The Commissioner Of Income Tax, Alwar v. Urban Improvement Trust, Bhiwadi, Alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 353 / 2011 THE COMMISSIONER OF INCOME TAX, ALWAR ----Appellant Versus URBAN IMPROVEMENT TRUST, BHIWADI, ALWAR ----Respondent Connected With D.B. Income Tax Appeal No. 366 / 2011 THE COMMISSIONER OF INCOME TAX, ALWAR ----Appellant Versus URBAN IMPROVEMENT TRUST, BHAGAT SINGH CIRCLE, ALWAR ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sameer Jain For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 24/07/2017 In both these appeals common questions of law and factsare involved, hence, they are decided by this common judgment. 1.By way of these appeals, the department has assailed thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the assessee reversing the order of AO andCIT(A). 2.This Court while admitting the matter framed the following question of law:- “i) Whether under the facts and in thecircumstances of the case, the ld. Tribunal isjustified in holding that the object and purpose ofassessee are charitable falling u/s 2(15) of the I.T.Act and further directing the CIT to allowregistration u/s 12A of the Income Tax Act.?” 3.In view of the decision of this Court in the case ofCommissioner of Income Tax vs. Jodhpur Development Authority,(2016) 287 CTR (Raj.) 473 wherein it has been held as under:- “12. But then, applicability of provisions of s. 11and s. 12 of the Act of 1961 so as to claim theexclusion from total income of the previous year ofthe person is subject to fulfillment of the conditionsspecified under s. 12A of the Act, which includes themaking of an application by the trust for registrationand granting of the registration by the CIT inaccordance with the procedure laid down under s.12AA. 13. Sec. 12AA lays down the procedure to befollowed by the CIT for grant or refusal of theapplication seeking registration under cl. (a) or cl.(aa) of sub-s. (1) of s. 12A. As per the procedurelaid down, the registration shall be granted by theCIT on being satisfied about the objects of the trustor institution and genuineness of its activities. Byvirtue of provisions of sub-s. (3) of s. 12AA, wherea trust or institution has been granted registrationunder cl. (b) of sub-s. (1) or has obtainedregistration at any time under s. 12A (as it stoodbefore the amendment by the Finance (No. 2) Act,1996) and subsequently, the CIT is satisfied thatsuch trust or institution are not genuine or are notbeing carried out in accordance with the objects ofthe trust or institution, as the case may be, he isempowered to pass an order in writing canceling theregistration of such trust or institution after giving areasonable opportunity of being heard to the trustorinstitution. 14. It is to be noticed that the registration of thetrust or institution under s. 12A is conditionprecedent for claiming exemption under ss. 11 and12 of the Act but the registration under s. 12A by 14. It is to be noticed that the registration of thetrust or institution under s. 12A is conditionprecedent for claiming exemption under ss. 11 and12 of the Act but the registration under s. 12A by itself does not make a trust or institution entitled toclaim exemption under ss. 11 and 12 of the Actunless, the conditions for claiming exemption asenvisaged under ss. 11 and 12 of the Act, aresatisfied. Obviously, the entitlement of the personor the trust claiming exclusion of the income underss. 11 or 12 has to be determined by the AO aftermaking necessary inquiries regarding the fulfillmentof the requisite conditions as enumerated under theaforesaid provisions. But, the fact remains thatunder s. 12AA, the scope of the enquiry under s.12AA for the purpose of grant of registration unders. 12A shall be confined with regard to the objectsof the trust or institution and genuineness of itsactivities and it cannot travel to the extent thatwhether the income of the trust in respect whereofexemption is claimed, is wholly applied for thereligious or charitable purpose or not so as to makethem entitle to claim exemption under ss. 11 and12 of the Act of 1961.” 4.After considering the Gujarat Judgment in the case of CIT vs.Gujarat Maritime Board's (2008) 214 CTR (SC) 81; the SupremeCourt observed as under:- "We have perused a number of decisions of thisCourt which have interpreted the words in s.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,advancement of any object of benefit to the publicor a section of the public as distinguished frombenefit to an individual or a group of individualswould be a charitable purpose [CIT v. AhmedabadRana Caste Association : (1983) 140 ITR 1 (SC)].The said expression would prima facie include allobjects which promote the welfare of the generalpublic. It cannot be said that a purpose wouldcease to be charitable even if public welfare isintended to be served. If the primary purpose andthe predominant object are to promote the welfareof the general public the purpose would becharitable purpose. When an object is to promoteor protect the interest of a particular trade orindustry that object becomes an object of public utility, but not so, if it seeks to promote theinterest of those who conduct the said trade orindustry CIT v. Andhra Chamber of Commerce :(1965) 55 ITR 722 (SC). If the primary orpredominant 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 : (1979) 13 CTR(SC) 378 : (1980) 121 ITR 1 (SC). The present case in our view is squarely coveredby the judgment of this Court in the case of CIT v.Andhra Pradesh State Road Transport CorporationMANU/SC/0252/1986 : (1986) 52 CTR (SC) 75 :(1986) 159 ITR 1 (SC) in which it has been heldthat since the Corporation was established for thepurpose of providing efficient transport system,having no profit motive, though it earns income inthe process, it is not liable to income-tax. The present case in our view is squarely coveredby the judgment of this Court in the case of CIT v.Andhra Pradesh State Road Transport CorporationMANU/SC/0252/1986 : (1986) 52 CTR (SC) 75 :(1986) 159 ITR 1 (SC) in which it has been heldthat since the Corporation was established for thepurpose of providing efficient transport system,having no profit motive, though it earns income inthe process, it is not liable to income-tax. Applying the ratio of the said judgment in the caseof CIT v. Andhra Pradesh State Road TransportCorporation (supra), we find that, in the presentcase, the Gujarat Maritime Board is established forthe predominant purpose of development of minorports within the State of Gujarat, the managementand control of the board is essentially with theState Government and there is no profit motive, asindicated by the provisions of ss. 73, 74 and 75 ofthe 1981 Act. The income earned by the board isdeployed for the development of minor ports in theState of Gujarat. In the circumstances, in our viewthe judgment of this Court in Andhra PradeshState Road Transport Corporation (supra) squarelyapplies to the facts of the present case." 5.In that view of the matter, the issue is required to beanswered in favour of the assessee against the department. 6.Both the appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/66-67