K.N.Goyal
Recently there was news about how Jammu Development Authority (JDA) was blatantly disobeying law, as to how it was not contributing towards the development of the Nation by paying due income tax.
JDA and SDA became a laughing stock for having claimed themselves to be charitable institutions. JDA was abused and butchered and made to cough up huge amounts of taxes.
While all the allegations were being levelled against JDA, a very important fact about which there was not even a whisper from the Income Tax Department was that the Income Tax Appellate Tribunal, Amritsar, which had denied charitable status to JDA had earlier passed similar orders in the case of various Improvement Trusts in Punjab but all those orders have now been reversed by the Amritsar Tribunal vide its order dated 10th September, 2015 and charitable status restored to all of them retrospectively. Crores of tax demands raised against them have been deleted.
These Authorities in Punjab had also faced the wrath of the Income Tax Department which attached their bank accounts to recover demands running into crores of rupees and made out to be culprits in the eyes of the public.
The Improvement Trusts of Hoshiarpur, Pathankot, Bhatinda, Jalandhar, Amritsar and Moga had approached the Punjab & Haryana High Court against the Tribunal’s order and the Court was pleased to set aside the orders of the Amritsar Tribunal and remand back the case to the Tribunal.
On fresh consideration, the Tribunal has reversed its earlier orders and the revised order dated 10th September, 2015 is a very beautiful order which exhaustively deals with the activities of all these development authorities. The Tribunal, in its revised order has held that the charitable status cannot be denied to these development authorities since their commercial activities are incidental to their dominant objective of development of the city which is a charitable objective. This Order sets at rest all the inhibitions that the Tax Department has about the Development Authorities.
While these Cousins of JDA in Punjab have now got justice, JDA was not lucky to get respite from J&K High Court. At the prime time, the Consultants were changed and proper facts could not be placed before the J&K High Court. The Supreme Court also dismissed the SLP without going into the merits.
Interestingly, JDA’s richer cousins in Chennai, Mumbai and Delhi, CMDA, MHADA and DDA also enjoy charitable status, which has been conferred and acknowledged by none less than the Tribunals of the respective jurisdiction. Similar status is enjoyed by JDA’s brethren in U.P, Rajasthan and Gujarat viz., Lucknow, Moradabad, Jodhpur, Jaipur,
Gujarat Industrial Development Authority, etc.
Now with revised order of the Tribunal, JDA would be well advised to seek legal opinion and file a review before the Supreme Court so that it is not singled out and treated differently from others of its fraternity.
The main issue that is being overlooked by the Tax Authorities is that these development authorities cannot be said to be carrying out commercial activities just because they are allotting lands to higher income groups or by way of auctions for commercial purposes. The main object of these development authorities is the development of the city and they have to cater to the needs of people of all walks of life, viz., the higher income group, the middle class, the lower classes and the economically weaker section. There can be no city which is inhabited only by the destitute. The Authorities have to provide land for dwelling of people. For the livelihood of the citizens, land has to be provided to the commercial establishments. Land has to be provided to house institutions like schools, colleges, hospitals, religious places, etc.
It has been observed that JDA has allotted land for Malls and Shopping complexes. These Malls and Shopping Complexes are for the convenience of the public and for the development of the city and its modernization. It is not for reaping profits. And, even if the same does lead to surpluses, the surpluses are for re-deployment into further developmental activities for the city and not for JDA or its employees to take home. Even the Government cannot take the money and it has to be re-deployed only in the development of Jammu city.
These activities cannot be dissected and viewed in isolation. The activities are complimentary to each other. The surplus generated in some of the schemes compensate the rebates and subsidies allowed in other schemes and for non-revenue generating activities like building of roads, parks, allotment to institutions, etc.
Generating revenue for its activities is not the same thing as generating profits. All these Development Authorities by their governing statute are barred from distributing any profits. In fact, all the funds generated from whatever sources have to be ploughed back in to the main objective ie. development of the City.
The Tax Department in its zeal to meet their targets forget that the taxes that they collect are also for development of the nation and the development activities are undertaken through these development agencies. What purpose would it serve to tax the resources generated by the development agencies and then give it back to them as grants?
If these development agencies are able to work in a self-sustaining model, they need to be applauded. If they do not generate resources, they will have to look to budgetary resources which are already meagre.
The fact of the matter is that the negative image of these Institutions clouds the thinking of the assessing officers and even the judiciary to some extent. The Institution is not seen separate from the employees who run it. If there is an erring or corrupt employee, there is vigilance, there is CBI, Police to check them, taxing the Institution is not the solution. A case in example is JDA’s own hearing before the Tribunal where even before the pleadings started, the Senior Member of the Tribunal thumps his chest and utters that he was against JDA! What justice could have been expected from the Tribunal where the judge expresses his pre-determination! Funds that were collected by JDA for the development of Jammu have now been taken away by the Tax Department and for development work, JDA would be forced to look upto the State for budgetary support and the State will in turn look upto the Centre for support. The erred equation is for anybody to understand.
Another important aspect that has not been spoken about is that what has been taxed is not JDA’s income. JDA was never in profits. It has huge accumulated losses. The Tax Department has claimed income tax on land sale. Land is a State matter and JDA has no ownership over the lands.
There are scores of judgements where the J&K High Court has itself held that JDA has no authority to acquire lands. Lands can be acquired only by the State Government and it can transfer the lands to JDA only after it pays for the land. JDA never had the means to pay for the lands. All money in its coffers are from land sale which belongs to the State Government. It is for anyone to appreciate if JDA can be said to have acquired the land from the State with the State government’s own funds!
JDA has been diligently following the law and made out separate account of transactions of the Government under Nazul Account and credited all land sale proceeds in the said account. JDA’s own accounts were recorded under General Development Account.
Now, by making JDA pay taxes on land, the Tax Department wants to impress that the land belongs to JDA. Where JDA was crediting 100% of the land sale proceeds to Government account, the Government seems content with 30%! It is another matter that the 100% was credited to the account of the State Government and the 30% tax claimed by the Tax Department goes to the Centre’s kitty. It is for the State Government to take a call and settle the matter with the Centre. Or, JDA might as well take the support of the Tax Department’s stand and manipulate its accounts and lay claim to all the funds of land sale as its own which thus far, it has religiously dealt with as Government funds and holding it in Trust!
(The author was Tax Consultant to JDA and other development authorities)
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