A.P.Housing Board, Hyderabad vs Assessee

A.P. Housing Board, Hyderabad vs. Director of Income Tax (Exemption), Hyderabad PAN - ALZPG0232L (Appellant) (Respondent)

Assessee by : Shri A.V. Raghuram Revenue by : Smt. G. Aparna Rao

Date of hearing 01-05-2015 Date of pronouncement 03 -06-2015

O RDE R

PER SAKTIJIT DEY, J.M.:

This appeal filed by assessee is directed against the order dated 11/02/2005 passed by ld. DIT(E), Hyderabad rejecting assessee's application seeking registration u/s 12A of the Act.

2. Briefly stated, assessee is a Board constituted by the legislature under A.P. Housing Board Act, 1956. All along assessee had been filing its return of income treating itself as a local authority and claimed exemption u/s 10(20) of the Act. However, once assessee lost the benefit of exemption after amendment of section 10(20) w.e.f. 01/04/2003, assessee made an application in form No. 10A on 23/08/2004 seeking registration u/s 12A of the Act. In course of proceeding for grant of registration, ld. DIT(E) called upon assessee to furnish certain information/evidences to substantiate its claim that it is engaged in charitable activity. After verifying the information submitted as well as considering the submissions made 2 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

by assessee, ld. DIT(E) held that exemption u/s 11 cannot be a substitute or alternative for exemption earlier granted u/s 10(20) of the Act to a local authority. Further, ld. DIT(E) held that assessee is merely engaged in construction of housing projects and selling them to prospective buyers, therefore, the activity of assessee is more or less like any other real estate developer/builder, hence, the activity/object of assessee cannot be considered to be a charitable in nature. On the aforesaid basis, ld. DIT(E) held that assessee is not eligible for registration u/s 12A of the Act.

3. Being aggrieved of the aforesaid order of ld. DIT(E), assessee filed appeal before the ITAT. However, appeal was filed with a delay of 1013 days. Though, assessee before the Tribunal pleaded for condonation of delay, but, the ITAT on considering submissions of assessee along with the cause shown for delay were not satisfied with the reason shown and accordingly dismissed the appeal of assessee vide order dated 14/05/2010 passed in ITA No. 110/Hyd/2008 without condoning the delay. The aforesaid order of the ITAT was challenged by assessee before the Hon'ble A.P. High Court. The Hon'ble High Court after considering the submissions of the parties condoned the delay and directed ITAT to decide the appeal of assessee on merit. Thus, at the direction of the Hon'ble A.P. High Court, the appeal is being reheard.

4. Ld. AR more or less reiterating the submissions made before ld. DIT(E) stated that assessee a statutory body has been created for providing housing facilities to different income groups and as such is doing a charitable activity of mitigating the housing problem of the general public. Ld. AR referring to the objects of assessee by taking us through different provisions of the A.P. Housing Board Act submitted, assessee is providing housing facility to the general public at much concessional rate, hence, cannot be compared with private real estate developers/builders whose sole motto is to earn profit 3 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

whereas assessee is not carrying on its activity only for profit motive. Contesting the reasoning of ld. DIT(E) on which registration was denied, ld. AR submitted, only because assessee earlier was claiming benefit u/s 10(20) as a local authority that cannot be a ground to hold that assessee is not entitled for exemption u/s 11, hence, not eligible for registration u/s 12A of the Act. Ld. AR submitted, the reasoning on which ld. DIT(E) denied registration to assessee are not at all relevant, hence, order of ld. DIT(E) deserves to be set aside.

5. Ld. DR, on the other hand, strongly relying upon the reasonings of ld. DIT(E) submitted before us, the nature of activities carried on by assessee would reveal no room for doubt that it is only engaged in selling houses to the general public at a price like any other builder/developer. Thus, there is no charity involved in such activity. Ld. DR submitted, while carrying out such activity, assessee is also deriving profit though at a lesser figure than the profit of builders/developers, but, that cannot take away from the basic fact that assessee is engaged in a commercial activity and deriving profit therefrom. Therefore, assessee is not being a trust/institution engaged in charitable activity or created for charitable purpose is not eligible for registration u/s 12A of the Act. In support of her contention, ld. DR relied on the following decisions:

1. Jalandhar Development Authority Vs. CIT [2009] 124 TTJ (Asr.) 598

2. Punjab Urban Planning and Development Authority Vs. CIT, [2006] 103 TTJ 988

3. AP State Housing Corporation Ltd. Vs. DIT(E), ITA No. 1845/H/12, dt. 19/04/2013.

6. In the rejoinder, ld. AR submitted, decisions relied upon by ld. DR are fully distinguishable as they do not relate to housing board and unlike assessee they are engaged in various other activities apart from building housing projects. Further, ld. AR submitted, there are many cases where registration u/s 12A has been granted to 4 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

authorities undertaking similar activity. In support of such proposition, ld. AR relied upon the following decisions:

1. Rajasthan Housing Board Vs. CIT, 51 SOT 383

2. Maharashtra Housing and Area Development Authority Vs. ADIT(E), 58 SOT 196

3. Jodhpur Development Authority Vs. CIT, 145 TTJ (JD) 221

Further, ld. AR relying upon a decision of ITAT, Mumbai in case of City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT, 2012, 138 ITD 381 (Mum.) submitted before us, housing board is actually carrying on the activity of building housing projects as an agent of the State Government, hence, it cannot be said that activities undertaken by assessee are of commercial nature. Thus, it was submitted by ld. AR, assessee , since, is carrying out charitable activity is eligible for registration u/s 12A of the Act.

7. We have considered the submissions of the parties and perused the materials on record. We have also carefully applied our mind to the decisions cited by both the parties. On perusal of the A.P. Housing Board Act as well as other materials on record, it is seen that the AP Housing Board has been created for the purpose of developing housing projects and selling them to different income groups, such as, Lower Income Group (LIG), Middle Income Group (MIG) and Higher Income Group (HIG). It is also a fact on record that assessee does not sell housing units to the general public at cost-to-cost basis, but, certainly at a profit. Though, it may be a fact that compared to the private builders/developers, profit ratio of assessee is at a lower level. However, that may be due to the reason that assessee being a statutory authority, gets some concessions from the Government on account of transfer of land and towards registration of the property in the name of buyers as far as stamp duty is concerned, as a result of which, the price charged for the housing unit to the prospective buyers is lesser than compared to the private builders/developers. However, that does not take away from the fact that assessee is 5 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

principally engaged in a commercial activity wherein no charity is involved. As can be seen, ld. DIT(E) has denied registration to assessee basically for two reasons. Firstly, because assessee earlier was availing exemption as a local authority u/s 10(20), hence, it cannot make alternative claim u/s 11 of the Act for claiming exemption as trust or institution. The second reasoning is, the activity carried on by assessee being purely commercial nature, it cannot be considered as a charitable activity. As far as the first reasoning of ld. DIT(E) is concerned, we do not agree with the same. On careful reading of the relevant statutory provisions we do not find any bar either u/s 12A or u/s 11 to prevent an institution like assessee from getting registered u/s 12A. However, for becoming eligible for registration u/s 12A assessee has to fulfill the conditions mentioned therein, the first of which is assessee must have been created for charitable purpose. The expression 'charitable purpose' has been defined u/s 2(15) of the Act and it is inclusive one. As per the said provision, charitable purpose includes education, medical relief, relief to poor or advancement of any other object of general public utility. In the present case, as held by ld. DIT(E) assessee is merely engaged in the activity of building housing projects and selling them to the prospective buyers having a different economic status. Thus, the activities of assessee is in no way different from the activities carried on by a private builder/developer engaged in similar activity of building housing projects and selling them to prospective customers. Though, it may be a fact that assessee is able to sell housing projects at a lesser cost due to some concessions granted by Government, but, that itself cannot be considered to be a charitable activity as assessee is deriving profit from such activity of selling housing projects. It is not the case of assessee that it is providing such housing projects either free of cost or on cost to cost basis. That being the case, assessee has to be treated at par with any other private builder/developer involved in such activity. Moreover, the activity of the assessee if at all can be considered to be for charitable 6 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

purpose, it will come within the residuary clause 'advancement of any object of general public' utility. However, the 1 st proviso to section 2(15) debars advancement of any other object of general public utility from being considered to be a charitable purpose, if it involves carrying of any activity in the nature of trade, commerce or business or 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 consideration. Further, on going through the materials on record there cannot be any doubt that assessee is engaged in a purely commercial activity and the predominant object of the assessee is to earn profit. Therefore, restrictions imposed under the first proviso to section 2(15) clearly apply to assessee. In fact, ITAT, Hyderabad Bench while considering refusal of registration u/s 12A of the Act to AP Housing Corporation Ltd., which is more or less involved in similar activity as assessee, followed its own decision in case of Tirupathi Urban Development Authority and upheld the rejection of assessee's application for grant of registration u/s 12A of the Act. For better clarity, the finding of ITAT in case of AP State Housing Corporation Ltd. Vs. DIT(E) (supra) is extracted hereunder in its entirety.

"10. We have heard both the parties, perused the record and gone through the order of the DIT(E). In this connection, we refer to the decision of the coordinate bench "B", where the AM was the author of the order, in ITA No. 230/H/10 for AY 2003-04 in Tirupathi Urban Development Authority, Tirupathi order dated 28/03/2013 wherein the coordinate bench held as under:

10. We heard both sides and perused the impugned order of the Commissioner of Income-tax and other material on record. Admittedly, the assessee has been constituted by the Government of Andhra Pradesh under Andhra Pradesh Urban Areas (Development) Act, 1975. S.3 of the said Act enabling the constitution of an urban Development Authority, to the extent relevant for our purpose, reads as follows-

"3. Constitution of urban development Authority:- (1) As soon as may be after an urban area or a group of urban area is declared to be a development area, under sub-section (1) of Section 13 the Government shall, by notification, constitute for the said development area, an Urban Development Authority with effect from such date as may be specified therein.

7 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

(2)......

(3)Every Authority so constituted shall be a body corporate by the name of the development area for which it is constituted having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable, immovable and to contract; and shall by the said name sue and be sued."

Section 5 of the said Act dealing with the objects and powers of an authority so constituted, reads as follows-

"5. Objects and powers of the Authority - The object of Authority shall be to promote and secure the development of all or any of the areas comprised in the development area concerned according to plan and for that purpose, the Authority shall have the power to acquire, by way of purchase or otherwise, hold, manage, plan, develop and mortgage or otherwise dispose of land and other property, to carry out by or on its behalf building, engineering, mining and other operations, to execute works in connection with supply of water and electricity, disposal of sewerage and control of pollution, other services and amenities and generally to do anything necessary or expedient for purposes incidental thereof.

(2) The Authority may, for the purpose of efficient performance of its functions, constitute as many committees as it thinks fit, in such manner as may be prescribed, and provide by regulations made in this behalf for rules of procedure at the meeting of the Committees and allowances to members thereof."

As noted above, the Tribunal, in its earlier round has set aside the matter to the file of the Commissioner of Income-tax for consideration of the assessee's application for registration under S.12AA of the Act afresh, in the light of the case-law in favour and against the assessee, brought to its notice, as in Gujarat Maritime Board (supra) and Adityapur Industrial Area Development Authority (supra).

11. In the fresh round of proceedings before him, after taking note of the above two decisions, the Commissioner of Income-tax followed the decision of Punjab Urban Planning and Development Authority V/s. CIT (supra), in which case also, the assessee was an urban development authority constituted under Punjab Regional and Town Planning and Development Act, 1995, which is analogous to Andhra Pradesh Urban Areas (Development) Act, 1975 under which the assessee before us was constituted, and declined to grant registration to the assessee, vide order dated 16.12.2009. In that case of Punjab Urban Planning and Development Authority (supra), followed by the Commissioner of Income-tax in the impugned order, the Chandigarh Bench of the Tribunal has held as follows-

"4. In the present appeal there is no dispute to the fact that the assessee moved application in Form No. 10A and furnished relevant information to the learned. Asstt. CIT, There is also no dispute that the assessee was constituted under the Act of the Government for making better planning and regulating development and use of land in planning areas delineated for the purpose, preparation of regional plans/master plans and implementation thereof and also for guiding and directing the planning and development process in the State. The major thrust of argument on behalf of the learned Counsel for the assessee is that PUDA is of general public utility and was 8 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

established to satisfy the need for housing accommodation of various sections of the people of Punjab and specially for planning and development in the cities, town and villages and is of charitable nature.

5. Before coming to any conclusion, we are supposed to see the meaning of the word 'charitable purpose' which has been defined in Section 2(15) of the Act which includes relief to the poor, education, medical relief and advancement of any other object of general public utility. A strong contention was raised by the learned Counsel for the assessee that the assessee/PUDA is also executing the development of following works/infrastructures:

(a) Development of rehri market

(b) Water supply and sewerage

(c) Development of sports complexes

(d) Bridges

(e) Bus queue shelters

(f) Bus stands

(g) Swimming pools (h) Community centres (i) Public toilets

(j) Development of parks

(k) Cremation grounds

(l) Construction of schools, etc.

Regarding the purpose of the Act, which is available at p. 13 of the paper book of the assessee and to which our attention was also drawn, it speaks about various amenities and utilities as has been mentioned in Section 2(b) of the said Act. The learned Counsel for the assessee during argument took a strong plea that on identical facts registration under Section 12A of the Act was accorded to Patiala Urban Planning & Development Authority, Patiala, vide order under Section 12AA of the Act, dt. 28th Sept., 2005 by the CIT, Patiala, the objects of which are ' identical to the present assessee. If the Act under which the assessee was constituted is analysed, it includes the State of Punjab excluding Patiala. Shri Ajay Vohra contended that it can be said that Patiala authority is part of the State and when registration has been granted to Patiala authority, then no two yardsticks should be adopted. At the outset, we are of the view that we are not agreeable with the contention of the learned Counsel because if the intention of creating Patiala authority was the same then there was no need of its creation as the same objects would have been fulfilled by the bigger unit, i.e., the assessee. At the same time, res judicata is not applicable in income-tax proceedings.

We do not want to comment as to why and how the registration was granted to Patiala authority as the same is not pending before us for adjudication. Reliance can be placed upon the decision pronounced by the Hon'ble apex Court in the case of Distributors (Baroda) (P) Ltd. v. Union of India and Ors. wherein the Hon'ble apex Court held that "it is almost as important that the law should be settled permanently as that it should be settled correctly but there may be circumstances where public interest demands that the previous decision be reviewed and reconsidered. The doctrine of stare decises should not deter the Court from overruling an earlier decision, if it is satisfied that such decision is manifestly wrong or precedes upon a mistaken assumption in regard to the existence or continuation of a statutory provision or is contrary to another decision of the Court." However, two views reasonably may be possible. Perpetuation of error is not a heroism. However, we make it clear that this observation of ours should not be treated to bear any effect in the case of Patiala authority. At the same time, the order passed by a lower authority is not binding on the Tribunal. However, it may be a good arguable point by the parties.

This issue requires deliberation from a different angle whether the assessee was constituted to provide any charity to the public at large or to satisfy the needs for housing accommodation for the people of Punjab and also planning and development of the cities, towns and villages or whether the development in such a way is of charitable nature. A plea was raised by the learned Counsel for the assessee that funds are provided by the Punjab Government or generated by the assessee itself. To generate its funds for carrying out its objects, the assessee is acquiring lands, developing them and selling the plots to the general public who apply for the same. Even the economically weaker strata of the society is generally applying. It is not the 9 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

case that the assessee is allotting houses to the poor masses free of cost. The Hon'ble apex Court in the case of Asstt. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) has deliberated upon the issue of charitable purposes wherein the founder of a daily newspaper created a trust in March, 1954 and the objects of the trust were originally to establish newspaper as an organ of educated public opinion for the Tamil reading public. In July, 1957, a supplementary deed making the trust irrevocable and Anr. supplementary deed for establishing and running a school/college for teaching journalism were added. The question before the Hon'ble Court was whether the income of the trust was exempt from income-tax during the relevant period, The Hon'ble apex Court while coming to a particular conclusion reversed the decision of the Hon'ble High Court of Madras and held that the trust did not fall within the provisions of Section 11(4A), as it then stood, and was not entitled to exemption from tax. The Hon'ble apex Court also considered various judicial pronouncements which were referred to it by the respective counsel as are available in the said order specially at p.

787. However, there is a major shift in the law with regard to institutions who are claiming charities. It is a well known fact that in some of the situations the provisions of law is misused in the names of charities. If an expanded/broader latitude is extended to the word charity, then there are so many institutions/Departments who will try to come under the umbrella of this provision to misuse the provision. Therefore, for the broad development of the nation/society a strict and positive vigil is required so that the provision can be saved from its misuse in any manner. We are aware that no activity can be carried on efficiently, properly unless and until it is carried out on business principle but it does not mean that the provision is misused in any manner under the garb of charity and any institution be allowed to become richer and richer under the garb of charity by making it a non-tax payable organization. In the cases of Addl. CIT v. Surat Silk Cloth Manufacturers Association and CIT v. Bar Council of Maharashtra , it was held that what is predominant object of the activity- whether, it is to carry out a charitable purpose and not to earn profit-the purpose should be that it should not lose its charitable character-

The major thrust of the learned Counsel for the assessee is that PUDA is of general public utility as it satisfies the need for housing accommodation for the section of the people of State of Punjab and is also doing planning and development of the cities, towns and villages. We are not agreeable with the argument of the learned Counsel because a charitable institution provides services for charitable purposes free of cost and not for a gain. In the present scenario, the similar activities are performed by big colonizers/developers who are earning a huge profit. If this registration is granted, then we will open a pandora box and anybody will claim the exemption from tax. If the accounts of the assessee are analysed, it has turned into a huge profit-making agency for which it is taking money from the general public. In such a situation, we are of the view that no charity is involved and if any institution of public importance like schools, community centers are created/developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government.

It can be said that objects/activities of the assessee are more of commercialized nature and we do not find any charity in it. At the same time, if these facilities are not provided, then nobody will purchase a plot. It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added, so no charity is involved. At best, the assessee can be said to be an authority created to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through his agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from the public itself, so where is the charity? If the activities of the assessee and the arguments of both the learned Counsel are put in a juxtaposition, it can be said that the objects of the assessee, though claimed to be charitable, but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very higher rates and is earning a profit therefrom.

A new trend has also emerged that PUDA, i.e., the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments. In such a situation, we are 10 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

of the view that no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution.

During argument, the learned Counsel relied upon the decision of the Hon'ble apex Court pronounced in the case of Addl. CIT v. Surat Art Silk Cloth Manufactures Association (supra) where the assessee was incorporated under the Companies Act wherein the dominant or the primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth as set out in Clause (a) and the object specified in cls. (b) to (e) and the object was found to be public utility not involving the carrying on of any activity for profit within the meaning of Section 2(15), the assessee was held to be entitled for exemption under Section 11(1)(a) of the Act. However, Hon'ble Justice Sen passed a dissenting order but in the present case there is a profit motive of the assessee, so will not help in any manner.

Reliance was also placed on the decision of the Hon'ble apex Court pronounced in the case of CIT v. Andhra Pradesh State Road Transport Corporation wherein the object of the assessee was development of roads, improving facilities for road transport and providing efficient and economical system of road transport service, the entire capital was provided by the State Government and the profits were utilized for providing amenities to the passengers and welfare of labour and approved expansion program and the remainder to be made over to the State Government for road development, it was held to be of charitable purposes and thus income was exempted but it is not so in the case of the present assessee. The Hon'ble apex Court in the case of CIT v. Bar Council of Maharashtra (supra) where the prime dominant purpose was for the advancement of object of public utility, it was held to be entitled to exemption. The learned Counsel for the assessee, during argument raised a plea that totality of circumstances has to be seen specially that all money goes with the State Government and not in private hands, the prices are fixed and the assessee is not a commercial organization and the predominant activity of the assessee is to develop infrastructure and contended that rule of consistency has to be seen for which reliance was placed upon the decisions pronounced in Union of India and Ors. v. Kaumudini Narayan Dalai and Anr. ,CTT v. Shivsagar Estate , CIT v. Federation of Indian Chambers of Commerce and Industry and also the decision in the case of Dy.

CIT v. United Vanaspati Ltd. (2004) 83 TTJ (Chd)(TM) 201 : (2004) 88 ITD 313 (Chd)(TM). We are of the view that principles of res judicata do not apply to income-tax proceedings. However, we agree with the learned Counsel to the extent that equally important is the rule of consistency. We are of the view that consistency has to be seen in totality of circumstances which depends upon facts of each case in the light of primary object and real activities done by the assessee, so these judicial pronouncements in our humble opinion are not going to help the assessee. The Hon'ble High Court of Delhi in the case of Daulat Ram Public Trust v. CIT wherein on scrutiny of objects; of the assessee-trust, there was no defined dominant charitable purpose in the trust deed to which the said objects would serve as ancillary objects and which were meant to feed the dominant purpose. Clause 21 of the trust deed empowered the chairman of the trust to spend the funds of the trust for the purchase of immovable property and since no part of the income of the trust was applied on any specific charitable purposes, the exemption under Section 11 of the Act was denied.

The Hon'ble Court relied upon various judicial pronouncements which are available at p. 515 of the said order and then came to a particular conclusion. In view of these facts and judicial pronouncements, we are supposed to see the predominant object of the assessee. If all the objects and activities actually carried out by the assessee are analysed and kept in juxtaposition with the aforesaid judicial pronouncements, we are of the view that activities of the assessee are more of commercial nature with profit-oriented intent, so no leniency should be shown to the assessee. The Department may also get support from the decision of the Hon'ble Patna High Court as pronounced in the case of Bihar State Forest Development Corporation v. CIT where the Government company was formed for promotion and development of forestry. The assessee-corporation was permitted under memorandum of association to engage in commercial activities and there was no 11 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

restriction on application of money, the corporation was not held to be a charitable trust and consequently not entitled to exemption. Similar is the case in the present appeal of the assessee. During arguments, the learned Counsel for the assessee invited our attention to the case of Maharashtra Housing & Area Development Authority wherein registration was granted. The learned CIT-Departmental Representative contended that in the case of Market Committee, the ownership remains with the committee but in the case of the assessee it goes to individual and the learned CIT was not satisfied with the explanation of the assessee. Likewise in the judicial pronouncements in New Life in Christ Evangelistic Association (NLC) v. CIT as relied by the assessee, it can be said that it is a religious trust, so not applicable to the present facts as the assessee is auctioning the plots on huge profits and even the Hon'ble Courts are intervening to enhance compensation on petitions filed by land owners. However, if the argument of the assessee is analysed on point of general public utility, still it can be said that commercial angle with profit motive is involved which has become predominant object of the assessee.

Even if this issue is analysed as contended by the learned Counsel for the assessee that application of income is not the criteria in the light of the decision of Hon'ble High Court of Allahabad in the case of Fifth Generation Education Society v. CIT , still we are of the view that if the objects and real situation is analysed, the objects are not of charitable nature, Almost in every activity there is a scent of commercialization/profit motive but in the charitable institution no profit motive is involved and the service is done mainly with the intent of social/religious upliftment of the masses in general. Admittedly, the assessee is doing some activities like housing/infrastructure development and the public is also benefited but for the same the assessee has already charged in the form of hidden cost. Rather the assessee is generating income, so no charity is involved. We agree with the conclusion of the learned GIT, as contended by learned CIT-Departmental Representative, that a charitable institution provides services for charitable purposes free of cost and for no gain and are for the benefit of public at large.

As we have discussed in the preceding para, the assessee acquires land at nominal rates and after developing the same, the same land (is sold) on high profit which cannot be said to be a charitable activity. Even just for argument sake, under the present facts, if registration is granted, then every private colonizer will claim charity. The facilities which are provided to the plot holders are incidental to the commercial activity carried out by the PUDA and if certain facilities like parks, community center, school are provided is not only basic requirement, rather a tool of attracting the investors wherein the hidden cost of these facilities is already included. In the absence of these facilities, normally the purchaser may not invest and the prices may be less.

In view of these facts and judicial pronouncements, we are of the view that the application of the assessee has been rightly rejected by learned CIT. The stand of the learned CIT is upheld. Appeal of the assessee is, therefore, dismissed."

12. The coordinate Bench of the Tribunal at Amritsar, following the decision in the case of Punjab Urban Planning and Area Development Authority(supra), held, in the case of Jalandhar Development Authority V/s.CIT (2009)124 TTJ (Asr) 598, to which one of us, viz. author member, is a party, that denial of registration under S.12AA(a) of the Act to that assessee, which was also constituted under Punjab Regional And Town Planning and Development Act, 1995, was justified. The objects of the Authority in that case as noted by the Tribunal in para 3 of its order reads as follows-

"The objects of the authority shall be to promote and secure better planning and development of any area of the State and for that purpose the authority shall have the powers to acquire by way of purchase transfer, exchange or gift or to hold, manage, plan, develop and mortgagee or otherwise dispose of land or other property or to carry out itself or in collaboration with any other agency or through any other agency on its behalf, building, engineering, mining and other operations to execute works in connection with supply of water, disposal of sewerage, control of pollution and other services and amenities and generally to do anything with the prior approval or on direction of the State Government, for carrying out the purposes of the Act."

13. At this juncture, it may be observed that the above objects noted by the Amritsar Bench of the Tribunal in the context of Jalandhar Development Authority, is 12 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

almost identical to S.5 of the Andhra Pradesh Urban Areas (Development) Act, 1975, under which the assessee was created, and which we have already extracted hereinabove. Considering the contention of the assessee with regard to the charitable nature involved in its activities, and also taking into account the case-law cited before it in that behalf, held in conclusive portion of para 6.1 of its order as follows-

"It is a well known fact that in some of the situations the provisions of law are misused in the names of charities. If an expanded /broader latitude is extended to the word charity, then there are so many institutions / departments who will try to come under the umbrella of this provision to misuse the provision. Therefore, for the broad development of the nation / society, a strict and positive vigil is required so that the provision can be saved from its misuse in any manner. No activity can be carried on efficiently, properly unless and until it is carried out on business principle but it does not mean that the provision is misused in any manner under the grab of charity and any institution be allowed to become richer and richer under the grab of charity by making it a non-tax payable organization. A charitable institution provides services for charitable purposes free of cost and not for a gain. In the present scenario, similar activities are performed by big colonizers/developers who are earning a huge profit. If this registration is granted, then anybody will claim the exemption from tax.

If the accounts of the assessee are analysed, it has turned into a huge profit-making agency for which it is taking money from the general public. If any institution of public importance like schools, community centers are created /developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government. It can be said that objects/activities of the assessee are more of commercialized nature and no charity is involved in it. At the time, if these facilities are not provided, then nobody will purchase a plot. It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added, so no charity is involved. At best, the assessee can be said to be an authority created to help it to achieve certain objects. It can be said that it is the duty of the Government to create / provide all these facilities to public large, which is being done through is agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from public itself.

The objects of the assessee, though claimed to be charitable, but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very higher rates and is earning as profit therefrom. A new trend has also emerged that the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments In such a situation, no charity is involved. Rather the assessee has converted itself into a big businessman. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution. The facilities which are provided to the plot holders are incidental to the commercial activity carried out by the assessee and if certain facilities like parks, community center, school are provided, it is not only basic requirement, rather a tool attracting the investors wherein the hidden cost of these facilities is already included.

In the absence of these facilities, normally the purchaser may not invest and the prices may be less. In view of these facts, the assessee's activities not being of charitable nature, the application of registration under s. 12A has been rightly rejected by CIT, - Asstt. CIT Vs Thanthi Trust (2001), 165 CTR (SC) 681: (2001) 247 ITR 785 (SC) and Bihar State Forest Development Corporation Vs CIT (1997) 224 ITR 757 (Pat) reline on : Addl. CIT Vs Surat Silk Cloth Manufacturers Association (1979) 13 CTR (SC) 378: (1980) 121 ITR 1 (SC), CIT Vs Andhra Pradesh State Road Transport Corporation (1986) 52 CTR (SC) 75: (1986) 159 ITR 1 (SC) and New Life in Christ Evangelistic Association (NLC) Vs CIT (2001) 165 CTR (Mad) 446: (2000) 246 ITR 532 (Mad) distinguished."

The Tribunal, distinguishing among others, the decision of the Apex Court in the case of Gujarat Maritime Board (supra), the Tribunal in that case observed in para 6.4 of its order as follows-

"6.4 The major trust of the learned counsel for the assessee is that JDA is a general public utility as it satisfies the need for housing accommodation. For the section (section) of the people of State of Punjab and is also doing planning and development 13 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

of the cities, towns and villages. We are not agreeable with the argument of the learned counsel because a charitable institution provides services for charitable purposes free of cost and not for a gain. In the present scenario, the similar activities are performed, by big colonizers/developers who are earning a huge profit. If this registration is granted, then we will open a Pandora box and anybody will claim the exemption from tax. If the objects of the assessee are analysed, it has turned into a huge profit making agency for which it is taking money from the general public. In such a situation, we are of the view that no charity is involved and if any institution of public importance like schools, community centres are crated/developed, the assessee is charging the cost of it from the public at large and the money is coming from the coffer of the Government. It can be said that objects/activities of the assessee are more of commercialized nature and we do not, find any charity in it. At the same time, if these facilities are not provided, then nobody will purchase a plot. It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added.

So no charity is involved. At best, the assessee can be said to be an authority crated to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through his agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated form the public itself, so where is the charity? If the activities of the assessee and the arguments of both the learned counsel are put in a juxtaposition, it can be said that the objects of the assessee, though claimed to be charitable; but actually are of purely commercial nature where profit motive is involved. It is a known fact that the assessee is acquiring the land at very low prices and selling the same land on very high rates and is earning a profit therefrom. A new trend has also emerged that JDA, i.e. the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on belated payments. In such a situation, we are of the view that no charity is involved.

Rather the assessee has converted itself into a big businessman. Similar development /infrastructure/- facilities are also provided by private developers these days, then they will also claim the status of a charitable institution."

For the above reasons, among others, discussed at length and also observing that the Chandigarh Bench of the Tribunal in the case of Punjab Urban Planning and Development Authority V/s. CIT (supra) squarely applies to the facts of that case, the Tribunal in that case held that the assessee was not entitled for registration under S.12AA of the Act.

14. Similarly, following the order of the Tribunal in the case of Jalandhar Development Authority (supra), in similar circumstances, in the case of Jammu Development Authority V/s. CIT (ITA 30/Asr/2011), the Amritsar Bench of the Tribunal, vide its order dated 14.6.2012, the Tribunal considered the legality and validity of the action of the Commissioner of Income-tax in withdrawing the registration granted in favour of the assessee, by invoking the provisions of S.12AA(3) of the Act. The Tribunal, besides following the coordinate Bench decision in the case of Jalandhar Development Authority (supra), considered at length the various contentions urged before it in the light of the case law relied upon by the parties, and ultimately upheld the action of the Commissioner of Income-tax in withdrawing the registration. Relevant portion of the order of the Tribunal dated 14.6.2012 in that case is reproduced below-

"7. We have heard the rival contentions and perused the facts of the case, including section 12AA(3) of the Act, where Trust or Institution has been granted registration and subsequently the 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 of such trust or institution, as the case may be , he shall, pass an order in writing canceling the registration of such trust or institution. Section 2(15) of the Act 14 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

defines "charitable purpose" to include the advancement of any other object of general public utility. It is also not disputed that the Ld. CIT while granting registration u/s 12AA(3) of the act to the assessee had observed that he is satisfied that instrument does not exist in any trade, commerce or business. The order is dated 30.09.2009 whereas the amendment by Finance Act, 2008 is w.e.f. 01.04.2009, where as per Finance Act, 2008, following proviso had been added w.e.f. 01.04.2009:

"Provided that the advancement of any other object of generally 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 of application, or retention, of the income from such activity."

7.1. Further, as per Finance Act, 2010, after first proviso, second proviso has been added w.e.f. 01.04.2009, which is read as under:

"Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year".

7.2 As a matter of fact from the perusal of the order of the Ld. CIT, it appears that first proviso so inserted by the Finance Act, 2008 w.e.f. 01.04.2009 was not taken into consideration while granting registration vide order dated 30.09.2009. Therefore, in the facts and circumstances of the case, we concur with the views of the Ld. CIT, who had placed reliance on the decision of five Member Bench of Hon'ble Supreme Court in the case of A Distributors (Baroda) P. Ltd. vs. Union of India & Ors. reported in 155 ITR120 (SC), wherein it has been held to perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derived comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (A.M.Y at page 18). Therefore, the Ld. CIT in view of the decision of the Hon'ble Supreme Court in the case of A Distributors (Baroda) P. Ltd. vs. Union of India & Ors.(supra) is within his power to decide the issue as per insertion of the first proviso by the Finance Act, 2008 w.e.f. 01.04.2009 and also the second proviso inserted by the Finance Act, 2010 w.e.f. 01.04.2009 whereas the aggregate value of the receipts in the present assessee are Rs. 10 lakhs.

Also on the principle of consistency, we concur with the views of the ld. CIT relying upon the decisions of various courts of law that an erroneous view in law could not be allowed to be perpetuated on the ground of consistency. Therefore, in the facts and circumstances of the present case, the Ld. Counsel for the assessee was put a question by the Bench how the facts in the present case are different from the facts in the case of M/s. Jalandhar Development Authority. The ld. counsel for the assessee argued and replied that the difference in the facts and circumstances of the present case with M/s.Jalandhar Development Authority is not there except that the registration had been granted in the case of M/s. Jalandhar Development Authority whereas in the present case, registration having been granted cannot be cancelled. Since the order of the CIT dated 30.09.2009 in the present case is after amendment to section 2(15) i.e. introduction of the first proviso was well before the Ld. CIT. 7.3. Considering the arguments of the ld. counsel for the assessee and on perusal of the facts of the present case with the facts in M/s. Jalandhar Development Authority (supra), we are of the view that facts in the present case are identical to the facts as in the case of Jalandhar Development Authority.

As regards the first proviso inserted in section 2(15) of the Act, we have given our views hereinabove that the Ld. CIT had not considered the first proviso to section 2(15) as well as the second proviso to section 2(15) while making the order for grant of registration on 30.09.2009. Therefore, the Ld. CIT is well within his power to decide the issue by his order in view of the decision of the Hon'ble Supreme Court in the case of A. Distributors (Baroda) P. Ltd. vs. Union of India and Ors. 155 ITR 120 (SC). Therefore, in the facts and circumstances of the present case and following our order in the case of M/s. Jalandhar Development Authority (supra) being on identical facts, the registration u/s 12AA cannot be granted to the assessee and the Ld. CIT has rightly cancelled the registration so granted.

15 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

7.4. Also, we concur with the views of the Ld. CIT(A) vide para 3.2 to 6.2 of his order that prior to insertion of these provisos i.e. first and second proviso to section 2(15) of the Act, certain bodies were treated as 'charitable' on the ground of advancement of object of general public utility. However, after the insertion of the above proviso, the advancement of any other object of general public utility shall not be a 'charitable purposes' if it involves the carrying on of :-

a) Any activity in the nature of trade, commerce or business;

b) Any activity of rendering any service in relation to any trade, commerce or business.

d) For a cess or fee or any other consideration, irrespective of the nature of use or application or retention of income from such activity.

7.4.1. Therefore, the Institutions/Trusts/Societies which are involved in the activities in

(a)(, (b) & (c) mentioned hereinabove and aggregate value of the receipt of the activities referred to in the first and second proviso is more than Rs. ten lakhs in the previous year, they shall not be eligible to continue with registration u/s 12A and the same is required to be withdrawn.

7.5. The main objects of the assessee's institution has been mentioned in Para 4.1. of Ld. CIT's order, as mentioned hereinabove. It has rightly been mentioned by the Ld. CIT in para 4.2 mentioned hereinabove that till the financial year 2002-03, the income of such Authorities were exempt u/s 10(20A) of the Act. However, in view of omission of section 10(20A) of the Act, an Explanation was added to section 10(20), which has been mentioned hereinabove. The income of Local Authority is chargeable under the head 'Income from House property', 'Capital gains' or "Income from other sources" or from a trade or business carried on by it was earlier excluded in computing the total income of the Authority of a previous year. However, in view of the amendment, with effect from 01.04.2003, the Explanation "Local Authority" was defined to include only the Authorities enumerated in the Explanation to include Panchayat, Municipal Committee and District Board and Cantonment Board as referred in the said Explanation.

7.6. Also, at the same time, section 10(20A) which related to income of and Authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20A) on such an Authority was taken away. Thus, in view of the fact that section 10(20A) was omitted and an Explanation was added to section 10(20) of the Act, enumerating the "Local Authorities" contemplated by section 10(20), the assessee could not claim any benefit under those provisions after April 1, 2003. The assessee subsequently claimed that its objects falls under the provisions of section 2(15) of the Act and has complied with all the eligibility criteria for grant of registration under section 12A of the Act, which was allowed vide order dated 30.09.2009. It is at this juncture that the first proviso and second proviso were added by the Finance Act, 2008 w.e.f. 01.04.2009, as mentioned hereinabove.

Therefore, after insertion of the said proviso, any institution carrying on of any activity in the nature of trade, commerce or business etc. as mentioned hereinabove, shall not be a charitable purpose. As per objects of the assessee, it is observed that the main object of the assessee is to promote and secure the development of local area and there is no charitable purpose or any activity for general public utility. The activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business. Further profit making by the assessee is not mere incidental or by product of the assessee. There is no real object of the assessee and there is no spending of the income exclusively for the purpose of charitable activities and profits of the assessee are not used for charitable purpose under the terms of the object and there is no obligation on the part of the assessee to spend on 'charitable purpose' only. Also as per clause 53 of the Jammu & Kashmir Development Act, on dissolution of all properties and funds to vest in the Government and for the purpose of realizing properties, the function of the Authority shall be discharged by the Government.

We concur with the views of the Ld. CIT on transfer of the properties, funds and dues and liabilities etc. will vest in the Govt. There is no restriction, how the same are to be utilized by the 16 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

Government. There are other objects like sale and purchase, which makes the Authority a commercial organization. Therefore, in the facts and circumstances of the case, even on dissolution or winding up by not having any restriction on application of asset for charitable purpose, the objects pursued by the assessee cannot be said to be a charitable in nature.

7.7 As regards the reliance on the decisions of various courts of law by the Ld. CIT, most of the decisions have been dealt by the Tribunal in the case of M/s. Jalandhar Development Authority vs. ITO (supra). In the facts and circumstances of the present case, we concur with the views of the ld. CIT that Jammu Development Authority is an Authority established with the motive of profit constituted under the Jammu & Kashmir Development Act, 1970 and that the activities of such Authority are hit by section 2(15) of the Act read with first and second proviso and are not in line with the objects of the Authority/Trust so far as the activities relating to purchase and sale of properties, as mentioned hereinabove. Hence, the activities are not genuine to the extent, mentioned hereinabove and the Ld. CIT, Jammu, has rightly being satisfied held that the Jammu Development Authority is not entitled to registration and accordingly cancelled the registration so granted."

15. In the light of the foregoing discussion, following the consistent view taken by the various Benches of the Tribunal in the cases of various other Urban Development Authorities constituted under analogous statutes, we uphold the action of the Commissioner of Income-tax in rejecting the assessee's application for registration under S.12AA of the Act, as the primary objects of assessee are of profit motive as considered by the Tribunal in similar cases discussed above, and therefore, we find no infirmity in the order of the Commissioner of Income-tax, Tirupathi. We accordingly uphold his order and reject the grounds of the assessee in this appeal."

11. The issue under consideration is identical to that of the said case decided by the coordinate bench in the case of Tirupathi Urban Development Authroity (supra). Further, as seen from the Memorandum of Association and Articles of Association filed by the assessee before us, the object of the assessee cannot be said that it is in the nature of general public utility and the objects stated therein make the assessee a commercial orginsation and there is no stipulation on utilization of income only for the purpose of charitable activities. The assessee being a commercial organisation just like any business entity engaged in the real estate business. The surplus funds generated by the assessee throughout various activities could be distributed as dividend and there is no restriction for declaration of dividend to the members of the assessee company as is evident from the Clause No. 99 of the Articles of Association. As the dominant object of the assessee was not charity, either its commercial activity carried on with profit motive and also there is no clause for application of income for charitable activities including relief to poor, education or medical relief and advancement of any other object of general public utility. There is nothing in this case which provides services to the mankind on charity basis. The argument of the learned counsel is not tenable because a charitable institution provides services for charitable purposes free of cost and not for gain. The object of the assessee is similar to activities performed by big developers, who are earning profit . If the registration is granted to the assessee u/s 12A of the Act, then, it will open pandora's box and everybody will claim exemption from tax, who are incidentally doing some charitable activities in providing parks or roads. The activities of the assessee is nothing but profit making activities for which it is taking money from general public and no charity activities are carried on for the public. Considering all these facts brought on record by the DIT(E), in our considered view, the assessee is not entitled for grant of registration u/s 12A of the Act. Being so, we do not find any infirmity in the order of the DITE) in refusing to grant registration u/s 12A to the assessee and accordingly, the order of the DIT(E) is hereby confirmed dismissing the appeal of the assessee."

17 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

The principles laid down by the coordinate bench as aforesaid, clearly apply to the facts of the present case. As far as the decisions relied upon by ld. AR are concerned, on careful examination of the same, we find them to be factually distinguishable, hence, will not be of any help to assessee. In case of Rajasthan Housing Board Vs. CIT (supra), registration u/s 12A was granted to assessee earlier. After insertion of first proviso to section 2(15) when registration was cancelled, Tribunal held if to be invalid on the reasoning that finding the object of assessee charitable, department had granted it registration u/s 12A earlier. Similar is the case with Maharashtra Housing & Area Development Authority Vs. ADIT (E) (supra). In case of Jodhpur Development Authority Vs. CIT (supra), Tribunal allowed registration u/s 12A being of the view that object of assessee is for general public utility and without profit motive. Whereas in the facts of the present case we are of the view that assessee is engaged in a purely commercial activity with profit motive, hence, ratio of the decisions relied upon by ld. DR are clearly applicable. In the aforesaid view of the matter, we do not find any merit in the submissions of assessee and accordingly uphold the order of ld. DIT(E) by dismissing the grounds raised by assessee.

8. In the result, assessee's appeal is dismissed.

Pronounced in the open court on 3 rd June, 2015.

Sd/- Sd/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 3 rd June, 2015 kv 18 ITA No. 110/Hyd/2008 AP Housing Board, Hyderabad

Copy to:-

1) Andhra Pradesh Housing Board, Gruhakalpa, M.J. Road, Hyderabad. 2) DIT(E), Hyderabad. 3) ADIT(E), Hyderabad

4) The Departmental Representative, I.T.A.T., Hyderabad.