M/S URBAN IMPROVEMENT TRUST,BHARATPUR vs. INCOME TAX OFFICER (EXEMPTION), ALWAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1049/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke M/s Urban Improvement Trust, The ITO(E), Agra Road, Bharatpur. Vs. Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATU 1956 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Shyam Lal Agarwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri Ram Singh (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 22/02/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 28/03/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 03.10.2017 of ld. CIT(A), Alwar for the assessment year 2013-14. The assessee has raised the following grounds:- “ A. On the facts and in the circumstances of the case and in law the Ld. CIT(Appeals, Alwar, has erred in:- 1. Not allowing the exemption u/s 11 of the Act by holding that the activities of the appellant authority are not charitable as the registration of the trust is pending.

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E)

the Act and making the addition of Rs. 50 lacs. The assessee was

established under Rajasthan Urban Improvement Act, 1959 as per

Gazette notification dated 12.05.1981. The main purpose and object of

the assessee are to carry out the civic amenities, general public utility

services and improvement of the urban area included in the municipal

limits of Bharatpur. The AO while framing assessment has denied the

benefit of section 11 of the Act and made an addition of Rs. 50 lacs on

account of the profit on sale of plots of land. The AO observed that the

assessee has sold land either at reserve price or in the auction carried

out for obtaining higher sale which is more than cost of acquisition

apportion on such land by the assessee trust. Accordingly, the AO

estimated the income from sale of lands at Rs. 50 lacs. The AO also

denied claim of depreciation of Rs. 20,73,551/- on the ground that the 2

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E)

cost of acquisition of asset is already allowed as expenditure. The

assessee challenged the action of the AO before the ld. CIT(A)

however, the ld. CIT(A) has confirmed the addition made by the AO on

the ground that the registration 12A of the act was still not granted to

the assessee.

assessee filed an application in form No. 10A on 31.05.2013 for

registration u/s 12A before the ld. CIT(E), Alwar which was rejected

vide order dated 12.11.2013. The assessee approach this Tribunal

against the said order of ld. CIT(E) and this Tribunal vide order dated

20.10.2015 in ITA No. 30/JP/2014 directed the ld. CIT(E) to decide the

matter afresh in light of Board Circular No. 11 of 2008 dated 19.12.2008

providing a reasonable opportunity to the assessee. The ld. AR has

pointed out that consequently the ld. CIT(E) vide order dated

15.12.2016 granted registration u/s 12AA w.e.f. 01.04.2013. He has

further submitted even otherwise the assessee is a local body as per the

provisions of section 10(20) of the Act and therefore, the income of the

assessee is not liable to tax. In support of his contention, he has relied

upon the decision of Hon’ble jurisdictional High Court dated 25.07.2017

in case of CIT vs. Urban Improvement Trust, Alwar in D.B. I.T.A. No.

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E)

643/2008, 706/2008 and 294/2009, in case of Urban Improvement

Trust Kota vs. ITO Kota in D.B.I.T.A. No. 73/2011 & CIT vs. Urban

Improvement Trust Ajmer in D.B.I.T.A. No. 392/11.

authorities below and submitted that the AO as well as ld. CIT(A) has

given finding that the assessee is charging more than the cost of

acquisition of land and therefore earning profit of purchase and sale of

land which cannot be treated as charitable. Further, the assessee is not

maintaining separate books of accounts showing the transaction of

purchase and sale of lands hence, the AO has rightly estimated the

income of the assessee at Rs. 50 lacs.

material on record. The AO as well as ld. CIT(A) denied the benefit of

section 11 of the Act to the assessee on the ground that the assessee

was not granted registration 12A of the Act. The ld. CIT(A) while

dealing with this issue has held in para 6.3 as under:-

“6.3 I have perused the assessment order as well as submissions made by the appellant. I have perused the contention of the A.O. that the trust has not been granted any exemption as the application for the registration was itself move on 31/05/2013 and the same was rejected by the competent authority and upon direction of the Hon’ble ITAT, the matter is still pending before the competent authority. I have further taken note of the fact 4

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E)

that although land were sold by the trust during the year but no trading account was filed nor any details as sought by the A.O. in this regard have been filed. In the circumstances, the A.O is justified in estimating the profit of Rs. 50 lakhs. Accordingly, the addition is sustained and the appellant’s ground of appeal on the issue is dismissed.”

Now the registration u/s 12A has been granted by the ld. CIT(E) vide

order dated 15.12.2016 w.e.f. 01.04.2013 therefore, the activity of the

assessee has been accepted as charitable in nature. Further, the

Hon’ble jurisdictional High Court in case of Urban Improvement Trust,

Alwar, Kota and Ajmer vide order dated 25.07.2017 (Supra) has held in

para 15 to 19 as under:-

“15. It is true that the functions which are carried out by the assessee are statutory functions and carry on for the benefit of the State Government for urban development therefore, in our considered opinion, the functions carried out by the authority is a supreme function and fall within the activity of the State Government. 16. In that view of the matter, the judgments which are strongly relied upon by counsel for the department are of no help in the facts of the case as the case relied upon by the department was in respect of industrial corporation which was under the statute for the purpose of making profit. The fees and other charges which are covered are statutorily for the development of the Urban area. In that view of the matter, the judgment which sought to be relied upon by the counsel for the respondents, in or

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E)

considered opinion, would be of importance and the functions which are carried out by the assessee is statutory function. In our considered opinion, under clause-10(20) & Sub-clause (3) Municipal Committee and District Board are legal entity entrusted the function of the Government within the control or management of the municipal or local authority and will try to held the assessee. 17. In that view of the matter, the reliance placed by counsel for the department regarding 10(20) and explanation A will not make any difference. Taking into consideration income of authority is under constitution of India vide order enacted either for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges. 18. In that view of the matter, deletion of 20A will not make difference in case of assessee. In our considered opinion, clause- 3 will come in the help of the assessee. In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State. 19. 19. In that view of the matter, the issue is required to be answered in favour of the assessee against the department. In view of the answer, other issues are become academic, therefore, we are not deciding those issue.” Accordingly, in view of the decision of Hon’ble Jurisdictional High Court

the assessee is eligible for the benefit u/s 10(20) of the Income Tax Act

being a local authority for the purpose the carrying out the 6

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E) improvement and development functions of the state. Hence, in view of

the decision of the Hon’ble Jurisdictional High Court (supra) as well as

the registration granted u/s 12AA of the ld. CIT(E). we are of the

opinion that the assessee’s income is not taxable in view of the

provisions of section 10(20) of the I.T. Act.

principle of law that the cost of acquisition of the asset is allowed an

application would not be a ground of disallowance of deprecation.

Hence, the addition/disallowance made by the AO are deleted.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 28/03/2018 Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28/03/2018. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Urban Improvement Trust, Bharatpur. 2. izR;FkhZ@ The Respondent- The ITO(E), Alwar. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 7

ITA No. 1049/JP/2017 M/s Urban Improvement Trust vs. ITO(E) 6. xkMZ QkbZy@ Guard File {ITA No. 1049/JP/2017} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत