Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, C BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2018-19 dated 21.12.2023. The assessee raised following grounds of appeal: 1. “The Order passed by the lower authorities, is not justified in law and on facts and circumstances of the case. 2. Under the facts and circumstances of the assessment order passed by CIT(Å, without affording the appellant fair, proper and adequate opportunity of being heard. This is in violation of principles of natural justice, is bad in law and not in accordance with the provisions of law hence is liable to be re heard. 3. Under the facts and circumstances of the case, the impugned assessment order passed without affording the appellant fair, proper and adequate opportunity of being heard, without even verifying the adjournment request filed by the appellant on 15.09.2021 and without disposing off the said adjournment request, which is in violation of principles of natural justice,
ITA No.279/Bang/2024 Udupi Nirmithi Kendra, Udupi Page 2 of 4 is bad in law and not in accordance with the provisions of law are remanded for fresh opportunities of being heard. 4. As regards denying exemption under section 11 of the IT Act by invoking 1st proviso to section 2 (15) of the IT Act: 4.1 The lower authorities have failed to appreciate that the objectives of the appellant do not involve carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. 4.2 The Lower Authorities have failed to appreciate that the Appellant does not fall within the mischief of 1 st proviso to section 2 (15) of the IT Act for the reason that the Appellant is established under Karnataka Rajya Nirmana Kendra which is an agency of the Department of Housing of the Government of Karnataka with a governing body consisting of government officials for carrying out the welfare programmes of the State. 4.3 The Lower Authorities have failed to appreciate that the activities of the Appellant falling within the domain of the State Government under List Il (State List) of the Seventh Schedule of the Constitution of India, the same cannot be regarded to be in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. 4.4 The Lower Authorities have failed to appreciate that the activities of the Appellant falling within the Part IV of the Constitution, the same cannot be regarded to be in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. 4.5 The Lower Authorities are not justified in applying the 1st proviso to section 2 (15) ignoring the tests laid down in India Trade Promotion Organization vs. DGIT 2015-TIOL-227-HC-DEL-IT where the said provision was read down to save the same from being declared unconstitutional. 4.6 The Lower Authorities have failed to appreciate that the monies received by the Appellant cannot be regarded as a cess or fee or. any other consideration for carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business. 4.7 Without prejudice to the above, the Lower Authorities are not justified in denying exemption by invoking 1 st proviso to section 2 (15) of the IT Act, failing to appreciate that the objects of the Appellant fall within the ambit of "relief of the poor”. 4.8 Under the facts and circumstances of the case, The Lower Authorities erred in law as far as application of provisions of clause 8 of Section 13 of The
ITA No.279/Bang/2024 Udupi Nirmithi Kendra, Udupi Page 3 of 4 Income Tax Act, 1961 concerned which is in consequent to the application of proviso to clause 15 of section 2.
Without prejudice to the above grounds, alternatively even when the stand taken by the Lower Authorities upheld, the taxable income would be restricted to Rs.1,80,99,821/- being excess of income over expenditure as per the income and expenditure account, rather than Rs.4,00,55,022/- which represents income accumulated to the extent of 15% under section Il(l)(b) of Income Tax Act 1961.”
At the time of hearing, it was submitted by ld. A.R. that similar issue came for consideration before this Tribunal in assessee’s own case in ITA No.1962/Bang/2018 & others dated 16.6.2022 for the assessment years 2013-14 and others where in the Tribunal decided the issue against the assessee. However, it was submitted that while adjudicating the above appeal for the assessment year 2013-14, the Tribunal has placed reliance on the judgement of Kerala High Court in the case of Nirmithi Kendra v. DCIT (2022) 141 taxmann.com 495 (Ker.), which was considered by the Hon’ble Supreme Court in the case of Nirmithi Kendra vs. DCIT (Exemptions) reported in (2024) 159 taxmann.com 62 (SC) and remitted the issue back to the file of ld. AO with following observations: “Section 2(15), read with sections 11 and 12A, of the Income-tax Act, 1961 - Charitable purposes (Proviso) - Assessment years 2009-10 and 2013-14 - Assessee-society was registered under section 12A with main objective to take up construction work of any nature to establish a chain of retail outlets - It undertook construction activities under State PWD department in lieu of 2.5 per cent supervision charges and accordingly claimed certain amount as applied for charitable purposes - Assessing Officer was of view that construction work was an activity of trade, commerce or business for consideration and assessee could not claim status under section 12A since activities carried on by it did not fall within meaning of charitable purpose warranting exemption from income tax - High Court by impugned order held that where assessee executed construction work for benefit of Government and received certain amount from Government for same, purpose of such construction work could not be accepted as an activity coming within meaning of advancement of other object of general public utility It further held that since assessee was involved in carrying on of any activity in nature of trade, commerce or business, proviso to section 2(15) would be attracted and assessee would not be entitled to benefit under section 11 - On appeal, all parties agreed that issue was covered by judgment in Asstt.
ITA No.279/Bang/2024 Udupi Nirmithi Kendra, Udupi Page 4 of 4 CIT (Exemptions) v. Ahmedabad Urban Development Authority [20221 143 taxmann.com 278/(20231 291 Taxman 11/120221 449 ITR 1 (SC) - Whether in terms of above judgment, matter was to be remanded to Assessing Authority for determination of commercial activity and for considering benefit of section 12A and for passing appropriate orders - Held, yes [Para 2] [Matter remanded]”
2.1 In view of the above, we are inclined to remit the entire issues in dispute to the file of ld. AO to decide the same as per direction of Hon’ble Supreme Court in the case of Nirmithi Kendra v. DCIT (Exemptions) cited (supra). 3. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 17th Apr, 2024
Sd/- Sd/- (Keshav Dubey) (Chandra Poojari) Judicial Member Accountant Member
Bangalore, Dated 17th Apr, 2024. VG/SPS
Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.