2024 (3) TMI 147 - AT - Income Tax

Exemption u/s 11 and 12 - charitable activity u/s 2(15) - As alleged total receipts from trade, commerce or business/service rendition for the same which exceeded 20% of total receipts in the case of the appellant - As per AO assessee trust has not filed Form 10 and Form 10B electronically, before the due date of filing the Return of Income as per Rule 17(2) and 17(3) of the I.T. Rules. Further, it was not clear whether the assessee has invested its accumulated fund u/s. 11(2) of the Act in the manner prescribed u/s. 11(5) - AO held that the assessee trust is not eligible to claim exemption u/s. 11(2) of the Act r.w.r. 17(2) and 17(3) of the I.T. Rules for accumulation for specific purposes - CIT(A) allowed the appeal in favour of the assessee HELD THAT - We do not find any infirmity in the order passed by Ld CIT A , the claim of the Revenue that onus was on the assessee to prove that receipts were on cost basis and income of the assessee was on cost basis for which full details were not submitted by the assessee. But it is seen that the assessment was conducted u/s. 143(3) of the Act and the assessee furnished all details before the AO. Therefore, the Ld CIT A held that such requirement of huge supporting evidences in remand proceedings is not called for when no specific instances has been pointed out in assessment order to prove to the contrary. In fact, not only the Hon'ble Supreme Court has dismissed revenue's appeal in AUDA 2022 (10) TMI 948 - SUPREME COURT but also that of many other Gujarat Urban Development Authorities viz. Surat, Gandhinagar, Rajkot Development Authorities, etc., all of which are subjected to the same Act of Gujarat State Government and work under the Control and Rules stated therein as has been discussed in detail by the Hon'ble Gujarat High Court. In fact, co-ordinate Bench of this Tribunal in the case of Surat Urban Development Authority 2020 (4) TMI 755 - ITAT AHMEDABAD has also referred to the decision of the Hon'ble Gujarat High Court in AUDA 2017 (5) TMI 1468 - GUJARAT HIGH COURT as well as the decision of Vadodara Urban Development Authority 2019 (2) TMI 543 - ITAT AHMEDABAD to allow the appeal of SUDA. Thus the assessee is also governed by same Rules/Act and no further distinguishing facts have been highlighted by the AO in the remand proceedings further in the Grounds of Appeal raised before us with specific instances. The Revenue is also silent about the new Section 10(46A) proposes to exempt any income derived by a body or authority, board, trust, or commission, other than a company, established or constituted by or under a central or state act for one or more General Public Utility. Therefore in our considered opinion, the provision to section 2(15) of the IT Act is not applicable to the case of the assessee and therefore the Ground nos. 1 2 raised by the Revenue are devoid of merits and the same is liable to be dismissed. Addition made on account of fixed assets - CIT(A) not upholding the addition and directing to allow the same u/s. 11(1) of the Act after verification - HELD THAT - CIT A has clearly observed that there is no specific discussion made with respect to this issue in the assessment order made by the AO. Since the AO has denied benefit u/s 11 and section 12 of the Act to the assessee, as a consequence the addition to fixed assets being a capital expenditure stands disallowed. However, since the claim of benefit of section 11 is now allowed in favour of the assessee, the AO was directed to allow the same after verification as per law u/s 11(1) of the I.T. Act. The Revenue could not demonstrate any infirmity in the order passed by the Ld CIT A Delay in filing Form 10 - CIT DR is correct in his argument that filing of Form 10 is mandatory under section 11 2 of the Act after the amendment made in Finance Act, 2015 - Hon ble Delhi High Court considered this issue post amendment of the Act in the case of BAR COUNCIL INDIA 2024 (1) TMI 317 - DELHI HIGH COURT as held delay in filing Form 10 in the present case occurred because the amendments went unnoticed by the officials of the petitioner. The assessment year 2016-17 was the first occasion subsequent to those amendments. Therefore, we find no reason to disbelieve the explanation furnished by the petitioner to explain the delay in filing Form 10. Further, we are unable to fathom as to what benefit would accrue to the petitioner by delaying the filing of Form 10. In our opinion the discretion conferred for condoning the delay was not correctly exercised by the Commissioner Income Tax. Decided in favour of assessee. Disallowance of addition of fixed assets - CIT(A) partly confirming the disallowance and directing to allow the same u/s. 11(1) of the Act after verification - HELD THAT - Since the claim of benefit of section 11 is now allowed in favour of the assessee, the AO was directed to allow the same after verification as per law u/s 11(1) of the I.T. Act. The assessee could not demonstrate any infirmity in the order passed by the Ld CIT A and therefore the same does not require any interference.

Summary

Issues Involved:
1. Applicability of Proviso to Section 2(15) of the Income Tax Act.
2. Denial of Exemption under Sections 11 & 12 of the Income Tax Act.
3. Addition of Fixed Assets and its Allowance under Section 11(1).
4. Denial of Benefit under Section 11(2) due to Delay in Filing Form 10.

Summary:

1. Applicability of Proviso to Section 2(15) of the Income Tax Act:
The Revenue contested that the assessee's activities were commercial in nature, thereby invoking the proviso to Section 2(15) of the Income Tax Act, which would disqualify the assessee from claiming exemptions under Sections 11 and 12. The Tribunal noted that the assessee, an autonomous body under the Gujarat Town Planning and Area Development Act, 1976, carried out activities for public benefit such as town planning and infrastructure development. The Tribunal referred to the Supreme Court judgment in ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority, which clarified that statutory bodies performing public utility functions are not engaged in trade, commerce, or business. Consequently, the proviso to Section 2(15) was deemed inapplicable to the assessee, and the assessee was entitled to exemptions under Sections 11 and 12.

2. Denial of Exemption under Sections 11 & 12 of the Income Tax Act:
The Tribunal upheld the CIT(A)'s decision, which allowed the assessee's appeal based on the Supreme Court's ruling that statutory bodies like the assessee are not engaged in commercial activities and are thus eligible for exemptions under Sections 11 and 12. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.

3. Addition of Fixed Assets and its Allowance under Section 11(1):
The Revenue challenged the CIT(A)'s decision to not uphold the addition of Rs. 36,66,427/- made on account of fixed assets. The CIT(A) directed the AO to allow the same under Section 11(1) after verification. The Tribunal found no error in this decision, noting that the AO had not specifically discussed this issue in the assessment order. Since the benefit under Sections 11 and 12 was allowed, the addition to fixed assets as capital expenditure was also allowed after verification.

4. Denial of Benefit under Section 11(2) due to Delay in Filing Form 10:
The assessee contested the denial of benefit under Section 11(2) due to the delayed filing of Form 10. The Tribunal acknowledged that the filing of Form 10 is mandatory post the amendment by the Finance Act, 2015. However, it referred to the Delhi High Court's decision in BAR COUNCIL INDIA vs. CIT (E) and the Tribunal's decision in ITO -Vs- Ramji Mandir Religious And Charitable Trust, which allowed for the condonation of delay in filing Form 10 under certain circumstances. The Tribunal found the assessee's delay excusable and allowed the benefit under Section 11(2), setting aside the lower authorities' orders on this ground.

Conclusion:
The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals, granting exemptions under Sections 11 and 12, allowing the addition of fixed assets under Section 11(1) after verification, and condoning the delay in filing Form 10 for the benefit under Section 11(2).