Case Law Details
Improvement Trust Vs ACIT (ITAT Chandigarh)
ITAT Chandigarh held that receipts of the assessee trust from its activities of sale of plots, flats and commercial booths and also its income earned form non-construction fee, transfer fee, penal interest and compounding fee, etc., are held to be entitled for exemption under Section 11 of the I.T. Act.
Facts- Vide notice issued u/s 143(1) of the Income Tax Act, 1961, the Assessee was asked to show cause as to why exemption u/s. 11 and 12 of the I.T. Act be not disallowed.
It was stated that it had been observed that the Assessee had earned income from sale of land, non-construction fee, transfer fee, penal rent, compounding fee, etc.; that the trust was mainly doing the work of sale of plots, SCOs, SCFs, booths, other commercial and residential places, etc., at market rates, and of development of land; that the Assessee buys land at nominal cost, develops it, cuts it into small plots and sells it at a much higher price in order to earn profits; that these activities of the trust are in the nature of trade, commerce or business and are similar to the activities of a builder operating on commercial lines and cannot be construed as charitable activities; and that in order to qualify for claiming deduction u/s 11 and 12 of the I.T. Act, for carrying out the charitable work of ‘general public utility’, the trust must fulfill the conditions laid down in the proviso to section 2(15) of the I.T. Act.
AO concluded that the Assessee was covered by the proviso to section 2(15) of the I.T. Act and could not be held to be engaged in charitable activities; that therefore, the Assessee was not liable for exemption u/s 11 and 12 of the I.T. Act. CIT(A) dismissed the appeal.
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