At registration stage CIT not supposed to examine Nature of Activities

CIT (E), while considering an application for registration under Section 12AA, is not supposed to examine “whether applicant is entitled for certain exemptions under Section 11 or 12 or not” since that is within the jurisdiction of Assessing Authority and not CIT (E). Reliance is placed on the judgements of certain High Courts which, in brief, we may discuss hereinafter.

First decision in the line is this Court’s judgement in Fifth Generation Education Society Versus Commissioner of Income Tax (1990) 185 ITR 634 (All) wherein it has been said that at the stage of considering application for registration, Commissioner is not to examine application of income. All that he may examine is whether application is made in accordance with the requirements of Section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He may also see whether objects of the trust are charitable or not, but it is not proper to examine application of income. The Commissioner is also not supposed to see whether any activity carried out by society is charitable in nature or not. That is not the requirement of Section 12A.

Gujarat High Court in N.N. Desai Charitable Trust Versus Commissioner of Income Tax 2000 (246) ITR 452 (Guj.) held that authority, examining the question whether a fund of institution is eligible to be certified for the purposes of Section 80G, is not to act as an Assessing Officer and pronounce upon the pending assessments. Commissioner, in examining this aspect, in respect of pending assessments, in our opinion, exceeded his jurisdiction while considering the application for approval. He, as a matter of fact, stepped into the jurisdiction of Assessing Officer.

One objection, which has been advanced seriously, is that Tribunal should not have directed to grant registration since competent authority is Commissioner, therefore, Tribunal should have directed Commissioner to consider registration. In our view, this submission also sans merit. Tribunal exercises coextensive appellate power against the order of Commissioner. It is the last Court of fact. There is no restriction on the power of Tribunal. Section 254 of Act, 1961 empowers Tribunal to pass such orders as it deems fit. Therefore, in all the matters, where appeal is provided to Tribunal, its power is coextensive with the authorities whose orders are appealed before Tribunal. There is no reason to read power of Tribunal, in a manner so as to linger on a matter between different authorities, particularly when there is no such restriction under the statute and on the contrary, statute confers widest power upon Tribunal.

Full Text of the High Court Judgment / Order is as follows:-

1. Heard Shri Ashok Mehta, learned Senior Advocate and Additional Solicitor General of India, assisted by Shri Alok Mathur, and Gaurav Mahajan, Advocates, appearing on behalf of appellants and Shri Balbir Singh, learned Senior Advocate, assisted by Shri Abhinav Mehrotra, Shri Ashish Chaturvedi, and Ms. Rubal Maini, Advocates appearing for respondents.

2. Appeals number 107/2016 and 108/2016 under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as “Act, 1961”) have come up at the instance of Commissioner of Income Tax (Exemption) (hereinafter referred to as “CIT(E)/Revenue”), assailing judgement and order dated 19.05.2016 passed by Income Tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as “Tribunal”) in Income Tax Appeals number 112/Del/2016 and 113/Del/2016. Appeal number 114/2016 has come up against judgement and order dated 22.07.2016 passed by Tribunal in Income Tax Appeal No. 172/Del/2016.

3. Tribunal has held that Greater Noida Industrial Development Authority (hereinafter referred to as “GNIDA”); Yamuna Expressway Industrial Development Authority (hereinafter referred to as “YEIDA”); and New Okhla Industrial Development authority (hereinafter referred to as “NOIDA”) are eligible for registration under Section 12A (1) (a) and consequently it has directed appellant to grant registration to the aforesaid bodies.

4. All these appeals were connected and by order dated 04.11.2016, admitted on the following substantial questions of law:

“i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of Section 12-AA of the Income Tax Act, 1961 and read with Section 2 (15) thereof?

(ii) Whether the findings recorded by the Tribunal to the effect that the respondent-assessee was not carrying out any activity of profit and it’s predominant object of welfare of public at large are correct or not?

(iii) Whether the Income Tax Appellate Tribunal at New Delhi had the jurisdiction to entertain an appeal from the order of the Commissioner of Income Tax (Exemptions), Lucknow in exercise of power under Section 12-AA of the Income Tax Act, 1961?”

5. Before answering aforesaid questions, we may, in brief, examine characteristics of the three bodies, issue of registration whereof is involved in these appeals.

6. U.P. State legislature enacted Uttar Pradesh Industrial Area Development Act, 1976 (hereinafter referred to as “UPIAD Act, 1976”) containing provisions for constitution of authority for the development of certain areas in State of U.P., into Industrial and Urban Township and for matters connected therewith.

7. Section 3 of UPIAD Act, 1976 provides that State Government by notification may constitute, for the purposes of said Act, an authority to be called ‘Industrial Development Authority’ (hereinafter referred to as “IDA”) of concerned area. Functions of authority are provided in Section 6, which reads as under:

“6. (1) The object of the Authority shall be to secure the planned development of the industrial development areas.

     (2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions :–

(a) to acquire land in the industrial development area, by agreement or through proceedings under the Land Acquisition Act, 1894 for the purposes of this Act:

(b) to prepare a plan for the development of the industrial development area;

(c) to demarcate and develop sites for industrial, commercial and residential purpose according to the plan;

(d) to provide infrastructure for industrial, commercial and residential purposes;

(e) to provide amenities;

(f) to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial, commercial or residential purposes;

(g) to regulate the erection of buildings and setting up of industries: and

(h) to lay down the purpose for which a particular site or plot of land shall be used, namely for industrial or commercial or residential purpose or any other specified purpose in such area.

(emphasis added)

8. Section 8 of UPIAD Act, 1976 confers power upon an ‘IDA’ to issue directions regarding architectural features of elevation or frontage of any building, alignment of buildings on any site, restrictions and conditions in regard to open spaces to be maintained, in and around buildings, and height and character of buildings, number of residential buildings that may be erected on any site, regulation of erection of shops, workshops, warehouses, factories or buildings, maintenance of height and position of walls, fences, hedges or any other structure or architecture constructions, maintenance of amenities, restriction of use of any site for a purpose other than that for which it has been allocated and means to be provided for proper (i) drainage of waste water, (ii) disposal of industrial waste, and (iii) disposal of town refuse.

9. Section 9 imposes restrictions on erection or occupation of any building in the ‘IDA’ in contravention of any building regulation made under sub-section (2) of Section 9.

10. Section 10 confers power upon ‘IDA’ with regard to making provisions requiring persons concerned for maintenance of site or building.

11. Section 11 confers power of levy of tax and reads as under:-

“11. (1) For the purposes of providing, maintaining, or continuing any amenities in the industrial development area, the Authority may with the previous approval of the State Government, levy such taxes as it may considers necessary in respect of any site or building on the transferee or occupier thereof, provided that the total incidence of such tax shall not exceed twenty five per cent of the annual value of such site or building.

Explanation : In this sub-section, the expression ‘annual value’ shall have the same meaning as in Section 174 of the U.P. Nagar Mahapalika Adhiniyam, 1959.

Definition of ‘‘annuals values’’ – ‘Annual value means’ :–

(a) in the case of railway stations, colleges, schools, hostels, factories and other such buildings, a proportion not below 5 per cent to be fixed by rule made in this behalf of the sum obtained by adding the estimated present cost erecting the building, less depreciation at a rate to be fixed by rule to the estimated value of the land appurtenant thereto, and

(b) in the case of a building of land not falling within the provisions of clause (a) the gross annual rent for which such building, exclusive of furniture or machinery therein, or such land in actually let, or where the building or land is not let or in the opinion of the assessing authority is let for a sum less than its fair letting value, might reasonably be expected to let from year to year. Provided that where the annual value of any building would, by reason of exceptional circumstances, in the opinion of the Mahapalika, be excessive if calculated in the aforesaid manner, the Mahapalika may fix the annual value at any less amount which appears to it equitable : Provided further that where the Mahapalika so resolves, the annual value in the case of owner occupied building and land shall for the purposes of assessment of property taxes be deemed to be 25% less then the annual value otherwise deter mine under the section.

(2) If the State Government considers it necessary or expedient in the public interest it may, by a general or special order, exempt wholly or partly – any such transferee or occupier or any class thereof from the taxes levied under sub-section (1).

12. NOIDA was constituted as the first authority under Act, 1976 as ‘IDA’ for area of New Okhla, vide Notification dated 17th December, 1976. GNIDA was constituted by a Notification dated 28.01.1991 issued under Section 3. Similarly, YEIDA was constituted by Notification dated 24.04.2001.

13. NOIDA and GNIDA were declared “Industrial Township” by Notification dated 24.12.2001. YEIDA was declared “Industrial Township” by Notification dated 18.12.2015.

14. All the three IDAs filed applications for registration as “Charitable Institution” under Section 12A (a) of Act, 1961, in the office of CIT(E). These applications were filed separately in Form-10A, which is duly prescribed under Rule 17-A of Income Tax Rules, 1962 (hereinafter referred to as “Rules, 1962”).

15. CIT(E) Lucknow, vide letter dated 29.09.2015 required GNIDA to furnish following information:

“(i) Please produce original documents regarding grant of certificate issued by Registrar of Society along with Memorandum of Association/ Trust deed (with English translation) for verification.

(ii) Please produce original documents regarding registration certificate issued u/s 12AA of the Income Tax Act, 1961.

(iii) Please furnish complete list of society members with address, PAN & telephone numbers as on date. (iv) Please furnish confirmations of donations/ corpus fund/ loans/ members fee/ grant received of 5,000/- and more with their address and PAN as on date.

(v) Please furnish evidence regarding ownership of land and building in the name of society or NOC from premises owner.

(vi) Please submit complete audit report in form 10B for the last 3 years with income & expenditure, receipt and Payment Account statement in respect of society.

(vii) Please explain whether any funds have been set apart/ accumulated during last 3 years for any specific object of the trust as required under provisions of section 11 (2) of the I.T.Act, if so please details thereof

(viii) Please furnish evidence regarding filing of Income Tax returns for last 3 years with PAN.

(ix) Please produce copy of Bank statement/ pass Book as on date.

(x) Please furnish details of charitable activities carried out during the last three years along with supporting evidences. (xi) Please produce all relevant papers/ documents/ registers/ books of accounts, bills/  Vouchers in original for verification.”

16. The reply was submitted on behalf of GNIDA through counsel vide letter dated 19.10.2015 and points were replied reads as under:

“Reply to point (i)

Notification published in Gazette of U.P. for formation of Greater Noida Industrial Development Authority.

Reply to point (ii)

No application for grant of registration u/s 12AA of Income Tax Act, 1961 was moved earlier by the Authority.

Reply to point (iii)

List of members of the Board of Authority is enclosed in the notification of creation of Authority.

Reply to point (iv)

No donations have been received by the Authority.

Reply to point (v)

The details are contained in the compiled Accounts.

Reply to point (vi)

Accounts of the Authority have been audited by the U.P. Local Fund. As the Authority is not registered u/s 12AA of the Income Tax Act, so there is no Audit Report in Form 10B.

Reply to point (vii)

No fund of the Authority has been set apart/ accumulated during last 3 years for any specific object of the Authority as required under the provisions of section 11 (2) of the Income Tax Act, 1961.

Reply to point (viii)

As the Authority is a state government authority and performing sovereign functions, it has voluminous bank transactions, hence cannot be produced in hard and can be produced in soft, if permitted so.

Reply to point (ix)

Charitable activities carried out during the last three years: as per section 6 of the U.P. Industrial Development Act.

Reply to point (x)

The authority is an instrumentality of the State Government and as such is entrusted with the tasks assigned to it under the provisions of Section 6 of the U.P. Industrial Development Act and as such discharges its functions in consonance with the constitutional mandate of Lazisise Faire Policy.”

17. Similar correspondence took place with other two “IDAs”.

18. CIT (E), however, passed order dated 19.11.2015 and rejected application for registration observing that material showing charitable purpose or Trust has not been made available by applicant-respondents. Further applicant-respondents are primarily engaged in business activity and not charitable activity therefore not eligible for registration under Section 12AA(1) (b) (ii) of Act, 1961. The aforesaid respondents i.e. “IDAs”preferred appeals before Tribunal which have been allowed by impugned orders.

19. Learned Senior Advocate Shri Ashok Mehta, appearing on behalf of appellants, submitted that neither GNIDA nor YEIDA nor NOIDA placed on record their bye-laws either before CIT(E) or this Court. The details of nature of activity being performed by two authorities have also not been furnished before CIT(E) and whatever material was disclosed shows that these authorities are acting as a private builder or developer of a property. None of the authorities satisfied definition of local authority under Section 10 (20) of Act, 1961 and similar claim made by New Okhla Industrial Development Authority has been decided against it in Writ Petition No. 1338 of 2005 decided on 02.08.2011. It is also contended that Tribunal was not justified in issuing a direction to CIT(E) to grant registration to aforesaid authorities when they did not satisfy requirement of charitable or religious purpose and also not being local authority under Section 10 (20) of Act, 1961.

20. Learned Senior Advocate Sri Balbir Singh appearing on behalf of GNIDA, YEIDA and NOIDA stated that applications were filed in compliance of requirement of Rule 17 (A) read with Form no. 10-A of Income Tax Rules,1962 (hereinafter referred to Rules, 1962) and certified copies of financial statements of last three years i.e. F.Y. 2011- 2012, 2012-2013 and 2013-2014 were also appended to the application. He said that Tribunal’s orders show that all the requisite details and information were supplied but CIT (E) passed erroneous orders of rejection of applications for registration. CIT(E) chose not to consider requisite documents furnished by respondents and erroneously rejected applications without considering the entire material placed before it.

21. Section 11 of Act, 1961 provides that income derived from property held under trust, wholly for charitable or religious purposes, shall not be included in the total income of the previous year of the person in receipt of income subject to certain conditions stated therein.

22. Section 12 deals with the income of trust or Institution from contributions and provides that any voluntary contributions received by a trust, credited wholly for charitable or religious purposes or by an Institution established, wholly for such purposes, shall for the purposes of Section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of Sections 11 and 13 shall apply accordingly.

23. Sub Section (2) provides that value of any services, being medical or educational services made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in Section 13 (3) Clause (a), ( b) ,(c), (cc) or (d) shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income tax notwithstanding Section 11 (1) of Act, 1961.

24. Section 12A contemplates certain conditions which may exist before attracting Sections 11 and 12. For our purpose, Section 12A(1) is reproduced as under:

“12A(1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—

(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA :

Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—

(i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;

(ii) from the 1st day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied:

Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;

(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;

(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.

25. Section 12AA lays down procedure for registration and reads as under:-

“…12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab)of sub-section (1)] of section 12A, shall—

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

(1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab)of sub-section (1) of section 12A.

(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 Principal Commissioner or 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 sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

(4) Without prejudice to the provisions of sub-section (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 it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution:

Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.”

(emphasis added)

26. Section 13 talks of certain conditions when Section 11 or 12 shall not apply.

27. Thus Section 11 of Act, 1961 grants exemption to income derived from property held for “charitable purpose”. What is “charitable purpose”, to examine it, one has to go to Section 2 (15) of Act, 1961, which is an inclusive definition. The definition of “charitable purpose” has undergone amendments from time to time. In order to appreciate scope and ambit, changes made from time to time are to be seen, which may demonstrate intention of legislature. The definition has undergone changes from time to time in Act, 1961,which are reproduced as under:

“(15)” “Charitable purpose” includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.”

(ii) From 1984 to 2009:

“(15) “charitable purpose” includes relief of the poor, education, medical relief and the advancement of any other object of general public utility;”

(iii) From 2009 to 2014 (last amendment) :

“charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year.”

(emphasis added)

28. Charitable purpose primarily shows that predominant object must be to promote welfare of general public. Ancillary activity, if any, than that general one performed by the said institution would not render such institution “non-charitable”. GNIDA, YEIDA and NOIDA perform functions as detailed under Section 6 of UPIAD Act, 1976. They, being statutory bodies, cannot travel beyond statuaries functions, prescribed. The primary purpose and predominant object of these ‘IDAs’ is to conduct sovereign and statutory functions assigned to them. They perform charitable activities during their life time.

29. We are told that the proviso to Section 2 (15) has been read down by certain Courts i.e. Delhi High Court in India Trade Promotion Organisation Versus Director General of Income Tax (Exemption) and others (2015) 371 ITR 333 (Delhi) and Punjab and Haryana in the Tribute Trust Versus Commissioner of Income Tax, Chandigarh decided on 23.12.2016.

30. However, we shall not make our analysis short by referring to above citations but would like to scrutinise the issue in the light of provisions as are existing and available. For the purpose of registration, Commissioner has to examine whether application has been submitted in accordance with requirement of statute. Commissioner can not examine whether the income derived by the person concerned is from the activities which are charitable in nature or not. All the three IDAs have been conferred status of “industrial township” as contemplated under Article 243 (Q) proviso of Constitution. It shows that the bodies are to perform municipal functions in their respective jurisdictions and therefore they enjoy to some extent, status of a local authority also.

31. Reverting back to pivotal issue, we find that CIT (E), at the stage of registration, is not supposed to inquire into the conduct of charitable or other activities to be performed by a trust or institution which has submitted application for registration. That is an investigation to be gone subsequently at the time of assessment by Assessing Authority. In this regard, reliance is placed on Kerala High Court in Sree Anjaneya Medical Trust Versus CIT (2016) 382 ITR 399 and Karnataka High Court in Commissioner of Income Tax and others Versus Sri Gururaja Seva Samithi decided on 3.7.2015 and some other authorities which we may discuss in detail at appropriate stage.

32. Though arguments have been advanced in a much wider compass, but we find that real dispute is whether respondents authorities would satisfy term ‘charitable purpose’ as defined under Section 2(15) of Act, 1961 so as to entitle them for registration under Section 12A(1) of Act, 1961. Another argument has been raised that at the stage of considering application for registration, CIT (E) is not entitled to look into the question, whether activities of applicants seeking registration are charitable or not.

33. Under the definition of ‘charitable purpose’ parties are ad idem that all three IDA’s at the best, would have to be covered by the words “advancement of any other object of general public utility”.

34. It is also admitted that if fail, they are not entitled for registration. Endeavour on the part of Revenue, is that proviso inserted in Section 2(15) by Finance Act, 2008 with effect from 01.04.2009 excluding activities in the nature of trade, commerce or business or any service rendered in relation to trade, commerce or business for a cess or fee or any other consideration, excludes all the aforesaid three ‘IDAs’ from the purview of definition of ‘charitable purpose’ under Section 2(15) of Act, 1961.

35. Explaining amended provision defining “charitable purpose”, Central Board of Direct Taxes, (hereinafter referred to as “CBDT”), has issued Circular No.134/34/2008-TPL (Circular No. 11/2008) dated 19th December, 2008. It is clarified therein that proviso to Section 2(15) will not apply to first 3 limbs, namely, relief of the poor, education or medical relief. It will apply only to entities whose purpose is “advancement of any other object of general public utility” i.e. 4th limb of definition of ‘charitable purpose”.

36. Entities which carry on commercial activities will not be eligible for exemption under Section 11 or 10 (23C) of Act, 1961. Whether an entity is carrying on activities in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activities. It is said that an Assessee, if engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is “charitable purpose”. In such a case, object of general public utility will be only a mask or a device to hide the true purpose, which is trade, commerce or business, or rendering of any service in relation to trade, commerce or business. In our view, each case would depend on its own facts and no generalisation is possible.

37. Recapitulating history of definition of expression “charitable purpose”, we find that phrase “advancement of object of general public utility” was raised sometimes during course of arguments in Morice Versus Bishop of Durham (1805) 10 Ves Jr 522 by Sir Samuel Romilly when he tried to subsume “charitable purposes” under four heads i.e. relief of the indigent, the advancement of learning, the advancement of religion and the advancement of objects of general public utility. Substance of the above statement was taken note by Lord Macnaghten in Special Commissioners Versus Pemsel (1891) A.C. 531 (HL), where he pointed out that charity in its legal sense, comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion and trusts for other purposes beneficial to the community not falling under any of the preceding heads. In Macduff’s case (1896) 2 Ch451 (456) Lord Lindley and other Law Lords held that the words “general public utility” are very wide in their scope and that every object of public utility may not necessarily be a charitable purpose.

38. In 1918, expression was inserted in Indian Income Tax Act, 1918 adding the phrase “advancement of other objects of general public utility”, without any restriction or qualification whatever in Explanation to Section 4 (3). In Trustees of Tribute, in re (1935) 3 ITR 246, 272 (Lah) Justice Tek Chand remarked, that Indian legislature, has used a phraseology which is much wider and more comprehensive than that of fourth head of classification in Special Commissioner Versus Pemsel (supra). The aforesaid remarks of Justice Tek Chand were approved by judicial committee of Privy Council in Trustees of the Tribute, In re (1939) 7 ITR 415(PC).

39. The four heads are to be read in ejusdem generis so as to give relief to public. Simultaneously, they should be given their natural meaning as it can be in common parlance but in a manner so as to keep objects, public in nature. Whether a particular object is of general public utility or not is to be tested by the principles applicable to such case in a Court of Law and by finding out whether Court should record a trust or charity and would undertake its administration and control.

40. In CIT Versus Andhra Pradesh State Road Transport Corporation (1986) 159 ITR 1 (SC), Court considered the question, whether Road Transport Corporation established by Government for providing road transport facilities to general public, and a statutory enactment obliged the Corporation to handover to the Government all income left over after meeting expenses which was to be invested by Government for road development, its activities do not involve carrying on of an activity for profit and its income would be exempted as that of an institution meant for advancement of an object of general public utility.

41. Broadly, it is said that a valid trust for a charitable or religious purposes involves:

1) the specification or identification of the property, the subject matter of the trust;

2) the dedication of the property;

3) the constitution of the public as the beneficiary; and

4) the specification of the objects on which or for which income from the property is to be spent or applied.

42. In the context of Krishi Utpadan Mandi Samiti, a similar question came up for consideration before this Court in CIT Versus Krishi Utpadan Mandi Samitee 2010 (1) ALJ 817. It was held that charging of cess/ fee is for the purpose of carrying out object of Act i.e. Krishi Utpadan Mandi Samiti Adhiniyam, 1964 (hereinafter referred to as “U.P. Act,1964”). Where dominant purpose of trust is charitable, incidentally if some profit is made and such profit is used for charitable purposes, the said trust/institution does not cease to be established for ‘charitable purposes”. The dominant object of Mandi Samiti is to regulate, procure and supply of agricultural and some other produce and to meet expenses required for achieving the said object. Legislature has empowered Assessee to levy/cess/fee. Whatever surplus remains in market fund would come back for carrying on the object for which Mandi Samities are established.

43. This judgment of High Court has been confirmed by Supreme Court in Appeal preferred by Revenue in CIT Versus Krishi Utpadan Mandi Samitee 2012 (12) SCC 267.

44. In Commissioner of Income Tax Vs. Dawoodi Bohra Jamat [2014] 364 ITR 31 (SC) the question, whether Dawoodi Bohra Jamat (hereinafter referred to as “DBJ”) is a “charitable trust” was considered. DBJ is a registered public trust under M. P. Public Trust Act, 1951. It filed an application before CIT (E) under Section 12A read with Section 12AA for registration so as to get exemption under Section 11 of Act, 1961. CIT (E) rejected application by order dated 14th September, 2007. It held that DBJ is not a charitable trust since its object and purpose is confined to only a particular religious community, it would attract provisions of Section 13(1)(b) hence registration was denied. In appeal, Tribunal however took a different view and held that DBJ is entitled to claim registration under Section 12A and 12AA. Revenue came in appeal to High Court which held that the findings of Tribunal are factual. However, Section 13(1)(b) would not be applicable to DBJ as trust is not created or established for benefit of any particular religious community or caste. Consequently, Revenue’s appeal was rejected by High Court vide judgement dated 22.06.2009. Then the matter went to Supreme Court. Objection of Revenue was that object of trust was not wholly religious in nature, but charitable and confined to the benefit of a particular religious community i.e. DB community hence Section 13(1)(b) was attracted, ousting trust from ambit of exemption available under Sections 11 and 12 of Act, 1961. Court held, that, under the scheme of Act 1961, Sections 11 and 12 are substantive provisions. They provide exemption to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by said trust are subject matter of exemption from taxation under Act, 1961. Section 12A and 12AA contain detailed procedural requirements for making application for registration. Registration under Section 12A and 12AA is a condition precedent for availing benefit under Section 11 and 12. Unless institution is registered under Sections 12A and 12AA, it cannot claim benefit of Sections 11 and 12. After referring to various authorities, Court then said that legal effect of true facts and documents is a question of law. Determination of nature of trust as wholly religious or wholly charitable or both charitable and religious under Act, 1961 is not a question of fact. It is a question which requires examination of legal effects on proven facts and documents, i.e., the legal implication or object of respondent-trust as contained in trust deed. Words “other objects of “general public utility” were considered in a catena of decisions. The said expression is of the widest connotation. Words ‘general’ in the said expression is pertaining to a whole class. Court relied on its earlier decision in Commissioner of Income Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC), and held that advancement of any object or benefit to the public or a section of public is distinguished from benefit to an individual or a group of individuals, and would be a charitable purpose. In Additional Commissioner of Income-Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) a Constitution Bench held, if primary purpose and predominant object of a trust are to promote welfare of general public, the purpose would be charitable purpose. If primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to dominant purpose, would not prevent institution from being a valid charitable trust.

45. In DBJ, (supra) Court relied on Thiagarajar Charities Vs. Additional Commissioner of Income-Tax [1997] 4 SCC 724. The word “charity” connotes altruism in thought and action and involves an idea of benefiting others rather than oneself. Supreme goal of all religions is philanthropy which could be manifested in various forms. It has been held that gifts for religious purposes are prima facie gifts for charitable purposes. Court also observed that in Section 13(1)(b) it could be inferred that Legislature intended to include trusts established only for charitable purposes. It does not mean that a trust, if composite one, that is, one for both religious or charitable purposes, then it would not be covered by clause (b) of Section 13(1). What is intended to be excluded from being eligible for exemption under Section 11 is a trust for charitable purpose, which is established for the benefit of any particular religious community or caste. Court, therefore, held that DBJ is a trust based on religious tenets under ‘Quran’ according to religious faith of Islam. Perusal of objects and purposes of DBJ Trust demonstrate that activities of trust, though both charitable and religious, are not exclusively meant for a particular religious community. The objects do not channel benefit of any community hence would not fall under the ambit of Section 13(1)(b) of Act, 1961.

46. In Director of Income Tax (Exemption) Vs. Sabarmati Ashram Gaushala Trust [2014] 362 ITR 539 (Gujarat), after looking into the documents relating to insertion of proviso in Section 2(15) of Act, 1961, Court said that activity of a trust would be excluded from the term ‘charitable purpose’, if it is engaged in any activity in the nature of trade, commerce or business or any service in relation to trade commerce or business for a cess, fee and/or any other consideration. Intention is not to exclude genuine charitable trust of general public utility, but is aimed at excluding activities in the nature of trade commerce or business, which are masked as “charitable purpose”. Gujarat High Court said that the main object of trust was for general public utility and for charitable purposes. The main objectives of trust are to breed the cattle and endavour to improve quality of cows and oxen in view of need of good oxen as India is prominently an agricultural country, to produce and sale cow milk, to hold and cultivate agricultural land etc. Various activities relating to cow milk and other research maintenance etc., Court held, that objects are of general public utility. Profit making was neither the aim nor object of trust. It was not principal activity. Merely because, while carrying out activities for the purpose of achieving the objects of the trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business.

47. In Delhi High Court this dispute was raised in Institute of Chartered Accountants of India Vs. Director General of Income Tax (Exemption) [2012] 347 ITR 99 (Delhi). Court held that activities of institute i.e. fundamental or dominant function of institute was to exercise overall control or regulate activities of members/ enrol chartered accountants and merely if same institute was holding coaching classes would not generate income. Court held that proviso to Section 2(15) of Act, 1961 would not be attracted to Institute of Chartered Accountants of India.

48. In the context of Lucknow Development Authority (hereinafter referred to as “LDA”) a statutory body constituted under U.P. Urban Planning and Development Act, 1973 (hereinafter referred to as “UPUPD Act, 1973”) in CIT Versus Lucknow Development Authority, Lucknow 2014 (2) ALJ 578, a question arose whether it would be entitled for registration under Section 12A/12AA. On behalf of Revenue, it was argued that LDA is engaged in activities of acquiring land, developing plots, constructing residential as well as commercial places and selling thereto. Sales are also undertaken through auction process and sold to highest bidder, to earn more and more profits. Said activities are trade in nature and liable to tax. Revenue sought to equate LDA with private colonisers and builder. On behalf of LDA various provisions of UPUPD Act, 1973 were placed. This Court held that expression ‘general’ under Section 2(15) means pertaining to whole class. Advancement of any object or purpose to benefit public or a section of public is distinguished from benefit to an individual or group of individuals. Expression “charitable purpose” would prima facie include all objects which promote welfare of general public.

49. In the context of Gujarat Maritime Board, similar issue came up for consideration in Commissioner of Income-Tax Vs. Gujarat Maritime Board [2007] 295 ITR 561 (SC). Here also Commissioner rejected application for registration, but Tribunal allowed it and judgement was confirmed by High Court. Supreme Court affirmed High Court verdict that Assessee was under a legal obligation to apply its income which was directly and substantially received from business held under trust for development of minor ports in State of Gujarat. Court distinguished Section 10(20) and Section 11 of Act, 1961 and held that both provisions operate in totally different spheres. If Board ceased to be “local authority”, it is not precluded from claiming exemption under Section 11(1) in the light of definition of “charitable purposes” under Section 2(15) of Act, 1961. Advancement of any object of benefit to public or a section of public as distinguished from benefit to an individual or a group of individuals could be a “charitable purpose”. It was held that Gujarat Maritime Board was established for predominant purpose of development of minor ports within State of Gujarat and its management was given in the hands of Government. Income earned by Board is deployed for development of minor ports in the State. In the circumstances, it was held within the ambit of definition of ‘charitable trust’ under Act, 1961.

50. In the case of Jaipur Development Authority, Revenue held that major source of income is sale of plots and built up properties. Remaining income is received from various charges, fees and penalties levelled and collected by Jaipur Development Authority. Jaipur Bench of Tribunal in I.T.A.No. 182/JP/2012, Jaipur Development Authority, J.L.N. Marg, Jaipur Vs. The C.I.T.-II Jaipur, decided on 30.09.2014, held that Jaipur Development Authority is entitled for registration under Section 12A and in this context said as under:-

“The JDA was established in October, 1982 by JDA Act. Purpose of JDA is for planning, coordinating and supervising for proper, orderly and rapid development of the areas in Jaipur region, in which several government departments, local authorities and other organisation are at present engaged within their own jurisdictions to provide also that such authority be enabled either itself or through other authority to formulate and execute plans, projects and schemes for the development of Jaipur region. So that housing, community facilities, civic amenities and other infrastructure are properly created for the population of Jaipur region in the prospective of 2001 AD or thereafter including the intermediate stage and to provide for matters connected with the purpose of aforesaid. Later on this Act further amended from time to time as per need of Jaipur region. As per chapter (vi), functions of the authorities have been defined in item No. (a) to (s). As per item-(h), the authority is authorised to develop agriculture, horticulture, floriculture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicare, tourism, entertainment and similar other activities. As per item-(n), it performs in the area of urban renewal, environment and ecology directly or through its functional boards, therefore, the JDA not only planning the urban area with master development plan and zonal development plan but also sanction projects and schemes for development. The JDA is a tool of State government for coordinated and planned development in Jaipur region. In practical, the main work of JDA is construction of roads, sewerage, parks, play grounds, provide plots for educational, health and cultural institution for over all development of the community. By making planned development it provides smooth transaction so that air pollution can be minimised and save time of the public. If it is left in the hands of private operator, these facilities would not be provided on similar price as provided by the JDA. Whatever, the Revenue is generated through these activities are finally utilised for the benefit of the public. The intention of the institution is not to earn profit but recover the cost of the establishment as well as other expenditure to implement the object of the JDA. The State Government also give the grant to it.”

(emphasis added)

51. We would now examine in the light of above “definition” as explained by CBDT vide Circular dated 19th December, 2008 and exposition of law, discussed above, whether an IDA constituted under a provincial enactment, on the subject of Industrial Development, would satisfy requirement of Section 2(15) of Act, 1961 and would not be disqualified by attracting proviso thereto.

52. In this regard, we may examine functions of aforesaid ‘IDAs’ visa-vis nature of funds they collect in different forms. All three ‘IDAs’ are statutory bodies. They cannot function beyond authority conferred by UPIAD Act, 1976. Section 6 provides object of IDA which includes acquisition of land; preparation of a plan for development of industrial development area; demarcation and development of sites for industrial, commerce and residential purposes according to plan; providing infrastructure for industrial, commercial and residential purposes; to provide amenities; allocate transfer either by sale or lease or otherwise plots of land for industrial, commercial and residential purposes; regulate erection of buildings and setting up of industries and laying down plans for which a particular site or plot of land shall be used i.e. for industrial, commercial or residential purposes; and, to regulate industrial, commercial, residential or any other specified purpose. Therefore basic object is to develop and regulate of an area notifying as industrial development area.

53. Funds collected by ‘IDAs’ constituted under UPIAD Act, 1976 include taxes under Section 11 which can be levied for the purpose of providing, maintaining or continuing amenities in industrial development area. However, maximum quantum of tax provided under Section 11 is that it shall not exceed 25% of annual value of such site or building and such tax cannot be imposed by IDA without previous approval of State Government.

54. Funds of IDA shall constitute, under Section 20, as under:-

“20. Fund of the Authority (1) The Authority shall have and maintain as own fund to which shall be credited

(a) all moneys received by the Authority from the State Government by way of grants, loans, advances or otherwise

(b) all moneys borrowed by the Authority from sources other than the State Government by way of loans or debentures

(c) all (fees, tolls and charges) received by the Authority under the Act

(d) all moneys received by the Authority from the disposal of lands buildings and other properties movable and immovable and

(e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other source.”

55. Section 20(2) says that funds shall be applied by IDA towards meeting expenses incurred in administration of UPIAD Act, 1976 and for no other purposes. Therefore, there is a complete bar that the funds of authorities can be used only for the purpose of UPIAD Act,1976 and not otherwise. As we have already said, they are for general public utility and not for an individual or any individual group or otherwise. State Government after due approval by Legislature by law, grant advances etc. to ‘IDA’ for performance of functions under UPIAD Act, 1976. Similarly, an ‘IDA’ may also borrow money by way of loan or debenture from such sources, other than Government, on such terms and conditions as may be approved by State Government. For re payment of borrowed money, an “IDA’ is required to maintain a sinking fund. Accounts of ‘IDAs’ are to be audited vide Section 22, in the area declared as ‘industrial township’. There may not be constituted any ‘municipality’ though it is obligatory under Article 243 (Q) of Constitution, but proviso to Article 243 (Q) (1) authorizes Governor to specify an ‘IDA’ as “industrial township” and municipal services thereof shall be provided by ‘IDA’ in that area. Therefore, within the area, the ‘IDAs’ have been declared industrial township and municipal services are to be provided by them.

56. We may also examine some other aspects commented by Revenue to exclude ‘IDAs’ from the ambit of Section 2(15) of Act, 1961.

57. One of the queries made by CIT (E) was evidence regarding ownership of land, building in the name of ‘IDAs’, audit report of preceding three years with income and expenditure receipt and payment account and also whether any fund has been set apart/ accumulated during last three years for any specified object or trust. We have already noted that the statute i.e. UPIAD Act, 1976, itself takes care of funds stating that ‘IDAs’ shall use entire fund, whatever is available from various resources, for the purpose of UPIAD Act, 1976 and in performance of their objectives and duties under the said Act.

58. With reference to Section 6 (2)(i), IDA acquire land, develop the same and sell at the cost of acquisition plus development. For the purpose of maintenance cost, it charges lease rent from the allottee of the land. If any surplus arises or remains with ‘IDAs’, it has to be consumed/ utilised for meeting expenses incurred by ‘IDAs’ in administration of UPIAD Act, 1976 and not for any other purpose.

59. Thus, whatever amount is received by ‘IDAs’ under different heads, whether tax, rent, fee, sale consideration etc., it has to be used in discharge of objectives and functions provided under UPIAD Act, 1976, for the benefit of general public.

60. In Ramtanu Cooperative Housing Society Limited and another Versus State of Maharashtra and others 1970 (3) SCC 323 a Constitution Bench had an occasion to examine validity of Maharashtra Industrial Development Act of 1962. Under the said Act, provisions were made for incorporation, regulation and winding up of Maharashtra Development Corporation. The true character of Corporation was examined by Court in the light of provisions of Act and it was observed that Corporation is established for the purpose of securing and assisting rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra. Functions of Corporation are generally to promote and assist in rapid and orderly establishment, development of industries in Maharashtra and to establish and manage industrial estates at places selected by State Government, develop industrial areas selected by Government for the purpose and make them available for undertakings to establish themselves, assist financially by loans and to undertake schemes or works, either jointly with other corporate bodies or institutions or with Government or local authorities, or an agency basis, in furtherance of the purposes for which Corporation is established. There also an industrial area was to be declared by notification by State Government. An argument was raised that Corporation was a trading one as it can sell property, transfer land, borrow money and entitled to charge rents and profits etc. Rejecting contention that Corporation is a trading body, Court said:-

“these profits will be themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulations and management of the Corporation. Such a corporation set up by the shareholders carries on business and is intended for making profits. When profits are carned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of the sole purpose of establishment, growth and development of industries.

17. The corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The fund of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner. The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct. The Corporation accepts deposits from persons, authorities or institutions to whom allotment or sale of land, buildings, or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appointed by the State Government. These provisions in regard to the finance of the Corporation indicate the real role of the Corporation, viz, the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation.”

(emphasis added)

61. Aforesaid observations applied from all corners to respondent authorities i.e. ‘IDAs’ and it is a complete answer in the present case also to the argument that Cess/ Fee and other considerations realised by ‘IDAs’ render their activities in the nature of trade, business or commercial so as to exclude them from definition of “charitable purposes” by application of proviso to Section 2 (15) of Act, 1961. It was also observed that there are two features, which are normally not found in trading corporation (1) that the sums payable to corporation are recoverable as arrears of rent under the Act and (2) on dissolution, assets vest in and liabilities become enforceable against the State Government. Court also said that underlying concept of trading Corporation is buying and selling, but in the case of Corporation under the aforesaid Act, there was no aspect of buying or selling. Corporation carries out the purpose of Act, i.e. development of industries in the State. Constructions of buildings, establishment of industries by letting building on hire or sale, acquisition and transfer of land, in relation to establishment of industrial estates, or development of industrial areas and setting up of industries, it cannot be said to be relating to land or buildings for the reason that State is carrying out the object of Act with the Corporation as an agent in setting up industries in the State. Act aims at buildings and industrial town and the Corporation carries out objects of the Act. Court further said that:-

“The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of the opinion that the Corporation is not a trading one.”

(emphasis added)

62. Sri Mehta, learned Senior Counsel, endeavoured with great pains and sincerity to urge that CIT(E) gave utmost opportunity to these authorities to show that they do not come within the ambit of activities constituting trade, business or commerce activities, but these authorities failed to place relevant material before CIT (E). He drew our attention to order of CIT(E) dated 19.11.2015. He referred to para-2 of said order wherein it is mentioned that respondent GNIDA could not produce books of accounts nor furnished required details. It had not filed any return for Assessment Year 2012- 2013 even after expiry of last date of filing of return. It had a net profit of Rs 20,64,84,209/- for Assessment Year 2012- 13, but filed return showing income nil. Similarly, for Assessment Year 2013-2014 net profit of Rs. 83,39,876/- was shown as nil income. CIT (E) also observed that GNIDA was claiming exemption under Section 10(20) of Act, 1961, but simultaneously sought registration under Section 12AA of Act, 1961. There was no reason for filing application after 12 years. Respondents authorities could not produce required details, books of accounts or any other evidence to show that it is involved in any charitable activity as such. Having said so, CIT (E) observed “on perusal of material available on record it is seen that applicant assessee is a profit making body and it is not carrying out any charitable activities”. Due to non production of books of accounts and vouchers, CIT (E) said that it could not verify genuineness of activities. Before registration is made, competent authority i.e. CIT (E) has to see object of charitable purposes and genuineness of activities. Respondents-authorities failed to prove the same. CIT (E) also observed that respondents-authorities have got property development income which comprises of sale and development of land and sale of constructed property. It has also got income under the head “urban services”, which comprises of lease rent, loan interest, fee, penalties, duties and taxes. Similarly, under head of administration ‘IDAs’ have got income form interest, forfeiture of property and miscellaneous income. Besides, interest bearing funds have been given interest free loan and grants. All these activities will show that respondents-authorities are primarily engaged in business of development and sale of properties for earning profit and if there is any charitable activity, it is coincidence or incidental to its business. Respondents- authorities are running business purely on commercial line without any intention of any sort of charitable purposes. Attempt of ‘IDAs’ is to seek parity with LDA or Haridwar Development Authority (hereinafter referred to “HDA”) in view of judgements rendered in respect of those bodies, directing grant of registration to CIT(E), was failed by distinguishing and observing that those development authorities were constituted under UPUD Act, 1973 and UPIAD Act, 1976 and provisions of two Acts are significantly different in all respects.

63. Interestingly, CIT (E) while admitting that after dissolution of these ‘IDAs’, assets and properties shall vest in Government, it has taken it as a negative factor and relevant to exclude ‘IDAs’ from ambit of “charitable purposes” by observing that there is no restriction that the left over property shall be used for “charitable purposes” but would vest in State Government. These observations are in the teeth of what has been observed by Constitution Bench in Ramtanu Cooperative Housing Society Limited (supra).

64. CIT (E) then tried to involve itself with Section 10(20A) and Section 10(20) of Act, 1961 observing that Section 10(20A) has been deleted/ omitted with effect from 01.04.2003 and Section 10(20) applies to “local authorities” only and ‘IDAs’ are not “local authorities” as stated in explanation to Section 10(20) of Act, 1961.

65. It is true that ‘IDAs’ being not very clear about provisions under which they are exempted, made attempts to refer and rely one or other provisions but a mistake of law in pleading status or claiming a particular advantage under a provision is neither an admission nor will attract principle of estoppel or acquiescence. When law requires something and provides a particular status with particular description, it is to be treated accordingly. A mistaken claim will not make any difference, either for affirmence or denial.

66. When CIT (E) was required to consider application for registration, in our view, it should have concentrated only to the requirement of Section 12A and 12AA, as the case may be, and not other provisions like Section 10(20) or 10(20A) etc. The factum that ‘IDAs’ would be covered or not, under Section 10(20), would make no difference for the reason, if these authorities satisfy requirement of Section 12A(1), then are entitled for registration after following procedure laid down under Section 12AA. A mere wrong claim on the part of these authorities will not be of any disadvantage to them.

67. The consideration on the part of CIT (E), it appears, is more influenced by concept of first three heads of charitable trusts. Apparently, it has lost objectivity in looking into thrust, ambit and spirit of 4th head i.e. advancement of any other object of “general public utility”. This is a sheer ignoring scope and ambit of statutory provisions of UPID Act, 1976 beyond which respondents-authorities cannot function, being statutory bodies constituted under said Act. They have to function within the provisions of said Act.

68. CIT (E) has attempted to equate these ‘IDAs’ with private builders and developers. Para-11 of said order is reproduced as under:-

“The law requires a conjunctive test whereby objects have to be charitable and genuineness of charitable activities should be established for registration of application u/s 12A. Mere recital of objects or activities without cogent or corroborative evidence are not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. The applicant, in this case is primarily carrying out its business activities for making profit, just like any other private builder/ developer. The applicant is neither a local authority, nor carrying out any charitable activity, as such. Like any other private builder or developer is acquiring land at a very low price and then developing the land along with other public utilities, in order to attract the buyers and sell the developed plots/flats with high margin or profit. In the instant case, the documents on record do not suffice to establish the genuineness of activities. The Applicant did not file any specific reply to queries raised and Books of accounts and Vouchers etc were also not produced under the pretext of being “Voluminous”, so the claim of the Applicant regarding charitable activities could not be ascertained or verified. As such the findings of fact regarding its charitable activities or rather the lack thereof arrived at on the basis of the evidence filed and arguments addressed stand uncontroverted. This is fatal to the claim of the applicant.”

69. This endeavour, in our view, is thoroughly misconceived and shows immature approach and misapplication to the issue in question. Observations made in para-11 of the order passed by CIT (E), in our view, are nothing but an irrational, illogical and misconceived approach so as to exclude respondents-authorities from the ambit of definition of “charitable purposes”

70. In our view, Tribunal has rightly set at naught aforesaid illegality by setting-aside said order.

71. Entire discussion, if we summarise, can be placed in a small arena of judicial analysis, that is, a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for “charitable purposes” and seek registration under Section 12A(1) of Act, 1961.

72. There is another limb of issue with regard to manner in which CIT (E) has proceeded. It is seriously argued by learned counsel for respondents-authorities that CIT (E), while considering an application for registration under Section 12AA, is not supposed to examine “whether applicant is entitled for certain exemptions under Section 11 or 12 or not” since that is within the jurisdiction of Assessing Authority and not CIT (E). Reliance is placed on the judgements of certain High Courts which, in brief, we may discuss hereinafter.

73. First decision in the line is this Court’s judgement in Fifth Generation Education Society Versus Commissioner of Income Tax (1990) 185 ITR 634 (All) wherein it has been said that at the stage of considering application for registration, Commissioner is not to examine application of income. All that he may examine is whether application is made in accordance with the requirements of Section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He may also see whether objects of the trust are charitable or not, but it is not proper to examine application of income. The Commissioner is also not supposed to see whether any activity carried out by society is charitable in nature or not. That is not the requirement of Section 12A.

74. Gujarat High Court in N.N. Desai Charitable Trust Versus Commissioner of Income Tax 2000 (246) ITR 452 (Guj.) held that authority, examining the question whether a fund of institution is eligible to be certified for the purposes of Section 80G, is not to act as an Assessing Officer and pronounce upon the pending assessments. Commissioner, in examining this aspect, in respect of pending assessments, in our opinion, exceeded his jurisdiction while considering the application for approval. He, as a matter of fact, stepped into the jurisdiction of Assessing Officer.

75. In Sanjeevamma Hanumanthe Gowda Charitable Trust Versus Director of Income Tax (Exemption) (2006) 285 ITR 327 (Kar.) Karnataka High Court said:

“Having regard to the scheme of sections 11, 12 and 13 ultimately what the Commissioner has to look into is not the source of income to the trust but whether such income is applied for charitable or religious purposes. The satisfaction of the Commissioner should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee to claim exemption. For arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into writing in the form of trust deed. If on the date of the application the trust has received income from its property, then find out how the said income has been expended, and whether it can be said that the income is utilised towards charitable and religious purposes, i.e., towards the object of the trust. Therefore, for the purpose of registration under section 12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust.”

(emphasis added)

76. In Director of Income Tax Versus Foundation of Ophthalmic and Optometry Research Education Centre (2013) 355 ITR 361 (Del.), Delhi High Court said:-

“10…… the above provision would suggest that there are no restrictions of the kind which the Revenue is reading into in this case. In other words, the statute does not prohibit or enjoin the Commissioner from registering a trust solely based on its objects, without any activity, in the case of a newly registered trust. The statue does not prescribe a waiting period, for a trust to qualify itself for registration…….”

77. Recently Kerala High Court in Sree Anjaneya Medical Trust Versus Commissioner of Income Tax (2016) 382 ITR 399 (Ker.) has taken a similar view and observed that:-

“ ….10. It is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the trust and the application of its funds arises at the time of the assessment. Where benefits are claimed by the assessees in terms of section 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the trust, going by the binding judgements of the apex court, what is to be looked into is whether the trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act………

xxxx

xxxx.

13. Going by the provisions of sections 12A and 12AA of the Income-tax Act, we hold that the grounds raised by the registering authority and upheld by the appellate authority for rejection of registration to the appellant trust cannot be sustained. The authorities could have examined only the genuineness of the trust and its activities. They did not have material to hold that the trust was either not genuine or its activities were not what was professed in the deed of trust……”

(emphasis added)

78. A taxation statute is to be interpreted strictly but not to the extent of disturbing natural consequence, which is evident from a plain and simple reading, particularly when statute is unambiguous. When a provision is clear, there is no reason to go beyond enactment and find out some objective intention by mere guess work which may not have been there. Similarly, a statute cannot be interpreted from the individual’s conviction, conception and perception, but its general and common meaning applicable to all, should be applied whether one likes such consequence and effect of Legislation or not.

79. One objection, which has been advanced seriously, is that Tribunal should not have directed to grant registration since competent authority is Commissioner, therefore, Tribunal should have directed Commissioner to consider registration. In our view, this submission also sans merit. Tribunal exercises coextensive appellate power against the order of Commissioner. It is the last Court of fact. There is no restriction on the power of Tribunal. Section 254 of Act, 1961 empowers Tribunal to pass such orders as it deems fit. Therefore, in all the matters, where appeal is provided to Tribunal, its power is coextensive with the authorities whose orders are appealed before Tribunal. There is no reason to read power of Tribunal, in a manner so as to linger on a matter between different authorities, particularly when there is no such restriction under the statute and on the contrary, statute confers widest power upon Tribunal.

80. Looking from all angles and giving our serious thoughts and utmost consideration to the arguments advanced on behalf of both sides and in the light of discussions made above, we have no hesitation in answering questions 1 and 2 in favour of respondents-authorities and against appellant-Revenue.

81. With respect to Question No. 3 learned counsel for Revenue sought to argue that jurisdiction of respective Tribunals should be determined with reference to place wherefrom order subjected to appeal is passed. It is, thus, contended that since order was passed by CIT(E) at Lucknow, therefore, in view of Rule 4(1) read with Notification dated 29.05.2001, appeal should have been filed at Lucknow Bench and not at Delhi.

82. We find that jurisdiction is not to be determined, as per aforesaid notification, with reference to the place where order under appeal was passed, but it has to be determined with reference to the location of office of Assessing Officer. Para- 4 of Standing Order under Income Tax Appellate Tribunal, Rules 1963 (hereinafter referred to as “Rules, 1963”) issued with reference to Rule 4 (1) of Rules, 1963 reads as under:

“4. The ordinary jurisdiction of the Bench will be determined not by the place of business or residence of the assessee but by the location of the office of the Assessing Officer.”

83. We may also mention, at this stage, that in the aforesaid Standing Order, jurisdiction of various Benches constituted at different places, have been given in detail and jurisdiction of Delhi Bench has been given at Serial No. 11 and it covers District Gautam Budh Nagar also. Item 11 of the aforesaid Standing Order giving details of territorial jurisdiction of Delhi Bench of Income Tax Tribunal reads as under:

11. Delhi Benches (7)

– National Capital of Territory of Delhi. – Districts of Bhiwani, Faridabad, Gurgaon, Hissar, Jhajjar, Karnal, Mohindergarh, Ranipat, Rewari, Rohtak and Sonepat of Haryana. – District of Badaun, Bijnor, Bulandshahr, Gautam Budh Nagar, Ghaziabad, Jyotiba Rao Phule Nagar, Meerut, Moradabad, Muzaffar Nagar, Rampur and Saharanpur of Uttar Pradesh. – District of Almora, Chamoli, Dehradun, Haridwar, Nainital, Pauri Garhwal, Pithoragarh, Tehri Garhwal, Udham Singh Nagar and Uttarkashi of Uttaranchal.

84. In the present case, Assessing Authority of respondents is at Gautam Budh Nagar and, therefore, Delhi Bench has jurisdiction to entertain appeal.

85. Question 3, accordingly, is also answered against Revenue.

86. In the result, all the appeals fail and are dismissed with costs.