DEPUTY COMMISSIONER OF INCOME TAX (E), JAPUR vs. M/S URBAN IPROVEMENT TRUST, JAIPUR

PER VIJAY PAL RAO, JM :

This appeal by the revenue is directed against the order dated 18th December,

2017 of ld. CIT (A)-3, Jaipur for the assessment year 2014-15. The revenue has

raised the following grounds :-

“ (a) On the facts and circumstances of the case and in law, the ld. CIT (Appeals) erred in allowing benefit of section 10(20) of the Act, by relying upon order of Hon’ble High Court of Rajasthan, Jaipur in the case of UIT, Kota in DBIT No. 73/2011 and 357/2011 dated 25.07.2017, in spite of the facts that income of UIT is not exempt after insertion of explanation 10(20) by the Finance Act, 2002 w.e.f. 01.04.2003.

(b) On the facts and circumstances of the case and in law the ld. CIT (Appeals) erred in allowing benefit of section 10(20) of the Act, by relying upon the decision of Hon’ble High Courts in the

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case of UIT, Kota in DBIT No. 73/2011 & 357/2011 dated 25.07.2017 which has not reached its finality.

(c) On the facts and circumstances of the case and in the ld. CIT (Appeals) has erred in ignoring the facts that assessee failed to maintain its books of accounts as well as getting audit of the same in accordance to the provision of section 12(A)(1)(b) of the Act.

(d) Any other question of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon’ble Tribunal in the interest of justice.

Rajasthan under the Rajasthan Improvement Act, 1959 with the purpose of carrying

out the improvement of urban area in the city of Kota. The AO denied the benefit of

exemption under section 10(20) of the IT Act while framing the assessment under

section 143(3). The assessee challenged the action of the AO before the ld. CIT (A)

and submitted that for the assessment years 2003-04 and 2004-05 this Tribunal

allowed the claim of the assessee by holding that the assessee trust is covered

within the exemption under section 10(20). The Hon’ble Jurisdictional High Court in

DBIT Appeal No. 73/2011 and 357/2011 vide judgment dated 25.07.2017 has

upheld the order of the Tribunal and dismissed the appeal filed by the revenue. Thus

the assessee claimed that after the omission of section 10(20A) by Finance Act,

2002 with effect from 01.04.2003 the assessee is eligible for exemption under

section 10(20) of the IT Act. The ld. CIT (A) accepted the claim of the assessee by

following the decision of Hon’ble Jurisdictional High Court in assessee’s own case in

para 5.3 as under :-

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“ 5.3. I have carefully considered the observation made by the Assessing Officer in the assessment order; submission filed by the A/R of the appellant and cited case laws. I find that in the appellant own case the Honourable Rajasthan High Court vide D.B.T.T.A. 73/2011 and 357/2011 dated 25/07/2017 held that the appellant trust is a local authority eligible for exemption under section 10(20) of the I.T. Act. Therefore following the above decision, the Assessing Officer is directed to allow the exemption u/s 10(20) of the I.T. Act. Accordingly this ground of appeal is allowed.”

material on record. At the outset, we note that the Hon’ble Jurisdictional High Court in assessee’s own case vide judgment dated 25th June, 2017 in DBIT Appeal Nos.

73/2011 and 357/2011 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 considered opinion, would be of importance

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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. 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, by following the decision of Hon’ble Jurisdictional High Court in

assessee’s own case, we hold that the assessee is eligible for benefit under section

10(20) of the IT Act being a local authority for carrying out the improvement and

development functions of the State. Hence we do not find any error or illegality in

the impugned order of ld. CIT (A).

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Order is pronounced in the open court on 21/06/2018.

Sd/- Sd/- (foØe flag ;kno) (fot; iky jkWo ½ (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Jaipur Dated:- 21/06/2018. Das/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

6 ITA No. 289/JP/2018 Urban Improvement Trust, Kota.