9911796707
TMI Blog2019 (6) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case are that the assessee is an Association of Persons and filed the Return of income belatedly on 5/12/2013 and the Return of income was processed u/s 143(1) of the Income-tax Act,1961 ['the Act' for short]. Subsequently the case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) of the Act were issued. The case was referred fir special audit u/s 142(2A) of the Act. Writ petition was filed by the assessee before the jurisdictional High Court. The Hon'ble Court passed interim order dated 5/7/2016 staying the proceedings initiated by the AO u/s 142(2A). Subsequently, the Hon'ble High Court has quashed 142(2A) proceedings for both the assessment years by order dated 02/01/2018. Writ appeal was filed by the Revenue before the Division Bench of the Hon'ble Karnataka High Court. AO, subject to outcome of the writ appeal, has proceeded in the assessment proceedings and AO has denied the claim of exemption u/s 11 and made addition and assessed the total income of Rs. 36,802,75,496/- by order u/s 143(3) of the Act dated 28/2/2018. 4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). The CIT(A) has dismissed the appeal. 5. Aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in that case enjoyed the benefit of exemption u/s.10(23C)(iv) of the Act. Sec.10(23C)(iv) provides any income received by any person on behalf of any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States, shall not form part of the total income under the Act. The prescribed authority withdrew the approval granted to the Assessee consequent to the insertion of the proviso to Sec.2(15) of the Act, on the ground that the Assessee was deriving rental income from letting out space for rent during trade fairs and exhibitions, was deriving income from sale of tickets and income from food and beverage outlets. The said withdrawal was challenged by the Assessee before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court had to go into the question as to the scope of the proviso to Sec.2(15) of the Act. The Hon'ble Delhi High Court has laid down the following very important principles as to how the proviso to Sec.2(15) of the Act has to be interpreted:- (i) The proviso to Sec.2(15) of the Act intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities which may be commercial, that does, in any way, affect the nature of the Institution as a charitable institution if it otherwise qualifies for such a character. (v)Merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. If the driving force is not the desire to earn profits but to do charity, the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. (vi)If a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). Courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above. (vii)Section 2(15) is only a definition clause. Section 2 begins with the words, ―in this Act, unless the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component of income of the Assessee is derived in the form of interest of Rs. 131.17 crores. Schedule "P" to the Income and Expenditure Account shows the break-up of the interest receipt by the Assessee. The interest on Fixed deposits is Rs. 120.90 Crores. The Earnest Money Deposit given by the allottees are parked by the Assessee in fixed deposit and those deposits has earned the aforesaid interest income. Therefore there can be no profit element in earning this interest income. Besides the above, the other components of interest are interest from Allottees, penal interest from Allottees, interest on staff loan, interest from SB and others, interest on seed money, dividend received and interest on income tax refund. The other component of income is gain on disposal of land, sale of application forms, recoveries of fines and penalties, interest, other receipts, rent, forfeiture of deposits, water supply charges. The income from sale of land is Rs. 18.69 Crores. The expenditure incurred by the Assessee comprises of repairs and maintenance, administrative expenses, water and electricity charges, special and other charges, Depreciation. If the gain on disposal of land of Rs. 18.69 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we hold that the Assessee's income is not includible in the total income and therefore the income returned by the Assessee is directed to be accepted." We find there is no change in facts and circumstances of the present case and apply the decision and set aside order of the CIT(A) and we hold that the provisions of section 2(15) are not applicable to the case of the assessee and follow the judicial discipline and direct the Assessing Officer to allow the benefit of exemption u/s 11 of the Act to the assessee and allow the grounds of appeal of the assessee. 7. Since the facts of the case for assessment year 2014- 15 are identical to the assessment year 2013-14. Hence, the decision taken by us for assessment year 2013-13 will equally apply to assessment year 2014-15 with mutatis mutandis and allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
