2018 (7) TMI 2147 - HC - Income Tax

High Court Affirms ITAT's Decision; Upholds Assessee's Exemption u/s 11, Rejects Revenue's Appeal Claims.

The Commissioner of Income Tax (Exemptions), Chandigarh Versus M/s Patiala Improvement Trust, Patiala

The High Court dismissed the revenue's appeal under Section 260A of the Income Tax Act, 1961, challenging the ITAT's decision to grant exemption to the ... Exemption u/s 11 - assessee was carrying on business of sale and purchase of residential plots and commercial properties by auction and earned huge net profit during the year under consideration, which was in the nature of trade, commerce and business and did not fall within the meaning of words “the advancement of any other object of general public utility” u/s 2(15) - HELD THAT:- Appellant-revenue did not dispute that the issues raised in this appeal are covered by the decision of this Court in The Tribune Trust Vs. Commissioner of Income Tax and another and Commissioner of Income Tax (Exemption) Vs. Improvement Trust, Moga [2017 (1) TMI 53 - PUNJAB AND HARYANA HIGH COURT] where the similar issues have been decided against the revenue and in favour of the assessee. Issues:Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2012-13.Analysis:Issue 1: Scope of proviso of Section 2(15)The appellant-revenue questioned whether the ITAT erred in not considering the scope of the proviso of Section 2(15) as directed by the High Court. The Assessing Officer found the assessee engaged in the sale and purchase of properties, leading to denial of exemption under Section 11 of the Act. The CIT(A) reversed this decision based on previous Tribunal orders. The Tribunal upheld the CIT(A)'s decision. The Court noted that similar issues had been decided against the revenue in previous cases, leading to the dismissal of the appeal.Issue 2: Circular No. 11 of 2008 of CBDTThe appellant contended that the ITAT erred in drawing conclusions from Circular No. 11 of 2008, which clarified that entities claiming charity under Section 2(15) should avoid commercial activities. The Assessing Officer had denied exemption to the assessee based on its profitable property dealings. The CIT(A) and ITAT, however, ruled in favor of the assessee, leading to the dismissal of the appeal by the High Court.Issue 3: Ignoring precedent casesThe appellant raised concerns about the ITAT ignoring precedents set by other ITATs in cases involving development authorities. The Assessing Officer had denied exemption to the assessee due to its profitable land development activities. The CIT(A) and ITAT favored the assessee, leading to the dismissal of the appeal by the High Court based on previous decisions.Issue 4: Statutory functions and tax obligationsThe appellant argued that performing statutory functions does not exempt a government-created authority from tax obligations. The Assessing Officer held that the assessee's activities did not qualify for exemption under Section 11. The CIT(A) and ITAT ruled in favor of the assessee, leading to the dismissal of the appeal by the High Court based on established legal principles.Issue 5: Commercial nature of activitiesThe appellant contended that the ITAT disregarded the commercial nature of the assessee's activities, similar to those of another entity denied exemption in a previous case. The Assessing Officer found the assessee engaged in commercial activities, leading to the denial of exemption. The CIT(A) and ITAT ruled in favor of the assessee, and the High Court dismissed the appeal citing consistent decisions against the revenue.Issue 6: Contrary to evidence and material on recordThe appellant claimed that the ITAT's decision was contrary to the evidence and material on record, rendering it perverse. The Assessing Officer denied exemption to the assessee based on its profitable activities. The CIT(A) and ITAT ruled in favor of the assessee, leading to the dismissal of the appeal by the High Court due to consistent legal interpretations.Issue 7: Non-application of mind and arbitrarinessThe appellant alleged that the ITAT's decision lacked proper application of mind and was unreasonable and arbitrary. The Assessing Officer denied exemption to the assessee based on its profitable dealings. The CIT(A) and ITAT favored the assessee, and the High Court dismissed the appeal, citing previous decisions against the revenue and in favor of the assessee.