2021 (9) TMI 698 - AT - Income Tax

Exemption u/s 11 - exemption denied on the ground that registration u/s 12AA granted to the assessee stood cancelled - HELD THAT - In view of the above observations of the Coordinate Bench of this Tribunal in assessee s own case restoring the registration u/s 12AA of the Act, we are of the opinion that the objects of the assessee authority are charitable in nature and the same are not hit by proviso to Sec.2(15) of the Act. However, we direct the Assessing Officer to examine the activities of the assessee authority and if the same are found to be in consonance with the objects, the benefit of exemption u/s 11 is to be allowed. Accordingly, Ground allowed for statistical purposes. Treating fund earmarked for Infrastructure Development Fund to the income of the assessee - HELD THAT - As in the case of Saharanpur Development Authority 2021 (3) TMI 1223 - ITAT DELHI and Khurja Development Authority 2019 (4) TMI 361 - ITAT DELHI we are of the view that source of funds transferred to Infrastructure Development Fund, control over the same and obligation of its utilization is required to be examined to ascertain the real nature of Infrastructure Development Fund. Accordingly, we direct the Assessing Officer to adjudicate the issue afresh keeping in mind the ratio laid down. Non-allowance of credit of prepaid taxes - HELD THAT - As credit of prepaid taxes is a statutory right envisaged under the Income Tax Act, 1961. The Assessing Officer is directed to allow the credit of prepaid taxes after due verification in accordance with law. Accordingly, Ground allowed for statistical purposes.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Eligibility for exemption under sections 11 and 12 of the Income Tax Act.
3. Nature of activities under section 2(15) of the Income Tax Act.
4. Treatment of funds transferred to Infrastructure Development Fund.
5. Credit of prepaid taxes.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The appellant challenged the reopening of assessment under section 147 of the Income Tax Act, arguing that the mandatory conditions of sections 147 to 151 were not complied with. However, the appellant did not press this issue during the hearing, and thus, it was dismissed as not pressed.

2. Eligibility for Exemption under Sections 11 and 12:
The appellant argued that the denial of exemption under sections 11 and 12 was incorrect, as the Tribunal had previously restored the registration under section 12AA, confirming the charitable nature of the appellant's activities as per section 2(15) of the Act. The Tribunal agreed, noting that the objects and activities of the appellant were charitable and not hit by the proviso to section 2(15). The Tribunal directed the Assessing Officer (AO) to examine the activities and allow the exemption if they were found to be in consonance with the objects.

3. Nature of Activities under Section 2(15):
The Tribunal referred to its earlier decision, which restored the registration under section 12AA, and held that the activities of the appellant were charitable in nature. The Tribunal emphasized that the activities were not commercial and were aimed at the advancement of general public utility, thus qualifying for exemption under section 11.

4. Treatment of Funds Transferred to Infrastructure Development Fund:
The appellant contended that the funds transferred to the Infrastructure Development Fund were of a capital nature and not taxable income, as they were earmarked for specific infrastructure projects under the control of the State Government. The Tribunal noted that similar issues had been decided in favor of other development authorities by various courts and tribunals. The Tribunal directed the AO to re-examine the nature and taxability of these funds, considering the precedent cases and the specific facts of the appellant's case.

5. Credit of Prepaid Taxes:
The appellant claimed that the AO did not allow the credit of prepaid taxes amounting to ?9,32,77,634/-. The Tribunal directed the AO to verify and allow the credit of prepaid taxes in accordance with the law, as it is a statutory right.

Conclusion:
Both appeals were partly allowed for statistical purposes. The Tribunal directed the AO to re-examine the exemption under sections 11 and 12, the nature of the Infrastructure Development Fund, and the credit of prepaid taxes, ensuring compliance with the legal precedents and statutory provisions.