TaxTMI 
TaxTMI 
2025 (1) TMI 1541
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....s)-4, Lucknow, hereinafter referred to as 'CIT(A)' erred, both in law and on facts, in holding that the appellant cannot be termed as charitable organization within the meaning of Sec. 2(15) of the I.T. Act by virtue of provisions contained in Sec. 58 of Uttar Pradesh Urban Planning & Development Act, 1973. Ld. CIT (A) failed to appreciate that as per statutory provisions, the dissolution of the authority could take place only when the purpose, for which the authority was constituted, has been substantially achieved. The Ld. CIT(A) was not justified to hold that the appellant has been created not by any irrecoverable transfer of assets. Further Ld. CIT(A) was legally unjustified in holding that the objects of the appellant are not charitable in view of the findings of Hon'ble Supreme Court in the case of ACIT Vs Surat Art Silk Cloth Mfrs. Association & CIT Vs Andhra Pradesh State Road Transport Corporation. The examination of objects was not within the domain of Assessing Officer or the Ld. CIT(A) during subsistence of registration u/s 12A. 2. Because the Ld. CIT(A) grossly erred, both in law and on facts in not following the pronouncement of the Hon'ble ju....
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....Authority [(2013) 38 taxmann.com 246 (All.)]. 5. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 8,68,50,000/- being the receipts shown in the 'Tourism Development Grant UP'. Ld. CIT(A) failed to appreciate that the above statutory receipts are in the form of government grants and not against any of the alleged business activities. The Ld. CIT(A) erred in law in holding the above grant as revenue receipts. Further, sustaining disallowance by Ld. CIT(A) is again in utter disregard to judicial pronouncement. 6. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 1,06,11,658/-, being the prior period expenses incurred during the year. The authorities below failed to appreciate the accounting system consistently followed by the appellant relating to payment made during the year in respect of work completed in earlier year. 7. Because the appellant craves leave to alter/ modify grounds before or at the time of hearing of the appeal." ITA No. 519/Lkw/2018, Grounds of appeal (A.Y. 2014-15) 1. Because the Ld Commissioner of Income Tax (Appeals)-4, Lucknow, here....
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....disregard to authoritative judicial pronouncements of Hon'ble High Court in the case of Lucknow Development Authority [(2013) 38 taxmann.com 246 (All. HC)], Moradabad Development Authority [ITA No. 3 of 2017 dt. 03.05.2017] [Lucknow bench, Alld. HC] and Hon'ble ITAT in Moradabad Development Authority [(2018) 89 Taxmann.com 263 (ITAT Delhi)]. 4. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 16,21,362/- being the balance in 'infrastructure development fund account'. Ld. CIT(A) failed to appreciate that the amount in the above statutory fund are specifically received by virtue of Government Order dt. 15.01.1998 and are meant for utilization in the development activities exclusively. Ld CIT(A) further failed to appreciate that the unutilized left over amount was to be utilized in development activities in continuity. The denial of exemption U/s 11 in respect of unutilized fund of 'infrastructure development fund Account', is in utter disregard to various judicial pronouncement including authoritative judicial pronouncement of Hon'ble Allahabad High Court in the case of Lucknow Development Authority [(2013) ....
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.... on facts, in holding that there is violation of Sec. 13(3) of the I.T. Act and consequentially exemption U/s 11 of the I.T. Act cannot be allowed. Ld. CIT(A) failed to appreciate that no part of income or property of the appellant is used directly or indirectly for the benefit of persons specified in Sec. 13(3). The employees of the appellant are not specified persons within the provisions of Sec. 13(3) of the I.T. Act. 4. Because the Ld. CIT(A) erred, both in law and on facts, in disallowing exemption U/s 11 to the appellant, holding its income as taxable business income and thereby sustaining addition of surplus amounting to Rs 13,46,17,446/-. The disallowance of exemption U/s 11 as well as holding the income as taxable business income is again in utter disregard to authoritative judicial pronouncements of Hon'ble High Court in the case of Lucknow Development Authority [(2013) 38 taxmann.com 246 (All. HC)], Moradabad Development Authority [ITA No. 3 of 2017 dt. 03.05.2017] [Lucknow bench, Alld. HC] and Hon'ble ITAT in Moradabad Development Authority [(2018) 89 Taxmann.com 263 (ITAT Delhi)]. 5. Because the Ld. CIT(A) erred, both in law and on facts, in s....
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.... whose objects are the same as that of the appellant Authority: a. Judgement of Hon'ble Allahabad High Court in case of Moradabad Development Authority dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Order of Hon'ble ITAT, Delhi in case of Moradabad Development Authority dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 c. Order of Hon'ble ITAT, Agra in case of Agra Development Authority for AY 2011- 12 in ITA No. 215/Agr/2016 dated 17.05.2021 and d. Order of Hon'ble ITAT, Agra in case of Jhansi Development Authority for AY 2010-11 in ITA No. 256/Agr/2014 dated 13.01.2021 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition against the NIL returned income as made by the appellant was founded on the following undisputed facts (i) the appellant is an authority duly notified as such under the Urban Planning and Development Act, 1973, by the State Government, for attainment of objects of General Public Utility. (ii) the Hon'ble ITAT in its own case, in ITA No. 703/Luc/03, order dated 25.07.2005 has alre....
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.... treating the appellant as Charitable Institution, even though the same has already been adjudged to be so by the Hon'ble Allahabad High Court in its judgement dated 16.09.2013 in appellant own case in ITA No. 4 of 2011 for A.Y. 2006-07 along with ITA No. 31 of 2010 for A.Y. 2004-05. 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by disregarding the following judgements in case of other Development Authorities which were also constituted under the same Act as that of the appellant Authority and whose objects are the same as that of the appellant Authority: a. Judgement of Hon'ble Allahabad High Court in case of Moradabad Development Authority dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Order of Hon'ble ITAT, Delhi in case of Moradabad Development Authority dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 c. Order of Hon'ble ITAT, Agra in case of Agra Development Authority for AY 2011- 12 in ITA No. 215/Agr/2016 dated 17.05.2021 and d. Order of Hon'ble ITAT, Agra in case of Jhansi Development Authority for AY 2010-11 in ITA No. 256/A....
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.... has erred in law and on facts in passing the order without giving adequate opportunity of being heard and without considering the written submission made before him. 3. That the Ld. Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the denial of exemption under section 11 with section 12, 12A and 13 on the grounds that the activities carried on by the appellant were profit making activities not falling under charitable purposes as envisage under section 2(15) of the Income- tax Act. 4. That the Ld. Assessing Officer has erred in law and on facts in disallowing the exemption u/s 11 on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1961. 5. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by not treating the appellant as Charitable Institution, even though the same has already been adjudged to be so by the Hon'ble Allahabad High Court in its judgement dated 16.09.2013 in appellant own case in ITA No. 4 of 2011 for A.Y. 2006-07 along with ITA No. 31 of 2010 for A.Y. 2004-05. 6. That the Ld. Commissioner of Income-tax ....
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....law and on facts in wrongly confirming the addition of 29,40,105/- made by applying the provisions of section 11(6) of Income-tax Act when more than 85% of income was utilized without considering the depreciation as application of funds. 10. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing assessment order which is contrary to the facts and law. 11. The appellant craves leave to add, amend, alter or withdraw any ground of appeal or raise any new ground of appeal during the pendency of appeal." 3. In addition to these appeals, the assessee also filed stay petitions for the assessment years 2012-13, 2014-15 and 2015-16. As the issues involved in all these appeals are common and the stay petitions also arise out of these issues, all the appeals are being taken up for disposal. Since assessment year 2012-13 is the first assessment year, the same is being taken up as the lead case and the common issues would be discussed with reference to the assessment done in assessment year 2012-13. Only unique issues pertaining to other assessment years would be discussed separately. However, our observations with regard to the issues in asse....
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....generated during the so-called charitable purpose period may later be utilized for the purposes of business. Therefore, the transfer was not an irrevocable transfer, which was meant exclusively for charitable purposes. The AO observed that the transfers of assets are revocable and sections 11 and 12 of the Income Tax Act, 1961 would not apply. The ld. AO further observed that for the creation of a valid trust, transfer of assets for charitable purposes should be irrevocable, which condition was not being fulfilled in the case of the Ayodhya-Faizabad Development Authority. The AO also observed that the assessee was neither in the field of education, nor in the field of medical relief of poor and held that, at the most, after seeing the objects and activities carried out by the assessee, it could be considered that the assessee was falling within the scope of, "general public utility" as per section 2(15) of the Income Tax Act, 1961. 5. The ld. AO further observed that the activities of the assessee were in the nature of real estate business and the provisions of the first proviso to section 2(15) of the Income Tax Act, 1961 were applicable to its case. He, therefore, asked the as....
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.... 16.09.2013, in respect of several parties of which the assessee was one, had decided the appeal in favour of the assessee. On the other hand, the Hon'ble Supreme Court had dismissed the SLP of the assessee in the case of Jammu Development Authority. In view of the legal conflict between the two judgments, the ld. AO made a reference to the Additional CIT(Exemptions) Lucknow under section 144A of the Act and directions were sought with regard to the decision to be taken on the issue of allowability of exemption under section 11 and applicability of the first proviso to section 2(15) of the Act in view of this apparent conflict of decisions of the two courts. The ld. Addl CIT (E) issued directions under section 144A in which it was stated as under:- "Going through section 2(15), it is obvious that carrying of any activities for charitable purposes is the back bone for allowability of exemption under section 11. Charitable purpose includes relief of the poor, education, medical relief, preservation of environment and the advancement of any other object of general public utility. At the same time, any trust/institution's business activities having receipts more than Rs. 25 La....
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....d that the objects pursued by the assessee could not be said to be charitable in nature and therefore, the Jammu Development Authority was an authority established with the motive of profit and the activities of such authority were hit by section 2(15) of the Act read with first and second proviso. It, therefore upheld the decision of the ld. CIT, Jammu to cancel the registration of the said authority. 9. The Ld. AO also referred to an earlier order by the ITAT, Amritsar Bench in the case of Jalandhar Development Authority, in which the Hon'ble ITAT had held that a charitable institution provides services for charitable purposes free of cost and not for a gain, but the Jalandhar Development Authority was performing activities similar to big colonizers / developers who were earning a huge profit. The Hon'ble Tribunal had held that the assessee authority had turned into a huge profit-making agency and that even for creating / developing institutions of public importance, the assessee was charging the cost of it from the public at large and from the coffers of the Government. It further observed, that the development of facilities by the authority were merely a means of attracting ....
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....income under the head, 'profits and gains from business and profession'. The net surplus disclosed by the assessee of Rs. 2,24,59,203/- in the income and expenditure account was therefore added to the total income of the assessee and penalty proceedings under section 271(1)(c) were initiated. 11. Moving on further, the ld. AO observed that the assessee had transferred funds to the infrastructure development fund. However, it had not included these receipts in its income for the year. The assessee had transferred the amounts to the infrastructure development fund in its balance-sheet, which according to the ld. AO was against normal accounting principle. Furthermore, since he had already denied the assessee's claim of exemption under section 11, the receipts of the infrastructure development fund of Rs. 92,10,505/-, was treated to be the income of the assessee and was accordingly added back. The ld. AO further observed that during the year, the assessee had received a grant of Rs. 8,68,50,000/- under the head, 'tourism development grant-U.P.'. However, the assessee had not included these receipts in its income for the year, but had directly transferred the amount to the balance-s....
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....matters where SLP was filed /processed/accepted before the Hon'ble Supreme Court on an issue where the Hon'ble High Court had decided a similar issue against the Revenue, and in pursuance of these directions the ld. AO declined to accept the ratio of these judgments quoted by the assessee, on the grounds that the Department had either filed SLPs or had recommended SLPs against these decisions, which were pending for consideration. 14. In his order for the assessment year 2017-18,the ld. AO observed that the assessee had generated income from rent received from guest houses, community centres and convention centres, which were let out for various functions. He held that this was a separate income of the assessee and was a commercial activity to derive the maximum profit from the asset owned by the assessee. It was not an income incidental to the business activity of the assessee, because the assessee had no byelaws and it had submitted that its main activity was developing plots and making flats. The ld. AO also referred to the provisions of sub section 4A of section 11 and pointed out that as per the same, this sub section stated that first of all, the business needed to be inci....
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....1.04.2009. The last such assessment order related to A.Y. 2011-12, wherein the declared nil income was accepted under section 143(3) by the assessment order. It was submitted that in the assessment order under appeal, the ld. AO had not brought on record any evidence relating to change in the activities of the appellant since the grant of registration under section 12A. It was submitted that the ld. AO had been misguided by the direction of the ld. JCIT issued under section 144A allowing the AO, the liberty to apply the judgment of the Hon'ble Supreme Court in the case of Jammu Development Authority and also the directions of the CBDT. It was submitted that the instruction of the Board was only to examine the nature of activities of the assessee, while the judgment of the Hon'ble Supreme Court related to the denial of registration under section 12A. It was further submitted that as the activities of the assessee had already been considered by the Hon'ble ITAT while directing the grant of registration under section 12A, the judgment in Jammu Development Authority was not applicable to the assessee's case. It was submitted that there were a series of judgments, including the binding ....
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....nt Authority had held in para 29 of the said order, that the said fund could not be treated as belonging to the authority and the receipt was not taxable in its hands. In view of this binding judgment, it was pointed out that the capital receipts were not of taxable nature or at worst did not disqualify the assessee for exemption under section 11. The addition was wholly illegal and may therefore, be deleted. With regard to the addition of Rs. 8,68,50,000/- being the grant received from the Tourism Department, Government of India and the U.P. Government, It was submitted that the grants from the Government of India and the U.P. Government were specifically given to develop the city, in order to attract the tourism. Such receipts were not the income of the appellant within the meaning of section 2(24) of the Act, as the institution receiving such grant had to spend the funds on the projects specified in the Government order. It was further submitted, that the assessee had incurred expenditure of Rs. 11,08,84,212/- during the year on the given projects and placing reliance on the decisions such as DCIT vs. Gujarat State Council (2014) 41 taxman.com 449 (Gujarat) and DIT vs. Society f....
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....y, where the jurisdictional High Court had held that section 2(15) of the I.T. Act was inapplicable to the authorities like the assessee authority and where the Courts had held, that other institutions whose objects were similar to that of the assessee, were also entitled to exemption under section 11 of the I.T. Act. The assessee further submitted, with regard to the stand of the ld. AO in basing his order on the dismissal of the SLP in the case of Jammu Development Authority, that the dismissal of SLP in limine could not operate as a confirmation of the reasoning in the decision sought to be appealed against. For this proposition, it placed reliance on the decision of the Hon'ble Supreme Court in Hemlata Gargya vs. CIT (2003) 259 ITR 1 (SC) and the decision of the Hon'ble Supreme Court in Kunhayammed & Ors vs State Of Kerala & Anr (2000) 245 ITR 360 (SC), in which their Lordships had held that an order refusing special leave to appeal did not stand substituted in place of the order under challenge. It was submitted that the mere dismissal of the SLP by the Hon'ble Supreme Court against the judgment of the Hon'ble Jammu & Kashmir High Court in the case of Jammu Development Authori....
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....xable as per the provisions of section 115TD of the Income Tax Act and therefore what would happen on the dissolution of the Ayodhya Development Authority should not be of concern to the Revenue. With regard to the applicability of section 13(1)(c) r.w.s. 13(3) of the Income Tax Act, 1961, it was submitted that the State Government can give directions to the authority by way of Government Order by virtue of section 41 of the U.P.U.P.D.A. 1973. Furthermore, the Members of the Board were not the employees of the Development Authority as they were either appointed by the State Government directly or were ex officio, who belonged to different departments of the State Government. Hence, they were not beneficiaries of the said scheme. Furthermore, even they could not be equated with managers of the assessee authority as they did not have the ultimate power. This was because the Members were appointed by the State Government by virtue of section 4 of the U.P.U.P.D.A. 1973 and as per section 58, the U.P.U.P.D.A. 1973, the State Government was empowered to dissolve the development authority. Furthermore, State Government had the power to call for records of the authority under section 41, a....
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....operties left over to the Government as per the provisions of section 58 of the U.P.U.P.D.A. 1973 would become a part of general Revenue of the State and the State Government was not under any obligation to utilize the same for the purpose for which the authority was set up, the assessee did not fulfill the conditions required for claiming the status of charitable organization as envisaged under the fourth limb of the definition of charitable purposes as contained in section 2(15). The ld. CIT(A) also held that the assessee was engaged in acquiring land, development, constructing buildings on commercial lines just like any commercial developer. He pointed out that the provisions of section 2(15) as amended by w.e.f. 1.04.2009 specifically prescribed that advancement of any other object of general public utility shall not be considered as a charitable activity if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering of any service relating to a trade, commerce or business for access or any other consideration, irrespective of the nature or use of application or redemption of income from such activity. The ld. CIT held ....
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....itled to registration under section 12A. The ld. CIT(A) pointed out that this decision of the Hon'ble Amritsar Bench had been confirmed by the Hon'ble Punjab and Haryana High Court in ITA No. 164 of 2012 dated 12.01.2003 and the SLP against the same had been dismissed by the Hon'ble Supreme Court on 24.07.2014. The ld. CIT(A) also referred to the decision of the ITAT Cochin Bench in the case of Greater Cochin Development Authority vs. JDIT(OSD)(Exemption), Range-4, wherein the ITAT had held that the said development authority had turned into a huge profit making agency and the decision of the ITAT in the case of Kanpur Development Authority in ITA Nos. 332 & 333/Lkw/2013, where the Hon'ble ITAT had held that the activity carried on by the assessee was no different from that carried out by private entrepreneurs on account of offering of plots / space by way of auctioning / tender. He also quoted from portions of the order in the case of Kanpur Development Authority, wherein the Hon'ble Bench had held that the amendment to section 2(15) of the Act had in fact limited the scope of general public utility charities by pointing out, that if the same involved the carrying of any activity ....
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....cause of interest charged by it on delayed payments and it was further observed that it was not as though the same property was being sold cheap to the weaker section of the society and expensive to the more affluent section of society, but the cheaper properties were cheaper on account of their shape, size and location rather than other consideration. With regard to other receipts, the ld. CIT(A) observed that they included nearly 23 heads of receipts for the assessee which included development fees, compounding fees, anurakshan fees, application fees, parking and corner charges etc. The ld. CIT(A) observed that the assessee charged its customers for each and every facility that it provided and was therefore, operating on the lines of a commercial enterprise. With regard to interest received, he submitted that the assessee earned interest from bank deposits and the same was reinvested to generate fresh investment. It had more than Rs. 11.11 Crores of investment in the form of FDRs and savings accounts and was earning interest on the same. This earning of interest was devoid of any charitable purpose and was also not incidental to the nature of activity performed by the assessee. F....
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....opment grant, the ld. CIT(A) rejected the argument of the assessee and stated that the submissions of the assessee did not support why this receipt was not an income and how the Government order may overrule accounting principles and why it was not taxable. He held that the receipt of tourist development grant was in the nature of Revenue receipts and whatever amounts had been incurred as expenditure, may be considered for deduction against receipts and the ld. AO had done it. Since, the receipts were of a revenue nature and taxable, he did not find any infirmity in the order of the ld. AO. 23. With regard to prior period expenses, he pointed out that the assessee had failed to submit relevant details to justify the claims of expenditure incurred therefore, merely on the principle of allowability of prior period expenses as necessary for business, the claim of the assessee could not be entertained. Therefore, he dismissed all these grounds of the assessee and the appeal itself. 24. The ld. CIT(A) dealt with the issue of disallowance on account of violation of section 13(3) of the Act by the assessee in his order for the A.Y. 2015-16. He pointed out that section 13(3) of the A....
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....ases including that of Jammu Development Authorities, the Courts held otherwise. However, Finance Act, 2010 (w.e.f. 1.04.2009) inserted a proviso below section 2(15) of the Act to restrict the scope of definition of charitable purpose if the assessee fell under the last limb of, 'general public utility' and undertook any activity in the nature of trade, commerce or business and received any cess or fee or any other consideration for the same, if the same exceeded a particular amount. That most of the decision of the Hon'ble Courts that held that registration under section 12A ought to be granted and an exemption under section 11 ought to be allowed to the assessee were for years prior to the introduction of this proviso to section 2(15). The ld. CIT(A) also pointed out that subsequently section 10(46) had been inserted into the Act to provide exemption in respect of income of authorities established by the Central Government or the State Government of regulating or administering any activity for the benefit of the general public. The decisions relating to the Greater Noida Authority, Noida and YEIDA relied upon by the assessee actually pertained to approval under section 10(46) of ....
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....f the said act, for the achievements of its objectives and was doing so under deep control and supervision of the state Government. On our directions, she produced copies of these Govt Orders issued under the Act and invited our attention to various Govt orders contained in her paper book. Pointing to order number 4049/9-aa-1-99/16 samiti/1998 dated 20.11.1999, she submitted that the state Government had laid down model guidelines on how properties of the authority should be valued. She pointed out that of the lands controlled by the authority, only 40-45% was saleable area. The rest was used for public facilities. She also invited our attention to Govt order no 3188/aath-1-13-80vividh/2010 dated 5/12/2013, which dealt with housing for EWS and LIG category. Taking us through the same, she pointed out that the authority was obliged to provide for a minimum of 10% of units for EWS and another 10% for LIG category in any housing scheme undertaken by it . If the project was larger than 4 hectares it was to be provided within that project, but even if it was smaller, it had to be provided within 5 kms from the project. She submitted that the costing and pricing of the property sold bey ....
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....ing that the matter stood covered by the judgment of the Court in the case of Ahmedabad Urban Development Authority (supra). Thus, it was submitted that the issue of whether the objects of the assessee authority were charitable, was no longer a matter for debate. It was also submitted that the allegations that the assessee was operating as a commercial entity were refuted from the fact that all the charges levied by the authority were as per the scheme laid down in the U.P.U.P.D.A. 1973 and the Government orders. She also pointed out that the betterment charges were on account of the development work rendered by the authority that enhanced the facilities in a particular locality and it was not aimed at earning profits but recovering costs.With regard to the issue of disallowance on account of alleged violation of section 13(3), the ld. AR submitted that there was in fact no violation and she took us through the Government order to show that the employees of the authority were only one of the many categories that had been afforded these concessions. 28. The ld. AR, then questioned the decision of the ld. CIT(A) to uphold the addition in the case of Infrastructure Development and ....
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....nding precedent to be followed, she pointed out that the same had been followed by the ITAT Lucknow Bench in the cases of Lucknow Development Authority, Awas Vikas Parishad and Meerut Development Authority and also by the Delhi Bench of ITAT in the case of Saharanpur Development Authority. She, therefore, prayed that the judgment of Hon'ble Allahabad High Court be followed and added that reliance could not be placed on the decision of the Hon'ble Delhi Bench in the case of Mussoorie Dehradun Development Authority, because the same did not enjoy exemption under section 11, as it was not registered under section 12A. When asked as to how the lack of exemption affected the issue of diversion / application of income, she pointed out that once registration under section 12A had been granted, the computation was to be done as per section 11 and if some amount was a corpus or part of capital receipt, then the same could not be taken into the income and expenditure account. Furthermore, she submitted that where two or more decisions were there on a subject, the one that was favorable to the assessee ought to be applied as per the ratio laid down by the Hon'ble Supreme Court in the case of ....
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.... tackle the problems of town planning and urban development. The appellant was incorporated vide Notification No. 4472/9 आवास 5-96-99 डीए/78 dated 26.11.1976. The objects of an Authority are defined under section 7 of Uttar Pradesh Urban Development and Planning Act, 1973 (hereinafter referred to as UPUPD Act) which reads as below: The objects of the Authority shall be promote and secure the development of the development area according to plan and for that purpose the Authority shall have the Power to acquire, hold, manage and dispose of land and other property, to carry out building, engineering, mining and other operations, to execute works in connection with the supply of water and electricity to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto: Provided that save as provided in this Act nothing contained in this Act shall be construed as authorising the disregard by the Authority of any law for the time being in force. The State Government to have control ....
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....4912 dated 04.11.1999 Guideline for methodology to be followed while auction of property having GO No. 378 dated 20.06.2001 Charging of Cess having GO No. 410 dated 22.03.2016. Through this GO we wish to establish that there has always been law in place to charge Cess. Through GO No. 899 dated 28.03.2013, para 2.1 it is being established that there is law in place to sell commercial properties through auction. GO No. 23 dated 06.07.2006 that land is provided free of cost for Government Schools Fee charged for vacant land vide GO No. 3192 dated 22.08.1998 Interest rate applicable for property allotted against instalment scheme vide G.O. No. 2504 dated 15.04.2008 Reservation to various sections of society on allotment of residential and commercial property vide GO No. 4982 dated 17.12.1999 Small Shops not sold through auction is being inferred through GO No. 3272 dated 11.08.2010 Rural Development by principle of cross subsidization, GO No. 2157 dated 22.07.2011. The costing guidelines for properties has been defined through Government Order, following which the sale consideration of a property ....
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....t vide order dated 19.10.2022 has laid down some guidelines for revenue to differentiate an ordinary GPU from a GPU charity through para 190 of its order and when it found that the same has been fulfilled by following development authorities, the SLP's filed by revenue were dismissed through abovementioned order: Moradabad Development Authority [SLP (C) No. 7779/2018] Raebareli Development Authority [C.A. No. 6489/2018] Mathura Vrindavan Development Authority [C.A No. 11884/2018] Meerut Development Authority [C.A No. 226/2019] It would be pertinent to mention that all above Development Authorities have been constituted under same Act as the appellant Authority. All are governed by same Government Orders and hence, the appellant's case is fully covered by the Hon'ble Supreme Court order dated 19.10.2022 as it satisfies all the test laid by it in para 190. The same is being established hereunder: Para 190(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 ....
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....cross subsidization for overall upliftment of stand of living of general public. Due to this provision are made for EWS & LIG plots/ houses in every area it develops and such properties can only be allotted to low-income group having a CAP set up for its pricing disrespect of cost involved. 190(iv) The determinative tests to consider when determining whether such statutory bodies, boards, authorities, corporations, autonomous or self-governing government sponsored bodies, are GPU category charities: 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.; The appellant is constituted by State Government law (i.e., U.P. Urban & Planning Development Act) for development of area and its town planning. 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 te....
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.... of property i.e. pricing has to be done as per Government Order in this regard. There are various Government Orders which entails Authority to collect fee, cess and interest. When an area is developed, only 40% to 50% of it is saleable area which includes 5% for commercial properties and rest is for residential properties, schools, hospital etc. Out of the residential area further there is allocation of area of 10%-10% for EWS & LIG housing. Apart from this socially backward society is given reservation of about 50% in allotment of houses and commercial units. Apart from this interest, fee and cess is charged in accordance with Government orders issued from time to time. There is no intent of profit making and thus, such fee, interest and cess collected by the Authority should not be construed as "fee, cess or other consideration" for engaging in activities in the nature of trade, commerce, or business 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;....
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....has been introduced for SC/ ST and Other Backward classes for allotment of residential and commercial units. Such objectives are being achieved by State Government through Authority as every Scheme that is floated have provision for EWS & LIG houses, shops for barber, vegetable vendor etc. Between 50% to 60% of area of the scheme is left for open space and roads with proper facilities of sanitation, drainage and water supply. Apart from this villages in nearby vicinity are also developed. The pricing is fixed as per the Government Order with separate pricing for EWS and LIG houses who have to pay a fixed consideration despite cost incurred be more than the same. Apart from this, in every scheme certain percentage is reserved for socially backward groups in our society in order to provide equal opportunity for overall upliftment of standard of living. The surplus, if any generated in hands of Authority cannot be distributed to even State Government before dissolution and has to be spent only for the administration of the Act through which it is enacted by virtue of law laid in UPUPD Act. As long as the concerned statutory body, corporation, authority, etc. while actually fu....
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....ention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected" The legislatures inserted proviso to target those nongenuine NGOs which carried on activities in the nature of trade or business under the grab of charity, however, the Development Authorities constituted by State Government to provide better standard of living through better facilities and amenities, started facing denial of exemption u/s 11 of Income-tax Act as their activities were considered to be commercial in nature. Many such cases travelled up to Hon'ble Apex Court which were decided collectively vide judgement dated 19.10.2022 making Ahmedabad Urban Development Authority its lead case. It would be pertinent to bring your honours kind attention to the fact that Moradabad Development Authority case for AY 2009-10 was also before Hon'ble Apex Court and SLP filed by revenue against the order of Allahabad High Court was dismissed through which it can be concluded that the Hon'ble Supreme Court has held that all the test laid by it were adhered by Moradabad Development Authority. Further, from combined rea....
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....CIT (Exemption) v. Ahmedabad Urban Development Authority [2022] 144 taxmann.com 78/[2023] 290 Taxman 137/[2022] 449 ITR 389/2022 SCC Online SC 1461. The special leave petition is accordingly dismissed. 2. All pending applications are disposed of." The Hon'ble Gujrat High Court while dismissing revenue's appeal in the case of CIT(Ex) v. Gandhinagar Urban Development Authority for AY 2015-16 reported in [2022] 137 taxmann.com 504 (Gujarat) had held as under: "4. The substantial questions of law raised are no longer res integra in view of the decision of this Court in the case of Ahmedabad Urban Development Authority v. Asstt. CIT(Exemption) [2017] 83 taxmann.com 78/396 ITR 323 (Gujarat). In view of the aforesaid, present Appeal fails and is hereby dismissed." Therefore, if the intention of Hon'ble Supreme Court was the same as put forward by the Ld. CIT(DR), the case of Gandhinagar Urban Development Authority for AY 2015-16 should have been remanded back to the file of Assessing Officer to test whether Gandhinagar Urban Development Authority fulfils the test laid by it for AY 2015-16. The Hon'ble Supreme Court in the case of CIT(E....
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.... Urban Development Authority [2022] 143 taxmann.com 278 (SC)/[2023] 291 Taxman 11 (SC) held that amounts or any money whatsoever charged by statutory corporations, boards, authorities, commissions, etc. (by whatsoever names called) in housing development, town planning, industrial development sectors may resemble trade, commercial, or business activities, however since their objects were essential for advancement of public purposes/functions, such receipts were prima-facie to be excluded from mischief of business or commercial receipts - Whether thus, following aforesaid view, assessee would be eligible to claim exemption under section 11 - Held, yes [Paras 7 and 8] [In favour of assessee] It would be pertinent to mention that Jaipur Development Authority was not one of the appellant or respondents in the case of AUDA before Hon'ble Apex Court. It is further submitted that Moradabad Development Authority was also incorporated under same Act as appellant Authority and for this reason their objects are same. Since the objects set out by the Act has not changed and it is still under full control of State Government as before and from planning to pricing to disposal is set on ....
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....es/ functions." In addition to above, reliance is placed on the order of Hon'ble ITAT, Lucknow dated 24.01.2022 in the case of Lucknow Development Authority which was also enacted under UPUPD Act and all the Government Orders applicable upon it are also applicable upon us. Also, the Ld. Assessing Officer has allowed exemption u/s 11 of Income-tax Act for AY 2022-23 vide order dated 22.03.2024 after issuing a show cause notice with respect to entailing legal issue emerging from earlier years assessment orders. Non-applicability of 13(3) of Income-tax Act The appellant Authority vide GO No. 4049/9 -आ 16/99 -1-समत /1998 dated 20.11.1999 of the State Government is liable to grant discount of 10% on the current value to the property once in the lifetime of employee/ officers on the payroll of a Development Authority constituted under U.P.U.D. Act, 1973. The State Government can give directions to the authority by way of G.O. by virtue of section 41 of the U.P.U.D. Act, 1973. Further, the members of the board are not employees of the Development Authority. They are either appointed by State Government directly or are ex-officio, who belo....
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.... in India only by giving relief to the poor, education, medical relief and advancement of any other object of general public utility not involving the carrying on of any activity for profit - Assessee claimed exemption in respect of its income on ground that the same had been applied exclusively for charitable purposes enumerated in the deed - It was found that 50 per cent of income was spent on employees of TISCO or their relations for charitable purposes - They got this benefit as ordinary members of public and not in capacity of employees - ITO rejected claim on ground that income was applied partly for charitable purpose and partly for non-charitable purpose - Tribunal held that trust was charitable trust and its income was exempt under section 11(1)(a) - Whether the purpose for which the trust had been created was a charitable purpose - Held, yes - Whether employees of author of trust fall within specified category of persons referred to in section 13(3) - Held, no - Whether application of part of income of trust for benefit of employees of TISCO and their relatives could disentitle trust from claiming exemption under section 11(1)(a) - Held, no Further, even the memb....
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....se law of Maruti Centre for Excellence, the assessee was rendering training to its members who, in turn were giving donations to the assessee exceeding an amount of Rs. 50,000/- therefore, those persons were the persons listed in sub-clause (b) of Section 13(3) and that is why that case law was decided in favour of the Revenue whereas in the present case, it is undisputed fact that the assessee was allowing discount to its employees, therefore, this case law is not applicable. As regards the applicability of case law of Noida Entrepreneurs Association, we find that in that case a CBI inquiry had been conducted and there were gross violation of funds of the assessee which is not in the present case. Therefore, in view of the above, we hold that the assessee had not violated the provisions of section 13(3) of the Act." The aforesaid observation and finding given in the case of Lucknow Development Authority is squarely applicable in the case of the appellant Authority also as both are governed by same Statute. In view of above stated facts that the appellant was incorporated under U.P. State Government Statute, all its members are either appointed by State Government....
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....appellant as exempt u/s 11 of Income-tax Act vide scrutiny assessment u/s 143(3) for AY 2022-23 and hence, placing further reliance on judgement of Hon'ble Apex Court in the case of Radhasoami Satsang wherein their lordships held that once an issue is decided it should not be reopened for a contrary view and in Vegetable Products Ltd. (1973) 88 ITR 192 (SC) it was held that when there are two possible views, the most favourable view should be taken for the assessee and thus, it is most respectfully prayed that the activities of the appellant not be treated in nature of trade, commerce and business and exemption claimed in the ITR u/s 11 of Income-tax Act may kindly be granted and consequential additions made by Ld. Assessing Officer and upheld by Ld. Commissioner of Income-tax (Appeals), may kindly be deleted. Infrastructure Development Fund So far as the addition on account of money transferred in Infrastructure Fund and not credited in I & E account is concerned, it is submitted that Infrastructure Development Reserve Fund is maintained in terms of G.O. Note No. 152/9-A-1-1998 dated 15.01.1998 of Government of Uttar Pradesh, Awas Anubhag-I. Through said governme....
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....nsideration assessee had to pay annual overriding charges to wife of transferee on basis of net profits earned by assessee - Overriding charges paid as per sale deed by assessee during relevant assessment year were disallowed by ITO on ground that it was neither allowable as overriding charge nor admissible as revenue expenditure - Whether since payment of amount as overriding charges was an integral part of sale deed by which going concern was transferred to assessee and obligation to pay said amount was attached to very source of income, payment of overriding charges was diversion of income and, hence, deductible from income of assessee - Held, yes As stated above through Government Order dated 15.01.1988 the State Government has directed to earmark certain percentage of some receipts in a separate bank account and for the management and expending of the said receipts a separate committee is formulated with direction that the funds so created shall be expended only as per direction of such Committee and the State Government, leaving no power with the Appellant and since due to this Government Order before the actual receipt/ accrual of such income a legal obligation has ....
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....led in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 for the relevant assessment year. From the record, it also appears that the "Authority" had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committee having constituted by the State Government under the said notification and the same could not be treated to be belonging to the "Authority" or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility. Moreover, in the instant case, the Assessing Officer has not given any defect in computation of income as per Section 11 as submitted in Form-10B, but observed that the activities of the assessee are not charitable. The activities of the assessees are genuine. So, then it is so, then we find no reason to interfere with impugned orders passed by the Tribu....
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....me is diverted before it reaches the assessee, it cannot be claimed as deduction but where the income is applied to discharge an obligation after such income reaches to the assessee then it can be claimed as deduction. The true test laid by the Supreme Court is satisfied in our case as the above referred Government Order uses word " नणय" i.e., decision to put aside certain receipts which though will be kept in a bank account in name of Authority but a separate account and power of expending shall vest with Committee constituted by State Government and through Government Orders from time to time. Thus, even before the income specified in the said GO accrues, the same has been diverted to be kept in a separate bank account which is governed by High Power Committee and Authority has no power to claim any expense than what is asked to be incurred through such fund by such committee and State Government. Therefore, respectively following the judgement of Hon'ble Allahabad High Court in the case of appellant and orders of Hon'ble ITAT, Delhi in case of Saharanpur Development Authority and Meerut Development Authority and order of Hon'ble ITAT, Lucknow ....
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....tructure Development Reserve Fund and Tourism Grant as Income of the appellant and by allowing the payment made for expenses as application of fund relatable to earlier years booked under Prior Period expense. 29. In conclusion, the ld. AR placed reliance on two more judgments i.e. that of the ITAT Amritsar Bench in the case of Jalandhar Development Authority vs. DCIT in ITA Nos. 377 to 379/Asr/2023 where the external development charges collected by that assessee on the directions of the State Government collected and spent as per the provisions of the Punjab Apartment and Property Regulation Act, 1995 had been held to be only in the custody of the Urban Development Authority and accordingly, the additions made by the ld. AO by treating such funds as assessable in the hands of that assessee had been deleted. The ld. AR also placed reliance on the judgment of the Hon'ble Chandigarh Bench of the Tribunal in the case of Improvement Trust Sungrur vs. ACIT (Exemption), Circle, Chandigarh in ITA No. 273/CHD/2020 where the Hon'ble Bench had held that neither the second proviso to section 2(15) or section 13(8) were applicable to the assessee's case and therefore, the aggregate receipt....
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....evi and Ors in 1996 Supp. (5) S.C.R. 32, to point out that the decision of a Court could only be ascertained from the questions raised before it and answered by the Court, after considering arguments and it was not every comment of the Court that was to be regarded as the decision of the Court, but only the order with regard to the issues that were before the Hon'ble Court. The ld. CIT DR therefore, submitted that there was no order of the Hon'ble Allahabad High Court on the issue of nature of and title to the Infrastructure Development and Reserve Fund (IDRF). On the contrary, he pointed out that in the case of Mussoorie Dehradun Development Authority, the specific issue as to the nature of and title to the Infrastructure Development and Reserve Fund (IDRF) had been considered by the Delhi Bench of the ITAT and while doing so, the Bench had considered the provisions of U.P.U.P.D.A. 1973. He also questioned the contention of the ld. AR, that the Government O.M. diverted the title to the fund to the State Government, by pointing out that the O.M. only said that a portion of the funds should be transferred to Infrastructure Development and Reserve Fund (IDRF), which continued to rema....
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....ction with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expenditure for purpose of such development and for purpose incidental thereto." The Assessing Officer further, found that the activities of the Authority was in the nature of trade/commerce/ business and the aggregate value of receipts from such activity were in excess of the limit prescribed under the first proviso to Section 2(15) of the Income Tax Act, 1961 and as the Authority was not in the field of education or in field of medical relief etc. but was within the scope of general public utility proviso to section 2(15) of the Act was applicable in this case. The assessee submitted before the Assessing Officer that its activities were of charitable nature and therefore, first proviso to section 2(15) of the Act was not applicable. The Assessing Officer referred to the decision of Hon'ble ITAT (dated 14.06.2012) in case of M/s Jammu Development Authority upholding the order of the Ld. CIT, Jammu, who had withdrawn the registration u/s 12AA of the Act, relying on the decision in case of Jaland....
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....ntral 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. Yes (b) While carrying on of such activities to achieve such objects (which are to be discerned from the object 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. The activity of GPU are being carried on as business and trade in the purchase and sale of properties mostly land and also by constructing residential and commercial properties and selling them. (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 nature....
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.... 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 concerned government, etc As discussed above, the land sold by the Appellant Development Authority is not on nominal markup but on a substantial markup on commercial basis. (f) As long as the concerned statutory body, corporation, authority, etc. while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit (20% as mandated by the second proviso to Section 2(15)) the concerned statutory or government organization's can be characterized as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10(23C) and by Section 11 have to necessarily be fulfilled. Issue of nominal/substantial markup v....
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.... The Hon'ble Supreme Court clearly directs the Assessing Officer to apply their minds and scrutinize all records to determine the amount charged over the cost and a nominal mark up. In view of the above direction, the Assessing Officer is duty bound to undertake this exercise for each projects and the properties sold for each assessment year. Therefore, I humbly pray that the matter may be restored to the file of the Assessing Officer to complete the exercise and find out the amount to be charged as business income denying the exemption u/s 11 or 12 of the Income Tax. Further, the Hon'ble Supreme Court in Clause H under the heading "Application of Interpretation" (Page- 146 of the order) (Page No. 197 of the Paper Book filed on 31st August 2023) has also directed as under, "H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessee (whether statutory or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The asse....
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....see if certain transactions for benefit of certain persons is carried out. Section 13(3) of the Act demands that if any part of the income or property of the trust is used or applied directly or indirectly for the benefit of specified persons as per section 13(3), then income of the trust will not be exempt u/s 11 of the Act. The appellant is providing discount in the price of the property to its officers and officials alike. A perusal of the scheme documents of the appellant, shows that the appellant is allowing a reservation of 2% in the allotment of the properties sold by it. Further the registration amount is also reduced to half in case of all reserved categories which also includes its own employees. The provision of section 13 of the Act will be applicable on the appellant. It can be seen that provisions of section 13 of the Act is clearly violated. It is pertinent to note that how an organization which is claiming to be formed for the purpose of charitable activity for the masses may take advantage which is not (available to the public at large. How taking such huge benefit of the funds may not hamper the purpose for which the appellant is found, as claime....
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.... applicable to fact of case and, consequently, assessee was not entitled for exemption under section 11. Appellant has violated section 13(3) of IT Act by providing reservation of 2% and a discount of 10% for the employees of the appellant in respect of allotment of residential and commercial properties. Point No. 3 Further, it is submitted that as per Uttar Pradesh Urban Planning and development Act, 1973 section 58 on dissolution of appellant all properties and fund will vest in the state government and there is complete freedom and no restriction as to how the same are to be utilized by the State Government. Therefore, the assessee is not irrevocable Trust. It shows that on dissolution of M/s Ayodhya Faizabad Development Authority all the properties, fund and dues which are vested in, or realizable by, the Authority shall vest in, or be realizable by, the State Government and it is discretion of the State Government to apply it for any purpose it deems fit. The funds generated during the so-called charitable purpose period may be utilized for the purpose of business. Therefore, it cannot be said irrevocable transfer which means exclusively for charitab....
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....at the receipt were meant for expenditure on development activities on the recommendation of and resolution passed by independent committee in which the appellant was a member. Reliance was placed on the observation of Hon'ble Allahabad High Court in the case of LDA which is reproduced as under:- "From the record, it also appears that the "Authority" had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committed having constituted by the State Government under the said notification and the same could not be treated to be belonging to the Authority" or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility" I have considered the submissions of the appellant as well as the basis for addition made by the A.O. The appellant has admitted that this fund has not been routed through income and expenditure account and has stated that the surplus should not have been added to the income as the appellant does not have any right etc. of its own ....
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....n against the receipts and AO has done it. The receipts is certainly of a revenue nature and taxable one and I do not find any infirmity in the order of the AO. The Hon'ble ITAT, Delhi Bench has decided the issue of receipt of income of Infrastructure Development Fund in the case of Mussoorie Dehradun Development Authority Vs Additional Commissioner of Income-tax, Range- 2, Dehradun[2012] 22taxmann.com 93 (Delhi) and held the same in favour of Revenue as under, ".....................There is a difference between amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be part of the income of the assessee. If the obligation income is diverted before it reaches the assessee, it cannot be claimed as deduction but where the income is applied to discharge an obligation after such income reaches to the assessee then it can be claimed as a deduction. In other words, the mere fact that the assessee has an obligation to apply a certain amounts out of its income for a particular purpose cannot make it a case of diversion of income by overriding title. [Para 19] On a conjoint reading of this m....
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....te authority in assessment year 2007-08 has rightly observed that arguments of the assessee demonstrating the 'infrastructure funds' as a separate entity, independent of assessee is a fiction. There is nothing in the memorandum to this effect. It only talks of a designated bank account in which a fixed portion of assessee's receipts would be deposited and out of which expenses would be incurred with the approval of an Empowered Committee. All these receipts also form part of the normal receipts of the assessee. It is further found that expenses incurred by the assessee out of this fund has already been allowed by the Assessing Officer. The Commissioner (Appeals) further took cognizance of the Empowered Committee referred in the memorandum as well as in the Act and observed that such committee is not alien to the assessee. The role of the committee is of regulatory in nature which only acts in furtherance of fulfilment of assessee's objects. The first appellate authority also observed that at the time of hearing a query was raised to the assessee regarding demonstration of material exhibiting the establishment of independent identity of so called infrastructure funds....
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....ty has been achieved, and there is no need for continuance of such authority, then it may pass the order of dissolution of the same. In that event, the income, assets, liabilities of the authority will vest with the State Government, and not otherwise. Thus, it is apparent from the record that the Supreme Court has already dealt with this matter, and in deference to the observations made by the Supreme Court in the case of Adityapur Industrial Area Development Authority v. Union of India [2006] 153 Taxman 107/283 ITR 97, it is concluded that the substantial questions that (i) whether 'State' would include the statutory authorities particularly those which have been constituted exclusively for effective discharge of one of the State obligations and (ii) collection of levies in the nature of fees, charges, tax etc. imposed by the State through an enactment, namely U.P. Urban Planning and Development Act, 1973, by the statutory authorities can be said to be the income of such authority to be taxed under the Act are already covered, and there is no need to further agitate with the issue. [Para 14]" It is clear from the above decisions that the receipt of income under t....
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....n the issue of disallowance of depreciation u/s 11(6) of the I. T. Act, 1961 in AY 2017-18 & 2018-19 The AO has discussed the issue in the AY 2017-18 as under, "As per Income and Expenditure account, the assessee has claimed depreciation of Rs. 31,53,656/-. As per provision of Sect 11(6) of the Income- tax Act, 1961 depreciation is not provided as the application has been claimed while purchasing the assets. Accordingly application claimed of Rs. 31,53,656/- as depreciation being disallowed." The Ld. CIT(A) had decided the issue as under, "The second ground raised is against the disallowance of depreciation by the Assessing Officer. It is pertinent to mention that Finance Act, 2014 has inserted section 11(6) of the I.T. Act w.e.f. 01.04.2015, whereby claim of depreciation is not allowable to an assessee claiming exemption u/s 11 of the I.T. Act. The appellant is aggrieved that in addition to denial of exemption u/s 11 of the I.T. Act, the Assessing Officer has also disallowed depreciation claimed. 5.12 Hypothetically, as exemption u/s 11 has been disallowed, and the income has been taxed as income from Business & Profession, as per comme....
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....the amounts paid as income tax from grants of subsequent years, but the circular issued by the State Government regulating the business / transaction between the Government and its corporation could not have any effect on the taxability of the interest income which is deemed to be income from other sources in the hands of the assessee. The ld. CIT DR submitted that the said judgment could therefore not be a proper precedent to determine the question before the Tribunal in this present matter. With regard to the decision of the Chandigarh Bench of the Tribunal in Improvement Trust Sungrur in ITA No. 273/CHD/2020, the ld. CIT DR submitted that in the said order, the ITAT had quoted from the case of Ahmedabad Urban Development Authority in para 83 of its order and that said paragraph itself recorded the fact that the conclusions arrived at in that judgment did not preclude the authorities from scrutinizing the accounts of the assessee's from year to year to determine whether the assessee's were indulging in activities that amounted to, 'Trade Commerce or Business and if so whether the threshold limit as laid down in proviso to section 2(15) had been breached. Thus, the said judgment d....
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....th in promoting public objects and also in the course of pursuing their objects, be involved or engaged in activities in the nature of trade, commerce or business but the determinative tests to consider whether such bodies were GPU category charities was i. whether the State or Central law or memorandum of association, Constitution advanced any GPU object (which were illustrated 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-water supply, sewage service, distributing medicines, food grains etc)., ii. while carrying on of such activities to achieve such objects, the purpose for which such public GPU charity is set up - whether it is for furthering the development of a charitable object or for carrying on trade, business or commerce in relation to such trade etc, Thus, the first issue raised by the ld. Assessing Officer and concurred with by the ld. CIT(A) viz that the activities of the appellate authority carried on as per its objects as laid down in section 7 of U.P.U.P.D.A., 1973 were not charitable activities, do not hold any water after this decision of ....
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....he Act, 1961, the assessee is not entitled for deduction. Many of these issues have been addressed by the Hon'ble Supreme Court in the case of ACIT (Exemption) vs. Ahmedabad Urban Development Authority (supra). In paragraph 140 of its order, the Hon'ble Supreme Court quoted from its earlier order in the case of New Delhi Municipal Corporation vs. State of Punjab (1979) 7 SCC 339, wherein the Hon'ble Court had held that unless an activity in the nature of trade and business is carried out with a profit motive, it would not be a trade or business contemplated by Clause ii of Article 289. By way of example, it had been highlighted that mere sale of Government properties, movable or immovable or granting of leases and licenses in respect of its properties, does not amount to carry on trade or business. Only where a trade or business is carried out with a profit motive - or any property is used or occupied for the purpose of carrying out such trade or business that the proviso or for that matter Clause ii of Article 289 would be attracted. From the said judgment, the Hon'ble Supreme Court observed in AUDA (supra), that the crucial and determinative element in the venture, is whether the....
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.... activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce. It further held that where the controlling instrument, particularly a statute, imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on predetermined statutory basis, or based on a formula regulated by law, or rules having the force of law, per se, the recovery of such charges, fees, 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 services in relation thereto. The Hon'ble Court further held that it merited examination to see whether 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 permissibly garnered, are there limits within which the plot rates or costs are to be worked out, whether the function in which the body is engaged in normally something a Government or State is expected to engage in, having regard to the provisions of the Constitution and the enacted laws and the observations of the....
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....thereto. The Act was enacted to tackle the problems of town planning and urban development resolutely in the developing areas of Uttar Pradesh. It recognizes that existing local bodies and authorities were not able to cope with the problems to the desired extent and hence the need was felt to create an authority in developing areas on the patter of Delhi Development Authority. Thus, it becomes clear from the Preamble itself that the predominant object and purpose for the creation of the Ayodhya-Faizabad Development Authority, is to tackle the problem of town planning and urban development, to have a planned and integrated development of the town within the development area, according to a plan and not otherwise. The purpose was therefore, to have a planned development and not profit making as its core objective. It is provided in section 4 of the 1973 under the U.P.U.P.D.A., 1973, that the authority shall be a body corporate having a perpetual succession with the power to, 'acquire, hold and dispose of property both movable and immovable. Thus, the acquisition and sale of property by the authority are well within its share of activity as regulated by the Act. Section 4 of the U.P.U....
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....Section 10 provides for the approval of the master plan and general development plans by the State Government. Under section 15 of the Act provides that the authority is vested with powers to levy fees, for granting permission to any person or body to carry out development of land, once the area is declared as the development area falling within the jurisdiction of the development authority. It is vested with the power to levy development fees, mutation charges, staking fees and water fees in such manner at such rates as may be prescribed. Section 16 of the Act empowers the authority to dispose of the land acquired by the State Government under the Land Acquisition Act for achieving the objects of planned and regulated development of the development area falling within its jurisdiction. Section 20(2) of the Act provides that the funds of the authority shall be meeting the expenses incurred by the authority in the administration of the U.P.U.P.D.A., 1973 and for no other purpose. Section 22 of the Act provides that the accounts of the authority shall be subject to audit annually by the examiner local funds accounts however, State Government may also entrust the audit to the Accounta....
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....the funds of the authority may not be utilized for any purpose other than the expenses incurred by the authority in the administration of the U.P.U.P.D.A., 1973. Furthermore, as per section 58 of the Act, upon dissolution of the authority, such funds as are left over with the authority would be transferred to the State Government for the specific purpose of carrying out development which has not been fully carried out by the Authority. Thus, the authority seems to satisfy the test laid down by the Hon'ble Supreme Court in AUDA, that it is a general public utility charity and there is no merit in the observation of the ld. Assessing Officer or the ld. CIT(A) that the sale and purchase of land renders it a commercial organization, because the same are seen to be done for furtherance of its objectives of ensuring planned development of its development area and neither the ld. Assessing Officer nor the ld. CIT(A) have brought on record any facts that would suggest that these sales and purchases take place with a huge markup or at rates other than what have been prescribed under the UPUPDA 1973 or the Govt Orders issued under that Act, that may render it ineligible for being regarded as....
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....ablishments amounts to maximization of profits converting the said receipts into commercial receipts, has been addressed by the Hon'ble Varanasi Circuit Bench in the case of M/s Varanasi Development Authority vs. ACIT, Circle-3, Varanasi in ITA Nos. 264, 265, 266 & 267/Alld/2017. The Hon'ble Tribunal has pointed out that the process of allocation by State or (State instrumentalities) of natural resources through the process of public auction brings in transparency and efficiency in the entire allocation process and is considered to be the most efficient and transparent process for allocation of natural resources. The process of allocation of natural resources leads to an efficient and transparent method for price discovery of the natural resources being allocated by the State, so that there is no allegation of bias and malafide, and chances of manipulation and distribution of resources at throw away prices is avoided. The Hon'ble circuit Bench, Varanasi drew reference to the decision of the Hon'ble Supreme Court in the 2G Telecom case and the subsequent Presidential reference - special reference No. 1 of 2012 under article 143(1) of the Constitution of India (2012) 9 SCR 31111. Acc....
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....it Bench concluded that there was a quid pro quo and only where the value of the property had been benefited by some development undertaken by the authority was a betterment charge levied. The Circuit Bench, Varanasi also held that to carry out the administration of vast and onerous responsibilities cast upon the authority by virtue of 1973 State Act to have planned development of the development area, and to provide various amenities, the authority has to raise funds from various sources to fulfill its responsibilities and to make itself self-sustainable and recovery of such betterment charges would not render the authority to implicate commercial enterprise. Most importantly, the Varanasi Circuit Bench pointed out that there are cost associated with implementation of any particular development scheme which is to be incurred by the authority, and if the said costs are recouped from the property owners of that area, it could not make the authority a commercial enterprise existing for some profits, even some surplus is generated on that count, as section 20(ii) of the 1973 State Act mandates that the authority was bound to apply its funds towards meeting the expenses incurred by the....
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....ilized by the Authority towards the administration of the U.P.U.P.D.A.1973 as per the provisions of section 20(2) and for no other purpose. Therefore, the denial of exemption on such grounds is held to be unwarranted. 40. The ld. Assessing Officer and the ld. CIT(A) have also held as one of the justifications for denying the benefit of exemption relief to the authority, their belief that the authority was not complying with the test laid down by the Hon'ble Supreme Court in the case of CIT vs. Andhra Pradesh State Road Transport Corporation reported in (1986) 159 ITR 1 (SC), in view of the provisions of section 58 of the U.P.U.P.D.A., 1973 which held that upon dissolution of the authority, the funds of the authority of the authority would vest to the State Government and the State Government was free to apply it in any manner that it chose. However, a plain reading of section 58 does not bear out this belief of the ld. Assessing Officer and ld. CIT(A) for the reason that they have committed to consider the provisions of sub section (d) of section 58 which state the purposes for which the properties, funds, dues, liabilities, lands etc., vested in, realizable, enforceable against....
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....as been created wholly for charitable purposes, when subsequently it is found that its income either ensures or is used or applied directly or indirectly for the benefit of any person specified under sub-section (3) of section 13, then such trust becomes disentitled to claim any exemption under section 11. But the list of such persons as contained under section 13(3) does not include the employees of the author of the trust. The employees of the author of the trust do not fall within the specified categories of persons referred to in section 13(3). Even section 13(3)(d), which includes any relative of the author, can have no application in the case of the employees of the author because 'relative' means a person connected by birth or marriage with another person. The person having any other relationship pursuant to a contract like that of employer and employee cannot be said to be a relative. Therefore, the application of part of the income of the trust for the benefit of the employees of TISCO and their relatives could not disentitle the trust from claiming exemption, under section 11(1)(a)." The Hon'ble Lucknow Bench, thereafter, distinguished the case laws relied upon by....
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....s, Scheduled Tribes, Other Backward Classes, MPs, MLAs, Freedom Fighter, Government Employees, Defense Services Employees above 50 years of age, handicapped persons, ex-serviceman and their dependents, employees of U.P. Housing Board, Water Board, Municipal Corporation etc,. Therefore, the said Government Order must be viewed as a social welfare measure for a broad category of citizens and not as an order to confer benefit on the employees of the authority in violation of the provisions of section 13(3) of the Act. Furthermore, the said Government Order, in fact, shows that the process of allotment and pricing of land to be based on social rather than commercial consideration, which would further buttress the argument that the objective of such sale is not the maximization of profit. Hence, we are not able to agree with the ld. CIT(A) or the ld. Assessing Officer that the exemption to the development authority should be denied on this account. 42. Finally, even while we have already observed that with the decision of the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra), the issue of whether the activities of a statutory corporation or body entru....
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....ra (d) of Para 190 that in the case of statutory corporations or bodies, where rates are fixed on a pre-determined statutory basis or based on formulae regulated by law or rules having the force of law and where money is invested in deposits or govt securities then any such receipts as laid down in sub para (d) of Para 190 of the said order cannot be characterized as " fee, cess or other consideration" for the purposes of computing the threshold under the provisos to section 2(15). Therefore, it is clear that in terms of the orders of the Hon Court, such receipts that are provided for in the statute, or in the rules and Govt orders framed under the powers granted to the State Govt under the statute, cannot be considered as "fee, cess or other consideration" for the purposes of computing the thresh hold of section 2(15). We observe that, the Assessing Officer or the CIT(A) or the Ld CIT(DR), have not till now brought on record any single instance of profiteering activity or pricing outside the ambit of the statute or the Govt orders issued thereunder, while we have seen that almost all the valuation and pricing has been done on the basis of Govt Orders and instances of cross subsidi....
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....rom the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings." The Learned CIT(DR) has also invited out attention to the orders of the Hon Supreme Court in Union of India vs. Dhanwanti Devi and Ors in 1996 Supp. (5) S.C.R. 32 for the proposition that a decision is only an authority for what it actually decides and it is the essence of the decision which constitutes its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. He has also invite....
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....ral utility. From our study of this judgment and order, it is fairly clear that the nature of or title over the Infrastructure Development and Reserve Fund (IDRF), was not a question of law presented to the Hon'ble Court for decision. Furthermore, the order does not show that any arguments were presented before the Hon'ble Court with regard to the nature of and title over the Infrastructure Development and Reserve Fund (IDRF). Thus, it is quite clear that the judgment and order of the Hon'ble Court in the aforesaid case, primarily related to the eligibility of the assessee authority for exemption under section 11 and the correctness or otherwise of the Tribunal's decision, to order its registration under section 12AA. It's judgment with regard to these issues is reflected in the paragraphs 18 to 28 and specifically in paragraphs 26 to 28 and it appears, that the observation made in para 29 of the said order with relation to the Infrastructure Development and Reserve Fund (IDRF), was also with a view to demonstrate that the funds of the authority were utilized for general utility, in support of the decision that was being rendered by the Hon'ble Court. Therefore, whi....
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....he ITAT Amritsar Bench, was delivered following the judgment of the Hon'ble Punjab and Haryana High Court in the case of Punjab Police Housing Corporation Limited(supra), which related to taxability of interest on bank deposit made out of unutilized government grants, which in our view is a different issue altogether and with regard to which there is a contrary decision by the Hon'ble Patna High Court in the case of Bihar Police Building Construction Corporation(supra), which in turn, has been delivered on the basis of the findings of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd v. CIT (1997) 6 SCC 117. Therefore, the only judgment the ownership of the Infrastructure Development and Reserve Fund (IDRF), among the decisions cited by the learned AR is the judgment of the Hon'ble Delhi Bench in the case of Saharanpur Development Authority. Here too, we observe that the basic question before the Hon'ble Delhi Bench was whether, if the principal amount (of the Infrastructure Development and Reserve Fund) had not been brought to tax by the ld. AO, whether the interest from the investment of such principal, could be brought to tax by him. It is true that the....
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.....A. 1973, the assessee could retain the funds collected by it under the Act. Thus, the powers to collect the funds were already in existence under section 20 of the Act and it had to credit the fees and charges collected by it, to its own funds, which were to be applied to the fulfillment of the assessee's object. The ld. Bench observed, that going through the office memorandum, would reveal that paragraph 1 of the said O.M. contemplates that the "income" of the development authorities described in Clause 5 of the said memorandum, would not be deposited in an ordinary pool, but would be deposited in a separate account, which would be used exclusively for residential infrastructure. Thus, it held that the provisions of the said memorandum itself showed that firstly, the fees and charges collected by the assessee in Clause 5 of the memorandum, would be the income of the development authority but it would not be deposited in the ordinary pool, rather it would be earmarked to ensure the development of residential infrastructure. It therefore held, that the memorandum only provided a regulatory mechanism for incurring the expenses and carving out a preferential area within the assessee'....
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....charges received by the authority under the Act; all monies received by the authority from the disposal of lands, buildings and other properties, movable and immovable and all monies received by the authority by way of rents and profits, or in any other manner from any other source. Sub Section 20(2) states that that fund shall be applied towards meeting the expenses incurred by the authority, in the administration of this act and for no other purpose. Section 41 of the Act relates to control by the State Government and empowers the State Government to issue such directions to the authority from time to time, as may be necessary, for the efficient administration of the Act and it states, that if there is any dispute between the authority and the State Government with regard to the exercise of its powers and discharge of its functions by the authority, then the decision of the State Government on such dispute shall be final. Thus, the provisions of the U.P.U.P.D.A. 1973 as laid out above makes it quite clear that all the money received by the authority from the State Government, from loans, from its earnings or from any source, would constitute the funds of the Authority. Furthermor....
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....ions of law raised by Mussoorie Dehradun Development Authority relating to Article 289 and whether the collection of levies by statutory authorities in the nature of fees, charges, tax etc. imposed by the State through an enactment (U.P.U.P.D.A. 1973) can be said to be income of such authority. Thereafter, it compared the provisions of section 17 of the Bihar Industrial Area Development Authority Act, 1974, with the corresponding provision in the Uttar Pradesh Urban Planning and Development Act, 1973, i.e. section 58 and pointed out that both the provisions were effectively para materia in substance. The Hon'ble High Court thereafter pointed out, that since the Mussoorie Dehradun Development Authority, also constituted under the Uttar Pradesh Urban Planning and Development Act, 1973, was a separate entity which was distinct from the State, having its own legal identity, as a cooperate body which could sue or be sued in its name and having its own assets and liabilities, it was only when the State Government decides that the purpose of the development authority had been achieved and there was no need for continuance of such an authority, then upon dissolution of that authority the i....
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....998, the plea that the assessee did not have any right, title or interest over the said infrastructure fund and that it was merely a Nodal agency for implementing the projects of the State Government, is fit to be rejected. The Learned AR has pointed to some inconsistencies in the order of the Delhi Bench and also pointed out that the Adityapur Development Authority ( whose case was followed by the Hon High Court) was seeking exemption under another section as also the fact that one of the items of receipt ie stamp duty was collected by the state Govt, but to our mind those arguments are not material because the specific provision of the U.P.U.P.D.A. 1973 render diversion of income to the state prior to the dissolution of the authority as an impossibility and the Govt Order dated 15.01.1998 could not be read as being issued for a purpose that was vires of the Act. It could only be read as issued under section 41 of the U.P.U.P.D.A. 1973 for better administration of the Act by channelizing some portion of the funds to certain preferential areas of the assessee's objects and nothing more. Therefore, following the Judgment of Hon. Uttarakhand High Court in Mussoorie Dehradun Developme....
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....he funds belonged to the State Government and had been given to it to implement tourism projects in the city of Ayodhya. It had also submitted that the addition was unfair, because it had spent more than the amount received and finally it had contended that if they were held to be the receipts of the assessee authority, then they were capital receipts which were not income within the meaning of section 2(24). In view of our detailed reasoning given on the issue of Infrastructure Development and Reserve fund, where we have observed that since the authority is an independent entity having its own funds and further that, as per the provisions of section 20 of the U.P.U.P.D.A. 1973, all Grants received by the authority also constitute its funds and, the power to divert the funds to the state Govt only arises upon dissolution of the authority under Section 58 of U.P.U.P.D.A. 1973, we hold that the funds received by way of tourism grant are the funds of the authority and not the state Govt. However we agree with the assessee, that before any portion of the same could be held to be its income and added to surplus, the expenditures incurred against the same have to be have to be allowed as....