U.P HOUSING & DEVELOPMENT BOARD,LUCKNOW vs. INCOME TAX OFFICER-2(3), LUCKNOW

BECAUSE the "appellant" did not have any right, title or interest of its own in the sums aggregating Rs. 28,62,63,922/- credited in "Infrastructure Fund", as the same stood diverted by over-riding title in favour of the State Government and consequently 4 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad the "CIT(A)" should have held that the sums in question alongwith interest thereon were outside the ambit of assessment in the case of the "appellant".

BECAUSE the amount of expenses claimed under the above mentioned head was fully supported by proper bills and vouchers and the same were duly accounted for in the books of account which had been subjected to twin audits and no defect or discrepancy having been found and specified therein, the dis-allowance made / sustained by the authorities are wholly erroneous both on facts and in law.

BECAUSE without prejudice to the ground nos. 3 and 4 above, the dis-allowance under the heads 'legal expenses', is much too high and highly excessive.

BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice to the extent stated in the foregoing grounds.” 1) Ld. CIT(A) has erred in law by directing the AO to compute the income as per direction given by the CIT(A)-1, Lucknow in the manner specified in section 11 of the Act taking into account information given in audit report in form 10B, ignoring the fact that the activities of the assessee are of commercial nature, therefore the assessee is hit by the amended proviso to section 2(15) of the Act, 1961 and second appeal on identical issue is already pending before Hon'ble ITAT, on a similar order passed by previous ld. CIT(A) in this very case. 2) Ld. CIT(A) has erred in law and facts in accepting/deciding the same issue, during the pendency before the Hon'ble ITAT, Lucknow Bench, Lucknow in appeal no. 532/Lkw/2014. 3) The order of Ld. CIT(A) be cancelled and the order of the A.O. be restored.

The facts of the case are that the appellant was constituted by the Government of U.P. in terms of the provisions of section 3 of the Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam, 1965. Section 15 in Chapter 3 of the Adhiniyam provides for the functions of the Parishad, which are also the objects of the assessee parishad. After abolition of section 10(20A) of the Act w.e.f. 1.04.2003, the assessee applied for registration under section 12AA of the Act, which was rejected by the Commissioner of Income Tax, Lucknow. Subsequently, in pursuance of directions by the ITAT, registration under section 12AA was granted to the appellant vide order dated 17.01.2006, w.e.f. 1.04.2003. In the assessment orders that were passed for the assessment years 2003-04, 2004-05, 2005-06 and 2006-07, the ld. AO denied the benefit of exemption under section 11 of the Income Tax Act, 1961 to the assessee authority. However, in subsequent appeals before the ld. CIT(A), the benefit of exemption under section 11 was allowed to the assessee and it was held that the income of the assessee was required to be computed as per section 11 of the Act. The matter of exemption under section 11 was also disputed by the Revenue for the assessment years 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15. However, the Hon’ble ITAT, vide its orders dated 8.06.2022, upheld & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad the exemption granted to the assessee vide the orders of the ld. CIT(A) and restored certain matter for re-examination back to the file of the ld. AO. 3.1 In the impugned assessment years (2007-08 and 2008-09), the ld. AO also assessed the income over expenditure as the income of the assessee and brought the same to tax. After making certain other additions, the income of the assessee was computed at Rs. 301,97,44,732/- for the assessment year 2007-08 and at Rs.225,45,17,400/- in the assessment year 2008-09. The ld. AO analyzed the functions and powers of the Board as laid down in section 15 of the Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam, 1965 (hereinafter known as UPAEVPA, 1965) and came to the conclusion that a plain reading of the same revealed that they outlined the features of a housing scheme and emanated out of a consideration of a expediency rather than a concern for charity. The ld. AO compared the housing projects developed by private builders / developers with the activities of the Parishad and pointed out that the Parishad was charging a price for the common amenities and ambience, from the buyer/allottees of the said housing scheme. The ld. AO therefore, concluded that there was no mention of any set of objects in the UPAEVPA, 1965 which could be considered as charitable. Therefore, he rejected the contention of the assessee that it had charitable objects. He further observed that Chapter 2 of the UPAEVPA, 1965 was entitled, “establishment and conduct of business of the Board” which in itself implied that the assessee Board had been constituted for conducting business. It was further pointed out that the return of the assessee that had been filed with both Form 10B and at the same time alongwith Form 3CA, 3CB and Form 10CCB. The ld. AO observed that evidently the assessee had both claimed exemption under section 11 of the Act and also deduction under section 80IB(10) of the Act. Therefore, the assessee was asked to explain, why in view of the claim made under section 80IB(10), the income shown by it may not be taxed as business income. In response, the assessee submitted that the claim had 8 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad been made as a matter of abundant precaution, in case the assessment of income was made by disallowing the assessee the benefit of section 11. However, the ld. AO concluded from the claim of deduction under section 80IB, that the assessee was engaged in business activity and therefore, on these grounds, he held that the exemption under section 11 was not allowable. He also held that the claim of section 80IB was also not allowable firstly because the assessee had filed a return belatedly (for the A.Y. 2007-08) and not furnished details of commencement and completion of projects along with documentary evidences (for the A.Y. 2008-09). The ld. AO, thereafter proceeded to call for certain details regarding its income / expenses and asked the assessee to justify its claim of being engaged in charitable activities. Among the details called for, was the detail of deposits, work done along with centage chart for the same; income from community centers and guest houses, along with charges; details regarding how costing of property was done; details of auction sales done along with reserve price and fetched prices and details of properties allotted for charitable purposes or concessional rate, such as for hospitals, educational institutions, orphanages etc,. The assessee furnished some details, including the details of costing for houses constructed for Ashrayheen/ EWS, LIG, MIG, Vambay Scheme and others so as to prove that it did not have any profit motive and was essentially working for the welfare of the poor and lower income groups. It is also submitted that all the schemes were duly approved and sponsored by the Government of Uttar Pradesh. It was submitted that it was functioning entirely for the attainment of objectives as enshrined in the UPAEVPA, 1965 and that there had been no deviation in the activities conducted by the Parishad either in the past or present. However, the ld. AO recorded that the assessee did not furnish the complete details to the queries raised by him in either of the assessment years. The ld. AO conceded the fact that the assessee had been granted registration by the ld. CIT(A), on the directions of the ITAT, but held that the registration under section 12AA did not give a blanket exemption to the assessee under section 11 of the Act. He opined 9 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad that the institution may be registered under section 12AA and still not be liable for exemption under section 11 of the Act, on account of enquiries made by the ld. AO which showed that the activities of the said assessee were not charitable. The ld. AO observed that a large surplus has been generated from the sale of properties, interest had been taken on payment of installments which also included penal interest on all kinds of properties including sales made on, “Valmiki Ambedkar Yojna” which showed that the assessee Parishad was not functioning on charitable considerations but on commercial calculations. The ld. AO further observed that the assessee had received large receipts from “EMOs” relating to property details of which were given in Schedule 28 of the accounts, from which he concluded that for each and every aspect of work performed by them, the assessee parishad has been charging the allottees. Thus, from the same he concluded that the activities of the assessees had all the ingredients of a commercial venture in which there was no essence of charity. The ld. AO observed that the assessee was levying non- construction charges where construction was not carried out by the allottees on the plots within stipulated period, forfeiting amounts paid on cancellation of allotments / sale of properties and thereafter taking revival charges for properties that had been forfeited or were on the verge of forfeiture for non-payment of dues or defaults. So from all these observations, the ld. AO concluded that the assessee parishad was functioning like a commercial entity. The ld. AO also observed that the assessee had placed large amount of deposits in the bank and was earning interest from the same, which was not a charitable activity. Furthermore, the ld. AO observed that the assessee was performing works on behalf of various Governments, from which it was charging, “Centage” going up to 12.5%, which in the opinion of the ld. AO was as good as the margin of profit received by other contractors for similar work. He rejected the explanation of the assessee that the centage was charged to meet its administrative and establishment cost as the assessee did not furnish substantiating evidence in this regard. The ld. AO concluded 10 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad that this activity was entirely on commercial lines. The ld. AO also observed that the funds received for centage work were also deposited in FDRs, from which interest was earned by the assessee. He went on to observe that, from the costing details submitted by the assessee, apart from expenses claimed on land, civil work, material cost, work charge cost, a 12% supervision charged was also charged for each unit built and interest was charged for the period of construction. Furthermore, 2% of the cost of the unit was also taken from the allottees on account of maintenance. Calling for the details of auctioned properties, with regard to reserve price and price fetched, the ld. AO observed that the land had been sold to private builders/real estate developers and therefore, this activity went to show that the sales were not for any charitable consideration, but rather the utility had been extended to those persons who could afford it. He also observed that the assessee was receiving money from community centers and guest houses, but despite calling for the retail of such receipts, ownership of guest houses etc., none were furnished before him. For the A.Y. 2007-08, the ld. AO also observed that the assessee had shown excess of income over expenditure of Rs.270,94,55,118/- which was 47.29% of its total receipts. He observed that for claiming exemption under section 11, the assessee was obliged to file a Form 10 as per the provisions of section 11(2) of the Act along with the return of income, which the assessee had not done. However, during the course of proceedings, on 21.12.2009, the assessee submitted a statement showing working of income set apart for utilization, on the basis of a decision of the Board on 27.11.2009 that Form No.10 shall be furnished by the Finance Controller of the Parishad. Thereafter, Form 10 for the year was furnished on 23.12.2009. Since, Form 10 was filed after almost three years of the return having been filed, the ld. AO held that it was not maintainable and further he observed that no particular purpose had been stated in the Form 10, which was in contradiction to the intention of the Legislature while enacting the provisions contained in section 11(2) of the Income Tax Act. He, therefore, held that since there was no specific purpose for 11 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad which the accumulation could be treated as justified, Form No.10 was rejected and the exemption of the assessee under section 11 was also liable to be dismissed on account of inadequate application of receipts. 3.2 In both assessment years, the ld. Assessing Officer observed that certain receipts under the head, “infrastructure Fund” (Schedule 9A), Vambey Scheme fund and revolving fund (Schedule 9B) had not been included in the income and expenditure accounts prepared for the year. He asked the assessee to explain why the total receipts under these heads had not been included in the total income shown, as these were Revenue receipts and as the system of accounting being followed was, “cash”. In its response, the assessee submitted that as per the order of the State Government order dated 15.12.1998, the contention that receipts on account of infrastructure were the revenue receipts of the assessee were not correct. Only 10% of such receipts were the income of the assessee which has been truly taken into the income and expenditure account. It ws submitted that as per the order of the State Government, 2% additional stamp duty is collected on Registry of properties in the entire U.P. Of the total collection, the Awas Vikas Parishad, development authorities & nagar nigams were given one third each at the discretion of the State Government in terms of G.P. No.5080/9/Aa-1-1998 dated 15.12.1998. The ld. AO went through the said Government Order and noticed that in the same, a certain amount of collection made from different sources (as enumerated) would be used for construction of roads, drainages, sewer, light, water and beautification etc,. However, he noted that it was nowhere directed that one third would be given to other authorities and in the circumstances, he held that these were the revenue receipts of the assessee, charged from persons with whom transactions for sale of land / houses /shops etc., were made. As they were the assessee’s trading receipts and by all commercial tests, formed part of the income of the assessee, they ought to have been accounted for in the credit side of the income and expenditure account 12 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad and not crediting of such receipts in the income and expenditure account amounted to suppression of current income for the year. In the assessment year 2008-09, the ld. AO also pointed out that the assessee had shown expenses to have been made out of this fund but no details or evidence had been submitted before him regarding the expenditure out of this fund. Therefore, in both years, he decided to add back the aggregate amount of receipts in the infrastructure funds (Rs.14,31,41,898/- in A.Y. 2007-08 and Rs. 28,62,63,922/- in A.Y. 2008-09) to the income of the assessee.

Coming to the issue of Vambay Fund, the ld. CIT(A) considered the arguments of the assessee that the same was conceptualized under the poverty elevation for urban poor scheme formulated by the Government and the assessee had been receiving grants from the State Urban Development Agency (SUDA) for utilization in a specified manner and unutilized funds were to be deposited into the bank. He further considered the submission that the interest on such deposits also partakes the character of the grant, therefore, the sum although collected by the assessee was diverted through overriding title in favour of SUDA only and was meant for being utilized as per its policy. The ld. CIT held that in the Vambay Fund, the grants were given by the State Urban Development Agency (SUDA) for poverty eradication for the urban poor. Since, the grants received were credited in a separate account and utilized as per the guidelines issued by the State Urban Development Agency (SUDA), he agreed with the contention put forth by the ld. AR that the grant had been received for a particular purpose and could not be taxed as 22 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad there was no element of profit in such grant. Placing his reliance on the following decisions: a. CIT vs. U.P. Upbhokta Sahkari Sangh Limited 288 ITR 106 (All) b. Bihar Agricultural Produce vs. CIT, 205 taxman 378 (Patna) c. Karnataka Urban Infrastructure Development Corporation 315 ITR 301 The ld. CIT(A) held that the grant and interest which have been taxed by the ld. AO were meant for specific projects and had been spent for meeting the expenses of these projects and hence these amounts were not taxable. He further held that since the expenses incurred by the assessee during the years under consideration under the Vambay Scheme were more than the receipts, there was no surplus which could be brought to tax. He, therefore, deleted the additions made by the ld. AO in this regard.

On the issue of revolving fund, the ld. CIT(A) observed after seeing the G.O. dated 11.07.2005 that the principle of diversion of income by overriding title, as argued by the ld. AR was not applicable as the sums credited to the said fund, as it merely represented appropriation of income in the hands of the assessee. He noted that .5% of the remittances made by headquarters to the units were retained by the headquarters under the fund. The fact of the retaining the amount was intimated to the concerned unit by the finance division and the concerned unit claimed it as an expenditure on relevant projects. The ld. CIT(A) held that the units claiming the money so retained under revolving fund as expenses, was not in consonance with accounting policy. In view of the same, he confirmed the additions made by the ld. AO on account of revolving fund and rejected this ground of appeal filed by the assessee. On the issue of claim of advances to contractors, the ld. CIT(A) held that the amounts represented advance payments made to contractors, which were neither receipts nor expenses in the hands of the assessee as no deduction in 23 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad respect of the same had been claimed. He, therefore, held that the sum in question could not be taxed as the income of the assessee and therefore, he directed that it be excluded from the computation of income in both assessment years. On the issue of claim of expenses under the head legal expenses, considering the submissions laid down by the ld. AR that payments were entered in the books of accounts which have been maintained on day to day basis and in regular course of activities carried out by the assessee after deducting tax at source wherever necessary, he observed that the assessee had neither furnished the details before the ld. AO nor before him, even though, number of opportunities was provided to the assessee in this regard. Therefore, the ld. CIT(A) held that the ld. AO had given cogent reasons for making the said disallowance and he did not find any reason to interfere with the same. He, therefore, decided these grounds against the assessee in both assessment years. On the issue of rent, rates and taxes in the assessment year 2007-08, the ld. CIT(A) again observed that the assessee had not furnished details before him also during the course of appeals and therefore, he declined to entertain the claim and accordingly he confirmed the addition made by the ld. AO. On the issue of deduction under section 80IB(10), since the ground was not pressed by the ld. AR, the ld. CIT(A) dismissed the same as not pressed. On the claim of TDS, the ld. CIT(A) directed the ld. AO to verify the TDS and grant the benefit to the assessee as per law. On the issue of charging of interest under section 234A, 234B and 234C, holding that the charging of interest was mandatory, he rejected the plea of the assessee but directed the ld. AO to allow the consequential relief that would arise as a result of the decisions made in the appeal. In this manner, both the appeals of the assessee were partly allowed.

Shri. G.C. Shrivastava, ld. Special Counsel appearing on behalf of the Revenue in & 533/Lkw/2014 and ITA Nos.21 & 22/Lkw/2019 drew our attention to drew our attention to the additional grounds of appeal

In response to these submissions, the ld. AR reiterated that the funds did not belong to the authority, they were being kept by the Parishad in fiduciary capacity and therefore, they were being kept separately.

Sh. Mazhar Akram, ld. CIT DR, representing department in & 535/Lkw/2014, pointed out that the judgment of the Amritsar Bench in the case of Jalandhar Development Authority that had been cited by the ld AR , was based on the judgment of the Punjab and Haryana in the case of Pr. CIT vs. Punjab Police Housing Corporation Limited as reported in 195 DTR 150 P & H wherein it had 37 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad been held that interest on grants received by the State Government could not be treated as income of the assessee. However, the ld. CIT DR argued that it had been pointed out by the Hon’ble Patna High Court in the case of Bihar Police Building Construction Corporation Private Limited vs. Pr. CIT (2023) (09) PAT CK 0020 that circulars of the State Government providing for deduction of grants in successive years to the extent of interest earned from the grants of early years, could not regulate the taxability under the Income Tax Act and if the interest was brought to tax in the hands of the assessee corporation, then the assessee corporation could request the Government not to deduct the amounts paid as income tax from grants of subsequent years, but the circular issued by the State Government regulating the business / transaction between the Government and its corporation could not have any effect on the taxability of the interest income which is deemed to be income from other sources in the hands of the assessee. The ld. CIT DR submitted that the said judgment could therefore not be a proper precedent to determine the question before the Tribunal in this present matter. With regard to the Infrastructure reserve fund being diverted by overriding title, he drew reference to the fact that the decision of the Hon’ble Bench of the Tribunal in the case of Mussoorie Dehradun Development Authority, that had been referred to by the Ld CIT(A) in his order had since been confirmed by the Hon’ble Nainital High Court in the case of Mussoorie Dehradun Development Authority and in that case, the Hon’ble Nainital High Court had pointed out that since the Development Authority was a separate entity that was capable of suing and being sued, could manage and had its own funds and since the funds could not be diverted away from the authority till the time of its dissolution, there was no diversion of income by overriding title and furthermore, since there were similar provisions that existed in the UPAEVPA, 1965, the decision of the ITAT Amritsar in the case of Jalandhar Development Authority Fund would have no application to the issue. Rather in view of similar provisions in the U.P.U.P.D.A, 1973 and UPAEVPA, 1965, the judgment of the 38 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad Hon’ble Uttarakhand High Court in the case of MDDA was the proper precedent to follow in the matter. With regard to the Judgment of the Chandigarh Bench of the Tribunal in Improvement Trust Sungrur in ITA No. 273/CHD/2020, the ld. CIT DR submitted that in the said order, the ITAT had quoted from the case of Ahmedabad Urban Development Authority in para 83 of its order and that said paragraph itself recorded the fact that the conclusions arrived at in that judgment did not preclude the authorities from scrutinizing the accounts of the assessee’s from year to year to determine whether the assessee’s were indulging in activities that amounted to, ‘Trade Commerce or Business and if so whether the threshold limit as laid down in proviso to section 2(15) had been breached. Thus, the said judgment did not preclude the ld. AO in the present case from examining the same, which he had done. Responding to the Learned AR’s Submission that the Form 10 filed by the assessee met the requirements of the law, Ld CIT(DR) pointed to the judgment of the Hon Supreme Court in the case of Commissioner of Customs (Import) vs Dilip Kumar and Company (2018) 95 taxmann.com327 (SC) to point out that an exemption provision had to be strictly interpreted and benefit of any ambiguity had to be given to the Revenue. He pointed out that the language of Section 11(2) clearly stated that the purpose for accumulation had to be specified and mere reference to the objects of the society did not fulfil the requirements of a valid intimation in Form 10. He therefore prayed that the CIT(Appeals) order be upheld on the issues of denial of accumulation and routing of Infrastructure fund through Income and Expenditure account. On the other issues raised by the assessee, he submitted that the matter could be restored to the AO for examination of details.

We have duly considered the facts and circumstances of the case, heard the rival parties and gone through the material placed on record. The question of whether development authorities and statutory corporations like the assessee, indulged in promoting housing and planned development can be regarded as a 39 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad body indulged in objects of, “general public utility” is no longer res integra after the decision of the Hon’ble Supreme Court in the case of ACIT (Exemption) vs. Ahmedabad Development Authority (2022) 143 taxman.com 278 (SC), wherein the Court the in para 190 of the said order and judgment has held that bodies which carry out statutory functions and whose income was eligible to be considered for exemption under section 10(20A) prior to 1.04.2003, but thereafter ceased to enjoy that benefit after deletion of that provision, are not ipso facto precluded from claiming benefit as a GPU category charity under section 11 r.w.s. 2(15) of the Act. The Hon’ble Court further held that statutory corporations, Boards, authorities, commissions etc., by whatever named called in the fields of housing development, town planning, industrial development sector etc., were involved in the objects of, “general public utility” and therefore were entitled to be considered as charities in the GPU categories. The Hon’ble Supreme Court also held that such statutory corporations, Boards, trusts, authorities may be involved in both promoting public objects and also in the course of pursuing their objects, be involved or engaged in activities in the nature of trade, commerce or business but the determinative test consider whether such bodies were GPU charities were whether they advanced any GPU object; while carrying on such activities to achieve such objects, what was the purpose for which such public GPU was set up – whether it was for furthering the development of a charitable object or for carrying on trade, commerce or business. Among the reasons cited by the ld. Assessing Officer for denial of exemption to the assessee were the observations that the assessee was generating income from the activities of the disposing of the plots, flats, shops and commercial complexes with the definite motive of profit and not charitable purposes as such profit was not incidental for by-product of the activity of the appellant, but was its main predominant purpose and there was no application of income for any charitable purpose under the terms of the object. It has also been argued that the levy of betterment charges, upon occupants of a development project and the auctioning of 40 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad properties by the Development Authority constitute activities in the nature of trade, commerce and business and because the sum total of the earnings from these activities exceeds the maximum amount permissible under section 2(15) of the Act, 1961, the assessee is not entitled for deduction. Many of these issues have been addressed by the Hon’ble Supreme Court in the case of ACIT (Exemption) vs. Ahmedabad Urban Development Authority (supra). In paragraph 140 of its order, the Hon’ble Supreme Court quoted from its earlier order in the case of New Delhi Municipal Corporation vs. State of Punjab (1979) 7 SCC 339, wherein the Hon’ble Court had held that unless an activity in the nature of trade and business is carried out with a profit motive, it would not be a trade or business contemplated by Clause ii of Article 289. By way of example, it had been highlighted that mere sale of Government properties, movable or immovable or granting of leases and licenses in respect of its properties, does not amount to carrying on trade or business. Only where a trade or business is carried out with a profit motive – or any property is used or occupied for the purpose of carrying out such trade or business that the proviso or for that matter Clause ii of Article 289 would be attracted. From the said judgment, the Hon’ble Supreme Court observed in AUDA (supra), that the crucial and determinative element in the venture, is whether the performance of a function is actuated by a profit motive. It thereafter proceeded to examine the true meaning of the expressions, ‘fee, cess or consideration’ and held that if a fee or cess or such consideration was collected for the purpose of an activity, by a State Department or entity, which is set up by a statute, its mandate to collect such amounts cannot be treated as consideration towards trade or business. It held that statutory Boards and authorities who are mandated to develop housing, industrial and other states including development of residential housing at reasonable or subsidized cost, which might entail charging higher amounts from some section of beneficiaries to cross subsidize the main activity, cannot be characterized as engaging in business. The character of, ‘State’ and such 41 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad corporations or bodies set up under specific laws would therefore, not mean that the amounts are, ‘fee’ or, ‘cess’ to provide some commercial or business service. Further in paragraph 176, after considering the fact that statutory powers and corporations have to recover the cost of providing essential goods and service s in public interest and also fund large scale development and maintain public property, which entailed recovering charges or fees, interest and also receiving interest for holding deposits ,the Hon’ble Court held that the mere fact that these bodies have to charge amounts towards supplying of goods and articles or rendering services (including maintenance of roads, parks etc.,) ought not to be characterized as, ‘commercial receipts’ the rational for such exclusion would be that if such rates, fees, tariffs etc., determined by statutes and collected for essential services were included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by the second proviso to section 2(15) would be attracted thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer which is the general public. In paragraph 190 while laying out the determinative tests to consider when whether such statutory bodies are GPU category charities, the Hon’ble Supreme Court had also pointed out that rendition of service or providing any article or goods by such Boards, authority, corporation etc., on cost or nominal markup basis would not ipso facto be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce. It further held that where the controlling instrument, particularly a statute, imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on predetermined statutory basis, or based on a formula regulated by law, or rules having the force of law. Per se, the recovery of such charges, fees, interest etc., cannot be characterized as fee, cess or other consideration for engaging in activities in the nature of trade, commerce or business or for providing services in relation thereto. . 42 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad 19. Thus, the issues raised by the ld. AO that the activities of the assessee Parishad carried on as per its objects laid down in section 15 of U.P. Awas Evam Vikas Parishad Adhiniyam, 1965 were not charitable activities do not hold any water after this decision of the Hon’ble Supreme Court which categorically states that statutory bodies engaged in housing development, town planning etc., are involved in objects of, “general public utility” and therefore are entitled to be considered as a charities in the GPU category. We also observe that even earlier, the Hon Allahabad High Court, in its orders in the case of Lucknow Development authority and others dated 16.09.2013, in which the assessee was one of the parties, had held that the objects of the assessee society were admittedly charitable and that it was entitled to the benefit of registration under section 12AA. Therefore, once the objects and functions of the assessee parishad have been held to be charitable by the jurisdictional High Court and not challenged or overturned by way of appeal to the Hon Supreme Court, we hold that it is not open for the assessing officer to contend that such objects are not charitable on the grounds that certain activities of the assessee parishad yielded surplus. Furthermore, we find that the ld. CIT(A) had held in his order that once the registration had been granted under section 12AA, the income of the assessee had to be computed as per section 11 and not under any other head of income. We do not find any infirmity in this line of reasoning. For this reason, we hold that the Ld CIT(A) was perfectly justified in directing the assessing officer to compute the income of the assessee parishad in the manner provided under section 11, with reference to the information contained in Form 10B and accordingly ground no.1.1 and 1.2 of the original grounds of appeal are dismissed. We also take note of the submission of the ld. Special counsel that in view of the fact that the proviso to section 2(15) and section 13(8) came into effect from 1.04.2009, he was not pressing additional ground no 1 of the appeal. Accordingly, the same is dismissed as not pressed.

We shall now, take up the assessee’s appeal n & 535/Lkw/2014. The first ground of appeal

We have duly considered these facts. It is observed that the act was amended with effect from 1.04.2016 and it was only vide such amendment that the condition of filing of the statement in form 10, prior to the due date of filing of return under section 139 (1) was introduced into the Act vide clause (c). Prior to that the only conditions were that the notice should be given to the assessing officer in the prescribed format, specifying the purpose for which the income was being accumulated, the period for which it was being accumulated (which couldn’t exceed five years) and that this accumulated money should be invested in one of the modes specified in section 11(5). However as per Rule 17(2) of the Income tax Rules ,the notice in Form 10 had to be filed before the due date of filing of return under section 139(1). However, the Hon’ble Courts have held that the statutory requirements would be fulfilled if such notice of accumulation were before the ld. AO at the time that the ld. AO did the assessment. In the instant case, it is seen that the notice of accumulation was submitted to the ld. AO before the completion of assessment Thus the Ld CIT (a) has correctly applied the Judgments in the case of Nagpur Hotel Owners Association (supra) and in giving relief to the assessee in this regard. It is a fact that the resolution by the Board was not passed before the due date of the filing of the return but to our mind, the Resolution of the Board is only to demonstrate the decision of the Managers of the trust/institution to accumulate the funds for a particular purpose. Even if it was passed at a later date and information is provided 52 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad to the ld. AO regarding such accumulation, before the completion of assessment, then going by the observation of the Hon’ble Supreme Court in the case of CIT vs. Nagpur Hotel Owners Association (supra), such Form 10 was to be considered. As regards, the other contention of the ld. AR, that the Resolution passed by the Board and the notice under section 10, which stated that that the income was being accumulated to meet the objects of the Parishad as enshrined in section 15 of the adhiniyam, fully met the requirements of law, as the object of the Parishad was one, we are unable to agree with the same. We observe that section 15 of the U.P. Awas Evam Vikas Parishad Adhiniyam, 1965, which contains the functions of the Board (and which are also its objects) contain a wide variety of objects for which the Parishad is required to function and which are 21 in number. These vary from framing and executing housing projects; to providing technical advice for and scrutinizing projects under Centrally assisted or State Government assisted schemes ; to manage properties belonging to the State Government; to organizing and running workshops and ; running stores for manufacturing and stock piling of building materials; to regulating building operations; to improving and clearing slums ; to providing roads, electricity, sanitation, water supply and other civic amenities; to raising loans from markets, grants and loans from State and Central Government and; to give grants and loans to local authorities, public corporations, housing cooperative societies and other persons for any of the purposes for which it functions. Besides this, the Parishad is also empowered to make examination or survey of any property and contribute to the cost of surveys made by any local authority. The Learned AR has submitted that all these objects are interrelated. However, to our mind, a plain reading of these functions do not show that the objects were of a singular or of a uniform nature, that could justify the quoting of general or global purposes for accumulation. To our mind, such a notice does not fulfil the mandatory condition of specifying the purpose for accumulation given in section 11(2)(a). 53 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad 24. We observe that the facts of the assessee’s case and the arguments presented by the learned AR in furtherance of its’ claim are quite similar to the case of DIT(Exemption) vs. Trustees of Singhania Charitable Trust 199 ITR 819 (Cal), as many of the facts in that case resemble that of the assessee parishad. In that case, the assessee, a public charitable trust had claimed exemption under section 11 for assessment year 1984-85, including for accumulation under section 11(2), for which purpose it had filed Form No.10. In the said form, as purposes of accumulation of income, the assessee had listed all the charitable objects for which it was created. These were 16 in number. The resolution passed by the Board of Trustees of the trust was to the effect that the balance of unapplied income of the year was to be accumulated and / or set apart for application to any one or more of the objects of the trust as set out in Item Nos. (I)to(XVI) under paragraph 1 of the deed of the trust. The assessment was completed allowing the exemption under section 11, including accumulation under section 11(2). Subsequently, the ld. Commissioner revised the case under section 263. According to him, section 11(2) contemplated only specific or concrete purposes and since those were not specified by the assessee, the assessment order was erroneous and prejudicial to the interest of revenue. Accordingly, the assessment was set aside. On appeal to the Tribunal, the Tribunal held, that on an examination of the scheme of the Act, since a plurality of charitable purpose was not ruled out, no objection could possibly be taken to the assessee listing out all its objects in Form No.10. It held that it had complied with the provisions of the Act and disagreed with the findings of the Commissioner. Before the Hon’ble Calcutta High Court, it was contended on behalf of the assessee that one purpose of accumulation was interlinked with the other and therefore, the mention of all the purposes did not make any difference and satisfied the requirements of section 11(2). However, the Hon’ble Calcutta High Court observed that the Tribunal’s decision overlooked the scheme relating to accumulation of income for particular future use. It held that while accumulation under section 11(1) could be 54 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad taken for the broad purposes of the trust as a whole, which is why the statute did not require an assessee to state to specify the purpose, long term accumulation was only permissible under sub section (2) and that could only be for a definite and concrete purpose or purposes. The Hon’ble High Court held that the assessee had sought permission to accumulate for the objects as enshrined in the trust deed in a blanket or global manner which, in its view, was definitely not in the contemplation of section 11(2), when it was construed in its setting. The Hon’ble High Court held that accepting the assessee’s contention that saving and accumulation of income for future application was for the purposes of the trust under widest terms so as to embrace the entirety of the objects clause of the trust deed, would render the requirement of specification for the purposes of acquisition in that sub section, redundant. The Hon’ble High Court further observed that when section 11(2) required the specification of the purpose, it did so with the objective of calling an assessee to state some specific purpose, out of the multiple purposes for which the trust stood; had it not been so, there would not have been any mandate for such specification since, in any case, a charitable trust could, in no circumstances, apply its income, whether current or accumulated, for any purpose other than the objects for which it stood. The very fact that the statute required the purpose of accumulation to be stated, implied that such a purpose be a concrete one, an itemized purpose for a purpose instrumental or ancillary for the implementation of its object or objects. The very requirement or purpose predicated that the purpose must have an individuality. The Hon’ble High Court further observed that it was not necessary that the assessee had to mention only one specific object; there could be setting apart and accumulation of income for more objects than one, but whatever the objects or purposes might be, the assessee must specify in the notice, the concrete nature of the purposes for which the application was being made. Plurality of purposes of accumulation may not be precluded, but it must depend on the exact and precise purposes for which the accumulation was intended; generality of the 55 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad objects of the trust could not take the place of the specificity of the need for accumulation. According to the Hon’ble High Court, the provision of section 11(2) was a concession provision to enable a charitable trust to meet the contingency, where the fulfilment of any project within its object or objects, needed heavy outlay calling for accumulation to a mass sufficient money to implement it and, therefore, specification of purpose, as required by section 11(2), admitted of no amount of vagueness about such purposes. The facts of the assessee’s case are exactly similar to the facts in the case of DIT(Exemption) vs. Trustees of Singhania and Charitable Trust (supra). In this case also, the assessee has filed the Form 10, in which it has given notice of accumulation for the generality of the objects of the functions of the parishad as enshrined in section 15 of the U.P.A.E.V.P.A. 1965. The ld. AR has submitted that the functions (which are 21 in number) are all inter-related and because the assessee parishad cannot spend any money outside of its objects, it is fully compliant with the requirements of section 11(2) of the Act.

Another decision upon which the Ld CIT(A) has relied in order to deny the benefit of accumulation under section 11(2) to the assessee, is that of the Delhi Tribunal in the case of Sir Sobha Singh Public Charitable Trust vs Assistant Director of Income Tax (Exemption)79 ITD 1(Del). In this case there was a difference of opinion between the members as to whether that assessee was eligible for accumulation in the given facts of that case and the matter had to be referred to a third member. However, both Members were unanimous in their understanding that specificity was required in the notice in Form 10 for compliance to the provisions of section 11(2). Para 5, of the order written by the Accountant member is worth reproducing in this regard. In the said para it was held as under “5. We have carefully considered the rival submissions, gone through the material placed on record to which our specific attention was drawn and the decisions cited on both sides. As per the provisions of section 11 of the Act, the income applied for charitable or religious purposes is not taxable. This is subject 56 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad to certain conditions laid down therein. The income so applied is to be for the purposes or objects the trust has. The Trust is allowed to accumulate part of its income both under section 11(1)(a) as well under section 11(2) of the Act. Under section 11(1)(a) or (b) accumulation is to be 25% of the income and under section 11 (2) it is to be 75% of unapplied income as referred to, in clause (a) or clause (b) of sub-section (1), read with the Explanation therein. In case of former, the accumulation is for a short period i.e., not beyond the year next succeeding and in case of latter, it can be for 10 years. While in case of former, no conditions are prescribed under the Act, in case of latter, the person has to specify both the purpose as well the period for which the income is to be accumulated. Further the money so accumulated or set apart is to be invested or deposited in forms or modes as specified in sub-section (5) of section 11 of the Act. Rule 17 of Income Tax Rules prescribes the notice as mentioned in sub-section (2) of section 11 of the Act. Form No. 10 prescribes the format of a notice to be given to the prescribed authority conveying the intention and purposes for which the income is to be accumulated or set apart. The aforesaid format makes a reference to the resolution passed by the Trustees to accumulate the surplus funds. Space has also been provided for indicating purposes/objects for which accumulation is sought. From the aforesaid format it is clear that the setting apart of the income could be for more than one purpose. As per language used in clause (b) of sub-section (2) of section 11, the purpose for which the income is being accumulated or set apart has to be specific. The expression specific as commonly understood is something which is contrary to what is general and vague. As per the meaning given in the Random House Dictionary of the English language (the Unbridged Edition), the expression 'specific connotes having a special application explicit, or definite, to state one's specific purpose as against this, the expression general has been defined as 'pertaining to all persons or things belonging to the group or category...... common to most prevalent or usual. not limited to one class, field, product, service ete. Thus, the purpose has to be a definite and precise one. The expression 'specific' has to be read in the context and the text in which it has been used. Since the same has been used in the context of purpose, the same has to be definite and concrete one in distinction to general or vague one. At the same time, it could not be for all the purposes as given in the Trust Deed which would make the provisions of sub-section (2) of section 11 as meaningless. As held in the case of Trustees of Singhania Charitable Trust (supra), the requirement of specification of purpose predicates that the purpose must have an individuality. The aforesaid interpretation also stands to reason when seen in the back-ground that the Legislature in its wisdom has provided for accumulation of surplus funds to the Trust, both under sections 11(1)(a) or (b) and 11(2) of the Act. There is both a distinction and the purpose behind the aforesaid two provisions. While in case of section 11(1)(a) of the Act, the accumulation could be for such purposes (not specific) it is not so under section 11(2) of the Act. The Trust must communicate in specific terms the purpose or purposes for which it wants to accumulate or set apart the income. The 57 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad concession as allowed in the Act is perhaps to meet a contingency where the fulfilment of a project requires heavy outlay and calls for accumulation of funds, as observed in the case of Singhania Charitable Trust. The language of section which is clear and unambiguous could not be interpreted in any other manner than what has been conveyed in case of Trustees of Singhania Charitable Trust (supra).”

It is however, pertinent to mention that the Hon Supreme Court in the said judgment of Dilip Kumar, has clarified that, in the said case, they were only concerned with a situation where there was an ambiguity in the exemption notification or the exemption clause. However, with regard to the question of whether a person claiming exemption, was required to comply with the procedure 59 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad strictly to avail the benefit, the Hon’ble Supreme Court, referred to its own earlier judgment in the case of CCE vs. Hari Chand Shri Gopal (2011) 1 SCC 236 in which case, the Constitution Bench had held that, if exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed a fulfilled exactly, though at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. The Constitution Bench in that case , then considered the doctrine of substantial compliance and held in paragraph 33 and 34 of its order as under:- “33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.

The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential.”

With regard to similar ground taken in assessment year 2008-09, we observe that in this year, the assessee has not filed the Form No. 10 in the course of assessment proceedings but filed the same in the course of the appeal proceedings. Thus, even taking into account the observations of the Hon’ble Supreme Court in CIT vs. Nagpur Hotel Owners Association (supra), these grounds were not before the ld. AO at the time of completing the assessment and in such circumstances, the Hon’ble Supreme Court had declined to allow the information to be supplied subsequent to the completion of assessment holding that to allow so would mean that the assessment would have to be reopened and the act did not contemplate such reopening. Hence, the Hon’ble Supreme Court had overturned the judgments of the Tribunal and the Hon’ble High Court which allowed the notice to be considered even though it was not filed before the completion of assessment. The assessee had cited the Judgment of the Hon Gujarat High Court in Mayur Foundation (supra) to point out that in that case the Hon High Court had held that assessment proceedings did not end with the assessment order but continued till the time the appeal was decided by the Tribunal because the assessing officer would have to give effect to 62 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad the orders of the Tribunal. However, the Ld CIT(A) had held that in this particular case the five-year period, which was the outside limit for accumulation, had already passed and therefore the notice which was being filed before him as additional evidence could not be entertained. In consideration of this matter, we are of the view that any application for additional evidence has to be accompanied by an explanation as to why that evidence could not be placed before the assessing officer. No such explanation has been placed before us or narrated in the order of the Ld CIT(A). Moreover, since the outside limit for utilization of accumulated income had already lapsed and a notice of accumulation cannot be given for regularization of funds already utilized in a particular manner, in our opinion, the case would squarely be covered by the decision of the Hon Supreme Court in Nagpur Hotel Owners association (supra). We therefore find no infirmity in the orders of the ld. CIT(A) in refusing to entertain the Form No.10 sought to be filed before him as additional evidence and consequently, in refusing to allow the accumulation of income under section 11(2) is held to be justified. Accordingly, ground no 1 of the appeal is dismissed for assessment year 2008-09 also.

Ground No.2 of the assessee’s appeal in both assessment years relates to the decision of the ld. AO and the ld. CIT(A) to direct that sums credited in the, “infrastructure fund” be included in the receipts of the assessee. The assessee has argued that it had no right, title or interest in the sums credited to this fund as the same stood diverted by overriding title in favour of the State Government and therefore, the ld. CIT(A) should have held that the sums in question alongwith the interest thereon were outside the ambit of assessment in the case of the assessee. We have considered the various arguments brought between us by the rival parties and have also considered this issue in our orders in the case of Ayodhya Faizabad Development Authority in 519 & 520/Lkw/2018 and ITA Nos. 143, ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad 144 & 145/Lkw/2021 for the A.Ys. 2012-13, 2014-15 & 2015-16 & A.Ys. 2016-17, 2017-18 & 2018-19 wherein in paragraph nos. 44 to 48, we have held as under:- “44. With regard to Ground Nos. 4 of assessment years 2012-13 and 2014- 15 and ground number 5 of Assessment year 2015-16, relating to the addition made by the learned Assessing Officer on the issue of Infrastructure Development Reserve Fund (IDRF), in view of the arguments presented by the learned AR and refuted by the learned CIT (D.R) on the subject, it is imperative to decide whether there was an exposition of law that created a binding precedent on the issue, in the order of the Hon'ble Allahabad High Court in the case of CIT vs. Lucknow Development Authority & others (2013) 38 taxman.com 246 Allahabad. It is an established principle of law, that a decision of a Court is to be ascertained from the questions involved in the case and the judgment rendered with respect to the same. The Hon’ble Supreme Court in the case of CIT vs. Sun Engineering (P) Ltd., ITD 198 ITR 197 SC, held that a decision could not be interpreted out of the context to the questions of law which were raised before it. The Hon’ble Court held as under:- “Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings.” The Learned CIT(DR) has also invited out attention to the orders of the Hon Supreme Court in Union of India vs. Dhanwanti Devi and Ors in 1996 Supp. (5) S.C.R. 32 for the proposition that a decision is only an authority for what it actually decides and it is the essence of the decision which constitutes its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. He has also invited our attention to the order of the Hon Supreme Court in State of U.P. and Another vs. Synthetics and Chemicals Limited and Another (1992) 87 STC 289 , for the proposition that an order passed sub silentio does not constitute a declaration of law .Perusal of the order in Lucknow Development Authority & others (supra), in the light of these orders of the Hon Supreme Court, shows that the questions of law that were raised before the Hon'ble High Court and answered by it in the said order, 64 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad related to the eligibility of the assessee authority for exemption under section 12 of the Income Tax Act and grant of registration by the Tribunal under section 12AA of the Income Tax Act. The third question related to the reopening of the case when there was still time to issue notice under section 143(2). After considering the rival arguments presented before it, the Hon'ble High Court rendered its decision, that the authority had objects which were admittedly charitable in nature and the mere selling of some products at a profit would not ipso facto hit the assessee, by applying the proviso section 2(15), so as to deny exemption under section 11. The intentions of the assessee and the manner in which the activities of the charitable trust were undertaken were highly relevant to decide the issue of applicability of the proviso of section 2(15) and there was no material or evidence brought on record by Revenue, to suggest that the assessee was conducting its affairs on commercial lines with a motive to earn profit. Therefore, the Hon'ble High Court held that the proviso to section 2(15) was not applicable to the facts and circumstances of the case and the assessee was entitled to exemption provided under section 11, for the relevant assessment years. In para 29 of the said order, the Hon'ble High Court also observed that the authority had been maintaining an Infrastructure Development and Reserve Fund (IDRF) as per the notification dated 15.01.1998 and the money transferred to this fund was to be utilized for the purpose of the project, as specified by a committee constituted by the State Government and the same could not be treated as belonging to the authority or making the receipt taxable in the hands of the authority. The Hon'ble High Court expressed its view that, for this reason also, it appears that the funds of the authority were utilized for general utility. From our study of this judgment and order, it is fairly clear that the nature of or title over the Infrastructure Development and Reserve Fund (IDRF), was not a question of law presented to the Hon'ble Court for decision. Furthermore, the order does not show that any arguments were presented before the Hon'ble Court with regard to the nature of and title over the Infrastructure Development and Reserve Fund (IDRF). Thus, it is quite clear that the judgment and order of the Hon'ble Court in the aforesaid case, primarily related to the eligibility of the assessee authority for exemption under section 11 and the correctness or otherwise of the Tribunal’s decision, to order its registration under section 12AA. It’s judgment with regard to these issues is reflected in the paragraphs 18 to 28 and specifically in paragraphs 26 to 28 and it appears, that the observation made in para 29 of the said order with relation to the Infrastructure Development and Reserve Fund (IDRF), was also with a view to demonstrate that the funds of the authority were utilized for general utility, in support of the decision that was being rendered by the Hon'ble Court. Therefore, while we have the greatest regard for the views expressed by their Lordships, we are inclined to agree with the learned CIT D.R. that the reference to ownership of the Infrastructure and Development Reserve Fund (IDRF) in para 29 of the said order, cannot be treated as an exposition of law having binding precedent, that would preclude us from looking into this question after 65 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad considering the arguments on the issue, but was only an observation in support of the actual decision rendered by the Hon’ble Court.

The ld. AR had also submitted that a number of decisions rendered by various Benches of the ITAT in the cases of Lucknow Development Authority, Varanasi Development Authority and Meerut Development Authority had followed this judgment. However, we observe that the various benches have not considered the issue on its merits, but have merely accepted the arguments of the assessees in those cases, that they were bound by the observations of the Hon’ble Allahabad High Court in para 29 of their order. With regard to the judgment of the ITAT Amritsar Bench in the case of Jalandhar Development Authority (supra), we observe that the same is distinguishable, because in that case, the External Development Charges (EDC) were collected by that assessee on the basis of various notifications issued by the Government of Punjab and the same could not be spent without the previous permission of the Government of Punjab, which is different from the case of the assessee because the charges from which the Infrastructure Development and Reserve Fund (IDRF) was constituted, were collected by the Ayodhya Development Authority, as per the powers assigned to it under the U.P.U.P.D.A. 1973 and even the committee constituted by the State Government was only to ensure, that funds so constituted were spent in a targeted manner, on certain objects of the assessee authority that were already enshrined in U.P.U.P.D.A. 1973. Furthermore, it is observed that the decision by the ITAT Amritsar Bench in the case of Jalandhar Development Authority (supra) was given after considering the provisions of the Punjab Apartment and Property Regulation Act, 1995, and the ld. AR has not brought any material on record, to show us that the provisions of the Punjab Apartment and Property Regulation Act, 1995 were para materia to the U.P.U.P.D.A. 1973. Furthermore, it is also seen that the judgment by the ITAT Amritsar Bench, was delivered following the judgment of the Hon’ble Punjab and Haryana High Court in the case of Punjab Police Housing Corporation Limited(supra), which related to taxability of interest on bank deposit made out of unutilized government grants, which in our view is a different issue altogether and with regard to which there is a contrary decision by the Hon’ble Patna High Court in the case of Bihar Police Building Construction Corporation(supra), which in turn, has been delivered on the basis of the findings of the Hon’ble Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd v. CIT (1997) 6 SCC 117. Therefore, the only judgment the ownership of the Infrastructure Development and Reserve Fund (IDRF), among the decisions cited by the learned AR is the judgment of the Hon’ble Delhi Bench in the case of Saharanpur Development Authority. Here too, we observe that the basic question before the Hon’ble Delhi Bench was whether, if the principal amount (of the Infrastructure Development and Reserve Fund) had not been brought to tax by the ld. AO, whether the interest from the investment of such principal, could be brought to tax by him. It is true that the Hon’ble Delhi Bench held in the course of that order, that the said Infrastructure Development and 66 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad Reserve Fund (IDRF) did not belong to the assessee but to the State Government, but it did so by relying on the judgments of the Hon’ble Delhi High Court in the case of Delhi State Industrial Development Corporation (supra) and the ITAT Bangalore in Karnataka Urban Infrastructure Development and Finance Corporation (supra). While doing so, the Delhi Bench did not delve into the provisions of the U.P.U.P.D.A. 1973 and therefore, its judgment was rendered without reference to the same. Nor did the said judgment look into the status of the assessee as an independent entity, possibly because that issue was never before them. Subsequently, the same Member who authored the judgment in the case of Saharanpur Development Authority, had occasion to consider the nature and title over the Infrastructure Development and Reserve Fund (IDRF), while authoring the judgment in the case of Mussoorie Dehradun Development Authority vs. Additional CIT, Dehradun in ITA Nos. 830/Del/2010 and 853/Del/2011. We observe that the ITAT Delhi Bench has analyzed the judgment in Karnataka Urban Infrastructure Development and Finance Corporation in great detail and rendered a different finding with regard to the ownership over the infrastructure fund, on account of conjoint reading of the O.M. dated 15.01.1998 viz. a viz., the provision of the Uttar Pradesh Urban Planning & Development Act, 1973 and after consideration of the status of the assessee as an independent entity. The Bench had rendered the finding that since the assessee was not a State and since it was performing activities of its own, which was not the case in Karnataka State Industrial Development Corporation, which was essentially implementing certain Central and State Governments projects, the facts of that case would not help the assessee.

Ongoing through the judgment of the Delhi Bench in the case of Mussoorie Dehradun Development Authority, we find that the Hon’ble Bench has duly considered both the O.M. dated 15.01.1998 issued by the U.P. Government and the provisions of the U.P.U.P.D.A. 1973. After a conjoint reading of both these provisions, it has held that authority had been given to the assessee for collecting certain fees and charges in the process of its functioning and according to section 20 of the U.P.U.P.D.A. 1973, the assessee could retain the funds collected by it under the Act. Thus, the powers to collect the funds were already in existence under section 20 of the Act and it had to credit the fees and charges collected by it, to its own funds, which were to be applied to the fulfillment of the assessee’s object. The ld. Bench observed, that going through the office memorandum, would reveal that paragraph 1 of the said O.M. contemplates that the “income” of the development authorities described in Clause 5 of the said memorandum, would not be deposited in an ordinary pool, but would be deposited in a separate account, which would be used exclusively for residential infrastructure. Thus, it held that the provisions of the said memorandum itself showed that firstly, the fees and charges collected by the assessee in Clause 5 of the memorandum, would be the income of the development authority but it would not be deposited in the ordinary pool, rather it would be earmarked to ensure the development of residential infrastructure. 67 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad It therefore held, that the memorandum only provided a regulatory mechanism for incurring the expenses and carving out a preferential area within the assessee’s objects. The Hon’ble Bench had observed, that the arguments of the assessee demonstrating that the infrastructure funds were a separate entity independent of the assessee, were a fiction and there was nothing in the memorandum to this effect. The memorandum only spoke of a designated bank account in which a fixed portion of the assessee’s receipts would be deposited and out of which, expenses would be incurred in a preferred area of the assessee’s objects, with an approval of an empowered committee. The Hon’ble Bench observed, that all these receipts formed part of the normal receipts of the assessee and that the committee referred to in the memorandum as well as in the Act, was not alien to the assessee (possibly because other than the Chairman, all others were also involved in the management of the authority). Thus, the Hon’ble Bench held, that the empowered committee was only concerned with giving approval for specific items of work to be done by the assessee, and not for the administration of funds. The funds formed part of the assessee’s balance- sheet and were audited in the course of audit of its own accounts. Therefore, there was no separate entity called infrastructure fund, but just a bank account which was designated for channelizing a portion of the assessee’s receipts, for the fulfilment of a preferential area of the assessee’s deposit.

On consideration of the various judgments presented before us by both parties, it is important to consider the fact that the judgment and order of the Delhi Bench in the case of Mussoorie Dehradun Development Authority (supra), is the only judgment where a detailed analysis had been conducted of the said O.M. dated 15.01.1998 along with the provisions of the U.P.U.P.D.A. 1973. It may be important for us at this stage, to consider some of these provisions of the U.P.U.P.D.A. 1973 which have been referred to by the Hon’ble Delhi Bench in the case of Mussoorie Dehradun Development Authority (supra). Section 20 of the Act (U.P.U.P.D.A. 1973) states, that the authority shall have and would maintain its own fund, to which would be credited all the monies received by the authority from the State Government, by way of grants, loans, advances or otherwise; all monies borrowed by the authority from the State Government from sources other than the State Government by way of loans and debentures; all fees, tolls and charges received by the authority under the Act; all monies received by the authority from the disposal of lands, buildings and other properties, movable and immovable and all monies received by the authority by way of rents and profits, or in any other manner from any other source. Sub Section 20(2) states that that fund shall be applied towards meeting the expenses incurred by the authority, in the administration of this act and for no other purpose. Section 41 of the Act relates to control by the State Government and empowers the State Government to issue such directions to the authority from time to time, as may be necessary, for the efficient administration of the Act and it states, that if there is any dispute between the authority and the State Government with regard to the exercise of its powers and discharge of its functions by the authority, then 68 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad the decision of the State Government on such dispute shall be final. Thus, the provisions of the U.P.U.P.D.A. 1973 as laid out above makes it quite clear that all the money received by the authority from the State Government, from loans, from its earnings or from any source, would constitute the funds of the Authority. Furthermore, the provisions of section 41 allow the State Government to issue directions to the authority for the effective administration of the Act. A conjoint reading of these two provisions, make it abundantly clear that the O.M. dated 15.01.1998, which arises out of the powers of the State Government under section 41 of the U.P.U.P.D.A. 1973, cannot divert the title to the funds of the authority to the State Government, but rather has to be viewed as directions to the authority, for efficient administration of the Act, in accordance with the objects of the authority. This interpretation is further reinforced by the judgment of the Hon’ble Uttarakhand High Court in the case of Mussoorie Dehradun Development Authority in ITA Nos.5 & 6 of 2012 which were filed in appeal against the aforesaid order of the Hon’ble Delhi Bench in ITA No. 830/Del/2010 and ITA No.853/Del/2011. The Hon’ble Uttarakhand High Court, while taking note of the dispute observed, that in the case of Adityapur Industrial Area Development Authority vs. Union of India (2006) 153 taxman 107 (SC), a question had arisen regarding interpretation of article 289 of the Constitution of India as well as section 17 of the Bihar Industrial Area Development Authority Act, 1974.The Hon’ble Supreme Court had held, that the income of the authority constituted under the said Act was its own income and that the authority managed its own funds. It had its own assets and liabilities. It could be sued and could sue in its own name and since it was an authority constituted under an act of the Legislature of the State, it had a distinct legal personality, being a body corporate, as distinct from the State. The Hon’ble Supreme Court further clarified, that section 17 of the said Act, stated that only upon its dissolution, would the funds, assets and liabilities of the authority, devolve upon the State Government. It accordingly stated, that therefore before its dissolution, its assets, funds and liabilities were its own. For this reason, it held that it was futile to contend that the income of the authority was the income of the State Government, even though the authority was constituted under an Act, enacted by the State Legislature, by issuance of a notification by the Government thereunder. Accordingly, basing itself on this judgment of the Hon’ble Supreme Court, the Hon’ble Uttarakhand High Court dismissed two questions of law raised by Mussoorie Dehradun Development Authority relating to Article 289 and whether the collection of levies by statutory authorities in the nature of fees, charges, tax etc. imposed by the State through an enactment (U.P.U.P.D.A. 1973) can be said to be income of such authority. Thereafter, it compared the provisions of section 17 of the Bihar Industrial Area Development Authority Act, 1974, with the corresponding provision in the Uttar Pradesh Urban Planning and Development Act, 1973, i.e. section 58 and pointed out that both the provisions were effectively para materia in substance. The Hon’ble High Court thereafter pointed out, that since the Mussoorie Dehradun Development Authority, also constituted under the Uttar Pradesh Urban Planning and 69 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad Development Act, 1973, was a separate entity which was distinct from the State, having its own legal identity, as a cooperate body which could sue or be sued in its name and having its own assets and liabilities, it was only when the State Government decides that the purpose of the development authority had been achieved and there was no need for continuance of such an authority, then upon dissolution of that authority the income, assets and liabilities of the authority would vest with the State Government and not before. It, therefore, held that in deference of the orders of the Hon’ble Supreme Court in the case of Adityapur Industrial Area Development Authority (supra), any fees collected for infrastructure development by the development authority, would be treated as the income of the authority and the expenses incurred by the authority for the purposes of infrastructure development would be deductible from its’ income. What emerges from the said order, is that the funds of the authority, which are defined vide section 20 of the U.P.U.P.D.A. 1973 cannot devolve or be diverted to the State Government, prior to the dissolution of the authority as envisaged in section 58 and therefore, to view the O.M. dated 15.01.1998, as diverting the funds of the authority to the State Government, is not maintainable in view of the express provisions of the Uttar Pradesh Urban Planning and Development Act, 1973. In fact, as has been clearly pointed out by the ld. CIT DR in his arguments and by the Delhi Bench of the Tribunal, is that Clause 1 of the said O.M., itself refers to the deposit of, ‘income of the development authorities described in Clause 5’ to be deposited in a separate account for residential infrastructure. The fact that the State Government has deep and pervasive administrative control over the authority is established and is, in fact, one of the grounds on which the assessee has been held eligible to be regarded as a general-purpose utility, having charitable objects, that are not for profit. Therefore, the O.M. dated 15.01.1998 has to be viewed in the context of the powers of supervision enjoyed by the State Government under the U.P.U.P.D.A. 1973 for the better administration of the Act, and not as creating any diversion of income by overriding title, as has been contended by the assessee and the ld. AR in their submissions before us, because the State Government did not have the power to divert the income under the Act prior to the dissolution of the authority. For this reason, the Judgments cited by the assessee claiming diversion of income, ie Imperial Chemicals and Jit & Pal X Ray, will have no application to the facts of the assessee’s case. Therefore, after analysis of the various legal pronouncements, the provisions of the U.P.U.P.D.A. 1973 and the O.M. dated 15.01.1998, the plea that the assessee did not have any right, title or interest over the said infrastructure fund and that it was merely a Nodal agency for implementing the projects of the State Government, is fit to be rejected. The Learned AR has pointed to some inconsistencies in the order of the Delhi Bench and also pointed out that the Adityapur Development Authority ( whose case was followed by the Hon High Court) was seeking exemption under another section as also the fact that one of the items of receipt ie stamp duty was collected by the state Govt, but to our mind those arguments are not material because the specific provision of the U.P.U.P.D.A. 1973 render diversion of 70 ITA Nos. 532 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad income to the state prior to the dissolution of the authority as an impossibility and the Govt Order dated 15.01.1998 could not be read as being issued for a purpose that was vires of the Act. It could only be read as issued under section 41 of the U.P.U.P.D.A. 1973 for better administration of the Act by channelizing some portion of the funds to certain preferential areas of the assessee’s objects and nothing more. Therefore, following the Judgment of Hon. Uttarakhand High Court in Mussoorie Dehradun Development Authority (Supra), we hold that the Infrastructure Development and Reserve Fund is also the fund of the Assessee authority and liable to be considered in its hands. Needless to say, before any part of the same is considered as income of the authority, the expenditure made out of the same has to be considered as application towards the objects of the assessee authority (as the assessing Officer has already done).

The ld. AR has also made an alternative argument against routing this amount through the income and expenditure account, pointing out that because of the effect of the OM, the receipts to the fund were capital receipts and were therefore to be considered as accretion to the corpus of the Authority rather than its income. We observe that the receipts listed the OM dated 15.01.1998 are not voluntary contributions with specific directions, within the meaning of section 11 (1)(d) of the Act, but it is also noted that the OM dated 15.01.1998, issued under section 41 of the UPUPDA 1973, earmarks certain portion of receipts to the infrastructure fund for capital expenditure and the Hon. Supreme Court has held, in the case of Padmaraje. R. Kadambande vs CIT 62 Taxman 456(1992), that it is settled law, that in order to find out whether a receipt is a capital receipt or a revenue receipt, one has to see what it is in the hands of the receiver and not its nature in the hands of the payer. In other words, the nature of the receipt is determined entirely by its character in the hands of the receiver and the source from which the payment is made has no bearing on the question. Therefore, we deem it appropriate to restore this matter back to the file of the assessing officer to analyze the nature of the receipts with reference to the OM dated 15.01.1998, and thereafter take an appropriate decision on the quantum that is required to be routed through the Income and Expenditure account. Ground number 4 of assessment year 2012-13 & 2014-15 and Ground number 5 of assessment year 2015-16 is accordingly partly allowed.”

Ongoing through the Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam, 1965, we find that section 58(1), section 92(2) and section 93 of the U.P. Awas Evam Vikas Parishad Adhiniyam are, effectively & in substance, para materia to sections 20, 41 and 58 of the U.P.U.P.D.A. 1973 therefore, our findings with regard to the nature of and title to the infrastructure fund created by the Government O.M. dated 15.01.1998, in the case of Ayodhya Faizabad Development Authority, would hold 71 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad good for the Uttar Pradesh Awas Evam Vikas Parishad also. In the circumstances, we deem it appropriate to restore this matter back to the file of the ld. AO to analyze the nature of the receipts with reference to the O.M. dated 15.01.1998 and therefore take an appropriate decision on the quantum that is required to be routed through the income and expenditure account. Furthermore, in respect of amounts that are required to be routed through the income and expenditure account, we direct that the ld. AO may allow credit for corresponding expenses. Ground No.2 for both assessment years 2007-08 and 2008-09 are accordingly partly allowed, as above.

Ground No. 3 & 4 of the assessee’s appeal for the assessment years 2007-08 and 2008-09 pertained to the disallowance of certain expenditures claimed by the assessee under the head legal expenses, consultancy expenses and rates and taxes, on account of the fact that the assessee had not submitted the requisite details before either the ld. AO or the ld. CIT(A). The assessee has submitted that the amount of expenses claimed under the above-mentioned heads were fully supported by proper bills and vouchers and the same were duly accounted for in the books of accounts, which had been subjected to twin audits and no defects or discrepancies had been found or specified therein. It has also been submitted by the ld. AR, that because the expenditure was incurred by various units of the assessee parishad, which were located in different parts of U.P., it was difficult to collate and present the details as desired by the ld. AO, within the limited time frame allowed to it. After considering these arguments, we deem it appropriate to restore the matter back to the file of the ld. AO, with a direction to the assessee to present the necessary evidences in support of these expenditures to the ld. AO, so that the ld. AO may consider the same afresh and take a fresh decision in the matter.Thus Ground number 3 in both assessment years is allowed for statistical purposes .As we have restored these grounds back to the file of the ld. AO therefore, ground nos.5 and 6 of the assessee’s appeal in assessment year 2007-08 and ground no.5 of the assessee’s 72 & 533/LKW/2014 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad appeal in assessment year 2008-09 are infructuous and are accordingly dismissed as such. Ground Nos. 7 of assessment year 2007-08 and ground no.6 of assessment year 2008-09 are general in nature and do not require a decision.

The assessee has also preferred an additional ground in both assessment years, ie the disallowance made by the learned CIT in respect of the revolving fund. We have duly considered the arguments of the learned AR and perused the concerned Govt Order . It appears that this revolving fund was created so that advertisements with relations to various projects (for the purposes of sale and allotment ) could be issued centrally by the Parishad, while the units would only take out advertisements with relation to awarding of tenders etc. Therefore a portion of the amounts being remitted to them for projects (.5%)were being retained at head office and every- time an advertisement was issued in respect of a project, by the head office, it would be billed to that project by the concerned unit. Also this fund was being generated by levy of a fee of (.25%) of the allotment cost upon the allottee. Thus in our view, there ought to be no occasion of bringing this amount to tax in the hands of the assessee. This is because the fee generated for advertising account would presumably be included in the income of the assessee parishad, while the expenditure being booked by the units, would presumably be consolidated into the expenditure account of the assessee parishad. The Ld CIT(A) has confirmed this addition because the assessee could not demonstrate as to where this fund came from and how expenditure from it was recorded in the accounts of the assessee. We therefore, restore this matter to the file of the assessing officer so that the assessee may explain how the fund was generated and how expenditures were recorded so that there is no apprehension of double claim of application. In the circumstances, these additional grounds of appeal are allowed for statistical purposes. Accordingly, the assessee’s appeals in & 535/Lkw/2014 are partly allowed.