DCIT (E), Ghaziabad V. M/s Ghaziabad Development Authortiy, Ghaziabad

ITA 2156/DEL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9569 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 09-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Charitable institution; Principle of natural justice; Revocable transfer; Benefit of exemption; TDS
• Section: 12; 11; 12A; 12AA; 142(2A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘C’, NEW DELHI Before Sh.A. D. Jain, Vice-President Dr. B. R. R. Kumar, Accountant Member ITA No. 1828/Del/2017 : Asstt. Year : 2003-04 ITA No. 1829/Del/2017 : Asstt. Year : 2006-07 M/s Ghaziabad Development Authority, C/o M/s RRA Taxindia, D-28, South Extension, Part-I, South Extension, New Delhi-110049 Vs DCIT(Exemption), Ghaziabad (APPELLANT) (RESPONDENT) PAN No. AAALG0072C ITA No. 2156/Del/2017 : Asstt. Year : 2003-04 DCIT(Exemption), Ghaziabad Vs M/s Ghaziabad Development Authority, C/o M/s RRA Taxindia, D-28, South Extension, Part-I, South Extension, New Delhi-110049 (APPELLANT) (RESPONDENT) PAN No. AAALG0072C Assessee by: Dr. Rakesh Gupta, Adv. Revenue by: Ms. Meenakshi Goswami, CIT DR Date of Hearing:28.10.2021 Date of Pronouncement: 28.01.2022 ORDER Per Dr. B.R.R.Kumar, Accountant Member: ITA No. 1828/Del/207: A.Y. 2003-04 (By the Assessee): Following grounds have been raised by the assessee: “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in subjecting the appellant to income tax. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 2 confirming the action of Ld. AO in passing the impugned assessment order even though it was barred by limitation. 3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in denying the benefit of exemption u/s 11 & 12 and not computing the income of appellant in accordance with provisions of law and holding the income is chargeable to tax u/s 11 (4A), is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in rejecting the books of accounts. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the action of Ld. AO in making the addition of Rs.746,27,55,523/- on account of closing stock fully and has further erred in sustaining the same to the extent of Rs.67,27,18,637/- and that too by recording incorrect facts and findings and in violation of principles of natural justice. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making the ad Rs.222,25,16,780/- on account of sales made during the year and that too by recording incorrect facts and findings and in violation of principles of natural justice. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) law and on facts in confirming the action of Ld. AO in making the Rs.36,79,49,958/- on account of balance portion of interest received on installments and that too by recording incorrect facts and findings and in violation of principles of natural justice. 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has err law and on facts in confirming the action of Ld. AO in seeking direction u/s 144 A and has further erred in not quashing the directions u/s 144A.” ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 3 ITA No. 2156/Del/207: A.Y. 2003-04: (By the Revenue) Following grounds have been raised by the Revenue: “1. The Ld. Commissioner Income Tax(Appeal) has erred in law and on facts in concluding that the sum of Rs.34,65,85,407/- and of Rs.32,61,33,230/- (Rs.32.61 crore), totaling to Rs.67,27,18,637/-, should have been charged to tax during the year under consideration. 2. The Ld. Commissioner of Income Tax(A) has erred in law on facts in allowing relief on account of closing stock of Rs.679,00,36,886/- (Rs. 746,27,55,523- Rs. 67,27,18,637). 3. The Ld. Commissioner of Income Tax(A) has erred in law and on facts in deleting the addition of Rs.2,00,00,000/-, on account of expenditure claimed to have been incurred of VAMBAY project.” ITA No. 1829/Del/207: A.Y. 2006-07 (By the Assessee): Following grounds have been raised by the assessee: “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in subjecting the appellant to income tax and that too at an income of Rs.4,62,53,14,224/- as against the returned income of NIL. ......................... 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 denying the benefit of exemption u/s 11 & 12 and has further erred in not computing the income of appellant in accordance with provisions of law and further erred in holding the income chargeable to tax u/s 11(4A).” ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 4 1. The assessee Ghaziabad Development Authority ("GDA") is a body constituted under U.P Urban Planning and Development Act, 1973 (hereinafter referred to as "UP” Act, 1973“). GDA applied for registration u/s 12AA of the Income Tax Act, 1961 vide application dated 31.3.2003. The Commissioner of Income Tax, Ghaziabad vide order dated 08.08.2006 rejected application observing that GDA is not Institution working for charitable purposes since it was not registered under Indian Trusts Act, 1982 or Societies registration Act, 1860. Further, the activities are also not charitable, per se as it sells land on commercial rates and to fudge profit it does not follow commercial accounting principles. GDA preferred appeal before the ITAT in ITA No.2903 (Del) of 2006 which has been allowed by the ITAT vide order dated 31.072007 against which Revenue filed appeal before the Hon’ble Allahabad High Court which has been dismissed vide order dated 29.08.2016. Needless to mention that the ITAT allowed this appeal of the assesee making a reference to an earlier judgment dated 25.07.2005 in ITA No. 590 (Luck) of 2003 wherein registration for similar body was directed to be allowed. Meanwhile, as per directions of the ITAT, New Delhi, against which Revenue filed appeal before Hon'ble High Court, the assessee was granted registration u/s 12AA of the Act w.e.f. 31.03.2003. The effective date of registration has further been directed by the ITAT, new Delhi vide order dated 20.09.2016 to be effective from 01.04.2002 instead of 31.03.2003, effect to which is yet to be given by the ld. CIT(Exemption), Lucknow. 2. The assessee is engaged in development work constituted under Uttar Pradesh Urban Planning and Development Act, 1973. The assessee had been claiming the benefits of provisions of section 10(20A). Section 10(20A) was omitted by ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 5 Finance Act 2002. Thus, the A.Y. 2003-04 was the first year wherein return of income was filed by the assessee as prior to this year. The assessee was getting assessed u/s 10(20A) which has been repealed with effect from 01.04.2003. The assessee filed return declaring Nil income on 31.10.2006. The case was selected for scrutiny. The assessee has shown an excess of income over expenditure of Rs. 4,61,95,89,445/- and claimed exemption u/s 11 alongwith Form 10 for exercising the option for accumulation of income u/s 11(2). 3. On 31.12.2008, the Assessing Officer invoked provisions of section 142(2A) to get the accounts of the assessee audited by the special auditor. The assessee has challenged the validity of appointment of special auditor before Hon'ble Allahabad High Court in Writ Tax No. 391/2009. The Hon’ble High Courtstayed the special auditor's appointment vide stay order dated 10/02/2009. 4. On 3.04.2015, the Hon'ble Allahabad High Court allowed the writ filed by the assessee and appointment of special auditor setting aside the order dated 29.12.2008 and granted liberty to AO to pass afresh order. On 25.05.2015,the ld. CIT(Exemption) appointed special auditor. 5. The Assessing Officer rejected books of accounts u/s 145(3) holding that correctness and completeness of books of accounts in the case of the assessee is neither verified by special auditors nor substantiated by bills and vouchers specially the details of date of acquisition, cost of acquisition, method of valuation and the valuation of property which were not presented to the AO. The AO denied the claim of the assessee considering that activities such as buying and selling of land etc. carried on by the appellant are of commercial ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 6 nature. The AO held that as per clause 58 on dissolution of the assessee body all properties, funds etc. shall vest with the state Government thereby held that funds generated during so called charitable purpose may be utilized for business, thus does not amount to irrevocable transfer of properties which met exclusively for charitable purposes. Thus, the AO held that the assessee is not entitled to exemption u/s 11. On the basis of auditor's report u/s 142(2A) an addition of Rs.1,17,545/- on account of uniform expenses, Rs.21,73,742/- on account vehicle maintenance expenses and Rs. 1,42,277/- wasmade for non/short deduction of TCS u/s 40(a)(ia). A sum of Rs.17,00,000/- was disallowed being expenses incurred on functions and inaugurations etc. wherein no TDS was done and this sum remained unconfirmed. A sum of Rs.3,41,215/- was added on account of capitalization of certain expenses under the head computer maintenance, which were of capital nature. A sum of Rs. 12,50,000/- was added on account of un-vouched payment of the same to Greater Noida Industrial Area Authority claimed to have been paid as contribution for exhibition on Real Estate India Exhibition 2005 and for which no TDS was deducted. On 30.10.2015, the AO passed the Assessment Order computing the income of Rs.4,62,53,14,224/- against the returned income of Rs. Nil. 6. While completing the assessment, the AO also denied the benefit of exemption u/s 11 of the Act, while the assessee was registered u/s 12A read with section 2(15) of the Act in the year under consideration. 7. Aggrieved, the assessee filed appeal before the Ld. CIT(A) against the additions. The ld. CIT(A) supported the order of the AO holding that GDA is an authority constituted by state for ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 7 looking after the development work in particular area of state is not subject to income tax laws as the object of creation of the authority is not to earn profit or income. The Ld.CIT(A) held that plain reading of Section 2(13) defining the term 'business' reveals that business includes any trade commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. 8. The Ld. CIT(A) held that the assessee is engaged in development of land and in accordance to the Uttar Pradesh Urban Development Act 1973. As per Section 7 of the Act, the object of authority is to promote and secure the development of the area according to the plan and for that purpose authority shall have power to acquire, hold, manage and dispose of land and other property to carry out building, engineering, mining and other operations to execute the works in connection with the supply of water and electricity dispose of sewage and to provide and maintain other services and amenities andgenerally to do anything necessary end expedient for the purpose of suchdevelopment and for purposes incidental thereto. Provided that save as provided in this act nothing contained in this act shall be construed asauthorizing the disregard by the authority of any law for, the time being inforce. Thus, the above said act authorizes the assessee to undertake any activity to fulfill the main object of development of land in the specified area. The sub-activities involved in fulfilling the main object such as buying and selling of land and plots, the construction and sale of residential houses, commercial spaces etc. are such activities which are per-se in the nature of business. The earning of profit or income is not the stated objective of the assessee and there is no denial to the fact that the assessee had earned income having more receipts than expenditure. ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 8 Thus, the contention of the assessee that though, the object of the creation of the authority is not to earn profitor income, yet the activities to fulfill the object of authority are very much in the nature of business chargeable to tax as per law. The Ld.CIT(A) observed that the assessee has filed income tax return on 01.12.2003 admitting the chargeability of income of the appellant to the tax. The question of allowing benefit of the other sections has to be examined separately. Merely the fact that the object of creation of society is not to earn profit explicitly, does not entitle non-chargeability of incidental income received by appellant especially while considering the inclusive definition of income u/s 2(24). 9. Holding thus, the Ld. CIT(A), keeping in view the above facts,affirmed the action of AO making an assessment denying the claim of the assessee. 10. In this background, the issue to be decided by us narrows down to whether Section 2(13) of the Income Tax Act, 1961 is applicable to the functions of the assessee or whether it is Section 2(15) of the Act which needs to be invoked. 11. Section 2(13) reads as under: “business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.” Whereas Section 2(15) of the Act defines “charitable purpose” to include relief of the poor, education, medical relief, preservation of environment, preservation of monuments and any other objects of public utility”. ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 9 12. This object of “public utility” as per Section 2(15) in the case of the assessee has been examined in detail by the Tribunal and further by Hon’ble Jurisdictional High Court and the registration u/s 12AA has been duly granted. The object of the assessee carrying the development of townships has been treated as “charitable purpose” for the purpose of the Income Tax Act. In the present case, the revenue authorities denied the benefit of exemption applying provisions of Section 2(13) instead of provisions of Section 2(15). In the light of the order of the Co-ordinate Bench of Tribunal and it being upheld by the Hon’ble High Court, the basis of denial of benefit u/s 11of the Act, as adopted by the Assessing Officer and affirmed by the Ld. CIT(A) stands vitiated and non-existent. In the instant case, the AO has not brought anything on record that distinguishes the clauses of the trust that were available before the authorities while granting registration u/s 12AA of the Act. There has been no change in the objects of the assessee. Hence, we hold that invoking of provisions of Section 2(13) against the relevant provisions of Section 2(15) is not legally sustainable. The similar ratio has been laid down in the following decisions:  ITO (E) vs. Saharanpur Development Authority (ITA No. 4113/D/17) (24/03/2021) (Delhi-Trib)  Jhansi Development Authority vs. DCIT [2021] 123 taxmann.com 247 (Agra - Trib.)  CIT vs. Ghaziabad Development Authority (ITA No. 2400/D/14) (Delhi-Trib)  Gujarat Industrial Development Corporation vs. ACIT (ITA No. 278/Ahd/13) (Ahmedabad-Trib.)  Bangalore Development Authority vs. Addl. CIT [2019] 104 taxmann.com 266 (Bangalore-Trib.) ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 10  Gujarat Housing Board (GHB) vs. DCIT(E) (ITA No. 3297/Ahd/2016) (Ahmedabad-Trib.)  Moradabad Development Authority vs. ACIT (Exemption) (ITA No. 4631 & 32/D/17) (Delhi-Trib)  Firozabad Shikohabad Development Authority vs. CIT [2018] 169 ITD 202 (Agra - Trib.)  DCIT (E) vs. Haridwar Development Authority  Ahmedabad Urban Development Authority vs. ACIT [2017] 396 ITR 323 (Guj High Court)  CIT vs. Jodhpur Development Authority [2016] 287 CTR 473 (Raj HC)  CIT vs. Lucknow Development Authority [2014] 265 CTR 433 (All HC)  New Okhla Industrial Development Authority vs. CIT(E) (ITA No. 172/Del/2016) (Delhi-Trib.) 13. In view of above and respectfully following the decision of Hon'ble Allahabad High Court and Coordinate bench in asssessee's own case, we are of the considered view the assessee is carrying out charitable activities with object of general public utility in accordance with section 2(15) of the Act and same cannot be termed as commercial or of business nature for the purpose of proviso to section 2(15) of the Act. 14. Hence, we hold that the decision of the ld. CIT(A) cannot be sustained. Having held that the assessee is eligible for deduction u/s 11 of the Act, the matter is being remand back to the file of the ld. CIT(A) for the limited purpose of re- computing the eligible deduction in accordance with the provisions of Section 2(15) of the Act. ITA Nos. 1828, 1829 & 2156/Del/2017 Ghaziabad Development Authority 11 15. In the result, both the appeals of the assessee are allowed and the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 28/01/2022. Sd/- Sd/- (A. D. Jain) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 28/01/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR