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2020 (9) TMI 277 - AT - Income TaxExemption u/s 11 - money received on account of IDC Infrastructure Development Charges - AO treating the interest income earned and the IDC receipts as its income and deducting therefrom the expenses as per the Income Expenditure account of the assessee - as per assessee the Fund was just a bank account of the State Government and was not a separate legal entity - HELD THAT - Fund merely represents money, belonging to the State, pooled for specific user purposes of infrastructure development in the state. The Fund belongs entirely to the State and has no distinct or separate identity of its own. From copies of documents being inter government department communication and minutes of the meeting of the High powered committee we find that the documents bring out the fact that the assessee Fund merely contributed to infrastructure projects in the state approved by the government and on direction of the government. No role in the development of infrastructure projects except being a depository of IDC charges collected by the state for the said purpose, to be utilized as determined by the State. Assessee fund merely represented money set apart/pooled by the government so as to facilitate its user for a specific purpose of infrastructure development in the state, all control over its collection and user remaining with the state - Fund entirely vested in the State and no separate entity, distinct from the state had been created by virtue of the creation of the fund. Argument of the Revenue that the formation of a high powered committee for administration of the Fund sufficiently established that an entity distinct from the State has been created, in our view holds no ground. No merit in the argument of the Revenue that the assessee itself having admitted being a distinct and separate entity from the state, while applying for grant of registration u/s 12A and filing income tax returns, it cannot now take a contrary stand. Undoubtedly the aforesaid admission of the assessee related to an interpretation of facts and did not relate to admitting a fact. Merely because the assessee had interpreted the facts relating to its creation and administration as demonstrating itself to be an entity distinct and separate from the state, while seeking registration u/s 12A of the Act, does not estop the assessee from taking a contradictory stand, which is in accordance with law, in any other proceeding. Merely because the assessee fund no longer requires approval of the Finance Department of the state while utilizing the funds, does not in our view alter or impinge upon its character as held by us as being money of the state kept aside for specific purpose.The presence of the Revenue Secretary in the high powered committee takes care of the requirement of obtaining approval of the Finance Department for utilization of funds. In view of the above we hold that Upto A.Y 2013-14, the Fund belonged to the State and was not liable to tax.The addition made of the IDC receipts and interest on FDRs in A.Y 2009-10 and A.Y 2013-14 are therefore directed to be deleted. Fund vested in the Board which was an entity distinct and separate from the State and was also not a nodal agency of the State - receipts of IDC and interest on FDR s created from the IDC receipts are liable to tax under the Act. Denial of benefit of accumulation u/s 11(2) - Non allowance of benefit of accumulation of income as per section 11(2) - non-filing of notice of accumulation in prescribed Form No.10 - HELD THAT - ITAT has held in a number of decisions that the assessee can file Form No.10 at any time during assessment proceedings and which has to be considered for granting benefit u/s 11(2) of the Act and the non filing of the same is a mere irregularity and technical lapse which needs to be condoned - we hold, that the denial of benefit of accumulation for delayed filing of Form No.10 is not as per law . Mismatch in the figure of accumulation as reported in the audit report filed in Form No.10B and that filed in the notice for accumulation in Form No.10 - We are not in agreement with the same since the requirement of law is to intimate the amount of accumulation in Form No.10, therefore a different figure reported in any other form should be of no relevance or consequence.As rightly argued by assessee the audit report is furnished by the auditor while the statement of accumulation is to be filed by the assessee. Therefore a figure reported by the auditor is of no consequence in the scheme of law for the purpose of claiming benefit of accumulation u/s 11(2) of the Act. There was a plausible explanation for the different figure reported by the auditor, since the audited profit and loss account did not take into consideration the IDC and IAC receipts, which were reflected as capital receipts in the audited Balance Sheet, as finds mention in the assessment order - only when the AO confronted the assessee with the proposed addition to be made of IDC and IAC receipts to the income, thus increasing the shortfall in 85% utilization of income to ₹ 382 crores, that the assessee filed Form No.10 notifying accumulation of the said shortfall u/s 11(2) - there was a bonafide explanation for the difference in reporting of accumulation by the auditors in form No.10B and by the assessee in Form No.10 being based on different figures of income reflected in the audited profit and loss account and income assessed by the AO respectively. We therefore do not agree with the finding of the Ld.CIT(A) that the form No.10 was unreliable on account of the aforesaid discrepancy - we hold that the assessee was entitled to benefit of accumulation u/s 11(2) of the Act as per Form 10 filed during assessment proceedings - Decided in favour of assessee.
Issues Involved:
1. Validity of notice under section 148. 2. Taxability of Infrastructure Development Charges (IDC) receipts. 3. Allowance of expenditure on infrastructure development. 4. Taxability of interest income from Fixed Deposits (FDRs). 5. Denial of benefits of accumulation of income under section 11(2). Detailed Analysis: 1. Validity of Notice under Section 148: The assessee challenged the validity of the notice dated 29.03.2016 issued under section 148 and the subsequent assessment order passed under section 147 read with section 143(3). The CIT(A) upheld the validity of the notice and the assessment order. The issue was not pressed before the Tribunal and was therefore dismissed. 2. Taxability of IDC Receipts: The primary issue was whether IDC receipts were taxable in the hands of the assessee fund. The assessee argued that the IDC receipts belonged to the State Government and that the fund was merely a nodal agency. The Tribunal examined the statutory provisions and the background leading to the creation of the fund. It was found that the fund represented money belonging to the State, pooled for infrastructure development, and administered by a high-powered committee comprising state officials. The Tribunal held that the fund vested in the State and was not a separate entity. Therefore, IDC receipts were not taxable in the hands of the fund for A.Y 2009-10 and 2013-14. However, for A.Y 2014-15, amendments to the Haryana Development and Regulation of Urban Areas Act, 1975, created a Board as a distinct entity separate from the State. The Board was not a mere nodal agency but had control over the funds and projects. Consequently, IDC receipts and interest income were taxable for A.Y 2014-15. 3. Allowance of Expenditure on Infrastructure Development: For A.Y 2009-10, the assessee claimed expenditure of ?75.30 crores incurred on infrastructure development projects. The AO disallowed the expenditure, and the CIT(A) upheld the disallowance. The Tribunal found that since IDC receipts were not taxable, the issue of allowing expenditure became infructuous. 4. Taxability of Interest Income from FDRs: The AO treated the interest income from FDRs as taxable income. The assessee argued that the interest also belonged to the State Government and should not be taxable. The Tribunal held that for A.Y 2009-10 and 2013-14, the interest income was not taxable as the fund belonged to the State. However, for A.Y 2014-15, the interest income was taxable as the Board was a distinct entity. 5. Denial of Benefits of Accumulation of Income under Section 11(2): The AO denied the benefit of accumulation of income under section 11(2) for A.Y 2013-14 and 2014-15, citing non-compliance with filing Form No.10 electronically by the due date. The Tribunal held that the mandate for filing Form No.10 before the due date was introduced only from 01-04-2016 and was not applicable for the impugned years. The Tribunal also found that the discrepancy in figures reported in the audit report and Form No.10 was explained and did not affect the claim. Therefore, the Tribunal allowed the benefit of accumulation under section 11(2) for both years. Conclusion: The appeals for A.Y 2009-10 and 2013-14 were partly allowed, with IDC receipts and interest income held not taxable. For A.Y 2014-15, the appeal was partly allowed, with IDC receipts and interest income held taxable, but the benefit of accumulation under section 11(2) was granted.
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