DCIT, EXEMPTION CIRCLE, GHAZIABAD vs. HARIDWAR DEVELOPMENT AUTHORITY, HARIDWAR

Appellant By Ms. Kirti Sankratyaan, Sr. DR Respondent by Sh. Mahesh B. Chibber, Adv. Date of Hearing 05.04.2021 Date of Pronouncement 30.06.2021 ORDER

PER SUDHANSHU SRIVASTAVA, JM:

2.0 The brief facts of the case are that the assessee is a Development Authority set up by Uttar Pradesh Government with the object of development of Hardwar, Pauri, Tehri and part of Dehradun. All developmental schemes as well as beautification of these Districts are to be done by the assessee. The assessment for years under consideration was framed u/s 143(3) of the Act after disallowance of claim of exemption u/s 11 and making further addition of Rs. 2,15,12,580/- being net amount transferred to Infrastructure Development Fund as income of the assessee- authority. The assessing officer disallowed the claim of exemption u/s 11 by disputing the charitable nature of activities carried out by the assessee in terms of section 2(15) of the Act.

2.1 The assessee, aggrieved by the assessment order passed u/s 143(3), preferred appeal before the Ld. CIT (A) and the same was partly allowed wherein the claim of exemption u/s 11 was allowed and addition of Rs.2,15,12,580/- being income transferred to Infrastructure Development Fund was upheld. The department is now in appeal before us against the order of the Ld. CIT (A) and identical grounds have been raised in both the years under appeal as under: :

1. 1. The Ld. CIT (A) has erred in law and facts in deleting addition upto Rs. 7,70,82,351/- made by the AO.

2. The order of Ld. CI T(A) be cancelled and the order of the AO be restored. : 1. The Ld. CIT(A) has erred in Law and on facts of the case in appreciating the fact that the AO denial to the exemption cannot be upheld, since the department is in appeal before Hon’ble Supreme Court on the same plea in the case of Jhansi Development Authority against the order of Hon,ble High Court.

2. The Ld. CIT(A) has erred in Law and on facts in restricting disallowance to the extent to Rs. 3,90,13,806/-.

3. The Order of Ld. CIT (A) be cancelled and the order of the AO be restored.

2.0 As the Ld. CIT (A) has partly upheld the assessment order, the grievance of the department in the present appeals is limited to allowance of claim of exemption u/s 11 of the Income Tax Act, 1961.

3.1 The Ld. DR supported the assessment order and vehemently argued that the assessee-authority fails to satisfy the criteria for claiming exemption u/s 11 of the Act. It was submitted that activities of the assessee-authority are of commercial nature and fail to satisfy the definition as given in section 2(15) of the Act.

3.2 On the other hand, the Ld. AR appearing for the assessee-authority submitted that the issue in hand is covered by the decision of this Tribunal (ITAT) and thereafter by the order granting registration u/s 12AA passed by the Ld. CIT (Exemption).

It was highlighted that the ITAT, vide order dated 25/07/2014, held that objects of assessee authority are charitable in terms of section 2(15) and directed the Ld. CIT (Exemption) to grant registration u/s 12A of the Income Tax Act, 1961 with effect from 01/04/2002. It was further submitted that the order of the ITAT has subsequently been upheld by the Hon’ble Allahabad High Court vide order dated 18/07/2017 in Income Tax Appeal No. 90 of 2015. The copies of the orders were placed on record. It was accordingly submitted that the Ld. CIT (A) has rightly allowed the claim of exemption u/s 11 of the Act.

4.0 We have considered the rival submissions and have gone through the facts of the case. The surviving issue before us is regarding nature of activities carried out by the assessee-authority in terms of section 2(15) and validity of claim of exemption u/s 11 of the Income Tax Act, 1961. The assessing officer has rejected the claim of exemption u/s 11 on the ground that the assessee failed to justify that its activities fell within the definition of charitable purpose u/s 2(15) of the Act. The assessing officer was of the opinion that assessee is primarily engaged in the activity of development and sale of property and same is in the nature of business and hit by proviso to section 2(15) of the Act. The Ld. CIT (A), after taking note of decision of the Coordinate Bench of this Tribunal, vide order dated 25/07/2014 in 3013/Del/13 and 6058/Del/12, in assessee’s own case and other orders passed in the case of other development authorities with similar objects allowed the claim of exemption u/s 11 by holding that assessee-authority is a charitable organization and not hit by proviso to section 2(15) of the Act. The finding of the Ld. CIT (A) are reproduced hereunder:

“I have duly considered the facts and circumstances of the case. The AO has disallowed the exemption of the assessee authority by relying upon the decision of the Hon'ble Jammu & Kashmir High Court in dated 07.11.2013, which has since been confirmed by the Hon'ble Supreme Court in special leave to appeal no. 4990/2014 dated 24.07.2014. The AO has also placed reliance on the judgment of ITAT Cochin in the case of Greater Cochin Development Authority vs JCIT (OSD) (Exemption) in ITA No. 792/93/ Cochin/2013 wherein the Hon'ble ITAT has held that the development authority could not be held as charitable. However, the Hon'ble ITAT in the assessee's case in ITA No. 3056/Del/2012 & 3013/Del/2013 & in ITA number 6058/ Del/2012 vide their order dated 25.07.2014 have distinguished the case of the assessee from the case of Punjab Urban Planning and Development Authority vs. CIT (2006) 103 TTJ (Chd) 988 and Jalandhar Development Authority vs CIT (2009) 124 TTJ (Asr) 598. It is further seen that the Hon'ble ITAT in the case of Jammu Development Authority, which was later on confirmed by the Hon'ble J&K High Court, followed the order in the case of Jalandhar Development Authority, as the facts in that case were identical to the case of Jalandhar Development Authority. However, in the assessee's case, the Hon'ble ITAT distinguished those cases and held that the decision in the case of Punjab Urban Planning and Development Authority (supra) and Jalandhar Development

Authority (supra) were not applicable to the assessee's case because the assessee was constituted under the Uttar Pradesh Nagar Yojna Evam Vikas Adhiniyam 1973 and was under the jurisdiction of the Hon'ble Allahabad High Court. It therefore followed the decision rendered by the Hon'ble Allahabad High Court in the case U.P. Awas Evam Vikas Parishad in dated 25.07.2005, Muzzafarnagar Development Authority vs. CIT, CIT vs. Krishi Utapadan Mandi Samiti (2010) 1 All LJ 817 and M/s Khurja Development Authority vs. CIT in ITA NO 1851(Del)2009 order dated 14.07.2009 to hold that the assessee was charitable organization that was not hit by the provision of section 2 subsection (15) of I.T. Act, 1961 because the assessee authority was not carrying out any activity with any profit motive but the pre dominant objective was the welfare of the people at large and in view of the fact that it was of the opinion that the decision of Allahabad High Court in the case of U.P. Awas Evam Vikas Parishad (supra) was applicable to the facts of the assessee's case, therefore it did not find any reason to refer to the decision of Punjab Urban Planning and Development Authority (supra) and Jalandhar Development Authority (supra). In view of the fact that the jurisdictional bench of ITAT after examining the assessee's case in the light of Uttar Pradesh Nagar Yojna Evam Vikas Adhiniyam 1973, has held that the assessee is a charitable organization not hit by the provisions of section 2(15) of the Act, the decision of the Ao to deny the exemption cannot be upheld. This is more so because the CIT(Exemption) has since granted registration u/s 12AA of the I.T. Act, 1961 vide his order dated 20.09.2016, in pursuance of the judgment of Hon'ble ITAT.

4.1 On a close perusal of the order of the Coordinate Bench of this Tribunal restoring the registration u/s 12AA, we find that this Tribunal, after examining the entire gamut of facts and objects of the assessee authority, gave a categorical finding that the assessee-authority is not carrying out any activity with any profit motive, but its predominant object is welfare of people at large. It was further held that the assessee-authority has been created with the object of general public utility which is a charitable object within the meaning of section 2(15) and the proviso to section 2(15) is not applicable. The order of this Tribunal has since been upheld by the Hon’ble Allahabad High Court vide order dated 18/07/2017 in Income Tax Appeal No. 90 of 2015.

4.2 We would like to stress upon the fact that the assessing officer has not brought on record any new or distinguishing feature to counter the facts which were there before this Tribunal at the time of deciding the appeal against cancellation of registration u/s 12AA of the Act. Undisputedly, it is not a case where there is any change in the objects of the assessee-authority or any allegation that the assessee was engaged in any activity beyond its objects and as such there is no compelling reason for us to deviate from finding given by the Coordinate Bench. We also take note that the Ld. CIT (A), while deciding this issue in favour of assessee, has placed reliance on various decisions rendered by the Coordinate benches of this Tribunal and the various Hon’ble High Courts in other cases of statutory authorities formed with similar objects, which, in our view, supports the case of the assessee authority.

4.3 We also draw strength from ratio laid down in following decisions: i. ITO (E) v. Saharanpur Development Authority (ITA No. 4113/D/17) (24/03/2021) (Delhi-Trib) ii. Jhansi Development Authority v. DCIT [2021] 123 taxmann.com 247 (Agra - Trib.) iii. CIT v. Ghaziabad Development Authority (ITA No. 2400/D/14) (Delhi-Trib) iv. Gujarat Industrial Development Corporation v. ACIT (ITA No. 278/Ahd/13)(Ahmedabad-Trib.) v. Bangalore Development Authority v. Addl. CIT [2019] 104 taxmann.com 266 (Bangalore-Trib.) vi. Gujarat Housing Board (GHB) v. DCIT(E) (ITA No. 3297/Ahd/2016)(Ahmedabad-Trib.) vii. Moradabad Development Authority v. ACIT (Exemption) (ITA No. 4631 & 32/D/17) (Delhi-Trib) viii. Firozabad Shikohabad Development Authority v. CIT [2018] 169 ITD 202 (Agra - Trib.) ix. Ahmedabad Urban Development Authority v. ACIT [2017] 396 ITR 323 (Guj High Court) x. CIT v. Jodhpur Development Authority [2016] 287 CTR 473 (Raj HC) xi. CIT v. Lucknow Development Authority [2014] 265 CTR 433 (All HC) xii. New Okhla Industrial Development Authority v. CIT(E) (ITA No. 172/Del/2016) (Delhi-Trib.)

4.4 In view of above and respectfully following the decision of the Hon’ble Allahabad High Court and the Coordinate bench in asssessee’s own case, we are of the considered view the assessee-authority is carrying out charitable activities with object of general public utility in accordance with section 2(15) of the Act and the same cannot be termed as commercial or of business nature for the purpose of proviso to section 2(15) of the Act. Accordingly, we find no reason to interfere with the order of the Ld. CIT (A) allowing benefit of application and exemption u/s 11 of the Act.

4.5 As a result, the grounds raised by the revenue are dismissed.

5.0 In the final result, both the appeals filed by the department are dismissed.

Order pronounced on 30th June, 2021.