Improvement Trust Khanna, Ludhiana V. The The Income Tax Officer,(Exemption), Jalandhar

ITA 172/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7752 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARIKSHIT AGGARWAL LD
• Keywords: Charitable institution; Competent authority; Set aside
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.172(ASR)/2017 ASSESSMENT YEAR:201 3-14 ITA NO.56(ASR)/2018 ASSESSMENT YEAR:201 4-15 IMPROVEMENT TRUST KHANNA, G.T. ROAD, KHANNA, DISTRICT LUDHIANA, (PB) [PAN:AAALI 0030N] VS. ITO (EXEMPTIONS), WARD JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PARIKSHIT AGGARWAL (LD. CA) RESPONDENT BY: SH. CHARAN DASS (LD. DR) DATE OF HEARING: 04.04.2019 DATE OF PRONOUNCEMENT: 23.04.2019 ORDER PER N.K.CHOUDHRY, JM: THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE/APPELLA NT AGAINST THE ORDERS DATED 20.02.2017 & 29.11.2017 PASSE D BY THE LD. CIT (APPEALS)-4, LUDHIANA U/S 250(6) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT). 2. IN BOTH THE APPEALS, THE ISSUE INVOLVED IS IDENTICAL, SIMILAR AND COMMON EXCEPT DIFFERENCE OF AMOUNT, THEREFORE, FOR THE SAKE OF CONVENIENCE AND BREVITY, BOTH THE APPEALS HAVE BEEN TA KEN FOR ADJUDICATION SIMULTANEOUSLY, HOWEVER, THE FACTS AND GROU ND OF ITA NO.172(ASR)/2017 HAVE BEEN TAKEN INTO CONSIDERATION FO R ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 2 ADJUDICATION AND THE RESULT OF THE SAME SHOULD ALSO BE A PPLICABLE TO THE ITA NO.56(ASR)/2018. 3. THE ASSESSEE/APPELLANT HAS RAISED THE SOLE GROUND OF APPE AL IN ITA NO. 172/ASR/2017 WHICH IS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAWS, LEARNED CIT-A ERRED IN UPHOLDING THE ACTIO N OF LD. AO THAT THE APPELLANT IS NOT ELIGIBLE FOR THE BENEFIT OF SECTION 11 & 12 OF THE ACT AND BY AFFIRMING ADDITION MADE BY LD. AO RS.1,62,70,169/- IGNORING VARIOUS JURISDICTIONAL TR IBUNAL AND COURT PRECEDENTS AND OUR SUBMISSIONS ON RECORD. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TRUST WAS FORMED BY THE GOVT. OF PUNJAB WITH THE ENACTMENT OF PUNJAB TOWN IMPROVEMENT ACT, 1972 FOR THE PURPOSES OF DEVELOPMENT OF TOWNSHIP BY WAY OF PROVIDING WELL MAINTAINED RESIDEN TIAL AND COMMERCIAL PLOTS, FLATS ETC. AND MAINTAINING OF STREET L IGHTS AND ROAD, DEVELOPMENT OF PARKS, TO PROVIDE BENEFITS TO TH E GENERAL PUBLIC WITHIN THE LOCAL MUNICIPAL LIMITS AND ALSO FOR DE VELOPMENT OF TOWNSHIP FOR PUBLIC BENEFITS AT LARGE. BEING A LOCAL A UTHORITY, THE ASSESSEE WAS AVAILING BENEFIT OF SEC. 10(20) OF THE ACT, U P TO A.Y.2002-03, HOWEVER, AFTER WITHDRAWAL OF EXEMPTION S AVAILABLE TO THE ASSESSEE FROM 1 ST APRIL, 2003 ONWARDS, THE ASSESSEE HAD APPLIED FOR REGISTRATION U/S 12AA WHICH WAS REJECTED BY THE LD. CIT(A), LUDHIANA THEREAFTER, ON APPEAL, THE HONBLE ITAT ALLOWED THE REGISTRATION TO THE ASSESSEE. AFTER AMENDMENT TO SEC. 2(15) OF THE ACT W.E.F. 1 ST APRIL, 2009, THE LD. CIT(A), LUDHIANA AGAIN REJECTED THE REGISTRATION OF THE TRUST AND THEREFORE I N THE ABSENCE OF REGISTRATION, ASSESSMENT ORDER WAS FRAMED AGAINST THE AS SESSEE BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE TO THE TUNE OF RS.1,62,70,169/. THE SAID ORDER WAS CHALLENGED BEFORE THE LD. ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 3 CIT(A), WHO VIDE ITS ORDER DATED 20.07.2017 IMPUGNED HEREIN DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASS ESSING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER WHILE DENYIN G EXEMPTION/DEDUCTION TO THE APPELLANT TRUST UNDER SE CTION 11 OF THE ACT AND THEREAFTER MAKING AN ADDITION OF RS.1,62,70 ,169/- TO THE RETURNED INCOME TO THE APPELLANT TRUST. I HAVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE APPELLANT TRUST TH ROUGH ITS LEARNED AR VIDE LETTERS DATED 24.01.2017 AND 07.02.2017 IN CONNECTION WITH THE ISSUE UNDER REFERENCE. I HAVE FURTHER CONS IDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE APPELLANT TRUST AS WELL AS OTHER MATERIAL PLACED BY HIM ON RECORD. I HAVE AGAIN CONSIDERED THE DECISION OF HONORABLE PUN JAB & HARYANA HIGH COURT DATED 23.12.2016 IN THE CASE OF M/S IMPR OVEMENT TRUST MOGA [ITA NO. 147 (O&M) OF 2016] WHICH HAS BE EN HEAVILY RELIED UPON BY THE LEARNED AR OF THE APPELLANT TRUS T. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, IT HAS BEEN NOTICED THAT THE HONORABLE PUNJAB & HARYANA HIGH COURT IN ITS DECISI ON DATED 23.12.2016 IN THE CASE OF M/S IMPROVEMENT TRUST MOG A [ITA NO. 147 (O&M) OF 2016] HAS HELD THAT AN IMPROVEMENT TRU ST CONSTITUTED UNDER THE PUNJAB TOWNS IMPROVEMENT ACT, 1922 AND CA RRYING ON ITS ACTIVITIES AS PER PROVISIONS OF THAT ACT CANNOT BE SAID TO BE CARRYING ON ANY TRADE, COMMERCE OR BUSINESS OF RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND THE REFORE, NOT HIT BY THE PROHIBITION CONTAINED IN PROVISO TO SECTION 2(15) OF THE ACT. THE HONOURABLE JURISDICTION HIGH COURT HAS ALSO HEL D THAT IT CANNOT POSSIBLY BE SUGGESTED THAT THE GOVERNMENT OF PUNJAB FORMED THE TRUSTS UNDER THE PUNJAB TOWNS IMPROVEMENT ACT, 1922 BECAUSE IT WANTS TO CARRY ON THE BUSINESS AS COLONIZERS OR DEV ELOPERS UNDER THE MASK OF THE CATEGORY OBJECTS OF OTHER PUBLIC U TILITY. IT HAS FURTHER BEEN HELD BY THE HONORABLE COURT THAT IT CA N HARDLY BE SUGGESTED THAT THE GOVERNMENT OF PUNJAB ESTABLISHED THE APPELLANT TRUST AND CONFERRED UPON IT PUBLIC RESPONSIBILITIES AND DUTIES OF THE NATURE SPECIFIED IN THE PTI ACT AS A CAMOUFLAGE FOR ITS COMMERCIAL, TRADE AND BUSINESS VENTURES. IT HAS AGAIN BEEN HELD THAT THE CREATION AND INCORPORATION OF THE TRUST UNDER SECTI ON 3 OF THE ACT WAS FOR A PUBLIC PURPOSE. IT HAS AGAIN BEEN HELD BY THEIR LORDSHIPS THAT WE HAVE NO DOUBT WHATSOEVER THAT THE ACTIVITIE S OF THE TRUST FALL WITHIN THE MEANING OF THE WORDS CHARITABLE PURPOSE S IN SECTION 2(15) OF THE ACT. AS THE ACTIVITIES OF THE APPELLAN T TRUST ARE IDENTICAL TO THE ACTIVITIES OF IMPROVEMENT TRUST, MOGA, THE R ATIO OF THE DECISION OF THE HONORABLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S IMPROVEMENT TRUST MOGA (SUPRA) IS SQUARELY APPLICAB LE TO THE CASE OF THE APPELLANT TRUST. SO, RESPECTFULLY FOLLOWING THE DECISION OF THE HONORABLE PUNJAB & HARYANA HIGH COURT DATED 23.12.2 016 IN THE ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 4 CASE OF M/S IMPROVEMENT TRUST MOGA [ITA NO. 147 (O& M) OF 2016], IT IS HELD THAT THE APPELLANT TRUST IS ENGAGED IN C HARITABLE ACTIVITIES. HOWEVER, FOR CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT, THE APPELLANT TRUST SHOULD BE REGISTERED UNDER SECTION 12AA OF THE ACT WHICH IS NOT THE CASE OF THE APPELLANT TRUST AS THE REGISTRATION GRANTED TO THE APPELLANT TRUST HAS BEEN CANCELLED B Y THE COMPETENT AUTHORITY ON 08.02.2013. IT HAS NOT BEEN BROUGHT TO MY NOTICE THAT REGISTRATION UNDER SECTION 12AA OF THE ACT HAS BEEN GRANTED TO THE APPELLANT TRUST AFTER 08.02.2013 BY ANY AUTHORITY. UNDER SUCH CIRCUMSTANCES, THE APPELLANT TRUST IS NOT TO BE TRE ATED AS REGISTERED UNDER SECTION 12AA OF THE ACT AS THE CANCELLATION O RDER STILL HOLD GOOD IN THIS CASE. AS THE APPELLANT TRUST IS NOT REGISTERED UNDER SECTION 12AA OF THE ACT WHICH IS A PRE CONDIT ION FOR CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT, THE APPELLANT TRUST CANNOT BE SAID TO BE ENTITLED FOR E XEMPTION UNDER SECTION 11 OF THE ACT . HAVING SAID SO, THE ACTION OF THE ASSESSING OFFICER IN DENYING EXEMPTION/DEDUCTION TO THE APPELLANT TRUST UNDER SECTION 11 OF THE ACT AND THEREAFTER MA KING AN ADDITION OF RS.1,62,70,169/- TO ITS RETURNED INCOME CANNOT B E SAID TO BE UNJUSTIFIED. 5.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE C IRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN DENYING EXEMPTION/DEDUCTION TO THE APP ELLANT TRUST UNDER SECTION 11 OF THE ACT AND THEREAFTER MAKING A N ADDITION OF RS.1,62,70,169/- TO ITS RETURNED INCOME. THE ADDITI ON OF RS.1,62,70,169/- MADE BY THE ASSESSING OFFICER IN T HIS CASE AFTER DENYING EXEMPTION TO THE APPELLANT TRUST UNDER SECT ION 11 OF THE ACT IS, THEREFORE, UPHELD. IN THE RESULT, GROUNDS NO. 1 , 2, 3, 4, 5 AND 6 OF THE APPEAL TAKEN BY THE APPELLANT TRUST ARE DISMISS ED. 6. THE GROUND NO.7 OF APPEAL TAKEN BY THE APPELLANT TRUST IS CONSEQUENTIAL IN NATURE AND DO NOT REQUIRE ANY ADJU DICATION SEPARATELY. 7. THE GROUND NO.8 OF APPEAL TAKEN BY THE APPELLANT TRUST IS GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATI ON SEPARATELY. 8. AS A RESULT, THE APPEAL FILED BY THE APPELLANT T RUST IS DISMISSED. 5. THE ASSESSEE IS IN APPEAL BEFORE US. 6. HAVING HEARD THE PARTIES AT LENGTH AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. IT EMERGES FROM THE ORDERS THAT T HE BENEFIT OF SEC.11 OF THE ACT HAS BEEN DENIED TO THE ASSESSEE MAINLY O N THE ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 5 GROUND THAT REGISTRATION OF THE ASSEEEE TRUST U/S 12AA O F THE ACT IS NOT IN EXISTENCE. OUR ATTENTION WAS DRAWN BY THE LD. AR OF THE ASSESSEE TO THE ORDER PASSED BY THE PUNJAB AND HARYANA HIGH COURT, AT CHANDIGARH IN ASSESSEES OWN CASE IN ITA NO.533/ 2017 (O&M) WHEREBY THE HONBLE HIGH COURT REMANDED THE CASE TO THE ITAT FOR DECISION AFRESH IN TERMS OF ORDER DATED 16.03. 2017 PASSED IN ITA NO.263/2015 BY THE HONBLE HIGH COURT. FOR THE SAKE OF BREVITY AND READY REFERENCE, THE CONCLUDING PART OF TH E ORDER OF THE HONBLE HIGH COURT IS REPRODUCED HEREIN BELOW. 3. A FEW FACTS NECESSARY FOR ADJUDICATION OF THE INSTA NT APPEAL AS NARRATED THEREIN MAY BE NOTICED. THE ASSESSEE WAS G RANTED REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE ORD ER DATED 13.11.2009 (ANNEXURE A-L) BY THE COMMISSIONER OF INCOME TAX-RE SPONDENT NO.L. THE SAID REGISTRATION WAS WITHDRAWN BY RESPONDENT NO.L VIDE ORDER DATED 7.2.2013 (ANNEXURE A- 2) ON THE GROUND THAT THE ASS ESSEE-TRUST WAS NOT CHARITABLE IN NATURE WITHIN THE MEANING OF PROV ISO TO SECTION 2(15) OF THE ACT. FEELING AGGRIEVED, THE ASSESSEE FILED A N APPEAL BEFORE THE TRIBUNAL WHO VIDE ORDER DATED 26.11.2014 (ANNEXURE A-3) DISMISSED THE APPEAL BY RELYING UPON THE ORDER DATED 27.3.201 4 PASSED IN ITA NO. 380/CHD/2013 (IMPROVEMENT TRUST MALERKOTLA V. COMMISSIONER OF INCOME TAX) WHEREIN IDENTICAL ISSUES WERE CONSIDERED. AGAINST THE ORDER DATED 27.3.2014, THE ASSESSEE FILED ITA- 236-2015 IN THIS COURT AND THIS COURT VIDE ORDER DA TED 16.3.2017 (ANNEXURE A-4) SET ASIDE THE ORDER OF THE TRIBUNAL AND REMANDED BACK THE MATTER TO THE TRIBUNAL. HENCE, THE PRESENT APPE AL BY THE ASSESSEE. 4. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES . 5. IT IS NOT DISPUTED THAT SIMILAR ISSUES CAME UP BEFO RE THIS COURT IN ITA-236-2015 (M/S THE IMPROVEMENT TRUST, MALERKOTLA V. COMMISSIONER OF INCOME TAX, LUDHIANA-II AND ANOTHER ) WHEREIN THIS COURT VIDE ORDER DATED 16.3.2017 (ANNEXURE A-4 ) WHILE SETTING ASIDE THE ORDER OF THE TRIBUNAL, HAD REMANDED THE M ATTER BACK TO THE TRIBUNAL TO DECIDE AFRESH IN THE LIGHT OF SUBMISSIO NS MADE BY THE LEARNED COUNSEL FOR THE PARTIES THEREIN AFTER AFFOR DING AN OPPORTUNITY OF HEARING TO THE PARTIES IN ACCORDANCE WITH LAW. 6. ACCORDINGLY, THE PRESENT APPEAL IS ALLOWED, ORDER DATED 26.11.2014 (ANNEXURE A-3) PASSED BY THE TRIBUNAL IS SET ASIDE AND THE MATTER IS REMANDED BACK TO THE TRIBUNAL TO DECIDE AFRESH IN TERMS OF ORDER DATED 16.03.2017 (ANNEXURE A-4). ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 6 6.1 IN VIEW OF THE DIRECTIONS OF THE JURISDICTIONAL HIGH C OURT, THE ITAT BENCH AT CHANDIGARH VIDE ITS ORDER DATED 21.02.2 019 PASSED THE CONSEQUENTIAL ORDER AND SET ASIDE THE ORDER OF THE LOWER AUTHORITIES IN CANCELING THE REGISTRATION AND ORDERED T O RESTORE THE REGISTRATION TO THE ASSESSEE. FOR THE SAKE OF READY REFER ENCE, THE CONCLUDING PART OF THE ORDER OF HONBLE ITAT, CHANDIGA RH IS REPRODUCED HEREIN BELOW. 2. THE PRESENT MATTER HAS BEEN RESTORED BACK BY THE HONBLE HIGH COURT VIDE ORDER DATED 22.10.2018 FOR DECIDING AFRESH IN ACCORDANCE WITH LAW. 3. THE SOLE ISSUE RAISED IN THIS APPEAL IS REGARDING CANCELLATION OF THE REGISTRATION GRANTED EARLIER TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEES ACTIVITIES ARE HIT B Y FIRST PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT.). 4. BOTH THE PARTIES HAVE FAIRLY AGREED THAT THE IS SUE IS NOW COVERED BY THE DECISION OF THE HIGHER COURTS INCLUD ING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. MOGA IMPROVEMENT TRUST, (2017) 390 ITR 547 AND OF THE H ON'BLE BOMBAY HIGH COURT IN DIT (EXEMPTIONS) VS. M/S KHAR GHYKHANA, ITA NO. 2349 OF 2013 ORDER DATED 6.6.201 6 WHEREIN, IT HAS BEEN HELD THAT THE DEVELOPMENT ACTIVITY CARR IED OUT BY IMPROVEMENT TRUST FALLS WITHIN THE DEFINITION OF OB JECTS OF GENERAL PUBLIC UTILITY, HOWEVER, TAKING INTO CONSIDERATION THE SUBSEQUENT AMENDMENTS IN THE RELEVANT PROVISIONS OF THE ACT, T HE ALLOWABILITY OF QUANTUM INCOME FROM THE ACTIVITY OF THE ASSESSEE IS A QUESTION OF ASSESSMENT OF INCOME WHICH CAN BE CONSIDERED WHI LE FRAMING ASSESSMENT U/S 11 OF THE ACT. SO FAR AS THE ISSUE R ELATING TO REGISTRATION OF THE ASSESSEE IMPROVEMENT TRUST IS CONCERNED, THE ISSUE IS NOW SETTLED THAT THE REGISTRATION CANNOT B E CANCELLED ON THIS ACCOUNT. WE, THEREFORE, SET ASIDE THE ORDER OF THE LOWER AUTHORITIES IN CANCELLING THE REGISTRATION AND ORDE R TO RESTORE REGISTRATION TO THE ASSESSEE IMPROVEMENT TRUST. H OWEVER, OUR FINDINGS GIVEN ABOVE ARE RESTRICTED TO THE RESTORAT ION OF REGISTRATION OF THE ASSESSEE TRUST U/S 12A OF THE INCOME TAX ACT . HOWEVER, THE ASSESSMENT OF INCOME SHALL BE SUBJECT TO APPLIC ATION OF THE RELEVANT STATUTORY PROVISIONS/LAW. NO OTHER GROUND HAS BEEN RAISED OR PRESSED BY THE COUNSEL. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED ITA NO.172 (ASR)/2017 IMPROVEMENT TRUST KHANNA VS. ITO(E) 7 6.2 FROM THE ORDERS OF THE HONBLE HIGH COURT AND CO-ORDI NATE BENCH AT CHANDIGARH, IT CLEARLY REFLECTS THAT THE REGIST RATION GRANTED TO THE ASSESSEE VIDE ORDER DATED 13.11.2009 U/S 12AA OF THE ACT, STANDS RESTORED, THEREFORE IN VIEW OF RESTORATION OF TH E REGISTRATION U/S 12AA OF THE ACT, THE ORDERS PASSED BY THE AUTHORITIE S BELOW DO NOT SUSTAIN AND HENCE STANDS QUASHED. CONSEQUENTLY THE CA SES ARE REMANDED BACK THE FILE OF THE ASSESSING OFFICER TO DECIDE AFRESH IN ACCORDANCE WITH LAW, KEEPING IN VIEW THE RESTORATION OF REGISTRATION BY THE TRIBUNAL BENCH AT CHANDIGARH VIDE ITS ORDER DA TED 21.02.2019. 7. IN THE RESULT, THE BOTH APPEALS FILED BY THE ASSESSEE/AP PELLANT ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCE IN THE OPEN COURT ON 23.04.2019 SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED:23.04.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) IMPROVEMENT TRUST KHANNA, G.T. ROAD, KHANNA, DISTRICT LUDHIANA, (PB) (2) THE ITO (EXEMPTION), WARD JALANDHAR (3) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER