M/S URBAN IMPROVEMENT TRUST, BHARATPUR V. INCOME TAX OFFICER (EXEMPTION), ALWAR

ITA 1049/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1974 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM SINGH
• Keywords: Capital asset; Depreciation; Question of law; Cost of acquisition; Competent authority
• Section: 12A; 12AA; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1049/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 M/S URBAN IMPROVEMENT TRUST, AGRA ROAD, BHARATPUR. CUKE VS. THE ITO(E), ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAATU 1956 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SHYAM LAL AGARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAM SINGH (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/02/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 28/03/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 03.10.2017 OF LD. CIT(A), ALWAR FOR THE ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(APPEALS, ALWAR, HAS ERRED IN:- 1. NOT ALLOWING THE EXEMPTION U/S 11 OF THE ACT BY HOLDING THAT THE ACTIVITIES OF THE APPELLANT AUTHORITY ARE NOT C HARITABLE AS THE REGISTRATION OF THE TRUST IS PENDING. ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 2 2. MAKING A LUMP SUM ADDITION OF PROFIT ON SALE OF LAND RS. 50 LACS WITHOUT ANY LEGITIMATE BASIS. 3. DISALLOWING DEPRECIATION RS. 2073551/- CLAIMING THAT THE CAPITAL ASSET IS ALREADY ALLOWED AS CAPITAL EXPENDI TURE. 4. NOT ALLOWING THE BENEFIT OF SECTION 10(2) OF THE INCOME TAX ACT, 1961 TO THE TRUST. B. ANY OTHER QUESTION OF LAW AS DEEMED FIT IN THE F ACTS AND CIRCUMSTANCES OF THE CASE MAY ALSO BE FRAMED BEFORE THE HONBLE TRIBUNAL IN THE INTEREST OF JUSTICE. 2. GROUND NOS. 1 AND 2 ARE REGARDING DENIAL OF EXEM PTION U/S 11 OF THE ACT AND MAKING THE ADDITION OF RS. 50 LACS. THE ASSESSEE WAS ESTABLISHED UNDER RAJASTHAN URBAN IMPROVEMENT ACT, 1959 AS PER GAZETTE NOTIFICATION DATED 12.05.1981. THE MAIN PUR POSE AND OBJECT OF THE ASSESSEE ARE TO CARRY OUT THE CIVIC AMENITIES, GENERAL PUBLIC UTILITY SERVICES AND IMPROVEMENT OF THE URBAN AREA INCLUDED IN THE MUNICIPAL LIMITS OF BHARATPUR. THE AO WHILE FRAMING ASSESSMEN T HAS DENIED THE BENEFIT OF SECTION 11 OF THE ACT AND MADE AN ADDITI ON OF RS. 50 LACS ON ACCOUNT OF THE PROFIT ON SALE OF PLOTS OF LAND. THE AO OBSERVED THAT THE ASSESSEE HAS SOLD LAND EITHER AT RESERVE PRICE OR I N THE AUCTION CARRIED OUT FOR OBTAINING HIGHER SALE WHICH IS MORE THAN CO ST OF ACQUISITION APPORTION ON SUCH LAND BY THE ASSESSEE TRUST. ACCOR DINGLY, THE AO ESTIMATED THE INCOME FROM SALE OF LANDS AT RS. 50 L ACS. THE AO ALSO DENIED CLAIM OF DEPRECIATION OF RS. 20,73,551/- ON THE GROUND THAT THE ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 3 COST OF ACQUISITION OF ASSET IS ALREADY ALLOWED AS EXPENDITURE. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) HOWEVER, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE REGISTRATION 12A OF THE ACT WAS STILL NOT GRANTED TO THE ASSESSEE. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE FILED AN APPLICATION IN FORM NO. 10A ON 31 .05.2013 FOR REGISTRATION U/S 12A BEFORE THE LD. CIT(E), ALWAR W HICH WAS REJECTED VIDE ORDER DATED 12.11.2013. THE ASSESSEE APPROACH THIS TRIBUNAL AGAINST THE SAID ORDER OF LD. CIT(E) AND THIS TRIBU NAL VIDE ORDER DATED 20.10.2015 IN ITA NO. 30/JP/2014 DIRECTED THE LD. C IT(E) TO DECIDE THE MATTER AFRESH IN LIGHT OF BOARD CIRCULAR NO. 11 OF 2008 DATED 19.12.2008 PROVIDING A REASONABLE OPPORTUNITY TO THE ASSESSEE. THE LD. AR HAS POINTED OUT THAT CONSEQUENTLY THE LD. CIT(E) VIDE O RDER DATED 15.12.2016 GRANTED REGISTRATION U/S 12AA W.E.F. 01. 04.2013. HE HAS FURTHER SUBMITTED EVEN OTHERWISE THE ASSESSEE IS A LOCAL BODY AS PER THE PROVISIONS OF SECTION 10(20) OF THE ACT AND THEREFO RE, THE INCOME OF THE ASSESSEE IS NOT LIABLE TO TAX. IN SUPPORT OF HIS CO NTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT DATED 25.07.2017 IN CASE OF CIT VS. URBAN IMPROVEMENT TRUST, ALWAR I N D.B. I.T.A. NO. ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 4 643/2008, 706/2008 AND 294/2009, IN CASE OF URBAN I MPROVEMENT TRUST KOTA VS. ITO KOTA IN D.B.I.T.A. NO. 73/2011 & CIT VS. URBAN IMPROVEMENT TRUST AJMER IN D.B.I.T.A. NO. 392/11. 4. ON OTHER HAND, LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO AS WELL AS LD. CIT(A) HAS GIVEN FINDING THAT THE ASSESSEE IS CHARGING MORE TH AN THE COST OF ACQUISITION OF LAND AND THEREFORE EARNING PROFIT OF PURCHASE AND SALE OF LAND WHICH CANNOT BE TREATED AS CHARITABLE. FURTHER , THE ASSESSEE IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNTS SHOWING THE TRANSACTION OF PURCHASE AND SALE OF LANDS HENCE, THE AO HAS RIGHTL Y ESTIMATED THE INCOME OF THE ASSESSEE AT RS. 50 LACS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO AS WELL AS LD. CIT(A) DE NIED THE BENEFIT OF SECTION 11 OF THE ACT TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS NOT GRANTED REGISTRATION 12A OF THE ACT. THE LD . CIT(A) WHILE DEALING WITH THIS ISSUE HAS HELD IN PARA 6.3 AS UND ER:- 6.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT. I HAVE PERUSED THE CONTENTIO N OF THE A.O. THAT THE TRUST HAS NOT BEEN GRANTED ANY EXEMPTION AS THE APPLICATION FOR THE REGISTRATION WAS ITSELF MOVE ON 31/05/2013 AND THE SAME WAS REJECTED BY THE COMPETENT AUTHORIT Y AND UPON DIRECTION OF THE HONBLE ITAT, THE MATTER IS STILL PENDING BEFORE THE COMPETENT AUTHORITY. I HAVE FURTHER TAKEN NOTE OF THE FACT ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 5 THAT ALTHOUGH LAND WERE SOLD BY THE TRUST DURING TH E YEAR BUT NO TRADING ACCOUNT WAS FILED NOR ANY DETAILS AS SOUGHT BY THE A.O. IN THIS REGARD HAVE BEEN FILED. IN THE CIRCUMSTANCES, THE A.O IS JUSTIFIED IN ESTIMATING THE PROFIT OF RS. 50 LAKHS. ACCORDINGLY, THE ADDITION IS SUSTAINED AND THE APPELLANTS GROUND OF APPEAL ON THE ISSUE IS DISMISSED. NOW THE REGISTRATION U/S 12A HAS BEEN GRANTED BY TH E LD. CIT(E) VIDE ORDER DATED 15.12.2016 W.E.F. 01.04.2013 THEREFORE, THE ACTIVITY OF THE ASSESSEE HAS BEEN ACCEPTED AS CHARITABLE IN NATURE. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF URBAN IMPROVEMENT TRUST, ALWAR, KOTA AND AJMER VIDE ORDER DATED 25.07.2017 ( SUPRA) HAS HELD IN PARA 15 TO 19 AS UNDER:- 15. IT IS TRUE THAT THE FUNCTIONS WHICH ARE CARRIE D OUT BY THE ASSESSEE ARE STATUTORY FUNCTIONS AND CARRY ON FOR T HE BENEFIT OF THE STATE GOVERNMENT FOR URBAN DEVELOPMENT THEREFOR E, IN OUR CONSIDERED OPINION, THE FUNCTIONS CARRIED OUT BY TH E AUTHORITY IS A SUPREME FUNCTION AND FALL WITHIN THE ACTIVITY OF THE STATE GOVERNMENT. 16. IN THAT VIEW OF THE MATTER, THE JUDGMENTS WHICH ARE STRONGLY RELIED UPON BY COUNSEL FOR THE DEPARTMENT ARE OF NO HELP IN THE FACTS OF THE CASE AS THE CASE RELIED UPON BY THE DE PARTMENT WAS IN RESPECT OF INDUSTRIAL CORPORATION WHICH WAS UNDE R THE STATUTE FOR THE PURPOSE OF MAKING PROFIT. THE FEES AND OTHE R CHARGES WHICH ARE COVERED ARE STATUTORILY FOR THE DEVELOPME NT OF THE URBAN AREA. IN THAT VIEW OF THE MATTER, THE JUDGMEN T WHICH SOUGHT TO BE RELIED UPON BY THE COUNSEL FOR THE RES PONDENTS, IN OR ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 6 CONSIDERED OPINION, WOULD BE OF IMPORTANCE AND THE FUNCTIONS WHICH ARE CARRIED OUT BY THE ASSESSEE IS STATUTORY FUNCTION. IN OUR CONSIDERED OPINION, UNDER CLAUSE-10(20) & SUB-CLAUS E (3) MUNICIPAL COMMITTEE AND DISTRICT BOARD ARE LEGAL EN TITY ENTRUSTED THE FUNCTION OF THE GOVERNMENT WITHIN THE CONTROL O R MANAGEMENT OF THE MUNICIPAL OR LOCAL AUTHORITY AND WILL TRY TO HELD THE ASSESSEE. 17. IN THAT VIEW OF THE MATTER, THE RELIANCE PLACED BY COUNSEL FOR THE DEPARTMENT REGARDING 10(20) AND EXPLANATION A WILL NOT MAKE ANY DIFFERENCE. TAKING INTO CONSIDERATION INCO ME OF AUTHORITY IS UNDER CONSTITUTION OF INDIA VIDE ORDER ENACTED EITHER FOR THE PURPOSE OF DEALING WITH OR SETTING UP THE H OUSING SCHEME FOR THE PURPOSE OF PLANNING AND DEVELOPMENT OF THE IMPROVEMENT OF THE CITIES, TOWN AND VILLAGES OR BOT H FOR WHICH THE AUTHORITY ARE CREATED TO CARRY OUT THE FUNCTION OF STATE WHICH ARE SOVEREIGN WHEREAS THE URBAN DEVELOPMENT A ND CALCULATION OF DEVELOPMENT CHARGES WILL FALL UNDER THE DEVELOPMENT CHARGES. 18. IN THAT VIEW OF THE MATTER, DELETION OF 20A WIL L NOT MAKE DIFFERENCE IN CASE OF ASSESSEE. IN OUR CONSIDERED O PINION, CLAUSE- 3 WILL COME IN THE HELP OF THE ASSESSEE. IN THAT VI EW OF THE MATTER, WE ARE CONSIDERED OPINION, THAT THE AUTHORI TY ASSESSEE IS A LOCAL AUTHORITY FOR THE PURPOSE OF CARRYING OUT O F THE IMPROVEMENT AND DEVELOPMENT FUNCTION OF THE STATE. 19. 19. IN THAT VIEW OF THE MATTER, THE ISSUE IS RE QUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AGAINST THE DEPA RTMENT. IN VIEW OF THE ANSWER, OTHER ISSUES ARE BECOME ACADEMI C, THEREFORE, WE ARE NOT DECIDING THOSE ISSUE. ACCORDINGLY, IN VIEW OF THE DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT U/S 10(20) OF THE INCOME TAX ACT BEING A LOCAL AUTHORITY FOR THE PURPOSE THE CARRYIN G OUT THE ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 7 IMPROVEMENT AND DEVELOPMENT FUNCTIONS OF THE STATE. HENCE, IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT (SUPRA) AS WELL AS THE REGISTRATION GRANTED U/S 12AA OF THE LD. CIT(E) . WE ARE OF THE OPINION THAT THE ASSESSEES INCOME IS NOT TAXABLE I N VIEW OF THE PROVISIONS OF SECTION 10(20) OF THE I.T. ACT. 6. AS REGARDS THE DISALLOWANCE OF DEPRECIATION IT I S NOW SETTLED PRINCIPLE OF LAW THAT THE COST OF ACQUISITION OF TH E ASSET IS ALLOWED AN APPLICATION WOULD NOT BE A GROUND OF DISALLOWANCE O F DEPRECATION. HENCE, THE ADDITION/DISALLOWANCE MADE BY THE AO ARE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28/03/2018 SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/03/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S URBAN IMPROVEMENT TRUST, BHARATPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO(E), ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. ITA NO. 1049/JP/2017 M/S URBAN IMPROVEMENT TRUST VS. ITO(E) 8 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1049/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR