M/s. Ghaziabad Development Authority, New Delhi V. ACIT (Excemption), Ghaziabad

ITA 2038/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6218 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Source of fund; Capital receipt; Benefit of exemption; Cancellation of registration; Set aside
• Section: 12A; 12AA; 13; 147; 148; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.2038/DEL/2017 (ASSESSMENT YEAR 2012-13) M/S GHAZIABAD DEVELOPMENT AUTHORITY VIKAS PATH, HAPUR ROAD, GHAZIABAD. PANAAALG 0072C VS. ACIT (EXEMPTIONS) GHAZIABAD (APPELLANT) (RESPONDENT) I.T.A NO.5355/DEL/2017 (ASSESSMENT YEAR 2013-14) M/S GHAZIABAD DEVELOPMENT AUTHORITY VIKAS PATH, HAPUR ROAD, GHAZIABAD. PANAAALG 0072C VS. D CIT (EXEMPTIONS) GHAZIABAD (APPELLANT) (RESPONDENT) APPELLANT BY DR. RAKESH GUPTA, ADV. RESPONDENT BY MS. SUNITA SINGH, CIT- DR DATE OF HEARING 16.06.2021 DATE OF PRONOUNCEMENT 13.09.2021 2 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT ORDER PER SUDHANSHU SRIVASTAVA, JM: BOTH THE APPEALS ARE PREFERRED BY THE ASSESSEE. ITA NO.2038/DEL/2017 PERTAINS TO ASSESSMENT YEAR 2012-1 3 WHEREAS ITA NO.5355/DEL/2017 PERTAINS TO ASSESSMENT YEAR 20 13-14. SINCE, BOTH THE APPEALS INVOLVED IDENTICAL ISSUES, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED BY THIS COMMO N ORDER FOR THE SAKE OF CONVENIENCE. 2.0 FIRST WE TAKE UP APPEAL FOR ASSESSMENT YEAR 20 12-13 BEARING ITA NO.2038/DEL/2017. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A DEVELOPMENT AUTHORITY CONSTITUTED UNDER THE U.P. UR BAN PLANNING AND DEVELOPMENT ACT, 1973 WITH THE OBJECT OF DEVELOP MENT OF AREAS ACCORDING TO PLAN AND FOR THAT PURPOSE, THE AUTHORI TY HAS BEEN EMPOWERED TO ACQUIRE, HOLD, MANAGE AND DISPOSE LAND AND OTHER PROPERTIES TO CARRY OUT BUILDING ACTIVITIES, ENGINE ERING, MINING AND OTHER OPERATIONS. THE ASSESSMENT FOR ASSESSMENT YEA R 2012-13 WAS FRAMED U/S 147/143(3) OF THE INCOME TAX ACT, 1963 ( HEREINAFTER 3 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT CALLED THE ACT) AFTER DISALLOWANCE OF ASSESSEES C LAIM OF EXEMPTION U/S 11 OF THE ACT AND AFTER MAKING A FURTHER ADDITI ON OF RS.3,46,03,14,429/- BEING NET AMOUNT TRANSFERRED TO INFRASTRUCTURE DEVELOPMENT FUND AS INCOME OF THE GHAZIABAD DEVELOP MENT AUTHORITY. THE ASSESSING OFFICER (AO) DISALLOWED TH E CLAIM OF EXEMPTION U/S 11 OF THE ACT ON THE GROUND THAT REGI STRATION U/S 12AA GRANTED TO THE ASSESSEE STOOD CANCELLED VIDE O RDER DATED 31.03.2014 PASSED BY THE LD. CIT, GHAZIABAD. FURTHE R, THE ASSESSING OFFICER ALSO DISPUTED THE CHARITABLE NATU RE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE IN TERMS OF SECTION 2(1 5) OF THE ACT. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE LD. CIT(A), WHO DISMISSED THE APPEAL. THE LD. CIT(A) NOT ONLY UPHELD THE ISSUANCE OF NOTICE U/S 148 OF THE ACT BU T ALSO UPHELD THE REJECTION OF EXEMPTION U/S 11 OF THE ACT AND AL SO UPHELD THE ADDITION ON ACCOUNT OF TRANSFER OF FUNDS AMOUNTING TO RS.3,46,03,14,429/- TRANSFERRED TO INFRASTRUCTURE D EVELOPMENT FUND. 4 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 2.3 AGGRIEVED, THE ASSESSEE HAS NOW APPROACHED THIS TRIBUNAL CHALLENGING THE ORDER OF THE LD. CIT(A) AN D HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT HAVING REGARD TO THE FACTS AND CIR CUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN PASSING THE IMPUGNED REASSE SSMENT ORDER U/S 147/143(3) AND THAT TOO WITHOUT ASSUMING JURISDICTION AS PER LAW AND WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS OF SECTION 147 TO 151 OF INCOM E TAX ACT,1961. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE M ATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN PA SSING THE IMPUGNED REASSESSMENT ORDER U/S 147/143(3) AND THAT TOO WITHOUT COMPLYING THE MANDATORY CONDITIONS OF SECTI ON 147 TO 151, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUM STANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIR CUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN NOT ALLOWING THE BENEFIT OF EXEMPTION U/S 11 AND 12 AS CLAIMED BY THE ASSESSEE AND FURTHER ER RED IN OBSERVING AS UNDER:- THAT THE ASSESSEE AUTHORITY IS COVERED UNDER THE PR OVISO TO SECTION 2(15). THAT THE ACTIVITIES OF THE ASSESSEE AUTHORITY ARE COMMERCIAL IN NATURE AND ARE WHOLLY OR PARTIALLY CA RRIED ON WITH A MOTIVE OF PROFIT. THAT THE ASSESSEE WAS ENGAGED DOMINANTLY IN THE ACT IVITY OF DEVELOPMENT AND SALE OF PROPERTIES. 5 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN DE NYING THE BENEFIT OF EXEMPTION U/S 11 & 12, IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT OBS ERVING THE PRINCIPLES OF NATURAL JUSTICE. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN TREATING THE INCOME OVER EXPEND ITURE AS INCOME CHARGEABLE TO TAX U/S 11(4A) OF THE INCOME T AX ACT, 1961 ON THE GROUND THAT NO SEPARATE BOOKS OF ACCOUN TS REGARDING INCIDENTAL ACTIVITY OF BUYING AND SELLING OF PROPERTY IS DONE BY THE APPELLANT. 6. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN TR EATING THE INCOME OVER EXPENDITURE AS INCOME CHARGEABLE TO TAX U/S 11(4A), IS BAD IN LAW AND AGAINST THE FACTS AND CIR CUMSTANCES OF THE CASE. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.3,46,03,1 4,429 - EARMARKED AS AMOUNT RELATED TO INFRASTRUCTURE FUND AND THAT TOO BY TREATING IT AS TAXABLE INCOME AND FURTHER ER RED IN OBSERVING AS UNDER:- THAT THIS AMOUNT IS TO BE FIRST CREDITED TO INCOME & EXPENDITURE ACCOUNT. THAT THESE RECEIPTS WERE NOT DEPOSITED IN ACCORDAN CE WITH THE G.O. THAT THE SAID AMOUNTS ARE IN THE NATURE OF CAPITAL RECEIPTS AND ARE TRANSFERRED TO INFRASTRUCTURE DEVELOPMENT F UND. 6 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 8. THAT IN ANY CASE AND IN ANY VIEW OF THE MAT TER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MA KING ADDITION OF RS.3,46,03,14,429/- ON ACCOUNT OF INFRASTRUCTURE FUND IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF T HE CASE. 9. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT GRANTING THE BENEF IT OF EXPENSES AND IN NOT COMPUTING THE INCOME AS PER GENERALLY AC CEPTED COMMERCIAL ACCOUNTING PRINCIPLES AFTER REJECTING TH E CLAIM OF REGISTRATION U/S 12AA. 10. 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. 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMI TTED THAT GROUND NOS.1 & 2 CHALLENGING THE REOPENING U/S 147 OF THE ACT WERE NOT BEING PRESSED. ACCORDINGLY, THE SAME ARE DI SMISSED AS NOT PRESSED. 3.1 WITH RESPECT TO GROUND NOS.3 TO 6, THE LD. AR SUBMITTED THAT THE ISSUE OF CANCELLATION OF REGISTRATION U/S 12AA OF THE ACT HAD BEEN CONSIDERED BY THIS TRIBUNAL AND THE TRIBUN AL HAD RESTORED THE REGISTRATION U/S 12AA VIDE ORDER DATED 29.04.20 19 IN ITA NO.2400/DEL/2014. A COPY OF THE SAID ORDER WAS PLAC ED ON RECORD 7 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT BY THE LD. AR AND IT WAS SUBMITTED THAT THE TRIBUNA L, AFTER TAKING NOTE OF THE OBJECTS AND ACTIVITIES OF THE ASSESSEE HAD HELD THAT THE OBJECTS OF THE ASSESSEE WERE CHARITABLE IN NATURE I N TERMS OF SECTION 2(15) OF THE ACT AND FURTHER THAT THE ASSESSEE WAS E NTITLED TO REGISTRATION U/S 12AA OF THE ACT. THE LD. AR ARGUED THAT ONCE THE OBJECTS AND ACTIVITIES WERE HELD TO BE CHARITABLE T HERE REMAINED NO BASIS FOR DENYING THE BENEFIT OF EXEMPTION U/S 11 O F THE ACT. 4.0 PER CONTRA, THE LD. CIT-DR RELIED ON THE CONCU RRENT ORDERS OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE WAS A DEVELOPMENT AUTHOR ITY WORKING ON COMMERCIAL LINES AND AS SUCH THE BENEFIT OF EXEM PTION U/S 11 HAD RIGHTLY BEEN DENIED. HOWEVER, THE LD. CIT-DR FA IRLY ACCEPTED THAT THE REGISTRATION U/S 12AA OF THE ACT IN THE CA SE OF THE ASSESSEE HAD BEEN RESTORED BY A CO-ORDINATE BENCH OF THIS TR IBUNAL. 5.0 HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE NOTE THAT THE ISSUE FOR OUR CONSIDERATION IS THE ALLOWABILITY OF ASSESSEES CLAIM OF EXEMPTIO N U/S 11 READ WITH PROVISIONS OF SECTION 2(15) OF THE ACT. THE ASSESSE E AUTHORITY HAS 8 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT BEEN CREATED UNDER THE UP URBAN PLANNING DEVELOPMEN T ACT, 1973 WITH THE PRELIMINARY OBJECT OF UNDERTAKING PLANNED D EVELOPMENT IN SPECIFIED AREA. FOR THE PURPOSE OF ASCERTAINING ELI GIBILITY U/S 11 OF THE ACT, IT IS IMPORTANT TO ANALYZE AND UNDERSTAND THE OBJECTS, PURPOSE AND OPERATIONAL STRUCTURE OF THE AUTHORITY SO AS TO AS CERTAIN WHETHER THE ACTIVITIES CARRIED OUT BY THE AS SESSEE FALL WITHIN THE DEFINITION OF CHARITABLE PURPOSE AS DEFINED U/S 2(15) OF THE ACT WHILE KEEPING IN MIND THE LANGUAGE AND INTENT OF THE PROVISO AS WELL AS. HOWEVER, WE NOTE THAT THIS EXERCISE HAS BEEN CU T SHORT BY THE ORDER OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CAS E IN ITA NO.2400/DEL/2014 WHEREIN, WHILE DECIDING THE ELIGIBIL ITY OF REGISTRATION U/S 12A OF THE ACT, THE TRIBUNAL HAD T HE OCCASION TO IN- DEPTH EXAMINE THE OBJECTS AND ACTIVITIES OF THE ASS ESSEE AUTHORITY IN CONTEXT OF SECTION 2(15) OF THE ACT. THE TRIBUNAL P ROCEEDED TO RESTORE THE REGISTRATION U/S 12AA OF THE ACT BY HOL DING AS UNDER: 13 IN THE CASE OF NAVODAYA EDUCATION TRUST AND G D SINGLA CHARITABLE TRUST MENTIONED SUPRA THE REGISTRATION WAS REFUSED AS THE ENTITIES WERE OPERATED BY A SINGLE FAMILY UNIT. IN THE CASE OF SE LF EMPLOYERS SERVICE SOCIETY, IT WAS HELD THAT THERE WAS NO CHARITABLE A CTIVITY UNDERTAKEN BY THE SOCIETY. SIMILARLY THE CASE OF UPDA, THERE WAS NO FINDING OF CHARITABLE WORK UNDERTAKEN BY THE ASSOCIATION. THE CASE OF TRA VANCORE EDUCATION SOCIETY THE REGISTRATION WAS CANCELLED DUE TO COLLE CTION OF CAPITATION FEE WHICH WAS PROHIBITED BY LAW. THUS WE FIND NONE OF T HE CASES REFERRED TO 9 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT BY THE REVENUE WERE IN THE WORK OF DEVELOPMENT OF T OWNSHIPS OR CITY DEVELOPMENT BY THE LOCAL BODIES / IMPROVEMENT TRUST / DEVELOPING AUTHORITY. THE FACTS AND THE OPERATIONS OF THE ASSE SSEE AND THE CASES REFEREED ABOVE ARE ON DIFFERENT SET OF CIRCUMSTANCE S. THE ONLY RELEVANT CASES REFERRED BY THE REVENUE NAMELY JDA AND BADDI BAROTIWALA DEVELOPMENT AUTHORITY HAVE BEEN WELL DIFFERENTIATED BY VARIOUS COURTS AND TRIBUNAL AS MENTIONED ABOVE AND REGISTRATION WAS AL LOWED TO VARIOUS DEVELOPMENT AGENCIES, DEVELOPMENT AUTHORITIES, IMPR OVEMENT TRUST BY WHATEVER NAME THEY ARE KNOWN AND IN THE SAME LINE O F OPERATION AS THAT OF THE ASSESSEE IN QUESTION. 14. WE ALSO FIND REGISTRATION UNDER SECTION 12 AA WAS DIRECTED TO BE GRANTED BY VARIOUS COURTS/TRIBUNALS IN THE CASE OF MORADABAD DEVELOPMENT AUTHORITY, JAIPUR DEVELOPMENT AUTHORITY, AHMDABAD_URBAN DEVELOPMENT AUTHORITY, JODHPUR DEVELOPMENT AUTHORITY, IMPROVEMENT TRUST, MOGA, IMPROVEMENT TRUST, SANGRUR, IMPROVEMENT TRUST, KHANNA, IMPROVEMENT TRUST, KAPURTHALA HARIDWAR DEVELOPMENT AUTHORITY AGRA DEVELOPMENT AUTHORITY 16 FURTHER WE ALSO FIND THAT HON'BLE ALLAHABAD HIGH COURT HAS HELD THAT THE OBJECTS AND ACTIVITIES OF GHAZIABAD DEVELOPMENT AUTHORITY ARE SUCH THAT IT IS ELIGIBLE FOR BENEFIT OF REGISTRATION U/S 12A EVEN AFTER PROVISO TO SECTION 2(15) IS TAKEN INTO CONSIDERATION. THE PROV ISO TO SECTION 2(15) HAS BEEN CONSIDERED BY HON'BLE ALLAHABAD HIGH COURT IN ASSESSEE'S OWN FASE IN THE ORDER, THEREFORE THE JUDGMENT OF JURISDICTIO NAL HIGH COURT WILL HAVE THE PRIMACY. THE AUTHORITY GDA IS CREATION OF STATE OF U.P UP URBAN PLANNING AND DEVELOPMENT ACT, 1973WHERE AS THE OTHE R IMPROVEMENT TRUSTS ARE CREATION OF VARIOUS STATE LAWS INVOLVING SIMILAR ACTIVITIES. FURTHER EXAMINATION OF THE ACTIVITIES OF THE ASSESSEE WITH REGARD TO THE OBJECTIVES, WHETHER THE MANNER IN WHICH THE ASSESSEE TRUST WAS CONDUCTING ITS ACTIVITIES CONSTITUTED ADVANCEMENT OF GENERAL PUBLI C UTILITY AS SET OUT IN SECTION 2(15) AND FURTHER WHETHER THE WORK CEASED T O BE FOR CHARITABLE PURPOSE DUE TO THE FIRST PROVISO TO SECTION 2(15) W HICH LAYS DOWN THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE 10 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT NATURE OF TRADE, COMMERCE OR BUSINESS, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE INCOME FROM SUCH A CTIVITY WE FIND THAT THE ASSESSEE HAS NOT BROUGHT ANY CHANGES IN THE OBJECTI VES WHICH FORCES THE REVENUE TO CHANGE ITS EARLIER STAND. AS LONG AS THE OBJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO HIDE TRUE PURPOSE O R RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICES ARE BE ING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTI VE OF GENERAL PUBLIC UTILITY', THE CARRYING ON OF BONAFIDE ACTIVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF GENERAL PUBLIC UTILITY' CANNOT BE HI T BY PROVISO TO S. 2(15). 17 HENCE KEEPING IN VIEW THE PROVISIONS OF THE ACT , OBJECTIVES OF THE ASSESSEE , JUDGMENT IN THE CASE OF THE ASSESSEE BY THE HON'BLE HIGH COURT OF ALLAHABAD, APPROVALS GIVEN IN THE CASE OF OTHER TOWN DEVELOPMENT AGENCIES, WE HOLD THAT THE ASSESSEE TRUST IS CARRYI NG OUT CHARITABLE ACTIVITY OF ADVANCEMENT OF PUBLIC UTILITY AND THE BUSINESS A CTIVITY CARRIED OUT BY IT ARE INCIDENTAL TO THE ATTAINMENT OF ITS MAIN OBJECT AND THUS THE PROVISO TO SECTION 2(15) IS NOT ATTRACTED IN THE ASSESSES CASE . WE THEREFORE HOLD THAT THE ASSESSEE IS ENTITLED FOR RESTORATION OF REGISTR ATION U/S 12AA OF THE INCOME TAX, 1961. 5.1 THEREFORE, IN VIEW OF THE ABOVE OBSERVATION S OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CA SE RESTORING THE REGISTRATION U/S 12AA OF THE ACT, WE ARE OF THE OPIN ION THAT THE OBJECTS OF THE ASSESSEE AUTHORITY ARE CHARITABLE IN NATURE AND THE SAME ARE NOT HIT BY PROVISO TO SEC.2(15) OF THE ACT . HOWEVER, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE ACTIVIT IES OF THE ASSESSEE AUTHORITY AND IF THE SAME ARE FOUND TO BE IN CONSON ANCE WITH THE OBJECTS, THE BENEFIT OF EXEMPTION U/S 11 IS TO BE A LLOWED. ACCORDINGLY, GROUND NOS.3 TO 6 ARE ALLOWED FOR STAT ISTICAL PURPOSES. 11 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 6.0 GROUND NOS.7 AND 8 RELATE TO ADDITION MADE BY TREATING FUND EARMARKED FOR INFRASTRUCTURE DEVELOPMENT FUND TO THE INCOME OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE FUND S TRANSFERRED TO INFRASTRUCTURE DEVELOPMENT FUNDS CANNOT BE CONSIDER ED AS INCOME AS THE SAME DOES NOT BELONG TO THE ASSESSEE AND THA T THERE WAS AN OVERRIDING OBLIGATION TO SPEND THIS AMOUNT TOWARDS S PECIFIED AND APPROVED INFRASTRUCTURE PROJECT. IT WAS, ACCORDINGLY , ARGUED BY THE LD. AR THAT INFRASTRUCTURE FUND WAS OF CAPITAL NATUR E. IT WAS ARGUED THAT THIS FUND WAS CREATED BY THE STATE GOVE RNMENT FOR THE DEVELOPMENT OF INFRASTRUCTURE OF CITIES AND THAT TH E SAME WAS UNDER THE CONTROL AND SUPERVISION OF THE STATE GOVERNMENT AND, THUS, THE ASSESSEE WAS MERELY A TRUSTEE OF THE SAID FUND. 7.0 PER CONTRA, THE LD. CIT-DR SUBMITTED THAT TH E AMOUNT TRANSFERRED TO INFRASTRUCTURE DEVELOPMENT FUND WAS O UT OF INCOME EARNED BY THE ASSESSEE AS SUCH IT WAS MERELY AN APPL ICATION OF INCOME. THE LD. CIT-DR REFUTED THE ARGUMENT OF THE LD. AR THAT THERE WAS AN OVERRIDING TITLE FOR THE PURPOSE OF TR ANSFER OF FUNDS TO THE INFRASTRUCTURE DEVELOPMENT FUND. THE LD. CIT-DR HIGHLIGHTED THE FACT THAT THE SAID INFRASTRUCTURE FUND WAS JUST A SEPARATE BANK 12 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT ACCOUNT WHICH CONTAINED PART OF THE RECEIPTS OF THE ASSESSEE WHICH WAS SUBSEQUENTLY USED FOR INCURRING EXPENSES IN THE NORMAL COURSE AND, THUS, BY NO STRETCH OF IMAGINATION IT COULD BE SAID THAT IT WAS A EARMARKED FUND HAVING AN OVERRIDING TITLE. 8.0 WE HAVE CONSIDERED THE ARGUMENTS OF BOT H THE PARTIES WITH RESPECT TO GROUND NOS. 7 & 8 AND HAVE ALSO GONE THROUGH THE MATERIAL ON RECORD. WE NOTE THAT THE ISSUE OF NATUR E AND TAXABILITY OF AMOUNT TRANSFERRED TO THE INFRASTRUCTURE DEVELOP MENT FUND WAS CONSIDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNA L IN THE CASE OF SAHARANPUR DEVELOPMENT AUTHORITY IN ITA NO.4113/DEL /2017 VIDE ORDER DATED 24.03.2021 WHEREIN IT WAS HELD AS UNDER: 6. IT IS NOTED FROM THE MATERIAL ON RECORD THAT IN THE CASE, SIMILAR ISSUE HAS BEEN DECIDED IN THE CASE OF THE ASSESSEE FOR TH E ASSESSMENT YEARS 2004-05 TO 2007-08 BY THE CO-ORDINATE BENCH OF ITAT G BENCH, DELHI WHERE IN IT WAS HELD THAT, THE APPELLANT HAS RECEI VED IN FRA STRUCTURE FUNDS UNDER THE ORDERS O F GOVT. O F U.P. AND IT WA S REQUIRED TO USE SUCH FUNDS AS PER THE DIRECTION OF THE HIGH POWERED COMM ITTEE AND HAS NO CONTROL OVER THE SAID FUNDS. THERE FORE, THE INTERE ST INCOME FROM SUCH FUNDS IS NOT THE INCOME O F THE APPELLANT. 7. THIS OBSERVATION HAS BEEN GIVEN CONSISTENTLY BY THE ITAT IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 TO 2007-0 8. FURTHER , THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF LUCKNOW DEVELOPMENT AUTHORITY HAS HELD THAT THE MONEY TRANSFERRED TO TH E INFRA STRUCTURE FUND ACCOUNT IS TO BE UTILIZED FOR THE PURPOSE OF THE PR O JECTS AS SPECIFIED BY THE COMMITTEE HAVING CONSTITUTED BY THE STATE GOVERNMEN T AND CANNOT BE TREATED AS BELONGING TO THE AUTHORITY OR RECEIPT IS TAXABLE NATURE IN ITS HAND. 13 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 8.1 IDENTICAL ISSUE WAS ALSO CONSIDERED BY TH E CO-ORDINATE BENCH IN THE CASE OF KHURJA DEVELOPMENT AUTHORITY V S. ACIT IN ITA NO.5103/DEL/2016 VIDE ORDER DATED 03.04.2019. THE R ELEVANT OBSERVATIONS OF THE CO-ORDINATE BENCH ARE REPRODUCE D HEREIN UNDER: 12. AS REGARDS, THE ADDITION MADE ON ACCOUNT OF IN FRASTRUCTURE FUND, LD. COUNSEL FOR ASSESSEE RELIED UPON THE JUDG MENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. LUCKNOW DEVELOPMENT AUTHORITY 265 CTR 433 IN WHICH IT WAS H ELD AS UNDER: WHERE THE TRUST IS CARRYING OUT ITS ACTIVITIES ON NONCOMMERCIAL LINES WITH NO MOTIVE TO EARN PROFITS, OR FULFILLMEN T OF ITS AIMS AND OBJECTIVES, WHICH ARE CHARITABLE IN NATURE AND IN T HE PROCESS EARN SOME PROFITS, THE SAME WOULD NOT BE HIT BY PRO VISO TO SECTION 2(15). 13. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THIS I SSUE IS RELATED TO EXEMPTION U/S 11 OF THE ACT AND THAT ASS ESSEE IS CUSTODIAN OF THE AMOUNT IN QUESTION AND THIS AMOUNT CAN BE USED BY THE ASSESSEE AS PER DIRECTIONS OF THE STATE AUTHORITIES. THEREFORE, IT CAN NEVER BE THE INCOME OF THE ASSESS EE. 14. LD. DR, HOWEVER, SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN DETAIL BY THE CIT(APPEALS), THEREFORE, T HE ORDER MAY BE MAINTAINED. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES RECONSIDERATION AT TH E LEVEL OF THE 14 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT AO. THE ASSESSEE HAS NOW BEEN GRANTED REGISTRATION U/S 12AA OF THE ACT AND THUS, ASSESSEE IS ENTITLED FOR EXEMP TION FROM INCOME U/S 11 OF THE ACT AS PER LAW. EVEN IF THE IN FRASTRUCTURE RESERVE FUND MAY BE TREATED AS INCOME OF ASSESSEE, IT WILL HAVE TO BE EXAMINED, WHETHER, ASSESSEE IS ENTITLED FOR E XEMPTION U/S 11 OF THE ACT ON THE SAME INCOME. THEREFORE, IT WOU LD DEPEND UPON FUNDINGS WITH REGARD TO EXEMPTION U/S 11 OF TH E 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, T HE AUTHORITIES BELOW HAVE NOT APPRECIATED THE FACT THAT ASSESSEE C LAIMED THAT INFRASTRUCTURE FUND WAS RECEIVED FOR DEVELOPMENT AC TIVITIES FROM THE STATE AUTHORITIES, THE ASSESSEE HAS TO SPEND TH E AMOUNT ON THE SAME AS PER APPROVAL OF THE STATE AUTHORITIES. THUS, THERE MAY NOT BE ANY PROFIT ELEMENT OUT OF THE SAME SOURC ES. IT MAY ALSO BE NOTED HERE THAT WHATEVER AMOUNT HAS BEEN SP ENT BY ASSESSEE ON THE SAME ISSUE, THE AO HAS ACCEPTED THA T 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 ISS UE ALSO REQUIRES RECONSIDERATION IN VIEW OF THE FACT THAT A SSESSEE IS ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. WE, ACCOR DINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THE IS SUE OF INFRASTRUCTURE FUND AS WELL AND RESTORE THE ISSUE T O THE FILE OF AO WITH DIRECTION TO REDECIDE THE ISSUE AS PER LAW BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8.2 IN THE LIGHT OF THE ORDERS OF THE CO-ORDINATE BENCH AS REPRODUCED IN THE PRECEDING PARAGRAPHS IN THE CASE OF SAHARANPUR DEVELOPMENT AUTHORITY (SUPRA) AND KHURJA DEVELOPMEN T AUTHORITY 15 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT (SUPRA), WE ARE OF THE VIEW THAT SOURCE OF FUNDS TRA NSFERRED TO INFRASTRUCTURE DEVELOPMENT FUND, CONTROL OVER THE S AME AND OBLIGATION OF ITS UTILIZATION IS REQUIRED TO BE EXA MINED TO ASCERTAIN THE REAL NATURE OF INFRASTRUCTURE DEVELOPMENT FUND. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ADJUDICATE THE IS SUE AFRESH KEEPING IN MIND THE RATIO LAID DOWN BY THE CO-ORDINA TE BENCHES OF THIS TRIBUNAL IN SAHARANPUR DEVELOPMENT AUTHORITY ( SUPRA) AND KHURJA DEVELOPMENT AUTHORITY (SUPRA). ACCORDINGLY, GROUND NOS.7 & 8 ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. 9.0 GROUND NO.9 IS AN ALTERNATIVE PLEA BY THE ASSE SSEE AND THE SAME IS DISMISSED AS HAVING BECOME INFRUCTUOUS. 10.0 IN THE RESULT, ITA NO.2038/DEL/2017 STAN DS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11.0 NOW, WE TAKE UP THE APPEAL PERTAINING TO ASSESSMENT YEAR 2013-14 BEARING ITA NO.5355/DEL/2017. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUM STANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDICTION AND IN FR AMING THE IMPUGNED REASSESSMENT ORDER AND THAT TOO WITHOUT CO MPLYING 16 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT THE MANDATORY CONDITIONS OF SECTION 147 TO 151 OF T HE INCOME TAX ACT, 1961. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN AS SUMING JURISDICTION AND IN FRAMING THE IMPUGNED REASSESSME NT ORDER 147/143(3) IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND NOT SUSTAINABLE ON VA RIOUS LEGAL AND FACTUAL GROUNDS. 3. THAT HAVING REGARD TO THE FACTS AND CIRC UMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN NOT ALLOWING THE BENEFIT OF EXE MPTION U/S 11 AND 12 AS CLAIMED BY THE ASSESSEE AND FURTHER ERRED IN OBSERVING AS UNDER:- THAT THE ASSESSEE AUTHORITY APPEARED TO FALL WITHIN THE AMBIT OF THE PROVISO TO SECTION 2(15) OF THE ACT. THAT THE ACTIVITIES OF THE ASSESSEE AUTHORITY ARE COMMERCIAL IN NATURE AND ARE WHOLLY OR PARTIALLY CA RRIED ON WITH A MOTIVE OF PROFIT. THAT THE ASSESSEE WAS ENGAGED DOMINANTLY IN THE ACTIVITY OF DEVELOPMENT AND SALE OF PROPERTIES. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE M ATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN DE NYING THE BENEFIT OF EXEMPTION U/S 11&12, IS BAD IN LAW AND A GAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT OBS ERVING THE PRINCIPLES OF NATURAL JUSTICE. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMS TANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN TREATING AN AMOUNT OF RS.348,73 ,27,829/- 17 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT EARMARKED AS INCOME OF THE ASSESSEE WITH REGARD TO AMOUNT RELATING TO INFRASTRUCTURE DEVELOPMENT FUND AND ALS O ERRED IN MAKING AN ADDITION OF RS.268,71,92,937/- IN THIS RE GARD AND THAT THAT TOO BY RECORDING INCORRECT FACTS AND FIND INGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE . 6. THAT IN ANY CASE AND IN ANY VIEW OF THE MA TTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MA KING ADDITION OF RS.268,71,92,937/-, IS BAD IN LAW AND AGAINST TH E FACTS AND CIRCUMSTANCES OF THE CASE. 7. THAT HAVING REGARD TO THE FACTS AND CIRC UMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN N OT ALLOWING THE CREDIT OF PREPAID TAXES AMOUNTING TO RS.9,32,77 ,634/- AS CLAIMED. 8. THAT ACTION OF LD. AO IN FRAMING THE IM PUGNED ASSESSMENT ORDER AND IN DENYING THE BENEFIT OF EXEM PTION U/S 11&12 AND IN MAKING ADDITION OF RS.268,71,92,937/- AND IN ASSESSING THE INCOME OF THE ASSESSEE AT AGGREGATE A MOUNT OF RS. 186,75,56,884/- IS NOT SUSTAINABLE ON VARIOUS L EGAL AND FACTUAL GROUNDS AND LD. CIT(A) OUGHT TO HAVE QUASHE D THE SAME. 9. THAT THE APPELLANT CRAVES THE LEAVE TO AD D, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJU DICE TO EACH OTHER. 12.0 GROUND NO.1 & 2 ARE DISMISSED AS NOT BEING PRESSED. 18 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 12.1 GROUND NOS. 3 & 4 RELATE TO ISSUE OF EXEMP TION U/S 11. WE HAVE ALREADY DECIDED THIS ISSUE WHILE ADJUDICATING GROUND NOS.3 TO 6 IN ITA NO.2038/DEL/2017 ABOVE IN PARA 5 & 5.1 AND THE FINDING RECORDED THEREIN IS APPLICABLE MUTATIS MUTANDIS. ACCORDINGLY, GROUND NOS. 3 & 4 ARE ALLOWED FOR STATISTICAL PURPO SES. 12.2 GROUND NOS.5 & 6 ARE AGAIN IDENTICAL AND PERT AIN TO TAXABILITY OF FUNDS TRANSFERRED TO INFRASTRUCTURE D EVELOPMENT FUND AND THE DIRECTIONS ISSUED BY US WHILE DECIDING GROU ND NOS. 7 & 8 IN ITA NO.2038/DEL/2017 IN PARA 8.0, 8.1 & 8.2 ABOVE A LSO APPLY HERE MUTATIS MUTANDIS. RESULTANTLY, GROUND NOS.5 & 6 ARE ALSO ALLOWED FOR STATISTICAL PURPOSES WITH IDENTICAL DIRECTIONS. 12.3 GROUND NO.7 CHALLENGES NON-ALLOWANCE OF CREDIT OF PREPAID TAXES TO THE EXTENT OF RS.9,32,77,634/-. AS CREDIT OF PREPAID TAXES IS A STATUTORY RIGHT ENVISAGED UNDER THE INCO ME TAX ACT, 1961. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CREDIT OF PREPAID TAXES AFTER DUE VERIFICATION IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO.7 ALSO ALLOWED FOR STATISTICAL PURPOSES. 19 ITA NOS.2038 &5355 /DEL/2017 M/S GHAZIABAD DEVELOPMENT AUTHORITY VS . ACIT/ DCIT 12.4 GROUND NO.8 IS GENERAL IN NATURE AND NOT R EQUIRED IN SPECIFIC ADJUDICATION AND THE SAME IS ACCORDINGLY D ISMISSED. 13.0 IN THE RESULT, ITA NO.5355/DEL/2017 IS AL LOWED FOR STATISTICAL PURPOSES. 14.0 IN THE FINAL RESULT, BOTH THE APPEALS OF TH E ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 TH SEPTEMBER, 2021. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:13/09/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT DEHRADUN