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TMI Blog2025 (1) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; erred, both in law and on facts, in holding that the appellant cannot be termed as charitable organization within the meaning of Sec. 2(15) of the I.T. Act by virtue of provisions contained in Sec. 58 of Uttar Pradesh Urban Planning & Development Act, 1973. Ld. CIT (A) failed to appreciate that as per statutory provisions, the dissolution of the authority could take place only when the purpose, for which the authority was constituted, has been substantially achieved. The Ld. CIT(A) was not justified to hold that the appellant has been created not by any irrecoverable transfer of assets. Further Ld. CIT(A) was legally unjustified in holding that the objects of the appellant are not charitable in view of the findings of Hon'ble Supreme Court in the case of ACIT Vs Surat Art Silk Cloth Mfrs. Association & CIT Vs Andhra Pradesh State Road Transport Corporation. The examination of objects was not within the domain of Assessing Officer or the Ld. CIT(A) during subsistence of registration u/s 12A. 2. Because the Ld. CIT(A) grossly erred, both in law and on facts in not following the pronouncement of the Hon'ble jurisdictional High Court in the case of Lucknow Development Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, both in law and on facts, in sustaining the addition of Rs 8,68,50,000/- being the receipts shown in the 'Tourism Development Grant UP'. Ld. CIT(A) failed to appreciate that the above statutory receipts are in the form of government grants and not against any of the alleged business activities. The Ld. CIT(A) erred in law in holding the above grant as revenue receipts. Further, sustaining disallowance by Ld. CIT(A) is again in utter disregard to judicial pronouncement. 6. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 1,06,11,658/-, being the prior period expenses incurred during the year. The authorities below failed to appreciate the accounting system consistently followed by the appellant relating to payment made during the year in respect of work completed in earlier year. 7. Because the appellant craves leave to alter/ modify grounds before or at the time of hearing of the appeal." ITA No. 519/Lkw/2018, Grounds of appeal (A.Y. 2014-15) 1. Because the Ld Commissioner of Income Tax (Appeals)-4, Lucknow, hereinafter referred to as 'CIT(A)' erred, both in law and on facts, in holding that the appellant cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013) 38 taxmann.com 246 (All. HC)], Moradabad Development Authority [ITA No. 3 of 2017 dt. 03.05.2017] [Lucknow bench, Alld. HC] and Hon'ble ITAT in Moradabad Development Authority [(2018) 89 Taxmann.com 263 (ITAT Delhi)]. 4. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 16,21,362/- being the balance in 'infrastructure development fund account'. Ld. CIT(A) failed to appreciate that the amount in the above statutory fund are specifically received by virtue of Government Order dt. 15.01.1998 and are meant for utilization in the development activities exclusively. Ld CIT(A) further failed to appreciate that the unutilized left over amount was to be utilized in development activities in continuity. The denial of exemption U/s 11 in respect of unutilized fund of 'infrastructure development fund Account', is in utter disregard to various judicial pronouncement including authoritative judicial pronouncement of Hon'ble Allahabad High Court in the case of Lucknow Development Authority [(2013) 38 taxmann.com 246 (All.)]. 5. . Because the appellant craves leave to alter/ modify grounds before or at the time of hearing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appreciate that no part of income or property of the appellant is used directly or indirectly for the benefit of persons specified in Sec. 13(3). The employees of the appellant are not specified persons within the provisions of Sec. 13(3) of the I.T. Act. 4. Because the Ld. CIT(A) erred, both in law and on facts, in disallowing exemption U/s 11 to the appellant, holding its income as taxable business income and thereby sustaining addition of surplus amounting to Rs 13,46,17,446/-. The disallowance of exemption U/s 11 as well as holding the income as taxable business income is again in utter disregard to authoritative judicial pronouncements of Hon'ble High Court in the case of Lucknow Development Authority [(2013) 38 taxmann.com 246 (All. HC)], Moradabad Development Authority [ITA No. 3 of 2017 dt. 03.05.2017] [Lucknow bench, Alld. HC] and Hon'ble ITAT in Moradabad Development Authority [(2018) 89 Taxmann.com 263 (ITAT Delhi)]. 5. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of Rs 14,01,930/- being the balance in 'infrastructure development fund account'. Ld. CIT(A) failed to appreciate that the amount in the above statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble ITAT, Delhi in case of Moradabad Development Authority dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 c. Order of Hon'ble ITAT, Agra in case of Agra Development Authority for AY 2011- 12 in ITA No. 215/Agr/2016 dated 17.05.2021 and d. Order of Hon'ble ITAT, Agra in case of Jhansi Development Authority for AY 2010-11 in ITA No. 256/Agr/2014 dated 13.01.2021 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition against the NIL returned income as made by the appellant was founded on the following undisputed facts (i) the appellant is an authority duly notified as such under the Urban Planning and Development Act, 1973, by the State Government, for attainment of objects of General Public Utility. (ii) the Hon'ble ITAT in its own case, in ITA No. 703/Luc/03, order dated 25.07.2005 has already held that the object of the appellant are the objects of General Public Utility falling in the definition of charitable purposes as given in section 2(15) of the I.T. Act (iii) accordingly, the appellant has already been held to be eligible for registration under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts by disregarding the following judgements in case of other Development Authorities which were also constituted under the same Act as that of the appellant Authority and whose objects are the same as that of the appellant Authority: a. Judgement of Hon'ble Allahabad High Court in case of Moradabad Development Authority dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Order of Hon'ble ITAT, Delhi in case of Moradabad Development Authority dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 c. Order of Hon'ble ITAT, Agra in case of Agra Development Authority for AY 2011- 12 in ITA No. 215/Agr/2016 dated 17.05.2021 and d. Order of Hon'ble ITAT, Agra in case of Jhansi Development Authority for AY 2010-11 in ITA No. 256/Agr/2014 dated 13.01.2021 7. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition against the NIL returned income as made by the appellant was founded on the following undisputed facts (i) the appellant is an authority duly notified as such under the Urban Planning and Development Act, 1973, by the State Government, for attainment of ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(15) of the Income- tax Act. 4. That the Ld. Assessing Officer has erred in law and on facts in disallowing the exemption u/s 11 on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1961. 5. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by not treating the appellant as Charitable Institution, even though the same has already been adjudged to be so by the Hon'ble Allahabad High Court in its judgement dated 16.09.2013 in appellant own case in ITA No. 4 of 2011 for A.Y. 2006-07 along with ITA No. 31 of 2010 for A.Y. 2004-05. 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by disregarding the following judgements in case of other Development Authorities which were also constituted under the same Act as that of the appellant Authority and whose objects are the same as that of the appellant Authority: a. Judgement of Hon'ble Allahabad High Court in case of Moradabad Development Authority dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Order of Hon'ble ITAT, Delhi in case of Moradabad Development Authority dated 04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stay petitions for the assessment years 2012-13, 2014-15 and 2015-16. As the issues involved in all these appeals are common and the stay petitions also arise out of these issues, all the appeals are being taken up for disposal. Since assessment year 2012-13 is the first assessment year, the same is being taken up as the lead case and the common issues would be discussed with reference to the assessment done in assessment year 2012-13. Only unique issues pertaining to other assessment years would be discussed separately. However, our observations with regard to the issues in assessment year 2012-13 and other years would apply to all the assessment years in question. 4. The brief facts of the case (for A.Y. 2012-13) are that the assessee filed a return of income in ITR 7 on 30.09.2012 declaring nil income. The case of the assessee was selected for scrutiny and statutory notices were issued by the ld. AO. The main question that was addressed by the ld. AO, was with regard to the claim of the assessee for grant of exemption under section 11 of the Income Tax Act, 1961. The assessee is registered under section 12A of the Income Tax Act. It was formed for the development of the twin c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was neither in the field of education, nor in the field of medical relief of poor and held that, at the most, after seeing the objects and activities carried out by the assessee, it could be considered that the assessee was falling within the scope of, "general public utility" as per section 2(15) of the Income Tax Act, 1961. 5. The ld. AO further observed that the activities of the assessee were in the nature of real estate business and the provisions of the first proviso to section 2(15) of the Income Tax Act, 1961 were applicable to its case. He, therefore, asked the assessee as to why the claim of exemption under section 11 of the Income Tax Act, 1961 should not be disallowed and why the net profit shown in its profit not be brought to tax. In response, the assessee submitted that its activities were of charitable nature and the first proviso to section 2(15), was not applicable in its case because its aims were the coordinated and planned development of the historical cities of Ayodhya and Faizabad. It further relied on the judgment of the Hon'ble Allahabad High Court dated 16.09.2013 in its own case, where the Hon'ble Allahabad High Court had ruled in its favour and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent conflict of decisions of the two courts. The ld. Addl CIT (E) issued directions under section 144A in which it was stated as under:- "Going through section 2(15), it is obvious that carrying of any activities for charitable purposes is the back bone for allowability of exemption under section 11. Charitable purpose includes relief of the poor, education, medical relief, preservation of environment and the advancement of any other object of general public utility. At the same time, any trust/institution's business activities having receipts more than Rs. 25 Lacs is beyond the purview of allowability of exemption under section 11, in spite of working for the advancement of general public utility. The above development authorities work like private developers and provide all facilities like private developers with a view to attract investors, so that they can earn more. Also, CBDT vide letter dated 31.12.2014 supports this view. Hence, you need not hesitate to rely on recent Supreme Court judgment in the case of Jammu Development Authority and comply with the direction of the CBDT." 8. Thereafter, the ld. AO quoted extensively from the judgment of the Hon'ble ITAT in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free of cost and not for a gain, but the Jalandhar Development Authority was performing activities similar to big colonizers / developers who were earning a huge profit. The Hon'ble Tribunal had held that the assessee authority had turned into a huge profit-making agency and that even for creating / developing institutions of public importance, the assessee was charging the cost of it from the public at large and from the coffers of the Government. It further observed, that the development of facilities by the authority were merely a means of attracting people for purchase of plots and the costs for development of the facilities were hidden in the costs of the plots. It further opined that similar development / infrastructure / facilities were also provided by private developers these days and were incidental to the commercial activity, as they were not only a basic requirement but a tool for attracting investors, wherein the hidden cost of those facilities were already included. The Hon'ble ITAT had observed that the objects of the assessee, though claimed to be charitable, were actually of a purely commercial nature where the profit motive was involved because the assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting principle. Furthermore, since he had already denied the assessee's claim of exemption under section 11, the receipts of the infrastructure development fund of Rs. 92,10,505/-, was treated to be the income of the assessee and was accordingly added back. The ld. AO further observed that during the year, the assessee had received a grant of Rs. 8,68,50,000/- under the head, 'tourism development grant-U.P.'. However, the assessee had not included these receipts in its income for the year, but had directly transferred the amount to the balance-sheet, which was against normal accounting principles. Since, he had already denied the assessee's claim for exemption under section 11, the ld. AO decided to treat the grant of Rs. 8,68,50,000/-, as the income of the assessee, and it was accordingly added back to the income of the assessee. Finally, the ld. AO observed, that during the year the assessee had debited Rs. 1,06,11,658/- to the head, prior period expenses. The assessee had failed to justify the inclusion of this amount in the expenses for the current year and since in his view, this was not an allowable expenditure, he added the same back to the income of the assessee. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various functions. He held that this was a separate income of the assessee and was a commercial activity to derive the maximum profit from the asset owned by the assessee. It was not an income incidental to the business activity of the assessee, because the assessee had no byelaws and it had submitted that its main activity was developing plots and making flats. The ld. AO also referred to the provisions of sub section 4A of section 11 and pointed out that as per the same, this sub section stated that first of all, the business needed to be incidental to the attainment of the objectives of the trust or institution and that separate books of accounts needed to be maintained by such trust / institution for availing the benefits, but rental income was not incidental to the attainment of the objects of the trust / institution and separate books had not been maintained for it. He, therefore, held that on this account also, it was not eligible for exemption under section 11. On the issue of the Government Order dated 20.11.1999 giving concessions to the officers and employees of the authorities in price and allotment, he quoted from the orders of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the instruction of the Board was only to examine the nature of activities of the assessee, while the judgment of the Hon'ble Supreme Court related to the denial of registration under section 12A. It was further submitted that as the activities of the assessee had already been considered by the Hon'ble ITAT while directing the grant of registration under section 12A, the judgment in Jammu Development Authority was not applicable to the assessee's case. It was submitted that there were a series of judgments, including the binding judgment of the Hon'ble Allahabad High Court on the issue of activities which were being carried out by development authorities. It was further submitted that the assessee was carrying out its activities strictly in accordance with its objects as contained in section 7 of U.P.U.P.D.A. 1973 and the statute did not allow for any commercial activities. The surplus appearing in the books was incidental to the other activities carried out by the assessee. It was further pointed out that the issue as to whether authorities like the assessee were carrying on any business activity, had been considered by the jurisdictional High Court as well as the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically given to develop the city, in order to attract the tourism. Such receipts were not the income of the appellant within the meaning of section 2(24) of the Act, as the institution receiving such grant had to spend the funds on the projects specified in the Government order. It was further submitted, that the assessee had incurred expenditure of Rs. 11,08,84,212/- during the year on the given projects and placing reliance on the decisions such as DCIT vs. Gujarat State Council (2014) 41 taxman.com 449 (Gujarat) and DIT vs. Society for Developing Alternatives (2012) 18 taxman.com 364 (Delhi), it was submitted that such grants were merely capital receipts and not Revenue receipts therefore, the addition made in this regard was not sustainable. Finally, it was submitted that the addition of prior period expenses claimed as expenditure during the year, was not warranted, because his expenses had not been claimed in earlier years. In subsequent hearings, the assessee submitted that the order of the Hon'ble ITAT granting registration under section 11 of the I.T. Act, 1961, passed in the case of Moradabad Development Authority, had been challenged by the Revenue before the Luck ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the decision of the Hon'ble Supreme Court in Hemlata Gargya vs. CIT (2003) 259 ITR 1 (SC) and the decision of the Hon'ble Supreme Court in Kunhayammed & Ors vs State Of Kerala & Anr (2000) 245 ITR 360 (SC), in which their Lordships had held that an order refusing special leave to appeal did not stand substituted in place of the order under challenge. It was submitted that the mere dismissal of the SLP by the Hon'ble Supreme Court against the judgment of the Hon'ble Jammu & Kashmir High Court in the case of Jammu Development Authority could not be construed as having the effect of elocution of law by the Hon'ble Supreme Court on the subject against the assessee authority and therefore, the view point of the Income Tax Department that the mandate of the Hon'ble jurisdictional High Court on the issue in the case of Lucknow Development Authority and Ors (including the assessee itself) in ITA No. 4 of 2011 for A.Y. 2006-07 and ITA No. 31 of 2010 for A.Y. 2004-05 dated 16.09.2013 could cease to have its binding force and hence preference should be given to the judgment of the Hon'ble Jammu & Kashmir High Court, had been held and observed by the Hon'ble ITAT in the case of Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the State Government. Hence, they were not beneficiaries of the said scheme. Furthermore, even they could not be equated with managers of the assessee authority as they did not have the ultimate power. This was because the Members were appointed by the State Government by virtue of section 4 of the U.P.U.P.D.A. 1973 and as per section 58, the U.P.U.P.D.A. 1973, the State Government was empowered to dissolve the development authority. Furthermore, State Government had the power to call for records of the authority under section 41, approve the budget under section 20, make the Rules under section 55 etc. Thus, from the above, it was clear that the main powers were vested with the State Government and the members of the authority were appointed merely for managing the daily affairs of the assessee authority. Further, the members of the authority being ex officio State Government employees could not be said to have any interest whatsoever in the assessee authority. Hence, the benefits provided by the assessee to its employees could not be equated to have been provided to the persons defined under section 13(3) of the Income Tax Act. 17. In consideration of the matter, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the provisions of section 2(15) as amended by w.e.f. 1.04.2009 specifically prescribed that advancement of any other object of general public utility shall not be considered as a charitable activity if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering of any service relating to a trade, commerce or business for access or any other consideration, irrespective of the nature or use of application or redemption of income from such activity. The ld. CIT held that the intention behind the charitable activity was always philanthropic and not to recoup or reimburse in monetary terms, what was given to the beneficiaries and the fee charged and the quantum of income could be indicative of whether the person was carrying out business or not. 18. The ld. CIT(A) considered the order of the Hon'ble Allahabad Court in the case of CIT vs. Lucknow Development Authority & Ors dated 16.09.2013 which was relied on by the assessee and pointed out that in that case, the Hon'ble Court had held that where the trust was carrying out its activities with no motive to earn profit, for the fulfillment of its aims and object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 332 & 333/Lkw/2013, where the Hon'ble ITAT had held that the activity carried on by the assessee was no different from that carried out by private entrepreneurs on account of offering of plots / space by way of auctioning / tender. He also quoted from portions of the order in the case of Kanpur Development Authority, wherein the Hon'ble Bench had held that the amendment to section 2(15) of the Act had in fact limited the scope of general public utility charities by pointing out, that if the same involved the carrying of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a fee or a cess or any other consideration then that activity would not be regarded as a charitable activity, irrespective of the nature or use of application of income from such activity or the retention of such income by the concerned entity. Therefore, the Lucknow Bench of the ITAT had held in the case of Kanpur Development Authority, that after the insertion of the proviso in section 2(15), in such cases, the eligibility for registration stood cancelled and therefore, the ld. CIT had the power to rectify his e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each and every facility that it provided and was therefore, operating on the lines of a commercial enterprise. With regard to interest received, he submitted that the assessee earned interest from bank deposits and the same was reinvested to generate fresh investment. It had more than Rs. 11.11 Crores of investment in the form of FDRs and savings accounts and was earning interest on the same. This earning of interest was devoid of any charitable purpose and was also not incidental to the nature of activity performed by the assessee. Furthermore, the assessee was earning interest from persons who had taken the properties of the assessee. The ld. CIT(A) also observed that the assessee had not made any byelaws and what was being done was being done as per the byelaws of the U.P.U.P.D.A. 1973 and while the assessee had submitted that it was working for the weaker section of the society and costing was decided for the benefit of the weaker section, it was unable to respond to the query as to how the sales of properties made by it had benefited the weaker sections. The assessee was also unable to back up its claim that HIG/ MIG/ LIG/EWS were sold at lower value than cost price. It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had failed to submit relevant details to justify the claims of expenditure incurred therefore, merely on the principle of allowability of prior period expenses as necessary for business, the claim of the assessee could not be entertained. Therefore, he dismissed all these grounds of the assessee and the appeal itself. 24. The ld. CIT(A) dealt with the issue of disallowance on account of violation of section 13(3) of the Act by the assessee in his order for the A.Y. 2015-16. He pointed out that section 13(3) of the Act demands that if any part of the income or property of the trust is used or applied directly or indirectly for the benefit of specified persons as per section 13(3), then he income of the trust will not be exempt under section 11 and he observed that the ld. AO had pointed out, that the assessee was allowing reservation of 2% in the allotment of property and was also allowing discount of 10% in the present value of the property to the employees of the assessee. He pointed out that the employees of the assessee authority also included persons specified under section 13(3) of the Act. The ld. CIT(A) noted that the submissions made by the assessee were completel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were for years prior to the introduction of this proviso to section 2(15). The ld. CIT(A) also pointed out that subsequently section 10(46) had been inserted into the Act to provide exemption in respect of income of authorities established by the Central Government or the State Government of regulating or administering any activity for the benefit of the general public. The decisions relating to the Greater Noida Authority, Noida and YEIDA relied upon by the assessee actually pertained to approval under section 10(46) of the Act. The ld. CIT(A) pointed out that the assessee is not approved under section 10(46) and the very fact that such provision was enacted, itself went to show that entities such as the assessee were not previously eligible to claim exemption under section 11 of the Act, because they would invariably be hit by the first proviso to section 2(15) of the Act, 1961. 26. Finally, in his orders for the A.Ys. 2017-18 and 2018-19, the ld. CIT(A) dealt with the claim of depreciation claimed by the assessee and disallowed by the ld. AO in accordance with the provisions of section 11(6) of the Act. The ld. CIT observed that as the exemption under section 11 had been disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /aath-1-13-80vividh/2010 dated 5/12/2013, which dealt with housing for EWS and LIG category. Taking us through the same, she pointed out that the authority was obliged to provide for a minimum of 10% of units for EWS and another 10% for LIG category in any housing scheme undertaken by it . If the project was larger than 4 hectares it was to be provided within that project, but even if it was smaller, it had to be provided within 5 kms from the project. She submitted that the costing and pricing of the property sold bey the authority was under Govt Control. She further invited our attention to Govt Order number 4912/9-aa-1-99/32 Hudco/97 TC dated 4/11/1999, to point out that not every property was auctioned. In case of residential units, first they were to be disposed of by lottery and only the unsold units/land were to be offered for auction. As regards commercial units, she submitted that the same were auctioned to obtain premium, but even here she submitted that it was necessary to develop those commercial properties for the planned development of the area and specific guidelines had been laid down by the Govt on how auctions should be done by way of Govt Order no 378/9-aa-1sampa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar locality and it was not aimed at earning profits but recovering costs.With regard to the issue of disallowance on account of alleged violation of section 13(3), the ld. AR submitted that there was in fact no violation and she took us through the Government order to show that the employees of the authority were only one of the many categories that had been afforded these concessions. 28. The ld. AR, then questioned the decision of the ld. CIT(A) to uphold the addition in the case of Infrastructure Development and Reserve Fund (IDRF). It was submitted that though that fund stood in the name of the development authority but it was administered by a committee appointed by a State Government and the authority had no say in the matter of how those funds would be utilized. The State Government, vide its order dated 15.01.1998 had also laid down what proportion of its income had to be set aside for the Infrastructure Development and Reserve Fund (IDRF). The ld. AR further pointed out that the Hon'ble Allahabad High Court in the case of Lucknow Development Authority and Ors vide its order dated 16.09.2013, in which the assessee was also a party, had pointed out that the Infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of diversion / application of income, she pointed out that once registration under section 12A had been granted, the computation was to be done as per section 11 and if some amount was a corpus or part of capital receipt, then the same could not be taken into the income and expenditure account. Furthermore, she submitted that where two or more decisions were there on a subject, the one that was favorable to the assessee ought to be applied as per the ratio laid down by the Hon'ble Supreme Court in the case of Vegetable Products in 88 ITR 192 (SC) . She also submitted that it had been held by the ITAT in Sarvodaya Agency vs. ITO (1989) 34 TTJ 214,that an Obiter Dicta was also worthy of respect and therefore, even if the findings of the Hon'ble Allahabad High Court in the case of Lucknow Development Authority and Ors on the issue of Infrastructure Development and Reserve Fund (IDRF) were considered an Obiter Dicta, it still was worthy of consideration as the views of the Hon'ble High Court. On the issue of tourism grant, the ld. AR pointed out that the same had been provided by the Government for the beautification of the city and because it was a part of the corpus, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works in connection with the supply of water and electricity to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes 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 authorising the disregard by the Authority of any law for the time being in force. The State Government to have control over the Authorities, firstly by virtue of section 4 of UPUPD Act appoints Chairman and Vice Charmain as its members. All other members are also ex-offico of various Government Departments/ Bodies. Further, to have deep rooted control over it every Plan (i.e., Master Plan & Zonal Plan) is required to be approved by State Government as per section 10 of UPUPD Act and Section 16 of UPUPD Act ensures the usage of land for the purpose it is acquired by the Authority by prohibiting to use it for any purpose other than the approved plan (i.e., Master Plan or Zonal Plan approved by State Government). Further through Section 41 of UPUPD Act, the State Government has ultimate control over the Authority, as State Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial property vide GO No. 4982 dated 17.12.1999 Small Shops not sold through auction is being inferred through GO No. 3272 dated 11.08.2010 Rural Development by principle of cross subsidization, GO No. 2157 dated 22.07.2011. The costing guidelines for properties has been defined through Government Order, following which the sale consideration of a property is fixed by an Authority. The State Government has set-up a separate costing guideline for EWS and LIG properties through which a CAP limit for the sale consideration has been provided. Therefore, the properties sold under low economic group cannot be priced anything above such limit, though the cost incurred for construction of same be far more than the limit set by State Government. It would be pertinent to mention here that when a scheme is launched, out of total area covered under said scheme between 40% to 50% of such area is saleable area and out of the saleable area for residential properties, about 10%-10% of the area has to be set aside for EWS and LIG properties. Only 5% area of saleable area is allocated for commercial properties. Besides these, provisions are made for economically weaker section of society f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he test laid by it in para 190. The same is being established hereunder: Para 190(i): The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. The assessee before amendment enjoyed exemption u/s 10(20A) of Income-tax Act. Post invocation of exemption under said section, the appellant holds registration u/s 12AA of Income-tax Act. Yes, it is true that the application for 12AA of Income-tax Act was initially rejected by Ld. Commissioner which was challenged before Hon'ble ITAT, Lucknow vide ITA No. 703/LUC/2003. The Hon'ble ITAT, Lucknow after considering all the aspects with respect to the objects and activities of the appellant, allowed the registration u/s 12AA vide order dated 25.07.2005 which is reported as [2007] 162 Taxman 173 (Lucknow)(Mag.). Later vide ITA No. 12 of 2006 dated 27.09.2013, the Hon'ble Allahabad High Court upheld the said order. The 12AA registration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted by State Government law (i.e., U.P. Urban & Planning Development Act) for development of area and its town planning. While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; From section 7 of U.P. Urban & Planning Development Act it is clear that the appellant has been enacted for furthering Development in its jurisdiction. The Government Orders have laid a maximum CAP for pricing of EWS and LIG houses, making the low economic group to avail houses at affordable pricing despite of cost involved in its construction. Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce; The costing guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a government or state is expected to engage in, having regard to provisions of the Constitution and the enacted laws, and the observations of this court in NDMC; whether in case surplus or gains accrue, the corporation, body or authority is permitted to distribute it, and if so, only to the government or state; the extent to which the state or its instrumentalities have control over the corporation or its bodies, and whether it is subject to directions by the concerned government, etc.; As demonstrated above, the Authority is constituted under a State Act having complete control in hands of State Government from approval of Master & Zonal Plans to formulation of Rules/ Regulations/ Bye Laws with its discretion to dissolve an Authority if the purpose for which it is formulated has been achieved. The purpose is "Development". The pricing of properties is set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government before dissolution and has to be spent only for the administration of the Act through which it is enacted by virtue of law laid in UPUPD Act. As long as the concerned statutory body, corporation, authority, etc. while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit (20% as mandated by the second proviso to Section 2(15)) - the concerned statutory or government organisations can be characterized as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10(23C) and by Section 11 have to necessarily be fulfilled. Our contention would still remain the same that the appellant is not carrying any activity of trade, commerce or business as there should be profit motive for the same and since it has been demonstrated that pricing is set at cost as per the Government Order, there is no inherent motive of generating profit. EWS & LIG properties are allotted to economically weaker section of society at no price above fixed by Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court was dismissed through which it can be concluded that the Hon'ble Supreme Court has held that all the test laid by it were adhered by Moradabad Development Authority. Further, from combined reading of test laid by Hon'ble Supreme Court in para 190 of its judgement and para 253(B1) by placing reliance on larger Bench orders in case of Ramtanu Cooperative Housing Society and NDMC it can be said that where a Statutory body incorporated under State Act for achieving public functions may resemble trade, commercial or business, however, their objects are essential for public purposes and they being restrain from statutory provisions, such receipts are prima facie to be excluded from mischief of business or commercial receipts. Since it has been established that neither the objects have changed nor there has been dilution of control of State Government over the appellant and since from planning to pricing to disposal is governed through UPUPD Act and State Government Orders, the money received from its activities should not be construed as trade, business or commerce and exemption disallowed u/s 11 of Income-tax Act may kindly be allowed. A contention was put forth by Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to test whether Gandhinagar Urban Development Authority fulfils the test laid by it for AY 2015-16. The Hon'ble Supreme Court in the case of CIT(Ex) v. Karnataka Industrial Area Development Board reported in [2023] 151 taxmann.com 430 (SC) dismissed the revenue's SLP for AY 2011-12 holding as under: "2. The issue is covered by the judgment reported as "Asstt. CIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278/[2023] 291 Taxman 11/[2022] 449 ITR 1 (SC)/2022 SCC Online SC 1461. 3. The special leave petition is dismissed in the light of the judgment and the clarification. 4. Pending applications, if any, are disposed of." It would be pertinent to mention that the case of Karnataka Industrial Area Development Board for AY 2011-12 was not before the Hon'ble Supreme Court while adjudicating AUDA and hence, if the contention of Hon'ble Supreme Court was the same as put forward by Ld. CIT(DR), in this case the Apex Court should have remanded back to the file of Ld. Assessing Officer, however, it dismissed revenue's appeal by following AUDA. Further, in the case of Hon'ble ITAT, Ahmedabad in the case Rajkot Urban Development Authority (i.e., an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of State Government as before and from planning to pricing to disposal is set on the basis of Government Orders, all other money collected by the Authority is also due to Government Guidelines / UPUPD Act and no money can be spent for any purpose other than administration of the Act for which it is enacted, the judgements of Hon'ble Apex Court referred to above shall squarely apply in the case of the appellant Authority and hence, exemption u/s 11 of Income-tax Act so claimed in the ITR should be granted to the appellant. Further, to the averments made above it is submitted that the Hon'ble Supreme Court drew the attention of the legislatures to provisions of section 10(46) of Income-tax Act which was inserted to granted exemption to Authorities/ Board but it too used the word "commercial", leading into litigative matter. It was then through Finance Act 2023 a new clause (46A) to section 10 of Income-tax Act has been inserted to provide blanket exemption to statutory Authorities engaged in Development activities and while doing so, the reason provided by the legislatures in Memorandum to Finance Bill 2023 makes a clear interpretation of law laid by Hon'ble Supreme Court for S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment directly or are ex-officio, who belongs to different departments of State Government. To corroborate the said facts, relevant portion of section 4 of Uttar Pradesh Urban Development Act, 1973 is reproduced below: "(3) The Authority in respect of a development area which includes whole or any part of a city as defined in the Uttar Pradesh Municipal Corporation Act. 1959, shall consist of the following members namely Chairman to be appointed by the State Government: Vice-Chairman to be appointed by the State Government: the Secretary to the State Government, in charge of the Department in which, for the time being, the business relating, to the Development Authorities is transferred, ex-officio:) the Secretary to the State Government in charge Of the Department of Finance, exofficio. the Chief Town and Country Planner, Uttar Pradesh ex-officio: the Managing Director of the Jal Nigam established under the Uttar Pradesh Water Supply and Sewerage Act, 1975. ex-officio) the Mukhya Nagar Adhikari, ex-officio: the District Magistrate of every district any part of W Included in the development area ex-officio: four members to be elected by Sabhasads of the Nagar M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant Authority as they do not have ultimate power. This is so because the members are appointed by State Government by virtue of section 4 of U. P. Urban Planning & Development Act, 1973 and as per section 58 of U. P. Urban Planning & Development Act, 1973 the State Government is empowered to dissolve the development authority. Further, the State Government has power to call for records of the Authority (Section 41), the budget approval is also done by State Government (Section 20), power to make Rules has been provided to State Government by Section 55 of U. P. Urban Planning & Development Act, 1973 and regulation, if made need to be approved by the State Government. Thus, from above it is clear that main powers are vested with State Government and the members of the Authority are appointed merely for managing the daily affairs of the appellant Authority. Further, the members of the Authority being ex-officio State Government employees cannot be said to have any interest whatsoever in the appellant Authority. In view of the aforesaid facts, the contention of revenue on applicability of provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1961, is unlaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and by virtue of section 41 powers have been drawn by State Government through which G.O. are passed for every matter from pricing computation to disposal of property. The books of accounts of Authority are audited by office of AG, no money by virtue of section 20(2) can be applied for any purpose other than administration of the Act and similarly section 16 debars from using of property for any purpose other than for which it is allocated in Plan approved by State Government. Not only this, power to make Rules vest with State Government and every Regulation / Bye Law has to be first approved by the State Government. Apart from this the Authority can be dissolved if State Government feels that the purpose for which it was enacted has been achieved. Thus, neither my objects have changed nor the governance of State Government upon the Authority has been diluted, for this it can be said that the years under consideration are fully covered from the order of Hon'ble Allahabad High Court in appellant's own case for AY 2004-05 and AY 2006-07 and also by the judgement of AUDA in which Moradabad Development Authority was a party and since we all are governed by same Statute and Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account and the Authority shall be its custodian in fiduciary capacity as the same was required to be spend for infrastructure work only as per directions of State Government and committee formulated separately by it (i.e., State Government) for management of said fund: Conversion of Land Use 90% Betterment & Registration 90% Compounding Fee 50% Income from Stamp Duty 90% Free Hold Charges 90% The committee formulated for the management of said fund by State Government comprises of Chairman (Commissioner), Vice Chairman, District Magistrate, M.N.A. Nagar Nigam, Executive Officers of Nagar Palika Parishad, Jal Nigam, Electricity Department and instructions provided by Govt. of U.P. Further, it would be pertinent to bring to your honour's kind attention that the Stamp Duty is levied and collected by State Government. Out of which a small amount is apportioned to Development Authority and from such amount received from State Government, 90% is set aside in a separate bank account whose control is with a special committee formulated by State Government for the management of Fund. Thus, the above receipts fall under "diversion of income by overriding title" and should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation furnished here-in-above, the amount of receipt credited under "Infra-structure Development Reserve Fund" should not be included in the income of the Authority as the said amount does not partake the character of income being held in fiduciary capacity. Similar view has been taken by Hon'ble ITAT, Delhi in the case of Saharanpur Development Authority in ITA No. 566/Del/2010 dated 05.04.2010. Then again in case of Meerut Development Authority in ITA No. 5457/Del/2010 dated 29.09.2016. The view taken earlier in case of Saharanpur Development Authority was affirmed by Hon'ble ITAT, Delhi vide order dated 24.03.2021 having ITA No. 4113/Del/2017. Further, it is submitted that Hon'ble Allahabad High Court in its judgement dated 16.09.2013 in appellant Authority's own case of AY 2006-07 and AY 2004-05 vide order dated 16.09.2013 has granted exemption u/s 11, 12 and 13 and also held that Infrastructure Development Reserve Fund could not be treated to be belonging to the "Appellant" nor the receipt is taxable nature in its hands. The relevant portion of the order is reproduced below: "For the applicability of proviso to Section 2(15), the activities of the trust should be carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in ITA No. 163/lkw/2019 dated 10.03.2022 respectfully followed the decision of Hon'ble Allahabad High Court in its own case. Further, in this context it is submitted that the case of Mussoorie Dehradun Development Authority for AY 2006-07 and AY 2007-08 reported in [2012] 22 taxmann.com 93 (Delhi) which was later upheld by the Hon'ble Uttarakhand High Court vide [2022] 140 taxmann.com 192 (Uttarakhand) has been relied upon Ld. CIT(DR). This case is not applicable upon us as primary issues before the Hon'ble Courts were whether Mussoorie Dehradun Development Authority is a State or a separate legal entity and whether its income is still exempt u/s 10(20) of Income-tax Act. The Hon'ble Uttarakhand High Court disallowed the claim of exemption u/s 10(20) in case of Mussoorie Dehradun Development Authority following the decision of Adityapur Industrial Area Development Authority reported in [2006] 153 Taxman 107 (SC) wherein the Hon'ble Supreme Court had held that in view of amendment, Adityapur Industrial Area Development Authority could not claim benefit under section 10(20A) and Explanation to section 10(20) after 01.04.2003 and that exemption under article 289(1) was also not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that AY 2022-23 has been completed by Ld. Assessing Officer at returned income and thus, this issue is no more challenged by revenue and hence, in light of judgement of Hon'ble Radhaswami Satsang (Supra) and all the averments made above, the receipts in Infrastructure Development & Reserve Fund should not be treated as income of the appellant. Grant from Tourism Department The appellant had received Grant from Tourism Department of the Government with specific directions of its utilization. The appellant was also required to maintain separate accounts for the same and hence, considering the grant as corpus receipt was not routed through Income & Expenditure A/c and neither was its receipts or expenditure considered while computing income u/s 11 of Income-tax Act. In this regard, reliance is placed on the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Safai Kamdar Vikas Nigam in ITA 1934 of 2009 wherein it was held that grant received by Government of Gujarat for implementation of certain Government Schemes to uplift the living condition of manual scavengers and other Safai Kamdars involved in similar activities would qualify as capital receipts, even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on behalf of the Revenue pointed us to para 190 of the Hon'ble Supreme Court judgment in the case of Ahmedabad Urban Development Authority and stated that the profit margin had to be identified in each case because the Hon'ble Supreme Court had said that the AO has to apply his mind to each year and each item of expenditure to determine whether the GPU charity was functioning on a cost to cost basis or whether it was having significant markup in the prices of services rendered by it. He, therefore, submitted that it was appropriate to refer the matter back to the ld. AO to re-compute the income of the assessee and re-examine the claim for eligibility, in the light of the judgment of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). On the issue of Infrastructure Development and Reserve Fund (IDRF), the ld. CIT DR took us through the Government order in question, to point out that the very first line of the said Government order talked of, 'income of the development authority/Vikas Parishad' and this demonstrated the fact that the income had already reached the hand of the assessee and not been diverted by the overriding title. Refuting the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it was not a corpus. With regard to the tourism fund, the ld. CIT DR pointed out that the as per the scheme of the Income Tax Act and the U.P.U.P.D.A. 1973 (particularly section 20), the tourism fund had to be passed through the income and expenditure account as it was the fund of the authority and the expenditures out of the same had also to be recorded. Thereafter, if 85% had been spent towards charitable purposes, the authority would be considered exempt from tax under section 11. On the issue of prior period expenditure, the ld. CIT DR pointed out that the assessee had not submitted any relevant details with regard to the ld. AO or the ld. CIT(A) and in the absence of any details, no concessions could be allowed to the assessee on a theoretical basis. On the issue of disallowance of depreciation under section 11(6), the ld. CIT DR pointed out that if the income of the assessee was assessed under the head business and profession, then the depreciation was allowable, but if it was to be granted exempt status, the same was disallowed. Therefore, in summing up his arguments, the ld. CIT DR submitted that it was a fit case to be restored back to the file of the ld. AO to re-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso made by the finance Act, 2008 with effect from 01.04.2009 to section 12AA of the Act. The Hon'ble Supreme Court also dismissed the SLP filed by the M/S Jammu Development Authority vide order dated 24.07.2014. The Assessing Officer in view of the above decision held that the Ayodhya Faizabad Development Authority was not charitable in nature and was involved in activities of trade/commerce/business and was hit by provisions of the first proviso to section 2(15) of the Act. Further, the Assessing Officer found that the Authority had received various funds and grants during the years which were directly transferred to balance sheet without passing through the Income and Expenditure A/c. The Assessing Officer after denying assessee's claim of exemption u/s 11 of the Act also added the receipts of such funds and grants to the total income of the assessees. The Ld. CIT (A) -4, Lucknow dismissed the appeal of the assessee after discussing various judicial decisions and held that the AO has rightly disallowed the exemption u/s 11 & 12 of the Income Tax Act, 1961to the assessee and has rightly assessed the income as taxable business income of the assessee. Submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food- grains, medicines, and/or retaining monies in deposits or government securities and drawing interest there from or charging lease rent, ground rent, etc., per se, recovery of such charges, fee, interest, etc. cannot be characterized as "fee, cess or other consideration for engaging in activities in the nature of trade, www.taxmann.com 108 commerce or business, or for providing service in relation in relation thereto There is no fixation of rates on predetermined statutory basis or on based on formulae regulated by law. The Board decides the price at which the properties are to be sold considering the location of the projects and the facilities to be provided and prevalent market rate like private builders and developers. The sale of land and/or buildings/commercial spaces, even to the weaker section, is by E-Auction on which there is no upper limit of sale price. No uniform rate is there, irres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, takes into account the objects of the enactment or www.taxmann.com 109 instrument concerned, its underlying policy, 98 and the nature of the functions, and activities, of the entity claiming to be a GPU charity. If in the course of its functioning it collects fees, or any consideration that merely cover its re expenditure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. As discussed above, the Landan other properties sold by the Appellant Development Authorityis not on nominal markup but on a substantial markup on commercial basis. However, the matter may be remanded to the Assessing Officer to examine and investigate the mark-up profit charged by the assessee. Further, the Hon'ble Supreme Court in Clause B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed, thus disentitling them to exemption." The Hon'ble Supreme Court clearly directs that the Assessing Officer must examine on a yearly basis after scrutinizing the record whether the assessee is doing any trade, commerce or business and whether the assessee is charging on cost basis or significantly higher. In view of the above direction, the Assessing Officer is duty bound to undertake this exercise for each projects and the properties sold for each assessment year. Therefore, I humbly pray that the matter may be restored to the file of the Assessing Officer to complete the exercise and find out the amount to be charged as business income denying the exemption u/s 11 or 12 of the Income Tax. Point No. 2 The Appellant Development Authority fails the above determinative tests and hence clearly falls in the mischief of proviso to section 2(15) of the Income- Tax Act. Accordingly, the provisions of section 13(8) come into play, which state as under.- (8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso" to clause (15) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust or manager (by whatever name called) of the institution:] any relative of any such author, founder, person, member, trustee or manager] as aforesaid; any concern in which any of the persons referred to in clauses (a), (b), (c), (cc)] and (d) has a substantial interest. The clause (cc) says that any trustee of the trust or Manager (by whatever named called) of the institution. The officers/ employees of the appellant clearly come under the category. The word used "whatever name called" also gives a wide meaning of the persons who is having undue advantage from the trust. The appellant has not provided complete details of the properties allotted to its employees in which benefit was allowed, during the appellate proceedings of previous years. The appellant had provided copies of accounts for the year under consideration. These audited accounts are subject to the Statutory Audit by The CAG of India. A perusal of the accounts and its various schedules show that the appellant has not given any disclosures regarding the allotment of property and discount allowed on such properties to its officers and officials. It is a material information pertaining to the accounts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the Issue of Infrastructure Development Reserve Fund and Tourism Grants The issue of Infrastructure Development Reserve Fund is common for the AY 201213, 2014-15 & 2015-16. For reference purpose the issue dealt in AY 2012-13 has been taken, however, in other years also the nature of receipt and its treatment is the same by the Assessee as well as the Assessing Officer. The AO has dealt with the issue in AY 2012-13 as under, "During the year, assessee has transferred funds to infrastructure Development fund. However, assessee has not included these receipts in his income for the year. The assessee has directly transferred the amount towards infrastructure development fund in balance sheet, which is against normal accounting principles. Further, since assessee's claim of exemption u/s 11 is already denied, the receipts of Infrastructure Development Fund Rs. 92.10,505/- is treated to be income of assessee and is hereby added to the income of the assessee." The Ld. CIT (A) has decided the issue as under, "Ground of appeal No. 5.1 The A.O. has made the addition of Rs. 92,10,505/on account of Infrastructure development fund, The A.O. noticed that the since the receipts ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, I sustain the addition made by the A.O. hence, this ground of appeal is dismissed." The AO has decided the issue of Tourism Grant in the assessment order as under, "During the year, assessee has received grant of Rs. 8,68,50,000/- under the head Tourism Development grant-UP. However, assessee has not included these receipts in his income for the year The assessee has directly transferred the amount to the balance sheet, which is against normal accounting principles. Further, since assessee's claim of exemption u/s 11 is already denied, the receipts of grant Rs. 8,68,50,000/- is treated to be income of assessee and is hereby added to the income of the assessee." The Ld. CIT(A) has decided the matter in favour of the Revenue as under, "The assessing officer has made the addition of Rs. 8,68,50,000/- being tourist development grant UP. The appellant has the argument that it is not an Income u/s 2(24) of the Act. The fund has not been routed through income and Expenditure account. The appellant has submitted that authority is bound to maintain separate account of such receipt as per government orders and as per schedule B of balance sheet and these receipts shown where c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are already in existence under section 20. It has to credit the fees and charges collected by it to its own funds and which is to be applied towards fulfilment of assessee's object. [Para 21] The nature and scope of the so called 'infrastructure fund' has to be understood in the light of statutory contexts available in section 20 of the UP Urban Planning and Development Act, 1973. As observed earlier, section 20 contemplates that all the fees, tolls and charges have to be credited by the assessee to its own funds and to be applied towards meeting the expenses incurred by the authority in the administration of the Act and not other purposes. If one goes through the officer memorandum then it would reveal that paragraph 1, contemplates that the income of the development charges described in clause (5) of the memorandum will not be deposited in ordinary pool but it will be deposited in a separate account which will be exclusively for residential infrastructure. This clause shows that firstly the fees and charges collected by the assessee in clause (5) of the memorandum would be income of the development authority but it will not be deposited in ordinary pool rather it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fulfilment of assessee's objects. [Para 22] The assessee is not to be regarded as a State. It is not registered under section 12A of the Act and claimed the benefit of exemption under sections 11 and 12 of the Act. There is no distinction between the other receipts collected by the assessee and taken to the main account which if remained unutilized would be amenable to tax. The alleged memorandum does not create any overriding title of the State Government at the source of collection of the alleged fees/charges. It only regulates how the funds so collected by the assessee is to be incurred for the fulfilment of its objects and which sector has to be given preference. Thus, it only suggests application of income. Considering all these factors and the detailed reasoning given by the first appellate authority no merit is found in these appeals, they are rejected. [Para 23]" The Hon'ble High Court of Uttarakhand in the case of Mussoorie Dehradun Development Authority Vs Additional Commissioner of Income-tax[2022] 140 taxmann.com 192 (Uttarakhand) decided the issue in favour of Revenue treating the same as the income of the assessee and to be taxed in the hands of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in AY 2012-13 The AO has dealt with the issue as under, "During the year assessee has debited Rs. 1,06,11,658/ to the head prior period expenses. Assessee has failed to justify the inclusion of this amount in the expenses for the current year. This is not an allowable expenditure. Hence it is added to the total income of the assessee." The Ld. CIT(A) has decided the matter in favour of the Revenue as under, "The AO has made addition of prior period expenses by adding Rs. 1,06,11,658. The appellant has submitted that he has not appreciated that these expenses which finally determine during the year are allowable expenditure. The AO has made addition by concluding that these are not allowable exemption for the current year. As per the assessment order it appears that the appellant has failed to submit relevant details to justify the claim of expenditure incurred. The appellant has also not submitted any details during the course of appellate proceeding. In absence of any detail, merely on the basis of principle of allowability of prior period expenses necessary for business, the claim of appellant cannot be entertain. Therefore, the ground of appeal is dismissed." It is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Further, the Ld. CIT(A) has already partly allowed relief to the assessee by way of directing the AO to recompute the allowable depreciation in view of the fact that the claim of exemption u/s 11 of the I T Act, 1961 of the assessee has been denied and the income of the assessee has been treated as income from business. My written submission may kindly be considered in addition to the oral submission made by me in due course of hearing of the case." 31. Subsequently, Sh Mazhar Akram Ld CIT(DR), who also appeared on behalf of the Revenue pointed out that the judgment of the Amritsar Bench in the case of Jalandhar Development Authority that had been cited by the ld AR, was based on the judgment of the Punjab and Haryana in the case of Pr. CIT vs. Punjab Police Housing Corporation Limited as reported in 195 DTR 150 P & H wherein it had been held that interest on grants received by the State Government could not be treated as income of the assessee. However, the ld. CIT DR argued that it had been pointed out by the Hon'ble Patna High Court in the case of Bihar Police Building Construction Corporation Private Limited vs. Pr. CIT (2023) (09) PAT CK 0020 that circulars of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own income. The other issues that have been raised by the Assessing Officer and the ld. CIT(A) are ancillary to the main issue i.e. the denial of exemption under section 11 by holding that the appellant authority is indulging in activities in the nature of trade, commerce or business and therefore, is hit by the proviso to section 2(15) of the Act, 1961. 33. The question of whether a development authority can be regarded as a body indulged in objects of, 'general public utility' is no longer res integra after the decision of the Hon'ble Supreme Court in the case of ACIT (Exemption) vs. Ahmedabad Development Authority (2022) 143 taxman.com 278 (SC), wherein the Court in para 190 of the said order and judgment has held that bodies which carry out statutory function and whose income was eligible to be considered for exemption under section 10(20A) prior to 1.04.2003, but thereafter ceased to enjoy that benefit after deletion of that provision, are not ipso facto precluded from claiming benefit as GPU category charities under section 11 r.w.s. 2(15) of the Act. The Hon'ble Court further held that Statutory Corporations, Boards, Authorities, Commissions etc., by whatever name called i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Housing Development Town Planning etc., are involved in the objects of, 'general public utility' and the earlier finding of the Hon'ble Allahabad High Court, after examination of the objects of the authorities set up under the U.P.U.P.D.A., 1973, that their activities are charitable activities not hit by section 2(15) of the Act, the orders of the ITAT Amritsar Bench in the case of Jammu Development Authority and Jalandhar Development Authority will have no application to the facts of the assessee's case or be a justification for the denial of exemption to it under sections 11 and 12 of the Income Tax Act, 1961. 34. Among the reasons cited by the ld. Assessing Officer and confirmed by the ld. CIT(A) for denial of exemption to the assessee were the observations that the assessee was generating income from the activities of the disposing of the plots, flats, shops and commercial complexes with the definite motive of profit and not charitable purposes as such profit was not incidental for by-product of the activity of the appellant, but was its main predominant purpose and there was no application of income for any charitable purpose under the terms of the object. It has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would therefore, not mean that the amounts are, 'fee' or, 'cess' to provide some commercial or business service. Further in paragraph 176, after considering the fact that statutory powers and corporations have to recover the cost of providing essential goods and servi ces in public interest and also fund large scale development and maintain public property, which entailed recovering charges or fees, interest and also receiving interest for holding deposits,the Hon'ble Court held that the mere fact that these bodies have to charge amounts towards supplying of goods and articles or rendering services (including maintenance of roads, parks etc.,) ought not to be characterized as, 'commercial receipts' the rational for such exclusion would be that if such rates, fees, tariffs etc., determined by statutes and collected for essential services were included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by the second proviso to section 2(15) would be attracted, thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer, which is the general public. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering granting exemption must take into account the objects of enactment or instrument concerned its underlying policy and nature of the functions and the activities of the entity claiming to be a GPU charity. If in the course of its functioning, it collects fees or any consideration that merely cover its expenditure (including administrative and other costs plus small proportion for provision), such amounts are not consideration towards trade, commerce or business or service in relation thereto, however, amounts which are significantly higher than recovery of costs have to be treated as receipts from trade, commerce or business. It is only for those amounts that the quantitative limit in proviso 2 to section 2(15) of the Act applies and for which separate books of accounts would have to be maintained under other provisions of the act. 35. It would be appropriate to examine the case of the assessee in the light of these observations of the Hon Supreme Court in the case of Ahmedabad Development Authority (supra). The assessee has been constituted under section 4 of the Uttar Pradesh Planning & Development Act, 1973 and was notified in exercise of power under section 3 of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Authority while section 6 provides that the State Government may appoint an advisory council for the purposes of advising the authority on the preparation of the master plan and on such other matters relating to the planning of development or in connection with the administration of the said act. This clearly shows that the State Government has a deep and pervasive control over the appointment and management of the authority. 36. The objects of the authority have been stated in section 7 of the U.P.U.P.D.A., 1973 which are to promote and secure the development of the area, according to plan. The authority has the powers to acquire, hold, manage and dispose of land and other property, to carry on building, engineering, mining and other operations, to execute work in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally do anything necessary or expedient for the purposes of such development and for purposes incidental thereto. It has also been invested with the responsibility of providing amenities within the development area falling within its jurisdiction which include road, water supply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t authority is constituted that the appellant authority meets the tests laid down by the Hon'ble Supreme Court in that, it is a body that is under a deep and pervasive control of the State Government; that it has been granted the power to acquire and dispose of lands etc as part of its overall objective of planned development or development areas; the fees and charges levied by the authority are levied in such manner and in such rates that have been prescribed under the Act. The Ld AR has brought on record several Govt orders regarding the manner of valuation of properties, the allotment of residential properties by lottery in the first instance and only thereafter by auction, the setting aside of a percentage of properties for accommodation of EWS and LIG categories and the placement of a pricing cap on their cost, the methodology to be adopted for auction of commercial properties and providing of properties for public utilities at concessional rates or at no cost other than payment of annual fees - to demonstrate that firstly, the pricing policy of these properties is determined by the Government keeping in mind the overall objectives of the authority and secondly that these are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te" and such Corporations or bodies set up under specific laws, (whether by States or Centre) would therefore, not mean that the amounts, 'fee' or 'cess' to provide some commercial or business service. Thus, the Hon'ble Court has accounted for the fact that certain services may be provided at a slightly higher rate, in order to cross subsidize other activities performed by the development authority. The Learned AR has taken us through various Govt Orders relating to valuation of properties and their auction. It is observed that in the first instance, the residential properties are offered by way of lottery and it is only the unsold units that are then put up for auction. With Regard to commercial properties, the State Govt has both laid down model guidelines for the valuation of properties and outlined a scheme for the auction of properties which all authorities are bound to follow. It is also observed that with relation to some priority areas such as information technology establishments, public utilities and large industrial undertakings, the reserve price is fixed at concessional rates and these concessions are to be provided on the basis of cross subsidization from receipts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner. It may not be out of place that section 18(2) of the UPUPDA, 1973 specifically prohibits the authority to dispose of any land by way of gift and specifies that any references to the disposal of land in the said act would be construed as references to disposal by way of sale, exchange, lease or creation of any rights on the land. Accordingly, we are not in a agreement with the ld. AO and the ld. CIT(A) that the assessee authority is a commercial agency on this account. 38. Similarly, another issue that has been raised by the authorities below to hold that the assessee is not a charitable organization but one functioning on market principle is the issue of, 'betterment charge'. We find that the matter has been also been considered by the Varanasi Circuit Bench in its order dated 6.07.2022. The Varanasi Circuit Bench has pointed out that these charges are levied under the authority of section 35 of the 1973 State Act and that they are levied only in situations where, in the opinion of the authority, as in consequence of any development scheme having been executed by the authority in any development area, the value of any property in that area which has been benefited by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra), such charges cannot be held to be fee or a cess and thereby taken into consideration for computation of receipts from commercial activities. 39. Another issue that has been raised by the Assessing Officer is that the assessee was in receipt of rent and since this was not a receipt that was incidental to its business, the same could not be held to be exempt. He has also pointed out that the Assessee has invested it's surplus funds in Banks and earned interest on the same and therefore the interest earned from such investments was not incidental to its objects. We must disagree with the Learned AO on both counts. In the first place, the authority has been given the power to dispose of property and as per section 17(2)of the U.P.U.P.D.A. 1973, Lease has been defined as one of the means of disposal. Furthermore, in section 20 (1)(e) of the U.P.U.P.D.A. 1973 it has been stated that all moneys received by the Authority by way of rents or profits or any other manner from any other source will also constitute the fund of the authority. Thus, it cannot be said that the earning of rent from leased properties is not in accordance with the objectives of the Authority. Furthermore, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -16, the ld. Assessing Officer has observed that the assessee violated the provisions of section 13 of the Act by allowing some rebate towards employees and reservation of some plots for its employees. The ld. CIT(A) while considering the matter in his orders has pointed out to the judgments of Hon'ble Patna High Court in the case of Buddha Vikas Samiti vs. CIT 199 taxman 395 Patna and the Hon'ble Supreme Court in the case of Noida Entrepreneurs Association vs. Noida & Others in WP (Civil) No. 150 of 1997. In consideration of their orders, we find that the Hon'ble Lucknow Bench of the ITAT has dealt with this issue in its order of Lucknow Development Authority, dated 10.03.2022 in ITA Nos. 185, 186, 163, 164, 439/Lkw/2019, wherein after going through the provisions of sub section (3) of section 13, it has found that the list of persons mentioned in sub section (3) does not contain employees as a category. The ld. AO and the ld. CIT(A) have held that the employees are, 'managers' as per Clause (d) of sub section (3) of section 13 however, the Lucknow Bench has referred to the decision of the Hon'ble Patna High Court in the case of CIT vs. Tata Steel Charitable Trust 78 taxman 98 (Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The decision of the Hon'ble Supreme Court in the case of Noida Entrepreneurs Association vs. Noida & Others (supra), would also not apply because the said judgment related to passing of colourable orders by the CEO to favour himself and certain contractors. The rebate and reservation allowed to the employees of the appellate authority, are not on account of any colourable exercise of power by the Managers of the authority, but on account of implementation of a Government Order, hence the facts of the case being entirely different, the case of Noida Entrepreneurs Association vs. Noida & Others (supra) cannot be relied upon to withdraw the exemption from the assessee authority. Similarly, it is observed that in the case of Buddha Vikas Samiti vs. CIT (supra), the appellant had utilized the form and organization of the trust to confer benefits on members of the family who were the trustees in violation of the parameters of the Act and the objectives of the trust whereas the instant case, the concessions have been allowed to the employees as a part of Government policy. Hence, there cannot be any comparison between the two situations. Moreover, looking in detail through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption to the appellate authority on account of the judgments of the ITAT, Amritsar Bench, in Jammu Development Authority, Jalandhar Development and Jammu & Kashmir High Court in Jammu Development Authority cannot be upheld. 43. In summation, it was observed that the development authority is constituted under a statute with the objective of developing the development area allotted to it and it's empowered to indulge in various activities such as buying, selling, leasing etc., in order to further its objectives. There is nothing on record to suggest that it has been charging exorbitant amounts from the general citizens for the services that it provides. In fact, it is seen that the pricing and allotment mechanisms are controlled by the statute under which it has been established. It is also seen that it is under deep and pervasive control of the Government in various ways and is obliged to apply of its earnings towards the objectives for which it has been set up. We have duly noted the submissions of the learned CIT DR that the Hon Supreme Court has pointed out that in each year the Assessing Officers should examine the expenses of the assessee to see whether they were on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessment Years 2012-13 & 2014-15, ground nos. 1 to 4 for the Assessment Year 2015-16, Ground number 3 to 7 for the Assessment Year 2016-17, Ground Numbers 3 to 8 for the Ay 2017-18 and ground nos. 3 to 8 for the Assessment Year 2018-19 stand allowed. 44. With regard to Ground Nos. 4 of assessment years 2012-13 and 2014-15 and ground number 5 of Assessment year 2015-16, relating to the addition made by the learned Assessing Officer on the issue of Infrastructure Development Reserve Fund (IDRF), in view of the arguments presented by the learned AR and refuted by the learned CIT (D.R) on the subject, it is imperative to decide whether there was an exposition of law that created a binding precedent on the issue, in the order of the Hon'ble Allahabad High Court in the case of CIT vs. Lucknow Development Authority & others (2013) 38 taxman.com 246 Allahabad. It is an established principle of law, that a decision of a Court is to be ascertained from the questions involved in the case and the judgment rendered with respect to the same. The Hon'ble Supreme Court in the case of CIT vs. Sun Engineering (P) Ltd., ITD 198 ITR 197 SC, held that a decision could not be interpreted ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt rendered its decision, that the authority had objects which were admittedly charitable in nature and the mere selling of some products at a profit would not ipso facto hit the assessee, by applying the proviso section 2(15), so as to deny exemption under section 11. The intentions of the assessee and the manner in which the activities of the charitable trust were undertaken were highly relevant to decide the issue of applicability of the proviso of section 2(15) and there was no material or evidence brought on record by Revenue, to suggest that the assessee was conducting its affairs on commercial lines with a motive to earn profit. Therefore, the Hon'ble High Court held that the proviso to section 2(15) was not applicable to the facts and circumstances of the case and the assessee was entitled to exemption provided under section 11, for the relevant assessment years. In para 29 of the said order, the Hon'ble High Court also observed that the authority had been maintaining an Infrastructure Development and Reserve Fund (IDRF) as per the notification dated 15.01.1998 and the money transferred to this fund was to be utilized for the purpose of the project, as specified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees in those cases, that they were bound by the observations of the Hon'ble Allahabad High Court in para 29 of their order. With regard to the judgment of the ITAT Amritsar Bench in the case of Jalandhar Development Authority (supra), we observe that the same is distinguishable, because in that case, the External Development Charges (EDC) were collected by that assessee on the basis of various notifications issued by the Government of Punjab and the same could not be spent without the previous permission of the Government of Punjab, which is different from the case of the assessee because the charges from which the Infrastructure Development and Reserve Fund (IDRF) was constituted, were collected by the Ayodhya Development Authority, as per the powers assigned to it under the U.P.U.P.D.A. 1973 and even the committee constituted by the State Government was only to ensure, that funds so constituted were spent in a targeted manner, on certain objects of the assessee authority that were already enshrined in U.P.U.P.D.A. 1973. Furthermore, it is observed that the decision by the ITAT Amritsar Bench in the case of Jalandhar Development Authority (supra) was given after considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure Development and Reserve Fund (IDRF), while authoring the judgment in the case of Mussoorie Dehradun Development Authority vs. Additional CIT, Dehradun in ITA Nos. 830/Del/2010 and 853/Del/2011. We observe that the ITAT Delhi Bench has analyzed the judgment in Karnataka Urban Infrastructure Development and Finance Corporation in great detail and rendered a different finding with regard to the ownership over the infrastructure fund, on account of conjoint reading of the O.M. dated 15.01.1998 viz. a viz., the provision of the Uttar Pradesh Urban Planning & Development Act, 1973 and after consideration of the status of the assessee as an independent entity. The Bench had rendered the finding that since the assessee was not a State and since it was performing activities of its own, which was not the case in Karnataka State Industrial Development Corporation, which was essentially implementing certain Central and State Governments projects, the facts of that case would not help the assessee. 46. Ongoing through the judgment of the Delhi Bench in the case of Mussoorie Dehradun Development Authority, we find that the Hon'ble Bench has duly considered both the O.M. dated 15.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y concerned with giving approval for specific items of work to be done by the assessee, and not for the administration of funds. The funds formed part of the assessee's balance-sheet and were audited in the course of audit of its own accounts. Therefore, there was no separate entity called infrastructure fund, but just a bank account which was designated for channelizing a portion of the assessee's receipts, for the fulfilment of a preferential area of the assessee's deposit. 47. On consideration of the various judgments presented before us by both parties, it is important to consider the fact that the judgment and order of the Delhi Bench in the case of Mussoorie Dehradun Development Authority (supra), is the only judgment where a detailed analysis had been conducted of the said O.M. dated 15.01.1998 along with the provisions of the U.P.U.P.D.A. 1973. It may be important for us at this stage, to consider some of these provisions of the U.P.U.P.D.A. 1973 which have been referred to by the Hon'ble Delhi Bench in the case of Mussoorie Dehradun Development Authority (supra). Section 20 of the Act (U.P.U.P.D.A. 1973) states, that the authority shall have and would maintain its own fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rakhand High Court, while taking note of the dispute observed, that in the case of Adityapur Industrial Area Development Authority vs. Union of India (2006) 153 taxman 107 (SC), a question had arisen regarding interpretation of article 289 of the Constitution of India as well as section 17 of the Bihar Industrial Area Development Authority Act, 1974.The Hon'ble Supreme Court had held, that the income of the authority constituted under the said Act was its own income and that the authority managed its own funds. It had its own assets and liabilities. It could be sued and could sue in its own name and since it was an authority constituted under an act of the Legislature of the State, it had a distinct legal personality, being a body corporate, as distinct from the State. The Hon'ble Supreme Court further clarified, that section 17 of the said Act, stated that only upon its dissolution, would the funds, assets and liabilities of the authority, devolve upon the State Government. It accordingly stated, that therefore before its dissolution, its assets, funds and liabilities were its own. For this reason, it held that it was futile to contend that the income of the authority was the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in view of the express provisions of the Uttar Pradesh Urban Planning and Development Act, 1973. In fact, as has been clearly pointed out by the ld. CIT DR in his arguments and by the Delhi Bench of the Tribunal, is that Clause 1 of the said O.M., itself refers to the deposit of, 'income of the development authorities described in Clause 5' to be deposited in a separate account for residential infrastructure. The fact that the State Government has deep and pervasive administrative control over the authority is established and is, in fact, one of the grounds on which the assessee has been held eligible to be regarded as a general-purpose utility, having charitable objects, that are not for profit. Therefore, the O.M. dated 15.01.1998 has to be viewed in the context of the powers of supervision enjoyed by the State Government under the U.P.U.P.D.A. 1973 for the better administration of the Act, and not as creating any diversion of income by overriding title, as has been contended by the assessee and the ld. AR in their submissions before us, because the State Government did not have the power to divert the income under the Act prior to the dissolution of the authority. For this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 (1)(d) of the Act, but it is also noted that the OM dated 15.01.1998, issued under section 41 of the UPUPDA 1973, earmarks certain portion of receipts to the infrastructure fund for capital expenditure and the Hon. Supreme Court has held, in the case of Padmaraje. R. Kadambande vs CIT 62 Taxman 456(1992), that it is settled law, that in order to find out whether a receipt is a capital receipt or a revenue receipt, one has to see what it is in the hands of the receiver and not its nature in the hands of the payer. In other words, the nature of the receipt is determined entirely by its character in the hands of the receiver and the source from which the payment is made has no bearing on the question. Therefore, we deem it appropriate to restore this matter back to the file of the assessing officer to analyze the nature of the receipts with reference to the OM dated 15.01.1998, and thereafter take an appropriate decision on the quantum that is required to be routed through the Income and Expenditure account. Ground number 4 of assessment year 2012-13 & 2014-15 and Ground number 5 of assessment year 2015-16 is accordingly partly allowed. 49. The issue of addition of Rs 8,68,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme that the grants made available to the assessee-trust for implementing the scheme in a particular manner cannot be treated as income of the assessee-trust. In our opinion, the ratio of this decision of Hon'ble Gujarat High Court is equally apply to the facts of present case, since the grants have been received for execution of certain specific projects and creation of facilities for development of tourism. Therefore, they cannot be added back to the assessees income and must be held to be part of the corpus. Thus there is no necessity to route these grants through the Income & expenditure account. Accordingly ground number 5 of assessment year 2012-13 is held to be allowed. 50. The next issue is the claim of prior period expenditures. It is observed after consideration of arguments of both Parties, that the issue is linked to the allowance of exemption under section 11. Since the exemption under section 11 has been held to be allowable, amounts expended during the year towards the objectives of the Authority, have to be held as application in the present year, no matter that they pertained to earlier years, especially because the authority maintains its accounts on cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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