TMI Blog2019 (6) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... ee the benefits of section 11 while giving effect to this order. Consequently, grounds raised by the assessee on this issue are allowed. - ITA Nos. 1970 And 1971/Bang/2018, ITA Nos. 1969 And 1968/Bang/2018 - - - Dated:- 4-6-2019 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Shri S Annamalai, Advocate For the Respondent : Shri.Suresh Battini, CIT(DR) ORDER PER N.V. VASUDEVAN, VICE PRESIDENT The appeals by the Assessee and revenue are against two orders both dated 31.3.2018 of CIT(Appeals), Bangalore-9, relating to assessment years 2013-14 2014-15. 2. In the appeals by the Assessee, if ground No.5 in both the appeals (which are identical) are adjudicated and if it is held that the Assessee is not hit by the proviso to Sec.2(15) of the Income Tax Act, 1961 (Act), then such adjudication will render the adjudication of other grounds in Assessee as well as revenue s appeals academic. Ground No.5 reads as follows:- 5. Ground on applicability of proviso to Section 2(15) and related grounds. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Without prejudice, the learned Commissioner of Income Tax(Appeals) failed to appreciate that the appellant fall under first to fifth limb of the definition of charitable purpose on the facts and circumstances of the case. 3. As far as ground 5 raised by the assessee is concerned, the issue for consideration is as to whether the revenue authorities were justified in coming to the conclusion that the Assessee does not exist for charitable purpose as it was carrying on activities which were in the nature of trade or business. The facts and circumstances under which the aforesaid issue arises for consideration are that the assessee is a statutory body by name Bangalore Development Authority, constituted under the Bangalore Development Authority Act, 1976 (BDA Act). The Assessee claimed the benefits of exemption under Sec.11 of the Act on the ground that it was existing for charitable purpose as defined in Sec.2(15) of the Act. Section 2(15) of the Act has been amended by Finance Act, 2010 w.e.f. 01.04.2009 (i.e., w.e.f. Assessment Year 2009-10). It is not in dispute that the objects of the Assessee would fall within the ambit of advancement of any obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO after referring to the Income and Expenditure Account of the Assessee has observed that the Assessee derives income from selling several categories of properties to the public. In Paragraph 5.12 5.13 of the order of assessment, he has brought out the various categories of receipts of the Assessee and has come to the conclusion in paragraph 5.14 of his order that the Assessee was carrying on systematic and regular activity of acquisition/purchase of land and development of the same as layout/sites and construction of houses and sale of the same to the general public and provided maintenance/infrastructure facilities in layouts/housing schemes. He has observed that the focus of the Assessee has been more on selling sites by auction to the highest bidder and was not for providing affordable housing to the public (vide paragraph 5.15 of his order). This is the main reason for the AO s conclusion that the Assessee was carrying on business and therefore was not existing for charitable object as laid down in the proviso to Sec.2(15) of the Act. The AO has drawn the following inferences to come to conclusion as above:- (i) The assessee is mainly engaged in devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest paid to KUIDFC towards '9 Grade Separator, Henur Junction' 6,23,38,000 4. Current year capital expenditure claimed as revenue expenditure due to change in accounting policy 213,92,70,000 5. Donation disallowed 58,00,000 8. Prior period expenses disallowed 7,58,01,000 0. conversion of loan into grant 1,06,00,000 0. land transfer to KPTCL 2,74,31,250 1. 'Receivable from BBMP 2,29,43,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Prior period expenses disallowed as per para 6.6 22,67,85,000 7. Current year capital expenditure claimed as revenue expenditure due-to change in accounting 100,28,80,000 8. Interest on FD with lOB of ₹ 98,89,42,664 adopted @ 8% p.a. as per Para 8.00 7,91,15,000 9. Conversion of loan into grant as per para 7.00 1,06,00,000 1 10 Sundry debtors rectification entry passed in F./Y 2014-15 as per para 9 above 38,50,000 11. Devpt. Expenditure on Arkavathy Layout as per para 10 above 12,39,69,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... historic interest). Though the five limbs are not specifically provided for in section 14 of the BDA Act, the objects enunciated involved preservation of environment, preservation of water bodies, preservation of forest areas, etc., appears to have merit; for it is a fact that planned urban development cannot take place or be done without due consideration being given to the preservation of the environment, water bodies like lakes, streams, etc., and forest areas. In coming to the above conclusion, the Tribunal found that from the financial statements of the assessee it was evident that it has expended an amount of ₹ 2095.24 lakhs on planting of one crore seedlings in the green belt area for improvement of the environment. The Assessee has expended a sum of ₹ 2997.42 lakhs towards development of lakes. The Tribunal therefore held that the Assessee carried out the activity of preservation of environment and water bodies and that the conclusion of the revenue authorities that these activities were done only to enhance the commercial value of the layout developed is untenable. 2. The Tribunal held that allotment of sites and flats to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal also referred to the decision of the Hon ble Apex Court in the case of Surat Art Silk Organisation Vs. CIT (121 ITR 1), wherein it was held that a charitable organization cannot be expected to balance its accounts in such a manner that the income for the year matches exactly with its expenditure. It is inevitable that in carrying on the activities, certain surplus may ensue. The earning of such surplus, in itself, would not mean that the organization existed for profit. The Hon ble Apex Court went on to observe that every Association requires funds for expanding the range of its activities (for example; an Educational Institution may require additional infrastructure under which more class rooms can be set up / created). If profits are generated to support and expand these activities, then it cannot, in the view of the Hon ble Apex Court, be held that there is a profit motive involved to deny the exemption. From the above ratio of the decision of the Hon ble Apex Court, it is clear that it is the basic motive behind the activity, which is important to be considered; whether it is one with profit motive or not. Merely because surplus is generated from a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO and CIT(A) have not done. 5. The Tribunal took note of the fact that in the case of similar urban development authorities in India, such as the Assessee, the revenue took a similar stand that those urban development authorities cannot be regarded as existing for Charitable Purpose after introduction of the proviso to Sec.2(15) of the Act and such approach has been held to be incorrect by the various judicial forums in the following cases: (i) Ahmedabad Urban Development Authority Vs. ACIT (Exemptions) (2017) 396 ITR 323 (Guj.); (ii) Jaipur Development Authority Vs. CIT (2014) 52 taxmann.com 25 (Jaipur Trib.) (iii) Haridwar Development Authority Vs. CIT (2015) 57 taxmann.com 6 (Delhi Trib.) (iv) CIT Vs. Lucknow Development Authority (2013) 38 taxmann.com 246 (Allahabad) (v) CIT Vs. Jodhpur Development Authority (2017) 79 Taxmann 361 (Raj.). 6. The Tribunal also held that the AO s reliance on the following decisions in support of his conclusion that the Assessee does not exist for Charitable Purpose was not correct because the issue involved in those ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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