DCIT (EXEMPTION), GHAZIABAD vs. M/S. HAPUR PILKHUWA DEVELOPMENT AUTHORITY, HAPUR

The first ground is against the view of the learned CIT(A) that the amended provisions of section 2(15) of the Income-tax Act, 1961 (hereinafter also called `the Act’) are not applicable to the assessee. Briefly stated facts of the case are that the assessee filed its return declaring Nil income, after claiming exemption under sections 11 and 12 of the Act. During the course of assessment proceedings, the Assessing Officer observed that the assessee was engaged in the activity of development and sale of land and related activities. Such activities were held to be in the nature of `Business’. The Assessing Officer opined that after amendment in section 2(15) w.e.f. 1.4.2009, the activities of the assessee in land development and selling the same constituted `Business’. He, therefore, held that the amended provisions of section 2(15) were attracted and hence the entire surplus of Rs.2,08,63,572/- was chargeable to tax. The learned CIT(A), relying on the 2 , 1385 & 1386/Del/2016 judgment of the Hon'ble’ble Jurisdictional High Court in CIT vs. Lucknow Development Authority (2013) 38 taxmann.com 246 held that the assessee was not indulging in trade commerce or business and hence amended provisions of section 2(15) were not applicable. He, therefore, deleted the addition of Rs.2.08 crore and odd made by the Assessing Officer. The Revenue is aggrieved against such deletion.

We have heard both the sides and perused the relevant material on record. The Hon'ble Jurisdictional High Court in CIT vs. Yamuna Expressway Industrial Development Authority, vide judgment delivered on 21.4.2017, has decided similar issue in assessee’s favour. The Delhi Bench of the Tribunal in Moradabad Development Authority vs. ACIT (Exemption), vide order dated 4.1.2018 in and 4632/Del/2017, dealt with the case of an Authority working in the same way as the assessee in question and held that the benefit of exemption under section 11 cannot be denied. In reaching this conclusion, the Tribunal considered the relevant judgments on the point and eventually held that the case is covered by the judgment of Hon'ble Jurisdictional High Court in the case of Yamuna Expressway Industrial Development Authority (supra). A copy of such order has been 3 , 1385 & 1386/Del/2016 placed on record in which the relevant discussion has been made from pages 2 to 7 of the order. Since the facts and circumstances of the instant case are mutatis mutandis similar to those as considered and decided by the Hon'ble Jurisdictional High Court in the case of Yamuna Expressway Industrial Development Authority (supra) and the Tribunal in Moradabad Development Authority (supra), we uphold the impugned order in deciding this issue in assessee’s favour. This ground is not allowed.

Second ground is against deletion of addition of Rs. 2,25,500/-. The Assessing Officer, on examination of account books, gathered that a sum of Rs. 2,25,500/- was debited twice under the head `Office expenses’. When pointed out, the assessee submitted that it was an unintentional error and requested for making disallowance. This led to addition of Rs. 2,25,500/-. The learned CIT(A) deleted the addition by observing that the assessee had complied with the provisions of section 11 and even after disallowance of expenditure of Rs.2,25,500/-, application of income was more than 85%. The Revenue has challenged the deletion of such addition.

We have heard both the sides and perused the relevant material on record. The view taken by the learned CIT(A) is erroneous. If the assessee 4 , 1385 & 1386/Del/2016 has claimed double deduction for one sum, it cannot be allowed at the outset, regardless of the fact that application of income, considering such disallowance, will be more than 85%. We, therefore, overturn the impugned order on this score and restore the addition made by the Assessing Officer. This ground is allowed.

The last ground is against the direction of the learned CIT(A) in allowing the set off and carry forward of deficit of earlier years to the current/next years. The Assessing Officer, without any discussion in the assessment order, did not allow the benefit of set off and carry forward of deficit of earlier years. The learned CIT(A), relying on certain decisions, directed the Assessing Officer to re-compute the income/loss after allowing necessary set off and carry forward.

Having heard both the sides and perused the relevant material on record, we find that this issue is no more res integra in view of several decisions discussed by the learned CIT(A) in the impugned order including the judgment of the Hon'ble Bombay High Court in CIT vs. Institute of Banking Personnel Selection 2003 264 110 (Bombay) in which it has been held that : `Income derived from the trust property has also got to be 5 , 1385 & 1386/Del/2016 computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in s. 11 of the Act and that such adjustment will have to be excluded from the income of the trust under s. 11(1)(a) of the Act’. In reaching this conclusion, the Hon’ble High Court drew support from the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293 (Guj). No contrary decision has been brought to our notice by the ld. DR. Respectfully following the precedent, we uphold the impugned order on this issue.

In the result, the appeal is partly allowed.

The first issue is against the denial of exemption. Both the sides are in agreement that the facts and circumstances of this ground are similar to those , 1385 & 1386/Del/2016 of the preceding year. Following the view taken hereinabove, we uphold the impugned order in granting exemption to the assessee under section 11 of the Act. The second ground is against the allowing set off and carry forward of deficit of earlier years. This ground is admittedly on the same lines as ground no. 3 for the preceding year. Following our above view, we dismiss this ground of appeal.

In the result, the appeal is dismissed.

Ground nos. 1 and 3 relating to allowing of exemption under section 11 and allowing set off and carry forward of deficit of earlier years, are similar to the preceding years. Following the view taken hereinabove, we dismiss these two grounds.

The only other ground which survives in this appeal is against the deletion of addition of Rs.3,87,37,804/- made by the Assessing Officer on account of interest. Briefly stated the facts of this ground as recorded in para 10 of the assessment order are that in support of payment of interest to GDA, the assessee filed copies of vouchers from which it transpired that loan of Rs. , 1385 & 1386/Del/2016 5 crore was repaid through cheques. These vouchers did not reflect / mention any payment of interest claimed to have been paid to GDA. The Assessing Officer made disallowance of interest of Rs.3,87,37,804/-. The learned CIT(A) deleted the addition by observing in para 8 of the impugned order that interest of Rs. 3.87 crore was claimed by the assessee during the course of assessment proceedings and the same was not claimed as an expenditure in the Income and expenditure account for the year under consideration.

Having heard both the sides and gone through the relevant material on record, it is seen that the Assessing Officer has made disallowance of interest of Rs. 3.87 crore and odd by observing that the same was not backed by any evidence. On the contrary, the learned CIT(A) deleted this addition by observing that no such deduction was claimed by the assessee in the computation of income. Since there is a contradiction in the factual position stated by both the authorities below, we set aside the impugned order on this score and remit the matter to the file of Assessing Officer for deciding it afresh. If no deduction of interest was claimed by the assessee in its computation of income and the computation of total income in the assessment order started with the income as declared in the return of income, 8 , 1385 & 1386/Del/2016 then there will no disallowance of interest in the absence of any such claim. In the otherwise scenario, the Assessing Officer will examine the claim as per law.

In the result, the appeal is partly allowed for statistical purposes.