2022 (1) TMI 79 - AT - Income Tax

Tribunal upholds charity status for urban development body, exempts income

The Tribunal upheld the assessee's entitlement to exemptions under Sections 11 & 12 of the Income Tax Act, ruling that the activities were for ... Entitlement of exemption u/s 11 & 12 - Poof of charitable purposes u/s 2(15) - assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act (GTPUDA), 1976 for proper development of specified area in the state as ensured by the State Government - HELD THAT:- The assessee's case is squarely covered by the order passed in own case [2020 (4) TMI 755 - ITAT AHMEDABAD] and [2021 (1) TMI 1043 - GUJARAT HIGH COURT] in holding the activities of the assessee for charitable purposes under Section 2(15) of the Act and the consequential benefits under Section 11 & 12 of the Act. We find no reason to deviate from the stand taken - Hence, respectfully relying upon the same we hold, that the assessee is entitled to the benefit of the claim under Section 11 & 12 of the Act for the year under consideration and hence the order passed by the Ld. CIT(A) in favour of the assessee as impugned before us is according to us just and proper so as to warrant interference and the same is, thus, hereby confirmed. The appeal preferred by the Revenue is found to be devoid of any merit and, therefore, dismissed. Issues Involved:1. Entitlement of exemption under Section 11 & 12 of the Income Tax Act, 1961.2. Application of proviso to Section 2(15) of the Income Tax Act, 1961.3. Eligibility of the assessee as a charitable institution.4. Accumulation of income under Section 11(2) and Section 11(1)(a) of the Income Tax Act, 1961.Detailed Analysis:1. Entitlement of Exemption under Section 11 & 12 of the Income Tax Act, 1961:The Revenue filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-9, which allowed the assessee's claim for exemption under Section 11 & 12 of the Act. The assessee, an autonomous body established under Section 22 of the Gujarat Town Planning and Urban Development Act, 1976, claimed exemptions for various expenditures. The Assessing Officer (AO) disallowed these exemptions, determining the total income at Rs. 85,96,19,188/- against the declared NIL income. The CIT(A) deleted these disallowances, leading to the Revenue's appeal.2. Application of Proviso to Section 2(15) of the Income Tax Act, 1961:The AO disallowed the exemptions claimed under Section 11 & 12, observing that the assessee's case fell under the ambit of proviso 1 & 2 to Section 2(15) of the Act. The proviso states that the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on any activity in the nature of trade, commerce, or business. The CIT(A) and the Tribunal, however, found that the assessee's activities did not fall under this proviso, as they were for public utility and not for profit.3. Eligibility of the Assessee as a Charitable Institution:The Tribunal considered the assessee's role as a regulatory body created by the State Government for the planned development of urban areas, including infrastructural activities such as roads, bridges, water supply, and sewerage disposal. The Tribunal relied on the Gujarat High Court's decision in the case of Ahmedabad Urban Development Authority (AUDA), which held that such activities are for public utility and do not constitute trade, commerce, or business. Therefore, the assessee was considered a charitable institution under Section 2(15) of the Act.4. Accumulation of Income under Section 11(2) and Section 11(1)(a) of the Income Tax Act, 1961:The AO disallowed the assessee's claim for accumulation of income under Section 11(2) and the deduction under Section 11(1)(a). The Tribunal found that the assessee complied with the conditions for accumulation under Section 11(2), including furnishing a statement of purpose and investing the accumulated money in specified forms. The Tribunal also upheld the assessee's claim for 15% deduction under Section 11(1)(a), as the income was applied for charitable purposes.Conclusion:The Tribunal held that the assessee's activities were for charitable purposes under Section 2(15) of the Act, and the assessee was entitled to exemptions under Section 11 & 12. The Tribunal's decision was based on the Gujarat High Court's ruling in similar cases, confirming that the proviso to Section 2(15) did not apply to the assessee's activities. Consequently, the appeal by the Revenue was dismissed, and the order of the CIT(A) in favor of the assessee was upheld.