These two appeals filed by the assessee are directed against the orders dated 27-09-2013 passed by the CIT(A)-II, Kochi for the assessment years 2009-10 and 2010-11. 2 Since the issues are identical in both the appeals, they were clubbed together, heard together and are being disposed of by this common order for the sake of convenience. I.T.A. Nos.792&793/Coch/2014 2

3. In these appeals, the crux of ground raised by the assessee is that the CIT(A) erred in confirming the order of the Assessing officer in denying the exemption u/s. 1i of the Income Tax Act, 1961.

4. The brief facts of the case as narrated by the CIT(A) in her order for the assessment year 2009-10 are that the assessee is a trust registered under the Income Tax Act and an authority constituted by Government of Kerala for planning and development of Greater Cochin Area. The return of income for the assessment year 2009-10 was filed on 29-09-2009 retuning a total income at NIL after claiming exemption u/s. 11. In view of the amended provisions of sec. 2(15), the Assessing officer disallowed this exemption and accordingly the total income was assessed at Rs. 8,00,94,700/-. The Assessing officer after analyzing the amendment brought in the statute in section 2(15) with effect from 01-04-2009, had gone into the details of activities undertaken by the GCDA. It is brought out in the assessment order that GCDA charges fees for supervision and centage charges, permission for transfer of land, copy of records, cost of forms, cost of plans, booklets etc. that have grossed upto Rs. 1,23,11,413/- in this assessment year. In view of these activities undertaken, Assessing officer concluded that the society in the advancement of its objects, charges and receives a consideration. The Assessing officer has also I.T.A. Nos.792&793/Coch/2014 3 pointed out that as part of the town planning schemes, several commercial centres are developed and rented out by the society and the society itself is responsible for the maintenance, upkeep and the provision of common facilities for these commercial establishments. Total receipts from such letting out and maintenance charges comes to Rs. 4,09,73,498/- as reflected in the return of income. The Assessing officer held that the activity of the letting out of the property, and provision of services constitute an activity in the nature of trade, commerce and business. In the development of the city, the commercial space developed by it is auctioned to the highest bidder which is a commercial activity in itself covered under the definition of any activity in the nature of trade, commerce and business. Accordingly he held that due to these activities undertaken by the society, which are in the nature of trade, commerce and business. According to the Assessing officer, in the development of the city, the commercial space developed by the assessee is auctioned to the highest bidder which is a commercial activity in itself covered under the definition of

any activity in the nature of trade, commerce and business

.

5. Accordingly, the Assessing officer held that due to these activities undertaken by the society, which are in the nature of trade, I.T.A. Nos.792&793/Coch/2014 4 commerce an business, the case of the society is covered under amended provisions of section 2(15), and hence the society is not entitled to exemption of its income u/s. 11. Against this, the assessee went in appeal before the CIT(A).

6. Before the CIT(A) , the assessee reiterated that GCDA is constituted by Government of Kerala with the primary object of planning and development in the Greater Cochin Region. There are no commercial motives of earning the profits in any of the activities undertaken by GCDA. For the collection of various fees for issue of permissions, cost of form, plans, booklets etc. can not be held in the nature of trade, commerce or business since these are statutory functions of GCDA and such fees are normally collected by statutory authorities to cover the cost involved. It was emphasized by the Ld. Counsel that the GCDA is not constituted by Government of Kerala to do any business. According to the Ld. AR, the sole intention is to plan the development of the region allotted to it and commerciality, profit motive find no place in the operations of GCDA. The assessee relied on amendment to sec. 2(15) by the Finance Act, 2008 which reads as follows: It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either u/s. I.T.A. Nos.792&793/Coch/2014 5 10(23C) or Section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the advancement of an object of general public utility as is included in the fourth limb of the current definition of charitable purpose. Such a claim, when made in respect of an activity carried out on commercial lines is contrary to the intention of the provision. With a view to limiting the scope of the phrase advancement of any other object of general public utility, it is proposed to amend section 2(15) so as to provide that

the advancement of any other object of general pubic utility shall not be a charitable purpose if it involves the carrying on of the following activities: (a) Any activity in the nature of trade, commerce or business or (b) Any activity of rendering any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity.

7. Accordingly, the assessee submitted that the question, therefore that needs consideration is whether GCDA is carrying on any activity on commercial line in the nature of trade, commerce or business or is involved in rendering any service in relation to any trade, commerce or business for a cess or fee or for any other consideration. The assessee submitted that the nature of activities undertaken by GCDA being for I.T.A. Nos.792&793/Coch/2014 6 overall development of Greater Cochin area, the assessee is entitled for exemption u/s. 11 of the Act.

8. After going through the assessment order, submissions of the assessee and the case law, the CIT(A) stated that the provisions of section 2(15) as amended by Finance Act, 2008 specifically laid down as under:

the advancement of any other object of general 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 services in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity and the aggregate vale of receipts from such activities is more than Rs. 25 Lakhs.

9. Thus, the CIT(A) found that GCDA had specific functions with main objects of development plans of Greater Cochin area including development of land and other ancillary objects. While the projects undertaken by the authority are in the nature of general public utility, the CIT(A) agreed with the Assessing officer that in the advancement of these objects, the assessee made charges and I.T.A. Nos.792&793/Coch/2014 7 received consideration. The CIT(A) observed that the assessee also acts like a real estate giant in as much as it enters in land deals and takes up construction and sales of commercial and residential complexes. According to the CIT(A) , the GCDA is also involved in auctioning of land developed by it to the highest bidders on the basis of commercial principles and prevailing market rate which resulted in commercial profits in the hands of the assessee and also lets out the developed commercial centres and charges rent and other maintenance fees which are determined by market prices. Hence, the CIT(A) observed that it cannot be said that the activities of the assessee are in the nature of general public utility . According to the CIT(A), in the context of section 2(15), profit motive is not relevant. What is important is that the profit gets derived from the activities of the society which may be incidental to the activities undertaken, and the activities are in the nature of trade, commerce and business and in that case, the assessee cannot claim exemption u/s. 11. According to the CIT(A), the decision in the case of Infoparks vs. CIT (392 ITR 404) [LQ/GujHC/2016/1462] is not applicable to the facts of the present case as the ratio of that decision is on one of the main activity of treating the income from property in the nature of trade, commerce and business. Relying on the decisions in the case of J&K Development Authority and Ghaziabad Development Authority wherein the activities carried out by the I.T.A. Nos.792&793/Coch/2014 8 authorities were in the nature of trade, commerce and business, the CIT(A) concluded that the Assessing officer was right in holding that the assessee is covered by the amendment to section 2(15) of the Act since the assessee derived income from such activities being more than Rs. 25 lakhs and the activities also fall in the category of trade, commerce and business and also in the category of any activity of rendering any service in relation to any trade, commerce and business. Accordingly, the CIT(A) confirmed the addition made by the Assessing officer on this issue. Against this, the assessee is in appeal before us.

10. The Ld. AR submitted that the authorities below are not justified in applying the proviso to section 2(15) to the case of the appellant herein. The appellant is entitled to the benefit of exemption u/s. 11 to the Act on account of the application of the income for charitable purposes, which are its only activities. The term charitable purpose is defined by way of an inclusive definition u/s. 2(15) as under: (15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment including watersheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: provided that the advancement of any other object of general public utility shall not be a charitable purpose, I.T.A. Nos.792&793/Coch/2014 9 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 or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakhs rupees or less in the previous year. Thus the term charitable purpose as defined above is divided into various limbs. The appellants case comes under the last limb pertaining to advancement of any other object of general public utility and this cannot be disputed, in view of the recognition granted hitherto by the Commissioner of Income Tax till the assessment year 2008-09. The appellants activities continue to be the same for the subsequent years also.

11. The Ld. AR submitted that the assessees claim for the year under assessment is denied on account of the alleged application of the first proviso to section 2(15) referred above. Therefore, the sole point for consideration before the lower authorities as well as before this Honble Tribunal is as to whether the first proviso applies to the case at hand or not. I.T.A. Nos.792&793/Coch/2014 10

12. According to the Ld. AR the first proviso to section 2(15) applies only when the activity of advancement of general public utility involves:- (i) Carrying of any activity in the nature of trade, commerce or business and (ii) Carrying on of any activity of rendering of any service in relation to any trade, commerce or business, for a cess or fee. The Ld. AR submitted that it is only if a particular case is falling under either of the above circumstances, the first proviso referred above will apply.

13. The Ld. AR submitted that the assessee herein, as stated earlier is constituted through a statute of the State Government. The assessees organization has been entrusted by the Government of Kerala the task of planning and developing the area in the specified schedule for the best interest of the society at large. The appellant in the course of this activity has been entrusted with some land which was hitherto held by the Government of Kerala. The appellant had developed the said land and some buildings are also constructed thereupon. The said building is let out by the appellant and rent is also received therefrom. Similarly, some portion of the land has also been sold I.T.A. Nos.792&793/Coch/2014 11 by the appellant. In this connection, it is to be noticed that the appellant is not engaged in real estate business as is highlighted by the authorities below. The activity of development of land, construction of buildings and letting out of the same on rental arrangements is not the main activity of the appellant herein. The assessee is only engaged in the advancement of general public utility which is the planned development of the Greater Cochin Area. The appellant has provided land to a total of about 125 recipients, selected from backward classes falling in the Greater Cochin Area. Similarly, it is also maintaining several monuments. So, all these activities are incidental to the main object Thus the proviso to section 2(15) will not apply to the facts of the present case.

14. According to the Ld. AR, the terms trade, commerce or business have been considered by various judgments of the Honble High Courts as well as the Apex Court and it has been laid down that it is only when the dominant object of the person is to carry on or do business, it can be held that this particular person is carrying on trade or business activity. It cannot be said that the GCDA is engaged in business activity and the dominant object is also the same. The properties in the possession of the GCDA were obtained from the I.T.A. Nos.792&793/Coch/2014 12 Government and the GCDA is only maintaining the same for the betterment of the society at large. The GCDA is not a real estate giant but is offering the building on rental arrangement through an auction process. So the mere fact of offering the buildings on auction cannot be used against the appellant.

15. In this connection, the Ld. AR relied upon the findings of the Apex Court in Additional CIT vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 [LQ/SC/1979/461] , wherein the Apex Court has laid down as under:

The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity

. Thus by virtue of the above findings of the Apex Court, as well as the findings of CST vs. Sai Publication Fund (2002) 258 ITR 70 [LQ/SC/2002/416 ;] , since the activity of the appellant is not predominantly business in nature, the benefit of exemption cannot be denied to it by virtue of the proviso to section 2(15). I.T.A. Nos.792&793/Coch/2014 13

16. Further, the Ld. AR submitted that the fact that even law makers had never intended to cover cases like the present one is clear from the budget speech of the Finance Minister while introducing the Finance Bill, 2008, as under: .Charitable purpose includes relief of the poor, education, medial relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose. Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. Therefore the Parliament has clarified that the intention was never to assess genuine charitable organization like the appellant herein. So much so, the assessment proceedings are illegal on account of the above also.

17. Further, Ld. AR placed reliance on Circular No. 11/2008 dated 19- 12-2008 issued by the CBDT, which clarified the position as under:

In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled I.T.A. Nos.792&793/Coch/2014 14 to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible.

Thus it is only in a situation where the organization is trying to mask the actual activity that the benefit can be taken away. As stated earlier, the appellant is coming under the direct control of the Government of Kerala and is a statutory body. The main activity of the appellant is not that of a real estate giant as stated by the revenue. So much so, section 2(15) (proviso) is not attracted in the present case.

18. The Ld. AR submitted that the assessing authority is not justified in finding that the appellant is facilitating the business activities of various persons who have let out the buildings from the appellant herein. In reality the income of the appellant is an income from house property and the same cannot be treated as an income from business as is done by the assessing authority. The buildings that are let out can only be classified as house property as contemplated under the statute and so much so, the rental income cannot in any event be the business income of the assessee. I.T.A. Nos.792&793/Coch/2014 15

19. The Ld. AR submitted that service has to be provided by one person to another and there should be a direct relation between the service and the fees for the service. In a shopping complex the direct relation is between the lessor and the lessee. There is no relation with the business of the lessee. The lessee may use the building for any purpose he deems fit. He may not use it too. Thus the lessor has no direct connection or association with the business and so he cannot provide any service to the business of the lessee. Therefore, in the case of GCDA the rental income realized is not by providing any activity or rendering any service in relation to any trade, commerce or business.

20. According to the Ld. AR other service provided by GCDA are also highlighted as involving in business. The services like collection of transfer fee for transfer of land, building, centage fee from municipalities and panchayaths, etc. are listed as business incomes. The transfer fees for properties are prescribed to regulate and restrict the transfer of the amenities provided to the weaker sections of the society to the more privileged sections of the society and are prescribed at the behest of the Government of Kerala. GCDA is involved largely in providing housing to the weaker sections of society. It wants to ensure that these do not go out of the hands of the I.T.A. Nos.792&793/Coch/2014 16 deprived persons to whom these houses are allotted. Hence a transfer procedure is prescribed to ensure that GCDA is informed of all transfers. This cannot be considered as rendering service as business. The centage charges are part of the revenues of the local government bodies provided for the functioning of GCDA. They are not collection from the public or charges from any specific services rendered to any business. It may be appreciated that these are not collected at the whims and fancies of GCDA as an entity. GCDA has no liberty to fix these fees on its own. The essential feature for any business is to have the liberty to fix charges for goods or services. Where even that does not exist the question of the role of GCDA as engaging in business or service is not relevant at all. The nature of services provided by trade associations to its members (for example, certification for exports) should not be equated with the services provided by GCDA. It is those kinds of services that are intended to be taxed by the proviso. Thus GCDA will continue to be out of the purview of the amendment.

21. The Ld. AR submitted that the assessing authority is not justified in placing reliance on the judgment of the Honble High Court in Infoparks case 329 ITR 404, when the High Court has not finally decided the issue and has ultimately only found that the question I.T.A. Nos.792&793/Coch/2014 17 requires a deep analysis from the side of the departmental authorities. So much so, the assessing authority went wrong in deciding the issue on the basis of the above judgment of the Honble High Court.

22. The Ld. AR submitted that similar reliance placed on the decision of the Tribunal, Amritsar Bench in the case of Jammu & Kashmir Development Authority vs. CIT in I.T.A. No. 30(Asr)/2011 dated 14/06/2012 is also out of context and can be distinguished on facts.

23. According to the Ld. AR the issue at hand is already settled by virtue of the following judgments/orders: (i) The judgment of the High Court of Allahabad in Commissioner of lncome Tax vs. Lucknow Development Authority (2013) 38 Taxman.com 246 wherein the Honble High Court has found in paragraph 27 and 28 as under:

27. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to section 2(15) and deny exemption available u/s. 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to section 2(15).

28. There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its object as detailed in the trust deed of the assessee. In these facts and circumstances of the case, and the assessee was entitled to exemption provided u/s. 11 for the relevant assessment year.

I.T.A. Nos.792&793/Coch/2014 18 This case, it is true, considered the issue with respect to the assessment years prior to the amendment w.e.f. 01-04-09. But the Honble Court has also considered the impact of the above provision as incorporated w.e.f. 01-04-09 and so much so the findings in this case apply to the facts of the present case also. (ii) Jodhpur Development authority vs. CIT (2012) 27 Taxman.com 183 wherein similar set of facts the issue was decided in favour of the development authority. (iii) Samarpan Samiti vs. CIT (2012) 24 Taxman.com 205 wherein the activity of running blood bank and proposals to deny the benefit alleging that the same is a commercial activity is set aside by the ITAT Agra Bench. (iv) The decision of the Delhi High Court in the case of ICAI vs. Director General of Income Tax (2013) 35 Taxman.com 140 wherein the Honble Delhi High Court has found that when the dominant objective of ICAI was only to regulate the profession of Chartered Accountancy in India, it is a charitable institution and mere receipt of a fee for conducting coaching classes as well as campus placements cannot be a business activity under the proviso to section 2(15). (v) The judgment of the Delhi High Court in BIS vs. Director General of IT (2012) 27 Taxman.com 127 wherein the Bureau of Indian Standards is extended the benefit irrespective of the proviso to section 2(15). In the light of the above judgments, it is humbly submitted that the orders of the authorities below are illegal, arbitrary and unjustified. I.T.A. Nos.792&793/Coch/2014 19

24. The Ld. AR submitted that the depreciation claim of GCDA is disallowed stating it amounts to double deduction. In fact, depreciation is claimed on assets acquired prior to 2002, the year when GCDA is brought to the armpit of Income Tax Act, 1961. Thus the depreciation of GCDA is proper and is allowable. The authorities below have erred in denial of depreciation to GCDA.

25.. The Ld. AR submitted that if such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. The assessees object is nothing but charitable activity which comes under the meaning of sec. 2(15) of the Act.

26. The Ld. AR relied on the judgment of the Apex Court in the case of Additional CIT vs. Surat Art Silk Cloth Manufacturers Association I.T.A. Nos.792&793/Coch/2014 20 (1980) 121 ITR 1 wherein it was held that the predominant object is not making profit or carrying out the object of general public utility, it would not lose its character of a charitable purpose merely because some profit arises from the activity carried out by the assessee.

27. The Ld. AR further relied on the judgment of the Supreme Court in the case of CST vs. Sai Publication Fund (2002) 258 ITR 70 [LQ/SC/2002/416 ;] where it was held that if the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in an incidental or ancillary activity is established. The assessee trust which has been set up for providing housing, accommodation cannot be held to be a dealer in goods so as to be denied exemption u/s. 11A of the I.T. Act.

28. The Ld. AR submitted that the judgment of High Court of Kerala in the case of Infoparks Kerala vs. DCIT (2010) 329 ITR 404 cannot be applicable to the facts of the present case.

29. The Ld. AR further relied on the judgment of the Allahabad High Court in the case of CIT vs. Lucknow Development Authority, Gomti Nagar (2013) 38 Taxman.com 246 wherein it was held that the where I.T.A. Nos.792&793/Coch/2014 21 the Trust has carried out its activities on non commercial lines with no motive to earn profits, for fulfillment of aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15) of the Act.

30. The Ld. AR also relied on the judgment of Jodhpur Bench of ITAT in the case of Jodhpur Development Authority vs. CIT reported in (2012) 145 TTJ 221 wherein it was held that where the main object of the assessee was urban planning and traffic control and management including preparation of master development plans and zonal development plans which are in the nature of public utility, even though the assessee might be selling certain property at market rate through auction after developing that property, such an activity is incidental to the objects of the assessee and therefore, it is entitled to registration u/s. 12AA of the I.T. Act.

31. The Ld. AR also relied on the judgment of the Agra Bench of the ITAT in the case of Samarpan Samiti vs. CIT reported in 54 SOT 30 (Agra) wherein it was held that the trust having the object of providing medical relief was eligible for exemption u/s. 12AA of the Act even if the assessee incidentally carried on commercial activity. I.T.A. Nos.792&793/Coch/2014 22

32. He further relied on the judgment of the High Court of Delhi in the case of Institute of Chartered Accountants of India vs. Director General of Income-tax(Exemptions) reported in 260 CTR 1 (Del.) wherein it was held that holding interviews and conducting coaching classes for a fee for the purpose of campus selection of its students does not amount to carrying of business activity so as to deny exemption u/s. 11 of the Act. It is not necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose. If the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. Reported in the assessees own case (2012) 347 ITR 99 (Del.) [LQ/DelHC/2011/3787] .

33. The Ld. AR also relied on the judgment of the High Court of Delhi in the case of Bureau of Indian Standards vs. Director General of Income-tax(Exemptions) reported in 358 ITR 78 where it was held that general public utility activity of prescribing of standards, and enforcing of those standards, through accreditation, continuing supervision, inspection etc. for a fee by BIS, does not involve the carrying on of trade or a commercial activity. I.T.A. Nos.792&793/Coch/2014 23

34. On the other hand, the Ld. DR submitted that from the Income & Expenditure statement of the assessee, it is seen that it earns income from letting out of property and provisions of services and amenities amounting to Rs. 5,38,66,791/- and Rs. 8,00,94,696/- for assessment year 2009-10 and 2010-11 respectively. It may be noted that the assessee has claimed various establishment and administrative expenses as well as depreciation, against the receipts credited in the I&E statement. The assessee itself treats these receipts as Business income. Thus on basis of the facts, the Ld. DR submitted that the Assessing officer held that the activity of letting out of property, and provision of services constituted an activity in the nature of trade, commerce or business. The Ld. CIT(A) has also held that the

GCD Authority is acting like a REAL ESTATE GIANT who enters into land deals and opts to take up construction and sales of commercial and residential complexes in the process, it auctions the land developed to the highest bidders and such auctions are done following commercial principles and prevailing market rate and consequently result in commercial profits in the hands of the society. Assessee may not have a profit motive but the fact remains that various activities undertaken by it results in commercial profits in the hands of the society. It is held in the case of J&K Development I.T.A. Nos.792&793/Coch/2014 24 Authority that the development activities carried out by such authorities is in the nature of trade, commerce and business

.

35. In this connection the Ld. DR relied on the decision of the Honble High Court of Kerala in the case of INFOPARKS Kerala reported in 329 ITR 404, the relevant extract is reproduced hereunder:

From the nature of activities being pursued by the petitioners, particularly as contained in the memorandum of association extracted by the respondent in the statement filed in WP(C) 6899/2009 (stated as more or less similar in the other case as well), it is very much evident that the derivation of income by the petitioner cannot be held as merely the income from property, so as to oust the involvement of trade, commerce or business or any service in connection with trade, commerce or business as contemplated under the statute, which requires to be exempted and appreciated in detail by the departmental authorities at the time of assessment. The Ld. DR contended that for the very same reason, the petitioners cannot have a short cut, to have an automatic declaration of exemption, by seeking for issuance of a Certificate u/s. 197(1); particularly when there is substantial variation in the statutory position as it existed earlier when the petitioners were given exemption under section 11 and the position was available after the amendment to section 2(15) brought into effect from 1-4-2009. The Ld. DR submitted that all the decisions cited by the learned Senior Counsel for the petitioners are in respect of the position as it existed earlier and the position as it now exists does not form the subject-mater of consideration in any such cases. Further, the Ld. DR pointed out that the petitioners have not chosen to challenge the amendment to section 2(1) and Union of India is not impleaded in the party array, I.T.A. Nos.792&793/Coch/2014 25 so as to answer the scope an extent of amendment.

36. According to the Ld. DR, yet another aspect to be noted in this context is that, after the amendment by incorporating proviso to section 2(15), the 4 th limb as to the advancement of any other object of general public utility will no longer remain as charitable purpose, if it involves 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 for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity.

37. Ld. DR submitted that the first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves trade, commerce or business. But the situation contemplated under the second limb (clause (b) stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words any trade, I.T.A. Nos.792&793/Coch/2014 26 commerce or business as they appear in the second limb of clause(b) are in connection with the service referred to the trade, commerce or business pursued by the institutions to which the service is given by the assessee.. As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under clause (b) in relation to the service rendered by the assessee the terms any trade, commerce or business refer to the trade, commerce or business pursued by the recipient to whom the service is rendered.

38. The Ld. DR submitted that in the case of Greater Cochin Development Authority, the assessee has sold land to private builders an others, and rented out commercial space on market rate which are today the Gateway Residency Hotel, the GCDA Shopping Complex, the Asoka Tarangini Apartments, the Bay Pride Mall, Kerala Trade Centre etc. hence, the submission of the assessee that this case law of Infoparks vs. CIT is not applicable to the facts of the case is not correct as the ratio of that case law is one of the main activity of treating the income from property in the nature of trade, commerce and business. I.T.A. Nos.792&793/Coch/2014 27

39. The Ld. DR placed further reliance on the Honble ITAT, Amritsar Bench decision in I.T.A. No. 30(Asr)/2011 in the case of M/s. Jammu Development Authority dated 14/06/2012 wherein the issue regarding refusal of grant of registration u/s. 12A by the Commissioner. The relevant paragraph is reproduced below:

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 u/s. 12A of the Act, which was allowed vide order dated 30-09-2009. It is at this juncture that the first proviso an 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 and Kashmir Development Act, on dissolution of all I.T.A. Nos.792&793/Coch/2014 28 properties and funds to vest in the Government and for the purpose of realizing properties, fund and dues and liabilities etc. will vest in the Govt. There is no restriction, how the same are to be uitilized by the 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. 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 o 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. We find no infirmity in the order of the Ld. CIT, Jammu and the same is upheld. Thus, all the grounds of the assessee are dismissed.

40. In view of the above facts, the Ld. DR reiterated that the Assessing officer and the Ld. CIT(A) are right in holding that the assessee is covered by the amendment to section 2(15). The activities carried out by the assessee may be of general public utility but in view I.T.A. Nos.792&793/Coch/2014 29 of the sum derived from such activities being more than Rs. 25.00 lakhs and the activities falling in the nature of trade, commerce and business also in the category of any activity of rendering any services in relation to any trade, commerce and business and even cess and fee is charged in the advancement of such activities, therefore, they cannot be treated as for charitable purposes.

41. The Ld. DR also drew our attention to the observation made by the Assessing officer in para 4 of the assessment order for assessment year 2009-10: The primary issue to be decided is whether the assessee carries out any activities in the nature of trade, commerce or business, or renders any service in relation to trade, activity or commerce. The language used in the proviso to section 2(15) is wide in scope. It refers to any activity in the nature of trade, commerce or business. It is of significance that the section does not use the words business or profession in the context of its usage in section 28 nor does it refer to the profits and gains of such business or profession. Rather, the use of the word any indicates the extensive applicability of the term to activities in the nature of trade, commerce or business. In the nature of

means similar to or like trade, commerce or business. Thus what is required to be examined is whether the letting out of buildings constitute activities which bear the characteristics of trade, commerce or business.

I.T.A. Nos.792&793/Coch/2014 30

42. The Ld. DR relied on the judgment of the Amritsar Bench of the Tribunal in the case of Jalandhar Development Authority vs. CIT (2010) 124 TTJ 598 (Amritsar).

43. We heard both sides and perused the impugned order of the Commissioner of Income-tax(A) and other material on record. Admittedly, the assessee has been constituted by the Government of Kerala. 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 is that the assessee is of general public utility and was established to satisfy the need for housing accommodation of various sections of the people of Kerala and specially for planning and development in the cities, town and villages and is of charitable nature.

44. 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, I.T.A. Nos.792&793/Coch/2014 31 medical relief and advancement of any other object of general public utility. A strong contention was raised by the learned Counsel that the assessee is also executing the development of following works/infrastructures: (a) Development of 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 (h) Development of parks (i) Cremation grounds (j) Construction of schools, etc.

45. The learned Counsel during argument took a strong plea that on identical facts registration under Section 12A of the Act was accorded to Lucknow Development Authority and Jodhpur Development Authority wherein the objects are identical to the present assessee. According to the Ld. AR if the Act under which the assessee was constituted is analysed, it is the same as in the above cases and I.T.A. Nos.792&793/Coch/2014 32 when registration has been granted to those authorities, then no two yardsticks should be adopted.

46. At the outset, we are of the view that we are not agreeable with the contention of the learned Counsel. 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 these authorities as the same is not pending before us for adjudication. Reliance can be placed upon the decision pronounced by the Honble Apex Court in the case of Distributors (Baroda) (P) Ltd. v. Union of India and Ors. (155 ITR 120) [LQ/SC/1985/208] wherein the Honble 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 other assessees. At the same time, order passed by a lower authority is not I.T.A. Nos.792&793/Coch/2014 33 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 Kerala 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 Kerala 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 case that the assessee is allotting houses to the poor masses free of cost. The Honble 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 Honble I.T.A. Nos.792&793/Coch/2014 34 Court was whether the income of the trust was exempt from income- tax during the relevant period, The Honble Apex Court while coming to a particular conclusion reversed the decision of the Honble 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.

47. The Honble 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 I.T.A. Nos.792&793/Coch/2014 35 organization. In the cases of Addl. CIT v. Surat Silk Cloth Manufacturers Association (121 ITR 1 [LQ/SC/1979/461] ) and CIT v. Bar Council of Maharashtra, 22 CTR (SC) 106, 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.

48. The major thrust of the learned Counsel for the assessee is that the assessee is of general public utility as it satisfies the need for housing accommodation for the section of the people of State of Kerala, specifically Cochin 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 either at free of cost or on cost to cost basis and not for profit. In the present scenario, the similar activities are performed by big colonizers/developers who are earning a huge profit. If this income is exempted u/s. 11, then we will open a pandora box and anybody will claim the exemption from tax. If the activities 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 I.T.A. Nos.792&793/Coch/2014 36 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 this 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 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 the assessee has started auctioning the plots by way of bidding at the market rate and sometimes more than that and charging interest on I.T.A. Nos.792&793/Coch/2014 37 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 business house. Similar development/infrastructure/facilities are also provided by private developers these days, then they will also claim the status of a charitable institution.

49. During argument, the Ld. Counsel relied upon the decision of the Honble Apex Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers 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, in the present case there is a profit motive of the assessee, so it will not help in any manner.

50. The Honble Apex Court in the case of CIT v. Bar Council of Maharashtra, 22 CTR (SC) 106 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 I.T.A. Nos.792&793/Coch/2014 38 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. 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. Further, on scrutiny 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. The trust deed empowered the authorities 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. 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 I.T.A. Nos.792&793/Coch/2014 39 assessee are analysed and kept in juxtaposition with the various 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 Honble Patna High Court as pronounced in the case of Bihar State Forest Development Corporation v. CIT, 224 ITR 757 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 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. 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 Honble 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 I.T.A. Nos.792&793/Coch/2014 40 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. 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 commercial developers/builders 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.

51. In view of these facts and judicial pronouncements, we are of the view that the claim of the assessee has been rightly rejected by I.T.A. Nos.792&793/Coch/2014 41 the CIT(A). The stand of the CIT(A) is upheld. Accordingly, the appeals of the assessee are, therefore, dismissed.

52. The coordinate Bench of the Tribunal at Amritsar, following the decision in the case of Punjab Urban Planning and Area Development Authority vs. CIT, 156 Taxman 37 (Chd.) 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." I.T.A. Nos.792&793/Coch/2014 42

53. 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 almost identical to the assessees case. 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 that 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 I.T.A. Nos.792&793/Coch/2014 43 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.

54. In view of the above discussion, we are inclined to hold that the CIT(A) is justified in rejecting the claim of exemption u/s. 11 of the I.T. Act.

55. In the result, both the appeals of the assessee are dismissed Pronounced accordingly on 8th-08-2014. sd/- sd/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 8th August, 2014 GJ Copy to:

1. The Greater Cochin Development Authority, S.A. Road, Kadavanthra, Kochi-20.

2. The Joint Director of Income-tax (OSD) (Exemption), Range-4, Kochi.

3. The Commissioner of Income-tax(Appeals)-II, Kochi.

4. The Commissioner of Income-tax, Kochi.

5. D.R., I.T.A.T., Cochin Bench, Cochin.

6. Guard File. By Order (ASSISTANT REGISTRAR) I.T.A.T, COCHIN