THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) vs. SURAT URBAN DEVELOPMENT AUTHORITY(SUDA)

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TAXAP/341/2020HC GujaratGJHC24049592202018 January 2021Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE ILESH J. VORA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that all the questions of law proposed by the Revenue were no longer res integra. The Court found that these questions were squarely covered by the decision of the High Court in the case of Ahmedabad Urban Development Authority (AUDA) Vs. ACIT, reported in 396 ITR 323 (Guj.). Consequently, the Tax Appeal filed by the Revenue was dismissed. The reasoning was that the High Court's prior decision on similar issues provided a binding precedent that resolved the matters raised in the present appeal. The operative direction was the dismissal of the appeal. No issues were expressly left undecided.

What were the facts?

This is a Tax Appeal filed by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT), 'D' Bench, Ahmedabad, dated February 20, 2012, for Assessment Year 2013-14. The appeal concerns the tax treatment of the Surat Urban Development Authority (SUDA). The Revenue has raised several questions of law challenging the ITAT's decision to grant exemptions and allow certain claims to SUDA. The procedural history indicates that the Revenue is appealing the ITAT's order, and the High Court is considering the proposed questions of law.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether the Tribunal was justified in holding that the assessee's activities are not in the nature of commerce/trade, considering its widespread commercial activities and the first and second provisos to Section 2(15) of the Income Tax Act, 1961. 2. Whether the Tribunal was justified in considering the assessee's activity as development of an urban area, which is in the nature of advancement of general public utility and not hit by the provisos to Section 2(15). 3. Whether the Tribunal was justified in allowing benefit in accumulation at 15% of Rs. 7,82,37,856/- under Section 11(1)(a) and exemption of Rs. 5,00,00,000/- under Section 11(2), given the applicability of the proviso to Section 2(15). 4. Whether the Tribunal was justified in deleting the addition of Rs. 23,48,891/- by not appreciating that the addition to fixed assets was already allowed as application of income in earlier years, amounting to double deduction. 5. Whether the Tribunal was justified in deleting the addition of General Development Expenditure Fund of Rs. 22,79,76,248/-, considering that a capital expenditure by a person need not be a capital receipt for the recipient. 6. Whether the Tribunal was justified in allowing deemed application of Rs. 6,77,02,219/- against future income in the absence of an express provision. 7. Whether the Tribunal was correct in allowing exemptions without appreciating that an SLP was filed on the issue of Section 2(15) in the case of AUDA vs. ACIT(E). 8. Whether the Tribunal was correct in allowing exemptions relying on a Coordinate Bench decision in ITA No. 2751/Ahd/2014, which was not accepted by the Revenue. 9. Whether the Tribunal was correct in allowing exemptions relying on a Coordinate Bench decision in ITA No. 3621/Ahd/2015, against which an appeal was filed before the High Court. Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that the Tribunal erred in holding the assessee's activities as not commercial, that urban development is general public utility not hit by provisos to Section 2(15), that Section 11(2) benefits cannot be allowed if Section 2(15) proviso applies, that allowing addition to fixed assets as application of income amounts to double deduction, that deletion of General Development Expenditure Fund was unjustified, that deemed application of income against future income lacks statutory basis, and that exemptions were allowed despite pending SLPs and appeals on similar issues, relying on decisions not accepted by the Revenue.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(15),Section 11(1)(a),Section 11(2)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/341/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 341 of 2020 ========================================================== THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus SURAT URBAN DEVELOPMENT AUTHORITY(SUDA) ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 18/01/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1.

This Tax Appeal under Section 260A of the Income Tax, 1961 (for short, 'the Act, 1961) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, 'D' Bench, Ahmedabad dated 20.02.2012 in the ITA No. 2432/Ahd/2017 for the A.Y. 2013-14. 2. The revenue has proposed the following questions of law for the consideration of this Court: “(A) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in holding that the activities of the assessee are not in the nature of commerce / trade without considering the fact that the assessee is involved in widespread commercial activities which is covered under first and second proviso to section 2(15) of the Act without considering the merit of the issue? (B) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified considering the activity of the assessee as engaged in the development of C/TAXAP/341/2020 ORDER urban area which is in the nature of advancement of general public utility not hit by the newly introduced first and second proviso to section 2(15) of the Act without considering the merit of the issue?” (C) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified giving benefit in accumulation @15% of Rs.7,82,37,856/- u/s. 11(1)(a) of the Act and exemption of Rs.5,00,00,000/- claimed u/s. 11(2) of the Act without appreciating the fact that once the proviso of Section 2(15) is applicable, the benefit of Section 11(2) cannot be allowed further without considering the merit of the issue? (D) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs.23,48,891/- by not appreciating the fact that the addition to fixed assets has already been allowed in earlier years as application of income which amounts to double deduction? (E) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of General Development

Expenditure

Fund

of Rs.22,79,76,248/- considering that a capital expenditure by a person need not be a capital receipt of the person receiving that amount which the assessee has received for the discharge of its? (F) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was justified in allowing deemed application of Rs.6,77,02,219/- against its future income in absence of any express provision in the Act regarding the same? (G) Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal is 424 and 425 of 2016? C/TAXAP/341/2020 ORDER (H) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal is correct in allowing the claim of exemptions relying on the decision of Coordinate Bench of Ahmedabad in ITA No.2751/Ahd/2014 which has not been accepted, though further appeal was not preferred on account of the quantum of tax involved? (I) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal is correct in allowing the claim of exemptions relying on the decision of Coordinate Bench of Ahmedabad in ITA No.3621/Ahd/2015 against which appeal filed before the High Court in T.A. No.79 of 2020, though further SLP was not preferred on account of the quantum of tax involved?”

3.

We have heard Ms. Mauna Bhatt, the learned Senior Standing Counsel appearing for the revenue.

4.

The questions of law, as proposed by the Revenue are no longer res-intigra in view of the decision of this Court in case of P.S. JOSHI

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