AI Drafter 
TaxTMI 
TaxTMI 
2024 (3) TMI 147
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....ll the appeals, the same are disposed of by this common order. 2. The Grounds of Appeal raised by the Revenue in ITA No. 333/Ahd/2023 for A.Y. 2016-17 reads as under: (i) Whether in the facts and in the law the Ld. CIT(A) is right in holding that the proviso to section 2(15) of the Act is not applicable to the case of the assessee, ignoring the fact that the assessee is hit by the proviso to section 2(15) of the I.T. Act-1961 and therefore r.w.s.13(5) of the Act was not eligible for any deduction u/s. 11 & 12 of the Act, especially of the fact that it is rendering services not at cost or nominal markup and carrying out its activity in commercial manner with profit motives ? (ii) Whether in the facts and in the law the Ld.CIT(A) is right in not upholding the addition of Rs. 11,87,34,600/- made by the AO ? (iii) Whether in the facts and in the law the Ld.CIT(A) is right in not upholding the addition of Rs. 36,66,427/-made on account of fixed assets and directing to allow the same u/s. 11(1) of the Act after verification ? 3. Assessment Year 2016-17 is the taken as the lead case. The brief facts of the case is that the assessee is an autonomous body wh....
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....art u/s 11(2) of the Act after reducing revenue expenditure of Rs. 3,85,16,135/- from the gross receipts of Rs. 32,13,14,003/-]. 5. Aggrieved against the additions, the assessee filed an appeal before Commissioner of Income Tax (Appeals) who has taken note of the Supreme Court judgement and direction issued therein in the case of CIT -Vs- AUDA & others in Civil Appeal No 21762 of 2017 called for a remand report from the Assessing Officer "... Further, it was also noticed that for the year under consideration, the total receipt of the assessee is Rs. 32,23,63,370/- whereas the activities of the assessee is Rs. 15,31,32,714/- which is more than 20% of the total receipt of the assessee. Provision of Section 2(15) of the Act "charitable purpose" includes relief of the poor, education, yoga, medical relief. preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:-- Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it inv....
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....e submitted as follows: "...The facts stated by the LAO in the Remand report dated 23.01.2023 are erroneous and prejudicial to the interest of the appellant. We would further like to state that the LAO has not considered the facts stated by the appellant in the reply dated 13.01.2023 against the issue letter dated 06.01.2023 giving the reasons for why the provisions of section 2(15) of the I.T.Act 1961 is not applicable to the appellant and why the receipts of the appellant are on cost to cost basis and the motive of the appellant is not to earn any profit and the activities carried by the assessee are not in the nature of trade, commerce or business. However we are once again producing the facts in the case of your appellant for justifying the points raised by the LAO in the remand report 01. The onus is on the assessee to prove that the receipt/income of the assessee is on cost to cost basis We would like to state that the income/receipt part of the appellant mainly comprises of Income from Fees and Subscriptions which includes Premium Fees, Verification fees, Betterment Charges, Tender Fees, Site Plan Fees, Zone Fees and Interest Income from t....
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....OF GUJARAT for collection of Amenities fees. "CLAUSE VI-A of sub section (1) of Section 23 of the GTPUD Act, 1976: execute works in connection with supply of water, disposal of sewerage and provision of other services and amenities; ((vi-a) to levy and collect such fees for the execution of works referred to in clause (vi) and for provision of other services and amenities as may be prescribed by regulations, 2- Development charges and scrutiny fee-As per clause No. 26 any person who wants to develop his land or any building in development plan area he has to pay development charge and scrutiny fees at the rates approved by Government of Gujarat which is utilized for verification of development permission process and preparation of development plan. We are enclosing herewith the guideline in which the rates are prescribed by the Government of Gujarat for collection of Scrutiny fees. 3- Betterment Charge and Collection of betterment charge as per provision 79 of incremental contribution to be levied by the appropriate authority on each plot included in the Final scheme calculated in proportion to the increment which is estimated and net amount payable by th....
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.... implementation of the same in its jurisdiction. The Authority is constituted not to make any profit but to carry out infrastructure work for development within its jurisdiction. So, the incomes generated through above resources are liability for VUDA and as such they are to be utilized only for the development of infrastructure within the jurisdiction Le, the basic object and motive of the appellant is advancement of general public utility. 02. Why provisions of the section 2(15) shall not be applicable to the assessee. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the 'advancement of any other object of general public 82 utility shall not be a charitable purpose if it involves the carrying on of (a) any activity in the nature of trade, commerce or business; or (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. As per the inserted new proviso to section 2(15) will not apply in respect of the first three ....
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....ith the reason it was made for the good of the general public. With reference to the above context we would like to state the activity carried out by the appellant is in the nature of advancement of general public utility, and it is not in the nature of trade, commerce or business and hence the restriction put on the limit of receipts of the appellant is not applicable in case of your appellant. Conclusion: Based on the above facts we humbly request your good selves not to consider the remand report submitted by the Learned Assessing Officer and to delete the additions made and allow the relief as claimed by the appellant. Should your kind office require any further information or explanation we shall be pleased to submit the same to do so." 7. We have heard rival submissions in detail and carefully considered the Written Submissions filed by both parties and given our thoughtful consideration. Hon'ble Supreme Court in the batch of case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. reported in 449 ITR 1 (SC) which has settled the issue by dismissing the Revenue's appeal vide Para 254(ii) of the judgment as follows: ".....
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....ts. 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 water, distribution of food grains, distribution of medicines, maintenance of roads, parks etc., ought not to be characterized as "commercial receipts". The rationale for such exclusion ....
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.... of housing infrastructure. However, the newly added Section 10(46) is wider in comparison and the activities of any body or authority or board constituted by or under any central or State Act with "the object of regulating or administering any activity for the benefit of the general public", has broader import. In a sense, the newly added Section 10(46), resembles a GPU category charity classified under Section 2(15). The second distinction is that Section 10(20A) did not bar any board, or corporations, etc. from indulging in commercial activities. However, sub-clause (b) of Section 10(46) imposes such a bar, and the concerned body cannot claim tax exemption if it engages in commercial activity. 188. The manner in which GPU charities has been dealt with under the definition clause, i.e., Section 2(15), indicates that even though trading or commercial activity or service in relation to trade, commerce or business appears to be barred - nevertheless the ban is lifted somewhat by the proviso which enables such activities to be carried out if they are intrinsically part of the activity of achieving the object of general public utility. Furthermore, in the case of GPU charitie....
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....rmining whether such statutory bodies, boards, authorities, corporations, autonomous or self governing government sponsored bodies, are GPU category charities: (a) Does the state or central law, or the memorandum of association, constitution, etc. advance any GPU object, such as development of housing, town planning, development of industrial areas, or regulation of any activity in the general public interest, supply of essential goods or services - such as water supply, sewage service, distributing medicines, of food grains (PDS entities), etc.; (b) While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; (c) Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the natur....
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....ly be fulfilled. (v) As a consequence, it is necessary in each case, having regard to the first proviso and seventeenth proviso (the latter introduced in 2012, w.r.e.f 01.04.2009) to Section 10(23C), that the authority considering granting exemption, takes into account the objects of the enactment or instrument concerned, its underlying policy, and the nature of the functions, and activities, of the entity claiming to be a GPU charity. If in the course of its functioning it collects fees, or any consideration that merely cover its expenditure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. 7.2. Further Hon'ble Supreme Court summarised its conclusion as follows: " IV. Summation of conclusions ....
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....rement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2015), has not been breached. Similarly, the insertion of Section 13(5), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions B. Authorities, corporations, or bodies established by statute B.I. The amounts or any money whatsoever charged by a statutory corporation. board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions services' (such as housing. industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is....
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.... the AO, the submissions of the appellant have been quoted above where the above action of the AO has been challenged Since there has been a recent landmark decision on the relevant issue rendered by the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority - Civil Appeal No 21672 of 2017 dated 19.10.2022, which has been relied upon by the appellant the remand report was called for from the AO by NFAC on 14.11.2022 which has been reproduced in Para 5 of the order above Reminders were also issued to the AO since the remand report was not received in its stipulated time. The remand report thus received has been reproduced in Para 5.1 of this order. The said remand report was then forwarded to the appellant for rejoinder and comments. The reply dated 22.02.2023 being rejoinder to the remand has been reproduced in Para 5.2 of this order. 6.3 All the above claims made, issues involved and decisions cited have been perused. Firstly, it is noted that the appellant had relied upon the decision of the Hon'ble ITAT D Bench Ahmedabad dated 05.02.2019- in ITA No 1692/AHD/2017 for AY 2009-10, 2011-12, 2012-13, 2013-14 & 2014-15 in its own case. The same bei....
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....ban Development Authority (AUDA). The activities of the assessee are similar to that of AUDA in Ahmedabad." 6.9 However, the AO has ignored the fact that Hon'ble ITAT's order in the case of AUDA dated 19.01.2016 was quashed by the Hon'ble Gujarat High Court by their judgement date 02.05.2017 in Tax Appeal Number 423 to 425 of 2016 and Civil Application (OJ) - No 211 & 213 of 2016 (2017) 83 Taxmann.com 78 (Gujarat). It is seen that decision of Hon'ble Gujarat High Court was relied upon by the appellant before the AO, as stated on Page 10 of the assessment order, yet the AO has not dealt with this judgement in his orders, though he has himself relied upon the Hon'ble ITAT decision in AUDA case, which was quashed by the Hon'ble High Court. The same is apparently because the impugned issue was then pending in Hon'ble Supreme Court, but now this order of Hon'ble Gujarat High Court has been upheld by Hon'ble Supreme Court. No factual difference between AUDA & VUDA case has been pointed out by the AO in the remand report as quoted above. It is relevant to discuss the decision of Hon'ble Gujarat High Court in the case of AUDA, which has been....
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....d that whatever income is earned from auction / selling of specified numbers of plots is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electricity, road, drainage, water etc. and even the entire control is with State Government and even accounts are also subjected to audit and there is no element of profiteering at all, the activities of the assessee cannot be said to be in the nature of trade, commerce and business and therefore, proviso to Section 2(15) of the Act shall not be applicable so far as assessee is concerned and therefore, the assessee is entitled to exemption under Section 11 of the Income Tax Act. 6.10.3 It is categorically held that proviso to section 2(15) shall not apply in so far as the appellant was concerned and therefore the appellant was found entitled to exemption u/s 11 of the Act. The Hon'ble Court held that collection of fees or cess which are regulatory in nature, the proviso to section 2(15) of the Act shall not be applicable. Thus, the Hon'ble High Court has held that (Para 15.1) having regard t....
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....he Act shall not be applicable so far as assessee- AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the revenue. 6.11. It is seen that in the remand report dated 20.01.2023 the AO has again referred to the proviso to section 2(15) of the Act to state that total receipts from trade, commerce or business/service rendition for the same which exceeded 20% of total receipts in the case of the appellant and reiterated the stand of the AO in the assessment order. However, as stated above, the Hon'ble High Court has clearly held that proviso to section 2(15) of the Act is not applicable in the case of AUDA. The AO has not pointed out any difference in facts of VUDA vis-à-vis AUDA and hence it is clear that provisions of section 2(15) of the IT Act is also not applicable to VUDA. In fact through its rejoinders dated 22.02.2023 (as quoted above), the appellant has further clarified this aspect with various details based on which it is held that no adverse infe....
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....ences in remand proceedings is not called for when no specific instances has been pointed out in assessment order to prove to the contrary. 9. In fact, not only the Hon'ble Supreme Court has dismissed revenue's appeal in AUDA but also that of many other Gujarat Urban Development Authorities viz. Surat, Gandhinagar, Rajkot Development Authorities, etc., all of which are subjected to the same Act of Gujarat State Government and work under the Control and Rules stated therein as has been discussed in detail by the Hon'ble Gujarat High Court. In fact, co-ordinate Bench of this Tribunal in the case of Surat Urban Development Authority reported in (2020) 116 Taxmann.com 242 dated 20.02.2020 has also referred to the decision of the Hon'ble Gujarat High Court in AUDA as well as the decision of Hon'ble ITAT in case of Vadodara Urban Development Authority -Vs- ITO (ITA No 2751/Ahd/2014 dated 28.01.2019) to allow the appeal of SUDA. Thus the assessee is also governed by same Rules/Act and no further distinguishing facts have been highlighted by the AO in the remand proceedings further in the Grounds of Appeal raised before us with specific instances. The Revenue is also....
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.....33,66,427/-by denying the benefit u/s 11 & 12 of the Act. 4. It is therefore prayed that the above addition/disallowance made by the Assessing Officer may please be deleted. 13. In support of the Grounds of Appeal Ld Counsel for the assessee relied upon various case laws that filing of From 10 is only procedural in nature and the assessee cannot be denied the benefit of section 11 for late filing of Form 10. 14. Per contra Ld CIT DR appearing for Revenue brought to attention the relevant portion of the provision prior to amendment by Finance Act, 2015 read as under: (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub- section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely;- (a) such....
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....hich the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms of modes specified in sub-section (5); the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year. 14.2. Thus as per the amended provision, clause (c) determines the time period for filling of statement made in Form no 10 and thus making it a requirement under the Act, which prior to the amendment was part only of Income Tax Rules. The said amendment is effective from 01.04.2016 thereby making it relevant for the Asst Year 2016-17 onwards, i.e. applicable to the present appeals. 14.3. Ld CIT DR also drawn our attention to the Apex Court judgment in the case of PCIT -Vs- M/s. Wipro Ltd. [2022] 140 taxmann.com 223 (SC), on a similar count. The issue in the present appeal is similar to the one discussed in the Wipro judgment i.e. regarding filing of form for claiming benefit, thus the view taken by the Hon....
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....y v. ACIT [2015] 62 taxmann.com 338 (Delhi-Trib.) The issue in the captioned case though was on similar grounds to the present case, ie, delay in filing of Form no. 10 resulting into denial of exemption u/s 11(2) by AO but the findings of the case would not be applicable since the captioned case was of AY 2007-08 i.e. prior to the amendment in Section 11(2) by Finance Act, 2015. 8. DCIT (Exemptions) v Audyogik Shikshan Mandal [2022] 139 taxmann.com 28 (Pune-Trib.) The issue in the captioned case is related to delay in filing of Form no. 10B audit report, provision of which and requirement under such provision is different than that of Form no. 10 and hence is not applicable to the present case. 9. Chandraprabhuji Maharaj Jain v. DCIT, (Exemptions), Chennai [2019] 110 taxmann.com 11 (Madras) The issue in the captioned case though was on similar grounds to the present case, Le, delay in filing of Form no. 10 resulting into denial of exemption u/s 11(2) by AO but the findings of the case would not be applicable since the captioned case was of AY 2008-09 1.e. prior to the amendment in Section 11(2) by Finance Act, 2015. 10. JCIT v. ....
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.... to condone delay beyond 365 days upto 03 years in filing Forms 9A and 10 for AY 201819. 8. For AY 2017-18 also, the petitioner/assessee had filed a similar application seeking condonation of delay in filing Form 10, which was allowed by the Commissioner Income Tax vide order dated 26.12.2019 correctly, laying emphasis that the mandate of Section 119(2)(b) of the Act is to mitigate the genuine hardship of assessee in certain circumstances and authorization to the Commissioners to admit the belated Form 10. In the said order dated 26.12.2019, the Commissioner Income Tax condoned the delay in filing Form 10 (which was electronically filed on 05.03.2019) for AY 2017-18. Similarly for AY 2018-19 also, delay on the part of the petitioner in filing Form 10 was condoned in view of the underlying principle of the above mentioned circulars to liberally condone such delays in order to mitigate hardships of the assessees. 9. As mentioned above, the delay in filing Form 10 in the present case occurred because the amendments went unnoticed by the officials of the petitioner. The assessment year 2016-17 was the first occasion subsequent to those amendments. Therefore, we find n....
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....tion u/s 10B. The AO rejected the withdrawal of exemption under section 10B by holding that assessee did not furnish the necessary declaration in writing before due date of filing return of income, which was an essential requirement for not claiming the benefit of section 10B. The Hon'ble High Court decided the issue in favour of the assessee by holding that the requirement of filing the declaration was mandatory but filing it along with the return of income u/s 139(1) was a directory requirement. The matter was brought by the Revenue before the Hon'ble Supreme Court. The assessee, inter alia, relied on the judgment of the Apex Court in G.M. Knitting Industries (P.) Ltd. (supra). Their Lordships held that the requirement of filing the report in support of deduction u/s 10B was not a directory but a mandatory requirement. It further held that both the conditions of - filing the declaration and filing it before the time limit u/s 139(1) - were mandatory and had to be cumulatively satisfied. Rejecting the reliance on G.M. Knitting Industries (P.) Ltd. (supra), the Hon'ble Supreme Court held that that decision was relevant in the context of deduction provisions and not the ....
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....he case of Wipro Limited held that section 10B of the Act is an "exemption provision" and hence, assessee claiming such exemption has to be "strictly" comply with the exemption provisions. However, notably, the Hon'ble Supreme Court in the case of CIT v. Yokogawa India Ltd 391 ITR 274 (Supreme Court), held that section 10A of the Act is a "deduction provision" and not an "exemption provision". Therefore, apparently there seems to be a difference of opinion to whether section 10A/B provisions qualify as "Exemption" or Deduction" provisions. Therefore, since it is well-settled principle of law that deduction provisions, which have been introduced in the Statute to provide incentive to the assessee, should be construed "liberally", in our considered view, once it is not disputed that the instant set of facts, the assessee claimed the benefit of provisions under section 10AA in the return of income (which in our view is a mandatory/directory requirement), the benefit of section 10AA cannot be denied only on the ground that the assessee could not file Form 56F along with the return of income (being a procedural requirement), especially when Form 56F has been filed by the assessee at....
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.... for claiming exemption u/s. 10AA of the Act. In the case of ITO v. Accentia Technologies 52 taxmann.com 89 (Mum), the Mumbai Tribunal held that deduction under section 10A cannot be denied merely because at time of filing of return, claim had mistakenly been made under section 10B of the Act. The Gujarat High Court in the case of Zenith Processing Mills v CIT 219 ITR 721 (Guj) held that provision of section 80J(6A) to extent it requires furnishing of auditor's report in prescribed form along with return, is directory in nature and not mandatory. Further, assessee can be permitted to produce such report at later stage when question of disallowance arises during course of assessment proceedings. In the instant case, the A.O. has denied s. 10AA benefit on account of an inadvertent error on the part of the assessee in not e- filing Form 56F along-with return of income. We are therefore of the view that there is sufficient compliance if the Form 56F has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the same was already available with the assessee. 6.5 In view of the ....