HARYANA BUILDING AND OTHER CONSTRUCTION WORKERS WELFARE BOARD,PANCHKULA vs. DCIT, EXEMPTION, CHANDIGARH

From the records, it is noticed that the appeals in ITA Nos. 337 to 339/Chd/2023 are filed belatedly by one day in each case. The Ld. Counsel for the assessee has submitted an 3

We have considered the contents of application and submission made for condonation of delay and we feel it appropriate to condone the delay in the appeals in question.

The ld. DR had no objection for condonation of delay.

Since the issue involved in all the appeals are identical, (except in ITA No. 673/Chd/2021 for AY 2015-16) wherein, the order had been passed u/s 263 of the I.T. Act by CIT Exemptions, Chandigarh, therefore, these appeals were heard together and are disposed off for the sake of brevity.

Appeal of the Assessee for A.Y. 2014-15 in ITA No 339/Chd/2023 is taken as a lead case, wherein, the grounds raised by the Assessee are as under: 1. That the order passed by the Ld. Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi is erroneous, devoid of merits, has been passed in haste without taking into consideration the facts of the case and submissions made and the same deserves to be quashed.

That the First Appellate Authority has erred both on facts and law in affirming the order of the AO that the Cess amount which was received by the appellant Board who is a custodian on behalf of the State Government of Haryana belonged to the appellant Board and was to be treated its income. The observations and findings of the First Appellate Authority are not based upon fair appreciation of facts of the case and deserve to be quashed. It is prayed that the Cess amount received by the appellant Board on behalf of State Government of Haryana though held by it in its account may kindly be ordered to be excluded from the scope of income.

That the Ld. Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi has erred both on facts and law in not allowing the benefit of accumulations as per provisions of Section 11(2) of the Income Tax Act on the ground that the notice of accumulation given by the appellant was not as per provisions of law, defective and thus deemed to have never been given and that the appellant was 6

That the First Appellate Authority has erred both on facts and law in not allowing appropriate relief in regard to the addition of the sum of Rs.1,58,34,30,328 made under section 11(3)(c). The order has been passed without considering the facts of the appellant and is illegal and deserves to be quashed.

That the Ld. First Appellate Authority has erred both on facts and law in not allowing the statutory reduction of 15% allowable under section 11(2) of the Income tax Act, thus making whole of the receipts amounting to Rs.4,86,73,08,657 liable to be treated as income. This resulted in excessive addition of Rs.73,00,96,298 to the income.

The appellant craves/ leave to add, amend alter or otherwise raise any other ground of appeal.

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in holding that Assessing Officer (AO) passed the order dated 27.09.2017 under section 143(3) of the Act for the impugned assessment year 2015-16 without making required enquiries/investigations.

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in giving contradictory observations that the Appellant was covered by fourth limb of definition of Charitable Purpose i.e. Advancement of any other object of General Public Utility' laid down in section 2(15) of the Act and the Appellant being engaged in 8

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in giving contradictory observations that the Appellant was in receipt of sums in the nature of 'cess' during assessment years 2016-17 and 2017- 18 and were covered under 4th limb of section 2(15) of the I.T. Act i.e. advancement of any other object of general public utility and since the major receipts of the assessee were 'cess receipts' far exceeding 20% of the total receipts as per provisions of section 2(15), the tax exemption was not allowable. The facts being the same, the AO should have denied the assessee the benefit of accumulation for the A.Y. 2015-16 also which he had failed to do so.

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in giving contradictory observations that A.O, did not make any inquiries at all about the issue and at the same time observing that A.O. erred in allowing the benefit of accumulation under provisions of section 11(3)(c) of the Act. The order passed by Ld. Commissioner of Income tax (Exemption) is thus bad in the eyes of law and may be ordered to be quashed.

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in holding that the notice given by the Appellant in the prescribed manner in form 10 was not correct and did not amount to compliance with provisions of section 11(2) of the Act and also directing the A.O. to reframe the assessment.

On the fact and circumstances of the case and in law, Ld. Commissioner of Income tax (Exemption) erred in holding that assessment order passed by the A.O. is erroneous in so far as it is also prejudicial to the interest of revenue, thereby setting aside the said assessment order to the file of the A.O. to re- examine the issue.

The appellant craves leave to add, amend alter or otherwise raise any other ground of appeal.

The Ld. AR has filed the common and consolidated written submissions in all the captioned appeals except separate written submissions in ITA No. 63/Chd/2021, wherein, separate order u/s 263 has been passed by the ld. Commissioner of Income Tax, Exemptions, Chandigarh.

The facts of the case and the detailed written submissions filed by the assessee have been taken on record and are reproduced ss under: ITA No. 237/Chd/2020 and 337 to 339/Chd/2024 1. Constitution of the Board as per the Central Act

1. The Haryana Building and Other Construction Workers Welfare Board (hereinafter referred to as “the Board” or “the appellant”) is a statutory body duly constituted by the Government of Haryana in pursuance of the provisions of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (hereinafter “the BOCW Act, 1996”) read with the Building and Other Construction Workers’ Welfare Cess Act, 1996 (hereinafter “the Cess Act, 1996”). The Copy of Notification of Haryana Government Gazette dated 02.11.2006. 1.2. The BOCW Act, 1996 was enacted by the Parliament with the primary objective of regulating the employment and conditions of service of building and other construction workers and to provide for adequate measures relating to their safety, health, and welfare. In furtherance of this legislative intent, Section 18 of the BOCW Act (Relevant extract of the Section 18 is mentioned at page 11 of the BOCW Act, 1996) mandates every State Government to constitute a “Building and Other Construction Worker’s Welfare Board” as a body corporate, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, to contract, and to sue or be sued in its own name, to exercise powers conferred on, and perform the functions assigned to it under this Act.

3. Further, Section 24 of the Act (Relevant extract of Section 24 is mentioned at page 13 of the BOCW Act, 1996) lays down that the Board shall have the responsibility of providing welfare measures and benefits to registered construction workers. Simultaneously, the Cess Act, 1996, particularly under Section 3 (Relevant extract of the Section 3 of the Cess Act, 1996 is mentioned at page 259 of the BOCW Act, 1996), requires the levy and collection of cess on the cost of construction incurred by employers, which is credited to the welfare fund. These funds are statutorily earmarked and can be utilized only for the welfare of 11

4. In pursuance of these statutory provisions, the State of Haryana notified the constitution of the present Board. The Board thus functions as an instrumentality of the State, discharging statutory obligations, and administering welfare schemes exclusively for the benefit of registered construction workers, in strict conformity with the mandate of the BOCW Act, 1996 and the Cess Act, 1996. 2. Grant of Exemption Under Section 12AA

1. It is pertinent to note that the appellant–Board has already been recognized as an institution established for charitable purposes within the meaning of Section 2(15) of the Income-tax Act, 1961. The Board was duly granted registration under Section 12AA of the Act pursuant to the order of the Hon’ble ITAT, Chandigarh Bench, dated 23.09.2009, wherein relief was allowed by accepting the contention of the appellant that it is engaged in carrying out welfare activities strictly in terms of the statutory mandate under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. The copy of Order of Commissioner of Income Tax, Panchkula dated 26.04.2010 form part of Paperbook (Volume-I) on Page No. 4. The Copy of Order of the ITAT, Chandigarh dated 23.09.2009, form part of Paperbook (Volume-I) from Page No. 5-14. 2.2. The Hon’ble Tribunal, while granting the said exemption, observed that the activities of the Board are wholly aligned with the welfare objects envisaged under the Act and are, therefore, charitable in nature. The statutory functions entrusted to the Board are specifically enumerated under Section 22 of the BOCW Act, 1996 (Relevant Extract of Section 22 is mentioned at Page 12 of the BOCW Act, 1996), which inter alia include: provision of financial assistance to beneficiaries, sanctioning of loans and advances, funding of group insurance schemes, educational assistance, medical benefits, and other welfare measures as may be prescribed for the benefit of registered construction workers.

3. Accordingly, the Board has been consistently recognized as a welfare- oriented statutory body, functioning on a non-profit basis, with its income being applied solely towards the fulfillment of the welfare objects mandated by law.

4. On a careful analysis of the objectives and activities of the appellant– Board, it becomes evident that the functions carried out by the Board are for the benefit of poor building workers and the general public at large, particularly a vulnerable section of society, i.e., building and other construction workers. Therefore, these activities clearly fall within the scope of “charitable purposes” as defined under Section 2(15) of the Income-tax Act, 1961, which includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.

5. In fact, the Department itself has recognized the charitable nature of such Boards in the past. An identical view was taken in the case of the Building and Other Construction Workers Welfare Board, Karnataka, wherein registration under Section 12AA of the Act was granted by order dated 30.09.2008. This reinforces and fortifies the claim of the appellant that its functions are in line with the statutory and charitable purposes contemplated under law.

6. Thus, this affirm that the appellant–Board is a statutory body engaged in charitable activities, and its registration under Section 12AA is in conformity with the law.

Grant of Exemption Under Section 10(46)

1. The exemption under Section 10(46) of the Income-tax Act, 1961 was inserted by the Finance Bill, 2011 with effect from 01.06.2011. The intention of the legislature, as reflected in the Memorandum explaining the provisions, was to provide tax neutrality to statutory regulatory authorities, Boards, and Commissions constituted by the Central or State Governments for discharging functions in the nature of public service or welfare administration. The copy of the extract of Finance Bill, 2011 form part of Paperbook (Volume-I) from Page No. 15-25. Prior to this amendment, such statutory bodies could only claim exemption under the general charitable registration framework of Section 12AA of the Act, subject to fulfilling the definition of “charitable purpose” under Section 2(15). However, many of these bodies were created under specific legislations and carried out welfare, regulatory, or supervisory activities as part of statutory obligations rather than voluntary charitable activities. This often resulted in litigation and interpretational difficulties, since these organizations were not “charitable trusts” in the strict legal sense, but rather statutory authorities functioning under mandate of law.

2. Therefore, the introduction of Section 10(46) was done to recognize such statutory entities as a distinct class and to exempt their income of specified nature, provided:

1 Section 10 of the Act excludes certain incomes from the ambit of total income. A new section 10(46) has been inserted in the Act, to provide exemption from income-tax to any specified income of body, authority, board, trust or commission which is set up or constituted by Central, State or Provincial Act or constituted by the Central Government or a State Government with the object of regulating or administering an activity for the benefit of general public, which is not engaged in any commercial activity, and is notified by the Central Government in this behalf. Such notified entities shall also file its return of income.

2 Applicability- This amendment has been made effective from 1st June 2011.”

4. The relevant extract of the Notification dated 09.07.2021 is reproduced as follows:

This notification shall be effective subject to the conditions that Haryana Building and Other Construction Workers Welfare Board,-

In this context, it would be useful to consider the judgment of the Delhi and Allahabad High Courts in Greater Noida Industrial Development Authority (supra) (hereafter "GNIDA") and CIT v. Yamuna Expressway Industrial Development Authority [2017] 81 taxmann.com 208/395 ITR 18/298 CTR 127 (All.).In GNIDA (supra), the High Court drew a distinction between bodies set up by the government with commercial purpose and objects - which are motivated by profit, and other government bodies. The court held, correctly so - that other government bodies are not entitled to exemption as they are motivated by profit. Then, dealing with the term "commercial activity" under section 10(46), it was held that the decisive test is whether the activities for which consideration in the form of fee, service charge etc., is collected, is "intrinsically associated, connected and had minimum nexus with the object of regulating and administering the activity for the benefit of the public".

It was also held that if the activity is not carried on commercial lines, i.e., with the profit motive in mind, but the body is assigned an administrative role, having regard to the objects of the controlling statute or law, exemption cannot be denied under section 10(46). As juxtaposed, activities for profit or activities which clearly were motivated by profit - carried on by government or statutory bodies, cannot avail of exemption. The judgment in Yamuna Industrial Development Authority (supra) is along the similar lines.”

Levy of Collection of Cess is a Statutory Mandate and not voluntary Contribution

1. The collection of cess by the appellant–Board is not voluntary or incidental in nature, but arises directly under the authority of law. The Cess Act, 1996, read with the rules and notifications issued thereunder, provides for the levy and collection of cess on the cost of construction incurred by employers, with the object of augmenting resources for the welfare of construction workers.

2. In terms of Section 3(1) of the Cess Act, 1996 (reference supra- mentioned), there shall be levied and collected a cess, at such rate not exceeding 2% but not less than 1% of the cost of construction incurred by an employer, as may be notified by the Central Government. In pursuance of the said provision, the Government of India, vide Notification dated 26.09.1996 published in the Gazette of India, notified the applicable rate of cess to be levied under the Act. (Relevant Extract of the Notification dated 26.09.1996 is mentioned at Page 286 of the BOCW Act, 1996)

3. Further, it mandates that the proceeds of the cess collected shall be credited to the Building and Other Construction Workers’ Welfare Fund constituted by the respective State Welfare Boards under Section 24 of the BOCW Act, 1996 (reference supra-mentioned).

4. Cess Collected is in the Nature of Corpus and Not Income

5. The amounts collected by way of cess under the Cess Act, 1996 cannot be treated as “income” of the appellant within the meaning of Section 2(24) of the Income-tax Act, 1961. The true legal character of the collection is that of a statutorily mandated contribution, forming part of a dedicated welfare fund, the utilization of which is strictly governed by law.

6. As per Section 24 of the BOCW Act, 1996 (reference supra-mentioned), all amounts of cess collected under the Cess Act are required to be transferred to the Welfare Board (constituted under Section 18 of the Act), and the said amounts stand credited to the “Building and Other Construction Workers’ Welfare Fund.” Further, Section 22 of the Act (reference supra-mentioned) enumerates the purposes for which the Fund may be utilized, which include provision of financial assistance to beneficiaries, loans and advances, group insurance, educational and medical assistance, and other notified welfare measures.

7. Section 2(24) of the Income-tax Act, 1961 provides an inclusive definition of “income.” While the scope is wide, it is settled law that not every receipt is income; only those receipts which belong to the assessee as a matter of right, or which the assessee can apply freely for its own purposes, qualify as income.

8. Thus, the cess collected does not vest in the Board as its income or revenue receipt, but rather as an earmarked corpus fund, held in fiduciary capacity for the benefit of registered workers. It is a settled principle of law that receipts which are statutorily earmarked for application towards specific purposes and cannot be appropriated for general use do not constitute income in the hands of the collecting authority. It has been held in various judicial precedents that statutory bodies collecting and applying funds for specified public utility purposes are not liable to be treated as having earned taxable income, as the amounts so collected partake the nature of trust or corpus funds.

9. Accordingly, the cess collections of the appellant–Board are basically linked to its statutory obligation and welfare objects, and therefore, must be regarded as corpus funds exempt from tax, and not as taxable income.

The impermissibility of any trade, or commercial activity or service, and income, from them, was intended to be conveyed through the prohibition, in the first part of the definition of GPU charities. The necessary implication which arises is that income (received as fee, cess, or any other consideration) derived from such 'prohibited activities' is necessarily motivated by profit. The ordinary meaning of fee or consideration would be synonymous with something of value, usually in monetary terms. However, the use of the expression "cess" facially lends a different colour to all the three expressions.

"Fee, cess and any other consideration" has to receive a purposive interpretation, in the present context. If fee or cess or such consideration is collected for the purpose of an activity, by a state department or entity, which is set up by statute, its mandate to collect such amounts cannot be treated as consideration towards trade or business. Therefore, regulatory activity, necessitating fee or cess collection in terms of enacted law, or collection of amounts in furtherance of activities such as education, regulation of profession, etc., are per se not business or commercial in nature. Likewise, statutory boards and authorities, who are under mandate to develop housing, industrial and other estates, including development of residential housing at reasonable or subsidized costs, which might entail charging higher amounts from some section of the beneficiaries, to cross-subsidize the main activity, cannot be characterized as engaging in business. The character of being 'state', and such corporations or bodies set up under specific laws (whether by states or the centre) would, therefore, not mean that the amounts are 'fee' or 'cess' to provide some commercial or business service. In each case, at the same time, the mere nomenclature of the consideration being a "fee" or "cess", is not conclusive. If the fee or cess, or other consideration is to provide an essential service, in larger public interest, such as water cess or sewage cess or fee, such consideration, received by a statutory body, would not be considered "trade, commerce or business" or service in relation to those. Non-statutory bodies, on the other hand, which may mimic regulatory or development bodies - such as those which promote trade, for a section of business or industry, or are aimed at providing facilities or amenities to improve efficiencies, or platforms to a segment of business, for fee, whether charged by subscription, or specific fee, etc, may not be charitable; when they claim exemption, their cases would require further scrutiny.”

Board as Custodian – Cess as Pass-Through Receipts and Not Real Income

1. The cess collected under the mandate of the Cess Act, 1996 does not constitute “real income” of the appellant–Board. The Board merely acts as a custodian and implementing authority of the said funds, which are statutorily earmarked for application towards welfare schemes for construction workers.

2. In this regard, Section 18 of the BOCW Act, 1996 (reference supra- mentioned) establishes the Board as a statutory body corporate for the purpose of administering the welfare fund, while Section 24 (reference supra-mentioned) mandates that all proceeds of cess collected shall be credited to the Building and Other Construction Workers’ Welfare Fund maintained by the Board. Importantly, Section 22 (reference supra- mentioned) of the Act strictly prescribes the objects for which such fund may be utilized, thereby eliminating any discretion in the hands of the Board to treat the cess as its own resources.

3. From the perspective of the Income-tax Act, 1961, it is well settled that only real income arising to an appellant can be subjected to tax. Income must be understood as a real accrual in the hands of the appellant, and not hypothetical or notional. In the present case, since the Board does not have any beneficial ownership or unfettered control over the cess but is legally bound to hold and apply the same only for prescribed welfare purposes, the amount collected cannot be said to be the Board’s income.

4. In essence, the cess operates only as a pass-through receipt, wherein the Board functions as a channel between the collecting machinery and the beneficiaries of the fund. The Board’s role is fiduciary in nature, akin to that of a trustee administering a specific corpus fund. Therefore, such receipts do not partake the character of taxable income under Section 2(24) of the Act.

Absence of Profit Motive – Welfare Orientation of the Board

1. The activities of the appellant–Board are not driven by any commercial considerations or profit motive. The Board is a statutory body constituted under Section 18 (reference supra-mentioned) of the BOCW Act, 1996 with the sole object of implementing welfare measures for building and other construction workers. Its functions are strictly circumscribed by statute, and it is not permitted to carry on any trade, business, or commercial activity for profit.

2. The statutory functions of the Board are enumerated under Section 22 of the BOCW Act, 1996, which inter alia include:

3. Moreover, Section 24 of the BOCW Act, 1996 (reference supra-mentioned) mandates that all sums received by the Board, including cess transferred to it, shall be credited to the “Building and Other Construction Workers’ Welfare Fund,” and such fund shall be applied only for meeting expenses for the welfare of workers. This statutory mandate of funds ensures that the Board cannot generate or appropriate any surplus for commercial gain.

4. In light of the above, it is evident that the Board’s motive is neither trade nor profit, but purely welfare-oriented. Accordingly, the appellant–Board’s activities are entirely welfare-driven, devoid of any profit motive, and must be viewed in the charitable framework envisaged under the Act.

5. Reliance is placed on the Hon’ble Judgement of Supreme court of India in the case of Commissioner of Income-tax vs Bankipur Club Ltd. [1997] 92 Taxman 278 (SC) where it was held that “in the case of 'mutual society or concern' (including a Members' club), there must be complete identity between the class of contributors and the class of participators. The particular label or form by which the mutual association is known, is of no consequence. In substance, the arrangement or relationship between the club and its members should be of a non-trading character. In the light of the above findings of the Tribunal as also the High Courts, it necessarily followed that the various receipts for the various facilities extended by the assessee-clubs to its members, as part of the usual privileges, advantages and conveniences, attached to the membership of the club, could not be 26

Accounting Treatment and Disclosure in Financial Statements & ITR

1. It is further submitted that the treatment of cess collections as a corpus fund has been duly reflected in the financial accounts and income-tax returns of the appellant–Board. Initially, prior to the grant of exemption under Section 10(46) of the Act, the amounts collected by way of cess were inadvertently reflected on the receipts side of the Income and Expenditure Account. In order to safeguard its position, the Board simultaneously filed Form 10 for accumulation of income in accordance with Section 11(2) of the Income-tax Act, 1961, thereby ensuring that the statutory funds remained earmarked for welfare purposes.

2. Subsequently, upon obtaining greater clarity on the true legal nature of such collections — being statutorily earmarked funds and not income in the commercial sense — the matter was duly deliberated in the meetings of the Board. It was unanimously resolved and accepted that cess is to be treated as a corpus fund, and not as the Board’s income. In line with this decision, the financial statements were revised to correctly reflect the cess collections under Corpus, and not as revenue income.

3. Thereafter, following the notification issued by the Central Government granting exemption under Section 10(46) in the year 2021, the appellant has consistently filed its Income-tax Returns by treating cess as corpus contributions, fully in line with statutory provisions and the accounting policy adopted by the Board. This uniform treatment across Board resolutions, audited financial statements, and income-tax filings demonstrates that the appellant has at all times acted bona fide and in strict conformity with the statutory mandate.

Recent Assessment Orders for AY 2021-22 And AY 2022-23 in the case of Appellant- Board

1. Assessment Year 2021-22: In response to the notices issued, the appellant-Board submitted all the requisite documents and clarified that  Cess collected by the Board is a statutory contribution meant for specific welfare activities and does not partake the character of income in the commercial or taxable sense.  The sums expended during April to May (i.e. following the close of FY) were towards the fulfillment of objectives from previously accumulated funds under Section 11(2).  The Board’s activities are charitable in nature, duly registered under Section 12AA, and meet all conditions under Sections 11 and 12 for exemption.  Form 10s filed for AYs 2019–20 and 2020–21 were submitted showing accumulation and break-up of funds under Section 11(2), along with corresponding applications.  The surplus accumulated in AY 2016–17 was fully utilized by AY 2021–22, in line with the five-year timeline prescribed under Section 11(2).  Since 85% of the gross receipts were spent during the FY, no accumulation under Section 11(2) was claimed for FY 2020–21 relevant to AY 2021–22. After considering the response and details furnished by the appellant- Board, the assessment was completed with no modification on the returned income. The copy of the Replies along with Annexures form part of Paperbook (Volume-II) from Page No. 142-204. The copy of the Assessment Order for the AY 2021-22 dated 19.12.2022, form part of Paperbook (Volume-II) from Page No. 205-209. The relevant extract of the Assessment Order:

2. Assessment Year 2022-23: The facts and issues in AY 2022-23 were identical to those of AY 2021-22. Assessment for AY 2022-23 were proceeded on same lines. The AO relied on previous accepted positions, reviewed the records and completed the assessment without making any additions. The copy of the Assessment Order for the AY 2022-23 dated 22.03.2024, form part of Paperbook from Page No 210-214. 8.3. It is thus, contented that when various determining factors like mode, manner and pattern of preparing and filing form 10, accumulation and utilization of unspent funds and nature of activities of the appellant-Board were fully accepted by the department in AYs 2021–22 and 2022–23, the same principle and consistency ought to be applied to the assessment year under appeal (2014-15, 2016-17, 2017-18 and 2018-19), where no change in factual matrix exists.

The assessee in ITA No. 63/Chd/2021 (AY 2015-16) has submitted the facts and his submissions as under: 1. Brief Facts

1 The facts of the case are that the Appellant-Board filed the Return of Income declaring an Income of Rs. Nil, on 30.09.2015. The case was selected for Scrutiny under CASS and after going through the submissions made by the appellant, no adverse inference was being drawn and the original assessment in this case was completed under section 143(3) of the Income-tax Act, 1961 on 27.09.2017 whereby the returned income was accepted.

2 Subsequently, the assessment was revised under section 263 of the Act. Vide order dated 05.03.2021, the learned Commissioner of Income-tax (Exemptions), Chandigarh set aside the original assessment with a direction to frame the order afresh in accordance with law. Thereafter, proceedings under section 143(3) read with section 263 and section 144B were initiated. In the course of such 30

3 Aggrieved by the Assessment Order under section 143(3) r.w.s. 263 and 144B dated 23.03.2022, the appellant filed an appeal before the Hon’ble CIT(A), NFAC on 22.04.2022. The first appeal proceedings are presently pending, wherein the appellant has already filed detailed written submissions on 19.08.2025 in response to the notice under section 250 dated 07.08.2025. 1.4 The appellant, Haryana Building and Other Construction Workers Welfare Board, is a statutory body constituted under the relevant State enactment adopting the Central legislation, with its registered office at Panchkula. The Board functions under the administrative control of the State Government and is headed by the Labour Commissioner-cum-Secretary (IAS). The primary objective of the appellant is the welfare and upliftment of building and construction workers through schemes such as medical aid, educational support, housing, marriage assistance, and other social security benefits. For this purpose, the Board is vested with statutory collection of Cess, which is to be deployed strictly in accordance with Government directions.

5 The appellant holds registration under section 12AA of the Income-tax Act, 1961. Accordingly, its income is eligible for exemption under sections 11 and 12, subject to fulfillment of statutory conditions. The appellant maintains regular audited books of account, and its receipts are duly applied or accumulated towards the stated objects, with unutilized funds invested in modes prescribed under section 11(5). The statutory Cess collected by the appellant does not partake the character of income, being neither voluntary contribution nor income from property held under trust, and its disbursement is not at the discretion of the appellant. Hence, such Cess cannot be considered for the purpose of determining application or accumulation under section 11. 2. Constitution of the Board and Cess collection is a Statutory mandate

1 The Appellant Board has been constituted under a Central Act with a statutory mandate to safeguard the welfare of construction workers. Its activities are wholly welfare-oriented and devoid of any profit motive. The receipts primarily comprise statutory cess collected under the Building and Other

2 The Board is duly registered under section 12AA of the Act and its activities fall squarely within the definition of “charitable purpose” under section 2(15). Additionally, the Appellant is covered by the provisions of section 10(46), which provides exemption to statutory bodies established under law and duly notified by the Central Government. The nature of the receipts and their application have been consistently disclosed in the accounts, which reflect the Board’s compliance with statutory provisions.

3 The statutory cess credited to the Board is in the nature of corpus funds and cannot be regarded as taxable income. Such funds are mandatorily applied towards welfare schemes and benefits of workers, thereby fulfilling the objectives of the Board as envisaged under the governing legislation. Being a statutory authority discharging public welfare functions, the Appellant operates on a not-for-profit basis and is entitled to exemption on its income.

4 In light of its statutory constitution, welfare-oriented functioning, 12AA registration, and eligibility under section 10(46), the Appellant’s receipts are not liable to tax. Its activities are inherently charitable, and the cess received forms part of corpus funds dedicated to public welfare. Accordingly, no part of its income can be brought to tax under the Act.

1 Complete Enquiry Conducted by the Learned Assessing Officer

1.1 In this case, the original assessment order passed under Section 143(3) was not an instance of non-application of mind or a failure to conduct inquiry. It is respectfully submitted that the Learned AO had conducted a detailed and exhaustive enquiry during the original assessment proceedings. A comprehensive questionnaire was issued to the Appellant containing 23 queries, including specific questions on accumulation of income under section 11(2), filing of Form No. 10, utilization of income, and treatment of corpus fund

1.2 The Appellant furnished detailed replies along with documentary evidence which were duly examined. After considering these submissions and after granting personal hearing, the Learned AO consciously accepted the returned income and passed the order under section 143(3) dated 27.09.2017. The Learned AO’s conclusion that "no adverse inference is being drawn" is not a mere formality but a clear statement that a conscious decision was made based on the material on record.

1.3 It is settled law that where the Learned AO has made enquiries and taken one of the possible views, the Learned Commissioner cannot invoke section 263 merely because he has a different opinion. The Hon’ble Supreme Court in CIT v. Max India Ltd. [295 ITR 282] held that when two views are possible and the Assessing Officer has taken one such view, revision under section 263 is not permissible.

1.4 Section 263 can be invoked only if the impugned assessment order is both erroneous and prejudicial to the interests of revenue. The twin conditions are conjunctive, satisfaction of only one does not permit revision. The record demonstrates that the AO carried out a detailed enquiry before passing the assessment. In particular, a comprehensive questionnaire (23 points) was issued and detailed replies were filed by the appellant during scrutiny.

1.5 The existence of detailed queries, the filing of written replies, and the conduct of personal hearing demonstrate application of mind by the AO. Where the AO has made specific enquiries and accepted the replies, it is not open to the Learned CIT to simply record a contrary view and label the AO’s order as “erroneous” unless there is a clear non-application of mind. The Ld. AO accepted the claims under section 11 and section 12 in the assessment dated 27.09.2017 after considering the material placed on record. Where an assessing officer, after enquiry, takes a view which is tenable on the material, such a view cannot be re- characterised as “erroneous” merely because the Learned CIT prefers an alternate conclusion.

1.6 In the present case, the Learned CIT, Exemptions has failed to demonstrate that the order was passed without enquiry. On the contrary, the records establish that full enquiries were made and the order was passed after due application of mind. Therefore, the allegation that the order was “erroneous and prejudicial to the interests of revenue” is factually incorrect and legally untenable.

2 It is not a case of “no enquiry”

2.1 The Learned AO has passed the Assessment order after taking into consideration all the relevant documents and evidence submitted during the course of Assessment proceedings. Thus, it is not a case of no enquiry. Following are the 33