JAIPUR DEVELOPMENT AUTHORITY Vs. THE C.I.T.

JUDGEMENT

(1.) THIS is an appeal filed by the assessee against the order dated 29/12/2011 of the learned CIT(A) -II, Jaipur. The sole ground of appeal is against the learned CIT has withdrawn the registration of Trust and hold out that the assessee is carrying out activities in the nature of trade, commerce or business and activities and objects are not charitable.

(2.) THE learned Commissioner of Income Tax, Jaipur observed that Jaipur Development Authority (In short JDA) was granted registration U/s. 12AA of the Income Tax Act, 1961 (hereinafter referred as the Act) on 21/11/2008 w.e.f. 14/3/2007. Later on in compliance of ITAT's order dated 30/01/2009, it was made effective fro. 12/10/1982. The objects of institution are given in Chapter -IV of JDA Act 1982, which regulates the function of institution. The objections are reproduced as under: -

(3.) BEING aggrieved by the order of the learned CIT -II, Jaipur, the assessee is in appeal before us. He submitted brief facts of appellant, which is a government authority wholly, owned and controlled of government of Rajasthan. The main purpose of forming the JDA Act, 1982 for setting up an authority for planning, coordinating and supervising for proper, orderly and rapid development of the areas in Jaipur region and of executing plans, projects and schemes for such development and to provide for the matters connected therewith, so that housing, community facilities, civil amenities and other infrastructural facilities are created. The main functions of the authority are mostly those as mentioned in Schedule -XII of Article 243W of the constitution for the municipalities. The powers and functions of the authority are given in para 16 of chapter IV of the JDA Act from serial No. (a) to (s). Authority was exempted U/s. 10(20/10(20A) of the Act. However, after amendment in Section 10(20), 10(20A), the authority was required to file return and get registration U/s. 12AA of the Act. The registration was granted to the authority by the direction of the Hon'ble ITAT, Jaipur Bench with retrospective effect. The learned CIT has withdrawn the registration of JDA by observing that the objects of the institution are not charitable but comes under the purview of last limb of Section 2(15) of the Act i.e. Advancement of any other object of general public utility. The whole order of withdrawal is on the wrong consideration that the activities are in the nature of trade, commerce or business only because the second proviso to Section 2(15) applies as per Section 12AA(3) of the Act where the Trust or an institution has been granted registration under Clause(b) of Sub -Section (1) of Section 12AA of the Act. The learned CIT can cancel the registration in two situations (i) if the activities of the institution are not genuine and (ii) the activities assessee not carried out in accordance with the objects of the institution. Further it has been argued that the withdrawn U/s. 12AA(3) of the Act is applied w.e.f. 01/6/2010 effective from A.Y. 2010 -11 it means prospective. The objects are genuine and activities are carried out as per the objects. As the authority is a government authority, its object is to prove civil amenities and infrastructure and no trade or business, therefore, withdrawn of registration by the learned CIT was not justified. The second proviso to Section 2(15) of the Act is not applicable to the assessee even in those cases, where it is applicable, the new Section 13(8) was inserted in budget 2012 w.e.f. 01/4/2009 where also the withdrawn of registration is not required to be made. He further relied on the decision of Hon'ble ITAT Mumbai Bench in case of Indian Plastic Association in ITA No. 308/Mum/2012 A.Y. 2009 -10 wherein it has been held by the Hon'ble Bench that insertion of first proviso to Section 2(15) is to cover those, which under the garb of general public utility carry on business on commercial activities to escape the liability under the Act gaining exemption U/s. 11 of the Act. The Hon'ble Madras High court in the case of Tamilnadu Cricket Association Vs. DIT exemption in Appeal No. 450 of 2013 dated 21/10/2013 has held that considering the provisions of Section 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances U/s. 12AA(3) of the Act. In the case of Lucknow Development Authority, the Hon'ble Allahabad High Court vide order dated 16/9/2013 held that mere selling some product at profit will not ipso facto hit assessee by applying proviso to section 2(15) and deny exemption available under section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of the provision to section 2(15). The activities of the Trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on commercial lines with no motive to earn profits for fulfillment of its aims and objectives which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15) of the Act. In case of Sarvodaya Ilakkiya Pannai Vs. CIT : 343 ITR 300 the Hon'ble Madras High Court vide order dated 25/1/2012 has held that under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down under section 12AA(3) of the Act. Whether the income derived from such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the Assessing Officer to decide as to whether it should be assessed or exempted. In para 10 of the order, it has been held that none of the conditions U/s. 12AA(3) were violated by the appellant. The Hon'ble Jodhpur Bench of ITAT in case of Jodhpur Development Authority Vs. CIT in ITA No. 508/Jodh/2010 wherein the Hon'ble Bench had allowed the registration U/s. 12AA to it. In another case of Rajasthan Housing Board Vs. CIT, the Hon'ble ITAT, Jaipur Bench, Jaipur in granting registration U/s. 12AA held that proviso to Section 2(15) are totally different. The exemption U/s. 11 is to be examined on yearly basis, therefore, the exemption U/s. 11 has no effect for granting registration U/s. 12AA. In similar case of Gujarat Cricket Association, ITAT 'A' Bench, Ahmedabad in ITA No. 93/Ahmedabad/2011 has held that the registration cancelled by DIT(E) on the basis of amended provision of Section 2(15) of the Act was not justified as amended provision does not fall with the permissible limit of Section 12AA(3) of the Act. The Hon'ble ITAT Agra Bench in case of Agra Development Authority Vs. CIT in ITA No. 166/Agr/2012 dated 11/01/2013 has held that the learned CIT cancelled registration U/s. 12A w.e.f. 2009 -10, which is the period prior to 01/6/2010, the CBDT has also clarified circular No. 762 dated 18/2/1989 that the amended provision U/s. 12AA(3) of the Act is applicable on A.Y. 2011 -12. No opinion has been expressed whether Agra Development Authority's works was charitable or not. He also relied on the following case laws: