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2023 (7) TMI 734
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....dated 14.10.2019 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad, arising out of the assessment order passed under section 143(3) of the Act relating to the Assessment Year (A.Y) 2016-17.Since common issues are involved in all these appeals, the same are disposed of by this consolidated order. Therefore Assessment Year 2012-13 is taken as the lead case for the sake of convenience. 3. The brief facts of the case is that the assessee is a Corporation established under the Gujarat Industrial Development Act, 1962 and carrying out the development of industrial estate, roads, drainage, wager supply, etc as Genera l Public Utility (for short G.P.U.). For the Assessment Year 2012-13, Assessment order was passed under section 143(3) of the Act on 25-03-2015, wherein the AO has observed that the assessee is involved in activity of sale of land/plots, hence it is carrying out activities of advancement of general public utility in the nature of trade, commerce, business and accordingly he applied prov iso of section 2(15) and income was assessed as regular business income. Further, the AO has denied exemption claimed u/s. 11 and 12 of the Act and demanded tax thereon. On ap....
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.... under section 11 of the Act. No error has committed by the learned Tribunal in holding so. We are in complete agreement with the view taken by the learned Tribunal. 18. In view of the above and for the reasons foretasted, no substantial question of law arises. All these Tax appeals deserves to be dismissed and are accordingly dismissed." 3.3. For the subsequent assessment years, the Hon'ble High Court in Revenue's tax Appeal nos. 535, 536, 537 539 of 2018 dated 07-08-2018 has again decided the appeals in favour of the assessee relating to the Assessment Years 2012-13 & 2013-14, even in those judgments, there is no direction for re-examination of other issues by the Assessing Officer. 3.4. In this background, the AO has issued s how cause notice dated 22-12-2018 which is reproduced at para-9 of the assessment order, wherein he has asked the assessee to state as to why income earned by the assessee corporation on sale of land/plots should not be treated as commercial activity and hit by section 2(15) of the Act and why exemption claimed under sections 11 & 12 should not be disallowed. 3.5. The assessee has filed its reply vide letter dated 24-....
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....has already dismissed departmental appeal for present assessment year and held that activities carried out by the appellant are charitable in nature. This fact is even accepted by the AO in impugned assessment order as well as in the remand report referred supra and still strangely has not computed income as per provisions of section 11 and 12 of the Act only on the ground that the department has filed an SLP before the Hon'ble Supreme Court and the matter has not attained finality. This observation of the AO cannot be accepted in view of binding decision of Hon'ble Gujarat High Court in the appellant's own case, it is a matter of fact that the Hon'ble Gujarat High Court in its order has not given any direction for adjudicating the other issues in the light of favorable decision as per section 2(15) of the Act as held by the Hon'ble ITAT and this fact is also admitted by the Assessing Officer at para-6 of the remand report. It is observed that as decision of the Hon'ble Gujarat High Court was rendered prior to passing of impugned order and as this matter was already on record of the AO, hence there was no reason for him to compute the income ignoring the pro....
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....t the income of the subsequent years, considering it as application of income u/s. 11(1)(a) in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing unpaid leave encashment in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing the provision for diminution of investment of Rs.6,58,500/- in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submitted before us copy of the Supreme Court Judgment in Civil Appeal No. 21762 of 2017 in the case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022 which has settled the issue by dismissing the Revenue's appeal in D. Nos. 39525....
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....lic interest, and also fund large scale development and maintain public property. These would entail recovering charges or fees, interest and also receiving interest for holding deposits. It was further pointed out that in some cases, income in the form of rents- having regard to the nature of the schemes which the concerned board, trust or corporation may be mandated or permitted to carry on, has to be received. For instance, in some situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents. 177. The answers to these, in the opinion of this court, are that the definition ipso 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 wa....
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.... out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of sole purpose of establishment, growth and development of industries. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The found of the Corporation consists of moneys received....
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....ess transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one." 186. In Shri Ramtanu Cooperative Housing Society (supra) no doubt, this court did not have to decide whether the Maharashtra Industrial Development Corporation was entitled to tax exemption. However, it examined the provisions of the Act, and the ratio, that such industrial development corporations are not engaged in trading, is binding. Like in that case, here too, the concerned state Acts (Gujarat Industrial Development Act, 1962 and the Karnataka Industrial Areas Development Act, 1966) tasked the boards with planning and development of industrial areas. Their personnel are appointed under the enactments and are deemed to be public servants. The state government is empowered to acquire land, in exercise of eminent domain power, for their purposes; their audits are by the Accountant General of the concerned state, or audito....
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.... services for the benefit of public weal. If such corporations (falling within the description of Section 10(46)) applied to the Central Government for exemption, the treatment of their receipts, should be no different than how such receipts can and should have been treated for the purposes of determining whether they are GPU charities, during the period when Section 10(46) was not in existence. Furthermore, this court is of the opinion that having regard to the observations in Gujarat Maritime Board case (supra), the denial of exemption under one category cannot debar such corporations from claiming income exempt status under another category. (b) Summary in relation to statutory authorities/corporations. 190. In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. (ii....
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....or government securities and drawing interest therefrom or charging lease rent, ground rent, etc., per se, recovery of such charges, fee, interest, etc. cannot be characterized as "fee, cess or other consideration" for engaging in activities in the nature of trade, commerce, or business, or for providing service in relation in relation thereto; (e) Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a government or state is expected to engage in, having regard to provisions of the Constitution and the enacted laws, and the observations of this court in NDMC; whether in case surplus or gains accrue, the corporation, body or authority is permitted to distribute it, and if so, only to the government or state; the extent to which the state or its instrumentalities have control over the corporation or its bodies, and whether it is subject to directions by the concerned governmen....
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....tility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (1) the activities of trade, commerce or business are connected ("actual carrying our..."inserted w.ef. 01.04.2016) to the achievement of its objects of GPU: and (1) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through ill....
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....tion 2(15) of the IT Act B.3. In clause (b) of Section 10(46) of the IT Act "commercial" has the same meaning as "trade, commerce, business in Section 2(15) of the IT Act Therefore, sums charged by such notified body, authority. Board, Trust or Commission (by whatever name called) will require similar consideration i. e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of "commercial activity. However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case by- case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01 04 2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under ....
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.... the assessing officer. Similarly, the conclusion in Para 253 G. was conclusive with respect to the claim of private trusts, the appeals were dismissed. These conclusions are accurately reflected in the final, operative directions in Para 254. In Para 254 (i) to (iv), the conclusions recorded are against the revenue. However, in Para 254 (v), (vi), (vii) and (vii), the conclusions, are in favour of the revenue. 5. The reference to application of the law declared by this court's judgment, therefore, has to be understood in the context, which is that they apply for the assessment years in question, which were before this court and were decided; wherever the appeals were decided against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for." 8.1. Thus it is seen from the above judgment in Miscellaneous App....
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....13. Regarding Ground No. 3, the assessee violated the provisions of Section 11(5) of the Act with regard to the investments made in Gujarat Alkalies and Chemicals Ltd. (GACL) and Gujarat Lease Finance Ltd. (GLFL) thereby attracting provisions of section 11(1)(d) of the Act. The Ld. Senior Counsel submitted that the Ld. CIT(A) followed identical disallowance made by the Assessing Officer in the case of Gujarat Maritime Board (GMB) relating to the Assessment Year 2013-14, wherein GMB also made investments in GACL and GLFL, both are not treated as 'public sector companies' as per Section 11(5)(vii) r.w.s. 2(36A) of the Act. Therefore the investments made by the assessee in these two companies namely GACL and GLFL violated the provisions of section 11(5) thereby attracting provisions of section 13(1)(d) of the Act. However the Ld. CIT(A) held that there is no investment made by the assessee during the Assessment Year 2016-17 in GACL and GLFL and only dividend income of Rs. 2,26,39,830/- on past investment has been received. Therefore the Ld. CIT(A) restricted this amount only, while giving effect to the appellate order. 13.1. The Ld. Senior Counsel further submitted that this ....
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....trust, otherwise fulfils the condition for exemption. Therefore, the exemption under section 11 would still be available to the assessee in respect of income, to the extent the same is derived in conformity to section 11 and applied during the year for the purposes of the trust. In the case of Gurdayal Berlia Charitable Trust Vs ITO [1990] 34 ITD 489 (Bom), it was held that nonfulfilment of the condition of investment under section 11(5) cannot deprive the trust of exemption of its other income, which has already been granted to it in the earlier years. The non-fulfilment of the condition under section 11(5) would only make a portion of the relevant income as specified under section 164(1), liable to tax. The jurisdictional Gujarat High Court in the case of CIT v S.P. Memorial Trust in Tax Appeal number 187 of 2005 vide order dated 13-11-2004 also allowed this issue in favour of the assessee. While passing the order, Gujarat High Court observed as under: "5. Having heard learned advocates for the parties we are of the opinion that the Tribunal was justified in upholding the order passed by CIT(A). The CIT(A) has very clearly observed that the provisions of Section 11....