Jodhpur Development Authority, JODHPUR V. CIT-1, JODHPUR

ITA 508/JODH/2010

• Counselvise Citation: 50823314 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 08-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M N MOURYA
• Keywords: Charitable institution; Principle of natural justice; Bonafide belief; Retrospective amendment; Cost of acquisition; Capital receipt; Condonation of delay
• Section: 260A; 12A; 12AA; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH , JODHPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO. 508/ JODH/2010 SECTION 12AA PAN: AAAAU 2527 P JODHPUR DEVELOPMENT AUTHORITY VS. THE CIT -1 JODHPUR JODHPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI DEPARTMENT BY : SHRI M.N. MOURYA DATE OF HEARING: 16-12-2011 DATE OF PRONOUNCEMENT: 19-01-2012 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT JODHPUR U/S 12AA DATED 22-03-2010. 2.1 THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- 1. THE IMPUGNED ORDER U/S 12AA OF I.T. ACT 1961 PAS SED BY THE LD. COMMISSIONER OF INCOME TAX-1, JODHPUR IN TH E CASE OF THE APPELLANT IS PATENTLY INVALID, CONTRARY TO PROVISIO NS OF LAW, CONTRARY TO ALL CANNONS OF NATURAL JUSTICE, CONTRARY TO BINDING JUD GMENTS RENDERED IN SIMILAR MATTERS AND IS VOID AB INITIO. 2. THE LD. CIT-1, JODHPUR HAS GROSSLY ERRED IN NOT PROPERLY CONSIDERING THE FACTS AND SUBMISSIONS MENTIONED IN APPLICATION U/S 12A SUBMITTED IN THE PRESCRIBED FORM 10A ALONG WITH VAR IOUS ANNEXURES AND ALSO THE ELABORATE FACTS STATED IN VARIOUS WRITTEN SUBMISSIONS INCLUDING THE ORAL AND WRITTEN SUBMISSIONS SUBMITTED DURING HEARI NG ON 28.9.2010 (COPY ENCLOSED). 2 3. THE LD. CIT-1, HAS GROSSLY ERRED IN OBSERVING (I N THE ORDER SIMULTANEOUSLY PASSED IN CASE OF JDA, WHICH TOOK OV ER UIT UNDER THE RESPECTIVE ACTS,) THAT THE APPELLANT DID NOT COMPLY WITH THE NOTICES ISSUED PURSUANT TO SUBMISSION OF APPLICATION FOR REGISTRAT ION IN PRESCRIBED FOR 10A U/S 12A. THE APPELLANT NEVER COMMITTED ANY DEFA ULT AND HAD DULY COMPLIED WITH ALL THE NOTICES AND MADE WRITTEN SUBM ISSIONS ON EACH SUCH DATE OF HEARING. IT WAS EXPLAINED IN WRITTEN SUBMIS SIONS DT. 28.9.2010 THAT THE ALLEGED DEFAULT POINTED OUT IN SHOW CAUSE NOTIC E ARE PATENTLY ERRONEOUS, AS THE ASSESSEE HAD DULY COMPLIED WITH. SINCE THE LD. OFFICERS WERE OUT OF STATION, WRITTEN SUBMISSIONS ON THE APP OINTED DAY WERE DULY SUBMITTED. SUCH FACTS STATED IN WS HAVE NOT BEEN RE BUTTED BY THE LD. CIT AND CORRECTNESS OF ASSESSEES SUBMISSION ARE ALSO C ORROBORATED BY THE ACKNOWLEDGMENT GIVEN BY THE DEPARTMENT ON SUCH LETT ERS. THE IMPUGNED ORDER HAS BEEN PASSED AGAINST THE PRINCIPLES OF NAT URAL JUSTICE AND FAIR PLAY. 4. THE LD. CIT HAS ERRED IN PLACING RELIANCE UPON MANY NEWS PAPERS CUTTINGS (IN THE ORDER SIMULTANEOUSLY PASSED IN CASE OF JDA, WHICH TOOK OVER UIT UNDER THE RESPECTIVE ACTS,) SUP PLIED TO HIM BY THE LD. AO WITHOUT PROVIDING ANY OPPORTUNITY WHATSOEVER TO THE APPELLANT AND WITHOUT SUPPLYING COPIES THEREOF TO THE APPELLA NT. THE ORDER PASSED BY THE LD. CIT ON THE BASIS OF ANY SUCH MATERIAL GATHE RED BEHIND THE BACK OF THE ASSESSEE WITHOUT PROVIDING THEM ADEQUATE AND RE ASONABLE OPPORTUNITY TO EXPLAIN THE SAME AND TO SUBMIT EVIDENCE IN REBUT TAL THEREOF, RENDERS THE IMPUGNED ORDER TO BE PATENTLY VOID AND MOST UNJUSTI FIED. 5. THE LD. CIT HAS GROSSLY ERRED IN HOLDING THAT TH E ACTIVITIES CARRIED OUT BY THE APPELLANT STATUTORY BODIES DO NO T COME WITHIN THE AMBIT AND SCOPE OF THE DEFINITION OF CHARITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF I.T. ACT 1961. 6. THE LD. CIT HAS GROSSLY ERRED IN HOLDING THAT TH E APPELLANT STATUTORY BODY SET UP FOR PLANNED DEVELOPMENT OF TH E CITY AND OTHER OBJECTS FOR ADVANCEMENT OF GENERAL PUBLIC UTILITY MENTIONED IN JDA / UIT ACTS, WITHOUT ANY PROFIT MOTIVE, IS CARRYING ON THE ACTIV ITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND THERE CASE FALLS UN DER THE PROVISO TO SECTION 2(15). THE LD. CIT HAS GROSSLY ERRED IN COM PARING THE ACTIVITIES OF JDA / UTI AS LIKE ACTIVITIES, AS ARE DONE BY ANY B UILDER. (SUCH OBSERVATIONS MADE IN THE ORDER SIMULTANEOUSLY PASSE D IN CASE OF JDA, WHICH TOOK OVER UIT UNDER THE RESPECTIVE ACTS,) SUC H FINDINGS ARE PATENTLY WRONG AND EXPOSE THE GROSS IGNORANCE OR DE LIBERATE LEGAL MALICE AND BIAS AGAINST THE APPELLANT. 3 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE, THE LD. CIT OUGHT TO HAVE ACCEPTED THAT THE INCOME OF THE APPELLANT STATUTORY BODY CONTINUES TO BE EXEMPT UNDER THE AME NDED PROVISIONS OF SECTION 10(20) OF I.T. ACT 1961 AND IN THE ALTERNAT IVE AND WITHOUT PREJUDICE TO THE SAID CLAIM, THE LD. CIT OUGHT TO H AVE HELD THAT THE SAID INSTITUTION CLEARLY QUALIFIES FOR GRANT OF REGISTRA TION U/S 12A AND ITS INCOME IS EXEMPT U/S 11 AND 12 OF I.T. ACT 1961. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE, THE LD. CIT-1, JODHPUR OUGHT TO HAVE GRANTED REGIST RATION TO THE APPELLANT U/S 12A/ 12AA OF I.T. ACT 1961 WITH RETROSPECTIVE E FFECT FROM AY 2003- 04, AS THE APPELLANT FULFILLS ALL THE CONDITIONS FO R GRANT OF SUCH REGISTRATION. 9. THE LD. CIT-1, JODHPUR, HAS ERRED IN NOT ACCEPTI NG THE APPELLANTS CLAIM FOR GRANT OF REGISTRATION U/S 12 A/ 12AA IN VIEW OF THE FACT THAT THE INCOME TAX DEPARTMENT HAS GRANTED REG ISTRATION U/S 12A/ 12AA TO JAIPUR DEVELOPMENT AUTHORITY WITH RETROSPEC TIVE EFFECT UNDER IDENTICAL FACTS AND CIRCUMSTANCES. THE LD. CIT HAS GROSSLY ERRED IN BRUSHING ASIDE THE AFORESAID FACT MERELY BY OBSERVI NG THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE TRIBUNAL AND H AS FILED AN APPEAL U/S 260A BEFORE THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JDA, JAIPUR. (OBSERVATIONS MADE IN THE ORDER SIMULTANEOUSLY PASS ED IN CASE OF JDA, WHICH TOOK OVER UIT UNDER THE RESPECTIVE ACTS,) LIK EWISE, THE LD. CIT HAS GROSSLY ERRED IN NOT ACCEPTING THE BINDING PREC EDENTS OF JURISDICTIONAL HIGH COURT AND OTHER COURTS CITED BEFORE HIM. 10. THE LD. CIT-1, HAS ERRED IN MAKING AN EXPARTE P RESUMPTION THAT THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT OF GETTING THE ACCOUNTS AUDITED BY AN ACCOUNTANT AS DEFINED IN SECTION 288( 2) AND HAS NOT FILED AUDIT REPORT IN THE PRESCRIBED FORM ALONG WITH THE RETURNS OF INCOME. SUCH BASIS FOR REJECTION HAS BEEN ADOPTED BY THE LD. CIT -1, WITHOUT GIVING ANY OPPORTUNITY WHATSOEVER TO THE APPELLANT. THAT ON TH E FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE APPELLAN T WAS NOT LIABLE FOR OBTAINING SUCH AUDIT REPORT, AS THE INCOME OF THE A PPELLANT, WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 11 AND 12 NEVER EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX IN ANY PREVIOUS YEAR. WHILE COMPUTING THE INCOME, THE LD. ASSESSING AUTHO RITY HAS GROSSLY ERRED IN CONSIDERING THE SALE OF LAND, WHICH IS A C APITAL RECEIPT NOT LIABLE TO TAX, AS TAXABLE INCOME. SUCH A VIEW TAKEN BY THE IN COME TAX AUTHORITIES IS PATENTLY INVALID, AS THE LAND VESTED IN UIT / JD A BY VIRTUE OF STATUTORY LAW READ WITH RELEVANT NOTIFICATIONS AND NO COST OF ACQUISITION OF SUCH LAND CAN BE ENVISAGED. THE SALE PROCEEDS OF PLOTS OF LAN D IS A CAPITAL RECEIPT NOT LIABLE TO TAX UNDER ANY PROVISION OF I.T. ACT. THE QUANTUM APPEALS OF THE APPELLANT AGAINST THE ASSESSMENT ORDERS FOR VARIOUS YEARS ARE PENDING 4 BEFORE THE APPELLATE AUTHORITIES. FURTHERMORE, THER E WAS AN IMPOSSIBILITY OF GETTING THE ACCOUNTS AUDITED AS PER SECTION 12A, ON ACCOUNT OF THE BONAFIDE BELIEF, AS ELABORATELY EXPLAINED IN THE AP PLICATION FOR CONDONATION OF DELAY SUBMITTED ALONG WITH FORM 10A BEFORE THE L D. CIT AND ALSO AS EXPLAINED IN ELABORATE WRITTEN SUBMISSIONS. 11. THE LD. CIT HAS ALSO FAILED TO CONSIDER THAT TH E TIME LIMIT FOR FURNISHING THE RETURN OF INCOME ALONG WITH AUDI T REPORT AS REQUIRED U/S 12A AS PER PROVISIONS OF SECTION 139(1) EXPIRES AFT ER EXPIRY OF SIX MONTH FROM THE END OF THE YEAR, FOR EXAMPLE, TIME LIMIT F OR RETURN OF INCOME FOR AY 2010-11 WILL EXPIRE ON 15 TH OCTOBER, 2010 U/S 139(1) AND THE LAST DATE FOR SUCH RETURN U/S 139(4) WILL EXPIRE ON THE EXPIR Y OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE APPLICATIO N FOR REGISTRATION U/S 12A IS REQUIRED TO BE FURNISHED WITHIN ONE YEAR FRO M THE DATE OF CREATION OF THE INSTITUTION. IT IS THEREFORE, CLEAR THAT THE REQUIREMENT OF FURNISHING THE AUDIT REPORT IN THE PRESCRIBED FORM IS NOT RELE VANT AND NOT MANDATORY FOR GRANT OF REGISTRATION U/S 12A / 12AA. THE COMPL IANCE OF THIS REQUIREMENT, EVEN IF APPLICABLE IN THE CASE OF ANY INSTITUTION, CAN BE EXAMINED ONLY DURING ASSESSMENT PROCEEDINGS AND NOT WHILE CONSIDERING THE APPLICATION FOR GRANT OF REGISTRATION. 12. THE LD. CIT HAS FAILED TO CONSIDERED THE FACT T HAT JDA HAD TAKEN OVER UIT BY VIRTUE OF PASSING OF THE RELEVANT ACTS AND THEREFORE, REGISTRATION U/S 12A / 12AA IN THE NAME OF EITHER J DA OR IN THE NAME OF UIT OR IN THEIR SEPARATE NAMES OF JDA/ UIT WAS CLEA RLY ALLOWABLE WITH RETROSPECTIVE EFFECT FROM AY 2003-04. THE LD. CIT H AS GROSSLY ERRED IN REJECTING THE APPLICATIONS FOR GRANT OF REGISTRATIO N U/S 12A / 12AA WITH RETROSPECTIVE EFFECT WITHOUT GIVING ANY VALID REASO NS WHATSOEVER. 13. THE IMPUGNED ORDER U/S 12AA PASSED BY THE LD. C IT IS BAD IN LAW AND ON THE FACTS AND MAY KINDLY BE QUASHED A ND MAY BE DECLARED TO BE NULL AND VOID AND THE LD. CIT MAY BE DIRECTED TO GRANT REGISTRATION U/S 12A/ 12AA FROM AY 2003-04. 2.2 THE ASSESSEE FILED AN APPLICATION IN FORM 10A O N 22-03-2010 FOR REGISTRATION U/S 12A(A) OF THE ACT. THE ASSESSEE JODHPUR DEVELOPMENT AUTHORITY (HEREINAFTER REFERRED AS JDA) WAS CREATED BY THE GOVERNOR OF RAJASTHAN UNDER JODHPUR VIKAS PRADHIKARAN ADHINIYAM, 2009. THE LD. CIT DIRECTED THE AO TO SUB MIT THE REPORT ON THE APPLICATION FILED BY JDA. THE AO REQUIRED THE ASSESSEE TO FURNI SH CERTAIN DETAILS BUT SUCH DETAILS 5 WERE NOT FURNISHED BEFORE HIM. THE AO THEREFORE, SU BMITTED HIS REPORT ON THE BASIS OF THE MATERIALS AVAILABLE ON RECORD WITH HIM. IN THE REPO RT, THE AO MENTIONED THAT JDA DERIVES INCOME FROM SALE OF PLOTS ETC. CHARGING LEASE MONEY AND INCURS EXPENSES ON SALARY ETC . THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE AO . THEREFORE, THE SOURCE OF INCOME AND EXPENDITURE ARE NOT VERIFIABLE. ON RECEI PT OF THE REPORT OF THE AO, THE LD. CIT PROVIDED AN OPPORTUNITY TO THE ASSESSEE TO FURNISH CERTAIN DETAILS. THE DETAILS REQUIRED ARE AVAILABLE AT PAGE 2 OF THE ORDER OF THE LD. CIT. HO WEVER, ON THE DATE FIXED FOR FURNISHING REPLY, NONE ATTENDED THE PROCEEDINGS BEFORE THE LD. CIT AND NO ADJOURNMENT APPLICATION WAS FILED. MEANWHILE, THE SECRETARY, JDA FILED A LE TTER DATED 5-08-2010 RECEIVED IN THE OFFICE OF THE LD. CIT ON 12-08-2010 AND IN THIS LET TER, THE SECRETARY, JDA MENTIONED THE CIRCUMSTANCES UNDER WHICH JDA FILED THE APPLICATION FOR REGISTRATION U/S 12A(A) BECAUSE THE PROVISION OF SECTION 10(20A) WAS OMITTED FROM I NCOME TAX ACT W.E.F. 2003. THE LD. CIT ISSUED ANOTHER LETTER DATED 17-09-2010 TO THE A SSESSEE TO FURNISH THE DETAILS SO AS TO ENABLE HIM TO DISPOSE OFF THE APPLICATION OF REGIST RATION FILED BY THE ASSESSEE. THE LETTER SO SENT IS REPRODUCED IN THE ORDER OF THE LD. CIT A T PAGES 2 AND 3 OF HIS ORDER. IN RESPONSE TO THIS LETTER, THE ASSESSEE FILED THE WRITTEN SUBM ISSION. THE CRUX OF THE WRITTEN SUBMISSIONS AND THE ARGUMENTS HAS BEEN MENTIONED BY THE LD. CIT AT PAGE 4 IN HIS ORDER AND THESE ARE REPRODUCED AS UNDER:- 1. IN SIMILAR CIRCUMSTANCES JAIPUR DEVELOPMENT AUTH ORITY HAS DULY BEEN GRANTED REGISTRATION U/S 12A/12AA WITH RETROSP ECTIVE EFFECT. 2. THE ASSESSEE EXISTS SOLELY FOR ADVANCEMENT OF OB JECTS OF GENERAL PUBLIC UTILITY WITHOUT ANY PROFIT MOTIVE. 6 3. THE PROVISIONS OF SECTION 10(20A) OMITTED W.E.F. 01-04-2003 HAVE BEEN INCORPORATED IN THE AMENDMENT TO SECTION 10(23 ) AND AS SUCH THE ASSESSEE CAN ALWAYS CLAIM ITS INCOME EXEMPTED NOW U /S 10(23) AN FOR EARLIER YEARS U/S 10(20A) 4. DELAY IN SUBMISSION OF THE REGISTRATION APPLICAT ION WAS DUE TO THE CONFUSION WHETHER SECTION 10(20) WILL APPLY OR WHET HER THE ASSESSEE SHOULD SEEK FOR REGISTRATION U/S 12A/12AA. 2.3 THE LD. CIT HAS REFERRED TO THE DEFINITION OF CHARITABLE PURPOSE AS MENTIONED IN SECTION 2(15) OF THE ACT. THE PROVISO TO SECTION 2( 15) SAYS THAT ADVANCEMENT OF ANY OTHER OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES A CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF NATURE OF USE OR APP LICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. ACCORDING TO THE LD. CIT, THE A SSESSEE ACQUIRES/ BUYS LAND, , DEVELOPS LAND BY PROVIDING AMENITIES AND THEREAFTER SELLING THE PLOTS/ SHOPS. THE ACTIVITY OF THE ASSESSEE IS SIMILAR TO THE ACTIVITY OF A BUILDER. T HE ENTIRE OPERATION IS CARRIED OUT IN A SYSTEMATIC COMMERCIAL WAY. THE LD. CIT WAS THEREFOR E, OF THE OPINION THAT PROVISO TO SECTION 2(15) OF THE ACT IS APPLICABLE. THE LD. CIT FURTHER OBSERVED THAT IN THE CASE OF JDA (JAIPUR DEVELOPMENT AUTHORITY), THE PROVISO TO SECTION 2(15) WAS NOT CONSIDERED. THE DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMEN T AND THE APPEAL HAS BEEN FILED U/S 260A OF THE ACT BEFORE HON'BLE RAJASTHAN HIGH COUR T. THE LD. CIT FURTHER OBSERVED THAT THE ASSESSEE HAS NOT GOT ITS ACCOUNTS AUDITED AND H AS NOT FILED THE RETURN. THE REQUEST FOR CONDONATION OF DELAY WAS ALSO REJECTED. IT WAS FURT HER OBSERVED THAT THE ASSESSEE NEVER EXISTED IN THE FINANCIAL YEAR 2003-04 AND THEREFORE , THE REGISTRATION CANNOT BE GRANTED W.E.F. FINANCIAL YEAR 2003-04. 7 2.4 WE HAVE HEARD BOTH THE PARTIES. THE GROUNDS OF APPEAL ARE ELABORATE AND INCLUDED IN THE ARGUMENTS OF THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT IN WHICH THE LD. CIT HAS REJECTED THE APPLICATION FOR REGISTRATION. SECTION 10(20) OF THE ACT PROVIDED EXEMPTION TO THE LOCAL AUTHORITIES. THE DEFINITION OF THE LOCAL AUTHORITY WAS GIVEN BY THE HON'BLE APEX COURT IN THE CASE OF AGRICULTURAL PRODUCE MARKET CO MMITTEE, NARELA V. COMMISSIONER OF INCOME-TAX [2008] 305 ITR 1 (SC) THOSE JUDGMENTS PROCEEDED PRIMARILY ON THE FUNCTION AL TESTS AS LAID DOWN IN THE JUDGMENT OF THIS COURT, VIDE PA RAGRAPH 2 IN THE CASE OF R. C. JAIN {[1981] 2 SCC 308, 311.}. WE QUO TE HEREIN BELOW PARAGRAPH 2 WHICH READS AS UNDER : 2. LET US, THEREFORE, CONCENTRATE AND CONFINE OUR ATTENTION AND ENQUIRY TO THE DEFINITION OF 'LOCAL A UTHORITY' IN SECTION 3(31) OF THE GENERAL CLAUSES ACT. A PROPER AND CAREFUL SCRUTINY OF THE LANGUAGE OF SECTION 3(31) SUGGESTS THAT AN AUTHORITY, IN ORDER TO BE A LOCAL AUTHORITY, MUST B E OF LIKE NATURE AND CHARACTER AS A MUNICIPAL COMMITTEE, DIST RICT BOARD OR BODY OF PORT COMMISSIONERS, POSSESSING, THEREFOR E, MANY, IF NOT ALL, OF THE DISTINCTIVE ATTRIBUTES AND CHARACTE RISTICS OF A MUNICIPAL COMMITTEE, DISTRICT BOARD, OR BODY OF POR T COMMISSIONERS, BUT, POSSESSING ONE ESSENTIAL FEATUR E, NAMELY, THAT IT IS LEGALLY ENTITLED TO OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTROL AND MANAGEMENT OF A MUNICIPAL OR LOCAL FUND. WHAT THEN ARE THE DISTINCTIVE ATTRIBUTES AND CHARAC TERISTICS, ALL OR MANY OF WHICH A MUNICIPAL COMMITTEE, DISTRICT BO ARD OR BODY OF PORT COMMISSIONERS SHARES WITH ANY OTHER LOCAL A UTHORITY ? FIRST, THE AUTHORITIES MUST HAVE SEPARATE LEGAL EXI STENCE AS CORPORATE BODIES. THEY MUST NOT BE MERE GOVERNMENTA L AGENCIES BUT MUST BE LEGALLY INDEPENDENT ENTITIES. NEXT, THEY MUST FUNCTION IN A DEFINED AREA AND MUST ORDINARILY , WHOLLY OR PARTLY, DIRECTLY OR INDIRECTLY, BE ELECTED BY THE I NHABITANTS OF THE AREA. NEXT, THEY MUST ENJOY A CERTAIN DEGREE OF AUT ONOMY, WITH 8 FREEDOM TO DECIDE FOR THEMSELVES QUESTIONS OF POLIC Y AFFECTING THE AREA ADMINISTERED BY THEM. THE AUTONOMY MAY NOT BE COMPLETE AND THE DEGREE OF THE DEPENDENCE MAY VARY CONSIDERABLY BUT, AN APPRECIABLE MEASURE OF AUTONOM Y THERE MUST BE. NEXT, THEY MUST BE ENTRUSTED BY STATUTE WI TH SUCH GOVERNMENTAL FUNCTIONS AND DUTIES AS ARE USUALLY EN TRUSTED TO MUNICIPAL BODIES, SUCH AS THOSE CONNECTED WITH PROV IDING AMENITIES TO THE INHABITANTS OF THE LOCALITY, LIKE HEALTH AND EDUCATION SERVICES, WATER AND SEWERAGE, TOWN PLANNI NG AND DEVELOPMENT, ROADS, MARKETS, TRANSPORTATION, SOCIAL WELFARE SERVICES, ETC., ETC. BROADLY WE MAY SAY THAT THEY M AY BE ENTRUSTED WITH THE PERFORMANCE OF CIVIC DUTIES AND FUNCTIONS WHICH WOULD OTHERWISE BE GOVERNMENTAL DUTIES AND FU NCTIONS. FINALLY, THEY MUST HAVE THE POWER TO RAISE FUNDS FO R THE FURTHERANCE OF THEIR ACTIVITIES AND THE FULFILLMENT OF THEIR PROJECTS BY LEVYING TAXES, RATES, CHARGES, OR FEES. THIS MAY BE IN ADDITION TO MONEYS PROVIDED BY GOVERNMENT OR OBT AINED BY BORROWING OR OTHERWISE. WHAT IS ESSENTIAL IS THAT C ONTROL OR MANAGEMENT OF THE FUND MUST VEST IN THE AUTHORITY. THE DEFINITION WAS BASED ON FUNCTIONAL TEST. AN EXP LANATION WAS INTRODUCED TO SECTION 10(20) OF THE ACT VIDE WHICH THE LOCAL AUTHORITY WA S DEFINED. IN VIEW OF DEFINITION OF LOCAL AUTHORITY AS CONTAINED IN SECTION 10(20), THE EARLIER DECISION OF THE HON'BLE APEX COURT IN THE CASE OF SHRI R.C. JAIN (SUPRA) CANNOT BE APPLIED FOR HOLDING AN AUTHORITY AS LOCAL AUTHORITY ON THE BASIS OF THE FUNCTIONAL TEST . REFERENCE IS MADE TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF AGRICULTURAL PROD UCE MARKET COMMITTEE, NARELA V. COMMISSIONER OF INCOME-TAX [2008] 305 ITR 1. 2.5 THE THEN UNION FINANCE MINISTER BY HIS LETTER D ATED NOV. 18, 2002 ADDRESSED TO THE CHIEF MINISTER OF DELHI, CLARIFIED THAT IRRESPE CTIVE OF THE WITHDRAWAL OF EXEMPTION U/S 9 10(2) OF THE ACT, IF THE ASSESSEE ARE WORKING FOR A DVANCEMENT OF AN OBJECT FOR GENERAL PUBLIC UTILITY AND THERE IS NO PROFIT MOTIVE, THEY LD. CIT(A) STILL CLAIM EXEMPTION FROM INCOME-TAX FOR EXEMPTION AS CHARITABLE INSTITUTION AFTER FULFILLING THE CONDITIONS PRESCRIBED U/S 11 OF THE ACT. THE WORD IT IN TH E PHRASE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS ETC. QUALIFIES THE OBJECT OF GENERAL PUBLIC UTILITY AND NOT ITS ADVANCEMENT OR ACCOMPLISHMENT OR CARRYING OUT. ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE, OR BUSI NESS FOR PAYMENT TO BE NON-CHARITABLE WITHIN THE MEANING OF PROVISO MUST BE CARRIED ON BY THE TRUST OF INSTITUTION, NOT TO SUBSERVE ITS CHARITABLE PURPOSES, BUT WITH THE REAL OBJECT OF CARRYING ON SUCH ACTIVITY ON COMMERCIAL LINES. IF THE PREDOMINANT OBJECT OF SUCH ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSES OF THE TRUST OR INSTITUTION THEN SUCH ACTI VITY WILL NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISE S FROM THE ACTIVITY. THE MAIN OBJECT OF JDA (JODHPUR DEVELOPMENT AUTHORITY) IS OF URBAN PLANNING INCLUDING PREPARATION OF MASTER DEVELOPMENT PLANS AND ZONAL DEVELOPMENT PLAN S. THE OBJECTS ARE MENTIONED IN CHAPTER IV OF JDA ACT, 2009. THE JDA WAS AUTHORIZED TO ENTER INTO CONTRACT OR AGREEMENT OR ARRANGEMENTS WHICH MAY BE NECESSARY FO R THE PERFORMANCE OF FUNCTIONS. THE HON'BLE JURISDICTIONAL HIGH COURT WHILE HOLDING THAT KRISHI UPAJ MANDI SAMITI IS ENTITLED FOR REGISTRATION U/S 12A OF THE ACT IN THE CASE OF CIT VS. KUMS, JAISALMER, 331 ITR 135 OBSERVED THAT IF THE ENTIRE AMOUNT RECEIVE D BY THE ASSESSEE WAS REQUIRED TO BE SPENT FOR THE PURPOSE MENTIONED THEREIN, INCLUDING THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY THEN THE SAMITI IS ENTI TLED TO BE REGISTERED U/S 12A OF THE ACT. 10 THE ITAT JAIPUR BENCH IN THE CASE OF JAIPUR DEVELOP MENT AUTHORITY VS. CIT-II IN ITA NO.027/JP/2007 DATED 30 TH MAY,2008 DIRECTED THE LD. CIT TO GRANT REGISTRATIO N U/S 12AA OF THE ACT. THE LD. CIT HAS ONLY REFERRED TO ONE AS PECT OF PURCHASE AND SALE OF LAND BY JDA. THE OBJECTS OF JDA HAVE BEEN DEFINED UNDER THE JODHPUR DEVELOPMENT ACT, 2009. AS PER CLAUSE 16 OF THE JODHPUR DEVELOPMENT ACT, 20 09, JDA WAS REQUIRED TO MAKE URBAN PLANNING INCLUDING PREPARATION OF MASTER PLAN AND ZONAL DEVELOPMENT PLAN. THE JDA WAS TO EXECUTE THE OBJECTS FOR THE DEVELOPMENT OF JODHPUR REGION AND TO PREPARE THE MASTER PLAN FOR TRAFFIC CONTROL AND MANAGEMENT. TH ERE ARE OTHER SIMILAR OBJECTS. THUS THE OBJECTS OF THE JDA ARE IN THE NATURE OF PUBLIC UTIL ITY. IT IS NOT THE CASE OF REVENUE THAT PROFIT FROM THE ACTIVITY OF ACQUIRING LAND AND SELL ING IT AFTER DEVELOPMENT CAN BE DISTRIBUTED IN ANY MANNER TO THE MEMBERS. IN CASE O F DISSOLUTION, THE ASSETS ARE TO BE VESTED IN THE STATE GOVT. THE CONTENTION OF THE REV ENUE THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE IN NO WAY DIFFERENT FROM THE ACTIV ITIES CARRIED OUT BY A BUILDER DEVELOPING LARGE COLONY. THE WORD BUSINESS HAS BEEN DEFINED IN SECTION 2(13) OF THE I.T. ACT AND IT INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OF MANUFACTURE. HENCE, IN THE IN STANT CASE, THE AUTHORITY MIGHT BE SELLING CERTAIN PROPERTY AT MARKET RATE THROUGH AUC TION AFTER DEVELOPING THAT PROPERTY. BUT IT IS NOT THE MAIN OBJECT OF THE WORD IT AS MENTI ONED IN SECTION 2 (15) REFERS TO THE OBJECTS OF THE TRUST. HENCE, SUCH ACTIVITY IS INCID ENTAL TO THE OBJECTS OF THE AUTHORITY. HENCE, THE PROVISION OF SECTION 11(4) WILL BE APPLI CABLE. IN CASE THE AUTHORITY HAS NOT COMPLIED WITH THE PROVISION OF SECTION 11(4) OF THE ACT THEN PERHAPS EXEMPTION U/S 11 MAY NOT BE APPLICABLE. HOWEVER, FOR THE PURPOSE OF REGISTRATION, WE FEEL THAT JDA IS 11 ENTITLED FOR REGISTRATION. WE HAD ALREADY NOTICED T HAT ITAT JAIPUR BENCH HAS ALLOWED THE REGISTRATION IN THE CASE OF JAIPUR DEVELOPMENT AUTH ORITY. ACCORDINGLY, WE DIRECT THE LD. CIT TO ALLOW REGISTRATION U/S 12AA OF THE ACT. SUB -CLAUSE (A) OF SECTION 12A REQUIRES THAT APPLICATION OF REGISTRATION SHOULD BE FILED W ITHIN ONE YEAR FROM THE DATE OF CREATION OF THE TRUST. IN CASE THE SAME IS FILED BEFORE 01-0 6-2007 THEN THE FIRST PROVISO TO SECTION 12A(A) PERMITTED THE LD. CIT TO CONDONE THE DELAY. HOWEVER, THE FIRST PROVISO TO SECTION 12A(A) IS NOT APPLICABLE FOR THE APPLICATION MADE O N OR AFTER 01-06-2007. HENCE, THE LD. CIT CAN ALLOW THE REGISTRATION FROM FIRST YEAR OF T HE FINANCIAL YEAR IN WHICH THE APPLICATION IS MADE. HENCE REGISTRATION, IF ANY, TO BE ALLOWED WILL BE FROM THE FIRST DAY OF FINANCIAL YEAR IN WHICH APPLICATION IS MADE OR FROM THE DATE OF CREATION OF TRUST WHICHEVER IS LATER 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED ON 19-01-2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 19 /01/2012 *MISHRA COPY FORWARDED TO :- 1. JODHPUR DEVELOPMENT AUTHORITY JODHPUR 2. THE LD. CIT -1 BY ORDER 3. THE LD. CIT 4. THE LD.DR 5. THE GUARD FILE (ITA NO. 508/JODH /10) A.R, ITAT, JODHPUR 12