Commissioner Of Income Tax-Bikaner v. Urban Improvement Trust, Sriganganagar(D.b.income Tax Appeal

Reportable COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) IN THE HIGH COURT OF JUDICATURE FORRAJASTHAN AT JODHPUR JUDGMENT 1.COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12) 2.COMMISSIONER OF INCOME TAX-BIKANER VS. URBAN IMPROVEMENT TRUST, SRIGANGANAGAR(D.B.INCOME TAX APPEAL NO.92/13) 3.COMMISSIONER OF INCOME TAX-BIKANER VS. URBAN IMPROVEMENT TRUST, SRIGANGANAGAR(D.B.INCOME TAX APPEAL NO.95/13) 4.COMMISSIONER OF INCOME TAX-BIKANER VS. URBAN IMPROVEMENT TRUST, SRIGANGANAGAR(D.B.INCOME TAX APPEAL NO.96/13) 5.COMMISSIONER OF INCOME TAX-BIKANER VS. URBAN IMPROVEMENT TRUST, SRIGANGANAGAR(D.B.INCOME TAX APPEAL NO.98/13) 6.COMMISSIONER OF INCOME TAX (EXEMPTION), JAIPUR VS. URBAN IMPROVEMENT TRUST, SRI GANGANAGAR(D.B.INCOME TAX APPEAL NO.12/15) 5[th] July, 2016. Dated:- HON'BLE MR.JUSTICE SANGEET LODHAHON'BLE MR.JUSTICE KAILASH CHANDRA SHARMA Mr.K.K.Bissa, for the appellant/Revenue. Mr.Anjay Kothari with Mr.Bhagirath Patel, forrespondent/Jodhpur Development Authority, Jodhpur.Mr.Dinesh Mehta with Mr.Sharad Kothari, forrespondent/Urban Improvement Trust, Sri Ganganagar. BY THE COURT (PER HON'BLE MR.SANGEET LODHA,J.) 1.These appeals arising out of various orders passed by the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench,Jodhpur, raising a common question of law regarding theentitlement of Jodhpur Development Authority (JDA),Jodhpur and Urban Improvement Trust (UIT), SriGanganagar, under Section 12A of the Income Tax Act,1961 (for short “the Act of 1961”), were heard together andare being disposed of by this common judgment. 2.The Appeal No.63/12 is directed against order dated19.1.12 of the ITAT, Jodhpur, partly allowing the appealpreferred by the assessee-JDA, Jodhpur, against the orderdated 22.3.10 of Commissioner of Income Tax-I (CIT-I),Jodhpur, rejecting an application seeking registration underSection 12A read with Section 12AA of the Act of 1961.Similarly, the Appeal No.92/13, is directed against the orderof ITAT dated 18.1.13, allowing an appeal preferred by theUIT, Sri Ganganagar, against the order dated 28.3.11 ofCommissioner of Income Tax (CIT), Bikaner, rejecting its COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) application seeking registration under Section 12A of the Act of 1961. The Appeal Nos.95/13, 96/13 and 98/13 aredirected against a common order of the ITAT dated 18.1.13of the ITAT, Jodhpur, allowing the appeals of the assessee-UIT, Sri Ganganagar against the different orders of theCommissioner of Income Tax (Appeals) [CIT (A)], affirmingthe assessment orders passed by the Assessing Officer(AO), for the assessment years 2004-05, 2005-06 and2006-07 and remanding the matter back to the AO for allthe assessment years. The Appeal No.12/15 is directedagainst the order of the ITAT, Jodhpur dated 23.7.14,dismissing the appeal of the Revenue against the orderdated 30.10.13 of CIT(A),Bikaner, partly allowing theappeal of assessee-UIT, Sri Ganganagar, against theassessment order dated 26.12.12 passed by the AO for theassessment year 2010-11, keeping in view the registrationgranted to the assessee under Section 12A of the Act of1961. 3.These appeals were admitted by this court by differentorders on the following substantial questions of law: COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 4 Appeal No.63/12 3.These appeals were admitted by this court by differentorders on the following substantial questions of law: COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 4 Appeal No.63/12 “Whether on the facts and in the presentcircumstances of the case, the learned Tribunal wasjustified in directing grant of registration to theAssessee despite the facts that it clearly falls withinthe ambit of First Proviso to S.2(15) of the Act?” Appeal No.92/13 “Whether on the facts and in the presentcircumstances of the case, the learned Tribunal wasjustified in directing grant of registration to theAssessee despite the facts that it clearly falls withinthe ambit of First Proviso to S.2 (15) of the Act?” Appeal No.95/13 “Whether the Income Tax Appellate Tribunal isjustified in deleting the additions made by assessingofficer by treating the Urban Improvement Trust,Sriganganagar, a commercial establishment?” Appeal No.96/13 “Whether the Income Tax Appellate Tribunal isjustified in deleting the additions made by assessingofficer by treating the Urban Improvement Trust,Sriganganagar, a commercial establishment?” Appeal No.98/13 “Whether the Income Tax Appellate Tribunal isjustified in deleting the additions made by assessingofficer by treating the Urban Improvement Trust,Sriganganagar, a commercial establishment?” Appeal No.12/15 “Whether the Income Tax Appellate Tribunal is COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 5 justified in deleting the additions made by AssessingOfficer by treating the Urban Improvement Trust,Sriganganagar, a commercial establishment?” 4.Precisely, the question comes for consideration of thiscourt is whether the activities of JDA, Jodhpur and UIT, SriGanganagar, which have been constituted and establishedby the Government of Rajasthan under the provisions ofJodhpur Development Authority Act, 2009 ('JDA Act') andUrban Improvement Trust Act, 1959 ('UIT Act'), for thepurposes of planning, coordinating and supervising theproper, orderly and rapid development of Jodhpur Regionand for the purposes of improvement and expansion of theurban area of Sri Ganganagar as specified, respectively, fallwithin the definition of 'charitable purposes' as definedunder Section 2(15) of the Act of 1961 so as to make thementitled to registration under the provisions of Section 12Aread with Section 12AA of the Act of 1961, for claiming thebenefit of exemption under Section 11 and 12 read withSection 13 of the Act of 1961? 5.Learned counsel appearing for the Revenue submittedthat it is not in dispute that the JDA, Jodhpur and UIT, Sri COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 5.Learned counsel appearing for the Revenue submittedthat it is not in dispute that the JDA, Jodhpur and UIT, Sri COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) Ganganagar, were created for the purpose of developmentof city of Jodhpur and the urban area of Sri Ganganagarrespectively by executing the plans, projects and schemefor such development and to provide for matter connectedtherewith but then, the source of income/receipt of JDA,Jodhpur and UIT, Sri Ganganagar is from sale of developedland, plots, constructed houses, shops, rents and also houseproperty, tax, interest on advances/FDR, land useconversion charges etc.; the activities which are beingcarried out systematically, continuously and regularly forearning profit at commercial level. Learned counselcontended that the ITAT has not appreciated the purposeand meaning of first proviso to Section 2(15) of the Act of1961 brought on statute book by Finance Act, 2008 w.e.f.1.4.09, which specifically provides that the advancement ofany object of public utility shall not be charitable purpose,if it involves the carrying on of any activity of rendering anyservice in relation to any trade, commerce or business, fora cess or fee or any other consideration irrespective ofnature of use or application or retention of the income from COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 7 such activity. Learned counsel would submit that theactivities of JDA, Jodhpur and UIT, Sri Ganganagar being inthe nature of trade, commerce and business, theadvancement of objects of general public utility by theseestablishments cannot be recognized as charitable purposeso as to make them entitle for registration under Section12A read with Section 12AA of the Act of 1961. Learnedcounsel submitted that the ITAT has seriously erred inobserving that pre dominant object of the assessees beingto carry out charitable purpose, such activity will not looseits character of charitable purpose merely because someprofit arises from such activities. In support of thecontention, learned counsel has relied upon a Benchdecision of Jammu & Kashmir High Court in the matter of“Jammu Development Authority vs. Union of India & Anr.”(ITA No.164/12, decided on 12.11.13).6.On the other hand, learned counsel appearing for theassessee-JDA, Jodhpur, while drawing the attention of thiscourt to the provisions of Section 3 of the JDA Act,contended that JDA has been constituted and established COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) under the JDA Act to secure the integrated development ofJodhpur Region as defined under Section 2(8) of the JDAAct. Learned counsel submitted that so as to achieve thesaid object for which the JDA is constituted, it is required todischarge the functions as specified under Section 16 of JDAAct, which are certainly the functions to be discharged forthe welfare of public at large. Learned counsel submittedthat Section 2(15), gives inclusive definition of 'charitablepurpose' and while specifically including relief of the poor,education, medical relief, preservation of environmentincluding water sheds, forests and wildlife and preservationof monuments of places or objects of artistic or historicinterest, it is provided that the advancement of any otherobject of general public utility, shall also fall within its ambitand therefore, the advancement of any object for benefit tothe public or a section of the public as distinguished frombenefit to an individual or a group of individuals would becharitable purpose. Learned counsel submitted thatindubitably, the JDA has been constituted and establishedfor the development of Jodhpur Region and its primary COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) purpose and pre dominant object is to promote welfare ofthe general public and not to extend any benefit to anindividual or group of individuals and therefore, even ifsome profit earning activity is undertaken by the JDA, whichis ancillary or incidental to its dominant object, it will not beceased to be an institution engaged in advancement of theobjects of general public utility or an institution engaged incarrying out charitable purposes. In support of thecontentions, learned counsel has relied upon a decisions ofthe Hon'ble Supreme Court in the matters of“Commissioner of Income Tax vs. Gujarat Maritime Board”,(2008) 295 ITR, 561, CIT vs. Andhra Chamber ofCommerce”, (1965) 55 ITR, 722 and “CIT vs. A.P.StateRoad Transport Corporation”, (1986) 159 ITR, 1, thedecision of Allahabad High Court in the matter of “CIT vs.Lucknow Development Authority”, (2014) 264 CTR 433(All.),decisions of Gujarat High Court in the matters of “CITvs. Kandla Port Trust”, (2014) 364 ITR 164 (Guj.) and “CITvs. Rajkot Municipal Corporation”, (2014) 112 DTR 363(Guj.) and a decision of this court in the matter of “CIT-II, COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) Jodhpur vs. Krishi Upaj Mandi Samiti, Didwana” (D.B.Income Tax Appeal No.181/10, decided on 16.1.15). 7.Learned counsel appearing on behalf of the assessee-UIT, Sri Ganganagar submitted that UIT, Sri Ganganagar isa statutory body, established by the State Government inexercise of the power conferred under Section 8 of UIT Actfor the purpose of carrying out the improvement of theurban area of Sri Ganganagar as specified by a notificationissued under Section 3 of the UIT Act. Learned counselsubmitted that the main objects of the assessee are toprepare the Master Plan and the Scheme for planneddevelopment and execution thereof, to construct the roads,to provide water and electricity facility, to construct thedrainage system, to improve the gardens and open spaces,to provide housing facility by allotting the residential plotsetc. which are in the nature of general public utility andtherefore, even if in furtherance of the object, some activityis undertaken by the assessee wherein income is earned butwhich does not involve profit motive as such, such activitybeing ancillary and incidental to the objects of the assessee, COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 11 the predominant object of the assessee of undertakingactivity of general public utility shall not cease to be anactivity for charitable purpose. Learned counsel submittedthat the activity of the assessee squarely falls within thedefinition of 'charitable purpose' within the meaning ofSection 2(15) of the UIT Act and therefore, the orderimpugned passed by the ITAT, holding the assessee entitledfor the benefit of registration under Section 12A of the Actof 1961, cannot be faulted with. In support of thecontentions, learned counsel has relied upon the decision ofthe Hon'ble Supreme Court in Gujarat Maritime Board'scase (supra), the decision of Madhya Pradesh High Court inthe matter of “CIT vs. Krishi Upaj Mandi Samiti”, (2011)331 ITR 140 (MP), the decision of this court in the matter of“CIT vs. Krishi Upaj Mandi Samiti”, (2011) 331 ITR 135(Raj.), the decision of Punjab & Haryana High Court in thematter of “CIT vs. Improvement Trust”, (2009) 308 ITR,361 (P& H), the decision of Allahabad High Court in thematter of “CIT-I vs. State Urban Development Agency(SUDA)”, (2013) 218 TAXMAN, 146 (All) and a decision of the Karnataka High Court in the matter of “CIT vs. BagalkotTown Development Authority”, MANU/KA/3984/2015. the Karnataka High Court in the matter of “CIT vs. BagalkotTown Development Authority”, MANU/KA/3984/2015. 8.We have considered the rival submissions of thelearned counsels for the parties and perused the relevantprovisions as also the various decisions cited at the Bar. 9.Before proceeding to examine the issue whether theactivities of the assessees fall within the definition of'charitable purposes' so as to make them entitle forregistration under Section 12A of the Act of 1961, thereference to the provisions germane to the lis between theparties, would be apposite. 10.As per the Section 11 (1) of the Act of 1961, subjectto provisions of Section 60 to 63, the income of thecharitable or religious trust in receipt of the income asspecified under sub clauses of the aforesaid section, appliedfor charitable or religious purposes and the income in formvoluntary contribution with the specific directions that theyshall form part of the corpus of the trust or institution in themanner and to the extent specified shall not be included inthe total income of the previous year. Sub-section (2) of COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) Section 11 deals with situation where income referred to inclause (a) and (b) of sub-section (1) read with Explanationto the sub-section is not applied or is not deemed to havebeen applied to the charitable purpose or religious purposesin India during the previous year but is accumulated or setapart either in whole or in part for application to suchpurposes in India and mandates that such income shall notbe included in the total income of the previous year of theperson in the receipt of the income on the compliance of theconditions specified in sub-clauses (a) and (b). Sub-section(3) of Section 11, provides that any income referred to insub-section (2) which is applied to purposes other thancharitable or religious purposes as aforesaid or ceases to beaccumulated or set apart for application thereto, or ceasesto remain invested or deposited in any of forms or modesspecified in sub-section (5) or is not utilized for the purposefor which it is so accumulated or set apart during the periodreferred to in clause (a) of that sub-section or in the yearimmediately following the expiry thereof or is credited orpaid to any trust or institution registered under Section 12A COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) or any fund or institution or trust or any university or other educational institution or any hospital or other medicalinstitution referred to in sub-clause (iv) or sub-clause (v) orsub-clause (vi) or sub-clause (via) of clause 23C of Section10, shall be deemed to be the income of such person of theprevious year in which it is so applied or ceases to beaccumulated or set apart or ceases to remain so invested ordeposited or credited or paid or as the case may be, of theprevious year immediately following the expiry of theaforesaid period. 11. Section 12 provides that any voluntary contributionreceived by the trust created wholly for charitable orreligious purposes or any institution established wholly forsuch purposes, not being contributions made with thespecific direction that they shall form part of corpus of thetrust or institution shall for the purposes of Section 11 bedeemed to be income derived from property held undertrust wholly for charitable or religious purposes and theprovisions of that section and Section 13 shall applyaccordingly. COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 15 12.Section 13, a non obstante clause provides that the 11. Section 12 provides that any voluntary contributionreceived by the trust created wholly for charitable orreligious purposes or any institution established wholly forsuch purposes, not being contributions made with thespecific direction that they shall form part of corpus of thetrust or institution shall for the purposes of Section 11 bedeemed to be income derived from property held undertrust wholly for charitable or religious purposes and theprovisions of that section and Section 13 shall applyaccordingly. COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 15 12.Section 13, a non obstante clause provides that the provisions of Section 11 or Section 12 shall not operate asto exclude from total income of the previous years of theperson in respect of various income enumerated underclauses (a) to (d) thereof. 13.But then, applicability of provisions of Section 11 andSection 12 of the Act of 1961 so as to claim the exclusionfrom total income of the previous year of the person issubject to fulfillment of the conditions specified underSection 12A of the Act, which includes the making of anapplication by the trust for registration and granting of theregistration by the Commissioner in accordance with theprocedure laid down under Section 12 AA.14.Section 12AA, lays down the procedure to be followedby the Commissioner for grant or refusal of the applicationseeking registration under clause (a) or clause (aa) of sub-section (1) of Section 12A. As per the procedure laid down,the registration shall be granted by the Commissioner onbeing satisfied about the objects of the trust or institutionand genuineness of its activities. By virtue of provisions of COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) sub-section (3) of Section 12AA, where a trust or institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time underSection 12A (as it stood before the amendment by theFinance(No.2) Act, 1996) and subsequently, theCommissioner is satisfied that such trust or institution arenot genuine or are not being carried out in accordance withthe objects of the trust or institution, as the case may be,he is empowered to pass an order in writing cancelling theregistration of such trust or institution after giving areasonable opportunity of being heard to the trust orinstitution. 15.It is to be noticed that the registration of the trust orinstitution under Section 12A is condition precedent forclaiming exemption under Section 11 & 12 of the Act butthe registration under Section 12A by itself does not make atrust or institution entitled to claim exemption underSection 11 & 12 of the Act unless, the conditions forclaiming exemption as envisaged under Section 11 & 12 ofthe Act, are satisfied. Obviously, the entitlement of the COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) person or the trust claiming exclusion of the income underSection 11 or 12 has to be determined by the AO aftermaking necessary inquiries regarding the fulfilment of therequisite conditions as enumerated under the aforesaidprovisions. But, the fact remains that under Section 12AA,the scope of the enquiry under Section 12AA for thepurpose of grant of registration under Section 12A shall beconfined with regard to the objects of the trust or institutionand genuineness of its activities and it cannot travel to theextent that whether the income of the trust in respectwhereof exemption is claimed, is wholly applied for thereligious or charitable purpose or not so as to make thementitle to claim exemption under Section 11 & 12 of the Actof 1961. person or the trust claiming exclusion of the income underSection 11 or 12 has to be determined by the AO aftermaking necessary inquiries regarding the fulfilment of therequisite conditions as enumerated under the aforesaidprovisions. But, the fact remains that under Section 12AA,the scope of the enquiry under Section 12AA for thepurpose of grant of registration under Section 12A shall beconfined with regard to the objects of the trust or institutionand genuineness of its activities and it cannot travel to theextent that whether the income of the trust in respectwhereof exemption is claimed, is wholly applied for thereligious or charitable purpose or not so as to make thementitle to claim exemption under Section 11 & 12 of the Actof 1961. 16.As noticed hereinabove, the contention of the Revenueis that since the assessees are involved in carrying onactivities in the nature of trade and commerce, by virtue offirst proviso to Section 2(15), their activity/objects cannotbe recognized as for charitable purposes so as to makethem entitled for registration under Section 12A of the Act COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) of 1961. 17.Section 2(15) of the Act of 1961 which defines'charitable purposes' reads as under: “(15) 'charitable purpose' includes relief of the poor,education, medical relief, preservation of environment(including watersheds, forests and wildlife) andpreservation of monuments or places or objects ofartistic or historic interest, and the advancement ofany other object of general public utility; Provided that the advancement of any otherobject of general public utility shall not be a charitablepurpose, if it involves the carrying on of any activity inthe nature of trade, commerce or business, or anyactivity of rendering any service in relation to anytrade, commerce or business, for a cess or fee or anyother consideration, irrespective of the nature of useor application, or retention, of the income from suchactivity; Provided further that the first proviso shall notapply if the aggregate value of the receipts from theactivities referred to therein is twenty-five lakh rupeesor less in the previous year;” 18.The 'charitable purpose' as defined under Section 2(15) and particularly, the expression 'any other object ofgeneral public utility' used therein, have been interpretedby the Hon'ble Supreme Court and various High Courts incatena of decisions, which may be beneficially referred. COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 19 19.In Andhra Chamber of Commerce's case (supra), while considering the expression 'object of general public utility' as used in Section 4(3) of the Income Tax Act, 1922, theHon'ble Supreme Court observed: 18.The 'charitable purpose' as defined under Section 2(15) and particularly, the expression 'any other object ofgeneral public utility' used therein, have been interpretedby the Hon'ble Supreme Court and various High Courts incatena of decisions, which may be beneficially referred. COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 19 19.In Andhra Chamber of Commerce's case (supra), while considering the expression 'object of general public utility' as used in Section 4(3) of the Income Tax Act, 1922, theHon'ble Supreme Court observed: “ The expression “object of general public utility” ins.4(3) would prima facie include all objects whichpromote the welfare of the general public. It cannotbe said that a purpose would cease to be charitableeven if public welfare is intended to be servedthereby if it includes the taking of steps to urge oroppose legislation affecting trade, commerce ormanufacture. If the primary purpose beadvancement of objects of general public utility, itwould remain charitable even if an incidental entryinto the political domain for achieving that purposee.g. promotion of or opposition to legislation”s.4(3) would prima facie include all objects whichpromote the welfare of the general public. It cannotbe said that a purpose would cease to be charitableeven if public welfare is intended to be servedthereby if it includes the taking of steps to urge oroppose legislation affecting trade, commerce ormanufacture. If the primary purpose beadvancement of objects of general public utility, itwould remain charitable even if an incidental entryinto the political domain for achieving that purposee.g. promotion of or opposition to legislation”concerning that purpose, is contemplated.(emphasis added)(emphasis added) 20.In Sole Trustee, Lok Shikshana Trust vs. CIT, (1975)101 ITR, 254, the Hon'ble Supreme Court observed:101 ITR, 254, the Hon'ble Supreme Court observed: “If the profit must necessarily feed a charitablepurpose under the terms of the trust, the mere factthat the activities of the trust yield profit will notalter the charitable character of the trust. Therestrictive condition that purpose should not involvethe carrying on of any activity for profit would besatisfied if profit making is not the object.”purpose under the terms of the trust, the mere factthat the activities of the trust yield profit will notalter the charitable character of the trust. Therestrictive condition that purpose should not involvethe carrying on of any activity for profit would besatisfied if profit making is not the object.” 21.In the matter of “Additional CIT vs. Surat Art Silk Cloth Manufactures Association”, (1980) 121 ITR, 1, the COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 21.In the matter of “Additional CIT vs. Surat Art Silk Cloth Manufactures Association”, (1980) 121 ITR, 1, the COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) Hon'ble Supreme Court held that if the primary or dominantpurpose of a trust or institution is charitable, another objectwhich by itself may not be charitable but which is merelyancillary or incidental to the primary or dominant purposewould not prevent the trust or institution from being a validcharity. The court further observed that true meaning of thewords in Section 2(15) viz. 'not involving carrying on anyactivity of profit' is that when the purpose of a trust orinstitution is advancement of an object of general publicutility, it is that object of general public utility which mustnot involve carrying on of any activity for profit and not itsadvancement or attainment. The court observed that whatis inhibited by these last ten words is the linking of activityfor profit with the object of general public utility and not itslinking with the accomplishment or carrying out of theobject. Thus, so long as purpose does not involve carryingon of any activity for profit, the requirement of definitionwould be met and it is immaterial how the money's forachieving or implementing such purpose are found whetherby carrying on an activity for profit or not. COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 21 22.In Andhra Pradesh Road Transport Corporation's case (supra), the Hon'ble Supreme Court while relying upon theearlier decisions in the matter of “Additional CIT vs. SuratArt Silk Cloth Manufactures Association”, (1980) 121 ITR 1and “CIT vs. Bar Council of Maharashtra”, (1981) 130 ITR28 (SC), held that if predominant object is to carry out acharitable purpose and not earn profit, the purpose wouldnot lose its charitable character merely because some profitarises from the activity. 23.In Gujarat Maritime Board's case (supra), the Hon'bleSupreme Court after due consideration of various earlierdecisions, observed : “We have perused a number of decisions of thiscourt which have interpreted the words, in section 2(15), namely , “any other object of general publicutility”. From the said decisions it emerges that thesaid expression is of the widest connotation. Theword “general” in the said expression meanspertaining to a whole class. Therefore, advancementof any object of benefit to the public or a section ofthe public as distinguished from benefit to anindividual or a group of individuals would be acharitable purpose(CIT v. Ahmedabad Rana CasteAssociation [(183) 140 ITR 1 (SC)]. The saidexpression would prima facie include all objectswhich promote the welfare of the general public. Itcannot be said that a purpose would cease to becharitable even if public welfare is intended to be served. If the primary purpose and the predominantobject are to promote the welfare of the generalpublic the purpose would be charitable purpose.When an object is to promote or protect the interestof a particular trade or industry that object becomesan object of public utility, but not so, if it seeks topromote the interest of those who conduct the saidtrade or industry (CIT v. Andhra Chamber ofCommerce [1965] 55 ITR 722 (SC)]. If the primaryor predominant object of an institution is charitable,any other object which might not be charitable butwhich is ancillary or incidental to the dominantpurpose, would not prevent the institution frombeing a valid charity (Addl. CIT v. Surat Art SilkCloth Manufacturers Association [1980] 121 ITR 1(SC)). served. If the primary purpose and the predominantobject are to promote the welfare of the generalpublic the purpose would be charitable purpose.When an object is to promote or protect the interestof a particular trade or industry that object becomesan object of public utility, but not so, if it seeks topromote the interest of those who conduct the saidtrade or industry (CIT v. Andhra Chamber ofCommerce [1965] 55 ITR 722 (SC)]. If the primaryor predominant object of an institution is charitable,any other object which might not be charitable butwhich is ancillary or incidental to the dominantpurpose, would not prevent the institution frombeing a valid charity (Addl. CIT v. Surat Art SilkCloth Manufacturers Association [1980] 121 ITR 1(SC)). The present case in our view is squarelycovered by the judgment of this court in the case ofCIT v. Andhra Pradesh State Road TransportCorporation [1986] 159 ITR 1 (SC) in which it hasbeen held that since the Corporation was establishedfor the purpose of providing efficient transportsystem, having no profit motive, though it earnsincome in the process, it is not liable to income-tax. Applying the ratio of the said judgment in thecase of Andhra Pradesh State Road TransportCorporation [1986] 159 ITR 1 (SC), we find that, inthe present case, the Gujarat Maritime Board isestablished for the predominant purpose ofdevelopment of minor ports within the State ofGujarat, the management and control of the Boardis essentially with the State Government and thereis no profit motive, as indicated by the provisions ofsections 73, 74 and 75 of the 1981 Act. The incomeearned by the Board is deployed for thedevelopment of minor ports in the State of Gujarat.In the circumstances, in our view the judgment ofthis court in Andhra Pradesh State Road TransportCorporation [1986] 159 ITR 1 squarely applies tothe facts of the present case.” (emphasis added) COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 24.In “Commissioner of Income Tax vs. Krishi Upaj MandiSamiti, Jaisalmer”, (2011) 331 itr 135 (Raj.), a Bench ofthis court while considering the entitlement of Krishi UpajMandi Samiti, a statutory body, constituted and establishedunder the Rajasthan Agricultural Produce Market Act, 1961,observed that may be the income received by the Samiti byway of cess or mandi fees is not shown to be spent whollyfor the purpose of relief of the poor, education, or medicalrelief, but under the scheme of the Act, being the RajasthanAgricultural Produce Markets Act, 1961, the entire amountreceived by the samiti is required to be spent for thepurposes mentioned therein, which obviously includeadvancement of “any other object of general public utility”. 25.In Lucknow Development Authority's case (supra),while examining the question regarding applicability ofproviso to Section 2(15), Allahabad High Court observed: “29. For the applicability of proviso to Section 2(15),the activities of the trust should be carried out oncommercial lines with intention to make profit. Wherethe trust is carrying out its activities on non-commercial lines with no motive to earn profits, forfulfillment of its aims and objectives, which arethe activities of the trust should be carried out oncommercial lines with intention to make profit. Wherethe trust is carrying out its activities on non-commercial lines with no motive to earn profits, forfulfillment of its aims and objectives, which are 25.In Lucknow Development Authority's case (supra),while examining the question regarding applicability ofproviso to Section 2(15), Allahabad High Court observed: “29. For the applicability of proviso to Section 2(15),the activities of the trust should be carried out oncommercial lines with intention to make profit. Wherethe trust is carrying out its activities on non-commercial lines with no motive to earn profits, forfulfillment of its aims and objectives, which arethe activities of the trust should be carried out oncommercial lines with intention to make profit. Wherethe trust is carrying out its activities on non-commercial lines with no motive to earn profits, forfulfillment of its aims and objectives, which are charitable in nature and in the process earn someprofits, the same would not be hit by proviso tosection 2(15). The aims and objects of the Mereselling some product at a profit will not ipso facto hitassessee by applying proviso to Section 2(15) anddeny exemption available under Section 11. Theintention of the trustees and the manner in which theactivities of the charitable trust institution areundertaken are highly relevant to decide the issue ofapplicability of proviso to Section 2(15).” 26.Coming to the decision of Jammu & Kashmir High Court in Jammu Development Authority's case (supra),relied upon by learned counsel for the Revenue, reveals thatthe appeal preferred by the Jammu Development Authoritywas dismissed by the court observing that there arefindings of facts that the assessee-appellant has not beenacting to advance any of the object concerning generalpublic utility. Further while referring to first proviso toSection 2(15), the court has observed that “we find that nosubstantial question of law much less a substantial questionof law would emerge from the impugned order of IncomeTax Appellate Tribunal warranting admission of the appeal.”A bare perusal of the order reveals that the catena ofdecisions of the Hon'ble Supreme Court referred tohereinabove, interpreting the effect of first proviso in COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) context of the main provision of Section 2(15), whichdefines 'charitable purpose', were not brought to the noticeof the court and therefore, the said order passed by thecourt by merely recording its ipse dixit does not help theRevenue in any manner. 27.From various decisions of the Hon'ble Supreme Courtdiscussed hereinabove, the settled position of law emergesis that if the primary or predominant object of an institutionis charitable, any other object which might not be charitablebut which is ancillary or incidental to the dominant purpose,may be involving element of profit, would not prevent theinstitution from being a valid charitable trust. 28. In the backdrop of settled position of law discussedhereinabove, adverting to the facts of the present case,indubitably, JDA is a statutory body constituted andestablished under the provisions of Section 3 of JDA Actwith a main object to secure the integrated development ofJodhpur Region and for that purpose to discharge inter aliathe functions of Urban Planning including preparation ofMaster Development Plan and Zonal Development Plans; 28. In the backdrop of settled position of law discussedhereinabove, adverting to the facts of the present case,indubitably, JDA is a statutory body constituted andestablished under the provisions of Section 3 of JDA Actwith a main object to secure the integrated development ofJodhpur Region and for that purpose to discharge inter aliathe functions of Urban Planning including preparation ofMaster Development Plan and Zonal Development Plans; formulation and sanction of the projects and schemes forthe development of Jodhpur Region or any part thereof;execution of the project and schemes directly by itself orthrough a local authority or other agency; coordinatingexecution of projects or schemes for the development ofJodhpur Region supervision or otherwise ensuring adequatesupervision over the planning and execution of any projector scheme the expenses of which in whole or in part are tobe met from Jodhpur Region Development Funds; preparingschemes and advising the concerned authorities,department and agencies in formulating and undertakingschemes for development of agriculture horticulture,forestry, dairy development, transport, communication,schooling, cultural activities, sports, medicine, tourism andsimilar other activities; to prepare Master Plan for trafficcontrol and management; devise policy and programmes ofaction for smooth flow of traffic and matters connectedtherewith; undertaking housing activity in Jodhpur Regionetc., are essentially the functions, which promote thewelfare of the general public. Of course, while discharging COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 27 the said functions, the JDA also discharges function toacquire, hold, manage and dispose of property movable orimmovable as may be deemed necessary and also entersinto contract, agreements or arrangements with any personor organization may deem necessary for performing itsfunction and in this process, it might be earning income butthe primary object of the JDA certainly does not involveany profit motive whatsoever. It is pertinent to note that asper the provisions of Section 51 of the JDA Act, for thepurpose of discharging the statutory functions, “TheJodhpur Region Development Fund” is created to which allmoney received by the authority is credited includingamount of contribution to be made by the StateGovernment, such other money as may be paid to theauthority by the State Government, Central Government orany other authority or agency by way of grant, loansadvances or otherwise, income derived from premium onsecond and subsequent sale of vacant land, income fromlevy on vacant land, all fees, costs and charges received bythe JDA under the JDA Act or any other law for time being COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 28 COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) 28 in force, all money received by the JDA from the disposal ofland buildings and other property movable and immovableand other transactions including lease money, urbanassessment development charges and other similar chargesand all money received by way of rents and profits or in anyother manner or from any other source. A fortiori, as perthe mandate of Section 54 of the JDA Act, all propertyfunds and other assets vesting in the JDA shall be held andapplied by it for the purposes and subject to the provisionsof the Act. Suffice it to say that the entire funds of the JDAis mandatorily required to be utilized for discharging thefunctions to achieve the object of integrated development ofJodhpur Region. Thus, predominant object of the JDA beingto secure the integrated development of the Jodhpur Regionwhich is undoubtedly falls within the expression'advancement of any other objects of general public utility'within the definition of Section 2(15) of the Act of 1961 andtherefore, on account of profit being earned by it throughsome of the activities, undertaken by it, which are ancillaryor incidental to the main object of general public utility, it COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) does not cease to be charitable in character so as to render it ineligible to claim registration under Section 12A readwith Section 12AA of the Act of 1961. As a matter of fact,it is not even the case of the Revenue that the object ofgeneral public utility sought to be achieved by constitutionand establishment of the JDA as such, involve carrying onof any activity for profit and therefore, it is immaterial ifsome income is earned by ancillary and incidental activities,which as per the mandate of the relevant statute, is usedfor achieving or implementing such object. The genuinenessof the activities of the JDA, which are regulated by theprovisions of the JDA Act and the Rules made thereunder,cannot be doubted. Thus, the order passed by the ITATholding the JDA, Jodhpur entitled for registration underSection 12A read with Section 12AA of the Act of 1961,does not suffer from any infirmity or illegality.29.Coming to the question of entitlement of UIT, SriGanganagar, for registration under Section 12A of the Actof 1961, as noticed above, the UIT, Sri Ganganagar, astatutory body, has been constituted and established under COMMISSIONER OF INCOME TAX-I, JODHPUR VS.JODHPUR DEVELOPMENT AUTHORITY, JODHPUR(D.B.INCOME TAX APPEAL NO.63/12 and five connected matters) Section 8 of UIT Act for the purpose of carrying outimprovement of ur