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2023 (5) TMI 1217 - AT - Income TaxExemption u/s 11 denied - exemption in the previous years had been allowed by the ITAT and approved by P H High Court - whether CIT(A) ought to have allowed this exemption as a judicial discipline - whether the activities of the Assessee-Trust are charitable in nature, entitling the Assessee to exemption u/s 11? - Tribunal held that the activity of the appellant was in the nature of trade, commerce or business and hence it cannot be regarded as activity for charitable purpose in view of the proviso to section 2(15) of the Income-tax Act, 1961? HELD THAT - As w.e.f. 1.4.2004, a new section, i.e., section 10 (46A) is slated to be incorporated in the Income Tax Act, so as to exempt any income arising to a body or authority, or Board or Trust or Commission, not being a company, which has been established or constituted by or under a Central of State Act with one or more of the following purposes, i.e., dealing with and satisfying the need for housing accommodation;planning, development or improvement of cities, towns and villages; regulating, or regulating and developing, any activity for the benefit of the general public; or regulating any matter, for the benefit of the general public, arising out of the object for which it has been created We find that our view is supported by the decision in the case of CIT (Exemptions) vs. Gujarat Industrial Development Corporation 2023 (4) TMI 392 - GUJARAT HIGH COURT wherein, the Hon'ble Gujarat High Court, following the decision of the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT has dismissed the appeal filed by the Revenue, holding that the matter is squarely covered by the decision of the Hon'ble Supreme Court and no question of law, much less any substantial question of law arises for consideration. It is relevant to note that in the said case, the Senior Standing Counsel appearing for the Revenue fairly submitted that the decision rendered in the case of Ahmadabad Urban Development Authority (supra) would govern the case of the assessee. We, therefore, find that the Revenue has also accepted the decision of the Hon'ble Supreme Court as applicable in the case of Gujarat Industrial Development Corporation, which is also a statutory corporation constituted under the Gujarat Industrial Development Act for the purpose of securing and assisting rapid and orderly establishment and organisation of industrial areas and industrial estates in the State of Gujarat. Conclusion (a) For A.Y. 2011-12, the Hon'ble High Court has granted exemption to the Assessee trust under section 11 of the Income Tax Act. (b) The Civil Appeal of the Department against the said High Court judgement has been rejected by the Hon'ble Supreme Court. (c) The Hon'ble High Court has held the Assessee s activity of sale of plots and premises, even at market price, not to be a commercial or business venture per se, but to be necessitated by the statutory mandate of the Punjab Town Improvement Act, 1922, i.e., the mother statute qua the Assessee trust. (d) Facts for the year under consideration, i.e., A.Y. 2016-17, not having undergone any change at all from the facts in A.Y. 2011-12, the judgement of the Hon ble High Court for A.Y. 2011-12, as approved by the Hon'ble Supreme Court in Ahmedabad Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT is squarely applicable to the year under consideration, that is, A.Y. 2016-17. (e) Therefore, the second proviso to section 2 (15) and, consequently, section 13 (8) of the Income Tax Act are held not applicable to the Assessee s case, and so, the aggregate receipts of the Assessee trust from its activities of sale of plots, flats and commercial booths and also its income earned form non-construction fee, transfer fee, penal interest and compounding fee, etc., are held to be entitled for exemption under section 11 of the I.T. Act. Such exemption is allowed to the Assessee. (f) The Order under appeal is, thus, reversed and cancelled on accepting the grievance of the Assessee. Assessee appeal allowed.
Issues Involved:
1. Condonation of Delay in Filing the Appeal 2. Denial of Exemption under Section 11 of the Income Tax Act Condonation of Delay in Filing the Appeal: The Assessee filed an appeal with a delay of 34 days, attributing the delay to the Covid Lockdown Period. The Tribunal found the explanation justified and condoned the delay, allowing the appeal to be considered on merits. Denial of Exemption under Section 11: The core issue was whether the activities of the Assessee-Trust were charitable in nature, thus entitling it to exemption under section 11 of the Income Tax Act. The Assessing Officer (AO) had denied the exemption, arguing that the Assessee's activities, involving the sale of plots and commercial spaces, were in the nature of trade, commerce, or business, and thus did not qualify as charitable activities under the proviso to section 2(15) of the Act. The Assessee contended that its activities were charitable, aimed at the improvement of the town, and similar exemptions had been granted in previous years by the ITAT and approved by the High Court. The Assessee cited the case of the Moga Improvement Trust, where similar activities were deemed charitable. The AO's stance was that the Assessee's activities were commercial, akin to those of a builder, and thus did not qualify for exemption under sections 11 and 12. The CIT(A) upheld this view, noting that the Assessee's receipts from such activities exceeded 20% of its total receipts, invoking the amended proviso to section 2(15). Tribunal's Findings: The Tribunal referred to the Hon'ble Supreme Court's decision in 'Ahmedabad Urban Development Authority' (449 ITR 1 SC), which clarified that statutory bodies engaged in activities mandated by law for public utility purposes do not fall under the mischief of "trade, commerce, or business" merely because they charge fees or sell properties at market rates. The Court emphasized that such activities, if incidental to the main charitable purpose and not driven by profit motives, do not disqualify the entity from claiming exemption under section 11. The Tribunal noted that the High Court had previously granted exemption to the Assessee for similar activities in earlier years, a decision upheld by the Supreme Court. It concluded that the facts for the year under consideration had not changed and thus, the Assessee's activities did not fall under the proviso to section 2(15). Consequently, the Assessee was entitled to exemption under section 11. Conclusion: The Tribunal allowed the appeal, reversed the order under appeal, and granted the Assessee exemption under section 11 of the Income Tax Act for the assessment year 2016-17. The order was pronounced on 25.05.2023.
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