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Facts
The assessee, Kanpur Development Authority, filed a NIL income return, claiming exemption under Sections 11 and 12 of the Income Tax Act. The Assessing Officer (AO) disallowed this exemption, treating the surplus as business income, and made additions of Rs. 10,97,08,028/- for infrastructure fund and Rs. 20,00,000/- for payment to Awas Bandhu. The CIT(A) subsequently allowed the assessee's appeal, prompting the Revenue to appeal to the ITAT.
Held
The ITAT, relying on its own precedents and various Supreme Court/High Court decisions, held that the assessee is entitled to exemption under Sections 11 and 12, as its activities primarily serve a public utility purpose and are not hit by the proviso to Section 2(15). Consequently, the Tribunal ruled that the infrastructure funds received and payments made to Awas Bandhu were not taxable additions in the hands of the assessee. The Revenue failed to bring any material to differentiate the facts or judicial precedents relied upon by the CIT(A).
Key Issues
1. Whether the assessee, a development authority, is eligible for exemption under Sections 11 and 12 of the Income Tax Act, considering its development and sale activities and the applicability of the proviso to Section 2(15). 2. Whether the amounts earmarked for 'Infrastructure Fund' and payments to 'Awas Bandhu' are taxable additions or allowable expenditures.
Sections Cited
Section 2(15), Section 10(20A), Section 10(23C), Section 11, Section 11(4A), Section 12, Section 12A, Section 12AA, Section 12AAA, Section 13(8), Section 142(1), Section 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI
Before: YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
1 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 4580/Del/2025 (A.Y 2012-13) Deputy Commissioner of Income Vs Kanpur Development Tax, CGO Complex, Hapur Authority, Motijheel, Kanpur, Chungi, Ghaziabad, Uttar Pradesh Uttar Pradesh PAN: AAALK0324M
Appellant Respondent Assessee by Dr. Rakesh Gupta, Adv& Sh. Somil Aggarwal, Adv Revenue by Ms. Pooja Swaroop, CIT(DR) Date of Hearing 23/12/2025 Date of Pronouncement 14/01/2026 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of
Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal
Centre, Delhi, (‘Ld. CIT(A)/NFAC’ for short), dated 27/05/2025
pertaining to Assessment Year 2012-13.
The grounds of Appeal are as under:-
“1. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CIT (A) has failed to appreciate correct facts of the case that the the authority is engaged dominantly in the activity of development and sale of properties. Besides, it is observed that the aggregate value of receipts from the activities referred to in the first proviso of section 2 (15) of the Act. 2. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CI (A) has failed to appreciate correct facts of the case that the assessee does not fulfill the criteria for 'charitable purpose' and its activities cannot be regarded for charitable purposes due to the reason of being the nature of trade or commerce. 3. The Ld. CIT(A) has also failed to appreciate the fact that the AO has rightly disallowed an amount of Rs. 10,97,08,028/-- towards Infrastructure Fund which was directly credited to Infrastructure fund without crediting it to Income & Expenditure account as the same was should be accordance with the
2 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
government circular which defines the mode of usage of this fund and the method of creation as well. 4. The Ld. CIT(A) has also failed to appreciate the fact that the AO has rightly disallowed claim of payment made to AwasBandhu, Lucknow of Rs. 20,00,000/ as these were directly incurred by the assessee from the balance sheets without crediting in to the Income Account.”
Brief facts of the case are that, the Assessee filed return
at NIL income. The excess of income over expenditure
(surplus) was claimed exempt as per provision of Section 11
and 12 of the Income Tax Act, 1961 ('Act' for short). An
assessment order came to be passed u/s 143(3) of the Act
on 18/03/2025 at income of Rs. 16,74,21,460/- by making
disallowance of the claim of exemption u/s 11 of the Act
treating the ‘surplus’ as income from business and made
addition on account of infrastructure fund of Rs.
10,97,08,028/- and also disallowed the payment made to
Awas Bandhu, Lucknow of Rs. 20,00,000/-. Aggrieved by
the assessment order dated 18/03/2015, Assessee preferred
an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order
dated 27/05/2025, allowed the Appeal of the Assessee. As
against the order of the Ld. CIT(A) dated 27/05/2025, the
Revenue preferred the present appeal on the Grounds
mentioned above.
3 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
The Ld. Departmental Representative vehemently submitted that
the Ld. CIT(A) failed to appreciate the fact that the Assessee authority
dominantly in the activity of the development and sale of properties,
however, erroneously observed that aggregate value of receipts of the
activities referred to in the first proviso of Section 2(15) of the Act.
Further submitted that, the Ld. CIT(A) failed to appreciate the fact
that A.O. has rightly disallowed the claim of payment made to Awas
Bandu, Lucknow of Rs. 20,00,000/-as there were directly incurred by
the Assessee from the balance sheet without creating into the income
account.The Ld. Department's Representative also submitted that the
Ld. CIT(A) failed to appreciate the correct facts of the case that the
Assessee does not fulfill the criteria of charitable purpose and its
activities cannot be regarded for charitable purpose due to reason of
being nature of trade and commerce, thus submitted that the A.O.
has rightly disallowed the amount of Rs. 10,97,08,028/- towards
infrastructure fund which was directly credited without crediting it to
income and expenditure account. Thus, sought for allowing the
Appeal of the Revenue.
Per contra, the Ld. Assessee's Representative submitted that the
Ld. CIT(A) has followed the order of the Tribunal in Assessee’s own
case for Assessment Year 2015-16 to 2017-18, therefore, the Ground
No. 1 to 4 of the Revenue deserves to be dismissed.
4 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
We have heard both the parties and perused the material
available on record. While deciding the issues involved in the First
Appeal, the Ld. CIT(A) relied on the order of the Tribunal in Assessee’s
own case for Assessment Year 2015-16 to 2017-18in following
manners:-
“5.1.1. I have considered the submission made by the Appellant. I have also perused the assessment order. In find that the AO has held that the Appellant is basically involved in development and sale of properties. The receipts from such activities exceed the prescribed limit as provided in proviso to section 2(15) as amended w.e.f. 01/04/2009. In view of the same, the Appellant is not entitled to exemption u/s 11 of the Act w.e.f.01/04/2009. The AO has also stated that the Appellant is mainly engaged in business activities and not in any charitable activities. It is predominantly engaged in the business of development of properties and selling the same for profits, The Appellant also earns from renting/hiring of properties. The Appellant has income from various other sources. The Appellant may be engaged in deploying certain part of its profits for some charitable purposes, however, that does not make it a charitable organization covered u/s 2(15) of the Act. In support of his contention, the AO has placed reliance on various decisions: • Hon’ble Supreme Court in the case of Surat Art Silk Cloth Manufacturer Association, (121 1TR 001) • Hon’ble ITAT. Amritsar Bench dated 14.6.2012 in ITA NO. 30(Asr)/ 2011 in the case of Jammu Development Authority, Jammu, which has been upheld by the Hon’ble High Court of Jammu & Kashmir in ITA NO 164/2012 date 07.11.2013. This order of Hon’ble High Court of Jammu & Kashmir has been confirmed by Hon’ble Supreme Court in Special Leave to Appeal No.4990/2014 vide order dated 24.07.2014.
However, I find that Appellant’s case is squarely covered by the decision of Hon’ble Jurisdictional Allahabad High Court in the case of LDA (supra). I further find that this issue has been decided in favor of the Appellant in its own case by Hon’ble ITAT Delhi in ITA No.920/Del/2024, dated 12/03/2025. Relevant part of the decision is reproduced below:
“2. The assessee has raised the following ground of appeal:
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in holding that the assessee authority is hit by the proviso to section 2(15) of the Act and the assessee authority is not entitled for the benefit
5 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
of section 11, 12 and 12A and assessee is not charitable entity and has further erred in holding that the assessee is engaged in the commercial activity and that too by recording incorrect facts and findings and in violation of principles of natural justice.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not granting the benefit of exemption u/s 11&12 as claimed by the assessee authority and further erred in observing that the assessee authority is carrying activity with the motive to earn profit and further erred in treating the assessee's income/surplus as taxable under the business income.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.3,25,27,565/- on account of infrastructure funds and that too by recording incorrect facts and findings and in violation of principles of natural justice.
The brief facts of the case are that the assessee is an authority, notified under by the Government of Uttar Pradesh u/s. 4 of Uttar Pradesh Urban Planning (Development and Registration) Act 1973 meant to promote and secure the development of the development area according to plan and for that purpose the Authority shall have the power to acquire, hold manage and dispose of land and other property, to carry out building, engineering mining and other operation, to execute works in connection with supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purpose of such development and for purpose incidental thereto. The assessee enjoyed exemption u/s. 10 (20A) of the Act, upto the Assessment year 2002-03, since w.e.f. 01.04.2023, the aforesaid provision got omitted from the statute resulting in the taxability of its income from thereon.
4.The assessee has filed return of income on 30-09-2013 declaring total income Nil. During the year the assessee declared surplus of Rs 32,99,35,347/- on total income /gross receipt of Rs 192,51,30,801/- which was claimed exempt as per provision of section 11 and 12 of the Act. The case was selected for scrutiny and statutory notice u/s 143(2) of the Act was issued. Further notice u/s 142(1) of the Act with questionnaire was issued. In the compliance of the notice the Authorized representative attended the proceedings. The A.O has observed that the assessee is not a charitable entity and completed the assessment by making the following additions.
(i). Addition on account of infrastructure fund taken in balance sheet Rs 3,25,27,565/- (ii). Addition on account of payment made of AwasBandhu as expenditure Rs 40,00,000/-. ……………
6 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
The learned counsel for assessee has submitted that the assessee has been setup for achieving essential public services and the objects of the assessee are essential for advancement of public purpose and therefore, the activities undertaken by the assessee are not hit by the proviso to Section 2(15) of the Act. Reliance has placed the case of ACIT (Exemption) v. Ahmedabad Urban Development Authority, 449 ITR1 (SC) in this case the Hon'ble Supreme Court held as under: ACIT vs. Ahmedabad Urban Development Authority (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022 reported in 449 ITR 1 (SC) which has settled the issue by dismissing the Revenue's appeal vide Para 254(ii) of the judgment as follows:
"....254. In accordance with the foregoing discussion, and summary of conclusions the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiala Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot Improvement Trust Improvement Trust, Hansi, and the Special Leave Petitions filed against the Gujarat Maritime Board and Karnataka Water Supply and Drainage Board are rejected.
(ii) The revenue's appeals against Ahmedabad Urban Development Authority, the Gujarat Housing Board, the GandhinagarUrban Development Authority, Rajkot Urban Development Authority, Surat Urban Development Development Authority, Jamnagar Area Development Authority, and the Gujarat Industrial Development Corporation are rejected. Likewise, the revenue's appeals against Agra Development Trust, UP AwasEvamVikasParishad, Raebarel, Development Authority, Rajasthan Housing Board, Mangalore Urban Development Authority; Mathura Vrindavan Development Authority, Meerut Development Authority, Belgaum Development Authority". Moradabad Urban Development Authority, Yamuna Expressway Industrial Development Authority, Greater Noida Industrial Development Authority, New Okhla Industrial Development Authority and Karnataka Industrial Areas Development Board are rejected."
The Ld DR has relied the order of the lower authorities.
The ground raised by 1 &2 is squarely covered the above sited case and the assessee is eligible for exemption u/s 11 and 12 of the Act. The grounds raised by the assessee are decided in the favour of the assessee.” Thus, respectfully following the decision of Hon’ble ITAT Delhi (supra), I hold that the Appellant is entitled to claim of exemption u/s 11 of the Act. Consequently, the AO has erred in taxing the surplus amount of Rs.5,57,13,432/-. Grounds are, thus, allowed.
5.2. Ground 4
7 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
Vide this ground, the Appellant has challenged the action of the AO in making addition of Rs.10,97,08,028/- by holding that the amount earmarked for Infrastructure Fund is taxable income of the assessee. In this regard, the Appellant has submitted that the said fund has been created as per the Government order and the same was liable to be utilized in the manner laid down in the related Government order itself. In other words, it was to be utilized only for the purposes as spelt out and specified by the State Government and the “appellant authority” has merely acted as “nodal agency”, having no right, title or interest of its own in the said ‘Fund’. It is a case when a receipt (if the receipts in question at their best be treated as income of the “appellant authority”) stood diverted by an “over riding title” in view of the principle laid down by the Hon’ble apex Court in the case of Provat Kumar Mitter vs. CIT reported in (1961) 41 ITR 624. The Appellant has further submitted that the issue is now squarely covered in favour of the appellant by the decision of Hon’ble Delhi Bench of the ITAT in the case of Saharanpur Development Authority vs.
5.2.1. I have considered the submissions made by the Appellant. I have also perused the assessment order. I have also perused the assessment order. I find that the AO has made the impugned addition observing that;
“3.18…………Thus, the income of Rs.31,29,08.746/- earmarked as amount relating to Infrastructure Fund is treated as taxable income of the assessee. This amount requires to be first credited lo Income & Expenditure account.
However, the expenses of Rs.20,32,00,718/- incurred on this account are allowed to the assessee against this and thus balance amount Rs. 10,97.08,028 - is added to the total income of the assessee.” However, I find that this issue has been decided in favour of the Appellant in its own case by Hon’ble ITAT Delhi in ITA No.920/Del/2024, dated 12/03/2025. Relevant part of the decision is reproduced below:
“2. The assessee has raised the following ground of appeal:
"1. ……… 2. ……….. 3.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.3,25,27,565/- on account of infrastructure funds and that too by recording incorrect facts and findings and in violation of principles of natural justice.
That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.3,25,27,565/- on account of infrastructure funds, is illegal, bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds.
8 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
The brief facts of the case are that the assessee is an authority, notified under by the Government of Uttar Pradesh u/s. 4 of Uttar Pradesh Urban Planning (Development and Registration) Act 1973 meant to promote and secure the development of the development area according to plan and for that purpose the Authority shall have the power to acquire, hold manage and dispose of land and other property, to carry out building, engineering mining and other operation, to execute works in connection with supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purpose of such development and for purpose incidental thereto. The assessee enjoyed exemption u/s. 10 (20A) of the Act, upto the Assessment year 2002-03, since w.e.f. 01.04.2023, the aforesaid provision got omitted from the statute resulting in the taxability of its income from thereon. 4.The assessee has filed return of income on 30-09-2013 declaring total income Nil. During the year the assessee declared surplus of Rs 32,99,35,347/- on total income /gross receipt of Rs 192,51,30,801/- which was claimed exempt as per provision of section 11 and 12 of the Act. The case was selected for scrutiny and statutory notice u/s 143(2) of the Act was issued. Further notice u/s 142(1) of the Act with questionnaire was issued. In the compliance of the notice the Authorized representative attended the proceedings. The A.O has observed that the assessee is not a charitable entity and completed the assessment by making the following additions. (i). Addition on account of infrastructure fund taken in balance sheet Rs 3,25,27,565/- ……………..
This observation has been given consistently by the ITAT in favour of the assessee for the Assessment years 2004-05 to 2007-08. Further, the Hon'ble Allahabad High Court in the case of Lucknow Development Authority has held that the money transferred to the Infra structure fund account is to be utilized for the purpose of the projects as specified by the Committee having constituted by the State Government and cannot be treated as belonging to the authority or receipt is taxable nature in its hand. (iii) Commissioner of Income Tax -1 Lucknow v. Lucknow Development Authority, Gomti Nagar [2013] 38 taxmann.com.246 (Allahabad) in this case the Hon'ble Allahabad High court held as under
:- 19. The contention that the assessee are earning profit has no merit as per the ratio laid down in the case of Shri Sarafa Association v. CIT [2007] 294 ITR 262/163 Taxman 228 (MP), where it was observed that " the promotion of commercial trade is a charitable purpose under section 2(15) of the Act". In the case of Director of Income -Tax (Exemption) v. GovinduNaicker Estate [2009] 315 ITR 237 (Mad), it was observed that the construction of commercial complex by charitable trust eligible.
If the objects of the "Authority" is charitable as public utility then the benefit being a charitable trust is eligible as per the ratio laid down in the case of CIT Vs. Gujarat Maritime Board [2007] 295 ITR 561 / [2008] 166 Taxman 58 (SC), where it was observed that:-..........in Section 2(15),
9 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
namely, "any other object of general public utility". From the said decisions it emerges that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR (SC). The said expression would prima facie include all objects which promote the welfare of the general public. 11 cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity [Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1/[1979] 2 Taxman 501 (SC)].
Applying the ratio laid down in the case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR L (SC), whereof in the present case, the "Autonomous Authority" was established for the purpose of predominant of development the area and provide to shelter to the homeless people within the State of U.P. The management and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State.
Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of Sections 11 & 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) of Section 12AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution, and (ii) about the objects of the trust or institution. Section 12A stipulates that the provisions of Sections 11 & 12 shall not apply in relation to income of a trust or an institution unless the conditions stipulated therein are fulfilled. Thus, granting of registration under Section 12AA denotes that the conditions laid down in Section 12A stand fulfilled.
The effect of such a certificate of registration under Section 12AAA, therefore, cannot be ignored or wished away by the Assessing Officer by adopting a stand that the trust or institution is not fulfilling the conditions for applicability of Sections 11 & 12. In the case of Gestetner Duplicators P. Ltd. v. CIT [1979] 117 ITR 1/1 Taxman 1 (SC), the Apex Court was
10 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
called upon to determine as to whether the contribution made by the employer should be treated as a business expenditure, the requirement being contribution should be made to a recognized provident fund.
Needless to mention that this Hon'ble Court in the case of CIT v. U.P. Forest Corpn. Ltd., Tax Appeal No. 70 of 2009 observed that the Forest Corporation being an statutory entity is entitled for the registration under Section 12A of the Act. The said observations was upheld by the Hon'ble Apex Court vide its order dated 12.05.2011 in Special Leave Petition No. (Civil) No. 2590/2011. 25. We may also like to refer a C.B.D.T. Circular No. 11/2008 dated 19.12.2008, wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:-
"2.2. 'Relief of the poor encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section 10(23C), which are that-
(1) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of account should be maintained in respect of such business."
For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfilment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the assessee-trust are admittedly charitable in nature.
Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15).
There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled
11 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
to exemption provided under Section 11 for the relevant assessment year.
From the record, it also appears that the "Authority" had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committed having constituted by the State Government under the said notification and the same could not be treated to be belonging to the "Authority" or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility,
Moreover, in the instant case, the Assessing Officer has not given any defective in computation of income as per Section 11 as submitted in Form-XB, but observed that the activities of the assessee are not charitable. The activities of the assessees are genuine. So, then it is so, then we find no reason to interfere with impugned orders passed by the Tribunal. The same are hereby sustained along with reasons mentioned therein.
The answer to the substantial questions of law are in favour of the assessee and against the department.
In the instant case the Infrastructure Funds are received by the assessee under the order of Government of Uttar Pradesh which was required to use as per the directions of the high-powered committee. The case of the assessee is squarely covered from the above sited case and the infrastructure funds are not taxable in the hands of the assessee. We decided the grounds no 3 &4 in the favour of the assessee.”
Thus, respectfully following the decision of Hon’ble ITAT Delhi (supra), I hold that the AO has erred in making the disallowance of Rs.10,97,08,028/-. The same is directed to be deleted. Ground is, thus, allowed.
5.3. Ground 5
Vide this ground, the Appellant has objected to the disallowance of claim of Rs. 20,00,000/- paid towards contribution to AwasBandhu, Lucknow, a statutory body constituted by U.P. Govt. In this regard, the Appellant has submitted that during the year a sum of Rs. 40,00,000/- was paid to AwasBandhu, AwasEvamSahariNiyojanVibhag, Uttar Pradesh Govt., Lucknow, by KDA as its contribution in terms of G.O. No. 6020/A.B.- 7/Adhiniyam-Contribution Dtd. 06th. June'2012. AwasBandhu was constituted by U.P. Govt. vide Notification No. 2713/9-A-1-11/Misc./97 Dtd. 17th . June'1997 with the main object to promote, develop, construct houses in the Urban Areas of the State to solve the residential problems of the public and to redress problems of various institutions including development authorities, AwasEvamVikasParishad etc. related with the
12 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
construction of houses and to follow up, keep watch and evaluate the activities of various development authorities and other institutions. It is working as a Nodal Agency. The Appellant has further submitted that payment made to AwasBandhu is in the nature of annual contribution made to nodal agency set up by the Go lit. of Uttar Pradesh, in the Ministry of Housing which is duly registered under Societies Registration Act. The said society had been set up by the Govt. of Uttar Pradesh on the same patter on which "UdyogBandhu" has been set up, for promotion of industries in the State. Contribution made by various institutions to 'UdyogBandhu' have been held to be qualifying for due deduction under the Income Tax Act. In this regard, the Appellant has placed reliance on the decision of Hon’ble Jurisdictional Allahabad High Court in ITA No. 103 of 2009 in the case of CIT vs. UPSIDC for the Assessment Year 2002- 2003.
5.3.1. I have considered the submission made by the Appellant. I have also perused the assessment order. I find that the AO has made the disallowance observing that;
“From the details filed by the assessee, it has been found that the assessee has received various grants for Manyavar K ashiramYojna. ManyavarKashiramYojna(ll), ManyavarKashiramYojna(Jhijhak), for M K- III etc. Against these grants the expenses have been incurred by the assessee directly from the balance sheets and none of these grants have been credited in the Income Account and none of these respective expenses have been debited from the same. The logic of the assessee in this regard is acceptable since the grants are received from the State Government and the expenses have been incurred for the same as per the direction of the Government. However, regarding to this exp. of AwasBandhu, no grant has been received, however, charge has been created against the income, though no such charge can be created and the income can only be applied after the taxation. This this expense is declared as application of income and not accepted as the charge against the taxable income. Accordingly, the same is being treated as payment made for nonbusiness purposes and added to the total income of the assessee society.”
However, I find that the issue has been decided in favour of the Appellant by Hon’ble Jurisdictional Allahabad High Court in the case of CIT vs. UPSIDC in ITA No. 103 of 2009, which has been relied upon by the Appellant. Respectfully following the same, I hold that the AO has erred in making the disallowance of Rs.20,00,000/-. The addition is directed to be deleted. Ground is, thus, allowed.
5.4. The Appellant has submitted copy of decision of Hon’ble ITAT Delhi in Appellant’s own case in ITA No. 2200, 2201 & 2202/Del/2023, dated 21/03/2025 , wherein all the above issues i.e issues raised vide grounds of appeal at sr.no.1 to 5, have been decided in the favour of the Appellant. Relevant part of the decision is reproduced below:
13 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
“The grounds raised in assessment year 2015-16 read as under:-
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in holding that the assessee authority is hit by the provisions of section 13(8) r.w.s. 2(15) of the Act and the assessee authority is not entitled for the benefit of exemption under section 11, 12 & 12A and assessee is not charitable entity and has further erred in holding that the assessee is conducting its affairs on commercial lines and further erred in taxing the surplus of Rs.77,27,50,277/" at maximum marginal rate and that too by recording incorrect facts and findings and without observing the principles of natural justice.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not granting the benefit of exemption u/s 11 & 12 and further erred in taxing the amount of surplus of Rs.77,27,50,277/- at maximum marginal rate, is bad in law and against the facts and circumstances of the case and without observing the principles of natural justice and further erred in observing that the assessee authority is carrying activity with the motive to earn profit and further erred in treating the assessee's income as taxable.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in treating the income earmarked as an amount of Rs.4,31,31,883/- relating to infrastructure fund and FAR fund as taxable and that too by recording incorrect facts and findings and without observing the principles of natural justice.
That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in treating the income earmarked as an amount of Rs.4,31,31,883/- relating to infrastructure fund and FAR fond as taxable is bad in law and against the facts and circumstances of the case.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making the addition of Rs.41,47,240/- on account of contribution to AwasBandhu by treating it as payment made for non-business purposes and that too by recording incorrect facts and findings and without observing the principles of natural justice.
That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld, AO in making the addition of Rs. 41,47,240/- on account of contribution to AwasBandhu by treating it as payment made for non-business purposes, is bad in law and against the facts and circumstances of the case.
14 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
……….. 6. We have heard both the parties and perused the records. With regard to Ground Nos. 1 and 2 are concerned, the primary issue in the present appeal is regarding the denial of exemption u/s 11 and 12 of the Income Tax Act, 1961 allegedly on the ground that the activities of the assessee are hit by the proviso to Section 2(15) of the Income Tax Act, 1961 and therefore, the activities of the assessee are in the nature of trade, commerce or business and are not eligible for exemption u/s 11 and 12 of the Income Tax Act, 1961. We note that assessee has been setup for achieving essential public functions/services and the objects of the assessee are essential for advancement of public purpose/functions and therefore, the activities undertaken by the assessee are not hit by the proviso to Section 2(15) as held by Hon'ble Supreme Court in the case of ACIT (Exemptions) vs. Ahmedabad Urban Development Authority, 449 ITR 1 (SC). 6.1 With regard to the Ground Nos. 3 and 4 are concerned, are against the action of Ld. CIT(A) in confirming the action of Ld. AO in treating the amount earmarked as Infrastructure Fund and FAR Fund as taxable in the hands of the assessee. We find that considerable cogency in the contention of the Ld. AR that in the following judicial precedents, it has been held that Infrastructure Funds are received by the assessee under the order of Government of Uttar Pradesh and appellant was required to use such funds as per the directions of the High Powered Committee having constituted by State Government and the assessee has no control over the said funds and therefore said funds cannot be treated as taxable in the hands of the appellant:- * CIT vs. Lucknow Development Authority, (2014) 265 CTR 433 (All). * ITO vs. Saharanpur Development Authority, ITA No. 4113/2017, dated 24.03.2021 (Del). * ACIT vs. M/s Firozabad Shikohabad Development Authority, ITA No. 270/2016, dated 25.01.2018 (Agra).
We note that the identical issues viz. Ground 1 to 4 as above, have already been decided in favour of assessee in assessee's own case for AY 2014- 15 in ITA No. 1655/Del/2018 vide order dated 12.03.2025 wherein, the Tribunal has held as under:-
“7. The learned counsel for assessee has submitted that the assessee has been setup for achieving essential public services and the object of the assessee are essential for advancement of public purpose and therefore, the activities undertaken by the assessee are not hit by the proviso to Section 2(15) of the Act. Reliance has placed the case of ACIT (Exemption) v. Ahmedabad Urban Development Authority, 449ITR1 (SC).
The Ld. Counsel for the assessee has also submitted that Infrastructure funds are received by the assessee under the order of the Government of Uttar Pradesh and the assessee was required to use such funds as per the directions of the high-powered committee having constituted by State Government and the assessee has no control over the said funds and therefore said funds cannot be treated as taxable in
15 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
the hands of the assessee. He has also submitted that in the case of CIT v. Rajasthan and Gujarati Charitable Foundation Poona Civil Appeal No. 7186/2014 dated the Hon’ble High Court held that the amendment of section 11(6) of the Act is prospective and therefore applicable from A.Y. 2015-16. Ld counsel for assessee prayed that the appeal be dismissed. Reliance have placed on the following decisions:
(i) ACIT, Circle -2(2) (1) vs M/s Firozabad Shikohabad Development Authority ITA no. 270/Agra/2016 dated 2501-2018
ii) ITO vs. Saharanpur Development Authority ITA No. 4113/Del/2017 dated 24-03-2021
iii) Commissioner of Income Tax -1 Lucknow v. Lucknow Development Authority, Gomti Nagar [2013] 38 taxmann.com.246 (Allahabad)
iv) LdCIT(A) has observed in his order as under: …………..
We have heard the parties and gone through the material available on record. 10. The LdCIT(A) has examined the issues in the correct prospective and rightly deleted the additions made by the A.O. The reasoning and findings of the Ld. CIT(A) granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reasons to interfere with the findings of the Ld. CIT(A). The appeal of the revenue is liable to be dismissed.
In the result the appeal of the revenue is dismissed. ”
In view of the aforesaid discussions and respectfully following the aforesaid precedent, we allow the ground nos. 1 to 4 in favour of the assessee 9.
As regards, Ground No. 5 and 6 are concerned, these grounds are against the disallowance of contribution to AwasBandhu allegedly as payment for nonbusiness purposes. We find potency in the arguments of the Ld. AR that the contribution to AwasBandhu is allowable as application of income in view of decision of Hon'ble Jurisdictional High Court (Allahabad) in the case of CIT vs. UPSIDC dated 03.09.2012 wherein Hon'ble High Court have decided the issue in favour of assessee and the said decision has been relied upon by Ld. CIT(A) in assessee's own case for AY 2013-14 and has allowed the contribution to AwasBandhu as application of income and department has not disputed this issue in AY 2013-14. Since assessee is eligible to benefit of section 11&12 and therefore the said disallowance does not survive and deleted as such. Accordingly, the ground no. 5 and 6 are allowed.”
5.5. As regards Ground 6, the same pertains to initiation of penalty proceedings. Since, penalty has not been levied yet, ground is dismissed being premature at this stage.”
16 ITA No. 4580/Del/2025 DCIT Vs. Kanpur Development Authority
Though the Revenue has relied on the findings and the
conclusion of the A.O. and sought for allowing the appeal, however,
failed to bring on record any material to differentiate the facts or any
Judicial precedent against the decision of the Tribunal in Assessee’s
own case for Assessment Year 2015-16 to 2017-18. As the Ld. CIT(A)
in the order impugned relied on the order of the Tribunal in Assessee’s
own case (supra), in the absence of any contrary judicial precedents,
we find no reason to interfere in the findings and the conclusion of the
Ld. CIT(A). Accordingly, Grounds of Appeal of the Revenue are
dismissed.
In the result, Appeal of the Revenue is dismissed.
Order pronounced in the open court on 14th January, 2026.
Sd/- Sd/-
(MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 14.01.2026 R.N, Sr.P.S*