF THE ASSESSEE, THOUGH CLAIMED TO BE CHARITABLE, BUT ACTUALLY ARE OF PURELY COMMERCIAL N ATURE WHERE PROFIT MOTIVE IS INVOLVED. IT IS A KNOWN FAC T THAT THE ASSESSEE IS ACQUIRING THE LAND AT VERY LOW PRIC ES AND SELLING THE SAME LAND ON VERY HIGHER RATES AND IS E ARNING AS PROFIT THEREFROM. A NEW TREND HAS ALSO EMERGED T HAT THE ASSESSEE HAS STARTED AUCTIONING THE PLOTS BY WA Y OF BIDDING AT THE MARKET RATE AND SOMETIMES MORE THAN THAT AND CHARGING INTEREST ON BELATED PAYMENTS IN SUCH A SITUATION, NO CHARITY IS INVOLVED. RATHER THE ASSE SSEE HAS CONVERTED ITSELF INTO A BIG BUSINESSMAN. SIMILAR DEVELOPMENT/INFRASTRUCTURE/FACILITIES ARE ALSO PROV IDED BY PRIVATE DEVELOPERS THESE DAYS, THEN THEY WILL ALSO CLAIM THE STATUS OF A CHARITABLE INSTITUTION. THE FACILI TIES WHICH ARE PROVIDED TO THE PLOT HOLDERS ARE INCIDENTAL TO THE COMMERCIAL ACTIVITY CARRIED OUT BY THE ASSESSEE AND IF CERTAIN FACILITIES LIKE PARKS, COMMUNITY CENTER, SC HOOL ARE PROVIDED, IT IS NOT ONLY BASIC REQUIREMENT, RATHER A TOOL ATTRACTING THE INVESTORS WHEREIN THE HIDDEN COST OF THESE FACILITIES IS ALREADY INCLUDED. IN THE ABSENCE OF THESE FACILITIES, NORMALLY THE PURCHASER MAY NOT INVEST A ND THE PRICES MAY BE LESS. IN VIEW OF THESE FACTS, THE AS SESSEES ACTIVITIES NOT BEING OF CHARITABLE NATURE, THE APPL ICATION OF REGISTRATION UNDER S. 12A HAS BEEN RIGHTLY REJEC TED BY CIT, - ASSTT. CIT VS THANTHI TRUST (2001), 165 CTR (SC) 681: (2001) 247 ITR 785 (SC) AND BIHAR STATE FOREST DEVELOPMENT CORPORATION VS CIT (1997) 224 ITR 757 (PAT) RELINE ON : ADDL. CIT VS SURAT SILK CLOTH ITA NO.444(ASR)/2010 37 MANUFACTURERS ASSOCIATION (1979) 13 CTR (SC) 378: (1980) 121 ITR 1 (SC), CIT VS ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION (1986) 52 CTR (SC) 75: (1986) 159 ITR 1 (SC) AND NEW LIFE IN CHRIST EVANGELISTIC ASSOCIATION (NLC) VS CIT (2001) 165 CT R (MAD) 446: (2000) 246 ITR 532 (MAD) DISTINGUISHED . 4.9. THE LD. CIT, VIDE PARA 5.1. OF HIS ORDER OBSER VED THAT THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE IS NOT ENGAGED IN THE ACTIVITY OF THE PROFITS AND AS SUCH THE ASS ESSEE IS NOT ENGAGED IN THE ACTIVITY OF THE PROFITS AND THE REG ISTRATION GRANTED U/S 12A OF THE ACT IS REQUIRED TO BE CANCEL LED WITHIN THE MEANING OF SECTION 12AA(3) OF THE ACT, AS THE FINDI NGS SHOW THAT THE ACTIVITIES OF THE ASSESSEE ARE AIMED AT EA RNING PROFIT AS IT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. FURTHER, FOR PROFIT MAKING BY THE ASSESS EE IS NOT MERE INCIDENTAL OR BY PRODUCT OF THE ACTIVITY OF THE ASS ESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSESSEES IS MAKING P ROFIT AND IT IS THE REAL OBJECT OF THE ASSESSEE AND ALSO THERE I S NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPOSE OF CHARIT ABLE ACTIVITIES AND PROFIT OF THE ASSESSEE NOT USED FOR CHARITABLE PURPOSES ONLY UNDER THE TERMS OF THE OBJECT CLAUSE OF NOTIFICATIO N UNDER WHICH IT WAS FORMED AND THERE IS NO OBLIGATION ON THE PA RT OF THE ASSESSEE TO SPEND ON CHARITABLE PURPOSE AND ACCOR DINGLY, THE LD. CIT CANCELLED THE REGISTRATION SO GRANTED U/S 12A OF THE ACT WITHIN THE MEANING OF SECTION 12AA(3) OF THE AC T. 4.10. THE LD. CIT HAS ALSO DEALT WITH THE ARGUMENTS OF THE LD. COUNSEL MADE BEFORE HIM THAT REGISTRATION TO THE AS SESSEE WAS GRANTED ON 30.09.2009 I.E. WELL AFTER THE AMENDMENT OF SECTION 2(15) OF THE ACT BY FINANCE ACT, 2008. IT WAS OBSER VED BY THE LD. CIT IN THIS REGARD AND INVITED OUR ATTENTION T O THE DECISION OF FIVE MEMBER BENCH OF HONBLE SUPREME COURT IN TH E CASE OF A DISTRIBUTORS (BARODA) PVT. LTD. VS. UNION OF INDI A AND OTHERS 155 ITR 20 (SC) WHEREIN WHILE REVERSING THE ORDER O F THE THREE MEMBER BENCH, THE HONBLE COURT RULED AS UNDER: WE HAVE GIVEN OUR MOST ANXIOUS CONSIDERATION TO TH IS QUESTION, PARTICULARLY SINCE ONE OF US, NAMELY, P.N . BHAGWATI J, WAS A PARTY TO THE DECISION IN CLOTH TR ADERS CASE.. WE ARE COMPELLED TO REACH THE CONCLUSION THAT CLOTH TRADERS CASE MUST BE REGARDED AS WRONGLY ITA NO.444(ASR)/2010 38 DECIDED. THE VIEW TAKEN IN THAT CASEMUST BE HEL D TO BE ERRONEOUS AND IT MUST BE CORRECTED.. TO PERPE TUATE AN ERROR IS NO HEROISM. TO RECTIFY IT IS THE COMPUL SION OF THE JUDICIAL CONSCIENCE. IN THIS, WE DERIVED COMFOR T AND STRENGTH FROM THE WISE AND INSPIRING WORDS OF JUSTI CE BRONSON IN PIERCE V. DELAMETER (A.M.Y AT PAGE 18) A JUDGE OUGHT O BE WISE ENOUGH TO KNOW THAT HE IS FA LLIBLE AND THEREFORE, EVER READY TO LEARN: GREAT AND HONES T ENOUGH TO DISCARD ALL MERE PRIDE OF OPINION AND FOL LOW WHEREVER IT MAY LEAD AND COURAGEOUS ENOUGH TO ACKNOWLEDGE HIS ERRORS. 4.11. ON THE ISSUE OF PRINCIPLE OF CONSISTENCY, AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE LD. CIT, IT WAS OBSERVED BY THE LD. CIT VIDE PARA 6.2. OF HIS ORDER AND REFERRED TO THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CAS E OF ITO VS. GOVERDHAN DASS & SONS 20 ITD 681 THAT AN ERRONEOUS VIEW IN LAW COULD NOT BE ALLOWED TO BE PERPETUATED ON THE G ROUND OF CONSISTENCY. THIS ORDER OF THE ITAT, HAS BEEN UPHEL D BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN 288 ITR 481 DATED 28.06.2006 THEREFORE, THE LD. CIT OBSERVED THAT IT IS TO BE APPRECIATED THAT AN ERROR IN LAW CANNOT BE ALLOWED TO BE PERPETUATED ON THE GROUND OF PRINCIPLE OF CONSISTE NCY. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SAT SANG VS. CIT (1992) 193 ITR 32 (SC). WITH REGARD TO THE SAID DECISION, THE HONBLE SUPREME COURT OBSERVED THAT THE FACTS OF THIS CASE BEING VERY SPECIAL, NOTHING SHOULD BE SAID IN A MANNER WHICH WOULD HAVE GENERAL APPLICATION AND WOUL D LIKE TO STATE IN CLEAR TERMS THAT THE DECISION IS C ONFINED TO THE FACTS OF THE CASE AND MAY NOT BE TREATED AS AN AUTH ORITY ON ASPECTS WHICH HAVE BEEN DECIDED FOR GENERAL APPLICA TION. SIMILARLY, THE LD. CIT DISTINGUISHED THE OTHER CASE RELIED UPON IN THE CASE OF H.A. SHAH & CO. VS. CIT (195) 30 ITR 618 (BOM.) 4.12. REFERRING TO VARIOUS COURTS OF LAW, THE LD. C IT FINALLY WHILE CANCELING THE REGISTRATION OBSERVED AS UNDER: THUS FROM THE ABOVE DISCUSSION IT IS CLEAR THAT IF A DECISION OR ORDER IS CONTRARY TO LAW OR NOT WARRANTED IN THE FA CTS AND CIRCUMSTANCES OF THE CASE OR RUNS CONTRARY TO THE R EASONING AND ITA NO.444(ASR)/2010 39 RESULT REACHED, OR A MISTAKEN VIEW OF STATUTORY PRO VISIONS HAS BEEN TAKEN OR THE ORDER IS CONTRARY TO THE LAW PRON OUNCED BY THE HONBLE SUPREME COURT OR JURISDICTIONAL HIGH CO URT OR TRIBUNAL, THEN THE RULE OF CONSISTENCY HAS NO APPLI CATION AND MERELY BECAUSE AN ILLEGAL .UNWARRANTED FOR ERRONEOU S VIEW IN LAW HAS BEEN TAKEN BY AN AUTHORITY, SUCH ILLEGALITY OR ERRONEOUS VIEW CANNOT BE ALLOWED TO BE REPEATED OR PERPETUATE D. SUCH ILLEGAL/ERRONEOUS VIEW MUST BE CORRECTED, IF IT CAN BE DONE ACCORDING TO LAW. AN ERRONEOUS VIEW IN LAW CANNOT B E ALLOWED TO BE PERPETUATED ON THE GROUND OF CONSISTENCY. ON A CURSORY LOOK AT THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL UNDER WHICH THE PROV ISIONS OF SECTION 10(20A) WERE OMITTED AND THE DEFINITION OF THE TERM CHARITABLE PURPOSES AMENDED, IT BECOMES ABUNDANTL Y CLEAR THAT THE LEGISLATURE CLARIFIED ITS INTENTION. AT TH IS STAGE, IT WOULD NOT BE OUT OF PLACE TO CONSIDER THE HYDRONS RULE A LSO KNOWN AS THE MISCHIEF RULE WHICH DEALS WITH ASCERTAINING T HE CORRECT INTENTION OF THE LEGISLATURE BY LOOKING INTO THE MI SCHIEF THAT WAS SOUGHT TO BE REMEDIED BY THE LEGISLATURE. THIS RULE OF CONSISTENCY COMPRISES FOUR THINGS TO BE CONSIDERED; A) WHAT WAS THE COMMON LAW BEFORE THE MAKING OF THE AC T; B) WHAT WAS THE MISCHIEF AND DEFECT FOR WHICH THE COMM ON LAW DID NOT PROVIDE; C) WHAT REMEDY THE PARLIAMENT HAS APPOINTED TO CURE TH E DEFECT; AND D) THE TRUE REASONS OF THE REMEDY. THIS RULE CONTEMPLATES N CONSIDERING THE POSITION P REVAILING ANTERIOR TO THE AMENDMENT, WHICH WAS INTENDED TO BE RECTIFIED BY WAY OF AMENDMENT OR INSERTION OF A SECTION AND T HEN CONSIDERING THE AMENDMENT AS OVERRULING THE HITHERT O LEGAL POSITION. IF A PARTICULAR PROVISION IS ENACTED FOR GETTING RID OF THE EXISTING LAW, AS IT IS OR AS INTERPRETED BY THE COURTS, THE NEW AMENDMENT WOULD BE CONSTRUED AS SUPERSEDING THE EAR LIER PREVALENT VIEW WHICH WAS CONSIDERED BY THE LEGISLA TURE AS MISCHIEVOUS. THE MISCHIEF RULE HAS BEEN REPEATEDLY APPROVED BY SEVERAL COURTS IN THE COUNTRY INCLUDING THE HON BLE APEX COURT IN THE CASE OF CIT VS. SHAHZADA NAND & SONS ( 1966) 60 ITA NO.444(ASR)/2010 40 ITR 392 (SC). COMING BACK TO OUR CASE AND APPLYING THE MISCHIEF RULE, WE OBSERVED THAT THROUGH FINANCE ACT , 2002 CLAUSE (20A) OF SECTION 10 HAS BEEN DELETED SO AS T O WITHDRAW EXEMPTION AVAILABLE TO THE DEVELOPMENT AUTHORITIES SO AS TO CLARIFY THE INTENTION OF THE LEGISLATURE THAT THEIR INCOME BECOMES TAXABLE. IT HAS BEEN DELETED SO AS TO WITH DRAW EXEMPTION AVAILABLE TO THE DEVELOPMENT AUTHORITIES SO AS TO CLARIFY THE INTENTION OF THE LEGISLATURE THAT THEIR INCOME BECOMES TAXABLE. IT HAS BEEN NOTICED THAT ENTITIES OPERATING ON COMMERCIAL LINES ARE NOW CLAIMING EXEMPTION ON THEI R INCOME BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 11 OF THE ACT ON THE GROUND THAT THEY ARE CHARITABLE INSTITUTIONS. T HIS IS BASED ON THE ARGUMENT THAT THEY ARE ENGAGED IN THE ADVANCEM ENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AS IS INCLUDED IN THE FOURTH LIMB OF THE CURRENT DEFINITION OF CHARITABLE PURPOSE.. SUCH A CLAIM, WHEN MADE IN RESPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES IS CONTRARY TO THE INTENTION OF THE PROVISION S. WITH A VIEW TO LIMITING THE SCOPE OF THE PHRASE ADVANCEMENT O F ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, SUB SECTION (15) OF SECTION 2 HAS BEEN AMENDED TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHA RITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVI TY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERA TION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY. IN VIEW OF THE ABOVE, I AM SATISFIED THAT JAMMU DEV DEVELOPMENT IS AN AUTHORITY ESTABLISHED WITH THE M OTIVE OF PROFIT CONSTITUTED UNDER THE JAMMU & KASHMIR DEVELO PMENT ACT, 1970 AND THAT THE ACTIVITIES OF SUCH AUTHORITY ARE HIT BY SUB SECTION 15 OF SECTION 2 OF THE ACT, THEREFORE, I AM SATISFIED THAT THE JAMMU DEVELOPMENT AUTHORITY IS NOT ENTITLE D TO REGISTRATION IN TERMS OF PROVISIONS OF SECTION 12AA (1)(A)(II) OF THE ACT. THEREFORE, IN TERMS OF THE PROVISIONS OF SECTION 12AA(3) WHICH PROVIDES THAT WHERE A TRUST HAS BEEN GRANTED REGISTRATION U/S 12AA(1)(B) AND SUBSEQUENTLY THE C. I.T. IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE ITA NO.444(ASR)/2010 41 TRUST, HE SHALL AFTER AFFORDING REASONABLE OPPORTUN ITY OF BEING HEARD TO IT, CANCEL THE REGISTRATION BY PASSING AN ORDER IN WRITING. ACCORDINGLY, I AM SATISFIED THAT JAMMU DE VELOPMENT AUTHORITY IS AN AUTHORITY ESTABLISHED WITH THE MOTI VE OF PROFIT CONSTITUTED UNDER THE JAMMU & KASHMIR DEVELOPMENT A CT, 1970 AND THAT THE ACTIVITIES OF SUCH AUTHORITY ARE HIT BY SUB- SECTION 15 OF SECTION 2 OF THE ACT AND ARE NOT IN L INE WITH THE OBJECTS OF THE TRUST SO FAR AS THE ACTIVITIES RELAT ING TO PURCHASE AND SALE OF PROPERTIES AS DISCUSSED ABOVE. HENCE, T HE ACTIVITIES ARE NOT GENUINE TO THE EXTENT DISCUSSED ABOVE, THER EFORE, I AM SATISFIED THAT THE JAMMU DEVELOPMENT AUTHORITY IS N OT ENTITLED TO REGISTRATION AND ACCORDINGLY THE REGISTRATION GR ANTED IS HEREBY CANCELLED IN TERMS OF PROVISIONS OF SECTION 12AA(3) OF THE INCOME TAX AC, 1961. 5. THE LD. COUNSEL FOR THE ASSESSEE ARGUED ON SIMIL AR LINES AS ARGUED BEFORE THE LD. CIT. IN ADDITION, IT WAS ARGUED THAT THE DECISION IN THE CASE OF M/S. JALANDHAR DEVELOPM ENT AUTHORITY VS. ITO JALANDHAR, IN ITA NO.562(ASR)/200 8 DATED 12 TH JUNE, 2009, IS NOT APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, SINCE IN THAT CASE REGIS TRATION OF THE INSTITUTION WAS NOT GRANTED. WHEREAS IN THE PRESENT CASE REGISTRATION HAVING BEEN GRANTED, THE LD. CIT DOES NOT HAVE ANY RIGHT TO WITHDRAW/CANCEL THE SAID REGISTRATION SINCE THE LD. CIT WHILE GRANTING REGISTRATION TO THE ASSESSEE HAD CONSIDERED THE INTRODUCTION OF IST PROVISO AND 2 ND PROVISO TO SECTION 2(15) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) IN THIS REGA RD. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE D ECISION OF THE LD. CIT AND DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY, JALANDHAR VS. COMMISSIONER OF INCOME TAX-II, JALANDHAR (SUPRA). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE, INCLUDING SECTION 12AA(3) OF THE ACT, WHERE TRUST OR INSTITUTION HAS BEEN GRANTED REGISTRATION AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT TH E ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE N OT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR ITA NO.444(ASR)/2010 42 INSTITUTION OF SUCH TRUST OR INSTITUTION, AS THE CA SE MAY BE , HE SHALL, PASS AN ORDER IN WRITING CANCELING THE REGI STRATION OF SUCH TRUST OR INSTITUTION. SECTION 2(15) OF THE ACT DEFINES CHARITABLE PURPOSE TO INCLUDE THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT IS ALSO NOT DI SPUTED THAT THE LD. CIT WHILE GRANTING REGISTRATION U/S 12AA(3) OF THE ACT TO THE ASSESSEE HAD OBSERVED THAT HE IS SATISFIED THA T INSTRUMENT DOES NOT EXIST IN ANY TRADE, COMMERCE OR BUSINESS. THE ORDER IS DATED 30.09.2009 WHEREAS THE AMENDMENT BY FINANCE ACT, 2008 IS W.E.F. 01.04.2009, WHERE AS PER FINANC E ACT, 2008, FOLLOWING PROVISO HAD BEEN ADDED W.E.F. 01.04.2009: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERALLY PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING A NY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NAT URE OF USE OF APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 7.1. FURTHER, AS PER FINANCE ACT, 2010, AFTER FIRST PROVISO, SECOND PROVISO HAS BEEN ADDED W.E.F. 01.04.2009, W HICH IS READ AS UNDER: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR. 7.2. AS A MATTER OF FACT FROM THE PERUSAL OF THE OR DER OF THE LD. CIT, IT APPEARS THAT FIRST PROVISO SO INSERTED BY THE FINANCE ACT, 2008 W.E.F. 01.04.2009 WAS NOT TAKEN INTO CONS IDERATION WHILE GRANTING REGISTRATION VIDE ORDER DATED 30.09. 2009. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE CONCUR WITH THE VIEWS OF THE LD. CIT, WHO HAD PLACE D RELIANCE ON THE DECISION OF FIVE MEMBER BENCH OF HONBLE SUP REME COURT IN THE CASE OF A DISTRIBUTORS (BARODA) P. LTD . VS. UNION OF INDIA & ORS. REPORTED IN 155 ITR120 (SC), WHEREI N IT HAS BEEN HELD TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY I T IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. IN THIS, WE DERIVED COMFORT AND STRENGTH FROM THE WISE AND INSPIRING WO RDS OF JUSTICE BRONSON IN PIERCE V. DELAMETER (A.M.Y AT PA GE 18). ITA NO.444(ASR)/2010 43 THEREFORE, THE LD. CIT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF A DISTRIBUTORS (BARODA ) P. LTD. VS. UNION OF INDIA & ORS.(SUPRA) IS WITHIN HIS POWE R TO DECIDE THE ISSUE AS PER INSERTION OF THE FIRST PROVISO BY THE FINANCE ACT, 2008 W.E.F. 01.04.2009 AND ALSO THE SECOND PROVISO INSERTED BY THE FINANCE ACT, 2010 W.E.F. 01.04.2009 WHEREAS THE AGGREGATE VALUE OF THE RECEIPTS IN THE PRESENT ASSESSEE ARE R S. 10 LAKHS. ALSO ON THE PRINCIPLE OF CONSISTENCY, WE CONCUR WIT H THE VIEWS OF THE LD. CIT RELYING UPON THE DECISIONS OF VARIOU S COURTS OF LAW THAT AN ERRONEOUS VIEW IN LAW COULD NOT BE AL LOWED TO BE PERPETUATED ON THE GROUND OF CONSISTENCY. THEREFORE , IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE LD . COUNSEL FOR THE ASSESSEE WAS PUT A QUESTION BY THE BENCH HOW TH E FACTS IN THE PRESENT CASE ARE DIFFERENT FROM THE FACTS IN TH E CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY. THE LD. COUNSEL FO R THE ASSESSEE ARGUED AND REPLIED THAT THE DIFFERENCE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WITH M/S. JALANDH AR DEVELOPMENT AUTHORITY IS NOT THERE EXCEPT THAT THE REGISTRATION HAD BEEN GRANTED IN THE CASE OF M/S. JALANDHAR DEVE LOPMENT AUTHORITY WHEREAS IN THE PRESENT CASE, REGISTRATIO N HAVING BEEN GRANTED CANNOT BE CANCELLED. SINCE THE ORDER OF THE CIT DATED 30.09.2009 IN THE PRESENT CASE IS AFTER AMENDMENT T O SECTION 2(15) I.E. INTRODUCTION OF THE FIRST PROVISO WAS W ELL BEFORE THE LD. CIT. 7.3. CONSIDERING THE ARGUMENTS OF THE LD. COUNSEL F OR THE ASSESSEE AND ON PERUSAL OF THE FACTS OF THE PRESENT CASE WITH THE FACTS IN M/S. JALANDHAR DEVELOPMENT AUTHORITY (SUPR A), WE ARE OF THE VIEW THAT FACTS IN THE PRESENT CASE ARE IDEN TICAL TO THE FACTS AS IN THE CASE OF JALANDHAR DEVELOPMENT AUTHO RITY. AS REGARDS THE FIRST PROVISO INSERTED IN SECTION 2(15 ) OF THE ACT, WE HAVE GIVEN OUR VIEWS HEREINABOVE THAT THE LD. CIT H AD NOT CONSIDERED THE FIRST PROVISO TO SECTION 2(15) AS W ELL AS THE SECOND PROVISO TO SECTION 2(15) WHILE MAKING THE OR DER FOR GRANT OF REGISTRATION ON 30.09.2009. THEREFORE, THE LD. CIT IS WELL WITHIN HIS POWER TO DECIDE THE ISSUE BY HIS ORDER IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF A. DISTRIBUTORS (BARODA) P. LTD. VS. UNION OF INDIA AN D ORS. 155 ITR 120 (SC). THEREFORE, IN THE FACTS AND CIRCUMSTA NCES OF THE PRESENT CASE AND FOLLOWING OUR ORDER IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY (SUPRA) BEING ON ID ENTICAL ITA NO.444(ASR)/2010 44 FACTS, THE REGISTRATION U/S 12AA CANNOT BE GRANTED TO THE ASSESSEE AND THE LD. CIT HAS RIGHTLY CANCELLED THE REGISTRATION SO GRANTED. 7.4. ALSO, WE CONCUR WITH THE VIEWS OF THE LD. CIT (A) VIDE PARA 3.2 TO 6.2 OF HIS ORDER THAT PRIOR TO INSERTIO N OF THESE PROVISOS I.E. FIRST AND SECOND PROVISO TO SECTION 2 (15) OF THE ACT, CERTAIN BODIES WERE TREATED AS CHARITABLE ON THE GROUND OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. H OWEVER, AFTER THE INSERTION OF THE ABOVE PROVISO, THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSES IF IT INVOLVES THE CARRYING ON OF :- A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR ; BUSINESS B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS. D) FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, I RRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION O F INCOME FROM SUCH ACTIVITY. 7.4.1. THEREFORE, THE INSTITUTIONS/TRUSTS/SOCIETIES WHICH ARE INVOLVED IN THE ACTIVITIES IN (A)(, (B) & (C) MENT IONED HEREINABOVE AND AGGREGATE VALUE OF THE RECEIPT OF THE ACTIVITIE S REFERRED TO IN THE FIRST AND SECOND PROVISO IS MORE THAN RS. TEN L AKHS IN THE PREVIOUS YEAR, THEY SHALL NOT BE ELIGIBLE TO CONTIN UE WITH REGISTRATION U/S 12A AND THE SAME IS REQUIRED TO BE WITHDRAWN. 7.5. THE MAIN OBJECTS OF THE ASSESSEES INSTITUTION HAS BEEN MENTIONED INPARA 4.1. OF LD. CITS ORDER, AS MENTIO NED HEREINABOVE. IT HAS RIGHTLY BEEN MENTIONED BY THE L D. CIT IN PARA 4.2 MENTIONED HEREINABOVE THAT TILL THE FINANCIAL Y EAR 2002-03, THE INCOME OF SUCH AUTHORITIES WERE EXEMPT U/S 10(20A) OF THE ACT. HOWEVER, IN VIEW OF OMISSION OF SECTION 10(20A) OF THE ACT, AN EXPLANATION WAS ADDED TO SECTION 10(20), WHICH HAS BEEN MENTIONED HEREINABOVE. THE INCOME OF LOCAL AUTHORITY IS CHARG EABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, CAPITAL GAINS OR INCOME FROM OTHER SOURCES OR FROM A TRADE OR BUSINESS CAR RIED ON BY IT WAS EARLIER EXCLUDED IN COMPUTING THE TOTAL INCOME OF T HE AUTHORITY OF A PREVIOUS YEAR. HOWEVER, IN VIEW OF THE AMENDMENT, W ITH EFFECT FROM ITA NO.444(ASR)/2010 45 01.04.2003, THE EXPLANATION LOCAL AUTHORITY WAS D EFINED TO INCLUDE ONLY THE AUTHORITIES ENUMERATED IN THE EXPL ANATION TO INCLUDE PANCHAYAT, MUNICIPAL COMMITTEE AND DISTRICT BOARD AND CANTONMENT BOARD AS REFERRED IN THE SAID EXPLANATIO N. 7.6. ALSO, AT THE SAME TIME, SECTION 10(20A) WHICH RELATED TO INCOME OF AND AUTHORITY CONSTITUTED IN INDIA BY O R UNDER ANY LAW ENACTED FOR THE PURPOSE OF DEALING WITH AND SATISFY ING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNIN G, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VIL LAGES WHICH BEFORE THE AMENDMENT WAS NOT INCLUDED IN COMPUTING THE TOTAL INCOME, WAS OMITTED. CONSEQUENTLY, THE BENEFIT CONF ERRED BY CLAUSE (20A) ON SUCH AN AUTHORITY WAS TAKEN AWAY. THUS, IN VIEW OF THE FACT THAT SECTION 10(20A) WAS OMITTED AND AN EXPLA NATION WAS ADDED TO SECTION 10(20) OF THE ACT, ENUMERATING TH E LOCAL AUTHORITIES CONTEMPLATED BY SECTION 10(20), THE A SSESSEE COULD NOT CLAIM ANY BENEFIT UNDER THOSE PROVISIONS AFTER APRIL 1, 2003. THE ASSESSEE SUBSEQUENTLY CLAIMED THAT ITS OBJECTS FALLS UNDER THE PROVISIONS OF SECTION 2(15) OF THE ACT AND HAS COMP LIED WITH ALL THE ELIGIBILITY CRITERIA FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT, WHICH WAS ALLOWED VIDE ORDER DATED 30.09.2 009. IT IS AT THIS JUNCTURE THAT THE FIRST PROVISO AND SECOND PR OVISO WERE ADDED BY THE FINANCE ACT, 2008 W.E.F. 01.04.2009, AS MENT IONED HEREINABOVE. THEREFORE, AFTER INSERTION OF THE SAI D PROVISO, ANY INSTITUTION CARRYING ON OF ANY ACTIVITY IN THE NATU RE OF TRADE, COMMERCE OR BUSINESS ETC. AS MENTIONED HEREINABOVE , SHALL NOT BE A CHARITABLE PURPOSE. AS PER OBJECTS OF THE ASSESSE E, IT IS OBSERVED THAT THE MAIN OBJECT OF THE ASSESSEE IS TO PROMOTE AND SECURE THE DEVELOPMENT OF LOCAL AREA AND THERE IS NO CHARITABL E PURPOSE OR ANY ACTIVITY FOR GENERAL PUBLIC UTILITY. THE ACTIV ITIES OF THE ASSESSEE ARE AIMED AT EARNING PROFIT AS IT IS CARRYING ON AC TIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. FURTHER PROF IT MAKING BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BY PRODUCT O F THE ASSESSEE. THERE IS NO REAL OBJECT OF THE ASSESSEE AND THERE I S NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPOSE OF CHARITABL E ACTIVITIES AND PROFITS OF THE ASSESSEE ARE NOT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AND THERE IS NO OBLIGATION ON THE PART OF THE ASSESSE TO SPEND ON CHARITABLE PURPOSE ONLY. ALSO AS PER CLAUSE 53 OF THE JAMMU & KASHMIR DEVELOPMENT ACT, ON DISSO LUTION OF ALL PROPERTIES AND FUNDS TO VEST IN THE GOVERNMENT AND FOR THE ITA NO.444(ASR)/2010 46 PURPOSE OF REALIZING PROPERTIES, THE FUNCTION OF TH E AUTHORITY SHALL BE DISCHARGED BY THE GOVERNMENT. WE CONCUR WITH TH E VIEWS OF THE LD. CIT ON TRANSFER OF THE PROPERTIES, FUNDS AND DU ES AND LIABILITIES ETC. WILL VEST IN THE GOVT. THERE IS NO RESTRICTION , HOW THE SAME ARE TO BE UTILIZED BY THE GOVERNMENT. THERE ARE OTHER O BJECTS LIKE SALE AND PURCHASE, WHICH MAKES THE AUTHORITY A COMMERCIA L ORGANIZATION. THEREFORE, IN THE FACTS AND CIRCUMST ANCES OF THE CASE, EVEN ON DISSOLUTION OR WINDING UP BY NOT HAVI NG ANY RESTRICTION ON APPLICATION OF ASSET FOR CHARITABLE PURPOSE, THE OBJECTS PURSUED BY THE ASSESSEE CANNOT BE SAID TO BE A CHARITABLE IN NATURE. 7.7. AS REGARDS THE RELIANCE ON THE DECISIONS OF VARIOUS COURTS OF LAW BY THE LD. CIT, MOST OF THE DECISIONS HAVE B EEN DEALT BY THE TRIBUNAL IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY VS. ITO (SUPRA). IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE CONCUR WITH THE VIEWS OF THE LD. CIT THAT JAMMU DEVELOPMENT AUTHORITY IS AN AUTHORITY ESTABLISHED WITH THE MOT IVE OF PROFIT CONSTITUTED UNDER THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 AND THAT THE ACTIVITIES OF SUCH AUTHORITY ARE HIT BY SECTION 2(15) OF THE ACT READ WITH FIRST AND SECOND PROVISO AND ARE NOT IN LINE WITH THE OBJECTS OF THE AUTHORITY/TRUST SO FAR AS THE AC TIVITIES RELATING TO PURCHASE AND SALE OF PROPERTIES, AS MENTIONED HEREI NABOVE. HENCE, THE ACTIVITIES ARE NOT GENUINE TO THE EXTENT, MENT IONED HEREINABOVE AND THE LD. CIT, JAMMU, HAS RIGHTLY BEING SATISFIE D HELD THAT THE JAMMU DEVELOPMENT AUTHORITY IS NOT ENTITLED TO REGI STRATION AND ACCORDINGLY CANCELLED THE REGISTRATION SO GRANTED. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT, JAMMU AND TH E SAME IS UPHELD. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE D ISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.30(ASR)/2011 IS DISMISSED. 7. THE ORDER OF THIS BENCH IN THE CASE OF JAMMU DE VELOPMENT AUTHORITY (SUPRA) HAS UNDENIABLY BEEN UPHELD RIGHT UP TO THE HONBLE SUPREME COURT. THE FACTUM OF ITS BEING CONFIRMED BY THE HONBLE HIGH COURT STANDS NOTED IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ALSO. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SE WRITTEN ITA NO.444(ASR)/2010 47 SUBMISSIONS. THE LD. DR, ON THE OTHER HAND, HAS AL SO PLACED STRONG RELIANCE ON THE IMPUGNED ORDER AND ON JAMMU DEVEL OPMENT AUTHORITY (SUPRA). 8. JAMMU DEVELOPMENT AUTHORITY (SUPRA), OF THIS BENCH IS DIRECTLY APPLICABLE TO THE PRESENT CASE. THE FACTS IN BOTH T HE CASES ARE EXACTLY SIMILAR, AS, INTER-ALIA, FOLLOWS: REGARDING BOTH THE AUTHORITIES, I.E., SRINAGAR DEVE LOPMENT AUTHORITY AND JAMMU DEVELOPMENT AUTHORITY: 1) E STABLISHED VIDE JAMMU AND KASHMIR DEVELOPMENT ACT, 1970. 2) T HE OBJECT OF THE AUTHORITY IS TO PROMOTE AND SECURE THE DEVELOPMENT OF THE LOCAL AREA FOR WHICH IT IS CONST ITUTED 3) THE POWER TO ACQUIRE, HOLD, MANAGE AND DISPOSE OF LAND AND OTHER PROPERTY, TO CARRY OUT BUILDING, ENGINEER ING AND OTHER OPERATIONS, TO EXECUTE WORKS IN CONNECTIO N WITH SUPPLY OF WATER AND ELECTRICITY, DISPOSAL OF SEWERAGE AND OTHER SERVICES AND AMENITIES AND GENERALLY TO DO ANYTHING NECESSARY OR EXPEDIENT FOR PURPOSES OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO. 4) THE AUTHORITY IS A BODY CORPORATE HAVING PERPETUA L SUCCESSION AND A COMMON SEAL WITH POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTIES, BOTH MOVABLE AND IMMOVABLE, TO CONTRACT, AND BY THE SAID NAME, SUE O R BE SUED. 5) THE AUTHORITY CONSISTS OF A CHAIRMAN, VICE-CHAIRMAN AND SEVEN OTHER MEMBERS APPOINTED BY THE STATE GOVERNMENT. ITA NO.444(ASR)/2010 48 6. THE AUTHORITY IS RESPONSIBLE FOR THE PLANNED DEVELOPMENT OF THE CITY, INCLUDING PREPARATION OF T HE MASTER PLAN OF THE AREA. 7. THE STATE GOVERNMENT IS AUTHORIZED TO ENTRUST THE AUTHORITY FROM TIME TO TIME WITH ANY WORK CONNECTE D WITH PLANNED DEVELOPMENT AND MATTERS CONNECTED THERETO. 8. SECTION- 19 (CHAPTER-VLL) OF THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 OBLIGES THE AUTHORITY TO MAIN TAIN ITS OWN FUND TO WHICH SHALL BE CREDITED MONEYS RECE IVED BY THE AUTHORITY FROM THE CENTRAL OR STATE GOVERNME NT BY WAY OF GRANTS, LOANS, ADVANCES OR OTHERWISE, ALL FEES, RENTS, CHARGES, LEVIES AND FINES RECEIVED BY THE AUTHORITY UNDER THE ACT, ALL MONEYS RECEIVED BY THE AUTHORITY FROM DISPOSAL OF ITS MOVABLE OR IMMOVABLE ASSETS AND ALL MONEYS RECEIVED BY THE AUTHORITY BY WAY OF LOAN FROM FINANCIAL AND OTHER INSTITUTIONS AND DEBENTURES FLOATED FOR THE EXECUTION OF A SCHEME OR SCHEMES OF THE AUTHORITY DULY APPROVED BY THE STATE GOVERNMENT . 9. UNLESS THE STATE GOVERNMENT OTHERWISE DIRECTS, ALL MONEYS RECEIVED BY THE AUTHORITY SHALL BE CREDITED TO ITS FUNDS WHICH SHALL BE KEPT WITH THE JAMMU AND KASHMIR BANK OR ANY OTHER BANK APPROVED BY THE STAT E GOVERNMENT. 10. TILL THE FINANCIAL YEAR 2002-03, THE INCOME OF SUCH AUTHORITIES WERE EXEMPT UNDER SECTION 10(20A) OF TH E INCOME TAX ACT, 1961. HOWEVER, IN VIEW OF OMISSION OF SEC. 10(20A) OF THE I.T. ACT, 1961 AN EXPLANATION W AS ADDED TO SECTION 10(20), WHICH IS REPRODUCED AS UND ER:- ITA NO.444(ASR)/2010 49 EXPLANATION:- FOR THE PURPOSE OF THIS CLAUSE, THE EXPRESSION LOCAL AUTHORITY' MEANS- I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTIC LE 243 OF THE CONSTITUTION; OR II) MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF A RTICLE 243P OF THE CONSTITUTION, OR III) MUNICIPAL COMMITTEE AND DISTRICT BOARD, LEGALL Y ENTITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, T HE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND; OR IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENTS ACT, 1924 (2 OF 1924). 11. THE INCOME OF A LOCAL AUTHORITY CHARGEABLE UND ER THE HEAD 'INCOME FROM HOUSE PROPERTY, CAPITAL GAINS OR 'INCOME FROM OTHER SOURCES OR FROM A TRADE OR BUSI NESS CARRIED ON BY IT WAS EARLIER EXCLUDED IN COMPUTING THE TOTAL INCOME OF THE AUTHORITY OF A PREVIOUS YEAR HOWEVER, IN VIEW OF THE AMENDMENT, WITH EFFECT FROM APRIL 1, 2003, THE EXPLANATION 'LOCAL AUTHORITY WA S DEFINED TO INCLUDE ONLY THE AUTHORITIES ENUMERATED IN THE EXPLANATION. 12. AT THE SAME TIME SECTION 10(20A), WHICH RELATED TO INCOME OF AN AUTHORITY CONSTITUTED IN INDIA BY OR U NDER ANY LAW ENACTED FOR .THE PURPOSE OF DEALING WITH AN D SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FO R THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, WHICH, BEFORE THE AMEND MENT WAS NOT INCLUDED IN COMPUTING THE TOTAL INCOME, WAS OMITTED. 13. CONSEQUENTLY, THE BENEFIT CONFERRED BY CLAUSE (20A) ON SUCH AN AUTHORITY WAS TAKEN AWAY. 14. IN VIEW OF THE FACT THAT SECTION 10(20A) WAS O MITTED AND AN EXPLANATION WAS ADDED TO SECTION 10(20) OF T HE INCOME TAX ACT, 1961 ENUMERATING THE AUTHORITIES CONTEMPLATED BY SECTION 10(20), THE AUTHORITY COULD NOT CLAIM ANY BENEFIT UNDER THOSE PROVISIONS AFTER APRI L 1, 2003. 15. THE BENEFIT CONFERRED BY SECTION 10(20A) OF TH E INCOME TAX ACT, 1961 ON THE AUTHORITY UP TO ASSESSMENT YEA R 2002-03 HAS BEEN EXPRESSLY TAKEN AWAY AND THE EXPLANATION ADDED TO SECTION 10(20) ENUMERATES THE 'LOCAL AUTHORITY. ITA NO.444(ASR)/2010 50 16. THE AUTHORITY HAS CLAIMED THAT ITS OBJECTS FALL UNDER THE PROVISIONS OF SECTION 2(15) OF THE I T. ACT, 1961 A ND HAS COMPLIED WITH ALL THE ELIGIBILITY CRITERIA FOR GRAN T OF REGISTRATION UNDER SECTION 12A OF THE INCOME TAX AC T, 1961. 17. THE AUTHORITY HAS GENERATED INCOME BY WAY OF DISPOSING OF THE DEVELOPED LANDS. 18. AS PER CLAUSE 53 OF THE JAMMU & KASHMIR DEVELOPMENT ACT RELATING TO DISSOLUTION OF THE AUTHORITY IT IS PROVIDED THAT ON DISSOLUTION / WIN DING UP OF THE AUTHORITY, ALL THE ASSETS AS WELL AS LIAB ILITIES WILL BE TRANSFERRED TO THE GOVERNMENT AND THERE IS NO RESTRICTION AS TO HOW THE SAME ARE TO BE UTILIZED B Y THE GOVERNMENT. 9. IN JAMMU DEVELOPMENT AUTHORITY (SUPRA), THIS B ENCH HELD THAT THAT THE FACTS IN THAT CASE WERE IDENTICAL TO THE F ACTS AS IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY; THAT AS REGARDS TH E FIRST PROVISO INSERTED IN SECTION 2(15) OF THE ACT, THE LD. CIT H AD NOT CONSIDERED THE FIRST PROVISO TO SECTION 2(15) AS WELL AS THE SECO ND PROVISO TO SECTION 2(15) WHILE MAKING THE ORDER FOR GRANT OF REGISTRAT ION ON 30.09.2009; THAT THEREFORE, THE LD. CIT WAS WELL WITHIN HIS POWER T O DECIDE THE ISSUE BY HIS ORDER, IN VIEW OF THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF A. DISTRIBUTORS (BARODA) P. LTD. VS. UNIO N OF INDIA AND ORS., 155 ITR 120 (SC); AND THAT THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE TRIBUNAL ORDER IN THE CASE O F M/S. JALANDHAR DEVELOPMENT AUTHORITY, BEING ON IDENTICAL FACTS, THE REGISTRATION U/S ITA NO.444(ASR)/2010 51 12AA COULD NOT BE GRANTED TO THE ASSESSEE AND THE L D. CIT HAD RIGHTLY CANCELLED THE REGISTRATION GRANTED. 9.1 IN THAT CASE THE TRIBUNAL CONCURRED WITH THE V IEWS OF THE LD. CIT(A) VIDE PARA 3.2 TO 6.2 OF HIS ORDER, THAT PRIO R TO INSERTION OF THESE PROVISOS, I.E., THE FIRST AND THE SECOND PROVISO TO SECTION 2(15) OF THE ACT, CERTAIN BODIES WERE TREATED AS CHARITABLE ON THE GROUND OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, THAT HOWEVER, AFTER THE INSERTION OF THE ABOVE PROVISO, THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSES IF IT INVOLVES THE CARRYING ON OF :- A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATIO N TO ANY TRADE, COMMERCE OR BUSINESS. C) FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION O R RETENTION OF INCOME FROM SUCH ACTIVITY, AND THEREFORE, THE INSTITUTIONS/TRUSTS/SOCIETIES W HICH ARE INVOLVED IN THE ACTIVITIES IN (A) (B) & (C) AND WHOSE AGGREGA TE VALUE OF THE RECEIPT OF THE ACTIVITIES REFERRED TO IN THE FIRST AND SECOND PROVISO WAS MORE THAN RS. TEN LAKHS IN THE PREVIOUS YEAR, SHALL NOT BE EL IGIBLE TO CONTINUE WITH REGISTRATION U/S 12A AND THE SAME WAS REQUIRED TO B E WITHDRAWN. 9.2 THE TRIBUNAL OBSERVED THAT THE MAIN OBJECTS OF THE ASSESSEE INSTITUTION HAD BEEN MENTIONED IN PARA 4.1. OF LD. CITS ORDER, THAT IT HAD RIGHTLY BEEN MENTIONED BY THE LD. CIT IN PARA 4.2, THAT TILL THE FINANCIAL ITA NO.444(ASR)/2010 52 YEAR 2002-03, THE INCOME OF SUCH AUTHORITIES WAS EX EMPT U/S 10(20A) OF THE ACT, THAT HOWEVER, IN VIEW OF OMISSION OF SECTI ON 10(20A) OF THE ACT, AN EXPLANATION WAS ADDED TO SECTION 10(20), THAT TH E INCOME OF A LOCAL AUTHORITY, CHARGEABLE UNDER THE HEAD INCOME FROM H OUSE PROPERTY; OR CAPITAL GAINS, OR INCOME FROM OTHER SOURCES, OR FROM A TRADE OR BUSINESS CARRIED ON BY IT, WAS EARLIER EXCLUDED IN COMPUTING THE TOTAL INCOME OF THE AUTHORITY OF A PREVIOUS YEAR, HOWEVER , IN VIEW OF THE AMENDMENT, WITH EFFECT FROM 01.04.2003, THE EXPRESS ION LOCAL AUTHORITY WAS DEFINED TO INCLUDE ONLY THE AUTHORIT IES ENUMERATED IN THE EXPLANATION TO INCLUDE PANCHAYAT, MUNICIPAL COMMIT TEE AND DISTRICT BOARD AND CANTONMENT BOARD, AS REFERRED IN THE SAID EXPLANATION, THAT ALSO, AT THE SAME TIME, SECTION 10(20A), WHICH REL ATED TO INCOME OF AN AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENACTED FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION, OR FOR THE PURPOSE OF PLANNING, DEVE LOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES WHICH, B EFORE THE AMENDMENT WAS NOT INCLUDED IN COMPUTING THE TOTAL INCOME, WAS OMITTED, THAT CONSEQUENTLY, THE BENEFIT CONFERRED BY CLAUSE (20A) ON SUCH AN AUTHORITY WAS TAKEN AWAY, THAT THUS, IN VIEW OF THE FACT THAT SECTION 10(20A) WAS OMITTED AND AN EXPLANATION WAS ADDED TO SECTION 10( 20) OF THE ACT, ENUMERATING THE LOCAL AUTHORITIES CONTEMPLATED BY SECTION 10(20), THE ASSESSEE COULD NOT CLAIM ANY BENEFIT UNDER THOSE PR OVISIONS AFTER APRIL 1, 2003, THAT THE ASSESSEE SUBSEQUENTLY CLAIMED THAT I TS OBJECTS FELL UNDER ITA NO.444(ASR)/2010 53 THE PROVISIONS OF SECTION 2(15) OF THE ACT AND IT H AD COMPLIED WITH ALL THE ELIGIBILITY CRITERIA FOR GRANT OF REGISTRATION UNDE R SECTION 12A OF THE ACT, WHICH WAS ALLOWED VIDE ORDER DATED 30.09.2009, THAT IT WAS AT THIS JUNCTURE, THAT THE FIRST PROVISO AND SECOND PROVIS O WERE ADDED BY THE FINANCE ACT, 2008 W.E.F. 01.04.2009 THAT THEREFORE, AFTER THE INSERTION OF THE SAID PROVISO, ANY INSTITUTION CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC., SHALL NOT BE FOR A CHARITABLE PURPOSE, THAT AS PER THE OBJECTS OF THE ASSESSEE, THE MAIN OBJECT OF THE ASSESSEE WAS TO PROMOTE AND SECURE THE DEVELOPMENT OF THE LO CAL AREA AND THERE WAS NO CHARITABLE PURPOSE OR ANY ACTIVITY FOR GENER AL PUBLIC UTILITY, THAT THE ACTIVITIES OF THE ASSESSEE WERE AIMED AT EARNIN G PROFIT, AS IT CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUS INESS, THAT FURTHER, THE PROFIT MAKING BY THE ASSESSEE WAS NOT MERELY I NCIDENTAL, OR A BY - PRODUCT OF THE ASSESSEE, THAT THERE WAS NO REAL OBJ ECT OF THE ASSESSEE AND THERE WAS NO SPENDING OF THE INCOME EXCLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES AND THE PROFITS OF THE ASSESS EE WERE NOT USED FOR CHARITABLE PURPOSES UNDER THE TERMS OF THE OBJECTS AND THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSE TO SPEND ON CHARITABLE PURPOSE ONLY, THAT ALSO AS PER CLAUSE 53 OF THE JAMMU & KAS HMIR DEVELOPMENT ACT, ON DISSOLUTION, ALL PROPERTIES AND FUNDS WER E TO VEST IN THE GOVERNMENT AND FOR THE PURPOSE OF REALIZING PROPERT IES, THE FUNCTION OF THE AUTHORITY SHALL BE DISCHARGED BY THE GOVERNMENT , THAT THE BENCH CONCURRED WITH THE VIEW OF THE LD. CIT THAT ON TRA NSFER OF THE PROPERTIES, ITA NO.444(ASR)/2010 54 FUNDS AND DUES AND LIABILITIES, ETC., WOULD VEST I N THE GOVT. AND THERE WAS NO RESTRICTION, HOW THE SAME WERE TO BE UTILIZ ED BY THE GOVERNMENT, THAT THERE WERE OTHER OBJECTS, LIKE SALE AND PURCHA SE, WHICH MADE THE AUTHORITY A COMMERCIAL ORGANIZATION, THAT THEREFORE , IN THE FACTS AND CIRCUMSTANCES OF THE CASE, EVEN ON DISSOLUTION OR W INDING UP, BY NOT HAVING ANY RESTRICTION ON APPLICATION OF THE ASSET S FOR CHARITABLE PURPOSES, THE OBJECTS PURSUED BY THE ASSESSEE COU LD NOT BE SAID TO BE CHARITABLE IN NATURE, THAT MOST OF THE DECISIONS R ELIED ON BY THE CIT HAD BEEN DEALT WITH BY THE TRIBUNAL IN THE CASE OF M/S. JALANDHAR DEVELOPMENT AUTHORITY VS. ITO, THAT THE BENCH CON CURRED WITH THE VIEW OF THE LD. CIT THAT JAMMU DEVELOPMENT AUTHORITY WA S AN AUTHORITY ESTABLISHED WITH THE MOTIVE OF PROFIT, CONSTITUTED UNDER THE JAMMU & KASHMIR DEVELOPMENT ACT, 1970 AND THAT THE ACTIVITI ES OF SUCH AUTHORITY WERE HIT BY SECTION 2(15) OF THE ACT, READ WITH IT S FIRST AND SECOND PROVISOS AND ITS ACTIVITIES WERE NOT IN LINE WIT H THE OBJECTS OF THE AUTHORITY/TRUST, SO FAR AS THE ACTIVITIES RELATING TO PURCHASE AND SALE OF PROPERTIES, AND THAT HENCE, THE ACTIVITIES WERE NO T GENUINE TO THE SAID EXTENT, AND THE LD. CIT, JAMMU, HAD RIGHTLY BEEN S ATISFIED THAT THE JAMMU DEVELOPMENT AUTHORITY WAS NOT ENTITLED TO REG ISTRATION AND HAD ACCORDINGLY, RIGHTLY CANCELLED THE REGISTRATION G RANTED. 10. JAMMU DEVELOPMENT AUTHORITY (SUPRA), AS NOTED , HAS BEEN UPHELD UPTO THE HONBLE SUPREME COURT. THE ARGUMENT S OF THE ASSESSEE BEFORE US, IN THE PRESENT CASE, STAND EFFECTIVELY C ONSIDERED AND MET IN ITA NO.444(ASR)/2010 55 JAMMU DEVELOPMENT AUTHORITY (SUPRA). TOO, THE CAS E LAWS RELIED ON, AS AGAINST JAMMU DEVELOPMENT AUTHORITY (SUPRA), ARE NOT APPLICABLE. SINCE JAMMU DEVELOPMENT AUTHORITY (SUPRA) CONCERN S AN AUTHORITY CREATED UNDER THE JAMMU AND KASHMIR DEVELOPMENT AC T, 1970, WHICH STATUTE IS ALSO THE MOTHER STATUTE OF THE PRESENT A SSESSEE/AUTHORITY, AND THE TRIBUNAL DECISION IN THE CASE OF JAMMU DEVELOP MENT AUTHORITY HAS BEEN CONFIRMED UPTO THE HONBLE SUPREME COURT, REL IANCE BY THE ASSESSEE ON THE TRIBUNAL DECISIONS IN THE CASES OF VARIOUS OTHER DEVELOPMENT AUTHORITIES IS OF NO AVAIL TO IT. FOR THE SAME REASON, THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT , WHICH CONCERNS AN IMPROVEMENT TRUST AND NOT ANY DEVELOPMENT AUTHOR ITY LIKE THE ASSESSEE, IS EVEN FURTHER OFF COURSE. 11. THE ORDER UNDER APPEAL IS THUS CONFIRMED AND WE HOLD THAT THE ASSESSEE HAS RIGHTLY BEEN HELD AS NOT ENTITLED TO R EGISTRATION UNDER THE ACT. THE ASSESSEES GRIEVANCE IS WITHOUT ANY MERIT AND IT IS REJECTED AS SUCH. 12. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/07/ 201 6. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 25/07/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SRINAGAR DEVELOPMENT AUTHORITY 2. THE C.I.T. JMMU 3. THE SR DR, ITAT, AMRITSAR. TRUE COPY ITA NO.444(ASR)/2010 56 BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.