JODHPUR DEVELOPMENT AUTHORITY,JODHPUR vs. DCIT (EXEMPTION), JAIPUR

6. The Id. CIT(A) has erred in sustaining the disallowance of Rs. 24,43,79,000/- on account of application of income on account of payment made to other departments/ institutions. The addition so sustained is bad in law and bad on fact.

7. The Id. CIT(A) has erred in sustaining the addition of Rs. 3,00,10,000/- on account of repayment of loan to HUDCO claimed as application of income.

8. The Id. CIT(A) has erred in not allowing application of income of Rs. 14,22,45,000/- claimed on account of payment of Security and Guarantee payment made. The addition so sustained is bad in law and bad on facts.

9. The Id. CIT(A) has erred in sustaining disallowance of Rs. 38,91,000/- on account of application of income claimed for Shala Swasthya Karyakrama 2 incurred. The disallowance so sustained is bad in law and bad on facts.

10. The Id. CIT(A) has erred in sustaining the action of Id. AO in not properly determining income on the basis of the financial statements submitted by treating the same as a charitable trust.

11. The interest charged u/s 234A, 234B and 2340 is bad in law and bad on facts.

12. The appellant crave liberty to add, amend, alter, modify, or delete any of the ground of appeal on or before its hearing before your honour.”

3.1 At the outset of hearing, the Bench observed that there is delay of 178 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers and the assessee to this effect also filed an affidavit:-

Respected Sir, Sub Submission of appeal of Jodhpur Development Authority for A.Y. 2009-10 and application for condonation of delay. We are submitting herewith appeal in the case of Jodhpur Development Authority, Jodhpur for A.Y. 2009-10, and it is submitted that the delay occurred in submission of appeal may kindly be condoned in the interest of justice and appeal submitted may kindly be entertained. The appellate order was passed by Id. Commissioner of Income Tax-NFAC, and was received through online mode, and the same was not seen by any authority. The same was passed on 27.2.2023 and came to the notice only in the month of August, when the bank account were attached, and the appellant appeared before the Id. CIT, Exemption for release of the bank account. It came to notice of the JDA that certain orders had been made by Id. CIT(A), for the year under consideration and no further action had been taken in the matter. The time limit for submission of appeal from the date of appeal order had already expired, but the date when the appeal order came to the notice of the appellant the appeal is filed within due time. Soon on becoming aware about the appeal order being passed, and need to file further appeal, the approval for appointment of consultant was sought and the papers were handed over to & 666/JPR/2023 Jodhpur Development Authority the Counsel, for the preparation of appeal, and soon the appeal had been submitted before the Hon'ble Tribunal. It is therefore submitted that our appeal may be treated as in time, and in any case if it is considered to be delayed, we request for condonation of the delay so occurred which was on account of genuine and bonafide reasons. In these circumstances the delay occurred in submission of appeal may kindly be condoned and the appeal may kindly be entertained, and justice be granted.

In support of the contentions so raised the Authorised person has filed an affidavit to support the contentions raised in the prayer for condonation of delay in filing the appeal.

3.2 The ld. AR of the assessee appearing in this appeal submitted that the assessee is serious on the duties and the delay of 178 days is on account of fact that the assessee an authority established to develop the area of Jodhpur. The matter of the taxation is looked after the department where the person was not technical to understand the intricacies and seriousness of the information about the hearing and the receipt of the order. The ld. AR of the assessee also submitted that in the appeal memo the email id was given of the CA who handles the case and the same may not been drawn to the attention of the authorised officer by him. There is no intention to delay the matter but because of that reason there was delay. The ld. AR of the assessee also submitted that that the addition made in the hands of the assessee is on account of order of ex- parteorder against which the assessee filed the appeal but the same was not considered on the merits of the case and the assessee thus prayed to condone the delay in filling the present appeal. 4 & 666/JPR/2023 Jodhpur Development Authority 3.3. During the course of hearing, the ld. DR objected to assessee’s application for condonation of delay but and prayed that bench may decide the issue as deem fit and proper in the interest of justice.

3.4 We have heard both the parties and perused the materials available on record. The Bench Noted that the present appeal is delayed by 178 days. In the appeal memo filed before the ld. CIT(A) the mail id mentioned is of the CA who handles the appeal related work. The reasons advanced that the authorised person was not made aware about the passing of the order and therefore, when it came to their knowledge immediately the appeal was filed. In the light of these facts and considering the various judicial precedent where in the courts has considered the explanation prevented the assessee and thereby ignored the delay on account of the technicality of the reasons. Even the apex court in the case of Collector, Land & Acquisition Vs. Mst. Katiji & Others 167 ITR 471(SC) directed the other courts to consider the liber approach in deciding the petition for condonation as the assessee is not going to achieve any benefit for the delay in fact the assessee is at risk. Based on these observations the delay of 178 days in filing the appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause. & 666/JPR/2023 Jodhpur Development Authority 4. Brief facts of the case is that in this case notice u/s 142(1) of the IT Act was issued on 22.07.2010 by ACIT, Circle-2, Jodhpur since return of income was not filed by the assessee. In response to the same, ROI was filed. Notice u/s 143(2) of the Act was issued on 18.08.2010. Further, notices were issued from time to time. A final show cause was issued on 11.10.2010. In response to the same reply was filed on 27.10.2010.

4.1 Thereafter, vide order dated 02.11.2010 in W P no. 10193/2010 the Hon'ble High Court stayed assessment proceedings Vide order dated 24.05.2019 the Hon'ble Court dismissed the writ petition of the assessee. In view of vacation of stay against assessment proceedings a notice u/s 142(1) was issued on 08.07.2019 by the ACIT(E), Circle- Jodhpur. However, no reply was filed in response to this notice. Thereafter, vide order u/s 127 of the I. T. Act dated 28.10.2020 issued by CIT (E) the case was centralized with DCIT(E), Circle-Jaipur. The CBDT, in view of COVID extended the limitation to finalize assessment through various notifications. Finally vide notification dated 25-06-2021 limitation to complete assessment was extended to 30.09.2021. In this case due to technical difficulty pendency could not be created on ITBA. The CBDT vide order u/s 119 of the Act dated 06.09.2021 provided exclusions to section 144B of the Act. Thus, in view of the above & 666/JPR/2023 Jodhpur Development Authority background, pending assessment proceedings were taken further. A notice u/s 142(1) of the Act seeking details/justification/explanation was issued on 10.09.2021. This notice was sent through ITBA on the given e- mail Id in the latest ROI filed on e-filing portal.

4.2 Since the assessee vide letter dated 27.10.2010 had submitted an application u/s 144A of the Act before Additional Commissioner of Income tax, range, Jodhpur a letter was written to Addl. CIT (E), Range, Jaipur to issue necessary direction in the matter. The Addl. CIT(E) issued letter to the assessee on 15.09.2021 and 20.09.2021 through ITBA. However, no reply was filed. Therefore, vide letter dated 23.09.2021 the Addl. CIT (E), Jaipur stated that the petition u/s 144A stands disposed off and stated to file submission before AO if any. Another opportunity was provided vide this office letter dated 21.09.2021. Requesting therein to file reply by 24.09.2021. However, on this date also no reply was filed. Therefore, another opportunity was provided wide office notice dated 24.09.2021 requesting therein to submit reply by 27.09.2021. However, on this date i.e. 27.09.2021 also no reply was filed. Last opportunity was provided vide this office letter dated 28.09.2021 requesting therein to file reply by 29.09.2021 by 1 PM since assessment is to be finalized by 30.09.2021 All these notices were sent through ITBA on given E mail ID. However, no reply was received & 666/JPR/2023 Jodhpur Development Authority till 5 pm in the office of the ld. AO. Since no reply has been with the ld. AO he has no choice but to complete assessment proceedings u/s 144 of the Act on the basis of details/replies/evidence available on record.

4.3 As held by the Hon'ble Supreme Court in the case of UIT, AIR 2018 SC 5085 the income of UIT is not exempt u/s 10(20) of the IT Act. However, the assessee UIT has got registered u/s 12A of the Act vide order dated 5-03-2012 with effect from 1-04-2009. Therefore, this is to be examined whether assessee UIT is eligible for exemption u/s 11 or not. The main object of UIT is said to be to secure the integrated development of the City. Though it is carrying out activities as per mandate of State Govt but the activities carried out by it are in the nature of business. It is noticed that the activities being carried out by the Trust are in the nature of trade and/or business. One of the main activity of the Trust is to acquire land, develop it and then sell to interested persons after plotting. For acquisition of land compensation is paid. After developing scheme plots are sold at market rates. The profit is booked in books of accounts. Other activities include selling of shops etc after construction, rental income from shops/kiosk etc. Considering the activities carried out by the Trust the case falls under the category of last limb of charitable purpose defined in section 2(15) i.e. advancement of any other object of general public utility. & 666/JPR/2023 Jodhpur Development Authority 4.4 This amendment was applicable for A.Y. 2009-10. During this year from sale of land alone income was Rs. 63,15,20,000/ Since receipt from trading/business/ commercial activities were more than 25 lakhs during the year proviso to section 2(15) of the Act is also attracted in this case Once activities are out of purview of Charitable purpose exemption u/s 11 of the Act is not available. Further, necessary audit report u/s 10B alongwith ROI was not filed before specified date which is mandatory requirement for claiming exemption u/s 11 of the Act. Hence assessee UIT's income cannot be treated as exempt u/s 11 of the IT Act by any means. Therefore, assessment is made on the principles of commercial expediency.

4.5 It is seen that the assessee has debited Rs 2443.79 lakhs in the Income & expenditure account as advance to another department/institution. Vide notice u/s 142(1) dated 11-10-2010 the assessee was confronted on this issue. In response to the same vide reply dated 27-10-2010 the assessee. Since apparently this is an advance given to other departments it cannot be treated a revenue expenditure incurred by the UlT. Therefore, again opportunity was provided vide notice u/s 142(1) dated 10-09 2021. However, no reply was filed by the given dated 17.09.021. Further opportunities were provided. But no reply was filed. Therefore, the ld. AO has no option but & 666/JPR/2023 Jodhpur Development Authority to disallow this expenditure and add back to the total income of the assessee.

4.6 It is seen that the assessee has debited Rs 300.10 lakhs in the Income & expenditure account as repayment of loan to HUDCO. Vide notice u/s 142(1) dated 11-10-2010 the assessee was confronted on this issue. In response to the same vide reply dated 27-10-2010 the assessee. Reply is not acceptable. Re-payment of loan is not an allowable expenditure. Since loan receipt is capital receipt, loan repayment is also capital expenditure hence not allowable. Only interest component is allowable. Vide notice u/s 142(1) dated 10-09-2021 the assessee was required to provide bifurcation of principal loan amount and interest paid. However, reply was filed by the given dated i.e. 17-09- 2021. Further opportunities were provided but no reply was filed. Therefore, the ld. AO has no option but to treat the whole amount as loan re-payment and disallow this expenditure and add back to the total income of the assessee.

4.7 It is seen that the assessee has debited Rs 1422.45 lakhs to the income & expenditure account as refund of security and Guarantee amount Vide notice U/s 142(1) dated 11-10-2010 the assessee was confronted on this issue. In response to the same vide reply dated 27- 10-2010 the assessee. Reply is not acceptable. Refund of security and & 666/JPR/2023 Jodhpur Development Authority Guarantee amount cannot be held as revenue expenditure. It is only refund of deposits received earlier. Hence, not allowable. Vide notice u/s 142(1) dated 10-09-2021 again the assessee was required to explain allowability of this expenditure. However, no reply was filed by the given dated i.e. 17-09-2021. Further Opportunities were provided, but no reply was filed. Therefore, the ld. AO disallowed that expenditure and add back to the total income of the assessee.

4.8 It is seen that the assessee has debited Rs 38.91 lakhs in the income & expenditure account as Shala SwasthyaKaryakrama. Vide notice a/s 142(1) dated 11-10-2010 the assessee was confronted on this issue. In response to the same vide reply dated 27-10-2010 the assessee. Reply is not acceptable. The expenditure on Shala SwasthyaKaryakrama is not as per object of the Trust. Yes, the expenditure is of public utility, but it is application of income. It cannot be termed as incurred towards its objects or for earning income. Besides the expenditure is capital in nature. Hence, the expenditure is disallowed and added back to the total income. Vide notice u/s 142(1) dated 10-09- 2021 again the assessee was required to explain allowability of this expenditure. However, no reply was filed by the given dated i.e. 17-09- 2021 Further opportunities were provided, but no reply was filed.

Therefore, the ld. AO disallowed that expenditure and add back to the total income of the assessee.

“5.0 Decision on grounds of appeal and reasons thereof:- In this appeal as many as 7 Grounds were raised. Ground no. 1, 2 and 3 being general in nature, require no separate adjudication and are, therefore, dismissed. Ground no. 4 challenges the addition of Rs. 2443.79 Lakh made on account of advance to another department. Ground no. 5 challenges addition of Rs. 300.10 Lakhs by disallowing repayment of loan and interest expenses as Capital expenditure. Ground no. 6 challenges disallowing refund of security and guarantee amount and treated as whole amount as income aggregating to Rs. 1422.45 Lakhs. Ground no. 7 challenges disallowance of the expenditure debited as "Shala SwasthyaKaryakrama" amounting to Rs. 38.91 Lakhs. These Grounds of appeal have not been pressed. In the Written Submission(entirely reproduced in para no. 4 suora) also nothing much has been said about these. Therefore, the Grounds no. 4, 5, 6 and 7 are dismissed. However, during the appeal proceedings the appellant submitted Written Submission on 09.01.2023 (in para no. 4 supra) raising following grounds of appeal:-

1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer have erred in holding that assessee is not entitled to the benefit of section 11 & 12 of the Income Tax Act, 1961.

2. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer have erred in holding that first & second proviso to section 2(15) of the Act, 1961 is applicable in the assessee's case.

3. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer have earned in disallowing exemption claimed u/s 11of the Act. 1961 of the Act 1961. The above grounds of appeal are now adjudicated as under- 5.1 Ground no. 2 challenges the applicability of the First & Second proviso to section of 2(15) of the IT Act.

5.1.1 Ld. AO made detailed discussion in Para no.7 in the impugned Assessment order dated 29.09.2021. The relevant portion of the discussion are as under:- Exemption of income of the UIT As held by the Hon'ble Supreme Court in the case of UIT, AIR 2018 SC 5085 the income of UIT is not exempt u/s 10(20) of the IT Act. However, the assessee UIT has got registered u/s 12A of the Act vide order dated 5- 03-2012 with effect from 1-04-2009. Therefore, this is to be examined whether assessee UIT is eligible for exemption u/s 11 or not. The main object of UIT is said to be to secure the integrated development of the City. Though it is carrying out activities as per mandate of State Govt but the activities carried out by it are in the nature of business. It is noticed that the activities being carried out by the Trust are in the nature of trade and/or business. One of the main activity of the Trust is to acquire land, develop it and then sell to interested persons after plotting. For acquisition of land compensation is paid. After developing scheme piots are sold at market rates. The profit is booked in books of accounts. Other activities include selling of shops etc. after construction, rental income from shops/kiosk etc. Considering the activities carried out by the Trust the case falls under the category of last limb of charitable purpose defined in section 2(15) i.e.advancement of any other object of general public utility. The section 2(15) was amended vide Finance Act, 2008 and proviso was added as under- "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity: Provided, further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year. This amendment was applicable for A.Y. 2009-10. During this year from sale of land alone income was Rs. 63,15,20,000/-, Since receipt from trading/business/ commercial activities were more than 25 lakhs during the year proviso to section 2(15) of the Act is also attracted in this case. Once activities are out of purview of Charitable purpose exemption u/s 11 of the Act is not available. Further, necessary audit report u/s 10B alongwith ROI was not filed before specified date which is mandatory requirement for claiming exemption u/s 11 of the Act. Hence assessee UITs income cannot be treated as exempt u/s 11 of the IT Act by any means. 5.1.2 Out of the submission of the appellant (reproduced entirely in para 4 supra), the following points being relevant for adjudication are gainfully mentioned here under: - “ Assessee submitted that the assessee is a regulatory body created by State Government us 9 of The Rajasthan Urban Improvement Act, 1959 for proper development of specified area in the state which is supposed to be ensured by the State Government. It was submitted that the assessee is just like a government body functioning for and on behalf of State Government. As further stated, the very purpose of the above Act is to ensure the development of various areas of the state in a phased and planned manner. The Government of Rajasthan as per the provisions of act had constituted Jodhour Development Authority as an development authority by its notification. The reason for enactment of actis the development of areas for public purpose and to create better environmental condition. It was further submitted that as per Section 2(15) of the Act. 1961, an assessee is considered as acharitable institution if it is involved in any of the following purposes, namely:  Relief of the poor  Education  Medical relief.  Preservation of environment (including watersheds, forests and wildlife).  Preservation of monuments or places or objects of artistic or historic interest.  Advancement of any other object of general public utility.

Further, it was contended that the first proviso to section 2(15) of the Act states that advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on  any activity in the nature of trade, commerce or business: or  any activity of rendering any service in relation to trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. It was thus contended that the first proviso to section 2(15) shall apply in respect of only last limb of section 2(15). Thus, if an institution is involved in providing relief of the poor, education, medical relief, preservation of environment or monuments or places or objects of artistic or historic interest, then it shall continue to constitute Charitable purpose' even if it incidentally involves the carrying on of commercial activities. UIT is the organization of Rajasthan Government. The Authority takes over the new infrastructure developments, residential projects for people falling in low and middle income group. Since the assessee trust is engaged in providing easily affordable residence to low and middle income group, hence the assessee comes under the purview of Relief to Poor, within the definition of Charitable Purpose. It was also submitted that irrespective of the fact the assessée trust is engaged in development of various areas as per the provisions of the above Act which is for the public at large, the assessee trust does not fall under the last limb of the definition of Charitable purpose. Since the assessee is engaged in above mentioned charitable purpose, hence it is not right to apply first proviso to Section 2(15) of the Act. Reliance was placed on the recent decision of the Hon'ble Gujarat High Court in the similar case of Ahmedabad Urban Development Authority (AIDA) vs Assistant 14 Commissioner of Income Tax (Exemptions) where the court was called upon to decide as to whether ALIDA constituted under Gujarat Town Planning and Urban Development Act, 1976, to undertake preparation and execution of town planning schemes and to execute works in connection with supply of water, disposal of sewerage and provision of other services and amenities, could be said to be providing general public utility services within meaning of section 2(15) and, thus, can claim for exemption of income under section II of the Act Similar case in the light of the decision rendered by the Hon'ble Gujarat High Court and applied by the co-ordinate bench in Vadodara Urban Development Authority (supra) and Gandhinagar Urban Development Authority vs. DCIT order dated 23.07.2019, we find merit in the plea raised on behalf of the assessee for holding the activities of assessee to be for charitable purposes under s.2(15) of the Act and consequence eligibility of benefits under s. 11 & Section 12 of the Act. The order of the CIT(A) is thus set aside and the AO is directed to grant relief claimed under s.11(2) and 11(1)(a) of the Act to the assessee in accordance with law. Similar case in supreme court C.A. No. 21762/2017 (Assistant Commission of Income Tax, Exemptions v.Ahmedabad Urban Development Authority) is taken as the lead matter. in this case argument on behalf of revenue tracing the genesis of Section 2/15) contended that the old IT Act contained no restrictive expressions forbidding trade or business activities by charities and argue that activity carried out by Ahmedabad Urban Development Authority are in nature of trade and commerce. Against this, assessee put their ground and submitted that corporations were established by under statutes enacted by the Gujarat legislature. hereafter they were treated as charitable institutions engaged in activities involved in the advancement of public utility till the amendment of 2008. Learned counsel highlighted that the AUDA was created purely for the development and redevelopment as well as for augmentation of roads and allotment of lands after redevelopment, in the areas under its control and activities carried out by AUDA are in nature of charitable, in this matter supreme court deny grounds of revenue and give decision in favour of assessee. 5.1.3 Definition of "Charitable Purpose" (a) Sub-section (15) of section 2 of the Act defines "charitable purpose" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under sub-section (23C) of section 10 or section 11 of the Act on the ground that they are charitable institutions This is based on the argument that they are engaged in the "advancement of an object of general public utility as is included in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision AL (b)With a view to limiting the scope of the phrase "advancement of any other object of general public utility, sub-section (15) of section 2 has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity. 5.1.4 The Hon,ble Supreme Court in its landmark judgment in the case of ACIT vis Ahmedabad Urban Development Authority Le. 449 ITR 1(SC)[19.10.2022] has observed and decided the issue related to the Section 2(15) of the Act as under- II. Section 10(40), read with sections 2(15) and 10(230), of the Income-tax Act, 1961 Body. Authority, Board, etc., constituted for benefit of general public (General) - Whether Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in housing development, town planning, industrial development sectors are involved in advancement of objects of general public utility. therefore are entitled to be considered as charities in GPU categories - Held, yes - Whether if statutory corporations within section 10(46) derive their income by charging a nominal mark-up over cost of service rendered or goods supolied, meant to recover costs of activities they engage in orimarily or to achieve object for which they were set-up, such as development of housing, road infrastructure, water suooly, sewage, treatment, supply of food grains, medicines, etc., with or without regulatory powers, mere fact that some surolus or gain is derived would not disentitle them from benefit of section 10(46) Held, yes Whether however, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business and quantitative limit in proviso to section 2(15) applies but no such activities would be permitted to local authorities and corporations - Held, yes. 5.1.5 Before discussing the applicability of the sub-section 15 of Section 2 of the Act. in the present case it will be very gainful to produce here the prarameter framed by the landmark judgment (supra) of the Hon,ble Apex Court in para no. 252 in its Order to arrive at conclusion- A. General test under section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration (cess, or fee, or any other consideration): A.2. However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected (actual carrying out.... inserted w.e.f. 1-4-2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 1-4-2009; then Rs. 25 lakhs w.e.f. 1-4-2012; and now 20% of total receipts of the previous year, w.e.f. 1-4-2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business, or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration, towards Jrade, commerce or business, In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4. Section 11(4A) must be interpreted harmoniously with section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to section 2(15), has not been breached. Similarly, the insertion of section 13(8), seventeenth proviso to section 10(23C) and third oroviso to section 143(3) (all w.r.e.f. 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. 5.1.6 All the facts and circumstances related to the impugned action of Ld. AO in disallowing exemption u/s 11 are duly considered. There is substantial force in the contention made by the Ld. A.O. It is observed, the appellant was engaged in the activity of earning profit from sale of plots/land, charging various fees for rendering services to the income earned is business income and the application of the said income is irrelevant in view of the first proviso to section 2(15) of the I.T. Act. Also, The section 2(15) was amended vide Finance Act, 2008 and proviso was added w.e.f. 01.04.2009 as under - "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from activity. “ Provided, further that the first proviso shall not only if the aggregate value of the receipts from the activities referred to therein is twenty-five lakhs rupees or less in the previous year" 5.1.7 During the year under consideration ie. AY 2009-10 from sale of land alone income Rs. 63,15,20,000. Since receipt from trading/business/commercial activities were more than 25 lakhs during the year breaching section 2(15) of the Act. Thus, the activities carried out by the JDA, falls under the category of last limb of charitable purpose defined in section 2(15) i.e. advancement of any other object of general public utility. As the activities are out of purview of charitable purpose exemption u/s 11 is denied. As discussed in preceding paras, it is hereby held that the appellant is not carrying out any charitable activity and is squarely covered by the proviso 1 & 2 of the Section 2(15) of the I.T. Act. Ground no. 2 is therefore, dismissed. Since, the appellant is not entitled to get any benefit of Section 11 & 12 of the Act in the context of Section 2(15) of the Act, therefore, Ground no. 1 and 3 are also dismissed. 6. As a result, the appeal is dismissed.”

“ MAY IT PLEASE YOUR HONOUR’S The appellant respectfully submits following facts and details for your honour’s kind consideration : 1. Re : Ground No. 1 and 3 : Assessment order being bad in law and bad on facts and the denial of exemption of income is also not justified : 1.1. The ld. CIT(A) has erred in sustaining the order passed by the ld. AO which is bade in law and bad on facts and has been made without giving due opportunity to the appellant and has been made without properly appreciating the facts and circumstances in the case of the appellant. The exparte order made by the ld. AO was not justified and the entire basis of the assessment was not justified. 1.2. The ld. CIT(A) has erred in not accepting the contention of the appellant that the entire income of the appellant is not liable to tax in view of various provisions under the Act including exemption u/s 11/12, under section 10(20) of the Act, u/s 10(46) and u/s 10(46A) of the Act. The appellant being a government body engaged in the work of public welfare, and executing the work of government being delegated, no income is liable to tax and no return of income was required to be submitted.

1.3. It was also further submitted that the Jodhpur Development Authority had been granted registration u/s 12A of the Income Tax Act and in view of such registration being granted, the benefit of the same deserved to be allowed in all the pending assessment including the assessment under consideration. 1.4. It is respectfully submitted that the provisions relating to 12AA had been amended by Finance Act, 2014 wherein the following proviso has been inserted in sub-section (2) of Section 12A and the same is reproduced hereunder for your honour’s kind consideration : “(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:] Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.] 1.5. Further explanatory notes to the provisions of Finance (No.2) Act, 2014 issued by DBDT vide Circular No. 01/2015 Circulated vide F.No. 142/12/2014-TPL clearly spell out the intent of amendment. For the sake of clarity relevant portion is reproduced as below :

“8. Applicability of the registration granted to a Trust or Institution to earlier years. 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 8.4 Further, it has been provided that no action for reopening of an assessment under section 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 8.5 However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and 20 the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled. 8.6 Applicability—These amendments take effect from 1st October, 2014.” 1.6. As per the first proviso if the registration had been granted than for all pending assessment also the provisions of section 11 and 12 shall apply and benefit has to be granted to the appellant under these provisions. The only exception is where the registration has been denied to the assessee. 1.7. The procedure relating to trust registration has been simplified and once the registration is granted it shall apply to all pending assessment. There is no need of condonation of delay and granting the registration from retrospective effect if the trust is carrying on the activities in accordance with its deed and other conditions are being duly complied with. 1.8. It is respectfully submitted that amendment brought in section 12A and explanatory notes thereon, even is a assessee gets registration u/s 12A at a later stage, and there is no change in the activities of the trust, and in the previous year such benefit is to be allowed to the assessee and no action even u/s 147 can be taken. The perusal of the amended provisions and explanatory notes clearly indicate that these amendments had been introduced to provide relief to such trusts and remove hardship in genuine cases where benefit of section 11 and 12 was not granted to a Trust or Institution in absence of registration u/s 12A, despite the fact that they fulfilled all the pre conditions to render them eligible u/s 12A. 1.9. The legislature intention on the issue is very clear that it is only a technical matter and assessee should not be punished for the same. If the assessee comes under the purview of the exemption than such benefit should not be denied to the assessee. 1.10. The contention of the appellant is also further supported by the recent decision of the Hon’ble Rajasthan High Court in the case of Commissioner of Income Tax v. Krishi Upaj Mandi Samiti, Didwana in Appeal No. 181/2010 dated 16th January, 2015. 1.11. The Hon’ble Rajasthan High Court in the similar matter in the case of Krishi Upaj Mandi Samiti Udaipur in Appeal No. 66/2010 in their order dated 19.8.2015 had taken the similar view and the benefit of 12A was granted 21 even in the earlier years. Your kind attention is also further invited towards the following further decisions in case of Shyam Mandir Committee vs. ACIT (2016) 179 TTJ (JP)752. 1.12. In view of the aforesaid provisions of law and in view of the decision of the jurisdictional High Court, it is submitted that the ld. A.O. was not justified in not allowing the benefit of 11/12A of the Act, and had accordingly erred in taxing the gross receipts. 1.13. It is also submitted that having once granted the registration u/s 12A, the authorities below were not justified in stating that the appellant is not carrying on any charitable activities and is a carrying on commercial activities. Such findings are not justified. 1.14. The appellant had duly submitted the audited financial statements even before the ld. CIT(A) and also submitted the Income and Expenditure statement and the ld. CIT(A) has erred in upholding the action of the ld. AO in not granting the benefit of such registration and all compliance being duly made by the appellant. 1.15. It is also further submitted that the appellant being a statutory local authority is also eligible for exemption u/s u/s 10(20) of the Income Tax Act. The plea of the appellant in this regard is fortified by the various facts as follows. 1.16. The provisions of section 61 and 68 of Rajasthan Urban Improvement Act 1959 and the Jodhpur Development Act, explain that the UIT / JDA have been entrusted by the State Government with the control or management of “Local Fund” and therefore, it clearly qualifies to be the local authority as defined in section 10(20) of I.T. Act 1961. These provisions also reveal that the JDA/ UIT is entitled to charge fees, duty, charges or other levies as per the provisions of the Acts and Rules in force from time to time, which is one of the important functions of any local authority. 1.17. Section 3(dd), 3(e) and 4 of Rajasthan Local Fund Audit Act 1954 provide that the UIT / JDA is a local authority and is governed by the law applicable to such local authorities. Section 51 and 58 of JDA Act 2009 defining the funds of the authority and showing that the JDA is entrusted with the control and management of “Local Fund”.

1.18. The following other Rules are also noteworthy in order to determine the true and correct nature of JDA / UIT being a local authority as defined in section 10(20) of I.T. Act 1961. Rajasthan Improvement Trust Rules 1961. Rajasthan Urban Improvement Trust Rule 1961.

The Rajasthan Urban Improvement (Change of Use of Residential land or premises for commercial purposes) Rules 1974. The Rajasthan Improvement Trust (Coordination between the Municipalities and the Improvement Trust with regard to construction of Buildings) Rule 1964. a. The Rajasthan Urban Improvement Trust (Disposal of Urban land) Rules 1974. b. The Rajasthan Urban Improvement Trust (General Rules) 1962 and 1964. c. The Rajasthan Urban Areas (Sub-division, reconstitution and improvement of plots) Rules 1975 etc. 1.19. It will be imperative here to reproduce the preamble of JDA Act which precisely explain the objects of passing JDA Act / UIT Act and also defines the functions of such statutory bodies. Preamble of JDA Act is reproduced below which explains the object of setting up UIT / JDA : “for forming Jodhpur City and certain contiguous areas into Jodhpur Region, to provide for the establishment of an Authority for the purposes of planning, co-ordinating and supervising the proper, orderly and rapid development of the Jodhpur Region and of executing plans, projects and schemes for such development and to provide for matters connected therewith. Whereas, Jodhpur City and areas contiguous to it are being progressively developed and populated, and the necessity is being increasingly felt for forming these areas into Jodhpur Region and for setting up of an Authority for the purpose of planning, co-ordinating, and supervising the proper, orderly and rapid development of these areas, in which several 23 government departments, local authorities and other organizations are at present engaged within their own jurisdictions; to provide also that such Authority be enabled either itself or through other authority to formulate and execute plans, projects and schemes for the development of Jodhpur Region so that housing, community, facilities, civic amenities and other infrastructure are properly created for the population of Jodhpur Region in the perspective of 2023 A.D. or thereafter including the intermediate stages, and to provide for matters connected with the purpose aforesaid;” 1.20. The functions of JDA have been given in section 16 of JDA Act, which are reproduced below and which were annexed by way of annexure to the writ petition also : “16. Functions of the Authority – The main object of the Authority shall be to secure the integrated development of the Jodhpur Region and for the purpose the functions of the Authority shall be :- a. urban planning including the preparation of Master Development Plan and Zonal Development Plans and carrying out surveys for the purpose and also making alterations therein as may be deemed necessary ; b. formulation and sanction of the projects and schemes for the development of the Jodhpur Region or any part thereof; c. execution of projects and schemes directly by itself or through a local authority or any other agency; d. to make recommendations to the State Government on any matter or proposal requiring action by the State Government, Central Government, any local authority or any other authority for overall development of the Jodhpur Region; e. participation with any other authority for the development of the Jodhpur Region; f. Co-ordinating executions or schemes for the development of the Jodhpur Region; g. supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme, the expenses of which, in whole or in part are to be met for the Jodhpur Region Development funds; h. preparing schemes and advising the concerned authorities, departments and agencies in formulating and undertaking schemes for development of agriculture, horticulture, floriculture, forestry, dairy development, transport, communication, schooling cultural activities, sport, medicare, tourism entertainment and similar other activities; i. execution of projects and schemes on the directions of the State Government. j. undertaking housing activity in Jodhpur Region, provided that the delineation of responsibility for housing between Rajasthan Housing Board and the Authority will be made by the State Government effective from the date to be fixed by it; k. to acquire, hold, manage and dispose of property, movable or immovable, as it may deem necessary; l. to enter into contracts, agreements or arrangements with any person or organization as the Authority may deem necessary for performing its functions; m. to prepare Master Plan for traffic control and management, devise policy and programmes of action for smooth flow of traffic and matters connected therewith; n. to perform functions designated by the State Government in the areas of urban renewal, environment and ecology, transport and communication, water energy resource management directly or through its Functional Board or other departments / agencies as the State Government may specify; o. regulating the posting of bills, advertisement hoardings, signpost, and name boards in Jodhpur Region or in any part thereof as specified by the Authority; p. regulating the erection or re-erection of buildings and projects, making material alternations therein and providing for open spaces in Jodhpur Region or in any part thereof as specified by the Authority; q. removing obstructions and encroachments upon public streets, open spaces and properties vesting in the Government or the Authority; r. to do all such other acts and things which may be necessary for or incidental or conducive to, any matters which arise on account of its 25 activity and which are necessary for furtherance of the objects for which the Authority is established; and s. to perform any other functions that the State Government may designate in furtherance of the objectives of this Act.” 1.21. Section 51 of JDA Act defines “Funds of the authority” as under : “54. Application of funds etc.- All property, funds and other assets vesting in the authority shall be held and applied by it for the purposes and subject to the provisions of this Act.” Section 18 of JDA Act empowers the JDA to give directions to any local authority with regard to implementation of any project and scheme. Section 19 empowers JDA to assume responsibility for the maintenance of the amenities or may require the local authority to maintain the areas so developed. Chapter X containing section 61 to 63 contain the powers to levy certain charges including levy of conversion charges annual levy on vacant land etc. This power thus clearly empowers the JDA to have control and management of local fund. Section 58 of JDA Act provides that accounts of JDA shall be subject to audit by Local Fund Audit in accordance with Rajasthan Local Fund Audit Act. Section 79 provides that recovery of any amount payable to JDA can be recovered as “Arrears of land revenue”. Section 85 of JDA Act provides that JDA shall exercise its powers and perform its duties under this Act in accordance with the policy framed and the guidelines laid down, from time to time by the State Government for development of the areas in the Jodhpur reasons and the JDA shall be bound to comply with such directions. Section 90 inter-alia provides that in the even of failure on the part of any local authority to carry out any plan, project or scheme, JDA may carry out such work with the sanction of the State Government. Similar provisions existed in UIT Act. A plain reading of the relevant provision of UIT Act and JDA Act clearly reveal that the appellant clearly comes within the ambit and scope of the expression “Local Authority” as defined for the purposes of Section 10(20) as amended by Finance Act 2002.

1.22. In view of the aforesaid facts and submissions, it is very humbly prayed that the claim of the appellant for grant of exemption u/s 10(20) may kindly be accepted for all the years under consideration. 1.23. The appellant has spent for development activities in accordance with provisions of JDA Act and in conformity with the instructions issued by the State Government from time to time. Such expenditure for public purposes have been incurred out of “Local Fund” / “Statutory Fund” in conformity with provisions of JDA Act. 1.24. The Major sources of funds are in the nature of grants given in kind (by way of allotment of land) or cash by the State Government, levy and collection of tax duty or fees, loans received etc. which are not in the nature of income liable to tax and are required to be incurred for public purposes as provided in JDA Act. Such receipts cannot form part of computing income liable to tax in the hands of the appellant statutory body. The major sources of the funds are as under : i. by way of sale of land allotted by Government, which is in the nature of grant for carrying out such public welfare / public charitable purposes. ii. Part of the amount has been collected by way of levy of Urban Tax, land conversion charges etc. which JDA is entitled to levy and collect on account of their being “Local Authority” having statutory authority for levy and collection of such fee, taxes, duties etc. and out of which a part amount has to be given to the State Government / Municipal Counsel etc. Such functions of levy of tax, fees etc. for public purposes are the functions of the Government, which cannot be subjected to tax in view of provisions the Articles 265, 289 and 285 of the Constitution of India. iii. The ld. CIT(A) and the ld. AO have failed to appreciate the Audited financial statements which were submitted giving Income and Expenditure Statement. The assessment made on the basis of Receipts and payments made by the ld. AO was absolutely unjustified and such order deserves to be set aside. The ld. CIT(A) was not justified in confirming such order. iv. The receipts side and payments account on the basis of which total income has been determined also includes the amount of loan taken, 27 amount of security deposits and earnest money received etc., which by no stretch of imagination can form basis for determination of taxable income as per the provisions of Income Tax Act. v. The grant in aid received from the government. 1.25. The aforesaid items are only illustrations of the fact that substantial amounts shown on the receipts side of the receipt and payment account are receipts in the nature of liability, grants of capital nature in the form of land or cash grant given for purposes carrying out development activities as per JDA Act, urban tax, land conversion charges etc. levied and recovered under the authority of law for carrying out public purposes. 1.26. If such receipts are excluded, it will be self-evident that the appellant has suffered heavy deficits / substantial losses in the year under consideration and as such institution has been set up under the law for providing basic amenities to the public, which will naturally involve incurring of substantial expenditure. 1.27. Your kind attention is invited towards the detailed submissions made in the subsequent grounds which contain exact figures of such amount of liability, capital receipts, taxes and duties collected with the authority of law, loans obtained, amount of deposits and Earnest money received etc. included in the receipt side of the receipt and payment account, which by no stretch of imagination can be taken into consideration while computing the taxable income. 1.28. All such disallowances made in the assessment under consideration of the expenses are patently wrong and unjustified as elaborately explained in subsequent grounds of appeal. ON the exclusion of “Non-taxable receipts” such as sale of land, grant in aid, loan taken, earnest money and security receipts, urban tax and conversion charges levied and collected etc. from the receipt side, it will be found that there will be heavy deficit / losses. 1.29. It will be imperative to state that the Ld. AO has grossly erred in treating the appellant statutory body / local authority as a private concern carrying on the business of builder. It is most unfortunate and exposes the attitude of the Ld. AO. It will be imperative here to invite your honours kind attention towards the head note of following judgment. 28  ACIT (Exemption) vs. Ahmedabad Urban Development Authority & Ors. (2022) 329 CTR (SC) 297 : (2022) 449 ITR 1 (SC)  CIT vs. Ahmedabad Urban Development Authority (2020) 4 NYPCTR 672 (Guj)  CIT V/s Kerala Land Development Ltd. 232 ITR 575 : 1.30. In view of above facts, it is submitted that the ld. CIT(A) and ld. AO were not justified in denying the benefit of exemption u/s 11/12, in view of above decisions and had wrongly treated the appellant as a commercial entity.

2. Re : Gr. No. 2 to 9 : Treating the computing income at Rs 56,79,92,000/- as against Nil income declared : 2.1. The ld. AO had proceeded on the basis of receipts and payments statements which is prepared for the preparation of the Budget Document. The assessment of income done on the basis of the said document was not justified. 2.2. Further, the appellant had also prepared the statement of Income and Expenditure Statement which should have been considered for the purpose of making the assessment, and the ld. CIT(A) had erred in not considering such document and nothing has been stated about such statement which was duly submitted before him. 2.3. Even as per the receipts and payments there was a deficit of Rs. 14,74,67,000/- which has wrongly been taken as a positive figure. This has resulted into double impact on the income assessed. The figure (- )14,74,67,000/- has been wrongly taken as (+) figure. 2.4. As per income and expenditure statement of the current year AY 2009-10 the following is the position of the year under consideration :

A.Y. 2009-10 Income Amount Rental Income from JDA Properties 9,02,34,906 Fees and User Charges 27,30,96,217 Revenue Grants, Contributions & Subsidies 14,56,000 Income from Corporation Assets & Investments 73,15,21,440 Miscellaneous Income 1,43,98,908 29 Total Income - I 111,07,07,471 Expenditure Amount Establishment Expenses 69,25,18,423 General Administrative Expenses 4,98,42,868 Public Works 64,72,79,927 Interest and Financial Expenses 1,07,13,925 Miscellaneous Expenses 39,69,24,407 Depreciation during the year 2,26,84,619 Total Expenditure - II 119,66,97,589 Net Surplus / (Deficit) (-) 8,59,90,118 2.5. Similarly the appellant also submitted the audited financial statements for AY 2013-14, in which also there was deficit of (-) Rs. 303,290,726/-, which is also annexed in the paper book, and the same is also reproduced hereunder for your honour’s kind and ready perusal : A.Y. 2013-14 Income Amount Rental Income from JDA Properties 418,382,641 Fees and User Charges 788,971,539 Revenue Grants, Contributions & Subsidies 139,978,786 Income from Corporation Assets & Investments 3,099,901,014 Miscellaneous Income 323,911,442 Total Income - I 4,771,145,422 Expenditure Amount Establishment Expenses 121,580,202 General Administrative Expenses 140,384,922 Public Works 4,110,780,873 Interest and Financial Expenses 40,063,692 Miscellaneous Expenses 566,919,915 Depreciation during the year 97,706,544 Total Expenditure - II 5,074,436,148 Net Surplus / (Deficit) (-) 303,290,726 2.6. In the preparation of the Income and Expenditure Statement the repayment of loan had not been taken into consideration as application of income nor the repayment of security deposits had been taken as expenditure. The assessment should have started from this statement which could have resolved many issues, and the authorities below had failed to appreciate such document. 2.7. It is also submitted that still certain item of income which is included in the income in the above income and expenditure requires to be reduced from the income as the same will not form part of the income for the purpose of making the assessment in the case of the appellant. 2.8. It will be imperative here to give the brief details about the nature of receipts which are stated to be not liable to tax Sale of land allotted by State Government free of cost or at token value as per the notifications issued from time to time by the State Government, which are required to be applied for public purposes as prescribed under the provisions of UIT Act / JDA Act and as per the directions and instructions given by State Government from time to time. Section 43(1) of Rajasthan Urban Improvement Act 1959 reads as under : “(1) The State Government may by notification in the official Gazette and upon such terms and conditions as may be agreed upon between it and the Trust, place at the disposal of the Trust all or any improved and unimproved lands in the urban area for which the Trust has been constituted and which may be vested in the State (known and hereinafter referred as Nazul Lands) for the purposes of improvement in accordance with a scheme framed and sanctioned under this Act.” Section 60 of Rajasthan Urban Improvement Act 1959 prescribes the rules relating to disposal of land disposal of land by the trust. The extract from section 60 are reproduced below : “60 Disposal of land by the Trust. – (1) the Trust may – (a) with the sanction of the State Government dispose of [by way of allotment, regularization or auction,] any land acquired by the State government and transferred to the Trust without undertaking or carrying on any improvement thereon, or (b) subject to any directions given by the State Government dispose of any such land after undertaking or carrying on such improvement as it thinks fit. ------ [(4) All lands which are deemed to have been placed at the disposal of the Trust under section 90-B of the Rajasthan Land Revenue Act, 1959 (Act No. 15 of 1956) upon resumption or surrender of tenancy rights and interest of khatedars thereof, as the case may b, shall be available for allotment or regularization preferably to the persons having possession over such land or part thereof, as the case may be, on the basis of allotment made or Patta given to them by the Housing Co-operative Society or on the basis of any other document of transfer of land to them either by tenant or any other person claiming through the tenant, whose tenancy rights have been resumed or surrendered, under the said provision, on such terms and conditions and subject to payment to the Trust of such charges or premium or both, as the case may be, and at such rates as may be prescribed by the State Government in this behalf : Provided that no allotment or regularization of any land shall be made which has been duly earmarked for public utilities/ services such as park, nursery, civil or military aviation, bus stand, transport terminal, railways, public roads, highways, footpath, sewage line, water supply, electricity supply, telephone lines, hospital. School, educational institution, university, cremation ground, grave-yard and for such other purposes as State Government may specify by notification in the Official Gazette. (5) The charges realized under sub-section (4) shall be credited to the Consolidated Fund of the State and the fund of the Trust as may be determined by the State Government.]” 2.9. It will be appropriate to submit herewith copy of one such specimen order from the Government of Rajasthan in respect of allotment of land made in favour of UIT, Jodhpur. Copy of one such order passed in the year 2002 by District Collector, Jodhpur is annexed herewith for convenience of your 32 honours ready perusal. This document shows that the land was allotted without charging any cost whatsoever. Some times the land was allotted at token value. The allotment of land is made from time to time as per the policy decision of the State Government. The sale proceeds of such land is required to be utilized for development purposes in view of clear provisions contained in UIT Act / JDA Act. It will be relevant here to reproduce section 54 of JDA Act which reads as under : “54. Application of Funds etc. – All property funds and other assets vesting in the Authority shall be held and applied by it for the purposes and subject to the provisions of this Act.” The State Government issues directions / instructions from time to time with regard to utilization of the funds of the UIT / JDA. 2.10. There is a statutory diversion at very source of the aforesaid sale receipts, which requires the JDA to utilize such amount for specific purposes. The amount stand diverted at source in favour of development activities required to be carried out as per the provisions of JDA Act and after obtaining approval from the State Government. Such sale of land allotted free of cost / at Concessional rate is in the nature of grant of subsidy of capital nature, which is not taxable under the provisions of Income Tax Act. The amount of sale proceeds stand diverted in favour of developmental activities as per the provisions of UIT Act and hence there is a diversion of receipt at source by virtue of overriding statutory provisions and orders of the State Government. 2.11. On account of this fact also such receipts cannot be charged to tax. Furthermore, tax cannot be charged on gross sale price without deducting the cost of acquisition. Since no cost can be envisaged, no tax can be levied on gross sale value of land sold by UIT for purposes of carrying out development activities. 2.12. We are submitting herewith gist of few judgments to support our contention that grant in aid / subsidy granted by State Government in kind or in cash for carrying out development schemes cannot be treated as income liable to tax on account of following well settled principles of law :

 Maharashtra State Board of Technical Education vs. ITO (2019) 200 TTJ (Mumbai) 810  DCIT vs. Indian Olympic Association (2018) 195 TTJ (Del)  CIT vs. Indian Institute of Management. (2015) 275 CTR (Kar) 424  H.P. Nursing Registration Council vs. PCIT (2022) 329 CTR (HP) 737  PCIT vs. State Fisheries Development Corporation Ltd. (2019) 414 ITR 443 (Cal)  CIT V/s Kerala Land Development Ltd. 232 ITR 575 2.13. In view of the aforesaid catena of judgments and circulars of CBDT the gross sale price of land sold by UIT and utilize for public purposes cannot be treated as forming part of income chargeable to tax. Moreover, no tax can be levied with reference to the gross sale price of the land. 2.14. There is a automatic statutory vesting of land so allotted by State Government in favour of UIT / JDA by virtue of statutory provisions and no sale deed is required to be registered in favour of UIT / JDA. Such statutory vesting of title does not attract any tax on capital gain. Inclusion of Urban Tax and Conversion charges as income not justified. 2.15. Nature of urban tax and conversion charges u/s 90B etc. levied and collected by JDA on behalf of State Government cannot be treated as part of Income in the hands of the appellant. 2.16. Article 265 of the Constitution provides that no tax shall be levied or collected except by the authority of law. JDA under the provisions of JDA Act, have statutory powers to levy certain charges. 2.17. For instance Chapter X of JDA Act authorizes JDA to charge annual levy on vacant land in Jodhpur Reason and also to charge conversion charges for conversion of the use of land from residential purpose to commercial or any other purpose. It will also be relevant here to point out that provisions of section 85 of JDA Act provides that the JDA shall exercise its powers and perform its duties under this Act in accordance with the policy framed and the guidelines laid down, from time to time by the State Government for development of areas in the Jodhpur Region. 2.18. The appellant levied and charged urban assessment (ground) and conversion charges u/s 90B and conversion charges for other types of conversion as authorized under the provisions of JDA Act. Rule 7of UIT (Disposal of Urban Land) 1974 and Sub-Rule (4) of Rule 7 provides that 40% of the amount of revenue collected by UIT may be retained by them and balance 60% should be credited to the consolidated fund of the State Government. 2.19. Likewise, the amount of conversion charges collected have also to be shared between the State Government, Municipal Counsel and the appellant JDA as per the provisions of law and circulars issued by the Government from time to time. We beg to submit herewith copies of few circulars issued by the Government of Rajasthan giving details of the manner and mode and manner of computing the amount of share in such taxes / statutory fees etc. collected by the JDA between State Government, UIT and Municipal Corporation etc. :  Circular Dt. 2.6.2009 by Government of Rajasthan requiring JDA to pay 40% of the land revenue, conversion charges to the State Government.  Copy of Letter dt. 29.12.2004 from the Finance Department, Government of Rajasthan to JDA requiring them to pay 40% land conversion charges in relation to agriculture land. 2.20. The aforesaid provisions of law relating to JDA along with circulars and relevant rules clearly prove that the amount of fee, tax, urban assessment (ground rent) etc. collected by the appellant was a function of the State / Local Authorities authorized by law and such collections by no stretch of imagination can be regarded as income liable to tax in the hands of the appellant. 2.21. Moreover, part of the amount of such fees and taxes collected are required to be deposited in the consolidated fund of the State Government and part is payable to Municipal Council and the balance is required to be spent for development purposes in accordance with JDA Acts and the rules made there under. Such receipts cannot be treated as income liable to tax under the provisions of Income Tax Act. 2.22. Grants received from Government in cash and in kind by way of allotment of land free of cost and / or at token value are not of the nature of income liable to tax under the provisions of Income Tax Act. Thus, major part of land was received free of charge from the State Government for carrying out development schemes / activities out of such sale proceeds of land. Such grants are like subsidies granted for carrying out capital projects like the various sanction schemes of development etc. Such receipts cannot form part of income liable to tax. Under the provisions of Income Tax Act. 2.23. The entire assessment proceedings was carried out in an erroneous manner, and no assessment could have been made on the basis of the receipts and payments and the same should have been proceeded on the basis of Income and Expenditure Statement. 2.24. It is also submitted that repayment of loan and interest is allowable as application of income and the ld. CIT(A) has erred sustaining the action of ld. AO in not allowing such deduction as application of income. The provisions of section also provides that such repayment of loan would be allowed as application of income. 2.25. Further certain payments are being made as per direction of the State government like the payment made for Shala Swasthya Karyakrama and therefore it was not justified in allowing deduction of such application of income made by the appellant. Re : Interest charged u/s 234A, 234B and 234C : 2.26. The entire demand created vide impugned assessment orders, which is patently invalid and most unjustified, may kindly be cancelled. The interest charged u/s 234A and 234B may also kindly be cancelled. The impugned assessment order for the year under consideration may kindly be declared to be null and void. The income of the appellant may be declared to be eligible for grant of exemption. On this ground also the impugned assessments for all the years under consideration may kindly be annulled, quashed and may kindly be declared to be null and void. 2.27. Without prejudice to the aforesaid grounds, it is very humbly and respectfully prayed that the impugned assessments, which have been passed in undue haste, and in apparent disregard of the Principles of Natural Justice and provisions of law without providing any reasonable or adequate opportunity to the assessee, may kindly be set aside and the matter may be restored back to the AO, who may be directed to consider & 666/JPR/2023 Jodhpur Development Authority afresh the claim of exemption and may also examine the question of determination of the quantum of assessed loss / income after a careful scrutiny of the various items of receipts and expenses. We are sure that you honour will be pleased to grant justice. “

The ld. AR of the assessee summarily submitted that the assessee’s case has merits and in law also the decision not to grant the benefit of section 11 & 12 has not been tested properly in the light of the decision of apex court in the case of ACIT vis Ahmedabad Urban Development Authority Le. 449 ITR 1(SC)[19.10.2022]. Moreover, while explaining the merits of the case the ld. AR of the assessee submitted that the ld. AO as well as ld. CIT(A) has not appreciated the fact that the assessee’s assessment is made based on the Receipt and payment account instated of Income and expenditure statement. Therefore, in the interest of equity and justice if the matter can not be decided by bench as the assessment order was passed u/s. 144 of the Act the ld. AR prayed to remand back the case to the ld. AO to be decided based on the Income and Expenditure account and considering the decision of apex court in the case of ACIT vis Ahmedabad Urban Development Authority Le. 449 ITR 1(SC)[19.10.2022]

In the result, the appeal in filed by the assessee is allowed for statistical purposes.

In the result, the appeal in filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 26 /04/2024.