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2021 (5) TMI 822 - AT - Income TaxExemption u/s 11 - Charitable activity u/s 2(15) - assessee drawing the receipt from various regulatory activities - as per revenue activities of the appellant as activities in nature of Trade, Business or Commerces or rendering services in relation to trade, commerce or business - assessee/appellant is a body corporate constituted under Uttar Pradesh Urban Planning Development Act, 1973. The assessee was filing its returns of income in the status of 'Local Authority' and claiming exemption d/s 10(20A) earlier - HELD THAT - Activities like Income from sale of plots/ lands ,Freehold conversion income, interest income from instalments,development charges, building plan sanction fees, lease rent, income from stamp duty , Building rent,Sale of masterplan book/tender form,Cycle/scooter/car stand charges and Miscellaneous incomewere discharged by the assessee in accordance with the objects of the Development Act 1973 and other statutory obligations, and therefore we have no hesitation to hold that all these activities are charitable in nature. These activities were undertaken by the assessee on account of the mandate given to it to do generalize charitable activities for the planned development of the city. These are regulatory and development activities which were done by the assessee and the receipt of the revenue was on account of the said activities. The predominant character of the activities continues to be that of the state and therefore the element of welfare and charity is inbuilt. In the light of the above we hold that these activities also charitable in nature From the reading of section 18 of the Development Act, it is clear that, the authorities entitled to transfer, dispose of and use the land in the manner provided by the state government or in any other manner as deemed fit. In our considered opinion, the giving of building on rent, parking space, sale of tender document for the purpose of development etc are having direct nexus with the obligation of the assessee under the act. The receipt of the amount on account of the above said activities are related to the statutory and state function of the assessee authority. In our view the above said activities were undertaken by the assessee on account of its obligation under the act and were done by the assessee keeping in mind the welfare and interest of the citizen in mind. The said activities were undertaken by the assessee without any discrimination and on the basis of the guidelines issued by the state government and other authorities in this regard. Respectfully following the decision of the coordinate bench in the matter of JHANSI DEVELOPMENT AUTHORITY 2021 (1) TMI 680 - ITAT AGRA we hold that the assessee activities like Income from sale of plots/ lands ,Freehold conversion income, interest income from instalments, development charges, building plan sanction fees, lease rent , income from stamp duty , Building rent, Sale of masterplan book/tender form, Cycle/scooter/car stand charges and Miscellaneous income were discharged by the assessee in accordance with the objects of the Development Act 1973 and other statutory obligations , and therefore we have no hesitation to hold that all these activities are charitable in nature.The activities of the assessee in receipt of amount from such activities cannot be examined in isolation, as the assessee was propelled to do all these activities under the statutory obligation under Development Act 1973 and therefore even if there is receipt more than the threshold limit, then also these activities which were driven by the Development Act, 1973 cannot be held to be in the nature of trade commerce or business. Various other authorities including Aligarh Development authority, NOIDA development authority etc , which are discharging the similar functions as that of the assessee and were created under the Development Act 1973, wereheld to be entitled for deduction under Section 11 the Income Tax Act by ITAT, Delhi. In the light of the above we are of the opinion that the assessee is also entitled to deduction under section 11 of the Income Tax Act for the activities mentioned hereinabove.- Decided in favour of assessee.
Issues Involved:
1. Status of the appellant as AOP (Trust) 2. Applicability of Section 2(15) of the IT Act, 1961 3. Denial of benefits under Section 11 of the IT Act, 1961 4. Applicability of Section 145(3) of the IT Act, 1961 5. Confirmation of recast net loss 6. Exemption of various incomes 7. Allowability of transfers to the infrastructure fund as expenditure 8. Additions in respect of old outstanding entries in the bank reconciliation statement 9. Additions in respect of liabilities under "sale of properties" 10. Additions for non-inclusion of other receipts under the infrastructure fund 11. Additions in respect of interest on FOR 12. Disallowance of payment made to UP Jal Nigam 13. Additions in respect of interest on FOR out of Path Kar receipts 14. Principles of natural justice 15. Other miscellaneous grounds Detailed Analysis: 1. Status of the appellant as AOP (Trust) The appellant argued that the CIT(A) erred in not treating its status as an AOP (Trust). The Tribunal, after examining the facts and the statutory obligations of the appellant under the U.P. Urban Planning and Development Act, 1973, concluded that the activities of the appellant were charitable in nature. The Tribunal held that the appellant was discharging its statutory duties and was not engaged in trade, commerce, or business. Therefore, the status of the appellant as an AOP (Trust) was upheld. 2. Applicability of Section 2(15) of the IT Act, 1961 The Tribunal examined whether the activities of the appellant fell under the definition of "charitable purpose" as per Section 2(15) of the IT Act. The Tribunal concluded that the appellant's activities, such as the sale of plots/lands, freehold conversion income, development charges, and building plan sanction fees, were carried out under statutory obligations and were charitable in nature. The Tribunal relied on the decisions of higher courts, including the Supreme Court and various High Courts, to hold that the appellant's activities were not in the nature of trade, commerce, or business. 3. Denial of benefits under Section 11 of the IT Act, 1961 The CIT(A) had denied the benefits under Section 11, holding that the appellant's activities were commercial. The Tribunal, however, found that the appellant was entitled to exemption under Section 11 as its activities were charitable and carried out under statutory obligations. The Tribunal emphasized that the activities were driven by the Development Act, 1973, and were for the public good. 4. Applicability of Section 145(3) of the IT Act, 1961 The appellant contended that the CIT(A) erred in applying Section 145(3) to its case. The Tribunal upheld this contention, stating that the appellant's income was not derived from business or professional activities but from statutory functions. Therefore, the provisions of Section 145(3) were not applicable. 5. Confirmation of recast net loss The Tribunal held that the CIT(A) erred in confirming the recast net loss. The Tribunal found that the appellant's activities were charitable and statutory, and the recast net loss should not have been confirmed. 6. Exemption of various incomes The Tribunal examined the exemption of various incomes, including development charges, bank interest, interest from employees, stamp duty, income from Path Kar, and other miscellaneous incomes. The Tribunal held that these incomes were derived from statutory activities and were exempt under Section 11. 7. Allowability of transfers to the infrastructure fund as expenditure The Tribunal found that the CIT(A) erred in not allowing the transfers to the infrastructure fund as expenditure. The Tribunal held that these transfers were statutory obligations and should be allowed as expenditure. 8. Additions in respect of old outstanding entries in the bank reconciliation statement The Tribunal held that the CIT(A) erred in confirming the addition of old outstanding entries in the bank reconciliation statement. The Tribunal found that these entries were related to statutory functions and should not have been added. 9. Additions in respect of liabilities under "sale of properties" The Tribunal held that the CIT(A) erred in confirming the addition of liabilities under the head "sale of properties." The Tribunal found that these liabilities were related to statutory activities and should not have been added. 10. Additions for non-inclusion of other receipts under the infrastructure fund The Tribunal held that the CIT(A) erred in confirming the addition for non-inclusion of other receipts under the infrastructure fund. The Tribunal found that these receipts were statutory and should be included in the infrastructure fund. 11. Additions in respect of interest on FOR The Tribunal held that the CIT(A) erred in confirming the addition of interest on FOR. The Tribunal found that the interest was derived from statutory activities and should not have been added. 12. Disallowance of payment made to UP Jal Nigam The Tribunal held that the CIT(A) erred in disallowing the payment made to UP Jal Nigam. The Tribunal found that the payment was a statutory obligation and should be allowed as expenditure. 13. Additions in respect of interest on FOR out of Path Kar receipts The Tribunal held that the CIT(A) erred in confirming the addition of interest on FOR out of Path Kar receipts. The Tribunal found that the interest was derived from statutory activities and should not have been added. 14. Principles of natural justice The Tribunal found that the order appealed against was contrary to the principles of natural justice. The Tribunal emphasized that the appellant's activities were statutory and charitable, and the principles of natural justice should be upheld. 15. Other miscellaneous grounds The Tribunal allowed the appellant to add, delete, modify, or substitute any or all grounds of appeal at any appropriate time. The Tribunal emphasized that the appellant's activities were charitable and statutory, and any other grounds should be considered in light of this finding. Conclusion The Tribunal allowed the appeals of the appellant and dismissed the appeal of the revenue. The Tribunal held that the appellant's activities were charitable and statutory, and the benefits under Section 11 should be allowed. The Tribunal emphasized that the appellant was not engaged in trade, commerce, or business, and its activities were for the public good.
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