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2022 (6) TMI 641 - AT - Income TaxExemption u/s 11 - Charitable activity u/s 2(15) - HELD THAT - We find that the assessee is a Parishad namely The Uttar Pradesh Awas Evam Vikas Parishad which has been incorporated by the Legislative Assembly vide Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam 1965. The scope of activities to be performed by the Parishad are strictly circumscribed by the provisions contained under section 15 of the said very enactment under the head function of the board and through the Parishad it is the Government of Uttar Pradesh itself which has been carrying on the objects of general public utility, in due discharge of its functions, duties and thereby it has acquired the status of a State under Article 12 of the Constitution of India - HELD THAT - As in the case of assessee itself for assessment year 2015-16, the case of the assessee was reopened u/s 148 and Assessing Officer has again examined the activities of the assessee and has granted exemption u/s 11 of the Act. Also relying on provisions of section 10(46) CBDT itself has granted exemption u/s 10(46) on the similar activities being undertaken by different assessees. In this respect reliance was placed on the notifications issued by CBDT in the case of Yamuna Expressway Industrial Development Authority and Greater Noida Industrial Development Authority. CBDT has examined the activities of these organizations and has issued notifications exempting the income u/s 10(46) of the Act - activities being undertaken by assessee are similar to the activities being undertaken by the assessee. In view of all these facts and circumstances assessee be allowed exemption u/s 11 of the Act. We find that after noting down the detailed arguments of both the parties in appeals issue decided the issue of grant of exemption u/s 11 in favour of the assessee. Transferring certain amounts to IDRF account and was directly reflecting that account in the balance sheet and was not routing through the profit loss account - AO has added back these amounts while denying exemption u/s 11 - HELD THAT - We find that this issue has already been dealt by the Hon'ble Allahabad High Court in the case of Lucknow Development Authority 2013 (9) TMI 570 - ALLAHABAD HIGH COURT has held that the money transferred to this fund is to be utilized for the purpose of project as specified by the committee having constituted by the Government and the same could not be treated to be belonging to the authority or the receipt is taxable in its hand.
Issues Involved:
1. Denial of exemption under section 11 of the Income-tax Act. 2. Applicability of proviso to section 2(15) of the Income-tax Act. 3. Compliance with section 11(2) of the Income-tax Act. 4. Compliance with section 13(1)(d) of the Income-tax Act. 5. Compliance with section 13(3) of the Income-tax Act. 6. Treatment of surplus and other specific additions to income. Detailed Analysis: 1. Denial of Exemption under Section 11: The core issue was the denial of exemption under section 11 of the Income-tax Act to the assessee. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessee was engaged in activities that amounted to carrying on business or trade, thus hitting the proviso to section 2(15). The Tribunal found that the assessee, a statutory body constituted under the Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam, 1965, carried out activities for the general public utility without profit motive. The Tribunal relied heavily on the jurisdictional High Court's judgment in the case of the assessee itself, which held that the activities were not hit by the proviso to section 2(15). The Tribunal followed the High Court's decision and allowed the exemption under section 11. 2. Applicability of Proviso to Section 2(15): The Revenue argued that the assessee's activities were in the nature of trade, commerce, or business, thus hitting the proviso to section 2(15). The Tribunal noted that the jurisdictional High Court had already decided this issue in favor of the assessee, holding that the activities were not hit by the proviso to section 2(15). The Tribunal also considered similar judgments in the cases of other development authorities and held that the assessee's activities were for the general public utility and not for profit, thus not hitting the proviso to section 2(15). 3. Compliance with Section 11(2): The Revenue raised the issue of compliance with section 11(2), which requires 85% of the income to be spent on charitable purposes. The Tribunal noted that the AO had not examined this aspect as the exemption under section 11 was outrightly denied. The Tribunal directed the AO to examine the compliance with section 11(2) while allowing the exemption under section 11. 4. Compliance with Section 13(1)(d): The Revenue argued that the AO had not considered the provisions of section 13(1)(d), which necessitates that the accumulated balance of surplus must be invested in specified modes. The Tribunal directed the AO to examine this aspect while granting exemption under section 11. 5. Compliance with Section 13(3): The Revenue contended that the assessee violated section 13(3) by providing benefits to its employees. The Tribunal noted that employees are not part of the specified persons under section 13(3). The Tribunal referred to the judgment in the case of Tata Steel Charitable Trust, which held that employees do not fall within the specified categories of persons under section 13(3). However, the Tribunal allowed the AO to re-examine this aspect for the relevant assessment years. 6. Treatment of Surplus and Other Specific Additions: The AO had added back certain amounts transferred to the Infrastructure Development Reserve Fund (IDRF) and other specific additions. The Tribunal referred to the High Court's judgment, which held that the money transferred to IDRF was to be utilized for specified projects and could not be treated as belonging to the authority or taxable in its hands. Thus, the Tribunal allowed the grounds related to IDRF and other specific additions. Conclusion: The Tribunal allowed the exemption under section 11, directed the AO to examine compliance with sections 11(2), 13(1)(d), and 13(3), and allowed the grounds related to IDRF and other specific additions. The Tribunal's decision was based on the jurisdictional High Court's judgment and similar cases of other development authorities.
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