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2022 (2) TMI 334 - AT - Income TaxExemption u/s 11 - CIT-A rejected application observing that GDA is not Institution working for charitable purposes since it was not registered under Indian Trusts Act, 1982 or Societies registration Act, 1860 - CIT(A) held that the assessee is engaged in development of land and in accordance to the Uttar Pradesh Urban Development Act 1973 - whether Section 2(13) of the Income Tax Act, 1961 is applicable to the functions of the assessee or whether it is Section 2(15) of the Act which needs to be invoked? - HELD THAT - As per Section 7 of the Act, the object of authority is to promote and secure the development of the area according to the plan and for that purpose authority shall have power to acquire, hold, manage and dispose of land and other property to carry out building, engineering, mining and other operations to execute the works in connection with the supply of water and electricity dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary end expedient for the purpose of such development and for purposes incidental thereto. Provided that save as provided in this act nothing contained in this act shall be construed as authorizing the disregard by the authority of any law for, the time being in force. Thus, the above said act authorizes the assessee to undertake any activity to fulfill the main object of development of land in the specified area. In the instant case, the AO has not brought anything on record that distinguishes the clauses of the trust that were available before the authorities while granting registration u/s. 12AA of the Act. There has been no change in the objects of the assessee. Hence, we hold that invoking of provisions of Section 2(13) against the relevant provisions of Section 2(15) is not legally sustainable Hence, we hold that the decision of the ld. CIT(A) cannot be sustained. Having held that the assessee is eligible for deduction u/s. 11 of the Act, the matter is being remand back to the file of the ld. CIT(A) for the limited purpose of recomputing the eligible deduction in accordance with the provisions of Section 2(15).Having held that the assessee is eligible for deduction u/s. 11 of the Act, the matter is being remand back to the file of the ld. CIT(A) for the limited purpose of recomputing the eligible deduction in accordance with the provisions of Section 2(15) - Decided in favour of assessee.
Issues Involved:
1. Validity of subjecting the appellant to income tax. 2. Assessment order being barred by limitation. 3. Denial of exemption under sections 11 and 12. 4. Rejection of books of accounts. 5. Addition on account of closing stock. 6. Addition on account of sales made during the year. 7. Addition on account of interest received on installments. 8. Directions under section 144A. Issue-wise Detailed Analysis: 1. Validity of Subjecting the Appellant to Income Tax: The assessee, a development authority, argued that it should not be subjected to income tax. However, the CIT(A) and AO held that the assessee's activities, including buying and selling land, were of a commercial nature. The Tribunal, referencing previous judgments, concluded that the assessee's activities fell under "charitable purpose" as defined in Section 2(15) of the Income Tax Act, 1961, and not "business" under Section 2(13). Therefore, the assessee should be eligible for exemption under sections 11 and 12. 2. Assessment Order Being Barred by Limitation: The appellant contended that the assessment order was passed beyond the permissible time limit. The Tribunal did not find sufficient grounds to address this issue explicitly, focusing instead on the substantive issues of taxability and exemptions. 3. Denial of Exemption Under Sections 11 and 12: The AO denied the exemption under sections 11 and 12, arguing that the activities were commercial. The Tribunal disagreed, citing that the assessee was registered under section 12AA and its activities were for "public utility." The Tribunal held that the denial of exemption was not justified and directed the CIT(A) to recompute the eligible deduction. 4. Rejection of Books of Accounts: The AO rejected the books of accounts under section 145(3), citing incomplete records and lack of verification by special auditors. The Tribunal noted that the AO's rejection was based on procedural issues rather than substantive discrepancies, implying that the rejection might not have been warranted. 5. Addition on Account of Closing Stock: The AO made a significant addition to the closing stock, which was partially upheld by the CIT(A). The Tribunal did not provide a detailed analysis on this specific issue but implied that the recomputation of deductions would address any discrepancies. 6. Addition on Account of Sales Made During the Year: The AO added a substantial amount to the income based on sales made during the year. The Tribunal's focus on the exemption under sections 11 and 12 suggests that this addition might be reconsidered during the recomputation of eligible deductions. 7. Addition on Account of Interest Received on Installments: The AO added interest received on installments to the income, which was upheld by the CIT(A). The Tribunal's directive to recompute deductions implies that this addition will also be reassessed. 8. Directions Under Section 144A: The CIT(A) sought directions under section 144A, which the appellant contested. The Tribunal did not specifically address this procedural issue, focusing instead on the substantive taxability and exemptions. Conclusion: The Tribunal concluded that the assessee's activities were charitable and not commercial, making it eligible for exemption under sections 11 and 12. The case was remanded back to the CIT(A) for recomputation of eligible deductions. The Tribunal's decision effectively nullified the AO's and CIT(A)'s findings that subjected the appellant to income tax based on commercial activities. Order Pronounced: The appeals of the assessee were allowed, and the appeal of the Revenue was dismissed. The order was pronounced in the open court on 28/01/2022.
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