TMI Blog2019 (4) TMI 1800X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of appeal of the assessee is partly allowed for statistical purposes. - ITA No.102/Rjt/2016 - - - Dated:- 22-4-2019 - SHRI MAHAVIR PRASAD AND SHRI WASEEM AHMED, JJ. Applicant by : Sanjay R Shah, A.R Respondent by : Shri Jitendra Kumar CIT. DR ORDER WASEEM AHMED, J. The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals) 9, Ahmedabad, [Ld. CIT (A) in short] dated 15/02/2016 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here in-after referred to as the Act ) dated 13/03/2015 relevant to the Assessment Year (AY) 2012-2013. 2. The assessee has raised the following grounds of appeal: The appellant, being dissatisfied with the appellate order dated 15-02-2015 passed by Commissioner of Income Tax (Appeals) - 9, Ahmedabad [hereinafter referred to as CIT(A)], files this appeal on the following grounds which are independent and without prejudice to each other. 1. The order passed by the learned CIT(A) is bad in law as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the first proviso to section 2(15) and section 13(8) of the Act and further erred in enhancing the addition by ₹ 4,16,12,646/- to the total income of the assessee. 4. The facts of the case are that the assessee, i.e., Jamnagar Area Development Authority (in short JADA) was incorporated to undertake the preparation of development plans, monitoring control of the development of town planning and supply of water and disposal of sewerage and many other services/activities for the benefit of the public at large. Accordingly, the assessee has been granted registration u/s 12AA of the Act for the activity of advancement of any other object of general public utility and claimed the exemption u/s 11 and 12 of the Act. 5. However, the AO during assessment proceedings for the year under consideration from the Income Expenditure Account observed that the assessee received various kinds of fees and development charges for carrying out the activities of providing infrastructure facilities. Accordingly, the AO held that the assessee is engaged in the activity which is like trade/commerce/business. Therefore the AO invoked the 1st and 2nd proviso atta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sardar Patel. Bhavan Project 46,42,1857- It represents grants /contributions received from the Government of Gujarat towards construction of project office for Government use. The corresponding capital expenditure incurred by the appellant is debited in the balance sheet under the head Capital Expenditure as Sardar Pate! Bhavan Project (Face - 1| Premium Fee 2,09,29,3567- It represents amount received from bidders in auction of plots Infrastructure Fund 1,51,67,9127- It represents grants / contributions received from the Government of Gujarat towards Drinking Water and Drainage Projects. The corresponding capital expenditure incurred by the appellant is debited in the balance sheet under the head Capital Expenditure as Sardar Patel Bhavan Project (Face - 1) Granfs from Government of Gujarat It represents common account wherein grants from the Government towards various capital projects is accounted for which is subsequently transferred to respective project account on completion of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007. Service and Amenities 3,08,42,0867- JADA receives service and amenities fees from the applicants for which JADA is obliged to provide various services relating to construction of road, light, drainage etc. in a particular area / under the TP scheme and therefore this amount is recognized and accounted for as liability in the books of account. Jamnagar Municipal Corporation 60,00,000/- During the year 2003-04, JADA had given a loan of ₹ 1 Crore to Jamnagar Municipal Corporation (JMC) which was repayable in instalments of ₹ 20 Lacs. Later on, certain projects were undertaken by JADA JMC jointly for which cost was incurred by JMC and as such JMC has adjusted balance amount of loan (₹ 60 Lacs) against amount receivable from JADA towards jointly owned projects. However, JADA has yet not accepted the claim of JMC and as such loan is still shown as receivable by JADA in its books in the name of JMC. JMC Project Advance 1,91,07,641 As per agreement with Jamnagar Municipal Corporation, amount has been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it. 7.1 The Ld. CIT (A) further observed that the provisions of section 13(8) as amended by Finance Act, 2012 are also applicable to it and accordingly denied the exemption claimed u/s 11 and 12 of the Act. 7.2 The Ld. CIT (A) after considering the facts of the case held that the functions performed by the assessee are carrying out with the profit motive. As such the activities are in the nature of trade, commerce or business. 7.3 However, Ld. CIT (A) was of the view that the expenditure incurred in connection with the income above needs to be reduced while determining the taxable income of the assessee. In view of the above, the Ld. CIT (A) confirmed the addition made by the AO for ₹ 4,25,77,240/- after allowing the capital expenditure of ₹ 70,33,105/- which comes out to ₹ 3,55,44,135/- only. 7.4 Further, the Ld. CIT (A) considered the revised statement of income filed by the assessee and found certain receipts which were not shown in the income expenditure account. The details of such receipts stand as under: i. Development fund ₹ 38,95,060/-, ii. Public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that activities of the assessee is profiteering, to be in the nature of trade, commerce and business. 13.1 In the case of Lucknow Development Authority, Gomti Nagar (supra), it is held by the Allahabad High Court that the activities of the authority cannot be said to be in the nature of trade, commerce or business and/or profiteering and therefore, proviso to Section 2(15) of the Act shall not be applicable. 13.2 Similar, view has been expressed by the Rajasthan High Court in the case of Commissioner of Income Tax-I, Jodhpur vs. Jodhpur Development Authority, Jodhpur -Tax Appeal No. 63 of 2012 decided on 5.7.2016. 14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body - Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever the income is earned/received by the assessee even while selling the plots (to the extent of 15% of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied. In paras 6, 7, 8 and 12, it is observed and held as under: 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term Charitable purposes and applies only to cases of advancement of any other of general general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of charitable trust. However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assessee- AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the revenue. 16. In view of the above and for the reasons stated above, the impugned order passed order passed by the learned Tribunal in respective appeals for different assessment year are hereby quashed and set aside. Accordingly, all these appeals are allowed and answered both the questions in favour of assessee and against the revenue. No costs. 11.1 In the above judgment, the Hon ble Gujarat High Court has held that the activities carried out by the assessee are like advancement of any other object of general public utility, and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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