2019 (2) TMI 364 - AT - Income Tax

Disallowing of claim u/s 11(1) and 11(1)(a) - charitable activity - Held that - Considering the fact that the assessee was a statutory body, an Authority constituted under the provisions of the Act, to carry out the object and purpose of Town Planning Act and collected regulatory fees for the object of the Acts, no services were rendered to any particular trade, commerce or business; and whatever income was earned by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) was required to be used only for the purpose to carry out the object and purpose of the Town Planning Act and to meet the expenditure of providing general utility service to the public such as electricity, road, drainage, water etc. and the entire control was with the State government and accounts were also subjected to audit and there was no element of profiteering at all. The activities of the assessee could not be said to be in the nature of trade, commerce and business and therefore, the proviso to Section 2(15) of the Act was not applicable so far as the assessee was concerned. Therefore, the assessee was entitled to exemption under section 11 - decided in favour of assessee

Summary

Issues involved:
Appeals filed against orders dated 28.04.2017 & 11.08.2017 by Commissioner of Income Tax (Appeals)-9, Ahmedabad for Assessment Years 2012-13, 2013-14, 2009-10, 2011-12 & 2014-15 under section 143(3) of the Income Tax Act, 1961.

Analysis:

Issue 1: Determination of total income after disallowing the claim u/s 11(1) and 11(1)(a) of the Act for A.Y. 2012-13.

Analysis: The Learned AO determined the total income at ?2,38,37,730 after disallowing the claim u/s 11(1) and 11(1)(a) of the Act for A.Y. 2012-13.

Issue 2: Claim of exemption u/s 11 and Section 11(1)(a) of the Act denied.

Analysis: The assessee claimed exemption u/s 11 and Section 11(1)(a) of the Act, arguing compliance with eligibility criteria for registration u/s 12A of the Act. However, the claim was rejected by the Learned AO, leading to an addition of ?2,38,37,730 in the assessee's income.

Issue 3: Dismissal of appeal by Learned CIT(A) based on applicability of proviso to Section 2(15) of the Act.

Analysis: The Learned CIT(A) dismissed the appeal, stating that the assessee is covered by the proviso to Section 2(15) of the Act, making Section 13(8) applicable. Consequently, the claim of benefit under Section 11 and 12 of the Act was rejected.

Issue 4: Interpretation of judgments of Jurisdictional High Court in similar cases.

Analysis: The Learned Counsel relied on judgments of Jurisdictional High Court in similar cases where the claim of the assessee was allowed. The Co-ordinate Bench's order in a previous case for A.Y. 2010-11 was also cited to support the claim.

Issue 5: Decision on the applicability of exemption u/s 11 of the Act.

Analysis: The Co-ordinate Bench found that the issue was covered by previous judgments and allowed the claim of the assessee towards exemption u/s 11 of the Act, deleting the disallowance of exemption and addition of ?2,38,37,730.

In conclusion, the appeals were allowed based on the precedent set by the Co-ordinate Bench and the judgments of the Jurisdictional High Court, leading to the deletion of the disallowed exemption and additional income.