ITAT affirms infrastructure funds' tax exemption under charitable activities, emphasizing governmental control.

The ITAT upheld the CIT(A)'s decision, confirming city development authorities' activities as charitable and ruling infrastructure funds non-taxable due to governmental control and project directives. The revenue's appeal was dismissed, emphasizing the authorities' charitable nature in land acquisition, plot development, and construction activities, supported by various court judgments. The ITAT highlighted the funds' government oversight and directed project utilization, concluding that interest income from such funds is not taxable, in line with previous rulings and legal guidance on fund control.

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Issues:
1. Whether the activity of city development authorities is charitable.
2. Treatment of infrastructure fund amount as revenue receipt.

Issue 1: Activity of City Development Authorities as Charitable:
The revenue appealed against the CIT(A)'s order allowing the benefit of section 11/12AA of the Income Tax Act, treating the activity as charitable. The revenue contended that certain High Courts had not admitted SLPs related to development authorities, questioning the charitable nature of their activities. However, various Courts and Tribunals consistently held that acquiring land, developing plots, and constructing residential and commercial places are charitable activities. Several judgments were cited to support this, including decisions related to different development authorities like Haridwar, Muzaffarnagar, Khurja, Jalandhar, and others. The ITAT noted that the funds received were under government orders and controlled by a high-powered committee, leading to the conclusion that the interest income from such funds is not taxable. The ITAT also referred to a judgment by the Allahabad High Court regarding the utilization of infrastructure funds for specific projects as directed by the State Government, emphasizing that such funds do not belong to the authority or constitute taxable receipts.

Issue 2: Treatment of Infrastructure Fund Amount:
Regarding the Infrastructure Development Fund, the AO insisted that the amount should have been credited in the income and expenditure account, with expenditures debited accordingly. However, it was established that the fund was not under the exclusive control of the assessee, and expenditures were approved by a high-powered committee. The ITAT referenced a previous decision related to the appellant, where it was held that interest income from infrastructure funds is not the appellant's income due to lack of control over the funds. Given the consistent rulings in favor of the assessee for previous assessment years and the legal direction on fund utilization by the State Government, the ITAT declined to interfere with the CIT(A)'s order, ultimately dismissing the revenue's appeal.

In conclusion, the ITAT upheld the CIT(A)'s decision, affirming the charitable nature of city development authorities' activities and the non-taxable status of infrastructure funds due to governmental control and specific project directives.

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