DDIT, Bangalore V. Bangalore Development Authority, Bangalore

ITA 600/BANG/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8570 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAVA
• Assessee Lawyers: S ANNAMALAI
• Keywords: Charitable institution; Opportunity of being heard; Earning of tax free income; Benefit of exemption; Cancellation of registration; Set aside
• Section: 143(3); 142(1); 12A; 12AA; 143(1); 250; 143(2); 139(1); 43; 13; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER SL.NO. ITA NO. & ASST. YEAR APPELLANT RESPONDENT 1. 600/BANG/2014 2009 - 10 DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(1), BANGALORE. BANGALORE DEVELOPMENT AUTHORITY, T.CHOWDAIAH ROAD, KUMARA PARK WEST, BANGALORE - 560020 2. 606/BANG/2014 2009 - 10 BANGALORE DEVELOPMENT AUTHORITY, KUMARA PARK WEST, BANGALORE - 560020 ADDL. DIRECTOR OF INCOM E TAX (EXEMPTIONS), RANGE - 17, BANGALORE. 3. 742/BANG/2014 20 09 - 10 BANGALORE DEVELOPMENT AUTHORITY, KUMARA PARK WEST, BANGALORE - 560020 ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE - 17, BANGALORE. 4. 936 /BANG/201 5 2009 - 10 ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE - 17, BANGALORE. BANGALORE DEVELOPMENT AUTHORITY, KUMARA PARK WEST, BANGALORE - 560020 5. 937/BANG/2015 2011 - 12 ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE - 17, BANGALORE. BANGALORE DEVELOPMENT AUTHORITY, KUMARA PARK WEST, BANGALORE - 560020 6. 938/BANG/2015 2011 - 12 BANGALORE DEVELOPMENT AUTHORITY, KUMARA PARK WEST, BANGALORE - 560020 ADDL. DIRECTOR OF INCOME TAX (EXEMPTIONS), RANGE - 17, BANGALORE. ASSESSEE BY: SHRI S. ANNAMALAI, ADVOCATE. REVENUE BY: SHRI ANURAG SRIVASTAVA, CIT (D.R) DATE OF HEARING : 02.12 .2019 DATE OF PRONOUNCEMENT : 17 . 01 .20 20 2 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 O R D E R PER BENCH : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST DIFFERENT ORDERS OF CIT(APPEALS) FOR THE ASSESSMENT YEAR 2009 - 10 AND 2011 - 12 . IT A NO.606/BANG/2014 IS ASSESSEE'S APPEAL, AND ITA NO 600/BANG/2014 IS REVENUES APPEAL FILED AGAINST T HE ORDER OF CIT(APPEALS) - 5, BANGALORE DT.25.5.2014 . ITA NO.742 /BANG/2015 ASSESSEE APPEAL AND ITA NO 936/B/2015 REVENUE APPEAL IS FILLED AGAINST THE ORDER G IVING E FFECT ORDER OF CIT(APPEALS) - 5, BANGALORE DT.28.5.2014. ITANO938/B/2015 ASSESSEE APPEAL AN D ITA NO937/B/2015 REVENUE APPEAL FILED AGAINST ORDER OF CIT(APPEALS) ORDER DT13 - 03 - 2015. SINCE THE ISSUES ARE COMMON IN ALL THESE APPEALS, THEY ARE CLUBBED AND HEARD TOGETHER AND CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE U P THE ASSESSEE'S APPEAL IN ITA 606/BANG/2014 ASST YEAR 2009 - 2010 AND F ACTS NARRATED THEREIN. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 3 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 4 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 5 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 6 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 7 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 8 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 9 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 2. THE ASSESSEE IS A STATUTORY BODY NAMED AS BANGALORE DEVELOPMENT AUTHORITY (BDA) AND IS CONST ITUTED BY GOVT. OF KARNATAKA. REGISTRATION WAS GRANTED UNDER SECTION 12AA FROM 1.4.2003 AND WAS CONSTITUTED BY LEGISLATURE WITH THE CONSENT OF GOVERNOR IN THE YEAR 1976. IN THE IMPUGNED ASSESSMENT YEAR 2009 - 10, THE ASSESSEE FIL ED RETURN OF INCOME ON 25.09.2009 WITHIN TIME ALLOWED UNDER SECTION 139(1) OF THE ACT. AS PER THE FINANCI AL STATEMENTS, THE ASSESSEE HAS DISCLOSED SURPL US OF RS.135.54 CRORES AFTER SET OFF OF THE PRIOR PERIOD EXPENSES OF RS.2.75 CRORES AND THE NET SURPLUS BEING RS.132.59 CRORES. T HE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 29.09.2010. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) AND 142(1) OF THE ACT 10 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 ALONG WITH QUES TIONNAIRE WERE ISSUED. IN COM PLIANCE, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED ALONG WITH THE CHIEF ACCOUNTS OFFICER FROM TIME TO TIME AND FURNISHED THE DETAILS. WHE REAS THE ASSESSING OFFICER ON CONSIDERING THE FINANCIAL RESULTS F OUND THAT SURPLUS IS RS.135.54 C RORES AFTER CLAIMING EXPENSES, OUT OF THE TOTAL RECEIPTS OF RS.376.46 CRORES , THE NET PROFIT PERCENTAGE WORKS OUT TO 35.95% AND THE AO ALSO REFERRED TO T HE EARLIER YEARS PROFIT, AND THE ASSESSEE HAS MADE NET PROFIT IS MORE THAN BUILDER ENGAGED IN SIMILAR KIND OF BUSINESS AND SYSTEMATIC PROFIT EARNED WITH A RANGE FROM 20 TO 30% . THE ASSESSING OFFICER C ONSIDERING THE PROFITS EARNED IN THE SYSTEMATIC COMM ERCIAL ACTIVITY BEING SALE OF SITES, APARTMENTS AND A UCTIO NS, RELIED ON THE DECISION OF HON'BLE JHARKHA ND HIGH COURT IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOCIETY 177 TAXMAN 326 AND OBSERVED THAT WHERE S YSTEMATIC PROFITS ARE EARNED, THE PURPO SE MAY NOT BE HELD AS CHARITABLE AND EXEMPTION UNDER SECTION 11 OF THE ACT IS NOT PE RMITTED AND DEALT ON PR OVISIONS OF SECTION 2(15) OF THE ACT AND OBSERV ED THE ASSESSEE ACTIVITIES WILL NOT COME UNDER ANY OTHER LIMB OF CHARITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF THE AC T. T HE MAJOR SOURCE OF INCOME OF BDA IS FROM SALE OF SITES THROUGH AUCTION AND THE AS SESSING OFFICER IS OF THE OPINION THAT ALL THE ACTIVITIES ARE COMMERCIAL ACTIVITIES. THEREFORE THE OTHER OBJECT S OF GENERAL PUBLIC ACTIVITY SHALL NOT BE CHARITABLE PURPOSE IF IT INVOLVES IN ANY CARRYING ON ACTIVITY IN TRADE, COMMERCE AND BUSINESS OR ANY A CTIVITY OF RENDERING ANY SERVI CES IN RELATION TO ANY TRADE, CO MMERCE OR BUSINESS FOR A CESS OR FEES OR ANY OTHER CONSIDERATION. 11 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 T HE ASS ESSING OFFICER IS OF THE VIEW THAT, THE ASSESSEE IS HIT BY THE PROVISO AND ITS ACTIVITIES CANNOT BE CA LLED AS CHARITABLE AND REGISTRATION DOES NOT AUTOMATICALLY EXEMPT INCOME OF THE INSTITUTION IN VIEW OF THE AMENDMENT FROM 1.4.2009.FURTHER SHOW CAUSE NOTICE DT.15.3.2011 WAS ISSUE D, AS THE ASSESSEE IS ENGAGED IN TRADING, AND COMMERCIAL ACTIVITY AND TURNO VE R FROM THE ACTIVIT I ES WAS MORE THAN RS.10 LAKHS. WHEREAS THE DIT (EXEMPTIONS) HAS CANCELLED REGISTRATION UNDER SECTION 12A OF THE ACT VIDE ORDER DT.8.11.2011 FROM ASST. YEAR 2009 - 10 AND THEREFORE THE ASSESSING OFFICER IS OF THE OPINION THAT THE TAXABLE INCOME OF THE ASSESSEE SHALL BE UNDER THE NORMAL PROVISIONS IN THE STATUS OF ASSOCIATION OF PERSONS (AOP)AND ALL PROVISIONS UNDER SECTION 28 TO 43 OF THE ACT ARE APPLICABLE. THE ASSESSING OFFICER DEALT ON PROVISIONS OF SECTI O N 2(1 5) OF THE ACT ON THE DEF INITION OF A CHARITABLE PURPOSE AND CBDT CIRCULAR NO.1912/2008 AND OBSERVED THAT THE ASSESSEE IS ACTIVELY INVOLVED IN COMMERCIAL ACTIVITIES WITH PROFIT ELEMENT AND NO CHARITABLE PURPOSE IS INVOLVED AND RELIED ON THE JUDICI AL DECISIONS AND FINALLY CONCL UDED THAT BDA IS NOT A CHARITABLE ORGANIZATION UNDER SECT ION 2(15) OF THE ACT AND DIT (EXEMPTIONS) HAS CANCELLED THE R EGISTRATION UNDER SECTION 12AOF THE ACT DT.8.11.2011, THEREFORE THE CLAIM OF THE ASSESSEE THAT THE OBJECTIVES ARE WHOLLY CHARITABLE CO ULD NOT BE AC CEPTED AND SURPLUS IS TAXABLE AND ALONG WITH OTHER ADDITIONS ASSESSED TOTAL INCOME OF RS.191,59,13,950 AND PASSED THE ORDER UNDER SECTION 143(3) OF THE ACT DT.22.11.2011. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE C IT (APPEALS). IN THE APPELLATE PROCEEDINGS, THE CIT 12 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 (APPEALS) CONSIDERED THE GROUNDS OF APPEAL, SUBMISSIONS AND FURTHER THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE MADE A REQUEST TO KEEP THE APPEAL IN ABEYANCE TILL 31.12.2013 AND IN VIEW OF CANCELLATION OF REGISTRATION UNDER SECTION 12AA BY DIT (EXEMPTIONS) DUE TO THE AMEND MEND TO SECTI O N 2(15) OF THE ACT. FURTHER LETTER WAS FILED ON 1.11.2014 MENTIONED TH A T THE APPEAL ORDER OF CANCELLATION UNDER SECTION 12AA(3) IS CHALLENGED BEFORE THE HO N'BLE TRIBUNAL IN ITA NO.1 2/BANG/2012 AND WAS POSTED FOR HEARING ON 31.12.2011 AND HENCE REQUESTED TO KEEP THE APPEAL IN ABEYANCE TILL THE DISPOSAL OF AP PEAL BY THE TRIBUNAL . F OR THE ASST. YEAR 2009 - 10, THE CIT (APPEALS) FOUND THAT ASSESSEE RELIED ON THE DECISION OF KARNATAKA HOUSING BOARD IN ITA NO.1095/BANG/2011 DT.31.01.2013 HOLDING THAT THE REGISTRATION ALREADY GRANTED UNDER SECTION 12AA CANNOT BE REVOKED . BUT THE R EVENUE HAS FILED AN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE ORDER OF THE TRIB UNAL IN THE CASE OF KARNATAKA HOUSING BOARD (SUPRA) WHICH WAS ADMITTED AND GRANTED STAY ON.14.8.2013. HENCE THE CIT (APPEALS) IS OF THE OPINION THAT THE TRIBUNAL DECISION ON THE ORDER OF CANCELLATION UNDER SECTION 12AA(3) OF IT ACT IS PENDING HEARING, S HOULD NOT BE ANY OBSTACLE TO ADJUDICATE THE DISPUTED ISSUES . IN THE PRESENT CASE THE EXEMPTION UNDER SECTION 11 OF THE ACT WAS DENIED BY THE ASSESSING OFFICER. THE CIT (APPEALS) DEALT ON THE SUBMISSIONS, R EMAND REPORT AND ASSESSEE S COMMEN TS ON THE REMAND REPORT AT PAGE 23 OF THE ORDER . 13 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 3. ON THE ISSUE OF GRANTING OF EXEMPTION UNDER SECTION 11 OF THE ACT, THE CIT (APPEALS) DEALT ELABORATELY ON THE FACTS, FINANCIAL STATEMENTS , GUIDELINES AND CANCELLATION OF REGISTRATION UNDER SECTION 1 2AA OF THE ACT AND IS OF THE OPINION THAT THE ASSESSEE ACTIVITIES ARE HIT BY PROVISO TO SECTION 2(15) OF THE ACT , AMENDED FROM 1.4. 2009. HENCE THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT AND CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER ON THIS DISPUTED ISSUE AND GRANTED RELIEF IN OTHER GROU NDS OF APPEAL AND PARTLY ALLOW ED THE APPEAL VIDE ORDER DT.25.2.2014. AGGRIEVED BY THE CIT (APPEALS) ORDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HE ARING, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE CIT (APPEALS) HAS ERRED IN DENYING THE EXEMPTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT THE ACTIVITIES ARE CHARITABLE IN NAT URE AND SUPPORTED HIS S TAND WITH THE JUDICIAL AND CO - ORDINATE BENCH DECISIONS . FURTHER SUBMITTED THAT THE A SSESSEE WAS GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT BY THE TRIBUNAL IN ITA NO.12/BANG/ 2012 DT.10.04.2015.AND I N THE SUBSEQUENT ASSESSMENT YEARS, THE REGISTRATION WAS CO NSIDERED BY THE REVENUE AUTHORITIES AND SUBSTANTIATED WITH VOLUMINOUS PAPER BOOK AND CATENA OF JUDICIAL DECISIONS AND PRAYED FOR ALLOWING THE APPEAL . CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF T HE CIT (APPEALS). 14 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FOUND THAT THE LEARNED AU THORIZED REPRESENTATIVE HAS RESTRICTED HIS SUBMISSIONS ON G RANTING OF REGISTRATION UNDER SECTIO N 12A OF THE ACT BY THE TRIBUNAL ,ON SETTING ASIDE THE CANCELLATION ORDER OF DIT (EXEMPTIONS). THE CONTENTION OF TH E LD. AR THAT THE REGISTRATION UNDER SECTION 12AA OF THE IT ACT IS OPERATIVE AND THE EXEMPTION UNDER SECTION 11 CANNOT BE DENIED BY THE ASSESSING OFFICER. FURTHER, TH ESE FACTS WERE BRO UGHT TO THE KNOWLEDGE OF THE CIT(APPEALS), ON THE PENDENCY OF APPEAL BEFORE THE TRIBUNAL AGAINST THE CANCELLATI ON ORDER OF 12AA OF THE ACT. WE FOUND THAT THE ASSESSEE HAS MADE A REQUEST BEFORE THE APPELLATE AUTHORITY ON THE ISSUE THAT THE APPEAL WAS FIL ED AGAINST THE CANCELLATION ORDER UNDER SECTION 12AA(3) OF THE ACT BY THE DIT (EXEMPTIONS) DT.8.11.2011 AT PAGE 2 PARAS 2 & 2.2 OF ORDER OF CIT(APPEALS) . WHEREAS THE CIT ( APPEALS) HAS PROCEEDED ON THE GROUNDS OF APPEAL I RRESPECTIVE OF REGISTRATION OR CA NCELLATION UNDER SECTION 12AA(3) OF THE ACT. WE ALSO FOUND THAT THE ASSESSEE HAS MADE A REQUEST FOR KEEPING THE APPEAL IN ABEYANCE TILL THE ORDER OF THE TRIBUNAL PRONOUNCED. BUT FOR VARIOUS REASONS AND LIM I TATIONS AND AS PER DEPARTMENT GUIDELINES , THE CI T(APPEALS) HAS PASSED THE OR DER ON 18.02.2014. WE FOUND THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL SET - ASIDE ORDER OF CANCELLATION OF REGISTRATION UNDER SECTION 12AA O F THE ACT. WE CONSIDER IT PROPER TO REFER TO THE FINDINGS AND OBSERVATIONS IN ASSESSEE CASE IN ITA NO.12/BANG/2012 DT.10.04.2015 AT PAGES 3 TO 9 PARAS 4 & 5 WHICH IS READ AS UNDER : 15 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 4. WE HAVE PERUSED THE ORDER OF THE LD.DIT(E). IT IS NOT DISPUTED THAT THE ASSESSEE HAS SUBSTANTIAL OTHER RECEIPTS ABOUT RS.25,563/ - LAKHS AND ALSO INCOME FROM SALE AND AUCTION OF HOUSES/SITES. IT IS ALSO NOT DISPUTED THAT THE BDA IS AN AUTHORITY SET UP BY THE STATE GOVERNMENT WITH PRIMARY OBJECT OF DESIGNING THE LAYOUTS AND SECURING THE DEVELOPMENT OF BANGALORE METROPOLITAN AREA. THE LD.DIT(E) H AD CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE ON 26/3/2003 FOR A REASON THAT IT WAS HIT BY THE PROVISO TO SEC.2(15) OF THE ACT WHICH CAME IN BY VIRTUE OF SUBSTITUTION OF SEC.2(15) OF THE ACT BY THE FINANCE ACT, 2008 W.E.F.1/4/2009. WE FIND THAT IN THE CASE OF KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD (SUPRA) ALSO, THE LD.DIT(E) HAD CANCELLED THE REGISTRATION GRANTED U/S 12A OF THE ACT FOR THE SAME REASON. THE SAID BOARD WAS ALSO HAVING SUBSTANTIAL RECEIPTS IN THE NATURE OF SALE OF APPLICATION FORM , RECOVERY OF FINES AND PENALTIES, RENT RECEIPT, WATER SUPPLY CHARGES, GAIN ON DISPOSAL OF LAND, FORFEITURE OF DEPOSIT AND INTEREST. THEIR LORDSHIPS, ON AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL, WHEREIN IT HAD SET ASIDE THE CANCELLA TION OF REGISTRATION HELD AS UNDER AT PARAS.2 TO 9 OF ITS JUDGMENT DATED 7/11/2014: 2. THE ASSESSEE, KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD, (FOR SHORT HEREINAFTER REFERRED TO AS KIADB) WAS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT VIDE ORDER DATED 20.6.1988 PASSED BY THE COMMISSIONER OF INCOME TAX (EXEMPTION). A N OTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 12AA(3) OF THE ACT CALLING UPON TO SHOW CAUSE AS TO WHY THE SAID REGISTRATION SHOULD NOT BE CANCELLED ON THE GROUND THAT CASE FALLS UNDER FIRST PROVISO TO SECTION 2(15) OF THE ACT. THE ASSESSEE APPEARED, CONTE STED THE MATTER. THE AUTHORITIES TOOK NOTE OF THE FACT THAT THE ACCOUNTS FOR THE YEAR ENDED 31.3.2009 SHOWS RECEIPTS BY WAY OF GAIN ON DISPOSAL OF LAND TO THE EXTENT OF RS.18,69,72,000/ - AND EXCESS OF INCOME OVER EXPENDITURE AT RS.155,76,64,004. AN EXTRACT OF THE INCOME AND EXPENDITURE ACCOUNT FOR THE FINANCIAL YEAR 2008 - 09 IS REPRODUCED AS UNDER: INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.3.2009 16 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 3. FROM THE AFORESAID FIGURES, IT IS EVIDENT THAT THE KIADB CHARGES FOR EVERY SERVICES IT RENDER S. THEREFORE, THE AUTHORITY WAS OF THE VIEW, THERE IS NO ELEMENT OF CHARITY OR PROVIDING ANY SERVICES OR INDUSTRIAL SITES FREE OF COST. AFTER MEETING ALL THE EXPENSES, KIADB HAS EARNED A NET PROFIT OF RS.155,76,64,004/ - . UNDER VARIOUS HEADS, KIADB HAS EARN ED HUGE PROFIT. THEREAFTER, TAKING NOTE OF THE CHANGE IN THE DEFINITION OF SECTION 2(15) OF THE ACT, WHICH CAME INTO EFFECT FROM 1.4.2009, IT WAS HELD THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIV ITY OF RENDERING ANY SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS AND THEREFORE, THE CONSIDERATION RECEIVED IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION, OR RETENTION, OF THE INCOME, FROM SUCH ACTIVITY WOULD TAKE THE CASE OUT OF SECTION 2(15 ) OF THE ACT AND THEREFORE AFTER REFERRING TO THE VARIOUS JUDGMENTS RELIED ON IT, PROCEED TO PASS AN ORDER CANCELLING THE REGISTRATION GRANTED UNDER SECTION 12AA WITH EFFECT FROM THE ASSESSMENT YEAR 2009 - 10. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFER RED AN APPEAL TO THE TRIBUNAL. THE TRIBUNAL RELYING ON THE JUDGMENT IN THE CASE OF KARNATAKA BADMINTON ASSOCIATION IN ITA NO.1272/BANG/2011 HELD; THE REGISTRATION ALREADY GRANTED UNDER SECTION 12A CANNOT BE REVOKED FOR THE REASON THAT THE CHARITABLE TRUST OR INSTITUTION PURSUING OF ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY CARRIED ON COMMERCIAL ACTIVITIES AND THEREFORE AS THE CONDITIONS STIPULATED IN SECTION 12AA(3) DO NOT EXISTS IN THIS CASE, SET ASIDE THE ORDER OF CANCELLATION AND REGISTRATION OF A SSESSEE UNDER SECTION 12A OF THE ACT. AGGRIEVED BY THE SAID ORDER, REVENUE IS IN APPEAL. 4. THIS APPEAL IS ADMITTED TO CONSIDER THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: I). WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE ASSESSEE IS ENTITLED TO CONTINUE REGISTRATION UNDER SECTION 12A OF THE ACT, WITHOUT APPRECIATING THE FACT THAT, IN VIEW OF THE AMENDMENT TO SECTION 2(15) OF THE ACT, THE ACTIVITIES CARRIED ON BY THE ASSESSEE WERE COMMERCIAL IN NATURE AND THEREFORE CANNOT BE CONSIDERED AS CHARITAB LE UNDER SECTION 2(15) OF THE INCOME TAX ACT? II). WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT DIRECTOR OF INCOME TAX (EXEMPTION) HAS NOT GIVEN ANY FINDING WITH REGARD TO GENUINENESS OF THE ACTIVITIES OR THE ACTIVITIES NOT IN ACCORDANCE WITH THE OBJ ECTS OF THE INSTITUTIONS, WITHOUT APPRECIATING THAT CLEAR FINDING IS RECORDED HOLDING ACTIVITIES OF THE ASSESSEE WERE NOT IN ACCORDANCE WITH THE OBJECTS AND THE OBJECTS ARE AMENDED WITHOUT APPROVAL OF THE DEPARTMENT AND THEREFORE, PROVISIONS OF SECTION 12A A(3) OF THE ACT WERE APPLICABLE AND RECORDED A PERVERSE FINDING? 5. LEARNED COUNSEL FOR THE REVENUE ASSAILING THE IMPUGNED ORDER CONTENDED THAT THE DEFINITION OF CHARITABLE INSTITUTION HAS UNDERGONE A CHANGE WITH EFFECT FROM 1.4.2009. THE ACTIVITY CARRIE D ON BY THE ASSESSEE IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR AT ANY RATE ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND THE AGGREGATE VALUE OF THE RECEIPTS FROM THE SAID ACTIVITIES EXCEEDS RS.25,00,000/ - AN D THEREFORE, IT SQUARELY FALLS UNDER THE FIRST PROVISO TO SECTION 2(15) OF THE ACT AND THEREFORE IT CEASES TO BE AN INSTITUTION FOR CHARITABLE PURPOSE. THEREFORE, RIGHTLY THE REGISTRATION UNDER SECTION 12A OF THE ACT WAS CANCELLED WHICH HAS BEEN ERRONEOUSL Y INTERFERED WITH BY THE TRIBUNAL. 6. PER CONTRA, LEARNED COUNSEL APPEARING FOR THE ASSESSEE CONTENDED, ONCE A PERSON IS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT, THE SAID BENEFIT COULD BE DENIED ONLY IF THE CASE FALLS UNDER SECTION 12AA(3) OF T HE ACT. ADMITTEDLY, THE ASSESSEES CASE DO NOT FALL UNDER THAT PROVISION. EVEN IF THE ACTIVITY CARRIED ON BY THE ASSESSEE CEASES TO BE A CHARITABLE PURPOSE IN VIEW OF THE AMENDMENT BROUGHT ABOUT TO THE DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15) O F THE ACT, THAT IS A MATTER TO BE CONSIDERED BY THE ASSESSING AUTHORITY TO EXTEND THE BENEFIT OF EXEMPTION OR NOT. THEREFORE HE SUBMITS THAT, NO CASE FOR INTERFERENCE IS MADE OUT. 17 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, IT IS NOT IN DISPUTE TH AT THE ASSESSEE WAS GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT. NOW THE SAID REGISTRATION IS CANCELLED BY INVOKING THE POWER CONFERRED UNDER SECTION 12AA(3) OF THE ACT. THEREFORE, IT IS NECESSARY TO FIND OUT UNDER WHAT CIRCUMSTANCES THE REGISTRATION GRANTED EARLIER COULD BE CANCELLED. SECTION 12AA(3) OF THE ACT, READS AS UNDER: SECTION 12AA(3) [(3)WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB - SECTION (1) [OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUBSECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REA SONABLE OPPORTUNITY OF BEING HEARD.] 8. A READING OF THE AFORESAID PROVISION MAKES IT VERY CLEAR, A REGISTRATION GRANTED EARLIER UNDER SECTION 12A OF THE ACT CAN BE CANCELLED UNDER TWO CIRCUMSTANCES; (A) IF THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE, (B) THE ACTIVITIES OF TRUST OR INSTITUTION NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUTION. ONLY ON THOSE TWO CONDITIONS BEING SATISFIED, THE REGISTRATION GRANTED UNDER SECTION 12A OF THE ACT COULD BE CANCELLED BY THE AUTHORITIES. 9. IT IS NOT IN DISPUTE THAT THERE IS NO VIOLATION OF THE SAID TWO CONDITIONS BY THE ASSESSEE. THE ACTIVITIES CARRIED ON BY THE ASSESSEE IS A GENUINE ONE. AS COULD BE SEEN FROM THE PROFITS THEY HAVE GENERATED, THE SAID PROFIT IS EARNED BY CARRYING ON THE A CTIVITIES IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THEREFORE, THE TWO CONDITIONS STIPULATED IN SUBSECTION (3) OF SECTION 12AA OF THE ACT, WHICH EMPOWERS THE AUTHORITY TO CANCEL REGISTRATION, DO NOT EXISTS IN THIS CASE. THE REGISTRATION GRANTED IS CANCEL LED IN VIEW OF THE AMENDMENT OF FIRST PROVISO TO SECTION 2(15) OF THE ACT. THAT IS NOT A GROUND SPECIFIED IN THE STATUTE FOR CANCELLATION OF THE REGISTRATION. IN FACT, SUB - SECTION(8) TO SECTION 13 WHICH IS INTRODUCED BY FINANCIAL ACT, 2012 WHICH CAME INTO EFFECT FROM 1.4.2009 CATEGORICALLY PROVIDES THAT, NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OR ANY RECEIPT THERE OF. IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE 15 OF SECTION 2 BECOMES APPLICABLE IN THE CASE OF SUCH PERSON IN THE SAID PREVIOUS YEAR, THE STATUTE HAS PROTECTED THE INTEREST OF REVENUE. NOT WITHSTANDING THE FACT THAT THE ASSESSEE IS CONFERRED REGISTRATION UNDER SECTION 12A OF THE ACT, UNLESS THE ASSES SEE FALLS WITHIN SECTION 2(15) OF THE ACT, EXCLUDING THE FIRST PROVISO, THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF EXEMPTION FROM THE TAX. IF THE CASE OF THE ASSESSEE FALLS WITH FIRST PROVISO TO SECTION 2(15) OF THE ACT, THE BENEFIT OF REGISTRATI ON WHICH FLOW FROM SECTION 12A OF THE ACT IS NOT AVAILABLE. ANYHOW, THAT IS A MATTER TO BE CONSIDERED BY THE ASSESSING AUTHORITY. BUT ON THAT GROUND, REGISTRATION CANNOT BE CANCELLED, WHICH IS PRECISELY THE TRIBUNAL HAS HELD. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT. THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE FIND THAT THE ASSESSEE HEREIN STANDS ON A SIMILAR FOOTING AS KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD (SUPRA). THEREFORE, THE V IEW TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAID CASE WILL APPLY HERE ALSO. IF THE ASSESSEE FALLS WITHIN THE FIRST PROVISO TO SECTION 2(15) OF THE ACT, THE BENEFIT OF REGISTRATION WHICH FLOW FROM SEC.12A OF THE ACT, WOULD NOT BE AVAILABLE TO IT. HOWEVER, AS NOTED BY THEIR LORDSHIPS, THIS WAS A MATTER TO BE CONSIDERED BY THE ASSESSING AUTHORITY AND NOT A GROUND FOR CANCELLATION OF REGISTRATION. WE HAVE, THEREFORE, NO HESITATION TO SET ASIDE THE ORDER OF THE LD.DIT(E). 5. APPEAL OF THE ASSESSEE STANDS ALLOWED. 18 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 HENCE , WE ARE OF THE CONSIDERED VIEW, THAT THE ABOVE ORDER OF THE TRIBUNAL WAS NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF HEARING IN APPELLATE PROCEEDING. T HE CO - ORDINATE BENCH OF TRIBUNAL HAS SET ASIDE THE ORDER OF DIT (EXEMPTION S) AND THE AND ALL OWED THE ASSESSEE APPEAL . WE ARE OF THE OPINION THAT THE DECISION BASED ON THE GRANTING OF REGISTRATION UNDER SECTION 12A OF THE ACT IS CRUCIAL A ND WHEREAS THE CIT (APPEALS) HAS CONFIRMED THE ACTION OF ASSESSING OFFICER, THOUGH REGIST RATION U/SEC 12A OF THE ACT IS PENDING BEFORE THE TRIBUNAL. WE FOUND THE CIT(APPEALS) HAS PASSED THE ORDER ON 25.2.2014 , BUT THE CO - ORDINATE BENCH OF TRIBUNAL IN ITA NO.12/BANG/2012 SETTING ASIDE THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA OF TH E ACT BY DIT (EXEMPTIONS) WAS PASSED ON 10.4.2015. HENCE THE ASSESSEE COULD NOT GET THE ORDER ON HAND AT THE TIME OF HEARIN G BEFORE THE CIT(A) . WE CONSIDERING THE FACTS, CIRCUMSTANCES , SUBMISSIONS AND THE DECISION OF THE CO - ORDINATE BENCH IN SETTING A SIDE THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA OF THE ACT ARE OF THE OPINION THAT THE DECISION MAKING HAS TO BE CONSIDERED AFRESH BASED ON THE REGISTRATION U/SEC12AOF THE ACT. . ACCORD INGLY, WE SET - ASIDE THE ORDER OF CIT(A) AND TO MEET THE EN DS OF JUSTICE , R ESTORE THIS ISSUE TO THE FILE OF CIT(APPEALS) TO ADJUDICATE AFRESH CONSIDERING THE REGISTRATION UNDER SECTION 12AA OF THE ACT AVAILABLE TO THE A SSESSEE AND PASS R EASONED AND SPEAKIN G ORDER. FURTHER THE ASSESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF 19 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 HEARING AND SHALL CO - OPERATE FOR EARLY DISPOSAL OF THE APPEAL AND ALLOW THE GROUNDS OF APPEAL OF ASSESSEE FOR STATISTICAL PURPOSES. 6. THE REVENUE HAS FILED APPEAL ITA NO.600/BANG/2014. WE FIND THE DECISION IN ITA NO.60 6 /BANG/2014 IS APPLICABLE TO THIS APPEAL . HENCE THE DISPUTED ISSUES IN THE REVENUE APPEAL ARE ALSO RESTORED TO THE FILE OF CIT(APPEALS) FOR ADJUDICATION AFRESH AND ALLOW GROUNDS OF APPEAL OF REVENUE FOR STATISTICAL PURPOSES. 7. SIMILARLY, THE ASSESSEE APPEAL ITA NO.742/BANG/2015 AND REVENUE APPEAL ITA NO936/BANG/2015 FILED AGAI NST THE ORDER GIVING EFFECT TO THE ORDER OF CIT(A) ORDER DT.19.03.2015 AND WE FOUND THE CIT(APPEALS) HAS PASSED THE ORDER, WHEN THE APPEAL AGAINST CANCELLATION OF REGISTRATION UN DER SE CTION 12AA OF THE ACT WAS PENDING BEFORE THE CO - ORDINATE BENCH OF THE TRIBUNAL . WE HAVE TAKEN A DECISION IN THE APPEAL NO.600/BANG /2014 IN R ESTORING TO THE CIT(APPEALS) TO ADJUDICATE AFRESH CONSIDERING THE REGISTRATION U/SEC12A OF THE ACT. SINCE THE ORDER GIVING EFFECT IS CONSEQUENT TO THE DECISION OF CIT(APPEALS) ORDER DT.25.2.2014, WE CONSIDER IT PROPER AND APPROPRIATE TO RESTORE THIS APPEAL ALSO TO THE FILE OF CIT(APPEALS) TO ADJ U DIC ATE AS DIRECTED IN ITA NO.600/BANG/2014. SINCE THE ASSESSEES APPEAL IS RESTORED TO THE FILE OF CIT(APPEALS), THE REVENUES APPEAL NO.936/BANG/2015 IS ALSO RESTORED TO THE FILE OF CIT(APPEALS) FOR FRESH ADJUDICATION AND ALLOW THE GROUNDS OF APPEAL OF ASSESSEE AND REVENUE FOR STATISTICAL PURPOSES. 20 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 9. SIMILARLY, FOR THE ASSESSMENT YEAR 2011 - 12 THE ASSESSEE IN ITA NO93 8 /BANG/2015 AND REVENUE IN ITANO 937/BANG/2015 HAVE FILED APPEAL AGAINST THE ORDER OF CIT(APPEALS) DT.13.03.2015 PASSED UNDER SECTION 143(3) AND 250 OF THE INCOME TAX ACT, 1961. E VEN IN THIS ASST YEAR , THE CIT(APPEALS) RELIED ON THE EARLIER ORDER OF CIT(APPEA LS) DT.25.2.2014 . WE HAVE TAKEN A DECISION IN THE APPEAL NO.600/BANG /2014 IN R ESTORING TO THE CIT(APPEALS) TO ADJUDICATE AFRESH CONSIDERING THE REGISTRATION U/SEC12A OF THE A CT. WE CONSIDER IT PROPER AND APPROPRIATE TO RESTORE THE ASSESSEE APPEAL ITANO938/BANG/2015 ALSO TO THE FILE OF CIT(APPEALS) TO ADJ U DIC ATE AS DIRECTED IN ITA NO.600/BANG/2014. SINCE THE ASSESSEES APPEAL IS RESTORED TO THE FILE OF CIT(APPEALS), THE REVEN UES APPEAL NO.937 /BANG/2015 IS ALSO RESTORED TO THE FILE OF CIT(APPEALS) FOR FRESH ADJUDICATION AND ALLOW THE GROUNDS OF APPEAL OF ASSESSEE AND REVENUE FOR STATISTICAL PURPOSES. 12. IN THE RESULT, TH E ASSESSEE'S APPEALS IN ITA NOS.606, 742/BANG/20 14 AND 938/BANG/2015 AND R EVENUES APPEALS IN ITA NOS. 600/BANG/2014 AND 936 & 937/BANG/2015 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 T H JAN., 20 20 . S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 7 .01 . 20 20. *REDDY GP 21 ITA NOS.600, 606 & 742/BANG/2014 & 936 TO 938/BANG/2015 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE