Case Law Details
JCIT(OSD), (Exemptions) Vs Patiala Improvement Trust (ITAT Chandigarh)
The AO noticed that during the year relevant to the assessment year under consideration the assessee carried on the business of sale and purchase of residential plots and commercial properties and earned huge net profit of Rs. 9,95,74,223/-, which does not fall within the ambit of the advancement of any other object of general public utility under section 2(15) of the Act. Accordingly, the AO asked the assessee to justify its claim and after hearing the assessee rejected the claim of the assessee. The AO rejected the claim of the of the assessee and after making addition on account of disallowance of donation amounting and disallowance of service Tax paid, passed Assessment Order u/s 143(3) of the Act, determined the total income of the assessee at Rs. 11,00,93,437/-
The only grievance of the Revenue is that the Ld. CIT (A) has wrongly held that the assessee is entitled for exemption u/s 11 of the Act. At the outset, the Ld. Counsel for the assessee submitted that the issue involved in the present appeal is covered in favour of the assessee by the order of the coordinate Bench in assessee’s own case in ITA No. 120/Chd/2017 for the A.Y. 2012-13. The Ld. Counsel further pointed out that the Tribunal has decided this issue in favour of the assessee by following the judgment of the Hon’ble Jurisdictional High Court in the case of Tribune Trust (2016) 76 taxmann.com 363 (P&H) in which the Hon’ble High Court has decided the issue of applicability of Section 2(15) of the Act in favour of the Improvement Trust, Moga.
It can hardly be suggested that the Government of Punjab established the assessee’s trust and conferred upon it public responsibilities and duties of the nature specified in the PTI Act as a camouflage for its commercial, trade and business ventures. The creation and incorporation of the trust under section 3 is for a public purpose. We have no doubt whatsoever that the activities of the trust fall within the meaning of the words “charitable purpose” in Section 2(15).
Whether the mandate of the Act is followed by such a trust is a different matter. The facts in that regard are relevant in examining whether the activities of the trust of a given year entitled it to the benefit of the Income Tax Act. Mere profit making on account of certain incidental or ancilary activities of the trust do not disentitle it to the exemptions. The Trust constituted under the PTI Act is likely to make profit on account of its commercial or business activities such as when it acts pursuant to the power under section 28(2)(iii) by disposing off its lands. That, however, does not take it out of the definition of ‘charitable purpose’ in Section 2(15). As we held earlier, trade, commerce and business in Section 2(15) must be such as to involve an element of profit. Profit, however, is not the predominant motive of such trusts. In our view considering the nature of the Act, selling of plots and premises by the trust is only incidental and ancillary to its main purpose which at the cost of repetition is “town improvement” in 70 of 74 ITA-62-2015 and ITA 1472016 – 71 -almost every respect. Even where the plots are developed and premises are constructed and sold at the market price, the activity is not commercial or business venture per se but one necessitated on account of the implementation of the provisions of the trust through statutory schemes. The main purpose of such schemes is driven by public requirements and not as a commercial venture per se. They are incidental to the main object of the trust.
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