URBAN IMPROVEMENT TRUST,KOTA vs. DCIT (EXEMPTIONS), CIRCLE, JAIPUR, JAIPUR

ITA 731/JPR/2024Status: DisposedITAT Jaipur11 August 202544 pages
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What did the Tribunal hold?

The Tribunal held that the assessee, Urban Improvement Trust, Kota, is a 'State' within the meaning of Article 289(1) of the Constitution of India, being an instrumentality of the State. This conclusion was based on the existence of deep and pervasive State control, the assessee's monopoly status conferred or protected by the State, the public importance of its functions closely related to governmental functions, and the potential transfer of government departments to such entities. Consequently, the Tribunal found that the assessee's income is not chargeable under the Income Tax Act at all. The Tribunal also noted that Sections 10(46) and 10(46A) of the Act were irrelevant in light of the constitutional provisions. The revenue's appeals were dismissed, and the assessee's appeals were allowed. The Assessing Officer was directed to delete all additions made, irrespective of the head of income.

What were the facts?

The appeals by the assessee (Urban Improvement Trust, Kota) and the revenue (ACIT/DCIT, Exemption, Jaipur) are directed against orders of the NFAC, Delhi, for various assessment years between 2003-04 and 2016-17. The revenue's appeals challenge the CIT(A)'s decisions to allow certain expenditures and to exclude amounts collected on behalf of the State Government and Nagar Nigam from the assessee's total income. The assessee's appeals, though not fully detailed in the provided text, are implicitly allowed based on the final outcome. The core of the dispute revolves around whether the assessee is an 'instrumentality of the State' for constitutional purposes and whether its income is taxable under the Income Tax Act.

What were the issues?

1. Whether the CIT(A) erred in allowing various expenditures claimed by the assessee, including non-plan expenditure for development, development of Kachhi Basti, expenditure under 'Deposit Work', vehicle repair, payments to RUIDP, and social welfare expenses, treating them as revenue expenditure (Revenue's grounds 4, 5, 10, 11, and similar grounds in other appeals). 2. Whether the CIT(A) erred in excluding amounts collected on behalf of Nagar Nigam and the State Government from the assessee's total income, holding them as shares of these bodies and not part of the assessee's income (Revenue's grounds 5, 6, 7, and similar grounds in other appeals). 3. Whether the CIT(A) erred in treating rental income assessed under 'income from house property' as 'income from business' (Revenue's grounds 7 and 4 in other appeals). Assessee's Contention: Not explicitly detailed, but implied to be that the CIT(A) correctly decided the issues in their favour. Revenue's Contention: The CIT(A) erred in ignoring facts and circumstances, not applying the correct preposition of law, and not following previous ITAT directions to set aside orders. The CIT(A) wrongly allowed expenditures and excluded amounts collected on behalf of government bodies, and misclassified rental income.

Which sections of the Income-tax Act were involved?

Section 250,Section 10(46),Section 10(46A)

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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR

Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL

For Appellant: Mr. Prakul Khurana, Adv. &, Mr. Mukesh Soni, Adv. Adv., Ld. ARs
Hearing: 11/08/2025Pronounced: 11/08/2025

These appeals by assessee and revenue are directed against the order of NFAC, Delhi dated 22.03.2024, 27.03.2024, 31.03.2024 & 30.0

The order continues below.

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