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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ C ’
Before: SHRI JASON P BOAZ & SHRI LALIET KUMAR
Per Shri Jason P Boaz, A.M. : These are cross appeals, by the assessee and revenue, directed against the order of Commissioner of Income Tax (Appeals)-14, LTU, Bangalore dt.27.01.2016 for the Assessment Year 2011-12.
2 & 764/Bang/2016 2. Briefly stated, the facts of the case are as under :- 2.1 The assessee, is engaged in the maintenance, upkeep, development, beautification, improvement, provision of amenities, security and infrastructure, etc to the entire area designated as Electronic City, Bangalore, including its adjoining areas and approach roads. The assessee was granted registration under Section 12A of the Income Tax Act, 1961 (in short 'the Act') by DIT (Exemptions), Bangalore, vide order No.DIT(E)/12A/Vol-I/E-112/2006-07 dt.28.11.2006. 2.2 For Assessment Year 2011-12, the assessee filed its return of income on 29.09.2011 declaring Nil income after claiming exemption under Section 11 of the Act. The return was processed under Section 143(1) of the Act and the case was subsequently taken up for scrutiny by issue of requisite notice and the assessment was concluded under Section 143(3) of the Act vide order dt.17.3.2014. In the order of assessment, the Assessing Officer, invoking the provisions of proviso to Section 2(15) of the Act and CBDT Circular No.11 dt.19.12.2008, concluded that since the assessee is involved in the rendering of services in the form of maintenance and provision of various facilities to different companies, firms, etc. of that area for a fee, the assessee was not eligible for exemption of its income under Section 11 of the Act and accordingly determined the assessee's income at Rs.1,99,51,973.
2.3 Aggrieved by the order of assessment for Assessment Year 2011-12 dt.17.3.2014, the assessee preferred an appeal before the CIT (Appeals) – 14, LTU, Bangalore. The learned CIT (Appeals) vide the impugned order 3 & 764/Bang/2016 dt.27.1.2016 allowed the assessee partial relief by (i) upholding the Assessing Officer’s view that since the assessee was providing services for a fee, no charity is involved and in view of the provisions of proviso to Sec.2(15) of the Act, which are attracted, the assessee was not entitled to exemption under Section 11 of the Act and (ii) by deleting the disallowance of depreciation claimed following, inter alia, the decisions of co-ordinate bench of this Tribunal in the case of ACIT Vs. City Hospital Charitable Trust 42 ITR (Trib) 583 (Bangalore); Jyothi Charitable Trust in 60 taxman.com 165; Karnataka Reddy Janasangha in ITA No.220/Bang/201 and Karnataka State Muslim Federation in ITA No.37/Bang/2013.
Aggrieved by the order of CIT (Appeals) – 14, LTU, Bangalore dt.27.1.2016 for Assessment Year 2011-12, both Revenue and the assessee have filed cross appeals before the Tribunal, which will be disposed off in seriatum hereunder.
Revenue’s Appeal in for A.Y. 2011-12 4.1 In Revenue’s appeal, the grounds raised are as under :-
4.2 The ld DR for Revenue was heard in support of the grounds raised (Supra) and placed strong reliance on the order of the AO in disallowing the assessee’s claim for depreciation on fixed assets in view of the decision of the Hon’ble Kerala High Court in the case of Lissie Medical Institutions (384 ITR 344) (Kar). 4.3.1 According to the ld AR for the assessee, the issue in respect of the claim of depreciation is covered by the decision of the Hon’ble Karnataka High Court in the case of DIT(E) Vs. Al- Ameen Charitable Trust and Others (383 ITR 517) (Kar) vide order dated 22/2/2016. The ld AR also, inter alia, placed reliance on the following decisions :-
(i) CIT Vs. Society of Sisters of St. Anne (1984) 146 ITR 28 (Kar); Page 6.1 & 764/Bang/2016 (ii) ITO Exemption Vs. Sharaddha Trust in ITA No.899/Bang/2016 dated 7/4/2017, (iii) Jyothi Charitable Trust Vs. DCIT (Exemption) in ITA No.622/Bang/2015 dt. 14/8/2015.
4.3.2 It was submitted that the issue in dispute i.e claim of depreciation is also covered by decision of the Hon'ble Karnataka High Court (supra) and the above orders of the various Co- ordinate benches of this Tribunal. 4.4.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. We find that the issue of claim of depreciation by a charitable trust u/s 11 of the Act has been considered and held in favour of the assessee by various Co- ordinate benches of this Tribunal as cited (Supra) and also by the Hon’ble Karnataka High Court, in the case of DIT(Exemption) Vs. Al- Ameen Charitable Fund Trust & Others (383 ITR 517) (Kar). In the case of Moogambigai Charitable and Education Trust Vs. ADIT (Exemption), the Co- ordinate bench in its order in dated 13/7/2016 at para 11 thereof has held as under:-
Page 6.2 & 764/Bang/2016 4.4.2 Respectfully following the decision of the Hon’ble Karnataka High Court in the case of Al-Ameen Charitable Fund Trust & Others (383 ITR 517), wherein the Hon’ble High Court has distinguished the decision of the Hon’ble Kerala High Court in Lissie Medical Institutions (Supra) and also following the decision of the co- ordinate Bench in the case of Jyothi Charitable Trust Vs. DCIT (Exemptions) in ITA No.622/Bang/2015 dt.14.8.2015, we uphold the decision of the ld CIT(A) in allowing the assessee’s claim for depreciation on fixed assets for asst. year 2011-12. Consequently, the grounds raised by Revenue (Supra) on this issue are dismissed.
5. In the result, Revenue’s appeal for Assessment Year 2011-12 is dismissed.
Assessee's Appeal in A.Y. 2011-12.
“1. The CIT (Appeals) have erred in passing the order : a. without considering all the submissions and/or order without appreciating properly the facts and circumstances of the case and the law applicable; b. in a mechanical manner and without application of mind.
The learned CIT (Appeals) has erred in law and on facts in not allowing the exemption to the appellant stating the object are not of charitable nature, in spite of admitting to the fact that the assessee is doing services for the benefit of public as the assessee is charging for its services to public and opining that charitable institution provides service for charitable purposes free of cost and for no gain and for the benefit by public at large.
6.2.1 The learned Authorised Representative for the assessee was heard in support of the grounds raised (supra). According to the learned Authorised Representative, the order of the learned CIT (Appeals) is erroneous, on facts and in law, in holding that the assessee is not eligible for exemption under Section 11 of the Act, by stating that its objects were not of charitable nature since it was charging a fee for services rendered as he was of the view that charitable institutions provide service for charitable purposes free of cost, in spite of admitting to the fact that the assessee carrying out services for the benefit of the public.
6.2.2 Before us, the learned Authorised Representative referred to the objects and purposes of establishment of the assessee entity. In this regard, it was submitted that Electronics City was conceived as an Industrial Estate exclusively for setting up of electronic hardware manufacturing industries in the later 1970s. KEONICS was entrusted with development of the land acquired and after creating industrial plots and allotting them to private companies / PSUs like BHEL, ITC etc transferred the same to KIADB (Phase I). In the 1990s KIADB enlarged the estate with additional acquisition of land (Phase II) which was allotted by it to 10 & 764/Bang/2016 enterprises like Infosys, Wipro, etc with access roads as well as other infrastructure provided, being below acceptable quality. Electronics City Industries Area (‘ECIA’) requested the Govt. of Karnataka to hand over the maintenance of the estate and accordingly the same was transferred to it in 1997 by KEONICS.
6.2.3 The learned Authorised Representative drew the attention of the objects of the assessee trust which are as under :
11 & 764/Bang/2016 It is submitted that there is no change in the activities of the assessee trust since the day it was granted registration under Section 12A of the Act and all the activities carried out are only in terms of the objects of general public activity as approved by the DIT (Exemptions), Bangalore and there is no finding to the contrary by the authorities below.
6.2.4 The learned Authorised Representative contends that from a perusal of the objects of creating the assessee trust and the activities carried out are charitable in nature as it is clear that the activities of the trust are for providing and establishing of industries and providing of facilities and amenities in Electronic City with charitable purpose for general public utility and certainly not carried out with profit motive in mind. In this context, the learned Authorised Representative referred to the income and expenditure details to submit that the assessee has made surplus below 15% of gross receipts; which is miniscule, considering the volume of activity and the establishment of the assessee. The learned Authorised Representative contends that in the light of the facts of the case it is amply clear that there is no inherent profit motive in the execution of the main activities of the assessee which are in accordance with the objects of the assessee trust. In support of this proposition, the learned Authorised Representative for the assessee pointed out that an identical issue was considered by a co-ordinate bench of this Tribunal in the case of Karnataka Industrial Areas Development Board Vs. DCIT (E) in dt.20.4.2016; wherein the Assessing Officer disallowed exemption under Section 11 of 12 & 764/Bang/2016 the Act in the light of the proviso to Sec.2(15) of the Act . The co- ordinate Bench, after considering the objects and activities of the assessee as well as analyzing the applicability of the said proviso in the light of various judicial precedents held that the proviso to Sec. 2(15) of the Act is not applicable in the said case in view of the fact that the dominant and prime objective of the assessee is not profit making.
6.2.5 It is further submitted that the assessee has been operating in accordance with the objects it was set up with and in respect of which Registration under Section 12A of the Act was granted in 2006. There is no change either in the activities carried or the element of income / fees charged for services provided with the objects for which the assessee was granted registration. According to the assessee, prior to the introduction of proviso toSec.2 (15) of the Act, there was no dispute with reference to the fact that the assessee was established for charitable purposes or that there was any deviance in its activities vis-a-vis the objects of the assessee trust or that any commercial, trade or business activities with profit as the dominant motive were carried on by the assessee. The predominant activity of the assessee is in furtherance of general public utility by provision of services / facilities upkeep of Electronic City for the welfare of all the Institutions operating therefrom and their employees and not with any dominant profit motive. The fees collected by assessee trust are only for funding provision of facilities in Electronic City such as, maintenance, scrutiny, upkeep, development, beneficiation, improvement additions to amenities, infrastructure for the 13 & 764/Bang/2016 entire industrial area and accordingly draws up its Income & Expenditure Account. The fact that the assessee provides service to the members of electronic city in general doesn’t detract from the fact that its activity advances general public utility with clearly charitable purpose; distinguishes it from an organization engaged in benefiting an individual or a group of individuals. It was reiterated that if the object, purposes and activities of an institution are charitable, the fact that the institution collects certain charges to meet the services it provides, does not alter the character of the institution. In this regard it was mentioned that surplus in the year under consideration is a mere 14.4%, which is below the permissible limit of 15% of gross receipts as permissible under Section 11(1)(a) of the Act. It is submitted that the surplus arising from provision of facilities / amenities are used for setting up of solid waste management facilities, police station and other activities of general public utilities and through it for various activities like managing 16 schools with over 5,000 students, free water for two villages, etc.
6.2.6 The learned Authorised Representative also submitted that during the year 2013-14, all municipal functions, CISF and movable assets handed over by Govt. of Karnataka to the assessee in 1997, were transferred to ELCITA, a township authority without any cost and which authority is exempt from Income Tax.
6.2.7 In sum and substance, the learned Authorised Representative’s submissions are that the assessee plays a vital role in supplementing
14 & 764/Bang/2016 governmental efforts and was constituted for the purpose of development of industries in Electronic City, by providing a forum to promote trade, commerce and industry and providing maintenance and facilities to those institutions and their employees and residents of the area which is certainly of general public utility. The management and control vest with an elected governing body and the benefit of its activities are for the general public of Electronic City and not for the benefit of any particular individual or group of individuals. Its activities are carried out in accordance with the objects under which it was constituted and registration under Section 12A of the Act was granted and there is no finding to the contrary by any of the authorities. Any minor surplus arising out of fees charged for amenities provided are utilized solely for achievement of its objects and no portion thereof is utilized for distribution of any income or profits. It is contended that in view of the above factual matrix of the case, the assessee's activities are charitable in nature and therefore the view of the authorities below that the assessee's activities are commercial in nature, thereby attracting the provisions of the proviso to Sec.2(15) of the Act is contrary to facts, bad in law and liable to be quashed. In support of the assessee's contention that the proviso to Sec.2(15) of the Act is not applicable in this case, reliance was, inter alia, placed on the following judicial pronouncements :-
(i) Karnataka Industrial Areas Development Board in dt.20.4.2016 for A.Y. 2010-11.
15 & 764/Bang/2016 (ii) India Trade Promotion Organisation Vs. DCIT (Exemptions) (2015) 53 Taxmann.com 404 (Delhi H.C)/ 371 ITR 333 (Delhi). (iii) GSI India Vs. DCIT (Exemptions) (2013) 38 Taxmann.com 364 (Delhi H C). 6.3 Per contra, the learned Departmental Representative placed strong reliance on the orders of the authorities below that hold the proviso to Sec. 2(15) of the Act is squarely attracted to the assessee in the case on hand.
6.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. The assessee trust was granted registration under Section 12A of the Act vide order dt.28.11.2006 as a charitable institution after examination of its objects by the DIT (Exemptions). It is seen from the order of assessment that the Assessing Officer has nowhere rendered a finding that the assessee is carrying on its activities not in consonance with its objects. The view of the Assessing Officer is that since there are certain fees charged by the assessee for provision of maintenance services of Electronic City from its members, therefore in view of the amended provisions of the proviso to Sec. 2(15) of the Act, such surplus income is not eligible for exemption under Section 11 of the Act, but is to be taxed. We find, from a perusal of the impugned order, that the learned CIT (Appeals) observes that the assessee is carrying out charitable activities and the public is benefited, but since there is a fee charged by the assessee for amenities provided, maintenance, security, 6.4.2 The stated purpose and objects of the assessee trust is that it exists for the ‘advancement of any other object of public utility’ and the fact that the assessee was granted registration under Section 12A of the Act after examination of its objects and activities is sufficient to come to this conclusion. The question for consideration before us is whether the proviso to Sec. 2(15) of the Act be applicable / attracted to the assessee in the case on hand.
6.4.3 In the case on hand, after an appreciation of the facts on record, it is seen that the assessee has carried on its activities in consonance with its stated objects and no deviance therefrom has been noticed or detected by the authorities below. The fact that the assessee has carried out its activities in providing the setting up of trade, industry and commence in Electronic City and attendant social and public amenities as per its objects and has been able to generate managerial surplus on account of fees charged for costs incurred in providing such infrastructure and facilities, would certainly not fit its activities with the bunch of ‘business activity’ carried out with a predominant profit motive to benefit an individual or a group of individuals. These facts, in our view by itself would not render the assessee a ‘non-charitable institution’. It is also not disputed that the surplus so generated is deployed for social welfare activities as per the assessee's objects.
17 & 764/Bang/2016 6.4.4 In the decision in the case of Karnataka Industrial Areas Development Board (supra), the co-ordinate bench of this Tribunal in its order observed that the fact that the assessee in that case was granted registration under Section 12AA of the Act in the past is sufficient to come to the conclusion that it exists for the ‘advancement of any other object of general public utility. ‘ Therefore, in the case on hand as in the case of Karnataka Industrial Areas Development Board (supra), the question that requires to be answered is whether the provisions of the proviso to Sec. 2(15) of the Act be applicable to the case of the assessee. In the aforesaid case of Karnataka Industrial Areas Development Board, the co-ordinate bench, followed the decision of the Hon'ble High Court of Delhi in the case of India Trade Promotion Organisation Vs. DCIT (Exemptions) & Others reported in 371 ITR 323 (Delhi) wherein it was held that the provisions of the proviso to Sec. 2(15) of the Act are not applicable even though an institution may derive income out of its activities which may be commercial, and that in any way does not affect its nature as a charitable institution for advancement of objects of general public utility carried out on make it less charitable institution since the activities are not carried out with any dominant profit motive. In this regard, the relevant portion of the decision of the co-ordinate bench in the case of Karnataka Industrial Areas Development Board at paras 44 to 49 are extracted hereunder :-
44. We have given a very careful consideration to the rival submissions. The purpose for which the Assessee exists is for the ‘advancement of any other object of general public utility . The fact that the Assessee enjoyed registration u/s.12AA of the Act in the past is 18 & 764/Bang/2016 itself sufficient to come to this conclusion. The withdrawn of registration u/s.12AA of the Act was only consequent to the introduction of the proviso to Sec.2(15) of the Act by the Finance Act, 2008. Therefore the question that we need to be answered is as to whether the proviso to Sec.2(15) of the Act would be applicable to the case of the Assessee.
We shall now understand the approach to be adopted in coming to the conclusion as to whether the proviso to Sec.2(15) of the Act will be applicable to the Assessee in the light of the decision of the Hon’ble Delhi High Court in the case of India Trade Promotion Organization Vs. DGIT(Exemption) and others 371 ITR 333 (Delhi). The learned counsel for the Assessee has placed strong reliance on this decision to support his plea that the proviso to Sec.2(15) of the Act is not applicable to Assessee. The facts of the case before the Hon’ble Delhi High Court in the case of India Trade Promotion Organization (supra) was that the Assessee in that case enjoyed the benefit of exemption u/s.10(23C)(iv) of the Act. Sec.10(23C)(iv) provides any income received by any person on behalf of any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States, shall not form part of the total income under the Act. The prescribed authority withdrew the approval granted to the Assessee consequent to the insertion of the proviso to Sec.2(15) of the Act, on the ground that the Assessee was deriving rental income from letting out space for rent during trade fairs and exhibitions, was deriving income from sale of tickets and income from food and beverage outlets. The said withdrawal was challenged by the Assessee before the Hon’ble Delhi High Court. The Hon’ble Delhi High Court had to go into the question as to the scope of the proviso to Sec.2(15) of the Act. The Hon’ble Delhi High Court has laid down the following very important principles as to how the proviso to Sec.2(15) of the Act has to be interpreted:- (i) The proviso to Sec.2(15) of the Act introduced by virtue of the Finance Act, 2008 with effect from 01.04.2009 has two parts. The first part has reference to the carrying on of any activity in the nature of trade, commerce or business. The second part has reference to any ac�vity of rendering any service ―in rela�on to any trade, commerce or business. Both these parts are further subject to the condition that the activities so carried out are for a cess or fee or any other consideration, irrespective of the nature or use or application or retention of the income from such activities. In other words, if, by virtue of a cess‘ or fee‘ or any other consideration, income is generated by any of the two sets of activities referred to above, the nature of use of such income or application or retention of such income is irrelevant for the purposes of construing the activities as charitable or not. (ii) If an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But, in deciding whether any activity is in the nature of trade, commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in 19 & 764/Bang/2016 relation to any trade, commerce or business, the element of profit making is also very important. (iii) The meaning of the expression "charitable purposes" has to be examined in the context of “income”, because, it is only when there is income the question of not including that income in the total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption would have to be determined having regard to the objects of the institution and its importance throughout India or throughout any State or States. (iv) Merely, because an institution derives income out of activities which may be commercial, that does, in any way, affect the nature of the Institution as a charitable institution if it otherwise qualifies for such a character. (v) Merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. If the driving force is not the desire to earn profits but to do charity, the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. (vi) If a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). Courts should always endeavour to uphold the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above. (vii) Sec�on 2(15) is only a defini�on clause. Sec�on 2 begins with the words, ―in this Act, unless the context otherwise requires. The expression "charitable purpose" appearing in Section 2(15) of the said Act has to be seen in the context of Section 10(23C)(iv). When the expression "charitable purpose", as defined in Section 2(15) of the said Act, is read in the context of Section 10(23C)(iv) of the said Act, we would have to give up the strict and literal interpretation sought to be given to the expression "charitable purpose" by the revenue. (viii) The expression "charitable purpose", as defined in Section 2(15) cannot be construed literally and in absolute terms. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of 20 & 764/Bang/2016 general public utility, it cannot but be regarded as an institution established for charitable purposes. (emphasis supplied) 46. It can be seen from the various provisions of the KIAD Act which we have set out in the earlier part of the order that the dominant and prime objective of the Assessee is not profit making. Prior to the introduction of the proviso to Section 2(15) of the Act, there was no dispute that the Assessee was established for charitable purposes. We shall now take a look at the Income and Expenditure Account for the year ended 31.3.2009 of the Assessee. The income side of the Account shows that the main component of income of the Assessee is derived in the form of interest of Rs.131.17 crores. Schedule “P” to the Income and Expenditure Account shows the break-up of the interest receipt by the Assessee. The interest on Fixed deposits is Rs.120.90 Crores. The Earnest Money Deposit given by the allottees are parked by the Assessee in fixed deposit and those deposits has earned the aforesaid interest income. Therefore there can be no profit element in earning this interest income. Besides the above, the other components of interest are interest from Allottees, penal interest from Allottees, interest on staff loan, interest from SB and others, interest on seed money, dividend received and interest on income tax refund. The other component of income is gain on disposal of land, sale of application forms, recoveries of fines and penalties, interest, other receipts, rent, forfeiture of deposits, water supply charges. The income from sale of land is Rs.18.69 Crores. The expenditure incurred by the Assessee comprises of repairs and maintenance, administrative expenses, water and electricity charges, special and other charges, Depreciation. If the gain on disposal of land of Rs.18.69 Crores which is the primarily object of the Assessee and expenditure in the form of administrative expenses of Rs.15.42 Crores and 10.61 Crores which are fixed expenses and necessary to carry on the primary object alone are considered than there would be loss. This by itself would demonstrate that the Assessee does not exist for profit.
The main aim and object for which the Assessee was established is to (a) Promote rapid and orderly development of industries in the stale. (b)Assist in implementation of policies of Government within the purview of KIAD Act. (c) Facilitate in establishing infrastructure projects.(d)Function on “No Profit - No Loss” basis. For the above purpose, the Assessee (a)Acquire land and form industrial areas in the state.(b)Provide basic infrastructure in the industrial areas.(ç) Acquire land for Single Unit Complexes.(d)Acquire land for Government agencies for their schemes and infrastructure projects. The dominant and main object of the Assessee is charitable and not for making profits.
A look at the income stream of the Assessee clearly reveals that all the activities from which the Assessee derives income are an inherent part of the main object of the Assessee. It is clear from the facts of the case that profit making is not the driving force or objective of the Assessee. Rather the purpose for which the Assessee was created is to regulate and develop drinking water and drainage facilities in the urban areas of the State of Karnataka and for matters connected therewith. This makes it clear that any income generated by the Assessee does not find its way into the pockets of any individuals or entities. It is to be utilized fully for the purposes of the objects of the petitioner.
Keeping in mind the above factual aspects and the provisions of the KIDA Act, and principle laid down in the aforesaid decision of the Hon’ble Delhi High Court in the case of 21 & 764/Bang/2016 India Promotion Organization (supra), in our view, will clearly show that the Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The assessee is operating on no profit basis. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. The proviso to Sec.2(15) of the Act is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 of the Act. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15) of the Act. In view of our conclusions that the said proviso is not applicable to the case of the Assessee, we hold that the Assessee’s income is not includible in the total income and therefore the income returned by the Assessee is directed to be accepted.”
We find that there is no change in the facts for the year under consideration as well as it was for the Assessment Year 2009-10. Accordingly, we hold that the provisions of proviso to Section 2(15) of the Act are not applicable in the case of the assessee. Though the assessee has contended that the surplus is arising only from the interest income and other income in the nature of penalty and other charges and not from the activity of acquisition of land and providing the infrastructure facilities for industrial development however, since the authorities below have not examined the issue from the point of the application of income in terms of Section 11 of the Act. Therefore, we direct the Assessing Officer to verify whether the assessee satisfies the provisions of section 11 so far as the application of income is concerned for availing the exemption under Section 11 of the Act.”
6.4.5 Respectfully following the decision of the Hon'ble High Court of Delhi in the case of India Trade Promotion Organisation (supra) and the aforesaid decision of the co-ordinate Bench in the case of Karnataka Industrial Areas Development Board (supra), which are on similar facts and issues as in the case on hand, we hold that the provisions of the proviso to Sec.2(15) of the Act are not applicable to the assessee in the case on hand and consequently reverse the orders of the authorities below on this issue. However, since the authorities below have not examined the issue from the point of application under Section 11 of the 22 & 764/Bang/2016 Act, the Assessing Officer is directed to examine and verify whether the assessee satisfies the provisions of Sec. 11 only so far as the application of income is concerned for availing exemption under Section 11 of the Act to which it is otherwise entitled. We hold and direct accordingly. Consequently, grounds raised by the assessee for both Assessment Year 2011-12 are allowed as indicated above.
In the result, assessee's appeals for Assessment Year 2011-12 is allowed as indicated above & revenue’s cross appeal is dismissed.