High Court allows Registration u/s 12A to GNIDA, YEIDA and NOIDA.
In a significant ruling, the division bench of the Allahabad High Court ruled that the Commissioner (exemption) is not empowered to examine the charitable nature of the Entity while considering registration application.
While confirming the ITAT’s decision to allow registration to GNIDA, YEIDA and NOIDA, under section 12A of the Income Tax Act, the bench clarified that when a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for “charitable purposes” and seek registration under Section 12A(1) of Income Tax Act.
Greater Noida Industrial Development Authority (GNIDA), Yamuna Expressway Industrial Development Authority (YEIDA) and New Okhla Industrial Development authority (NOIDA) are statutory authorities established under the Uttar Pradesh Industrial Area Development Act, 1976. All these Industrial Development Authorities (IDA) were declared as “Industrial Townships” by the State Govt. The IDA’s application for registration under section 12A was rejected by the CIT(E) on ground that they are primarily engaged in business activity and not charitable activity therefore not eligible for registration under Section 12AA(1) (b) (ii) of Act, 1961.
However, on appeal, the Tribunal held that the IDAs are eligible for taking registration under s. 12A. Against the order of the Tribunal, the IDAs approached the High Court.
Before the High Court, the Revenue contended that these authorities are acting as a private builder or developer of a property and none of them satisfied definition of local authority under Section 10 (20) of Act, 1961 and similar claim.
The division bench comprising of Justice Sudhir Agarwal and Justice Ravindra Nath Mishra observed that, for the purpose of the Income Tax Act, charitable purpose primarily shows that predominant object must be to promote welfare of general public. “Ancillary activity, if any, than that general one performed by the said institution would not render such institution “non-charitable”. GNIDA, YEIDA and NOIDA perform functions as detailed under Section 6 of UPIAD Act, 1976. They, being statutory bodies, cannot travel beyond statuaries functions, prescribed. The primary purpose and predominant object of these ‘IDAs’ is to conduct sovereign and statutory functions assigned to them. They perform charitable activities during their life time.”
The bench further analysed the power of the Commissioner (Exemption) and held that he cannot examine whether the income derived by the person concerned is from the activities which are charitable in nature or not. According to the bench, Commissioner has to examine whether application has been submitted in accordance with requirement of statute while considering an application for registration.
It was also noted that all the three IDAs have been conferred status of “industrial township” as contemplated under Article 243 (Q) proviso of Constitution which would show that the bodies are to perform municipal functions in their respective jurisdictions and therefore, they enjoy to some extent, status of a local authority also.
“CIT (E), at the stage of registration, is not supposed to inquire into the conduct of charitable or other activities to be performed by a trust or institution which has submitted application for registration. That is an investigation to be gone subsequently at the time of assessment by Assessing Authority.”
Examining the nature and purpose of the IDAs, the bench noted that all the three are statutory bodies and they cannot function beyond authority conferred by the Act. Section 6 provides object of IDA which includes acquisition of land; preparation of a plan for development of industrial development area; demarcation and development of sites for industrial, commerce and residential purposes according to plan; providing infrastructure for industrial, commercial and residential purposes; to provide amenities; allocate transfer either by sale or lease or otherwise plots of land for industrial, commercial and residential purposes; regulate erection of buildings and setting up of industries and laying down plans for which a particular site or plot of land shall be used i.e. for industrial, commercial or residential purposes; and, to regulate industrial, commercial, residential or any other specified purpose. Therefore basic object is to develop and regulate of an area notifying as industrial development area.
It was noted that whatever amount is received by ‘IDAs’ under different heads, whether tax, rent, fee, sale consideration etc., it has to be used in discharge of objectives and functions provided under the Act.
Concurring with the findings of the Tribunal, the bench observed that “a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for “charitable purposes” and seek registration under Section 12A(1) of Act, 1961.”
Allowing the appeal, the bench observed that the exclusion of the respondent-IDAs from the ambit of definition of “charitable purposes” was “nothing but an irrational, illogical and misconceived approach.”
Read the full text of the Judgment below.
