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TMI Blog2017 (9) TMI 1724X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of section 13(8) r.w. 1st and 2nd proviso of section 2(15) are attracted? ii) Whether on the facts and in circumstances of the case and in law the Hon'ble ITAT has erred in law in allowing the benefits of set apart u/s 11(2) of the Act, deleting the additions of Rs. 79,76,39,913/- as unspent amount in spite of the fact that the provision of section 11(2) r.w.s. 11(3)(c) are attracted as assessee is not granted exemption u/s 11 & 12 of the Act.? iii) Any other question of law as deemed fit in the facts and circumstances of the case may also be framed by the Hon'ble Court in the interests of justice." In appeal no. 113/2016 (i) Whether on the facts and the circumstances of the case the Hon'ble ITAT is right in law in treating the assessee a charitable institution and allowing benefit of exemption U/s. 11, 12 of the Act? (ii) Whether on the facts and circumstances of the case the Hon'ble ITAT is right in holding the change of accounting policies by the assessee's are accurate and scientific to determine assessee without considering the qualification made by the auditor of the assessee in his audit report and schedule 'X' specifically mentioning. "Further effect of cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t circumstances of the case, the Ld. Tribunal is legally correct in allowing Rs. 1,74,22,857/- on account of amortization of expenditure on three guard/wire fencing being provided for growing trees in JDA region." 3. Counsel for the appellant contended that these appeals have now become academic inasmuch as this Court in case of Urban Improvement Trust, Kota vs. The Income Tax Officer, Ward-1(2), Kota which is statutory authority like the Jaipur Development Authority in Tax Appeal No. 294/2009 & 73/2011 and other matters decided on 25th July, 2017 has held as under:- "3. Counsel for the appellant has taken us to the definition of local authority under the Income Tax Act and contended that in view of the proviso added to explanation of Section 10(20) of the Income Tax Act which reads as under:- "Explanation. For the purpose of this clause, the expression "local authority" means (i) Panchayat as referred to in clause (d) of article 243 of the constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal Committee and District Bioard, legally entitled to, or entrusted by the Government with, the control or management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local authority? First, the authorities must have separate legal existence as Corporate bodies. They must not be mere Governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. Next, they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Next, they must be entrusted by Statute with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they must have the power to raise fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant had valued the land according to reserves price of each scheme determined in the Trust Meeting. It was also explained that during the relevant period no change in reserve price was made. In this regard the ld. AR submitted the copy of decision of the meeting of the trust held on 29-5-1999. However, the AR could not file the basis of such reserve price as determined by the Trust. The AO found that as per provision of Rule 6(2) of Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974, the reserve price was required to be worked out after adding the following amounts:- (i) Cost of undeveloped land this would be subject to change to the extent of final cost of compensation determined by the competent court, (ii) Cost of development based on the prevailing PWD Schedule of rates for the area, (iii) 30% of the items (i) and (ii), to cover administrative and establishment charges, and (iv) 20% of the items (i), (ii) and (iii), to cover maintenance cost for a period upto five years. The appellant failed to provide the basis on which the reserves prices were fixed. Further it also failed to show that it had adhered to the provision of Rajasthan Impro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for value of opening stock remaining in closing stock is Rs. 3,06,44,23,524/- & not of Rs. 3,20,87,56,328/-. The value of closing stock accordingly, works out to Rs. 4,31,82,76,563/- as against Rs. 4,46,26,09,367/- worked out by the AO resulted in the year valuation of closing stock by Rs. 14,43,32,804/- (4462609367-4318276563). (i) Similarly when opening stock of Rs. 1,12,12,783/- is revalued at Rs. 4,32,98,69,111/- i.e. increased by 286.21% the closing stock of Rs. 1,07,06,84,101/- also needs to be increased by same percentage which works out to Rs. 3,06,44,23,524/- as against Rs. 3,20,87,56,328/- considered by the AO. The closing stock is thus overvalued by Rs. 14,43,32,804/- (3,20,87,56,328- 3,06,44,23,524). (ii) As per the generally accepted accounting principles and Accounting standard the stock is to be valued at cost or marker price which ever is less. Administrative, establishment and maintenance cost should not form part of the valuation of the inventories. The AO without any basis increased the valuation of the stock by Rs. 6,57,52,952/- (3,52,24,706+3,05,25,156) on account of administrative and maintenance expenses. The valuation of the above closing stock is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of India. The levy of property taxes under the aforesaid enactments on lands or buildings belonging to the State Government was invalid and incompetent by virtue of the mandate contained in Clause (1) of Article 289. However, if any land or building is used or occupied for the purpose of any trade or business, meaning thereby a trade or business carried on with profit motive, by or on behalf of the State Government, such land or building shall be subject to the levy of the property taxes levied by the said enactments. In other words, State property exempted under Clause (1) means such property as is used for the purpose of the Government and not for the purpose of trade or business. That was a case where the question arose in relation to the levy of property tax on lands and buildings owned by the State Governments which was "property of the State Government". In the instant case, we are concerned with the income of the appellant/Authority and the same principles apply. The exemption can be claimed only if the income can be said to be the income of the State Government. In the facts of this case, it is not possible to hold that the income of the appellant/Authority is the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable under the head "income from house property", "Capital gains" or "Income from other sources" or from a trade or business carried on by it was earlier excluded in computing the total income of the Authority of a previous year. However, in view of the amendment with effect from April 1, 2003, the Explanation "Local Authority" was defined to include only the Authorities enumerated in the Explanation, which does not include an Authority such as the Jammu Development Authority. At the same time section 10(20A) which related to income of an Authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20A) on such an Authority was taken away. Thus, in view of the fact that section 10(20A) was omitted and an Explanation was added to section 10(20A) of the Act, enumerating the "Local Authorities" contemplated by section 10(20A), the assessee i.e. Jammu Development Authority could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment which sought to be relied upon by the counsel for the respondents, in our considered opinion, would be of importance and the functions which are carried out by the assessee is statutory function. In our considered opinion, under clause-10 (20) & Subcluase (3) Municipal Committee and District Board are legal entity entrusted by the function of the Government within the control or management of the municipal or local authority and will try to help the assessee. 17. In that view of the matter, the reliance placed by counsel for the department regarding 10(20) and explanation A will not make any difference. Taking into consideration income of authority is under constitution of India vide order enacted either for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. 18. In that view of the matter, deletion of 20A will not make difference in case of assessee. In our co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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