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The Commissioner of Income Tax Versus Bagalkot Town Development Authority

2015 (12) TMI 1422 - KARNATAKA HIGH COURT

Entitlement for exemption under Section 11 - nature of interest income from FD with the banks - the respondent being a Trust not having submitted Form No.10 and not having applied 85% of income towards Charitable & Religious purposes - Held that:- Assessee is a statutory authority created under the Karnataka Improvement Boards Act to carry out public purposes. Therefore, ratio of judgement in the case of CIT v. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT OF INDIA ] is applicable to t .....

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character of funds provided by the Government and cannot be brought to tax as Income from other sources.

In the premise, we are of the considered view that the argument advanced on behalf of the Revenue that assessee was not entitled for exemption under Section 11 of the Act for the reasons recorded by the Commissioner of Income Tax, is untenable and deserves to be rejected and accordingly rejected. - Decided in favour of assessee - ITA No. 100027/2014 - Dated:- 15-12-2015 - S. Abdu .....

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t was earned on funds parked in FDS for specific purposes pending utilisation ignoring the provisions of sections 11(1)(a) and 11(1)(b) read with section 11(2) of the I.T.Act, 1961, which are mandatory provisions as held by the Supreme Court in the case of CIT V. Nagpur Hotel Owner s Association (247 ITR 201). 2. Whether, in law and on fact, the ITAT is correct in not appreciating the provisions of section 11(1)(a) and 11(1)(b) which clearly provides that income to be excluded to the extent to w .....

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ened by the Assessing Authority as held by the Hon ble Supreme Court in Nagpur Hotel s case supra. 4. Whether, in law and on facts, the ITAT is correct in holding that the Form No.10 as required by Income Tax Rule 17 can be filed after completion of assessment during the pendency of appeal." (sic) 2. Heard Sri Y.V. Raviraj, learned Counsel for the appellant and Sri Parthasarathi, learned Counsel for respondent-assessee. 3. Though the Revenue has raised aforementioned questions of law for co .....

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at there is no dispute with regard to the fact that the respondent was getting funds from the Government to carry out certain public works such as Rehabilitation & Resettlement of Persons Displaced during the construction of Almatti Dam. Respondent had applied and obtained registration under Section 12-AA of the Act and it was considered as an Institution for charitable purposes. Consequently, assessee income was exempt from Income Tax under Section 11 of the Act. 4. Commissioner of Income T .....

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the purpose for which the income was being accumulated. The Commissioner had also noticed the deposits to the tune of ₹ 15,80,86,596/- were made in the Banks and it was claimed that the said deposit was meant for charitable purpose and whereas in the opinion of the Commissioner, the amount in deposit was not applied towards the objects. Accordingly, a show-cause notice was issued, which was duly replied. After considering the reply, the Commissioner of Income Tax held that the assessee had .....

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e said income for the assessment year 2008-09. The said order was challenged before the Income Tax Appellate Tribunal, Bengaluru. The Tribunal following the Judgment in the case of CIT v. Karnataka Urban Infrastructure Development & Finance Corporation reported in 284 ITR 582 (Kar) held that the interest earned by parking the funds received from the Government also assumed the character of funds provided by the Government and cannot be brought to tax as Income from other sources. The Tribuna .....

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ory requirement. Records being conspicuous to the effect that the assessee had disclosed an income of ₹ 47,66,36,982/- and deployed only ₹ 31,85,50,386/- was liable to pay tax on the difference income of ₹ 8,65,91,048/-. Accordingly, he prayed for allowing this appeal. 6. Per contra, learned Counsel appearing for the respondent/assessee supporting the order of the Tribunal prayed for dismissal of the appeal. 7. Careful consideration of the rival contentions and perusal of mater .....

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2010 dated 21.06.2010; (iv) Assessee acts as an agent of the Government to give effect to the Rehabilitation & Resettlement policies; (v) Assessee has no discretion in mode of deployment or utilisation of funds and fully controlled by periodical instructions issued by the Government; and (vi) Funds belonging to the Government placed in deposits in the Banks by the assessee and the interest accruing thereon shall continue to remain under the absolute control of the Government and the responde .....

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stration under Section 12-A of the 1961 Act. The Department's case was that the Maritime Board was a statutory authority. It was not a trust. Its business was not held under a trust. Its property was not held under trust. Therefore, the Board was not entitled to be registered as a charitable institution. It was the case of the Department that the Board was performing statutory functions. Development of minor ports in the State of Gujarat cannot be termed as the work undertaken for charitable .....

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is not precluded from claiming exemption under Section 11(1) of the 1961 Act. Therefore we have to read Section 11(1) in the light of the definition of the words "charitable purposes" as defined under Section 2(15) of the 1961 Act. 13. We have perused number of decisions of this Court which have interpreted the words in Section 2(15), namely, "any other object of general public utility". From the said decisions it emerges that the said expression is of the widest connotation .....

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