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TMI Blog2023 (7) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax (Appeals)-9, Ahmedabad, arising out of the assessment order passed under section 143(3) of the Act relating to the Assessment Year (A.Y) 2016-17.Since common issues are involved in all these appeals, the same are disposed of by this consolidated order. Therefore Assessment Year 2012-13 is taken as the lead case for the sake of convenience. 3. The brief facts of the case is that the assessee is a Corporation established under the Gujarat Industrial Development Act, 1962 and carrying out the development of industrial estate, roads, drainage, wager supply, etc as Genera l Public Utility (for short G.P.U.). For the Assessment Year 2012-13, Assessment order was passed under section 143(3) of the Act on 25-03-2015, wherein the AO has observed that the assessee is involved in activity of sale of land/plots, hence it is carrying out activities of advancement of general public utility in the nature of trade, commerce, business and accordingly he applied prov iso of section 2(15) and income was assessed as regular business income. Further, the AO has denied exemption claimed u/s. 11 and 12 of the Act and demanded tax thereon. On appeal the main issue regarding applicability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding so. We are in complete agreement with the view taken by the learned Tribunal. 18. In view of the above and for the reasons foretasted, no substantial question of law arises. All these Tax appeals deserves to be dismissed and are accordingly dismissed." 3.3. For the subsequent assessment years, the Hon'ble High Court in Revenue's tax Appeal nos. 535, 536, 537 539 of 2018 dated 07-08-2018 has again decided the appeals in favour of the assessee relating to the Assessment Years 2012-13 & 2013-14, even in those judgments, there is no direction for re-examination of other issues by the Assessing Officer. 3.4. In this background, the AO has issued s how cause notice dated 22-12-2018 which is reproduced at para-9 of the assessment order, wherein he has asked the assessee to state as to why income earned by the assessee corporation on sale of land/plots should not be treated as commercial activity and hit by section 2(15) of the Act and why exemption claimed under sections 11 & 12 should not be disallowed. 3.5. The assessee has filed its reply vide letter dated 24- 12-2018, wherein it has drawn the attention of the AO regarding passing of various appellate orders by Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt are charitable in nature. This fact is even accepted by the AO in impugned assessment order as well as in the remand report referred supra and still strangely has not computed income as per provisions of section 11 and 12 of the Act only on the ground that the department has filed an SLP before the Hon'ble Supreme Court and the matter has not attained finality. This observation of the AO cannot be accepted in view of binding decision of Hon'ble Gujarat High Court in the appellant's own case, it is a matter of fact that the Hon'ble Gujarat High Court in its order has not given any direction for adjudicating the other issues in the light of favorable decision as per section 2(15) of the Act as held by the Hon'ble ITAT and this fact is also admitted by the Assessing Officer at para-6 of the remand report. It is observed that as decision of the Hon'ble Gujarat High Court was rendered prior to passing of impugned order and as this matter was already on record of the AO, hence there was no reason for him to compute the income ignoring the provisions of section 11 and 12 of the Act and such computation made by the AO is against the observations made by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act in place to uphold the decision of AO on merits? 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing unpaid leave encashment in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing the provision for diminution of investment of Rs.6,58,500/- in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submitted before us copy of the Supreme Court Judgment in Civil Appeal No. 21762 of 2017 in the case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022 which has settled the issue by dismissing the Revenue's appeal in D. Nos. 39525/2017, 15525/2019, 21237- 2019; 15488/2019; 15489/2019 and 21237/2019; CA Nos. 3971- 3972/2018, 170/2019; SLP (C) No. 15055/2019 vide Para 254(ii) of the judgment as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in some cases, income in the form of rents- having regard to the nature of the schemes which the concerned board, trust or corporation may be mandated or permitted to carry on, has to be received. For instance, in some situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents. 177. The answers to these, in the opinion of this court, are that the definition ipso facto does not spell out whether certain kinds of income can be excluded. However, the reference to specific provisions enabling or mandating collection of certain rates, tariffs or costs would have to be examined. Generically, going by statutory models in enactments (under which corporations boards or trust or authority by whatsoever name, are set up), the mere fact that these bodies have to charge amounts towards supplying goods or articles, or rendering services i.e., for fees for providing typical essential services like providing water, distribution of food grains, distribution of medicines, maintenance of roads, parks etc., ought not to be characterized as "commercial receipts". The rationale for such exclusion would be that if such rates, fees, tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of sole purpose of establishment, growth and development of industries. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The found of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial estates and industrial areas. We are of opinion that the Corporation is not a trading one." 186. In Shri Ramtanu Cooperative Housing Society (supra) no doubt, this court did not have to decide whether the Maharashtra Industrial Development Corporation was entitled to tax exemption. However, it examined the provisions of the Act, and the ratio, that such industrial development corporations are not engaged in trading, is binding. Like in that case, here too, the concerned state Acts (Gujarat Industrial Development Act, 1962 and the Karnataka Industrial Areas Development Act, 1966) tasked the boards with planning and development of industrial areas. Their personnel are appointed under the enactments and are deemed to be public servants. The state government is empowered to acquire land, in exercise of eminent domain power, for their purposes; their audits are by the Accountant General of the concerned state, or auditors appointed by the state. They are authorized by law, to levy rates and charges, for the services they provide, on pre-determined basis. In the light of these provisions, clearly, these boards and authorities perform objects of general public utility; and they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of determining whether they are GPU charities, during the period when Section 10(46) was not in existence. Furthermore, this court is of the opinion that having regard to the observations in Gujarat Maritime Board case (supra), the denial of exemption under one category cannot debar such corporations from claiming income exempt status under another category. (b) Summary in relation to statutory authorities/corporations. 190. In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. (ii) Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the advancement of objects of general public utility, therefore are entitled to be considered as charities in the GPU categori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a government or state is expected to engage in, having regard to provisions of the Constitution and the enacted laws, and the observations of this court in NDMC; whether in case surplus or gains accrue, the corporation, body or authority is permitted to distribute it, and if so, only to the government or state; the extent to which the state or its instrumentalities have control over the corporation or its bodies, and whether it is subject to directions by the concerned government, etc.; (f) As long as the concerned statutory body, corporation, authority, etc. while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit (20% as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment A.4. Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mischief of "commercial activity. However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case by- case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01 04 2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act. 6.1. Thus the Ld. Senior Counsel submitted that the assessee's activities are for General Public Utility in the nature of charitable nature and eligible for exemption u/s. 11 & 12 of the Act, which was confirmed by the Hon'ble Gujarat High Court and the Revenue appeals on the same are now dismissed by the Hon'ble Supreme Court. Therefore the other Grounds raised by the Revenue becomes infru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared by this court's judgment, therefore, has to be understood in the context, which is that they apply for the assessment years in question, which were before this court and were decided; wherever the appeals were decided against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for." 8.1. Thus it is seen from the above judgment in Miscellaneous Application, wherever the Revenue's appeals are dismissed they are to be treated as final. Respectfully following the same, we hereby dismiss the appeal filed by the Revenue. 9. In the result, the appeal filed by the Revenue in ITA No. 105/Ahd/2020 is hereby dismissed. ITA No. 106/Ahd/2020 for A.Y. 2013-14 and ITA No. 11/Ahd/2020 for A.Y. 2016-17 10. Since identical grounds are raised by the Revenue in ITA Nos. 106/Ahd/2020 & 11/Ahd/2020 relating to Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACL and GLFL, both are not treated as 'public sector companies' as per Section 11(5)(vii) r.w.s. 2(36A) of the Act. Therefore the investments made by the assessee in these two companies namely GACL and GLFL violated the provisions of section 11(5) thereby attracting provisions of section 13(1)(d) of the Act. However the Ld. CIT(A) held that there is no investment made by the assessee during the Assessment Year 2016-17 in GACL and GLFL and only dividend income of Rs. 2,26,39,830/- on past investment has been received. Therefore the Ld. CIT(A) restricted this amount only, while giving effect to the appellate order. 13.1. The Ld. Senior Counsel further submitted that this issue is been considered by Co-ordinate Bench of this Tribunal in the case of Gujarat Maritime Board for the Assessment Year 2016-17 in ITA No. 171/Ahd/2020 dated 29.03.2023 wherein the Hon'ble Court held that violation of section 13(1)(d) cannot lead to denial of exemption u/s. 11 and 12 of the Act to the total income of the trust. Thus the Ld. Counsel pleaded the assessee trust would not disentitle the complete benefit of section 11 and 12 of the Act. 14. Per contra, the Ld. D.R. appearing for the Revenue suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it in the earlier years. The non-fulfilment of the condition under section 11(5) would only make a portion of the relevant income as specified under section 164(1), liable to tax. The jurisdictional Gujarat High Court in the case of CIT v S.P. Memorial Trust in Tax Appeal number 187 of 2005 vide order dated 13-11-2004 also allowed this issue in favour of the assessee. While passing the order, Gujarat High Court observed as under: "5. Having heard learned advocates for the parties we are of the opinion that the Tribunal was justified in upholding the order passed by CIT(A). The CIT(A) has very clearly observed that the provisions of Section 11(l)(a) are very clear and provide that the income derived from the property held under trust shall not be included in the income to the extent it is applied for the charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which the restriction u/s 11(5) applies. The Tribunal has relied upon its own decision on a similar issue rendered in ITA No. 644 to 646/Rjt/2003 dated 22.12.2003. We are in complete agreement with the reasonings adopted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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