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Income Tax Appellate Tribunal, DELHI BENCH
Before: SHRIMAHAVIR SINGH, HON’BLE & SHRI MANISH AGARWAL, HON’BLE
ORDER PER MAHAVIR SINGH, VP : This appeal has been filed by the Assessee against the order dated 28.3.2024 passed by the NFAC, Delhi for the assessment year 2021-22 on the following grounds 1. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in making disallowance of Rs. 1,27,41,46,000/- on account of development fund.
2. That in any case and in any view of the matter, action of Id. CIT(A) in confirming the action of the AO in making disallowance of Rs, 1,27,41,46,000/- on account of development fund as taxable is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not reversing the action of AO in charging interest u/s. 234A and 234B of the Act.
2. The brief facts of the case are that ,- sessee filed its return of income on 14.3.2022 at NIL income. Thereafter, AO completed the assessment u/s, 143(3)/144B of the Act on 27.12.2022 at an assessed income of Rs. 48,25,64,491/- by adding back the amount of Rs. 127,41,46,000/- which was transferred to development fund to the income of the assessee as the same is not an allowable deduction if the activities are the assessee are not charitable. Against the above, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 28.3.2024 has affirmed the action of the AO on the above said issue and partly allowed the appeal of the assessee.
Aggrieved with the aforesaid, assessee is in appeal before us.
At the time of hearing, Ld. Counsel for the assessee submitted that the issue involved in this appeal are no more res-integra as the same has been decided in favour of the assessee by the Hon’ble Allahabad High Court in Assessee’s own case in Assessment Year 2003-04, 2006-07, 2012-13 and 2013-14 dated 04/08/2022 (Allahabad), therefore, submitted that the issue involved in ground may be decided in favour of the assessee.
Per contra, the Ld. DR relying on the orders of the lower authorities sought for dismissal of the appeal.
We have heard the parties and perused the materials on record. The similar issues involved in the instant appeal has been decided in favour of the assessee by the Hon’ble Allahabad High Court in 67/2022, 33/2022, and 35/2022 for AYs.2003-04, 2006-07, 2012-13 and 2013-14 on 04/08/2022, wherein it has been held as under: “5. The impugned order of the Income Tax Appellate Tribunal. shows that the order cancelling the registration under Section 12 AA of the Act, 1961 has been set aside by the Tribunal and the Tribunal has restored the registration of the respondent - assessee under Section 12 AA of the Act, 1961 by order dated 29.04.2019 in ITA No.2400/DEL/2014. In paragraph 5.1 the tribunal has recorded the findings of fact that the nature o f activity of the respondent - assessee is charitable and it is not hit by proviso o f Section 2(15) o f the Act, 1961. The Tribunal has remanded the matter to the Assessing Officer to examine the activity of the respondent - assessee and if it is found to be inconsonance with the object the benefit of exemption under Section 11 has been directed to be allowed. The Tribunal has also considered the taxability o f the amount transferred to the Infrastructure Development Fund and followed its decision dated 24.03.2021 in and directed the Assessing Officer to adjudicate the issue afresh keeping in mind the ratio laid down by Co-ordinate benches o f the Tribunal in Saharanpur Development Authorities case and Khurja Development Authorities Thus, the tribunal has remanded the matter to the assessing officer to examine the activities of the respondent assessee for allowing benefit of exemption under Section 11 o f the Act. The assessing officer has also been directed to adjudicate the issue o f transfer o f fund to infrastr ucture development fund in terms of the ratio laid down by Co-ordinate benches of the Tribunal in the case of Saharanpur Development Authorities and Khurja Development Authority. That apart the question of grant of registration under Section 12 AA of the Act, 1961 to Development Authority like the present respondent asses see, was considered by Co-ordinate bench of this court in Income Tax Appeal No. 657 o f2007 and other connected appeals decided on 29.08.2016 in the matters of Hapur Pilkhuwa Development Authority, Ghaziabad Development Authority, Kanpur Development Authority, A.D.A. Allahabad, Alighar Development Authority, Jhansi Development Authority, Gorkahpur Development Authority and Banda Development Authority in various income Tax appeals and it was held in paragraphs 18, 19, 20, 21 and 22 as under :
“18. We find it unnecessary to go for much research work and debate issue further for the reason that in respect to a similar authority, namely, "Lucknow Development Authority", which is also constituted under U.P. Act, 1973, a similar question, whether activities o f Development Authority can be said to be 'charitable' as defined under Section 2(15) came up for consideration before a Division Bench in CIT Vs. Lucknow Development Authority 2014 (98) DTR (All) 183 and Court held as under:
"21. We have heard learned counsel for the parties and gone through the material available on record.
It is undisputed fact that the asses see is a "statutory authority" which was established under the provisions o f the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee was enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A. In view of the objects, there is no good reason for holding that statutory bodies could not be treated as "charitable" within the meaning of Section 2(15). The object o f the "Authority" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 7 & 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim o f the assessees under Sections 11 & 13 and give such treatment to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolutse or conclusive. It is subject to control of Sections 60 to 63. If it is found by keeping in view the provisions o f Sections 60 to 63 that it is not so includible then such income does not qualify for any relief."
"25. Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability o f Sections 11 & 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) o f 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 o f 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 o f 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 o f Gestetner Duplicators P. Ltd. vs. CIT (1979) 8 CTR (SC) 371 : (1979) 117 ITR 1 (SC), the Apex Court was 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 vs. M/s. U.P. Forest Corporation Ltd., in Income Tax Appeal No. 70 o f 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 12th May, 2011 in Special Leave Petition (Civil) No. 2590 of2011.
We may also like to refer a C.B.D.T. Circular No. 11 of 2008 dated 19th December, 2008 [(2009) 221 CTR (St) 1 : (2009) 17 DTR (St) 1] 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 o f the poor' encompasses a wide range o f objects for the welfare o f the economically and socially disadvantaged or needy. It will, therefore, include within its amt 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 that8 (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of accounts should be maintained in respect of such business."
For the applicability o f proviso to Section 2(15), the activities o f the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on noncommercial lines with no motive to earn profits, for fulfillment o f 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 o f 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 o f 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 5 | P a g e 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 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 15th January, 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 o f taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility."
The findings and observations in the aforesaid judgment are squarely applicable in the case in hand also.'
We also find that another statutory body, namely, Krishi Utpadan Mandi Samiti constituted under U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter referred to as "Act, 1964") was also registered under Section 12AA o f Act, 1961 and the question whether amount transferred to Mandi Parishad would constitute application of income for ’charitable purpose’ under Section 11(1) (a) o f Act, 1961 has been decided against Revenue by Supreme Court in Commissioner of Income Tax Vs. Krishi Utpadan Mandi Samiti 2012 (12) SCC 267 wherein Court has also confirmed this Court's judgment dated 04.12.2009 passed by this Court at Lucknow in o f2009.
In view of above, we answer above question against Revenue and confirm judgment of Tribunal impugned in all these appeals.
All the appeals are, accordingly, dismissed. ”
6. The appellant herein has challenged the aforesaid judgment of this Court dated 29.8.2016 in Income Tax Appeal No.657 o f 2007 (Commissioner o f Income Tax Ghaziabad and another Vs. Hapur Pikhuwa Development Authority Preet Vihar) in Special Leave Petition (Civil) Diary No(s).26127 of 2018 which was dismissed by Hon ’ble Supreme Court by order dated 27.08.2018 with cost o f Rs.10 lacs. The aforesaid order of Hon ’ble Supreme Court dated 27.08.2018 is reproduced below:
This petition for special to leave has been filed by the Commissioner o f Income Tax, Ghaziabad. First of all this petition has been filed after a delay o f 596 days. There is an inadequate and unconvincing explanation given for the delay in filing the petition. Secondly, it is mentioned in the proforma for first listing that a similar matter being C.A. No. 7096/2012 is pending in this Court. However, the office has given a report stating that C.A. No. 7096/2012 was decided by this Court as far back as on 27.09.2012. In other words, the petitioners have given a totally misleading statement before this Court. We are shocked that the Union o f India through the Commissioner o f Income Tax has taken the matter so casually. As we have noted, there is an inadequate explanation of delay o f596 days in filing the petition and a misleading statement about pendency o f a similar civil appeal. Under the circumstances, we dismiss the petition with costs of Rs. 10 lacs to be paid to the Supreme Court Legal Services Committee within four weeks from today. The amount be utilizedfor juvenile justice issues. List the matter for compliance after four weeks.
7. In view of the facts and circumstances and legal position as noted above, we find that no substantial question of law is involved in the impugned order o f the Tribunal. The controversy is concluded by findings of fact and the judgments o f this Court as affirmed by the Hon ’ble Supreme Court. ”
By respectfully following the ratio laid down by the above Judgment of the High Court, we allow the Ground no. 1 & 2 raised by the assessee.
Ground no. 3 is consequential in nature, hence, need not be adjudicated at this juncture.
In the result, the Assessee’s appeal is allowed.