INCOME TAX ACT, 1961

--Charitable trust--Registration under section 12ACharitable purpose vis-a-vis profit motive--The assessee filed an application in Form 10A on 22-3-2010 for registration under section 12A(a). The assessee Jodhpur Development Authority (JDA) was created by the Governor of Rajasthan under Jodhpur Vikas Pradhikaran Adhiniyam, 2009. The Commissioner directed the assessing officer to submit the report on the application filed by JDA. The assessing officer required the assessee to furnish certain details but such details were not furnished before him. The assessing officer, therefore, submitted his report on the basis of the materials available on record with him. In the report, the assessing officer mentioned that JDA derives income from sale of plots, etc., charging lease money and incurs expenses on salary, etc. The books of account were not produced before the assessing officer. Therefore, the sources of income and expenditure are not verifiable. On receipt of the report of the assessing officer, the Commissioner provided an opportunity to the assessee to furnish certain details. The details required are available at p. 2 of the order of the Commissioner. However, on the date fixed for furnishing reply, none attended the proceedings before the Commissioner and no adjournment application was filed. Meanwhile, the Secretary, JDA filed a letter dt. 5-8-2010 received in the office of the Commissioner on 12-8-2010 and in this letter, the Secretary, JDA mentioned the circumstances under which JDA filed the application for registration under section 12A(a) because the provision of section 10(20A) was omitted from Income Tax Act w.e.f. 1-4-2003. The Commissioner issued another letter dated 17-9-2010 to the assessee to furnish the details so as to enable him to dispose of the application of registration filed by the assessee. The letter so sent is reproduced in the order of the learned Commissioner at pp. 2 and 3 of his order. In response to this letter, the assessee filed the written submissions. The crux of the written submissions and the arguments has been mentioned by the Commissioner at p. 4 in his order and these are reproduced as under : '1. In similar circumstances Jaipur Development Authority has duly been granted registration under sections 12A/ 12AA with retrospective effect. The assessee exists solely for advancement of objects of general public utility without any profit motive. 3. The provisions of section 10(20A) omitted w.e.f. 1-4-2003 have been incorporated in the amendment to section 10(23) and as such, the assessee can always claim its income exempted now under section 10(23) and for earlier years under section 10(20A). Delay in submission of the registration application was due to the confusion whether section 10(20) will apply or whether the assessee should seek for registration under sections 12A/12AA. The Commissioner has referred to the definition of 'charitable purpose' as mentioned in section 2(15). The proviso to section 2(15) says that advancement of any other of general public utility shall not be a charitable purpose, if it involves a carrying on of any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of nature of use or application, or retention of the income from such activity. According to the Commissioner, the assessee acquires/buys land, develops land by providing amenities and thereafter selling the plots/shops. The activity of the assessee is similar to the activity of a builder. The entire operation is carried out in a systematic commercial way. The Commissioner was, therefore, of the opinion that proviso to section 2(15) is applicable. The Commissioner further observed that in the case of JDA (Jaipur Development Authority), the proviso to section 2(15) was not considered. The decision has not been accepted by the Department and the appeal has been filed under section 260A before Hon'ble Rajasthan High Court. The Commissioner further observed that the assessee has not got its accounts audited and has not filed the return. The request for condonation of delay was also rejected. It was further observed that the assessee never existed in the financial year 2003-04 and, therefore, the registration cannot be granted with effect from financial year 2003-04. Held: Assessee was entitled to registration under section 12AA as the objects of assessee (JDA) being planning and development of city including preparation of master plan and zonal development plan are in the nature of public utility, even though assessee was selling plots after development of that property through auction but such acivity is incidental to objects of assessee.