2021 (1) TMI 1043 - HC - Income Tax

Exemption u/s 11 - activities of the assessee in the nature of commerce / trade or not? - Tribunal justified considering the activity of the assessee as engaged in the development of urban area which is in the nature of advancement of general public utility not hit by the newly introduced first and second proviso to section 2(15) of the Act without considering the merit of the issue? - HELD THAT - The questions of law as proposed by the Revenue are no longer res-intigra in view of the decision of this Court in case of Ahmedabad Urban Development Authority Vs. ACIT 2017 (5) TMI 1468 - GUJARAT HIGH COURT all the questions of law as proposed stand squarely covered by the decision of this Court in case of AUDA (supra).

Summary

Issues:
1. Interpretation of provisions related to commercial activities under Section 2(15) of the Income Tax Act, 1961.
2. Eligibility for benefits under Sections 11(1)(a) and 11(2) of the Act.
3. Treatment of addition to fixed assets as application of income.
4. Deletion of General Development Expenditure Fund.
5. Deemed application of income against future income.
6. Claim of exemptions pending Special Leave Petition (SLP) and appeal.
7. Reliance on previous decisions for allowing exemptions.

Analysis:
1. The main issue in this case involves the interpretation of provisions under Section 2(15) of the Income Tax Act, 1961, regarding the nature of commercial activities conducted by the assessee. The Revenue questioned the Tribunal's decision on the nature of the assessee's activities and the applicability of the first and second provisos to Section 2(15). However, the Court held that the questions raised by the Revenue were already settled in a previous case, and the Tribunal's decision was in line with the precedent set by the Court.

2. Another issue raised was the eligibility for benefits under Sections 11(1)(a) and 11(2) of the Act. The Revenue contested the benefit given to the assessee under these sections, arguing that the proviso of Section 2(15) should impact the allowance of Section 11(2). The Court dismissed this argument, stating that the issues were already decided in previous cases and upheld the benefit given to the assessee.

3. The Court also addressed the treatment of addition to fixed assets as application of income, where the Revenue challenged the deletion of a certain amount. The Court found that the addition had already been allowed in earlier years, constituting double deduction. Therefore, the Tribunal's decision to delete the addition was upheld.

4. Regarding the deletion of the General Development Expenditure Fund, the Court considered whether a capital expenditure received by the assessee should be treated as a capital receipt. The Tribunal's decision to delete the fund was justified based on the nature of the expenditure and its treatment as a capital receipt.

5. The issue of deemed application of income against future income was raised, questioning the absence of an express provision in the Act. The Tribunal had allowed the deemed application, which the Court upheld, finding it to be reasonable and in line with the circumstances of the case.

6. The Court also addressed the claim of exemptions pending Special Leave Petition (SLP) and appeal, where the Revenue raised concerns about the pending litigation. However, the Court found that the issues were already decided in previous cases and upheld the exemptions granted to the assessee.

7. Lastly, the Court considered the reliance on previous decisions for allowing exemptions. The Revenue contested the reliance on certain decisions, but the Court found that the decisions were valid and upheld the exemptions granted based on the precedent set by previous cases.

In conclusion, the Court dismissed the Tax Appeal, as the issues raised by the Revenue were already settled in previous cases, and the Tribunal's decisions were found to be in accordance with the law and established precedents.