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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. SANJAY ARORA & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.172(Asr)/2017 Assessment Year:2013-14 ITA No.56(Asr)/2018 Assessment Year:2014-15
Improvement Trust Khanna, Vs. ITO (Exemptions), G.T. Road, Khanna, Ward Jalandhar District Ludhiana, (PB) [PAN:AAALI 0030N] (Appellant) (Respondent) Appellant by : Sh. Parikshit Aggarwal (Ld. CA) Respondent by: Sh. Charan Dass (Ld. DR)
Date of hearing: 04.04.2019 Date of pronouncement: 23.04.2019 ORDER PER N.K.CHOUDHRY, JM: These appeals have been preferred by the Assessee/Appellant against the orders dated 20.02.2017 & 29.11.2017 passed by the Ld. CIT (Appeals)-4, Ludhiana u/s 250(6) of the I.T. Act, 1961 (hereinafter called as ‘the Act’).
In both the appeals, the issue involved is identical, similar and common except difference of amount, therefore, for the sake of convenience and brevity, both the appeals have been taken for adjudication simultaneously, however, the facts and ground of ITA No.172(Asr)/2017 have been taken into consideration for
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adjudication and the result of the same should also be applicable to the ITA No.56(Asr)/2018.
The Assessee/Appellant has raised the sole ground of appeal in ITA No. 172/Asr/2017 which is as under: “That on the facts and in the circumstances of the case and in laws, learned CIT-A erred in upholding the action of Ld. AO that the appellant is not eligible for the benefit of section 11 & 12 of the Act and by affirming addition made by Ld. AO Rs.1,62,70,169/- ignoring various jurisdictional Tribunal and Court precedents and our submissions on record.
The brief facts of the case are that the assessee trust was formed by the Govt. of Punjab with the enactment of Punjab Town Improvement Act, 1972 for the purposes of development of township by way of providing well maintained residential and commercial plots, flats etc. and maintaining of street lights and road, development of parks, to provide benefits to the general public within the local municipal limits and also for development of township for public benefits at large. Being a local authority, the assessee was availing benefit of sec. 10(20) of the Act, up to A.Y.2002-03, however, after withdrawal of exemptions available to the assessee from 1st April, 2003 onwards, the assessee had applied for registration u/s 12AA which was rejected by the Ld. CIT(A), Ludhiana thereafter, on appeal, the Hon’ble ITAT allowed the registration to the assessee. After amendment to Sec.2(15) of the Act w.e.f. 1st April, 2009, the Ld. CIT(A), Ludhiana again rejected the registration of the trust and therefore in the absence of registration, assessment order was framed against the assessee by assessing the total income of the assessee to the tune of Rs.1,62,70,169/. The said order was challenged before the Ld.
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CIT(A), who vide its order dated 20.07.2017 impugned herein dismissed the appeal of the assessee by observing as under:
“5.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while denying exemption/deduction to the appellant trust under section 11 of the Act and thereafter making an addition of Rs.1,62,70,169/- to the returned income to the appellant trust. I have also considered written submissions filed by the appellant trust through its learned AR vide letters dated 24.01.2017 and 07.02.2017 in connection with the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the appellant trust as well as other material placed by him on record. I have again considered the decision of Honorable Punjab & Haryana High Court dated 23.12.2016 in the case of M/s Improvement Trust Moga [ITA No. 147 (O&M) of 2016] which has been heavily relied upon by the learned AR of the appellant trust. On careful consideration of the rival contentions, it has been noticed that the Honorable Punjab & Haryana High Court in its decision dated 23.12.2016 in the case of M/s Improvement Trust Moga [ITA No. 147 (O&M) of 2016] has held that an Improvement Trust constituted under the Punjab Towns Improvement Act, 1922 and carrying on its activities as per provisions of that Act cannot be said to be carrying on any trade, commerce or business of rendering of any service in relation to any trade, commerce or business and therefore, not hit by the prohibition contained in proviso to section 2(15) of the Act. The Honourable jurisdiction High Court has also held that it cannot possibly be suggested that the Government of Punjab formed the trusts under the Punjab Towns Improvement Act, 1922 because it wants to carry on the business as colonizers or developers under the mask of the category ‘objects of other public utility’. It has further been held by the Honorable Court that it can hardly be suggested that the Government of Punjab established the appellant trust and conferred upon it public responsibilities and duties of the nature specified in the PTI Act as a camouflage for its commercial, trade and business ventures. It has again been held that the creation and incorporation of the trust under section 3 of the Act was for a public purpose. It has again been held by their lordships that we have no doubt whatsoever that the activities of the trust fall within the meaning of the words “charitable purposes” in section 2(15) of the Act. As the activities of the appellant trust are identical to the activities of Improvement Trust, Moga, the ratio of the decision of the Honorable Punjab & Haryana High Court in the case of M/s Improvement Trust Moga (supra) is squarely applicable to the case of the appellant trust. So, respectfully following the decision of the Honorable Punjab & Haryana High Court dated 23.12.2016 in the
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case of M/s Improvement Trust Moga [ITA No. 147 (O&M) of 2016], it is held that the appellant trust is engaged in charitable activities. However, for claiming exemption under section 11 of the Act, the appellant trust should be registered under section 12AA of the Act which is not the case of the appellant trust as the registration granted to the appellant trust has been cancelled by the competent authority on 08.02.2013. It has not been brought to my notice that registration under section 12AA of the Act has been granted to the appellant trust after 08.02.2013 by any authority. Under such circumstances, the appellant trust is not to be treated as registered under section 12AA of the Act as the cancellation order still hold good in this case. As the appellant trust is not registered under section 12AA of the Act which is a pre condition for claiming exemption under section 11 of the Act, the appellant trust cannot be said to be entitled for exemption under section 11 of the Act. Having said so, the action of the Assessing Officer in denying exemption/deduction to the appellant trust under section 11 of the Act and thereafter making an addition of Rs.1,62,70,169/- to its returned income cannot be said to be unjustified.
5.3 In view of the above stated facts and in the circumstances of the case, I am of the opinion that the Assessing Officer is fully justified in denying exemption/deduction to the appellant trust under section 11 of the Act and thereafter making an addition of Rs.1,62,70,169/- to its returned income. The addition of Rs.1,62,70,169/- made by the Assessing Officer in this case after denying exemption to the appellant trust under section 11 of the Act is, therefore, upheld. In the result, grounds No. 1, 2, 3, 4, 5 and 6 of the appeal taken by the appellant trust are dismissed.
The ground No.7 of appeal taken by the appellant trust is consequential in nature and do not require any adjudication separately.
The ground No.8 of appeal taken by the appellant trust is general in nature and do not require any adjudication separately.
As a result, the appeal filed by the appellant trust is dismissed.”
The assessee is in appeal before us. 6. Having heard the parties at length and perused the material available on record. It emerges from the orders that the benefit of sec.11 of the Act has been denied to the assessee mainly on the
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ground that registration of the Asseeee Trust u/s 12AA of the Act is not in existence. Our attention was drawn by the Ld. AR of the assessee to the order passed by the Punjab and Haryana High Court, at Chandigarh in assessee’s own case in ITA No.533/2017 (O&M) whereby the Hon’ble High Court remanded the case to the ITAT for decision afresh in terms of order dated 16.03.2017 passed in ITA No.263/2015 by the Hon’ble High Court. For the sake of brevity and ready reference, the concluding part of the order of the Hon’ble High Court is reproduced herein below. “3. A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee was granted registration under Section 12AA of the Act vide order dated 13.11.2009 (Annexure A-l) by the Commissioner of Income Tax-respondent No.l. The said registration was withdrawn by respondent No.l vide order dated 7.2.2013 (Annexure A- 2) on the ground that the assessee-Trust was not charitable in nature within the meaning of Proviso to Section 2(15) of the Act. Feeling aggrieved, the assessee filed an appeal before the Tribunal who vide order dated 26.11.2014 (Annexure A-3) dismissed the appeal by relying upon the order dated 27.3.2014 passed in ITA No. 380/Chd/2013 (Improvement Trust Malerkotla v. Commissioner of Income Tax) wherein identical issues were considered. Against the order dated 27.3.2014, the assessee filed ITA- 236-2015 in this Court and this Court vide order dated 16.3.2017 (Annexure A-4) set aside the order of the Tribunal and remanded back the matter to the Tribunal. Hence, the present appeal by the assessee. 4. We have heard learned counsel for the parties. 5. It is not disputed that similar issues came up before this Court in ITA-236-2015 (M/s The Improvement Trust, Malerkotla v. Commissioner of Income Tax, Ludhiana-II and another) wherein this Court vide order dated 16.3.2017 (Annexure A-4) while setting aside the order of the Tribunal, had remanded the matter back to the Tribunal to decide afresh in the light of submissions made by the learned counsel for the parties therein after affording an opportunity of hearing to the parties in accordance with law.
Accordingly, the present appeal is allowed, order dated 26.11.2014 (Annexure A-3) passed by the Tribunal is set aside and the matter is remanded back to the Tribunal to decide afresh in terms of order dated 16.03.2017 (Annexure A-4).”
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6.1 In view of the directions of the jurisdictional High Court, the ITAT Bench at Chandigarh vide its order dated 21.02.2019 passed the consequential order and set aside the order of the lower authorities in canceling the registration and ordered to restore the registration to the assessee. For the sake of ready reference, the concluding part of the order of Hon’ble ITAT, Chandigarh is reproduced herein below. 2. The present matter has been restored back by the Hon’ble High Court vide order dated 22.10.2018 for deciding afresh in accordance with law. “3. The sole issue raised in this appeal is regarding cancellation of the registration granted earlier to the assessee on the ground that the assessee’s activities are hit by first Proviso to section 2(15) of the Income tax Act, 1961 (in short ‘the Act’.).
Both the parties have fairly agreed that the issue is now covered by the decision of the Higher Courts including of the Hon’ble Jurisdictional High Court in the case of ‘CIT Vs. Moga Improvement Trust’, (2017) 390 ITR 547 and of the Hon'ble Bombay High Court in ‘DIT (Exemptions) Vs. M/s Khar Ghykhana’, ITA No. 2349 of 2013 order dated 6.6.2016 wherein, it has been held that the development activity carried out by improvement trust falls within the definition of objects of general public utility, however, taking into consideration the subsequent amendments in the relevant provisions of the Act, the allowability of quantum income from the activity of the assessee is a question of assessment of income which can be considered while framing assessment u/s 11 of the Act. So far as the issue relating to registration of the assessee ‘improvement trust’ is concerned, the issue is now settled that the registration cannot be cancelled on this account. We, therefore, set aside the order of the lower authorities in cancelling the registration and order to restore registration to the assessee ‘improvement trust’. However, our findings given above are restricted to the restoration of registration of the assessee Trust u/s 12A of the Income Tax Act. However, the assessment of income shall be subject to application of the relevant statutory provisions/law. No other ground has been raised or pressed by the counsel.
In the result, the appeal of the assessee is treated as allowed”
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6.2 From the orders of the Hon’ble High Court and Co-ordinate Bench at Chandigarh, it clearly reflects that the registration granted to the Assessee vide order dated 13.11.2009 u/s 12AA of the Act, stands restored, therefore in view of restoration of the registration u/s 12AA of the Act, the orders passed by the authorities below do not sustain and hence stands quashed. Consequently the cases are remanded back the file of the Assessing Officer to decide afresh in accordance with law, keeping in view the restoration of registration by the Tribunal Bench at Chandigarh vide its order dated 21.02.2019.
In the result, the both appeals filed by the Assessee/Appellant are allowed for statistical purposes.
Order pronounce in the open Court on 23.04.2019
Sd/- Sd/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:23.04.2019 /PK/ Ps. Copy of the order forwarded to: (1) Improvement Trust Khanna, G.T. Road, Khanna, District Ludhiana, (PB) (2) The ITO (Exemption), Ward Jalandhar (3) The SR DR, I.T.A.T., Amritsar True copy By order