TaxTMI 
TaxTMI 
2020 (9) TMI 277
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....reated under the Haryana Development & Regulation of Urban Areas Act, 1975, as amended by the Haryana Development & Regulation of Urban Areas Ordinances 2006, and had been set up by the Govt. of Haryana through a notification dated 23.11.2006. To this fund was credited Infrastructure Development Charges(in short referred to as IDC charges), paid by various colonizers while setting up Housing Project in the State of Haryana, and which contribution was for the purpose of carrying out development of capital expenditure on infrastructure projects such as National/State Highways etc. The assessee fund had been granted registration u/s 12AA by the Commissioner of Income Tax, ( CIT), Panchkula vide order dated 31.08.2010. 3. During assessment proceedings for A.Ys 2013-14 and 2014-15, the AO noted that the IDC charges received were not being shown/reflected in the profit and loss account nor the capital expenditure incurred from the same but were taken directly to the Balance Sheet. He further noted that the IDC charges received had been parked in Fixed Deposits in bank. It was the interest earned from the same only which was being reflected in the profit and loss account. The AO furthe....
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....e AO on other grounds, the assessee raised a ground claiming that the money received on account of IDC belonged to the State Government and that the assessee was only Nodal Agency of the Government with regard to the same, having no control over expending the same also and therefore, the same was not in the character of income of the assessee. The ld. CIT(A) after considering the submissions of the assessee at length, rejected all the grounds raised and upheld the order of the AO in all the years. On the issue of the fund/IDC receipts belonging to the state government, Ld.CIT(A) held that the background leading to the formation of the fund, the provisions of the HUDR Act, 1975 by which it was formed, coupled with the conduct of the assessee while seeking registration u/s 12A of the Act wherein it claimed itself to be a separate entity, belied assesses claim that it was not distinct and separate from the State. Aggrieved by the same the assessee has now come in appeal before us. The Ld. Counsel for the assessee contended that the primary and foremost issue raised for adjudication in all the appeals, is regarding the taxability of IDC receipts in the hands of the assessee fund.....
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.... has erred in not correctly appreciating the facts and wrongly treating IDC receipts amounting to Rs. 482.61 crores as income of the appellant ignoring that the money belongs to state government which is highly unjustified and uncalled for. 2. That the Ld. AO has erred in not correctly appreciating the facts and wrongly treating Rs. 146.61 Crores on account of interest income from FDR's income of the assessee which is highly unjustified and uncalled for." 6. Ld. Counsel for the assessee first took up the issue of addition made of IDC receipts raised in Ground No.2 of ITA No.644/Chd/18 for A.Y 2009- 10 and in Ground No.1 of the additional Grounds raised in ITA No.528/Chd/17 for A.Y 2013-14.The primary thrust of the argument made by the Ld.Counsel for the assessee against the said addition was that since the Fund belonged to the State, the IDC receipts were not taxable. Ld. Counsel, in this regard, referred to the background leading to the creation of the fund, the levy of IDC charges, and the constitution of a high powered committee for its administration, all effected by way of amendments to the Haryana Development & Regulation of Urban Areas Act, 1975(HDRUA Act). Re....
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....te Government. * During the deliberations of creation of IDF, the department submitted the proposal for amendment in the statutory Act i.e. Act No. 8 of 1975 and following proposal in Section 3A was submitted to the Government for its concurrence:- ( PB Page 28-30) Existing Provisions Proposed Provisions (6) The amount of service charges so deposited by the colonizer shall constitute a fund called the Haryana Urban Development Fund (hereinafter referred as the Fund) which shall vest in the State Government. The amount of service charges and Infrastructure Development Charges so deposited by the colonizers shall constitute a fund called the Haryana Infrastructure Development Fund (hereinafter referred to as the Fund) which shall vest in the State Government. * It was proposed to amend the Act through Ordinance. It was also proposed that the fund will continue to be administered through the Department of Town and Country Planning, Haryana. For this reference be made PB Page 38. Kind attention is invited towards recommendations of the Committee which are placed at Paper Book Page 41. On perusal of the same it can be seen that the dedicated fund was to be ....
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....inistered by the High Powered Committee constituted by the State Government. * After Governor of Haryana promulgated an Ordinance, a bank account was required to be opened in the name of the fund to enable the deposit of infrastructural development charges. A proposal was made requesting grant of concurrence from Finance Department for opening a separate account. The copy of said note is placed at Paper Book Page 61-62. * The said proposal for opening the bank account was approved by the Finance Department on 21.12.2006. The copy is placed at Paper Book Page 63. * Thereafter on 26.04.2007, the Finance Department advised to Administrative Department i.e. Town and Country Planning Department to create a statutory Board for administration of fund. The copy of the letter of Finance Deptt. is at placed at Paper Book Page 64. * The High Powered Committee was constituted vide notification dated 12.07.2007 in pursuance to sub section (7) of Section 3A( Paper Book Page No. 82. ) The above facts clearly show that the no separate Board/Authority was created but a separate fund was created which was to vest in State Government and was to be monitore....
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....extract is as under:- "The Fund shall be collected and managed by the Director and passed on for the purpose of its' further utilization to the Board to be constituted by the Government for this purpose". * Till 05.04.2013, there was no provision in the Act to constitute Board. The State Government vide notification dated 05th April 2013 had amended Section 3AA of Haryana Development & Regulation of Urban Areas Act 1975 and by virtue of which the High Powered Committee was replaced by Haryana Infrastructure Development Board to monitor only the utilization of fund but has no control on the receipts of IDC. The copies of relevant amendment in the Act No. 8 of 1975 and its objects are enclosed at Paper Book Page 65-72 * From the amendment in Section 3A(7) made in 2013, it becomes clear that prior to the amendment, the said Fund vested with the State Govt. and was administered by a High Powered Committee constituted by the State Government for the purpose. * Even after the amendment in 2013, the collection of the amount is still with the Director Town & Country Planning and the fund has to be passed on for the purpose of utilization to the ....
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....the case of o Saharanpur Development Authority vs. Assistant Commissioner of Income Tax 8 ITR 0263 (Del) Tri. o CIT(A) vs Delhi State Industrial Development 295 ITR 0419 Del HC o Commissioner of Income Tax & Anr. Vs. Karnataka Urban Infrastructure Development & Finance Corporation 284 ITR 0582 ISSUE (in AY 2009-10 only) Not allowing expenditure of Rs. 75.30 crores SUBMISSION * The assessee fund has been created by the state government under the Haryana Development & Regulations of Urban Area Act, 1975 for development of major infrastructure projects for the benefit of the State of Haryana. * During the year Rs. 75.30 crores has been incurred on the directions & approval of the state government. The amount of Rs. 71 crores has been incurred for Delhi Metro & Rs. 2.5 crores for construction of bridge over Tanguri Nadi. * The expenditure has been incurred for the purpose for which the fund has been created. The genuineness of the expenditure is not in doubt and the same has been expressly accepted by the AO in the assessment order itself. * The expenditure incurred has not been allowed only becau....
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....copies of the approval granted by CIT(E) and proof of receipt of approval by the A.O on 29.3.2016 (stamp of receipt in A.O's office ) are at pages 1-4 of DPB showing that there was no irregularity in issuance of notice u/s 148 on 29.3.2016. Issue 2: The Infrastructure Development Charges(IDR) claimed by the assessee as Capital receipts have been held by A.O and confirmed by CIT(A) to be revenue receipts to be added to income of assessee. (Ground 2 of AY 2009-10 and Ground 1 of A.Y 2014-15) The basic argument of the assessee is twofold. Firstly, that it is not a trust but instead a nodal agency and hence not liable to be assessed to income-tax. Secondly, that IDC is not income of the assessee and is held on behalf of the state govt and hence is shown as a capital receipt in the balance sheet and not in Income and expenditure account. The arguments of the Department are outlined as under: 1. Reliance is placed on the order of CIT(A) A.Y 2009-10 dt 28.2.2018 para 9 from pages 6 to 25 where the issue is discussed in detail. Following aspects are highlighted. a.) Background leading up to the creation of the fund (para 9.4.1 pg 12-14 of CI....
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....al income of the assessee. This is supported by the fact that the assessee in its audited accounts for year ending 31.3.2008 and year ending 31.3.2009 submitted for purposes of 12A application before CIT Panchkula has also shown the "service charges"(nomenclature later changed to IDC) as income in the Income and Expenditure Account (DPB pages 6-13). The underlying argument of the assessee before the I.T authorities is that since it is a nodal agency, there is diversion of income at the source since the money is being held on behalf of the state govt. The assessee in its has cited a number of judgements which have been discussed and countered by the CIT(A) at para 9.4.7 pg 18 to para 9.4.8 page 25 of his order for A.Y 2009- 10 and has finally held at para 9.4.9 pg 25 that the IDC are the income of the assessee. The CIT(A) has also countered the claim of the assessee that it is only in receipt of 1% of the IDC and not the balance, at para 9.4.5 page 17 of his order. e) In addition to the discussion in order of CIT(A), a compilation of cases laws relied upon by the department has also been submitted on 24/4/2019 which support the department's stand on this issue. ....
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....eking registration as a charitable trust u/s 12A of the Act, and complying with the provisions of the Income Tax Act by getting its accounts audited under it and filing income tax returns since A.Y 2009-10 projecting itself as a separate entity. The Revenue has also contended that there was no diversion of income by overriding title vis a vis IDC receipts as claimed by the assessee and relied on various case laws in support of its contention. Both the parties have relied on the background facts and statutory provisions leading to the creation of the assessee fund, under the Haryana Development and Regulation of Urban Areas Act, 1975, (HDRUA Act) to buttress their arguments and which in our view are determinative factors for adjudicating whether the assessee fund belonged to the state or not. 10. We have gone through the relevant statutory provisions creating the Fund and facts relating to its functioning and what emerges is that the Fund merely represents money, belonging to the State, pooled for specific user purposes of infrastructure development in the state. The Fund belongs entirely to the State and has no distinct or separate identity of its own. The relevant provisi....
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.... any other money from such source as the state Government may decided, shall be credited to the fund. [(9) The Fund shall be utilized for stimulating socio-economic growth and development of major infrastructure projects for the benefit of the state of Haryana. The Fund may also be utilized to meet the cost of administering the Fund.]} 11. A bare reading of the section clearly shows that the Fund was constituted under the HDRUA Act, 1975, of the State Government, from the Infrastructure Development charges [sub section (6)], which were levied by the State [sub section (1)] and collected by the State [sub section(3)], for development of major infrastructure projects for the benefit of the state [sub section (6)]. The administration of the Fund vested in a high powered committee, the notification relating to which is reproduced hereunder : HARYANA GOVERNMENT TOWN AND COUNTRY PLANNING DEPARTMENT Notification The 12th July 2007 No. DS.2007/17807 - In pursuance of the provisions of Sub-section (7) of Section 3A of the Haryana Development and Regulation of Urban Areas Act, 1975 (8 of 1975), the Governor of Haryana hereby constitutes High Powered Committee....
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....enuka Dam project and development of international civil air terminal at Chandigarh, to name a few.The decision for undertaking all these projects were taken by the Government which is evident from the minutes of the meeting held under the chairmanship of the Finance commissioner and Principal Secretary to Govt. of Haryana regarding cost(P.B 33) and his note seeking approval of the Chief Minister for release of funds from IDC for the Bridge project, (P.B 30), the letter addressed to the Senior Town planner, Chandigarh, by the Chief Cordinator Planner(NCR) requesting release of funds from IDC for Delhi Metro Gurgaon project as approved in the meeting held under the chairmanship of FC Finance Department (P.B 34) and such other documents relating to other projects. Thus the Fund had no role in the development of infrastructure projects except being a depository of IDC charges collected by the state for the said purpose, to be utilized as determined by the State. What emerges from the from the above therefore is that the assessee fund merely represented money set apart/pooled by the government so as to facilitate its user for a specific purpose of infrastructure development in the s....
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....dings, including appellate proceedings, is to determine the taxable income as per correct interpretation of law applied to the facts of each case. We therefore do not find any merit in the contention of the Revenue that the assessee having itself admitted to being an entity separate and distinct from the state in proceedings u/s 12A of the Act cannot now take a contradictory stand, and dismiss the same. At the same time we hold that considering our findings as above that the assessee Fund was not an artificial juridicial person, the Revenue is free to take all necessary action as a consequence, within the framework of law. Also merely because the assessee fund no longer requires approval of the Finance Department of the state while utilizing the funds, does not in our view alter or impinge upon its character as held by us as being money of the state kept aside for specific purpose.The presence of the Revenue Secretary in the high powered committee takes care of the requirement of obtaining approval of the Finance Department for utilization of funds. In view of the above we hold that Upto A.Y 2013-14, the Fund belonged to the State and was not liable to tax.The addition made o....
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....on FDR's created therefrom in the hands of the assessee raised in Ground No. 1 & 2 respectively, , the arguments, it was common ground between both the parties was identical as in earlier years appeal dealt with us above, with the assessee contending that the fund belonged to the state while the Revenue contending that it was a distinct and separate entity. In the impugned year, we find that the facts differ with the earlier years since, by virtue of a notification dated 05-04-13, amendments were made to the HDRUA Act, 1975, vesting the Fund to a Board.This Board, we have noted from the amendments made, was created as an entity distinct and separate from the State. This is evident from section 3AA of the HDRUA Act stating in clear terms the constitution of the Board on its incorporation as a body corporate having perpetual succession and common seal and power to acquire, hold and dispose off property and to contract and sue or be sued in its own name.Even the constitution of the Board, provided for in the said section, reflected that it was distinct from the State, by clearly showing that not all members were to be representative of the State and some members could be nominated ....
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.... to the development of infrastructure sectors or infrastructure projects; (ii) advise or recommend to the Government acquisition of land under the Land Acquisition Act, 1894 for the purposes of infrastructure projects; (iii) lease, sell, exchange, or otherwise make allotments of the property referred to in clause (i) to concessionaire and to modify or rescind allotments, including the right and power to evict the allottees concerned on breach of any of the terms or conditions of such allotment; (iv) borrow and raise money in such manner as the Board may think fit and to secure the repayment of any money borrowed, raised or owing by mortgage, charge, standard security, lien or other security upon the whole or any part of the Board's property or assets (whether present or future), and also by a similar mortgage, charge, standard security, lien or security to secure and guarantee the performance by the Board of any obligation or liability, it may have undertaken or which may become binding on it; (v) constitute a professional multi-disciplinary Project Management Team and one or more Advisory Committee or Committees or Sectoral Sub-Committee or ....
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....and structuring of investments of the Government in the projects, creating an SUV for implementing a project, all were in the domain of the functions of the Board. The administration of the Fund was only one of the manifold functions of the Board.This is clearly brought out by subsection (2) of section 3AA of the HDRUA Act, 1975 as under: 3AC. Functions and Powers of Board.-(1) The Board shall be the apex body for overall planning and development of infrastructure sector and infrastructure projects for the benefit of State of Haryana, subject to the limitations specified in sub-section (3). (2) The Board shall- (i) act as a nodal agency to co-ordinate all efforts of the Government regarding the development and implementation of infrastructure sectors and infrastructure projects for the benefit of State of Haryana, involving private participation and funding from sources other than those provided by State budget and shall, - (a) identify infrastructure projects for private participation; (b) promote competitiveness and progressively involve private participation while ensuring fair deal to the end-users; (c) identify and promote technolog....
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....lopment of infrastructure projects in the State alongwith private participation, in its own right and not merely as a nodal agency of the State, as under: NOTES Statement of Objects and Reasons-The Section 3A of the Act 8 of 1975 provides for creation of a Fund from the receipts on account of Infrastructure Development Charges (IDC) and Infrastructure Augmentation Charges (IAC). The said Fund vests with the Director General, Town and Country Planning Haryana, and is presently administered by a High Powered Committee constituted for the purpose for investment on major infrastructure projects and for the purpose of stimulating socio-economic growth for the benefit of State of Haryana. Owing to the increasing complexities involved in such infrastructure projects and in order to leverage the Fund available for structuring and implementation of larger infrastructure projects in PublicPrivate- Partnership, the Government has decided for setting up of Haryana Infrastructure Development Board (hereinafter referred as the Board) as a dedicated agency for encouraging private sector investment in infrastructure projects across all sectors through innovative development and financial ....
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....tration. Accordingly it was held that the fund belonged to the Delhi administration and not the assessee who was only a nodal agency of the Delhi administration for the project. Similarly in the case of Karnataka Urban Infrastructure Development & Finance Corporation (supra) the assessee was found to be have been created for a specific scheme for development of a megacity and a fund created for the purpose. In this backdrop of facts the Hon'ble Court held the assessee to be a mere nodal agency for executing a specific project and the Fund therefore not taxable in its hands.In the case of Saharanpur Development authority, (supra) the Fund was found to have been received by the assessee from the Government of Uttar Pradesh to be utilized as per the directions of a High Powered Committee. The assessee was found to have no control over the utilization of the Funds and accordingly was held to be a mere nodal agency of the Government. 17. We therefore hold that the Fund vested in the Board which was an entity distinct and separate from the State and was also not a nodal agency of the State.In view of the same the receipts of IDC and interest on FDR's created from the IDC receipts are ....
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.... that the assessee could not utilize 85% of the receipts during the year and amounts which were less utilized were accumulated by the assessee to be utilized in future years. * However, the assessee could not file the Form 10 before the AO at the time of filing the return of income. * As per proviso to the Rule 12(2), the form 10 has to be filed electronically on or after 01.04.2014. * In this regard we submit that as per the provisions of the Act and the rules, for the AY 2014-15, only filing of Form 10 electronically was mandatory. However, the provisions that the Form 10 has to be filed before the due date for filing the return of income has been bought in Section 11(2) and Rule 17 w.e.f 01.04.2016 only. Thus are not applicable to the year in hand. * The assessee for the year under reference has duly filed the Form 10 for accumulation of income before the AO during the course of assessment proceedings These facts have been admitted by AO in the assessment order. * It is well settled that if the assessee has filed the Form 10 during the course of assessment proceedings, the assessee cannot be denied the benefit of accumulation....
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....e details of accumulation shown in the Form 10 filed during assessment proceedings were not in conformity with the figures mentioned in Original Audit Report which clearly indicate that the details put forth by the appellant in the Form No 10 were reliable and the correct picture was not put up before the assessing officer as required for claiming exemption u/s 11 of the Act. More importantly the Audit Report in farm 10B filed electronically had mentioned accumulation u/s 11(2) of Rs. 20, 32, 87, 909/-but no such details were furnished by the assessee during assessment proceeding. The cases relied upon by the appellant are distinguishable on facts from the facts in the case of the appellant. In the case of the appellant, it is not only not furnishing of form 10 within time but also that the information given in the audit report in Form 10B regarding accumulation etc. were not in conformity with the details in the balance sheet. In Form 10, the assessee is under obligation to put forth the details of accumulation, the purpose for accumulation etc. before the assessing officer which has not been done in this case. The appellant has failed to satisfy the conditions p....
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....SIONER OF INCOME TAX (2013) 59 SOT 0197 (Delhi) o JOINT COMMISSIONER OF INCOME TAX vs. SEWA EDUCATION TRUST 27 ITR (Trib) 0292 (Agra) o V. RAMAKRISHNA CHARITABLE TRUST vs. DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS)-II (2015) 155 ITD 0727 (Chennai) In view of the same, we hold, that the denial of benefit of accumulation for delayed filing of Form No.10 is not as per law . 24. Another reason for denying the benefit is mismatch in the figure of accumulation as reported in the audit report filed in Form No.10B and that filed in the notice for accumulation in Form No.10. We are not in agreement with the same since the requirement of law is to intimate the amount of accumulation in Form No.10, therefore a different figure reported in any other form should be of no relevance or consequence.As rightly argued by the Ld.Counsel for the assessee the audit report is furnished by the auditor while the statement of accumulation is to be filed by the assessee. Therefore a figure reported by the auditor is of no consequence in the scheme of law for the purpose of claiming benefit of accumulation u/s 11(2) of the Act. Even otherwise we have noted that there was a plausibl....