2019 (2) TMI 543 - AT - Income Tax

Exemption u/s.11(1) - retrospectivity of Amended Sec.2(15) to the term charitable purposes inserted to the Act by Finance Act, 2012 - Held that - We find that the object of the assessee is similar to that of the corporation before the Jurisdictional High Court in AHMEDABAD URBAN DEVELOPMENT AUTHORITY VERSUS ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTION) 2017 (5) TMI 1468 - GUJARAT HIGH COURT and on the similar set of facts the appeal was allowed in favour of the assessee hence relying upon the same we allow the claim of the assessee and the disallowance of exemption as claimed by the assessee u/s 11 of the Act to the tune is hereby quashed and addition made thereon is thus deleted. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of exemption u/s 11(1) of the Income Tax Act
- Interpretation of Section 2(15) and its retrospective application
- Application of Section 13(8) in relation to exemption u/s 11 & 12 of the Act

Analysis:
The appeal involved a dispute regarding the disallowance of exemption u/s 11(1) of the Income Tax Act by the Assessing Officer, which was upheld by the Commissioner of Income Tax (Appeals). The assessee, an authority under the Gujarat Town Planning and Urban Development Act, claimed exemption under Section 11(1) of the Act for income of Rs. 70,73,005. The Commissioner held that the amended Section 2(15) was retrospective from 1-4-2009, affecting the assessee's entitlement to exemption. Additionally, it was found that Section 2(15) applied, leading to the conclusion under Section 13(8) that the assessee was not entitled to exemptions u/s 11 & 12 of the Act.

The assessee contended that its activities fell under the provisions of Section 2(15) and were eligible for registration u/s 12A of the Act. The Commissioner's decision was based on the belief that the object of general public utility could be a guise for non-charitable purposes like trade or business. The assessee's plea was rejected, leading to the disallowance of exemption u/s 11 of the Act under Section 13(8). However, the Tribunal noted that similar cases before the Jurisdictional High Court had ruled in favor of the assessee, allowing exemptions based on the nature of the activities carried out.

Citing judgments related to similar entities, the Tribunal found that the assessee's activities were not in the nature of trade, commerce, or business, making them eligible for exemption under Section 11. The Tribunal relied on the decisions of the High Court to quash the disallowance of exemption claimed by the assessee u/s 11 of the Act, resulting in the deletion of the added income of Rs. 70,73,005. Consequently, the assessee's appeal was allowed, overturning the previous decisions.

In conclusion, the Tribunal's decision was based on the interpretation of relevant sections of the Income Tax Act and the application of precedents set by the Jurisdictional High Court. By aligning with the High Court's rulings on similar cases, the Tribunal granted the assessee the exemption claimed under Section 11, emphasizing the non-commercial nature of the activities undertaken by the authority.