BULANDSHAHR DEVELOPMENT AUTHORITY,BULANDSHAHR vs. ACIT, EXEMPTION CIRCLE, GHAZIABAD

This appeal by the assessee is directed against order dated 22/06/2016 passed by the learned Commissioner of Income-tax (Appeals), Ghaziabad [in short ‘the Ld. CIT(A)’] for assessment year 2012-13 raising following grounds: 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the exemption u/s 11 & 12 and more so when registration u/s 12AA has been allowed to the appellant by Hon’ble Allahabad High Court.

2. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 2,99,11,347/- on account of surplus in infrastructure reserve fund by treating it revenue receipts instead of earmarked fund as claimed by the appellant and impugned addition has been made by recording incorrect facts and findings and without observing the principles of natural justice.

3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the exemption u/s 11&12 and in making addition of Rs.2,99,11,347/- on account of surplus in infrastructure reserve fund, is bad in law and against the facts and circumstances of the case.

4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961.

5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.

2. Briefly stated facts of the case are that the assessee filed its return of income on 27/09/2012, declaring Nil income. The assessee claimed surplus of ₹ 8,46,06,884/- as exempt under the provisions of section 11 and 12 of the Income-tax Act, 1961 (in short ‘the Act’). The return of income filed by the assessee was selected for scrutiny assessment and statutory notices were issued and complied with. During the scrutiny proceedings, the Assessing Officer noted that registration granted to the assessee under section 12A of the Act was withdrawn under section 12AA of the Act by the Commissioner of Income-tax, Meerut. He further observed that the Income Tax Appellate Tribunal (in short ‘the Tribunal’) vide order dated 29/04/2014 set aside the order of the learned Commissioner of Income-tax, Meerut and against which the Department has filed appeal before the Hon’ble High Court, which was pending at the time of passing the assessment order and, therefore, the Assessing Officer did not allow benefit of exemption eligible to trust/entity registered under section 12A of the Act. The learned Assessing Officer also held the amount of infrastructure fund of ₹ 2,99,11,347/- taken directly by the assessee in balance-sheet, as income of the assessee during the year under consideration. 2.1 On further appeal, the Learned CIT(A) upheld the denial of exemption claimed under section 11 to 13 of the Act by the assessee. He also sustained addition of ₹ 2,99,11,347/- on account of surplus in infrastructure reserve funds. Aggrieved with the finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above.

3. Before us, both the parties appeared through Videoconferencing facility. The assessee filed a paper-book electronically containing pages 1 to 51. 4. We have heard rival submission of the parties and perused the relevant material on record. Before us, the Learned Counsel of the assessee has submitted that issue in ground No. 1 of the appeal is covered by the order of the Tribunal in the case of the assessee for assessment year 2009-10 and 2010-11. The relevant finding of the Tribunal in and 4293/Del./2014 for assessment year 2009-10 and 2010-11 is reproduced as under:

“5. After considering the relevant finding given in the impugned order and the submissions made by the parties, we find that the Assessing Officer has taxed the surplus amount as revealed from the Income & Expenditure account, on the ground that 12A registration granted earlier by the CIT has been withdrawn u/s. 12AA(3) of the Act. Now' the said order of the CIT, cancelling registration u/s. 12A, has been set aside and registration u/s. I2A of the Act has been restored by the Tribunal (supra). Once registration u/s. 12A of the Act has been restored and is fait accompli, then the income has to be computed in accordance W'ith section 11 of the Act. Accordingly, we are remanding the matter back to the file of the Assessing Officer to compute the income in accordance with section 11 to 13 of the Act after examining the income and expenditure account and records and after giving due opportunity to the assessee to represent its case.”

“15 After considering the rival submissions, we are of the view tht this issue also requires reconsideration at the level of the AO. The assessee has now been granted registration u/s 12AA of the Act and thus, assess is entitled for exemption from income u/s 11 of the Act as per law. Even if, the infrastructure reserve fund may be treated as income of assessee, it will have to be examined, whether, assessee is entitled for exemption u/s 11 of the Act on the same income. Therefore, it would depend upon fundings with regard to exemption u/s 11 of the Act. We have already restored the issue of exemption u/s 11 of the Act to the AO for fresh decision as per law. Further, the authorities below have not appreciated the fact that assessee claimed that infrastructure fund was received for development activities from the State Authorities, the assessee has to spend the amount on the same as per approval of the State Authorities. Thus, there may not be any profit element out of the same sources. It may also be noted here that whatever amount has been spent by assessee on the same issue, the AO has accepted that assessee spent the same amount as per the directions of the State Authorities. Then in that event it is difficult to believe that part amount is capital receipt and part would be Revenue in nature. Therefore, there was no justification for Ld. CIT(A) to hold that the impugned receipt is Revenue in nature. This issue also requires reconsideration in view of the fact that assessee is entitled for exemption u/s 11 of the Act. We, accordingly, set aside the orders of the authorities below on the issue of infrastructure fund as well and restore the issue to the file of AO with direction to redecide the issue as per law by giving reasonable opportunity of being heard to the assessee.”