TaxTMI 
TaxTMI 
2024 (3) TMI 147
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.... this common order. 2. The Grounds of Appeal raised by the Revenue in ITA No. 333/Ahd/2023 for A.Y. 2016-17 reads as under: (i) Whether in the facts and in the law the Ld. CIT(A) is right in holding that the proviso to section 2(15) of the Act is not applicable to the case of the assessee, ignoring the fact that the assessee is hit by the proviso to section 2(15) of the I.T. Act-1961 and therefore r.w.s.13(5) of the Act was not eligible for any deduction u/s. 11 & 12 of the Act, especially of the fact that it is rendering services not at cost or nominal markup and carrying out its activity in commercial manner with profit motives ? (ii) Whether in the facts and in the law the Ld.CIT(A) is right in not upholding the addition of Rs. 11,87,34,600/- made by the AO ? (iii) Whether in the facts and in the law the Ld.CIT(A) is right in not upholding the addition of Rs. 36,66,427/-made on account of fixed assets and directing to allow the same u/s. 11(1) of the Act after verification ? 3. Assessment Year 2016-17 is the taken as the lead case. The brief facts of the case is that the assessee is an autonomous body which is established under section 22 of the Gujarat Town Planning an....
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.... Rs. 32,13,14,003/-]. 5. Aggrieved against the additions, the assessee filed an appeal before Commissioner of Income Tax (Appeals) who has taken note of the Supreme Court judgement and direction issued therein in the case of CIT -Vs- AUDA & others in Civil Appeal No 21762 of 2017 called for a remand report from the Assessing Officer "... Further, it was also noticed that for the year under consideration, the total receipt of the assessee is Rs. 32,23,63,370/- whereas the activities of the assessee is Rs. 15,31,32,714/- which is more than 20% of the total receipt of the assessee. Provision of Section 2(15) of the Act "charitable purpose" includes relief of the poor, education, yoga, medical relief. preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:-- Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation ....
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.... to state that the LAO has not considered the facts stated by the appellant in the reply dated 13.01.2023 against the issue letter dated 06.01.2023 giving the reasons for why the provisions of section 2(15) of the I.T.Act 1961 is not applicable to the appellant and why the receipts of the appellant are on cost to cost basis and the motive of the appellant is not to earn any profit and the activities carried by the assessee are not in the nature of trade, commerce or business. However we are once again producing the facts in the case of your appellant for justifying the points raised by the LAO in the remand report 01. The onus is on the assessee to prove that the receipt/income of the assessee is on cost to cost basis We would like to state that the income/receipt part of the appellant mainly comprises of Income from Fees and Subscriptions which includes Premium Fees, Verification fees, Betterment Charges, Tender Fees, Site Plan Fees, Zone Fees and Interest Income from the GSFS Fixed deposits. INCOME TAY DEPARTME Enactment and Object of VUDA: We would like to state that VUDA ie. the appellant is formed under section 22 of The Gujarat Town Planning & Urban Development Act 19....
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....and collect such fees for the execution of works referred to in clause (vi) and for provision of other services and amenities as may be prescribed by regulations, 2- Development charges and scrutiny fee-As per clause No. 26 any person who wants to develop his land or any building in development plan area he has to pay development charge and scrutiny fees at the rates approved by Government of Gujarat which is utilized for verification of development permission process and preparation of development plan. We are enclosing herewith the guideline in which the rates are prescribed by the Government of Gujarat for collection of Scrutiny fees. 3- Betterment Charge and Collection of betterment charge as per provision 79 of incremental contribution to be levied by the appropriate authority on each plot included in the Final scheme calculated in proportion to the increment which is estimated and net amount payable by the contributor/land owners which are be utilize for roads, water supply, storm water, drainage, street light etc. 4- Premium fee for regularization of unauthorized construction & premium fee for extra F.S.I.. The income of premium fee is being utilized for development of....
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.... development of infrastructure within the jurisdiction Le, the basic object and motive of the appellant is advancement of general public utility. 02. Why provisions of the section 2(15) shall not be applicable to the assessee. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the 'advancement of any other object of general public 82 utility shall not be a charitable purpose if it involves the carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. As per the inserted new proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose even if it incidentally involves the carrying on of commercial activities 'Relief of the poor'....
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....ppellant. Conclusion: Based on the above facts we humbly request your good selves not to consider the remand report submitted by the Learned Assessing Officer and to delete the additions made and allow the relief as claimed by the appellant. Should your kind office require any further information or explanation we shall be pleased to submit the same to do so." 7. We have heard rival submissions in detail and carefully considered the Written Submissions filed by both parties and given our thoughtful consideration. Hon'ble Supreme Court in the batch of case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. reported in 449 ITR 1 (SC) which has settled the issue by dismissing the Revenue's appeal vide Para 254(ii) of the judgment as follows: "....254. In accordance with the foregoing discussion, and summary of conclusions the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiala Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot Improvement T....
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....pso 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, tariffs, etc., determined by statutes and collected for essential services, are included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by second proviso to Section 2(15) would be attracted thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer which is the general public. By way of illu....
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....ard, or corporations, etc. from indulging in commercial activities. However, sub-clause (b) of Section 10(46) imposes such a bar, and the concerned body cannot claim tax exemption if it engages in commercial activity. 188. The manner in which GPU charities has been dealt with under the definition clause, i.e., Section 2(15), indicates that even though trading or commercial activity or service in relation to trade, commerce or business appears to be barred - nevertheless the ban is lifted somewhat by the proviso which enables such activities to be carried out if they are intrinsically part of the activity of achieving the object of general public utility. Furthermore, in the case of GPU charities there is a quantified limit of the overall receipts, which is permissible from such commercial activity. In the case of local authorities and corporations covered by Section 10(46) no such activities are seemingly permitted. 189. As was observed in the earlier part of this judgment - while considering whether for the period 01.0.2003 - 31.05.2011, statutory boards, corporations, etc. could have lawfully claimed to be GPU charities, this court has observed that the nature of such corpor....
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....entities), etc.; (b) While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; (c) Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce; (d) where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposit....
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....ve and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. 7.2. Further Hon'ble Supreme Court summarised its conclusion as follows: " IV. Summation of conclusions 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of "charitable purpose" (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. General test under Section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"). A.2. However, in the course of achieving th....
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....overnment or central governments, for achieving what are essentially 'public functions services' (such as housing. industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). B.2. However, at the same time, in every case, the assessing authorities would have to apply their minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of "trade, commerce or business" and as a result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 2(15) ....
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.... order. The said remand report was then forwarded to the appellant for rejoinder and comments. The reply dated 22.02.2023 being rejoinder to the remand has been reproduced in Para 5.2 of this order. 6.3 All the above claims made, issues involved and decisions cited have been perused. Firstly, it is noted that the appellant had relied upon the decision of the Hon'ble ITAT D Bench Ahmedabad dated 05.02.2019- in ITA No 1692/AHD/2017 for AY 2009-10, 2011-12, 2012-13, 2013-14 & 2014-15 in its own case. The same being jurisdictional ITAT decision in own case of the appellant is binding on the CIT(A). However, in view of the latest decision of Hon'ble Supreme Court on the relevant issue, remand report was called for from AO and rejoinder was also obtained from the appellant as quoted above. 6.4 On perusal of the order of the Hon'ble ITAT in the case of the appellant as referred above, it is noted that Hon'ble ITAT had held that similar facts were involved in the decisions cited which are case of Urban Development Authority Vs ACIT of the jurisdictional Hon'ble High Court and CIT v/s GIDC and granted relief to the appellant 6.5 The appellant has claimed that facts....
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....h was quashed by the Hon'ble High Court. The same is apparently because the impugned issue was then pending in Hon'ble Supreme Court, but now this order of Hon'ble Gujarat High Court has been upheld by Hon'ble Supreme Court. No factual difference between AUDA & VUDA case has been pointed out by the AO in the remand report as quoted above. It is relevant to discuss the decision of Hon'ble Gujarat High Court in the case of AUDA, which has been upheld by Hon'ble SC in the following Paragraphs: 6.10 Decision of the Hon'ble Gujarat High Court dated 02.05.2017 in the case of Ahmedabad Urban Development Authority - 6.10.1 In this decision of Hon'ble Gujarat High Court, it has been held that AUDA has been constituted as Urban Development Authority under the provisions of Section 22 of the Town Planning Act of Gujarat Government. The purpose and object of constitution of the Urban Development Authority is proper development / redevelopment of Urban Area. The Hon'ble High Court noted that constitution of Urban Development Authority is subject to control of State Government. The section 23 and section 40 of the Town Panning Act have also been discussed ....
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....x Act. 6.10.3 It is categorically held that proviso to section 2(15) shall not apply in so far as the appellant was concerned and therefore the appellant was found entitled to exemption u/s 11 of the Act. The Hon'ble Court held that collection of fees or cess which are regulatory in nature, the proviso to section 2(15) of the Act shall not be applicable. Thus, the Hon'ble High Court has held that (Para 15.1) having regard to the facts of the case and purpose for which the appellant is established/constituted under the provisions of Gujarat Town Planning Act, the collection of fees & cess is incidental to the objects and purposes of the Act and thus case would not fall under second part of proviso to section 2(15). 6.10.4 Further, with respect to collection of cess and fees also the same being regulatory in nature, the provisions of section 2(15) was not found applicable. The relevant Para 14 & 15.2 of the judgement of the Hon'ble HC are being quoted below. "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, c....
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....e Act is not applicable in the case of AUDA. The AO has not pointed out any difference in facts of VUDA vis-à-vis AUDA and hence it is clear that provisions of section 2(15) of the IT Act is also not applicable to VUDA. In fact through its rejoinders dated 22.02.2023 (as quoted above), the appellant has further clarified this aspect with various details based on which it is held that no adverse inference could be drawn against the appellant in the instant case 6.12. As regards the claim of the AO that onus was on the appellant to prove that receipts were on cost basis and income of the appellant was on cost basis for which full details were not submitted by the appellant, it is noted that assessment in this case was conducted u/s 143(3) of the IT Act and full compliance was made by the appellant. Such requirement of huge supporting evidences in remand report proceedings is not called for when no specific instance has been pointed out in assessment order to prove to the contrary. In fact, not only the Hon'ble Supreme Court has dismissed revenue's appeal in AUDA but also that of many Gujarat Urban Development Authorities viz. Surat, Gandhinagar, Rajkot Development Au....
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....ion of Hon'ble ITAT in case of Vadodara Urban Development Authority -Vs- ITO (ITA No 2751/Ahd/2014 dated 28.01.2019) to allow the appeal of SUDA. Thus the assessee is also governed by same Rules/Act and no further distinguishing facts have been highlighted by the AO in the remand proceedings further in the Grounds of Appeal raised before us with specific instances. The Revenue is also silent about the new Section 10(46A) proposes to exempt any income derived by a body or authority, board, trust, or commission, other than a company, established or constituted by or under a central or state act for one or more General Public Utility. Therefore in our considered opinion, the provision to section 2(15) of the IT Act is not applicable to the case of the assessee and therefore the Ground nos. 1 & 2 raised by the Revenue are devoid of merits and the same is liable to be dismissed. 10. Regarding Ground No.3 the Ld.CIT(A) is right in not upholding the addition of Rs. 36,66,427/- made on account of fixed assets and directing to allow the same u/s. 11(1) of the Act after verification. The Ld CIT[A] has clearly observed that there is no specific discussion made with respect to this issue ....
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....the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely;- (a) such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b) the money so accumulated or set apart is invested or deposited in the former modes specified in sub-section (5) 14.1. The said section was then amended by Finance Act, 2015 w.e.f. 01.04.2016 which read as under: (2) Where eighty-five per cent of the income referred to in clause (a) of section (1) read with the Explanation to that sub-section is not applied, is not to have been applied, to charitable or religious purposes in India during the previous year but in accumulated or set apart, either in whole or in part, for application to such purposes in d such income so accum....
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.... judgment in the case of PCIT -Vs- M/s. Wipro Ltd. [2022] 140 taxmann.com 223 (SC), on a similar count. The issue in the present appeal is similar to the one discussed in the Wipro judgment i.e. regarding filing of form for claiming benefit, thus the view taken by the Hon'ble Apex Court is applicable to the present subject matter. 14.3. Ld CIT DR also distinguished the case laws as relied by the assessee Counsel as follows: 1. Trust For Reaching the Unreached Through Trustee v. CIT (Exemptions), Ahmedabad - (2021) 126 taxmann.com 77 (Gujarat) The issue in the captioned case though was on similar grounds to the present case, le delay in filing of Form no. 10 resulting into denial of exemption u/s 11(2) by AD but the findings of the case would not be applicable since the captioned case was of AY 2014-15 Le, prior to the amendment in Section 11(2) by Finance Act, 2015. 2. Social Security Scheme of GICEA v. CIT (Exemptions) - [2023] 147 taxmann.com 283 (Gujarat) The issue in the captioned case is related to delay in filing of Form no. 10B audit report, provision of which and requirement under such provision is different than that of Form no. 10 and hence is not applicable ....
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....t be applicable since the captioned case was of AY 2008-09 1.e. prior to the amendment in Section 11(2) by Finance Act, 2015. 10. JCIT v. Sewa Education Trust - [2013] 40 taxmann.com 143 (Agra-Trib.) The issue in the captioned case though was on similar grounds to the present case, i.e. delay in filing of Form no. 10 resulting into denial of exemption u/s 11(2) by AO but the findings of the case would not be applicable since the captioned case was of AY 2006-07 1.e. prior to the amendment in Section 11(2) by Finance Act, 2015. 14.4. Thus Ld CIT DR submitted keeping in view the judgment of Hon'ble Apex Court in Wipro Ltd. and the amendment in the concerned provision, it is clear that the time period provided under the law is not directory but mandatory and the said delay can thus be not ignored or condoned and the exemption u/s 11(2) of the Act cannot be allowed to the assessee. 15. We have given our thoughtful consideration and also perused the materials on record, the Ld CIT DR is correct in his argument that filing of Form 10 is mandatory under section 11[2] of the Act after the amendment made in Finance Act, 2015. However the Hon'ble Delhi High Court considered this is....
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....sment year 2016-17 was the first occasion subsequent to those amendments. Therefore, we find no reason to disbelieve the explanation furnished by the petitioner to explain the delay in filing Form 10. Further, we are unable to fathom as to what benefit would accrue to the petitioner by delaying the filing of Form 10. In our opinion the discretion conferred for condoning the delay was not correctly exercised by the Commissioner Income Tax. 15.1 Similarly co-ordinate Bench of this Tribunal in the case ITO -Vs- Ramji Mandir Religious And Charitable Trust reported in (2023) 69 CCH 0288 Ahd Trib distinguished the Apex Court judgement and held as follows: "... 9. Further, we are also an agreement for the Counsel for the assessee that the case of Wipro Limited supra was rendered on a different set of facts, wherein in the original return of income the assessee had claimed benefit under Section 10B of the Act and thereafter, a revised return of income was filed by the assessee foregoing the claim of benefit of Section 10B of the Act. However, the facts of the instant case are clearly distinguishable for the reason that in both the original return of income as well as the revised return ....
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....cision was relevant in the context of deduction provisions and not the exemption provisions as given under Chapter III of the Act. 6.3.1. In our view, the aforesaid decision would not apply to assessee's set of facts and would not preclude / prohibit the assessee from claiming deduction u/s 10AA of the Act, for the following reasons: (i) Firstly, in the case of Wipro Limited supra, the issue for consideration before the Hon'ble Supreme Court was that in the original return of income, the assessee had claimed deduction under section 10B of the Act, whereas in the revised return filed under section 139(5) of the Act, assessee did not claim deduction under section 10B of the Act, and instead claimed benefit of carry forward of losses. It was in light of these facts that the Hon'ble Supreme Court held that on a plain reading of section 10B(8) of the Act, it is clear that where assessee claimed benefit under section 10B(8) by furnishing declaration in revised return much after due date prescribed under section 139(1), same was to be denied as requirement of furnishing declaration before AO before due date of filing original return under section 139(1) was a mandatory conditi....
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....ly when Form 56F has been filed by the assessee at the assessment stage when such claim was being considered by the Assessing Officer. (iii) Besides the above, in the case of G. M. Knitting Industries (P.) Ltd. case supra, the Hon'ble Supreme Court further held that even though necessary certificate in Form 10CCB along with return of income had not been filed but same was filed before final order of assessment was made, assessee was entitled to claim deduction under section 80-IB of the Act as well. Therefore, in light of the decision of Yokogawa supra (which is held that section 10A of the Act is a "deduction provision" not an "exemption provision") and the decision of G. M. Knitting Industries case supra, which have been rendered on a similar facts as that of the assessee i.e. claim of deduction was made in the original return of income itself, in our view, the ratio laid down in the Wipro Ltd case would not disentitle assessee to claim benefit of section 10AA of the Act, since it has been rendered on a different set of facts. Therefore in our considered view, once such claim has been made in the original return of income and assessee has also furnished Form 56F during the ....