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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI S.S. GODARA & SHRI PRADIP KUMAR KEDIA
Consolidated Appeals (4)
आदेश / O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned cross-appeals have been filed by the assessee and Revenue are against the respective orders of the Commissioner of
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 2 - Income Tax(Appeals)-Gandhinagar [CIT(A) in short] dated 31/08/2016 & 28/12/2016 in the matter of assessment orders under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 25/03/2015 and dated 28/03/2016 relevant to Assessment Years (AYs) 2012-13 & 2013-14 respectively.
In both the cross-appeals, the facts and question for determination are broadly similar. Therefore, the Assessment Year 2012-03 is taken as a lead year for the sake of convenience.
ITA No.2700/Ahd/2016 – AY 2012-13 – Assessee’s appeal 3. The grounds of appeal raised by the assessee read as under:-
On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the appellant’s ground of appeal that, for all practical purposes, it is an agent of the State Government of Gujarat and, therefore, by virtue of the provisions contained in Article 289 of the Constitution of India, it cannot be subjected to assessment and levy of tax under the Income-tax Act, 1961 (Hereinafter referred to as “Act”).
On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the finding of the Assessing Officer that the activities of the appellant fall in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration.
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 3 - 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that, as per provisions of section 2(15) and section 13(8) of the Act, the income of the appellant is not eligible to be excluded from the total income under the provisions of sections 11 & 12 of the Act.
On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the total income of the appellant has to be computed as per the normal provisions of the Act and, therefore, the benefits of sections 11(1) and 11(1 A) or the benefit of application or accumulation of income u/s. 11(1) or u/s.11(1)(d) of the Act would not be available to the appellant.
5.1 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the Assessing Officer to the effect that the premium received on long term lease of land is income chargeable to tax as against the appellant's claim that such premium is in the nature of capital receipt.
5.2 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the Assessing Officer that the advance premium received during the year on long term lease of land is appellant's income chargeable to tax in the present assessment year.
5.3 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the Assessing Officer that, even if such advance premium is assumed to the assessee's income, the same arises from leasing of land for a period of 99 years and accordingly such premium receipts are required to be proportionately spread over the period of 99 years for the purposes of computation of total income under the provisions of the Act.
5.4 On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the appellant's ground of appeal to the effect that, while holding that the appellant is a land dealer/real estate developer, the Assessing Officer erred in not appreciating the well-settled law that the sale of land only materializes in the year of passing of title on execution of valid transfer deeds.
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 4 - 5.5 On the facts and in the circumstances of the case, the learned CIT(A) erred in estimating the quantum of deduction from gross advance premium, in respect of cost and expenses incurred in relation to such advance premium receipts, at a figure of Rs. 819,49,88,617, by adopting an estimated rate of 60% against the lease premium received of Rs. 13,65,83,14,362.
6.(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in allowing depreciation allowance at Rs. 2,80,18,241 as against the appellant's claim for deduction of depreciation allowance at Rs.62,87,37,304.
(ii) On the facts and in the circumstances of the case, the learned CIT(A) erred in directing that depreciation is to be allowed only on additions to the assets during the financial years 2008-09 to 2011-12 and further after reducing there from the proportionate cost to be deducted from the advance premium receipts, as determined by the learned CIT(A).
On the facts and in the circumstances of the case, the learned CIT(A) erred in dismissing as infructuous the following grounds of appeal raised by the appellant before the learned CIT(A):
"12.1 On the facts and in the circumstances of the Appellant's case, if the income of the Appellant is treated as business income then brought forward deficit of earlier years i.e. upto A.Y. 2008-09 should be allowed to be set off against such business income of current year and subsequent years.
12.2 On the facts and in the circumstances of the Appellant's case, the deficit of earlier years i.e. excess of expenditure (including capital expenditure) over income, should be allowed to be carried forward and set off against the income of the current year and subsequent years, if any, determined at any stage of income tax proceedings, by considering it as application of income u/s 11(1)(a) of the Act. The Assessing Officer may be directed to allow such set off and carry forward.
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 5 - 12.3 On the facts and in the circumstances of the Appellant's case, the deficit of current year as per return of income should be allowed to be carried forward and set off against the income of subsequent years, if any determined at any stage of income tax proceedings, by considering it as application of income u/s 11 (1 )(a) of the Act. The Assessing Officer may be directed to allow such set off and carry forward.
12.4 On the facts and in the circumstances of the Appellant's case, the Assessing Officer may be directed to set off the deficit of earlier years against income of current years only in the event of application of income, before considering such brought forward deficit, falling short of 85 % of income of current year." 8. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the disallowance made by the Assessing Officer u/s.436 of the IT. Act in respect of unpaid leave encashment of Rs.13,41,81,550.
ITA No.2738/Ahd/2016 – AY 2012-13 – Revenue’s appeal
The grounds of appeal raised by the Revenue read as under:- I. Whether on the facts and in the circumstances of the case is the Ld.CIT(A) justified in restricting the addition to the extent at Rs.5,56,33,25,746/- as against the addition of Rs.13,65,83,14,363/- made by the A.O. on account of premium of land and shades.
II. Whether on the facts and in the circumstances of the case is the Ld.CIT(A) justified in directing the A.O. to tax the lease premium at the rate of 40%.
The Ld.Counsel for the assessee Mr.S.N.Soparkar at the outset submitted that predominant ground which requires adjudication at this stage is ground No.3 of the assessee’s appeal. The Ld.Counsel submitted
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 6 - that the AO held for this year as well as in the earlier year that activities carried out by the assessee-company are in the nature of ‘advancement of other general public utility’ in the nature of trade/commerce/business and therefore the activities carried out by the assessee cannot be reckoned as attributable to ‘charitable purpose’ within the meaning of section 2(15) of the Act. The Assessing Officer (AO) has accordingly denied the benefit of exemption claimed by the assessee under s.11 of the Act. The Ld.Counsel in this context submitted that the assessee-company is constituted by the State Government Act, i.e. Gujarat Industrial Development Act, 1962. The object of Gujarat Industrial Development Corporation (GIDC) is to establish and develop the industries in the State of Gujarat. The GIDC is under obligation to fulfill the industrial development policies framed by the Government. The GIDC is acquiring land all over Gujarat to develop industrial states. The Ld.Counsel submitted that the assessee having been constituted by law for facilitating for all kinds of development for public purposes require to be treated as the assessee which is engaged for ‘charitable purpose’ and thus eligible for claim of exemption under s.11 of the Act. The Ld.Counsel next submitted that identical issue arose in assessee’s own case in preceding assessment years 2009-10 to 2011-12 in ITA Nos.278/Ahd/2013 and Ors. order dated 10/01/2017 where the Coordinate Bench of Tribunal held that the assessee-company cannot
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 7 - said to be conducting its affairs solely on commercial lines with a motive to earn profit and consequently proviso to section 2(15) of the Act does not get triggered in the case of the assessee. The object of the assessee was thus held to be of charitable purpose. The Ld.Counsel thereafter submitted that the aforesaid order of the Tribunal has also been affirmed by the Hon’ble Jurisdictional High Court in the case of CIT vs. Gujarat Industrial Development Corporation (2017) 80 taxmann.com 366 (Guj.). The Ld.Counsel accordingly submitted that the consequential assessment can be carried out afresh after deeming the activities of the assessee to be of charitable purpose. It was submitted that for assessment purpose, the assessment order can be fairly set aside in the light of the order of the Coordinate Bench of ITAT and judgement of Hon’ble Jurisdictional High Court (supra). On this note, the Ld.Counsel concluded his arguments.
The Ld.DR for the revenue, on the other hand, relied upon the orders of the AO and submitted that without prejudice, the matter should be sent back to the file of the AO for determination of assessed income afresh in the light of the decisions quoted.
We have considered the rival submissions. The core issue in controversy is correctness of applicability of proviso to s.2(1t) in due facts of the case. We find that the identical issue arose in assessee’s own
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 8 - case in the preceding three assessment years. We find that the Coordinate Bench has determined the issue in favour of assessee and held that proviso to section 2(15) does not apply in the facts of the case. It consequently upheld the claim of the assessee that object of the assessee are for carrying out the activity for charitable purpose. The Revenue carried the aforesaid decision of the Coordinate Bench in appeal before the Hon’ble Jurisdictional High Court without any success. The catch- notes of the judgement of the Hon’ble Gujarat High Court are extracted hereunder:-
Section 2(15), read with section 11, of the Income-tax Act, 1961 - Charitable purpose (Objects of general public utility) - Assessment year 2009-10 - Whether where assessee-corporation was constituted under Gujarat Industrial Development Act, 1962, for purpose of securing and assisting rapid and orderly establishment and organization of industrial areas and industrial estates in State of Gujarat, and for purpose of establishing commercial centers in connection with establishment and organization of such industries it could not be said that activities carried out by assessee were either in nature of trade, commerce or business, for a Cess or Fee or any other consideration so as to attract proviso to section 2(15) and same could be said to be for charitable purpose and, consequently, assessee was entitled to exemption under section 11 - Held, yes [Paras 15 and 17] [In favour of assessee].”
The Hon’ble Jurisdictional High Court in essence upheld that assessee was not involved in the activities in the spirit of commercial accommodation and therefore falls within the ambit of definition of ‘charitable purpose’ contemplated under s.2(15) of the Act. In view of
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 9 - the foregoing, we find that the relief sought by the assessee to the extent that the activities carried on by the assessee should be recognized to be of charitable nature requires to be endorsed. However, all other issues raised in the respective appeals of the assessee and revenue would require re-examination in the light of conclusion drawn in favour of assessee towards applicability of section 2(15) of the Act as noted above. Thus, all other issues are kept open for re-examination at the end of the AO.
In the result, cross-appeals of the assessee as well as revenue in ITA No.2738/Ahd/2016 & 2700/Ahd/2016 relevant to AY 2012-13 are allowed for statistical purposes in terms of directions noted hereinabove.
ITA No.427/Ahd/2017 – AY 2013-14 - Assessee’s appeal and ITA No.544/Ahd/2017 – AY 2013-14 - Revenue’s appeal
The directions and findings in ITA Nos.2700/Ahd/2016 and ITA No.2738/Ahd/2016 for AY 2012-13 would apply mutatis mutandis to both the cross-appeals in ITA Nos.427/Ahd/2017 & 544/Ahd/2017 relevant to AY 2013-14. Consequently, the assessment framed by the AO for AY 2013-14 is also set aside and restored back to his file for re- examination and for de novo framing of the assessment order in consonance with directions given in AY 2012-13(supra).
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 10 - 11. In the result, cross-appeals of the assessee and Revenue in ITA Nos.427/Ahd/2017 and 544/Ahd/2017 relevant to AY 2013-14 are allowed for statistical purposes. 12. In the combined result, captioned appeals of the assessee as well as revenue are allowed for statistical purposes. This Order pronounced in Open Court on 10/ 11 /2017
Sd/- Sd/- (एस.एस.गोदारा) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( PRADIP KUMAR KEDIA ) ( S.S. GODARA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 10/ 11 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-Gandhinagar �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad
ITA Nos.2700/Ahd/16 & 427/Ahd/17 (by Assessee) ITA Nos.2738/Ahd/16 & 544/Ahd/17 (By Revenue) GIDC vs. DCIT/ACIT Asst.Years – 2012-13 & 2013-14 - 11 -
Date of dictation ..9.11.17 (dictation-pad 11-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …9.11.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….10.11.17 7. Date on which the file goes to the Bench Clerk…………………10.11.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………