THE JT. CIT (OSD) (EXEMPTIONS), CIRCLE-1, AHMEDABAD vs. GUJARAT HOUSING BOARD,, AHMEDABAD

Date of hearing : 04-12-2024 Date of pronouncement : 06-12-2024 आदेश/ORDER PER BENCH:-

These bunch of six appeals are filed by the Revenue as against the different appellate orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the different Assessment Years 2011-12, 2015-16 to 2018-19.

Asst. Year 2011-12 wherein in the first round of appeal, the Revenue challenged the same before Hon’ble Supreme Court of India as against the judgment dated 02-07-2018 passed Hon’ble Gujarat High Court in 5 Ors. A.Ys. 2011-12, 2015-16 to 2018-19 Page No 3 JCIT(E)/DCIT(E) Vs. Gujarat Housing Board Tax Appeal No. 752 of 2018. The Revenue raised the following Questions of Law before Hon’ble Supreme Court. “1. Whether, on the facts and in the circumstances of the case, and in law, the Hon'ble High Court is justified in upholding the order of the Appellate Tribunal in remanding the matter to the assessing officer to examine the issue of deduction/exemption under Sections 11 & 12 of the Income Tax. Act, 1961 (for short 'the Act') on the basis of material on record and in view of the judgments of Hon'ble High court of Gujarat in the case of Ahmedabad Urban Development Authority 396 ITR 323 (Gujarat), and in the case of Gujarat Industrial Development Corporation 83 taxmann.com 366 (Gujarat), without appreciating that these judgments are pending consideration before this Hon'ble Court in C.A. No.-21762-21762 /2017- ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS) VS AHMEDABAD URBAN DEVELOPMENT AUTHORITY and C.A. No. 003971 /2018 COMMISSIONER OF INCOME TAX VS 1 GUJARAT INDUSTRIAL. DEVELOPMENT CORPORATION DIRECTOR? 2. Whether, on the facts and in the circumstances of the case, and in law, the Hon'ble High Court was justified in upholding the decision of the Appellate Tribunal on the issue of deduction/exemption under Sections 11 & 12 of the Act, in view of the applicability of Section 2(15) of the Act without appreciating, that sufficient opportunities were given to the assessee during assessment proceedings which the assessee did not avail and comply and that the Appellate Tribunal ignored the substantive discussion and findings of the first appellate authority on the application of proviso to Sections 2(15) and 13 (8) of the Act?” 4.1. The Hon’ble Supreme Court of India vide its common judgment dated 19-10-2022 in a batch of cases namely ACIT(Exemptions) Vs. Ahmedabad Urban Development Authority held as follows: “IV. Summation of conclusions 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of "charitable purpose" (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. A. General test under Section 2(15)

5 Ors. A.Ys. 2011-12, 2015-16 to 2018-19 Page No 4 JCIT(E)/DCIT(E) Vs. Gujarat Housing Board

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. 01.04.2016) 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. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); 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 "trade, 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 proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. B. Authorities, corporations, or bodies established by statute 5 Ors. A.Ys. 2011-12, 2015-16 to 2018-19 Page No 5 JCIT(E)/DCIT(E) Vs. Gujarat Housing Board

B.1. The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the state government or central governments, for achieving what are essentially 'public functions/services' (such as housing, industrial development, supply of water, sewage management, supply of food prain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra), B.2. However, at the same time, in every case, the assessing authorities would have to apply their minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of "trade, commerce or business" and as result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 2(15) of the IT Act. B.3. In clause (b) of Section 10(46) of the IT Act, "commercial" has the same meaning as "trade, commerce, business" in Section 2(15) of the IT Act. Therefore, sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration - i.e.. whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of "commercial activity". However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case- by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act. ……………………. H. Application of interpretation 5 Ors. A.Ys. 2011-12, 2015-16 to 2018-19 Page No 6 JCIT(E)/DCIT(E) Vs. Gujarat Housing Board H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory. or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee's activities amount to "trade, commerce or business" based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of "trade, commerce or business", then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption.

5 Ors. A.Ys. 2011-12, 2015-16 to 2018-19 Page No 7 JCIT(E)/DCIT(E) Vs. Gujarat Housing Board

Order pronounced in the open court on 06-12-2024 Sd/- Sd/- (NARENDRA PRASAD SINHA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 06/12/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद