By Advs.sri.harisankar v. Menon

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN FRIDAY, THE 19TH DAY OF DECEMBER 2014/28TH AGRAHAYANA, 1936 ITA.No. 208 of 2014 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 792/Coch/2013 of I.T.A.TRIBUNAL,COCHINBENCH DATED 08-08-2014 APPELLANT(S)/APPELLANT/ASSESSEE: ----------------------------------------------------------- THE GREATER COCHIN DEVELOPMENT AUTHORITY S.A ROAD, KADAVANTHRA, KOCHI 20 REPRESENTED BY ITS SECRETARY BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON RESPONDENT(S)/RESPONDENT/REVENUE: ------------------------------------------------------------ THE JOINT DIRECTOR OF INCOME TAX, (OSD) (EXEMPTION), RANGE 4, KOCHI 689 006 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 21-11-2014,ALONG WITH ITA. 210/2014, THE COURT ON 19-12-2014 DELIVERED THEFOLLOWING: ITA NO.208/14 APPENDIX APPELLANT'S EXHIBITS ANNEXURE A:COPY OF ASSESSMENT ORDER U/S.143(3) OF TEINCOME TAX ACT, 1961 DATED 30/3/13. ANNEXURE B:COPY OF APPELLATE ORDER NO.ITA51/R-/E/CIT-II/2013-14 DATED 27.9.13. ANNEXURE C:COPY OF ORDER OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.792 AND793/COCH/2013 DATED 8.8.14. //True Copy// Rp PA to Judge ANTONY DOMINIC & ANIL K. NARENDRAN, JJ. =============================== I.T.A.Nos. 208 & 210 of 2014==================== Dated this the 19[th] day of December, 2014 J U D G M E N T Antony Dominic, J. In these Appeals filed by the Greater Cochin Development Authority, thecommon order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITANos.792 and 793/2013, which were filed by the appellant, are challenged. 2.Since the issues raised in these appeals are identical in nature, theseappeals were heard together and are being disposed of by the common judgmenttreating ITA No.208 of 2014 as the leading case. 3.The appellant is an authority constituted by the Government ofKerala, under the Town Planning Act for the planning and development of GreaterCochin Area. In so far as ITA No.208/2014 is concerned, the facts which arerelevant are that the appellant filed its return of income for the A.Y. 2009-10 on29.09.2009, returning total income at NIL and claiming exemption under Section11 of the Act. The Assessing Officer considered the matter and taking note of theamended provision of Section 2(15) of the Act, disallowed the exemptionclaimed. Accordingly, total income of `8,00,94,700/- was assessed to tax.Similarly, assessment pertaining to the A.Y. 2010-11 was also completed disallowing the exemption claimed and it is that issue which is raised in ITANo.210/2014. 4.Appeals were filed before the Commissioner of Income Tax(Appeals), who dismissed the appeals and confirmed the order of assessment.These orders were challenged before the Tribunal and the Tribunal by acommon order rendered on 08.08.2014 dismissed the appeals. It is in thesecircumstances, the appellant has filed these appeals under Section 260(A) ofthe Income Tax Act. 5.We heard the learned counsel for the appellant and the learnedstanding counsel appeared for the Revenue. 6.The question that arises for consideration in these appeals iswhether the activities of the appellant would qualify to be a charitablepurpose as defined in Section 2(15) of the Act to claim exemption as providedunder Section 11 of the Act. 7.Before we deal with the factual aspects relied on by the statutoryauthorities, we shall first refer to Section 2(15) which reads thus: 5.We heard the learned counsel for the appellant and the learnedstanding counsel appeared for the Revenue. 6.The question that arises for consideration in these appeals iswhether the activities of the appellant would qualify to be a charitablepurpose as defined in Section 2(15) of the Act to claim exemption as providedunder Section 11 of the Act. 7.Before we deal with the factual aspects relied on by the statutoryauthorities, we shall first refer to Section 2(15) which reads thus: “(15) “charitable purpose” includes relief of the poor,education, medical relief, preservation of environmentincluding watersheds, forests and wildlife and preservationof monuments or places or objects of artistic or historicinterest, and the advancement of any other object of generalpublic utility:education, medical relief, preservation of environmentincluding watersheds, forests and wildlife and preservationof monuments or places or objects of artistic or historicinterest, and the advancement of any other object of generalpublic utility: Provided that the advancement of any other object ofgeneral public utility shall not be a charitable purpose, if itinvolves the carrying on of any activity in the nature oftrade, commerce or business, or any activity of renderingany service in relation to any trade, commerce or business,for a cess or fee or any other consideration, irrespective ofthe nature of use or application, or retention, of the incomefrom such activity: Provided further that the proviso shall not apply if theaggregate value of the receipts from the activities referred totherein is twenty five lakhs rupees or less in the previousyear.” 8.In so far as the first part of Section 2(15) is concerned, evenaccording to the appellant, its activities are in advancement of objects ofgeneral public utility and it is therefore claimed that their objects are of acharitable purpose. If as contended, the objects of the appellant are inadvancement of general public utility, then the appellant will have to satisfythe requirements of the first proviso to the section. This proviso shows that ifthe objects of an assessee involves the carrying on of any activity in the natureof trade, commerce or business or any activity of rendering any service inrelation to any trade, commerce or business for a cess or fee or any otherconsideration, the object carried on by the assessee for advancement ofgeneral public utility shall not be a charitable purpose. It is also clear from : 4 : the last part of this proviso that the above shall be the conclusion irrespectiveof the nature of use or application or retention of the income from suchactivity of the assessee. This is the scope and purport of Section 2(15) whichwas amended and is brought into the present form with effect from01.04.2009. 9.The contention raised by the appellant is that while appreciatingtheir case, regard must be had to the question whether their dominant objectis to do business. According to the appellant, it is only on that basis, it shouldbe found out whether they are carrying on activities in the nature of trade,commerce or business. In support of this contention, learned counsel for theappellant placed considerable reliance on the judgment of the Apex court inAddl. CIT, Gujarat v. Surat Art Silk Cloth Manufacturers Association, Surat(1980 (121) ITR 1), where the Apex court held that where the predominantobject of the activity is to carry out the charitable purpose and not to earnprofit, the assessee would not lose its character of charitable purpose merelybecause some profit arises from the activity carried on by it. The assesseealso referred us to the budget speech of the Finance Minister whileintroducing the Finance Bill 2008 and also Circular No.11 of 2008, dated19.12.2008 and contended that only in a situation where an assessee is trying to cover up its actual commercial activities in the guise of charity that thebenefit of Section 2(15) can be denied. to cover up its actual commercial activities in the guise of charity that thebenefit of Section 2(15) can be denied. 10.These contentions raised by the assessee will have to beappreciated with reference to the undisputed facts available on record.Before we undertake that exercise, we wish to clarify that when the abovereferred judgment relied on by the appellant was rendered, Section 2(15)merely provided that charitable purpose includes relief of the poor, education,medical relief and the advancement of any other object of general publicutility not involving the carrying on of any activity for profit. It wasconsidering the scope of this provision that the Apex Court held that the testwhich has to be applied is whether the predominant object of the activityinvolved in carrying out the object of general public utility is to subserve thecharitable purpose or to earn profit and that where profit making is thepredominant object of the activity, the purpose, though an object of generalpublic utility, would cease to be a charitable purpose. In this context, what isimportant to be noticed is that the statutory provision as it obtained then didnot contain any proviso which clarified the circumstances in which theadvancement of any other object of general public utility shall not be acharitable purpose. : 6 : 11.Having clarified the factual position as above, we shall now dealwith the case of the appellant and find out whether there is any substance intheir contention that their activities would qualify to be a charitable purposeas defined in Section 2(15) of the Act. According to the counsel, the appellantwas established by the Government of Kerala to satisfy the need for housingaccommodation of various sections of the people and especially for planningand development in the cities, towns and villages. It was therefore that theypointed out that they acquired land at nominal rates, developed the same andsell it to general public. It was also their case that they are executing severalworks of infrastructural development such as markets, water supply andsewerage, development of sports complexes, bridges, bus stand, swimmingpools, community centers, public toilets, parks, cremation grounds, schoolsetc,. 12.We have already stated that for the assessment year, the totalincome assessed was `8,00,94,700/-. It is undisputed that the appellant ischarging fees for supervision and centage charges, permission for transfer ofland, copy of records, cost of forms, cost of plans, booklets and that theincome on this account during the assessment year 2009-10 was`1,23,11,413/-. It is also undisputed that the appellant has developed several commercial centers and rented it out and that the appellant itself isresponsible for the maintenance, upkeep and the provision of commonfacilities. The total receipts of such letting out and maintenance chargesduring the assessment year came to `4,09,73,498/-. It is also admitted thatthe commercial space developed by the assessee is auctioned by it to thehighest bidder. These activities that are carried on by the assessee are forconsideration and purely on commercial lines and these are activities whichany other real estate developer is engaged in. It was considering theseadmitted facts that the assessing officer and the appellate authorities haveconcurrently come to the conclusion that the activities carried on by theassessee are in the nature of trade, or commerce or business, and that theassessee is receiving consideration in return for its activities. 13.Considering the nature of the activities that are carried on by theassessee, the factual correctness of which is undisputed, we can only endorsethe view taken by the statutory authorities that in view of the proviso toSection 2(15), the activities of the assessee do not qualify to be charitablepurpose as defined therein. In such a scenario, the assessing officer wasjustified in disallowing the exemption claimed and assessing to tax the incomeof the assessee and the appellate authorities were justified in confirming the : 8 : same. In such circumstances, we don’t see any question of law arising in these appeals to be considered by this Court under Section 260(A) of the IncomeTax Act. 14.For these reasons, ITA No.208/2014 is dismissed. Since the issue raised in ITA No.210/2014 is identical in all respectsand in view of our conclusion as above, this appeal is also dismissed. Sd/- ANTONY DOMINIC JUDGE Rp Sd/- ANIL K. NARENDRAN JUDGE //True Copy//PA TO JUDGE