TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 142
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....re not project specific or were given for generic purpose then to consider the same in the nature of voluntary donation to be included as the income of the appellant u/s 12 (1) of the Act. 3. Ld. CIT (A) erred in law and on facts holding the appellant as not entitled to claim (i) accumulation @ 15% u/s 11(l)(a) of the Act on specific grants (ii) claim capital expenditure out of these grants as application of income & (iii) claim depreciation on fixed assets created out of grants received for a specific purpose of for specific project as application of income. 4. Ld. CIT (A) erred in law and on facts directing AO to treat funds received as per provisions of GTPUD Act such as Development charges, Betterment charges, Impact fees, Amenities fees, Scrutiny fees, Zoning fees etc. as the income of appellant irrespective of their treatment as balance sheet item. 5. Ld. CIT (A) erred in law and on facts directing AO to treat receipts of premium on lease of plots of land and receipts from sale of land/ shops as income of the appellant irrespective of its treatment as balance sheet item. 6. Ld. CIT (A) further erred in law and on facts holding the appellant as not entitled to claim fr....
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....stry of Urban Development and premium on lease/ sale of plots/ shops/ flats as revenue receipts." We shall first take up the assessee's appeal for assessment year 2016- 17. 4. Before us, the counsel for the assessee submitted that he shall not be pressing for ground nos. 1 to 5. Accordingly, ground nos. 1-5 of the assessee's appeal are dismissed as not pressed. Ground No. 6 (i) (ld. CIT(A) erred in holding that the assessee is not entitled to accumulation @ 15% u/s. 11(1)(a) of the Act. 5. Before us, the counsel for the assessee submitted that this issue has been decided in favour of the assessee passed by ITAT in assessee's own case for assessment year 2014-15 in ITA No. 2434 and 2378/Ahd/2017. The counsel for the assessee invited our attention to page no. 23-25 of the order of ITAT (paras 17 to 17.3). 6. Before adjudicating on the issue, it would be useful to reproduce the observations made by ld. CIT(A) in this regard: "(vii) If the appellant has applied more than the income during the year then the A.O. is directed to allow carry forward of deficit of that year to be set off against future income of the appellant (Reliance placed on the judgment of Hon'ble Gujarat Hi....
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....ion of the Co-ordinate Bench in the case of Gnyan Dham Vapi Charitable Trust Vs. DCIT (Exemptions) in ITA No. 2208/Ahd/2018 dated 19-08-2020 observing as follows: "...8.1 Under s.11 of the Act, income derived from property held under trust wholly for charitable or relates purposes shall not be included in the total income subject to certain conditions. On a combined reading of Section 11(1)(a) and Section 11(2) of the Act, it emerges that the trust is allowed to accumulate 15% of its income without any time limit and balance 85% can be set apart for specified period to five years. In the instant case, the assessee in the assessment year in question as well as in some other assessment years have made spendings in excess of its receipts resulting in certain deficit. Owing to excess spending over receipts, a peculiar situation has arisen in the present case towards the manner of computation of quantum of deficit eligible to be carried forward for set off in subsequent assessment years having regard to statutory permission towards 15% accumulation under s.11(1)(a)/11(1)(b) of the Act without any time limit. 8.2 To delineate on the issue, it may be pertinent to note that in order to....
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....d thus put the assessee in a worser position in the event of accelerated application of receipts for salutary purposes. The action directed by CIT(A) has the effect of deprivation of concession granted and is repugnant to the intended outcome. The Pune Bench of Tribunal in Maharshi Karve Stree Shikshan Samstha Karvenagar vs. ITO 174 ITD 591 (Pune) has also essentially held that relaxations conferred under s. 11(1)(a)/(b) r.w. Section 11(2) of the Act to the extent of 15% of income would not nullify the entitlement of such absolute nature by way of reduction in quantum of deficit. We thus have no hesitations to quash the observations of the first appellate authority towards exclusion of 15% of income for the purposes of determination of quantum of deficit to be carried forward for set off in ensuing years in accordance with law." 17.2. Ld. Senior Counsel further relied upon Pune Bench decision in the case of Maharshi Karve Stree Shikshan Samstha Karvenagar Vs. ITO wherein it has been held as follows: "IT: Exemption under section 11(1)(a) i.e... 15 per cent of income, is absolute exemption and application of section 11(2) does not extend to nullify said absolute exemption IT: W....
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....is allowed for statistical purposes. Ground No. 6 (iii) ld. CIT(A) erred in holding that the assessee is not entitled to claim depreciation on fixed asset created out of such funds 12. Before us, at the outset, the counsel for the assessee fairly conceded that w.e.f. assessment year 2015-16, the law has undergone a change and accordingly depreciation would not be allowed on such assets purchased after 01-04-2015. However, the counsel for the assessee submitted that in the interest of justice, the matter may be set aside to the file of Assessing Officer to check the applicabilitiy of provisions of section 11(6) of the Act to the extent, the assessee has not claimed such depreciation on fixed assets created out of grant given for a specific purpose. 13. Accordingly, in the interest of justice, the matter is being set aside to the file of Assessing Officer to check the eligibility of applicability of section 11(6) of the Act to the assessee's set of facts. 14. In the result, ground no. 6(iii) is set aside to the file of Assessing Officer with the aforesaid directions. Ground No. 7 15. Before us, the counsel for the assessee submitted that ground no. 7 is in sum and substance is ....
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....assessee is entitled to claim the depreciation as 'plant and machinery' as the assessee in promoting public objects which are activities in the nature of trade, commerce or business but without commercial motive. Thus the ground no. 8 raised by the Assessee is hereby allowed." 20. Respectfully following the aforesaid decision passed by ITAT in assessee's own case for A.Y. 2014-15, we hold that assessee is entitled to claim depreciation as plant and machinery since the assessee is promoting public objects which are activities in the nature of trade, commerce or business but without a commercial motive 21. In the result, ground no. 8 of the assessee's appeal is allowed. Ground No. 9 22. Before us, the counsel for the assessee submitted that ground no. 9 of assessee's appeal is identical to ground no. 6(i) in the preceding paragraphs. 23. Accordingly, our observations with respect to ground no. 6(i) also would also apply to ground no. 9 of assessee's appeal. 24. Ground Nos. 9 & 10 to the assessee's appeal are consequential in nature and do not require any specific adjudication. 25. In the result, the appeal of the assessee is partly allowed for statistical purposes. ITA No. 4/....
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....Hon'ble Supreme Court judgment are as follows: ".....D. What kinds of income or receipts may not be characterized as derived from trade, commerce, business or in relation to such activities, for a consideration (i) Statutory corporations, authorities or bodies 176. It would be essential now to deal with certain kinds of receipts which GPU charities, typically statutory housing boards, regulatory authorities and corporations may be entitled to, if mandated to collect or receive. During the course of hearing, learned counsels highlighted that statutory boards, and corporations have to recover the cost of providing essential goods and services in public 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 ass....
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....ill by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and management of the Corporation Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying 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 th....
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....cquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business 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 provisi....
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...., in the case of GPU charities there is a quantified limit of the overall receipts, which is permissible from such commercial activity. In the case of local authorities and corporations covered by Section 10(46) no such activities are seemingly permitted. 189. As was observed in the earlier part of this judgment - while considering whether for the period 01.0.2003 - 31.05.2011, statutory boards, corporations, etc. could have lawfully claimed to be GPU charities, this court has observed that the nature of such corporations is not to generate profit but to make available goods and other 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....
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....ce in relation to such business, trade or commerce; (d)where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposits 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 ....
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....ritable purpose" (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. General test under Section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration ("cess, or fee, or any other consideration"). A.2. However, in the course of achieving the object of general public utility, 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.e.f. 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 ge....
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.... minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of "trade, commerce or business" and as a result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 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 considerationi. 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 caseby- 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.....