2023 (4) TMI 392 - HC - Income Tax

Exemption u/s 11 - applicability of Section 2(15) - addition on account of premium on land and shades - Tribunal allowed the exemption under Section 11 and 12 - HELD THAT - As correctly held by Tribunal The Assessee -Corporation was constituted under the Gujarat Industrial Development Act, 1962 for the purpose of securing and assisting rapid and orderly establishment and organization of Industrial areas and Industrial estates in the State of Gujarat and for the purpose of establishing the commercial centers in connection with establishment and organization of such industries. It is also held that it could not be said that the activities carried out by the Assessee were either in nature of trade, commerce or business, for Cess or Fee or any other consideration so as to attract the proviso to Section 2(15) and the same could be said to be for charitable purpose and consequently, the exemption under Section 11 was permitted. When this issue was taken up before the Apex Court 2022 (10) TMI 948 - SUPREME COURT held that section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. No substantial question of law has arisen.

Summary

Issues:
1. Benefit of Section 11 and 12 disallowed by Assessing Officer under Section 2(15) read with Section 13(8) of the Income Tax Act.
2. Addition of Rs. 703,30,00,837 on account of premium on land and shades.
3. Depreciation allowance and set-off of brought forward deficit for re-examination.
4. Deemed rent amounting to Rs. 8,02,879.

Analysis:

Issue 1:
The High Court addressed the challenge of allowing the benefit of Section 11 and 12, disallowed by the Assessing Officer under Section 2(15) read with Section 13(8) of the Income Tax Act. The Tribunal upheld the exemption under Section 11 and 12 for the Assessee-Corporation, constituted under the Gujarat Industrial Development Act, 1962. The Tribunal found that the activities of the Assessee were not in the nature of trade, commerce, or business, but for charitable purposes, hence permitting the exemption under Section 11. The High Court affirmed the Tribunal's decision based on the precedents and the nature of the Assessee's activities.

Issue 2:
Regarding the addition of Rs. 703,30,00,837 on account of premium on land and shades, the Tribunal set aside the issue for re-examination by the Assessing Officer. The Tribunal considered the applicability of Section 2(15) of the Act and directed a fresh assessment on this matter. The High Court found no substantial question of law arising from this issue as it was adequately addressed by the Tribunal.

Issue 3:
The Tribunal also set aside the issue of depreciation allowance and set-off of brought forward deficit for re-examination by the Assessing Officer in view of the applicability of Section 2(15) of the Act. The High Court noted that the issue was thoroughly examined and decided by the Tribunal, and no new substantial question of law emerged from this aspect of the case.

Issue 4:
The Tribunal set aside the issue of deemed rent amounting to Rs. 8,02,879 in view of the applicability of Section 2(15) of the Act. The High Court concurred with the Tribunal's decision, finding that the matter was adequately considered and no new legal question arose from this issue.

In conclusion, the High Court disposed of the appeal based on the precedents and the specific circumstances of the case, finding no substantial questions of law to be addressed. The judgments and decisions of the Tribunal were upheld, and the issues raised by the Revenue were not found to warrant further examination.