The Improvement Trust, Sangrur V. ITO, Sangrur

ITA 987/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95743 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Business income; Charitable institution
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 987/CHD/2014 ASSESSMENT YEAR:2010-11 THE IMPROVEMENT TRUST VS. THE ITO KAULA PARK, SUNAM SANGRUR HQ SANGRUR PAN NO. AAATI6009F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. Y.K. SUD RESPONDENT BY : MS. RAJINDER KAUR DATE OF HEARING : 08/10/2015 DATE OF PRONOUNCEMENT : 14/12/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF HONBLE CIT(A), PATIALA, DATED 26-08-14. THE ASSESSEE HAS T AKEN THE FOLLOWING GROUNDS OF APPEALS:- 1. THAT THE CIT WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN DENYING THE EXEMPTION TO THE TRUST U/S 11. BOTH OF THEM FAI LED TO APPRECIATE THAT AFTER GRANTING OF THE REGISTRATION TO THE TRUST U/S 12AA BY THE CIT, ASSESSMENT COULD ONLY BE FRAMED IN THE STATUS OF REGISTERED CHARITABLE TR UST AND NOT ARTIFICIAL JURISDICTIONAL PERSON. 2. THAT BOTH CIT AND AO FAILED TO APPRECIATE THAT A FTER GRANTING OF THE REGISTRATION U/S 12AA BY THE CIT BOTH OF THEM COULD NOT INTERFERE INTO THE OBJECTS OF THE TRUST, THE AO COULD ONLY EXAMINE THE APPLICA TION OF THE INCOME IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. 3. THAT BOTH CIT(A) AND AO BY COMMENTING UPON THE O BJECTS OF THE TRUST THAT THE SAME WERE NOT CHARITABLE IN NATURE NEGATED THE JUDGMENT OF THE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE C ASE OF IMPROVEMENT TRUST MOGA WHEREIN THE HONBLE HIGH COURT HAS HELD THE OB JECTS OF THE IMPROVEMENT TRUST AS CHARITABLE AND OF GENERAL PUBLIC UTILITY A ND APPROVED THE ORDER OF THE TRIBUNAL FOR GRANTING REGISTRATION U/S 12A. 4. THAT BOTH CIT(A) AND AO WERE NOT JUSTIFIED IN HO LDING THAT THE TRUST WAS CARRYING ON THE BUSINESS IN VIEW OF THE AMENDED PRO VISIONS OF SECTION 2(15). THEY FAILED TO APPRECIATE THAT DEVELOPMENT AND PROVIDING OF HOUSING WAS THE OBJECT OF THE TRUST WHICH WAS FOR THE GENERAL WELFARE OF T HE PUBLIC AND RECOGNIZED BY THE CIT WHILE GRANTING REGISTRATION AND APPROVED BY THE HIGH COURT. 2 5. THAT THE CIT(A) HAS WRONGLY UPHELD THE ACTION OF THE AO IN TREATING THE SURPLUS OF RS. 3,36,90,540/- AS INCOME OF THE TRUST AGAINST THE NIL INCOME RETURNED AS PER THE PROVISION OF SECTION 11 & 12. 6. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS IN C ASE BUSINESS INCOME WAS TO BE WORKED OUT ALL THE EXPENSE SHOULD HAVE BEEN S ET OFF AGAINST THE INCOME. 2. AT THE OUTSET IT MAY BE STATED THAT THERE WAS A DELAY OF 2 DAYS IN FILING THE APPEAL. AN APPLICATION FOR CONDONING THE DELAY WAS FILED BEFORE US, IN WHICH IT WAS STATED, THAT THE DELAY WAS ON ACCOUNT OF THE IN ADVERTENT MISTAKE OF THE PEON OF THE ASSESSEE TRUST, WHO DEPOSITED THE APPEA L IN THE INCOME TAX OFFICE INSTEAD OF THE ASSISTANT REGISTRAR, ITAT AND THE MI STAKE WAS DISCOVERED BY THE COUNSEL FOR THE ASSESSEE ON 09/11/2014 WHEN THEY WE NT TO INQUIRE ABOUT THE DATE OF FIXATION OF APPEAL. THEREFORE, IMMEDIATELY THEREAFTER THE APPEAL WAS TAKEN BACK FROM THE OFFICE OF THE DCIT AND FILED WI TH THE REGISTRY OF ITAT ON 11/11/2014, RESULTING IN A DELAY OF 2 DAYS IN FILIN G THE APPEAL. THE LD. COUNSEL ALSO PLACED COPY OF THE RECEIPT, RECEIVED FROM THE INCOME TAX OFFICE FOR FILING THE FORM NO. 36, DATED 26/10/2014. WE HAVE GONE THR OUGH THE SUBMISSIONS OF THE LD. COUNSEL AND FIND MERIT IN THE SAME AND AGRE E THAT THE DELAY WAS ON ACCOUNT OF INADVERTENT MISTAKE ON THE PART OF THE P EON OF THE ASSESSEE TRUST. WE THEREFORE CONDONE THE DELAY IN FILING THE APPEAL . 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE AS SESEE IS A TRUST CREATED BY THE STATE GOVERNMENT UNDER THE PUNJAB TOWN IMPROVEM ENT ACT, 1922, FOR THE PURPOSE OF PLANNING, DEVELOPMENT AND IMPROVEMENT OF CITIES. THE TRUST HAD BEEN GRANTED REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO FOUND THAT T HE ASSESSEE WAS CARRYING ON BUSINESS OF SALE AND PURCHASE OF RESIDENTIAL HOU SES, MULTI STORIED HOUSES AND COMMERCIAL PLOTS BY WAY OF AUCTION IN A SYSTEMATIC MANNER AND HAD EARNED HUGE PROFITS. THE AO, ASKED THE ASSESSEE TO EXPLAIN HOW THE AMENDED PROVISION OF SECTION 2(15) WOULD NOT APPLY IN THE PRESENT CAS E TO DENY EXEMPTION U/S 11 TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT ITS PRIMA RY OBJECT IS IMPROVEMENT OF 3 TOWNS, WHICH IS AN OBJECT OF GENERAL PUBLIC UTILITY AND NOT MAKING PROFIT. THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT SINCE THE ASSESSEE WAS SELLING RESIDENTIAL PLOTS BY AUCTION AT HIGH RATES AND NOT BY DRAW OF LOTS, CONTRARY TO THE RULE PRESCRIBED BY THE PUNJAB TOWN IMPROVEME NT RULES 1983 AND THE ASSESSEE HAD EARNED HUGE INTEREST INCOME AND WAS AL SO CHARGING HUGE FEES IN THE FORM OF LATE CONSTRUCTION FEES, THE ASSESSEE WA S PRIMARILY INDULGING IN BUSINESS ACTIVITY AND ITS MAIN OBJECTIVE WAS MAKING HUGE PROFITS AND NOT ADVANCING ANY OTHER OBJECT OF GENERAL PUBLIC UTILIT Y. HE THEREFORE HELD THAT IN VIEW OF THE AMENDMENT IN SECTION 2(15) THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. THE AO FURTH ER HELD THAT THE OMISSION OF SECTION 10(20A) SHOWED THE INTENTION OF THE LEGISLA TURE IN NOT GRANTING EXEMPTION TO ANY AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FO R HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVE MENT OF CITY, TOWNS AND VILLAGES. THE AO THEREFORE DENIED THE ASSESSEE EXEM PTION UNDER SECTION 11 OF THE ACT AND BROUGHT TO TAX INCOME OVER EXPENDITURE AMOUNTING TO RS. 3,36,90,540/-. THE AO ALSO TOOK THE STATUS OF THE A SSESSEE AS ARTIFICIAL JUDICIAL PERSON AND NOT AOP AS CLAIMED, FOLLOWING THE JUDGM ENT OF HONBLE ITAT CHANDIGARH BENCH, IN ITA NO. 545/CHD/2009 DT. 29/01 /2010 IN THE CASE OF IMPROVEMENT TRUST PATIALA. 4. THE MATTER WAS TAKEN-UP IN APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS ORDER DATED 26-08-14 UPHELD THE ORDER OF THE A.O. D ENYING THE EXEMPTION CLAIMED U/S 11 OF THE ACT, BY HOLDING AS FOLLOWS: LOOKING INTO THE ENTIRETY OF THE FACTS OF THE CASE I HAVE THE OPINION THAT THE APPELLANT IS ENGAGED IN AN ACTIVITY IN THE CASE OF TRADE, COMMERCE AND BUSINESS AND NOT FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY U/S 2(15) OF THE INCOME TAX ACT, 1961 AND THEREFORE THE ACTION TAKEN BY THE A.O. IS CONFIRMED ACCORDINGLY AND THIS GROUND OF APPEAL IS HERE BY DISMISSED. 5. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PR ESENT APPEAL BEFORE US. 4 6. GROUND NO. 2, 3, 4 & 5 RAISED BY THE ASSESSEE AR E AGAINST THE DENIAL OF EXEMPTION U/S 11 OF THE ACT. 7. BEFORE US LD. A.R STATED THAT THE ASSESSEES CASE WAS COVERED BY THE ORDER OF AMRITSAR BENCH OF THE ITAT IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST VS. ITO, IN ITA NO. 496/ASR/2013 DATED 10-09-2015. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRES ENTATIVE OF BOTH THE PARTIES AND PERUSED DOCUMENTS PLACED BEFORE US AND THE ORDER OF THE AUTHORITIES BELOW. 9. WE FIND THAT IN THE CASE OF HOSHIARPUR IMPROVEME NT TRUST VS. ITO, ITA NO. 496/ASR/2013 RELIED UPON BY THE ASSESSEE, THE ASSES SEE WAS AN IMPROVEMENT TRUST CONSTITUTED UNDER THE PUNJAB TOWN IMPROVEMENT ACT (PTIA), 1922, BY THE GOVERNMENT OF PUNJAB WITH THE PRINCIPAL OBJECTIVE O F BRINGING ABOUT IMPROVEMENT IN TOWNS BY THE MEANS SET OUT UNDER SEC TION 22 TO 26 OF THE PITA. THE HONBLE AMRITSAR BENCH IN THE IMPUGNED CASE DEA LT WITH THE ISSUE WHETHER THE MANNER IN WHICH THE ASSESSEE TRUST WAS CONDUCTI NG ITS ACTIVITIES CONSTITUTED ADVANCEMENT OF GENERAL PUBLIC UTILITY AS SET OUT IN SECTION 2(15) AND FURTHER WHETHER THE WORK CEASED TO BE FOR CHARITABLE PURPOS E DUE TO THE FIRST PROVISO TO SECTION 2(15) WHICH LAYS DOWN THAT THE ADVANCEMEN T OF ANY OTHER OBJECT OF 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, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF T HE INCOME FROM SUCH ACTIVITY. AS A COROLLARY THE HONBLE BENCH ADJUDICATED UPON T HE ISSUE WHETHER THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE INCOME TAX ACT. SINCE IN THE PRESENT CASE THE ASSESSEE TRUST IS ALS O AN IMPROVEMENT TRUST FORMED UNDER THE PUNJAB TOWN IMPROVEMENT ACT 1922 FOR THE PURPOSE OF IMPROVEMENT 5 OF THE CITIES AND THE ISSUE BEFORE US IS THE CLAIM OF EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT, WE FIND THAT THE CASE OF HOSHIARPUR IMPROVEMENT TRUST IS IDENTICAL TO THE ASSESSEES CASE AND THE RATIO PROPO UNDED THEREIN WOULD SQUARELY APPLY TO THE ASSESSEES CASE. ADVERTING TO THE DECISION IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST(SUPRA) WE FIND THAT THE HONBLE BENCH INTERPRETED THE PROVISI ON OF SECTION 2 (15) IN DETAIL AND HELD AT PARA 17 OF ITS ORDER THAT WHERE ACTIVIT IES IN THE NATURE OF TRADE/ COMMERCE/BUSINESS ARE INCIDENTAL TO THE MAIN OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY, THE PROVISO TO SECTION 2(15 ) IS NOT ATTRACTED. THE RELEVANT PARA 17 OF THE ORDER, IS REPRODUCED HEREUNDER: 17. AS LONG AS THE OBJECT OF GENERAL PUBLIC UTILIT Y IS NOT MERELY A MASK TO HIDE TRUE PURPOSE OR RENDERING OF ANY SERVICE IN RELATIO N THERETO, AND WHERE SUCH SERVICES ARE BEING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF GENERAL PUBLIC UTILITY, THE CARRYING ON OF BONAFIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC U TILITY CANNOT BE HIT BY THE PROVISO TO S. 2(15) THEREAFTER THE HONBLE BENCH APPLIED THE AFORESTATE D PROPOSITION TO THE FACTS OF THE CASE AND HELD THAT THE PRIMARY OBJECTIVE OF THE ASSESSEE TRUST WAS ADVANCEMENT OF GENERAL PUBLIC UTILITY AND THE ACTIV ITIES IN THE NATURE OF BUSINESS CARRIED OUT BY IT WERE PRIMARILY TO SERVE THIS PURP OSE. THE HONBLE BENCH HELD THAT THE PROFIT MADE BY THE ASSESSEE TRUST DID NOT OBLITERATE THE OVERALL OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY. THUS IT HELD AT PARA 31 & 32 OF ITS ORDER THAT THE BUSINESS ACTIVITIES CARRIED OUT BY THE ASS ESSEE TRUST WERE NOT COVERED UNDER THE PROVISO TO SECTION 2(15) AND THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE ACT. THE RELEVANT PARA 31 & 32 OF THE ORDER ARE REPRODUCED AS FOLLOWS: 31. CLEARLY, THEREFORE, SO FAR AS PRE INSERTION OF EXPLANATIONS TO SECTION 2 (15), I.E. PRIOR TO 1ST APRIL 2009, IS CONCERNED, THE STAND TA KEN BY THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. ASSUMING THAT ALL THE A LLEGATIONS OF THE ASSESSING OFFICER, WITH RESPECT TO PRESENCE TO PROFIT MOTIVE IN ACTIVITIES OF THE ASSESSEE ARE CORRECT, SINCE THESE ACTIVITIES WERE CARRIED OUT WI TH THE LARGER AND PREDOMINANT OBJECTIVE OF GENERAL PUBLIC UTILITY. IT IS ONLY WHE N, TO USE THE WORDS OF THE CBDT CIRCULAR CITED EARLIER IN THIS ORDER AND THE BENEFI CIAL IMPACT OF WHICH HAS THE BINDING FORCE ON THE FIELD AUTHORITIES UNDER SECTIO N 119 OF THE ACT, THE ASSESSING 6 OFFICER FINDS THAT THE INCOME IS INCOME OF ANY OTH ER BUSINESS WHICH IS NOT INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE TRUST OR INSTITUTION THAT THE SUCH AN INCOME WILL NOT BE EXEMPT FROM TAX. THERE IS NO FINDING TO THAT EFFECT BY ANY OF THE AUTHORITY BELOW. IN ANY CASE, IT IS N OT EVEN THE CASE OF REVENUE AUTHORITIES THAT THE ACTIVITIES OF THE TRUSTS DO NO T SERVE THE OBJECTS OF THE GENERAL PUBLIC UTILITY BUT THE CASE IS CONFINED TO THE STAN D THAT THESE ACTIVITIES HAVE BEEN CARRIED OUT IN SUCH A MANNER AS TO MAKE PROFIT AND NO ACTIVITIES DIRECTLY OF ANY GENERAL PUBLIC UTILITY ARE CARRIED OUT. THE REGISTR ATION GRANTED TO THE ASSESSEE EVIDENCES THAT THE OBJECTS OF THE ASSESSEE TRUST WE RE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, AND THERE IS NOTHING TO DEM ONSTRATE ANY PARADIGM SHIFT FROM THIS FUNDAMENTAL POSITION. THE ALLEGATION IS ONLY O F THE PROFIT MAKING BUT THAT DOES NOT OBLITERATE THE OVERALL OBJECTS OF GENERAL PUBLI C UTILITY. AS REGARDS THE MAINTENANCE OF THE SEPARATE BOOKS OF ACCOUNTS FOR T HE BUSINESS ACTIVITIES PURSUED BY THE ASSESSEE TRUST, SINCE ALL THE ACTIVI TIES OF THE ASSESSEE TRUST ARE SAID TO BE OF THE BUSINESS NATURE, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE TRUST MEET THIS REQUIREMENT AS WELL. OF COURSE, WE WILL DEAL WITH THE ISSUE OF ACTIVITIES BEING IN THE NATURE OF PROFIT MAKING AC TIVITIES A LITTLE LATER, BUT, SUFFICE TO SAY, THAT ON THE ADMITTED FACTS OF THIS CASE, SO FA R PERIOD PRIOR TO 1ST APRIL 2009 IS CONCERNED AND FOR THE REASONS SET OUT ABOVE, THE BE NEFIT OF SECTION 11 READ WITH SECTION 2(15) COULD NOT HAVE BEEN DECLINED AT ALL. 32. TURNING ONCE AGAIN TO THE AMENDMENTS BROUGHT ON THE STATUE WITH EFFECT FROM 1ST APRIL 2009, WE HAVE TO UNDERSTAND THAT THE RE ARE THE TWO MUTUALLY EXCLUSIVE SITUATIONS IN WHICH BUSINESS ACTIVITIES A RE CARRIED OUT BY THE ASSESSE TRUST ONE, IN WHICH THE OBJECT OF GENERAL PUBLIC UTIL ITY WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRADE, COM MERCE, OR BUSINESS ETC [REFERRED TO IN THE CBDT CIRCULAR NO. 11 DATED 19TH DECEMBER 2008 ISSUED AT THE POINT OF TIME WHEN FIRST PROVISO TO SECTION 2(15) W AS INTRODUCED]; AND SECOND, IN WHICH ANY ACTIVITIES IN THE NATURE OF TRADE, COMMER CE OR BUSINESS ETC ARE UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, [INSERTION OF NEW PROVISO TO REPLACE FIRST AND SECOND PROVISO TO SECTION 2(15)- EFFECTIVE 1ST APRI L 2016 I.E. ASSESSMENT YEAR 2016- 17]. AS FOR THE FIRST CATEGORY, POST 1ST APRIL 2009 AMENDMENT, THIS CATEGORY CANNOT BE TREATED AS COVERED BY SECTION 2(15) BUT THEN THA TS NOT THE CASE BEFORE US. IT IS NOT, AND IT CANNOT BE, THE CASE THAT THE GOVERNM ENT FORMED THESE TRUSTS BY LEGISLATING THE PUNJAB TOWNS IMPROVEMENT ACT 1922 B ECAUSE IT WANTED TO CARRY ON THE BUSINESS AS COLONIZER OR DEVELOPER. THEREFOR E, BY NO STRETCH OF LOGIC, FORMATION OF TRUSTS CAN BE SAID TO A MASK OR DEVICE TO HIDE THE TRUE PURPOSE OF THE DOING BUSINESS. THE CASE OF THE REVENUE AT BEST IS THAT THE MANNER IN WHICH THE ACTIVITIES ARE CARRIED OUT IS OF A PROFIT SEEKI NG ENTITY THAT A BUSINESS INHERENTLY IS. IN OTHER WORDS, THUS, THE CASE OF THE REVENUE I S THAT THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE AND BUSINESS ARE CARRIED OUT FOR ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY. THIS SITUATION AT BEST FALL S IN THE SECOND CATEGORY. HOWEVER, THESE CASES, FOR THE DETAILED REASONS SET OUT ABOVE , THE EXCLUSION OF THESE CASES FROM SECTION 2(15) IS ONLY EFFECTIVE 1ST APRIL 2016 , I.E. ASSESSMENT YEAR 2016-17. THE LAW IS WELL SETTLED BY A FIVE JUDGE BENCH OF HONBL E SUPREME COURT, IN THE CASE OF VATIKA TOWNSHIP PVT LTD (SUPRA), THAT, FOLLOWING TH E MAXIM LEX PROSPICIT NON RESPICI, THE LAW, PARTICULARLY WITH RESPECT TO A REQUIREMENT WHICH IS MORE ONEROUS ON THE ASSESSEE, CANNOT BE TREATED AS RETROSPECTIVE IN EFF ECT UNLESS IT IS SPECIFICALLY LEGISLATED TO BE SO. IN OUR CONSIDERED VIEW, THEREF ORE, THIS AMENDMENT CANNOT BE TREATED AS CLARIFICATORY OR RETROSPECTIVE IN EFFECT . IN VIEW OF THESE DISCUSSIONS, EVEN POST INSERTION OF PROVISO TO SECTION2(15) BUT BEFORE 1ST APRIL 2016, WHEN BUSINESS ACTIVITIES ARE CARRIED BY THE ASSESSEE TRU ST IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY, THE BENEFIT OF SECTION 11 READ WITH SECTION 2 (15) CANNOT BE DECLINED. NOTHING, THEREFORE, TURNS ON THE ASSESSEE CARRYING OUT, EVEN IF THAT BE ACTUALLY SO, ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC AS LONG AS THESE ACTIVITIES ARE CARRIED OUT IN THE COURSE OF ACTUAL CARRYING OUT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PLANNED DEVEL OPMENT OF CITIES AND TOWNS IS AN OBJECT OF GENERAL PUBLIC UTILITY, AND THAT IS AN OBJECT CONSISTENTLY FOLLOWED BY THE ASSESSEE IN ALL ITS ACTIVITIES. FOR THIS SHORT REASON ALONE, THE STAND OF THE AUTHORITIES BELOW MUST BE HELD TO BE UNSUSTAINABLE IN LAW. 7 THE HONBLE BENCH FURTHER HELD AT PARA 33, 35 AND 3 6, OF ITS ORDER THAT PROFIT MAKING WAS NOT THE MAIN OBJECT OF THE ASSESSEE TRUS T. 33. WE MUST, HOWEVER, ALSO DEAL WITH THE FUNDAMENTA L ALLEGATION OF THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS SOLD RESIDENTIAL AND COMMERCIAL UNITS AND RESIDENTIAL AND COMMERCIAL LANDS JUST TO EARN PROF IT 35. WHILE DEALING WITH THE PROFIT MOTIVE ALLEGATION OF THE REVENUE AUTHORITIES, IT IS ESSENTIAL TO APPRECIATE THE DIFFERENCE THAT PROFIT ON SALE DOES NOT ESSENTIALLY AND NECESSARILY IMPLY PROFIT MOTIVE IN ACTIVITIES OF TH E ASSESSEE TRUST. WHAT I S IMPORTANT IS THE MOTIVE OR PREDOMINANT OBJECT OF THE ACTIVITI ES. AS WE DO SO, WE MAY ONLY MAKE A NOTE OF THE FOLLOWING OBSERVATIONS MADE BY A COORDINATE BENCH DECISION IN THE CASE OF DEVKI DEVI FOUNDATION VS DIT [(2015) 56 TAXMANN.COM 56 (DELHI)]: 29THE SOUL OF CHARITY IS BENEVOLENCE AND GENEROSITY TOWARDS OTHERS AND THE COMMUNITY AT LARGE. OF COURS E, IT IS IMPORTANT AS TO WHAT ARE THE ACTIVITIES OF A CHARITABLE INSTITUTION BUT WHAT IS EVEN MORE IMPORTANT IS WHAT IS THE PREDOMINANT MOTIVATION FOR SUCH ACTIVIT IES. NO ACTIVITY, BY ITSELF, COULD BE CHARITABLE IN NATURE WHEN IT IS DOMINATED AND TR IGGERED BY ECONOMIC GREED. THERE IS NO DIFFERENCE IN WHAT A SOLDIER AND A MERC ENARY DOES, BOTH USE BULLETS TO DEFEND THEIR INTERESTS, BUT WHILE A SOLDIER DOES IT OUT OF PATRIOTISM, A MERCENARY DOES IT FOR MONETARY GAIN. THE ACTION IS THE SAME, AND YET MOTIVATION FOR THE ACTIONS ARE SO MATERIALLY DIFFERENT THAT THE CHARAC TER OF ACTIVITY IS ALTOGETHER CHANGED. CLEARLY, UNDERLYING MOTIVE AND TRIGGER FOR DOING WHAT A PERSON DOES IS, IS IMPORTANT FOR DETERMINING WHETHER SUCH AN ACTION IS IN THE COURSE OF BUSINESS OR CHARITY. WHAT IS REALLY, THEREFORE, REQUIRED TO BE CAREFULLY EXAMINED, IN ORDER TO FIND WHETHER AN ACT OF THE INSTITUTION IS CHARITABL E OR NOT, IS NOT ONLY TO ASSESS THE WORK BEING DONE BY THE INSTITUTIONS, WHICH CLAIM TO BE PURSUING CHARITABLE ACTIVITIES, BUT ALSO THE ECONOMIC DYNAMICS AND MOTI VATIONS OF SUCH ACTIVITIES. 36. LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE COMMERCIAL PLOTS AND UNITS ARE AUCTIONED OFF WHICH SHOWS THAT THE IDEA IS TO MAKE MAXIMUM PROFITS BUT WHAT HE CLEARLY OVERLOOKS IS THE FACT T HAT SINCE IT IS NOT A DESIRABLE STATE OF AFFAIRS FOR THE STATE TO SUBSIDIZE BUSINESSES, A ND TO ENSURE HIGHEST DEGREE OF TRANSPARENCY IN MAXIMISING RETURNS FROM PUBLIC ASSE TS, COMPETITIVE BIDDING FOR COMMERCIAL UNITS IS A SAFE OPTION, AND THAT THE USE OF BIDDING PROCESS IS JUSTIFIED FOR THE LARGER CAUSES. THE BIDDING PROCESS ENSURES TRANSPARENCY IN FUNCTIONING OF THE IMPROVEMENT TRUSTS AND THAT, BY ITSELF, DOES NO T MAKE THE FUNCTIONING OF THE IMPROVEMENT TRUST A COMMERCIAL VENTURE. IT IS ALSO IMPORTANT THAT THIS USE OF BIDDING PROCESS IS ONLY IN THE CONTEXT OF COMMERCIA L UNITS ETC. THE DEVELOPMENT OF COMMERCIAL AREAS IS IN THE INTEREST OF PLANNED G ROWTH OF AN AREA AND WHEN SUCH COMMERCIAL AREAS DEVELOP, ALL THE STAKEHOLDERS IN THE DEVELOPMENT OF THAT AREA BENEFIT. IN ORDER OF THIS BENEFIT TO THE COMMO N CAUSE, IT IS NOT NECESSARY THAT THE BUSINESSMEN, BUYING SUCH UNITS, MUST ALSO BENEF IT. THE DENIAL OF ANY ADVANTAGE, AT THE COST OF GENERAL PUBLIC, TO THE BU SINESS ENTITIES BUYING THE COMMERCIAL AREAS, IN OUR CONSIDERED VIEW, DOES NOT AMOUNT TO AN DEFEATING AN OBJECT OF GENERAL PUBLIC UTILITY. IN THIS CONTEXT, IT IS IMPORTANT TO UNDERSTAND THE BENEFIT FROM DEVELOPING COMMERCIAL AREAS, WHICH IS FOR PUBLIC GOOD, AND BENEFIT TO THE BUSINESS PERSONS IN BUYING THESE UNITS FROM THE ASSESSEE TRUST, WHICH CAN ONLY BE FOR THE GOOD OF BENEFIT OF THESE ENTREPRENE URS. AS FOR THE SALE OF RESIDENTIAL UNITS, IT IS AN ADMITTED POSITION THAT IN TERMS OF THE PUNJAB TOWN IMPROVEMENT (UTILIZATION OF LAND AND ALLOTMENT OF P LOTS) RULES, 1983, THERE IS A FORMULAE ON THE BASIS OF WHICH THE PRICE IS WORKED OUT. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THAT ASPECT BUT HE ALLEGES PROFIT MOTIVE EMBEDDED IN THIS FORMULA AS SHOWN BY ADJUSTMENTS FO R (A) CONSERVANCY CHANGES FOR 5 YEARS @ 10% PER MONTH PER ACRE; AND (B) PROVI SION FOR UNFORESEEN CHARGES @ 15% OF TOTAL RESERVE PRICE. FIRSTLY, EVEN IF THIS A LLEGATION ABOUT PRESENCE OF THE TWO ELEMENTS ONLY TO MAXIMIZE THE PROFIT BE TAKEN AS CO RRECT, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THIS IS NOT THE PRESENCE OF PROF IT ELEMENT IN THE ACTIVITIES WHICH VITIATES CHARITABLE CHARACTER OF THE ACTIVITIES BUT IT IS THE ABSENCE OF RESTRICTIONS ON MAKING PROFITS WHICH VITIATES THE CHARITABLE CHARAC TER OF THE ACTIVITIES. IN THE INDIAN CHAMBER OF COMMERCE (SUPRA), WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND REFERRED TO IN CBDT INSTRUCTI ON NO. 1024 (SUPRA), IT HAS BEEN STATED THUS: ORDINARILY PROFIT MOTIVE IS A NORMAL INCIDENT OF BUSINESS ACTIVITY AND IF THE ACTIVITY OF A TRUST CONSISTS OF CARRYING ON OF A BUSINESS AND THERE ARE NO 8 RESTRICTIONS ON ITS MAKING PROFIT, THE COURT WOULD BE WELL JUSTIFIED IN ASSUMING IN THE ABSENCE OF SOME INDICATION TO THE CONTRARY THAT THE OBJECT OF THE TRUST INVOLVES THE CARRYING ON OF AN ACTIVITY FOR PROFIT.. THAT A PART, MERE PRESENCE OF THESE TWO ITEMS DOES NOT SHOW THAT THE UNDERLYING OBJECT OF I NCLUDING THESE TWO ITEMS IN THE FORMULA WAS PROFIT MAXIMISATION. THE INCLUSION FOR PROVISION FOR UNFORESEEN CHARGES, IN OUR UNDERSTANDING, IS A FAIR AND CONSER VATIVE APPROACH TO ENSURE THAT THE COSTS INCURRED BY THE ASSESSEE TRUST ARE RECOVE RED FROM THE END BUYERS OF THE RESIDENTIAL UNITS OR LAND. THE ELEMENT OF CHARITY I S NOT IN GIVING AWAY THE RESIDENTIAL UNITS AT SUBSIDIZED OR LOW PRICES BUT IN PURSING TH E OBJECT OF ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY IN PLANNED DEVELOP MENT OF THE ARE IN ACCORDANCE WITH THE POLICIES OF THE STATE GOVERNMENT. THEREAFTER THE HONBLE BENCH CONCLUDED AT PARA 40 O F THE ORDER THAT THE ASSESSEE TRUST WAS ENTITLED TO CLAIM EXEMPTION U/S 11 READ WITH SECTION 2(15) OF THE ACT, AS FOLLOWS : 40. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CO NSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DECLINING T HE BENEFIT OF SECTION 11 READ WITH SECTION 2(15) TO THE ASSESSEE, AND IN HOLDING THAT THE ASSESSEE TRUST WAS NOT COVERED BY ADVANCEMENT OF ANY OBJECT OF GENERAL PUB LIC UTILITY. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOW ANCE OF EXEMPTION OF RS 65,20,690. THE ASSESSE GETS THE RELIEF ACCORDINGLY. GRIEVANCES OF THE ASSESSEE ARE UPHELD. SINCE AS STATED ABOVE THE FACTS IN THE PRESENT CASE ARE IDENTCIAL TO THAT IN THE CASE OF HOSHIARPUR IMPROVEMENT TRUST (SUPRA), RESPE CTFULLY FOLLOWING THE SAME WE HOLD THAT THE ASSESSEE TRUST IS CARRYING OUT CHA RITABLE ACTIVITY OF ADVANCEMENT OF PUBLIC UTILITY AND THE BUSINESS ACTI VITY CARRIED OUT BY IT ARE INCIDENTAL TO THE ATTAINMENT OF ITS MAIN OBJECT AND THUS THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED IN THE ASSESSEES CASE. WE TH EREFORE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961, AND THE SURPLUS OF RS. 3,36,90,540/- EARNED BY THE ASSESSEE CANNOT BE SUBJECTED TO TAX AS INCOME OF THE ASSESSEE. 10. GROUND NO. 2, 3, 4, & 5 RAISED BY THE ASSESSEE ARE THEREFORE ALLOWED. 11. GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST T HE FRAMING OF ASSESSMENT IN THE STATUS OF ARTIFICIAL JURIDICAL PERSON. 12. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURI NG ASSESSMENT PROCEEDINGS THE A.O. CHANGED THE STATUS OF THE ASSESSEE FROM AOP TO ARTIFICIAL JUDICIAL PERSON, FOLLOWING THE DECISIONS OF HONBLE ITAT CHANDIGARH IN ITA NO. 544 AND 545/ 9 CHD/2009, DATED 29-01-2010 IN THE CASE OF IMPROVEME NT TRUST, PATIALA. LD. CIT(A) UPHELD THE ACTION OF THE A.O. 13. BEFORE US THE LD. AR PLEADED THAT SINCE THE ASS ESSEE IS INVOLVED IN CHARITABLE ACTIVITIES IT COULD NOT BE ASSESSED AS A N ARTIFICIAL JURIDICAL PERSON BUT WAS IN FACT AN ASSOCIATION OF PERSONS. LD. DR ON TH E OTHER HAND RELIED UPON THE ORDER OF CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE AUTHORITIES BELOW. 15. IN VIEW OF THE FACT THAT WE HAVE HELD THE ASSES SEE TRUST TO BE INDULGING IN ACTIVITIES WHICH CONSTITUTE ADVANCEMENT OF GENERAL PUBLIC UTILITY AND HENCE CHARITABLE ACTIVITIES AS DEFINED U/S 2(15) OF THE A CT, THE STATUS OF THE ASSESSEE SHALL BE AOP AS SPECIFIED IN SECTION 164(2) OF THE ACT. SECTION 164(2) STATES THAT WHERE INCOME IS DERIVED FROM PROPERTY HELD UNDER TR UST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TAX SHALL BE CHARGED ON THE TAX ABLE INCOME IF ANY IN THE STATUS OF AOP. IN CASE OF DISCRETIONARY TRUST WHICH ARE NOT COVERED U/S 164(2), THE INCOME IS TO BE ASSESSED IN THE STATUS OF INDIVIDUA L. THIS VIEW HAS BEEN UPHELD BY THE HONBLE GUJARAT HI GH COURT IN THE CASE OF CIT VS. DEEPAK FAMILY TRUST NO. 1 AND OTHER 211 ITR 575 WHEREIN IT HAS BEEN HELD AS FOLLOWS: 'THE AMENDMENT EFFECTED BY THE FINANCE ACT, 1980, H AS DONE AWAY WITH THE DEEMING PROVISIONS WHEREBY A TRUST, UNDER S. 164(1) , COULD BE ASSESSED AS THOUGH IT WERE AN AOP. WHERE, HOWEVER, A CASE FALLS UNDER SUB-S. (2) OF S. 164, THE TAX IS CHARGEABLE AS IF THE INCOME TO BE CHARGED WERE THE INCOME OF AN AOP. BUT THE FICTION OF AN AOP AS CONTAINED IN SUB-S. (2) OR, FO R THAT MATTER, SUB-S. (3) OF S. 164 RELATES ONLY TO A CHARITABLE OR PUBLIC RELIGIOUS TR UST BUT NOT TO A DISCRETIONARY PRIVATE TRUST DEALT WITH BY SUB-S. (1) OF S. 164. S EC. 164(1) ONLY LAYS DOWN THE RATE OF TAX APPLICABLE TO A DISCRETIONARY TRUST. IT IS NOT CONCERNED WITH THE MANNER OF COMPUTATION OF TOTAL INCOME. IN FACT, THIS SECTION COMES INTO PLAY ONLY AFTER THE INCOME HAS BEEN COMPUTED IN ACCORDANCE WITH THE OTH ER PROVISIONS OF THE IT ACT, 1961. SINCE THE DETERMINATION OF THE STATUS OF AN ASSESSEE IS A PART OF THE PROCESS OF COMPUTATION OF INCOME, IT IS NECESSARY T O LOOK INTO THE GENERAL PRINCIPLES FOR DETERMINING WHETHER THE STATUS OF TH E TRUSTEES OF A DISCRETIONARY TRUST CAN BE TAKEN TO BE AS `AN AOP' OR AN `INDIVIDUAL'. IT IS NOW WELL SETTLED THAT THE WORD `INDIVIDUAL' DOES NOT NECESSARILY AND INVARIAB LY ALWAYS REFER TO A SINGLE NATURAL PERSON. A GROUP OF INDIVIDUALS MAY AS WELL COME IN FOR TREATMENT AS AN INDIVIDUAL UNDER THE TAX LAWS IF THE CONTEXT SO REQ UIRES. THE WORD `ASSOCIATION' 10 MEANS `TO JOIN IN ANY PURPOSE' OR `TO JOIN IN ACTIO N'. THEREFORE, `AOP' AS USED IN S. 2(31)(V) OF THE IT ACT, 1961 MEANS AN ASSOCIATION I N WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION. THE ASSO CIATION MUST BE ONE THE OBJECT OF WHICH IS TO PRODUCE INCOME, PROFITS OR GA INS. IN THE CASE OF A DISCRETIONARY TRUST, NEITHER THE TRUSTEES NOR THE B ENEFICIARIES CAN BE CONSIDERED AS HAVING COME TOGETHER WITH THE COMMON PURPOSE OF EAR NING INCOME. THE BENEFICIARIES HAVE NOT SET UP THE TRUST. THE TRUSTE ES DERIVE THE AUTHORITY UNDER THE TERMS OF THE TRUST DEED. NEITHER THE TRUSTEES NOR T HE BENEFICIARIES COME TOGETHER FOR A COMMON PURPOSE. THEY ARE MERELY IN RECEIPT OF INCOME. THE MERE FACT THAT THE BENEFICIARIES OR THE TRUSTEES, BEING REPRESENTA TIVE ASSESSEES, ARE MORE THAN ONE, CANNOT LEAD TO THE CONCLUSION THAT THEY CONSTI TUTE AN `AOP'. THE TRUSTEES OF A DISCRETIONARY TRUST HAVE TO BE ASSESSED AS AN `IN DIVIDUAL' AND, CONSEQUENTLY, DEDUCTION UNDER S. 80L OF THE IT ACT, 1961 WAS ALLO WABLE.' IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE TRUS T BE ASSESSED IN THE STATUS OF AOP AND NOT ARTIFICIAL JUDICIAL PERSON. 16. THIS GROUND OF APPEAL OF THE ASSESSEE IS THEREF ORE ALLOWED. 17. GROUND NO. 6 IS AN ALTERNATIVE PLEA RAISED BY T HE ASSESSEE THAT IN CASE EXEMPTION IS DENIED TO THE ASSESSEE U/S 11, THE BUS INESS INCOME SHOULD BE WORKED OUT AFTER SETTING OFF ALL EXPENSES. SINCE WE HAVE HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM EXEMPTION U/S 11, WE DO NOT FIND ANY NEED TO ADJUDICATE THE SAME. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2015 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 14 TH DECEMBER, 2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR