1. Travancore Education Society vs. CIT [2021[ 431 ITR 50 (SC)
Charitable purposes – The object of a trust which admittedly collects capitation fees for admission in addition to regular fees cannot be said to be charitable and is not entitled to be registered u/s 12AA
The assessee was a society registered under the Travancore-Cochin Literary, Science and Charitable Trust Act, 1955. It had established an engineering college named ‘Travancore Engineering College’. During a search operation in the office of the assessee, several incriminating materials were found which disclosed the receipt of capitation fees for admission of students. It was collected by the trust in addition to the prescribed fees. The fact that capitation fee was being collected was admitted by the treasurer of the trust, one Shajahan, and the secretary, Sainulabdeen, in the statement given by them. On these facts, the Commissioner rejected the application for registration u/s 12AA. According to the Commissioner, the object of the trust was not charitable. The Tribunal dismissed the appeal of the assessee.
On appeal, the High Court agreed with the Tribunal that on the materials it was evident that the trust was not carrying out any charitable activities entitling it for registration u/s 12AA.
On further appeal, the Supreme Court dismissed the appeal holding that there was no ground to interfere with the order passed by the High Court.
2. PCIT vs. Majestic Developers [2021] 431 ITR 49 (SC)
Special deduction in respect of housing project – Condition precedent – Proof of completion of project within specified time must be satisfied in terms of local State Act
The assessee was involved in the business of development and construction. For the assessment year 2008-09, it filed its return of income on 29th September, 2008 declaring an income of Rs. 2,53,460 by claiming deduction u/s 80-IB. This return of income was taken up for scrutiny and was accepted. Subsequently, in exercise of the power vested u/s 147, reassessment proceedings were commenced for withdrawing the deduction allowed u/s 80-IB and reassessment proceedings came to be concluded by withdrawing the said deduction.
The claim of the assessee for deduction u/s 80-IB, which was in respect of a residential project ‘Majestic Residency’ had been disallowed by the A.O. on the ground that the assessee had failed to produce the completion certification.
The first appellate authority, the Commissioner of Income-tax (Appeals), considered the assessee’s claim in the background of the provisions, viz., u/s 80-IB(10) and clause (ii) of the Explanation to clause (a), and allowed the claim since the documents and explanation proved or established that the assessee had completed the project within five years from the date of commencement.
The Revenue, being aggrieved by the said order, preferred a second appeal before the Income-tax Appellate Tribunal which came to be dismissed by arriving at a conclusion that in a similar / identical fact situation, the issue had been dealt with by the jurisdictional High Court in CIT vs. Ittina Properties Pvt. Ltd. [2014] 49 taxmann.com 201 (Karn.).
Revenue filed an appeal contending that the authorities erred in arriving at the conclusion that the assessee was entitled to deduction u/s 80-IB(10) by relying upon the decision in Ittina Properties Pvt. Ltd. (Supra) which had not reached finality.
The High Court dismissed the appeal, holding that the completion certificate which is referred to in section 310 of the Karnataka Municipal Corporation Act, 1976 (KMC Act) is the completion certificate which is required to be issued by the architect and / or engineering supervisor, as the case may be, of the factum of completion of the building or project to the Commissioner. It is only after the completion certificate is furnished and inspection conducted by the Commissioner that the occupancy certificate would be issued by the Commissioner of the Bengaluru Mahanagara Palike. According to the High Court, the contention of the Revenue that the completion certificate was required to be issued by the local authority as prescribed under clause (ii) of the Explanation to clause (a) of sub-section (10) of section 80-IB could not therefore be accepted.
The Supreme Court dismissed the appeal of the Revenue opining that the judgment of the High Court did not warrant any interference, clarifying that the observations as to the scope of section 310(2) of the KMC Act made in the impugned judgment were qua the State of Karnataka given the particular local Act in that case.
