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TaxTMI 
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2025 (9) TMI 497
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....on the facts and circumstances of the case the order of the ld. CIT(A) is bad in law. 2. CIT(A) erred in not considering the receipts covered under section 11(1)(d) as income liable for accumulation even it is brought to the notice that there is wrong filing of return of income by the assessee. 3. CIT(A) erred in not considering the specific collections like betterment fees, lake rejuvenation fees are specific collections covered u/s 11(1)(d) of the income tax and treated it as income in general." 3. Brief facts of the case as stated by the AR of the assessee are that the assessee is a Town Planning authority constituted under the special act called The Bangalore Metropolitan Region Development Authority Act, 1985. Thus, the assessee is an Authority constituted under the act of State Legislature and assessed to ITO (Exemption), Ward-3, Bangalore having PAN-AAALD2630B. The assessee filed its return of income for the AY 2019-20 belatedly on 29.11.2020 declaring the total income of Rs. Nil whereas the due date of filing the return of Income for the Asst. year 2019-20 was 30/09/2019. Thereafter, the said Return of Income was processed by the ld. Asst. Director of I....
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....in, aggrieved by the order of the ld. ADDL/JCIT(A) Panchkula dated 25/10/2024, the assessee has filed the present appeal before this Tribunal. 7. Before us, the ld. AR of the assessee CA Sri Dinesh Kumar Joshi vehemently submitted that the ld. ADDL/JCIT(A) erred in not considering the amount collected by the planning authority by virtue of section 18 of the Town planning act being betterment fees amounting to Rs. 5,20,97,935/- & Rejuvenation fees amounting to Rs. 55,10,500/- is covered under section 11(1)(d) of I. Tax Act as capital Receipt. Further the ld. AR of the assessee relied upon the Apex Court verdict in the case of Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad urban development authority reported in (2022) 449 ITR 1 & (2022) 449 ITR 389 as well as Order of the ITAT, 'C' Bench, Bangalore in the case of Magadi Planning Authority in ITA No. 1056, 1352 & 1353 /Bang/2024 dated 22/01/2025. 7.1 Further, the Member secretary of the Assessee has also filed the detailed written submission which is reproduced below for ease of reference & convenience: - BEFORE THE INCOME TAX APPELLATE TRIBUNAL- BANGALORE APPELLANT DODDABALLAPURA LANNING ....
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....rporated or not, for all or any of the purposes of this Act. (3) The State Government shall, every year, make a grant to the Authority of a sum equivalent to the administrative expenses of the Authority till the Authority is able to meet its administrative expenses out of its own resources. (4) All moneys received by or on behalf of the Authority by virtue of this Act, and all interests, profits, and other moneys accruing to or borrowed by the Authority, shall be credited to the Fund. (5) Except as otherwise directed by the State Government, all moneys and receipts specified in the foregoing provisions and forming part of the Fund shall be deposited in any Scheduled Bank as defined in the Reserve Bank of India Act, 1934 or invested in such securities, as may be approved by the State Government. (6) The Fund, and all other assets vesting in the Authority shall be held and applied by it, subject to the provisions of and for the purposes of this Act. 12. Budget. - The Authority shall prepare, every year, in such form and at such time as may be prescribed, an annual budget estimate in respect of the next financial year showing the estimated ....
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....eceipt has restriction on collection, deposit and utilisation thereof from the Government of Karnataka. The Government is exercising the power to fix the fees/cess/charges. It only regulates the utilisation of the same. The Assessee is only in executive position in the capacity as custodian in implementing the project of civic amenity as set out in the objectives of the constitution of the Land. Therefore we are of strong view that the amount received the Authority belongs to the Government of Karnataka and utilise according to the prior approval of the Government. Hence it is not income taxable in the hands of assessee. We are also enclosing here with the sample copy of utilisation circular issued by the government of Karnataka hence the authority does not have any right over the fund. Hence it is not an income taxable in hands of assessee. At present, consequent to according of approval u/s 12A(1) from A.Y.2022-23 vide Order passed by the Commissioner of Income Tax (Exemptions), Bengaluru, on 15/11/2021, our Trust/Organisation has been treated as a Charitable Institution. However, it is seen that our Trust/Organisation is in possession of last limb of c....
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....ake in the jurisdiction. The moto of the Planning authority is for the proper planning of the area and maintenance of the same. Authority need to collect the fees as specified by government of Karnataka for the approval of the layout Plan and collect the fees as specified and to be utilised for the purpose for which it has been collected. Hence we are of the Strong view that the It is not our income taxable in our Hands. 7. The Receipt of the Planning authority formed under the statute of State or central legislation is not hit by the first proviso of 2(15) r.w.s 13(8) of the income tax act 1961. This view was upheld in the judgement of the Supreme Court in the case of "Assistant commissioner of Income tax (Exemption)V/S Ahmedabad Urban Development Authority and others" dated 19/10/2022. Supreme court heard the case and discuss elaborately along with others in relation to these batch of appeals and special leave petitions, the primary question which falls for consideration is the correct interpretation of the proviso to Section 2(15) of the IT Act introduced by amendment w.e.f. 01.04.2009 (b) Summary in relation to statutory authorities/....
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...., trade or commerce; (d) where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposits or government securities and drawing interest therefrom or charging lease rent, ground rent, etc., per se, recovery of such charges, fee, interest, etc. cannot be characterized as "fee, cess or other consideration" for engaging in activities in the nature of trade, commerce, or business, or for providing service in relation in relation thereto; (e) Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally ....
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....ation, board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions/services' (such as housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). 8. We reproduced below the Provision of Town Planning authorising the Authority for collection of Service charges for different type of approval SECTION 18. RECOVERY OF A FEE IN CERTAIN CASES OF PERMISSION FOR CHANGE IN THE USE OF LAND OR BUILDING .- 1 [(1) Where permission for change of land use or development of land or building is granted under section 14A or section 14B or section 15 or section 17 and such change of land use or development is c....
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....ollect from the owner of such land or building :- (i) a cess for the purpose of carrying out any water supply scheme; (ii) a surcharge for the purpose of formation of ring road; (iii) a cess for the purpose of improving slums; and 86 Town and Country Planning [1963: KAR. ACT 11 (iv) a surcharge for the purpose of establishing Mass Rapid Transport System. at such rates but all the above levies together not exceeding one-tenth of the market value of the land or building as may be prescribed. 3 [ 2 [(v) XXX] 2 ] 3 (2) The cess and surcharge levied under sub-section (1) shall be assessed and collected in such manner as may be prescribed. (3) Any person aggrieved by the levy, assessment and collection of cess or surcharge munder this section may within thirty days from the date of the order appeal to the prescribed authority whose decision shall be final. (4) The prescribed authority may after giving a reasonable opportunity of being heard to the appellant and the planning Authority pass such order as it deems fit. (5) The State Government may exempt any Board Authority or Body constituted by or under any law and ow....
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....vious year as per clause (2) of explanation to section 11(1) of the Act on the ground that the assessee had failed to file Form 9A before the due date as per the provisions of the Act read with rule 17 of the Income Tax Rules. We also take a note of the fact that such denial was on the strong credence that the assessee is registered u/s 12A/12AA of the Act since in the Return of Income as per the details furnished in schedule personal information under "Details of registration or approval under the Income Tax Act, the assessee had declared to be registered u/s 12A/12AA of the Act and is claiming exemption u/s 11 of the Act. Before us, the ld. AR of the assessee submitted that the claim of registration in the return was due to the inadvertent mistake on the part of the assessee. Further on going through the order for registration in Form 10AC dated 15/11/2021 submitted before us, we observe that the ld. PCIT/CIT granted the registration under sub clause (i) of clause (ac) of sub- section (1) of section 12A of the Act vide Unique Registration No. (URN)- AAALD2630BE20215 effective from AY 2022-23 to AY 2026-27, the copy of which is reproduced below for ease of reference & convenience ....
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....of the amended deed and no such amendment shall be effected until and unless the approval is accorded. b. In the event of dissolution, surplus and assets shall be given to an organization, which has similar objects and no part of the same will go directly or indirectly to anybody specified in section 13(3) of the Income Tax Act, 1961. c. In case the trust/institution is converted into any form, merged into any other entity or dissolved in any previous year in terms of provisions of section 115TD, the applicant shall be liable to pay tax and interest in respect of accreted income within specified time as per provisions of section 115TD to 115TF of the Income Tax Act, 1961 unless the application for fresh registration under section 12AB for the said previous year is granted by the Commissioner. d. The Trust/ Institution should quote the PAN in all its communications with the Department. e. The registration u/s 12AB of the Income Tax Act, 1961 does not automatically confer any right on the donors to claim deduction u/s 80G. 4 f. Order u/s 12AB read with section 12A does not confer any right of exemption upon the applican....
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....are not genuine or are not being carried out in accordance with the objects of the Trust/ Institution/ Non Profit Company. n. If it is found later on that the registration has been obtained fraudulently by misrepresentation or suppression of any fact, the registration so granted is liable to be cancelled as per the provision u/s section 12AB(4) of the Act. o. This certificate cannot be used as a basis for claiming non-deduction of tax at source in respect of investments etc. relating to the Trust/ Institution. p. All the Public Money so received including for Corpus or any contribution shall be routed through a Bank Account whose number shall be communicated to Office of the Jurisdictional Commissioner of Income Tax. q. The applicant shall comply with the provisions of the Income Tax Act, 1961 read with the Income Tax Rules, 1962. r. The registration and the Unique registration number has been instantly granted and if, at any point of time, it is noticed that form for registration has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be p....
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.... u/s 12A is a condition precedent for availing benefit under sections 11 and 12 of the Act. Unless and until an institution is registered under section 12A of the Act, it cannot claim the benefit of section 11(1)(a) of the Act." The relevant Paragraphs are reproduced below for ease of reference & convenience: - "11. We are of the considered view that for claiming benefit under section 11(1)(a), registration under section 12A is a condition precedent. Section 11 provides for exemption of income which is applied for charitable purposes. Section 12 is in the nature of an Explanation of section 11. Section 12A provides that provisions of sections 11 and 12 shall not apply in relation to income of any trust or institution unless certain conditions are satisfied, one of which is clause (a), the same is reproduced as under: "12A. Conditions as to registration of trusts, etc .- The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :- (a) the person in respect of the income has made an application for registration of the trust or institution in the pre....
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....st. year 2021-22 under appeal. Once the provisions of section 11 of the Act is not applicable to the assessee, then even the claim of the assessee that the amount collected by the planning authority by virtue of section 18 of the Town planning act being betterment fees amounting to Rs. 5,20,97,935/- & Rejuvenation fees amounting to Rs. 55,10,500/- is covered under section 11(1)(d) of I. Tax Act as capital Receipt is also not tenable. 9.3 Before proceeding further it is apposite here to mention that Section 12A of the Act deals with the conditions for applicability of sections 11 and 12 of the Act which are reproduced below for ease of reference & convenience :- Section 12A in The Income Tax Act, 1961 12A. [Conditions for applicability of sections 11 and 12] [(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [* * * ] [Principal Commissioner or] Commissione....
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....registration of the trust or institution,- (i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020)], within three months from the first day of April, 2021; (ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period; (iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; (iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative; (v) where the trust or ins....
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....ar, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: [Provided also] that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under [section 12AA or section 12AB ].]." 9.4 On plain reading of section 12A of the Act we take a note of the fact that Section 12A provides for the conditions for applicability of Sections 11 and 12 of the Act. It prescribes three essential conditions which must be satisfied by charitable/religious trust in order to claim exemption under the aforesaid sections: firstly, that the person in receipt of the income has made an application for registration of the....
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....uthority does not change from the date of inception to the date of application or even after. Further we are of the opinion that the word 'assessment' is used in the Income Tax Act in a number of provisions in a comprehensive sense and includes all proceedings, starting with the filing of the return or issue of notice and ending with determination of the tax payable by the assessee. The expression assessment proceedings as held in case of Auto & Metal Engineers v. Union of India (1998) 229 ITR 399 (SC), comprehend the entire process of assessment starting from the date of filing of returns u/s 139 or issuance of notice under section 142(1) till making of the order of assessment under section 143(3) or section 144 of the Act. The order granting the registration was passed by the ld. PCIT/CIT in Form 10AC on 15/11/2021. The Return of income for the Asst. year 2019-20 was filed on 29/11/2020 & the intimation u/s 143(1) of the Act for the Asst. year 2019-20 was passed on 12/02/2021 i.e. way before the date of granting the registration on 15/11/2021. Further, as on 15/11/2021, the time limit to issue notice u/s 143(2) of the Act for the Asst. year 2019-20 had already expired. Th....
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....mption under Sections 11 and 12 of the Income Tax Act, 1961, and the proviso to Section 2(15) does not apply to disqualify it from such exemption which is not in dispute in the present case. 9.9 In conclusion, we dismiss the appeal of the assessee. The assessee is not entitled to claim benefit of exemptions under Sections 11 and 12 of the Act, 1961 in the absence of valid registration under the Income Tax Act. Hence the grounds of appeal raised by the assessee are hereby dismissed. 10. In the result, the appeal of the assessee is hereby dismissed. Coming to ITA No. 2116/Bang/2024 for the A.Y. 2021-22. 11. At the outset, we note that the issues raised by the assessee in its grounds of appeal for the AY 2021-22 are identical to the issue raised by the assessee in ITA No. 2115/Bang/2024 for the assessment year 2019-20 i.e. the ld. ADDL/JCIT(A) erred in not considering the specific collections like betterment fees, lake rejuvenation fees are covered u/s 11(1)(d) of the Act as income liable for accumulation even it is brought to the notice that there is wrong filing of return of income by the assessee. 12. Further, on going through the intimation passed u/s 143(1) of the ....