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2023 (12) TMI 1224 - AT - Income TaxEligibility of exemption u/s 11 - main grievance of the revenue is that the relevant year under consideration is AY 2018-19; and the Parliament had substituted the first and second proviso of section 2(15) of the Act by Finance Act, 2015 w.e.f 01.04.2016 which is applicable for the year under consideration - whether the assessee s case falls under mischief of proviso to section 2(15)? - HELD THAT - We note that the relevant year under consideration is AY 2018-19 and the Parliament had substituted the first and second proviso of section 2(15) of the Act by Finance Act, 2015 w.e.f 01.04.2016 which is applicable for the year under consideration. And the Hon ble Supreme Court had laid the law on the issue regarding claim of exemption by similar assessee s in the case of Ahmedabad Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT as well as in the case of Servants of People Society 2023 (2) TMI 535 - SUPREME COURT which was decided after considering the proviso to section 2(15) of the Act, which admittedly the Ld. CIT(A) did not consider, before he passed the impugned order. n the light of the recent decision of the Hon ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) as well as Servants of People Society (supra), we are of the opinion that Ld. CIT(A) erred in merely following the order of the Tribunal in assessee s own case for AY. 2011-12 to AY. 2013-14 passed on 06.09.2022. And that AO has framed the assessment only discussing the Principle of Mutuality and did not consider the application of proviso to section 2(15) of the Act. And since the ratio laid by the Hon ble Supreme Court (supra) is applicable in the case of assessee for assessment regarding claim of exemption for the relevant year under consideration, in the interest of justice and fair play, we are inclined to set aside the impugned order and restore the assessment back to the file of AO for denovo assessment. AO to decide the issues claim of exemption involved in assessment for AY. 2018-19 after giving proper opportunity to assessee and assessee is directed to file relevant/details/written submission and request for video conference as per rules. Appeal of the revenue stands allowed for statistical purpose.
Issues Involved:
1. Justification of exemption under section 11 of the Income Tax Act. 2. Application of proviso to section 2(15) of the Income Tax Act. 3. Consideration of recent Supreme Court decisions. Summary: Issue 1: Justification of exemption under section 11 of the Income Tax Act: The main grievance of the revenue is against the action of the Ld. CIT(A) allowing the appeal of the assessee by following the Tribunal order in assessee's own case for AY. 2012-13 & AY. 2013-14 wherein exemption u/s 11 of the Income Tax Act, 1961 was allowed to the assessee. The revenue contends that the Tribunal did not consider the proviso to section 2(15) of the Act and recent Supreme Court decisions, specifically ACIT(Exemptions) Vs. Ahmedabad Urban Development Authority (2022) 143 taxmann.com 278 (SC). Issue 2: Application of proviso to section 2(15) of the Income Tax Act: The revenue argues that the objects of the assessee fall under "advancement of any other object of general public utility"¯ and that the benefit is limited to members of the assessee company only, thus invoking the proviso to section 2(15) of the Act. The AO held that the income from non-members is hit by the proviso to section 2(15) and computed it as "Business Income," rejecting the exemption u/s 11 of the Act. Issue 3: Consideration of recent Supreme Court decisions: The Ld. DR emphasized that the Ld. CIT(A) did not consider the recent Supreme Court decision in Ahmedabad Urban Development Authority (2022) while allowing the exemption. The revenue asserts that the fees charged by the assessee are significantly higher than the cost incurred, constituting commercial or business receipts, and thus attracting the proviso to section 2(15) of the Act. Judgment: The Tribunal noted the revenue's contention that the relevant year is AY 2018-19, and the proviso to section 2(15) of the Act was amended by the Finance Act, 2015, applicable from 01.04.2016. The Tribunal found merit in the revenue's argument that the Ld. CIT(A) erred in following the Tribunal's earlier order without considering the Supreme Court's recent decisions. The Tribunal set aside the impugned order and restored the assessment to the AO for a de novo assessment in light of the Supreme Court's rulings in Ahmedabad Urban Development Authority (2022) and Servants of People Society (2023). The AO is directed to provide proper opportunity to the assessee and consider the Supreme Court decisions before passing a fresh assessment. Conclusion: The appeal of the revenue is allowed for statistical purposes, and the case is remanded to the AO for a fresh assessment considering the recent Supreme Court decisions.
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