INCOME TAX ACT, 1961

Section 12AA(3)

Charitable trust - Cancellation of registration under section 12AA - CIT proceeded on mere assumption of assessee being engaged in commercial activity without any cogent material -

Assessee was established under APUDA Act to promote and secure development of all or any of the areas in its jurisdiction according to Master plan and for that purpose, assessee has been vested with powers to acquire by way of purchase or otherwise hold, manage, plan, develop and mortgage or otherwise dispose of land and other property. It had been granted registration under section 12AA(3) in 2006 with effect from 1-4-2003. CCIT cancelled registration granted under section 12AA(3) with effect from 2006 onwards on the reasoning that assessee was engaged in commercial activity and it acted as an agent of Government of Andhra Pradesh, sold land indiscriminately belonging to State Government, and from 2008 onwards it lost sight of the objects and acted like realtor and being engaged in commercial activity, assessee was hit by amendment to section 2(15) which has come into force with effect from 1-4-2009. Held: Assessee was hit by the amendment to section 2(15). In the instant case, the assessee is a Government institution and department did not place any material to show that assessee was engaged in commercial activity. The activities such as sale of lands by public auction, entering into joint development agreement for construction of commercial complexes, houses and malls were to be considered for public utility services for furtherance of objects, hence, the activities of the assessee were within the purview of the Act and objectives. Assessee was not established to have made profit out of above activities nor proved to be used for other purposes than it's objects. There was no material placed by department to establish that the assessee has made trade, commerce or commercial activity and the funds were distributed among shareholders or individual persons or for the benefit of any individual or the persons or association or profits being remitted to Government account. Whatever surplus generated was used for activities of assessee-society, and, therefore, cancellation of registration under section 12AA on mere presumption without having proper material was not justified.

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