Appeal details
Counselvise Citation
[2023] 102 COUNSELVISE.COM (IT) 7143 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 7 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-06-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
04-04-2023
Assessment Year
2014-2015
Appeal Filed On
02-11-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The Dy. Commissioner of Income-tax (Exemptions), Circle-1, Ahmedabad (Appellant) Vs Ahmedabad Urban Development Authority Sardar Vallabhbhai Patel Sankul, Ashram Road, Usmanpura, Ahmedabad-380014 PAN: AAALA0233B (Respondent) Ahmedabad Urban Development Authority Sardar Vallabhbhai Patel Sankul, Ashram Road, Usmanpura, Ahmedabad-380014 PAN: AAALA0233B (Appellant) Vs The ACIT (Exemption) Circle-1, Ahmedabad (Respondent) Assessee Represented: Shri S.N. Soparkar, Sr. Adv. & Shri Parin Shah, A.R. Revenue Represented: Shri Sudhendu Das, CIT-DR ITA No. 2434/Ahd/2017 Assessment Year 2014-15 ITA No. 2378/Ahd/2017 Assessment Year 2014-15 I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 2 Date of hearing : 05-04-2023 Date of pronouncement : 16-06-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These cross appeals are filed by the Revenue and Assessee as against the appellate order dated 28.08.2017 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2014-15. 2. The brief facts of the case is that the Assessee trust is an autonomous body which is established under 5/2 of the Gujarat Town Planning and Urban Development Act, 1976 (XXVII of 1976) and Rules made there under carrying Planned Development of areas as defined and designed by the Government of Gujarat and also infrastructural activities relating thereto such as construction of roads, bridges, drainage system, water connection for the benefit of public at large. The Assessee is registered u/s. 12AA of the Act and the assessee is engaged in the activities of urban development and town planning. For the Assessment Year 2014-15, the assessee filed its Return of Income on 15-09-2014 with Nil income. The case was taken up for scrutiny assessment. 2.1. During the assessment proceedings, the Assessing Officer noticed that the activities carried out by the assessee remained unchanged as those of the Assessment Year 2009-10, wherein the I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 3 activities carried out of “advancement of other general public utility” in the nature of trade/commerce/business and therefore the provisions of Section 2(15) read with proviso 1 & 2 were held to be applicable with the facts of the assessee’s case. Therefore the A.O. denied exemption u/s. 11 & 12 of the Act. This assessment is confirmed by Ld. CIT(A) and also ITAT dismissed the assessee’s appeal vide order dated 19-04-2016 for the Assessment Year 2009- 10. As the activity of the assessee remained unchanged for the present Assessment Year 2014-15, the Assessing Officer issued show cause notice and ultimately denied the exemption u/s. 11 & 12 and assessed the total income of the assessee as Rs. 188,26,25,642/- and demanded tax of Rs. 76,41,75,550/-. 2.2. In the meantime, the assessee’s appeal for the Assessment Years 2009-10, 2010-11 & 2011-12 were challenged before Hon’ble High Court of Gujarat in Tax Appeal Nos. 423 to 425 of 2016 and vide judgment dated 02-05-2017 the Hon’ble High Court of Gujarat held that the assessee society constituted under Gujarat Town Planning and Urban Development Act, 1976, to undertake preparation and execution of town planning schemes and to execute works in connection with supply of water, disposal of sewerage and provision of other services and amenities could be said to be providing general public utility services within the meaning of section 2(15) of the Act and thus eligible for exemption u/s. 11 of the Act and thereby allowed the assessee’s appeal observing as follows: “.....14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body Urban Development Authority constituted under the provisions of the Act, I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 4 constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever the income is earned / received by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electricity, road, drainage, water etc. and even the entire control is with State Government and even accounts are also subjected to audit and there is no element of profiteering at all, the activities of the assessee cannot be said to be in the nature of trade, commerce and business and therefore, proviso to Section 2(15)of the Act shall not be applicable so far as assessee is concerned and therefore, the assessee is entitled to exemption under Section 11 of the Income Tax Act. Therefore, the question no.1 is to be held in favour of the assessee and against the revenue. 15. Now, so far as another question which is posed for the consideration of this Court i.e. whether while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assessee is collecting cess or fees which is regulatory in nature, the proviso to Section 2(15)of the Act shall not be applicable. As observed herein above neither there is element of profiteering nor the same can be said to be in the nature of trade, commerce or business. At this stage, decision of the Division Bench of this Court in the case of Sabarmati Ashram Gaushala Trust (supra) is required to be referred to. In the case before the Division Bench, the assessee Trust Sabarmati Ashram Gaushala Trust was engaged in the activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities. The Assessing Officer denied the exemption to the trust under Section 11 of the Act on the ground that considerable income was generated from the activities of milk production and sale and therefore, considering the proviso to Section 2(15) of the Act, the said Trust assessee was denied the exemption under Section 11 of the Act. While holding that the activities of the assessee trust still can be said to be for charitable purpose within the meaning of Section 2(15) of the Act and same cannot be said to be in the nature of trade, commerce or business for which proviso to Section 2(15) of the Act is required to be applied. In para 6, 7, 8 and 12, it is observed and held as under: "6.The legal controversy in the present Tax Appeal centres around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term Charitable purposes and applies only to cases of advancement of any other of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of charitable trust. However, for the application of the proviso, what is necessary is I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 5 that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Ministers speech in the Parliament. Relevant portion of which reads as under: I once again assure the House that genuine charitable organisations will not in any way be affected. The CBDT will, following the usual practise, issue an explanatory circular containing guidelines for determining whether any entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organisations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as advancement of any other object of general public utility. 7. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under : '3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is advancement of any other object of general public utility ie., the fourth limb of the definition of charitable purpose contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 6 charitable institutions as well as mutual organisations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organisations have dealings with nonmembers, their claim to be chargeable organisations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 8. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose. 12. All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility. 15.1. Applying the aforesaid decision to the facts of the case on hand and the object and purpose for which the assessee is established/constituted I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 7 under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. 15.2. Considering the aforesaid facts and circumstances of the case, we are of opinion that the learned Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assessee AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the revenue. 16. In view of the above and for the reasons stated above, the impugned order passed order passed by the learned Tribunal in respective appeals for different assessment year are hereby quashed and set aside. Accordingly, all these appeals are allowed and answered both the questions in favour of assessee and against the revenue. No costs.” 3. Aggrieved against the assessment order, the assessee filed an appeal before Commissioner of Income Tax (Appeals)-9, Ahmedabad. The Ld. CIT(A) vide his impugned order dated 28-08- 201, following Gujarat High Court judgment in assessee’s own case held that the assessee cannot be considered to cover by the proviso to section 2(15) of the Act. Thus the A.O. cannot withdraw the claim of exemption by invoking proviso to Section 2(15) r.w.s. 13(8) of the Act, that is the assessee cannot be assessed u/s. 28 to 44 of the Act and thus partly allowed the appeal observing as follows: “.....4.4 Although hon'ble High Court of Gujarat has denied applicability of provisions of proviso to section 2(15) r.w.s. 13(8) to the appellant, the AO needs to be careful while computing the income of the appellant. There are issues with regard to maintenance of accounts and the appellant has treated the various grants received by it. There are issues with regard (a) to claim of accumulation@ 15% u/s 11(1)(a) of the Act; (b) to claim u/s 11(1)(d) of the act; (c) to claim of correct rate of depreciation; (d) to claim of income receipts being reflected in the balance sheet: (e) to claim of application of income from project specific grants; I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 8 (f) to claim of capital expenses as application of income etc. As certain grounds of appeal pertain to these issues.” 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: ITA No. 2434/Ahd/2017 1. The Ld. CITCA) has erred in the law and on facts in considering the activity of the assessee as engaged in the development of urban area of Ahmedabad which is in the nature of advancement of general public utility not hit by the newly introduced first and second proviso to sec.2(15) of the Act. 2. The Ld CIT(A) has erred in the law and on facts in allowing the benefit of exemptions u/s 11 without considering the fact that the assessee is involved in widespread commercial activities in nature of business and the activity of the assessee is covered under first and second proviso to sec.2(15) of the Act. 3. The Ld CIT(A) has erred in the law and on facts in deleting the addition of Rs. 246,26,73,000/- and grants of Rs. 148,61,17,000/- considering that a capital expenditure by a person need not be a capital receipt of the person receiving that amount which the assessee has received for the discharge of its objects. 4. The Ld CIT(A) has erred in the law and on facts in allowing the accumulation of Rs.44,54,98,000/-/- u/s.11(1)(2) and accumulation @15% of Rs 36,87,56,250/- u/s11(1)(a) of the Act without appreciating the fact that once the proviso to section 2(15) is applicable, the benefit of section 11 and 12 cannot be allowed further. 5 On the facts and circumstances of the case, the Ld. Commissioner of Income- Tax (Appeals) ought to have upheld the order of the Assessing Officer. 6. It is, therefore, prayed that the order of the Ld. Commissioner of Income- tax (Appeals) may be set aside and that of the Assessing Officer be restored 7. The Revenue craves to add, alter, amend modify, substitute, delete and/or rescind all or any Grounds of Appeal on or before the final hearing, in necessity so arises. 5. Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submitted before us copy of the Supreme Court Judgment in Civil Appeal No. 21762 of 2017 in assessee’s own case of ACIT I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 9 (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022 reported in 449 ITR 1 (SC) which has settled the issue by dismissing the Revenue’s appeal vide Para 254(ii) of the judgment as follows: “....254. In accordance with the foregoing discussion, and summary of conclusions the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiala Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot Improvement Trust Improvement Trust, Hansi, and the Special Leave Petitions filed against the Gujarat Maritime Board and Karnataka Water Supply and Drainage Board are rejected. (ii) The revenue's appeals against Ahmedabad Urban Development Authority, the Gujarat Housing Board, the Gandhinagar Urban Development Authority, Rajkot Urban Development Authority, Surat Urban Development Development Authority, Jamnagar Area Development Authority, and the Gujarat Industrial Development Corporation are rejected. Likewise, the revenue's appeals against Agra Development Trust, UP Awas Evam Vikas Parishad, Raebarel, Development Authority, Rajasthan Housing Board, Mangalore Urban Development Authority; Mathura Vrindavan Development Authority, Meerut Development Authority, Belgaum Development Authority". Moradabad Urban Development Authority, Yamuna Expressway Industrial Development Authority, Greater Noida Industrial Development Authority, New Okhla Industrial Development Authority and Karnataka Industrial Areas Development Board are rejected.” 6. The relevant operative portion of the Hon’ble Supreme Court judgment are as follows: “.....D. What kinds of income or receipts may not be characterized as derived from trade, commerce, business or in relation to such activities, for a consideration (i) Statutory corporations, authorities or bodies 176. It would be essential now to deal with certain kinds of receipts which GPU charities, typically statutory housing boards, regulatory authorities and corporations may be entitled to, if mandated to collect or receive. During the course of hearing, learned counsels highlighted that statutory boards, and corporations have to recover the cost of providing essential goods and services in public interest, and also fund large scale development and maintain public property. These would entail recovering I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 10 charges or fees, interest and also receiving interest for holding deposits. It was further pointed out that in some cases, income in the form of rents– having regard to the nature of the schemes which the concerned board, trust or corporation may be mandated or permitted to carry on, has to be received. For instance, in some situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents. 177. The answers to these, in the opinion of this court, are that the definition ipso facto does not spell out whether certain kinds of income can be excluded. However, the reference to specific provisions enabling or mandating collection of certain rates, tariffs or costs would have to be examined. Generically, going by statutory models in enactments (under which corporations boards or trust or authority by whatsoever name, are set up), the mere fact that these bodies have to charge amounts towards supplying goods or articles, or rendering services i.e., for fees for providing typical essential services like providing water, distribution of food grains, distribution of medicines, maintenance of roads, parks etc., ought not to be characterized as “commercial receipts”. The rationale for such exclusion would be that if such rates, fees, tariffs, etc., determined by statutes and collected for essential services, are included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by second proviso to Section 2(15) would be attracted thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer which is the general public. By way of illustration, if a corporation supplies essential food grains at cost, or a marginal mark up, another supplies essential medicines, and a third, water, the characterization of these, as activities in the nature of business, would be self-defeating, because the overall receipts in some given cases may exceed the quantitative limit resulting in taxation and the consequent higher consideration charged from the user or consumer. ..................... 185. As far as boards and corporations which are tasked with development of industrial areas, by statute, the judgments of this court, in Shri Ramtanu Cooperative Housing Society (supra) and Gujarat Industrial Development Corporation (supra) have declared that these bodies are involved in ‘development’ and are not essentially engaged in trading. In Shri Ramtanu Cooperative Housing Society (supra) this court, by a five judge bench, held that the Maharashtra Industrial Development Corporation is not a trading concern, and observed as follows: “These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and management of the Corporation I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 11 Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of sole purpose of establishment, growth and development of industries. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The found of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner. The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct. The Corporation accepts deposits from persons, authorities or institutions to whom allotment or sale of land, buildings, or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appointed by the State Government. These provisions in regard to the finance of the Corporation indicate the real role of the Corporation viz. the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation. There are various departments of the Government which may have excess of income over expenditure. ************** ******** ********* I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 12 20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in this State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one.” 186. In Shri Ramtanu Cooperative Housing Society (supra) no doubt, this court did not have to decide whether the Maharashtra Industrial Development Corporation was entitled to tax exemption. However, it examined the provisions of the Act, and the ratio, that such industrial development corporations are not engaged in trading, is binding. Like in that case, here too, the concerned state Acts (Gujarat Industrial Development Act, 1962 and the Karnataka Industrial Areas Development Act, 1966) tasked the boards with planning and development of industrial areas. Their personnel are appointed under the enactments and are deemed to be public servants. The state government is empowered to acquire land, in exercise of eminent domain power, for their purposes; their audits are by the Accountant General of the concerned state, or auditors appointed by the state. They are authorized by law, to levy rates and charges, for the services they provide, on pre-determined basis. In the light of these provisions, clearly, these boards and authorities perform objects of general public utility; and they are not driven by profit motive. 187. There is a two-fold distinction between the now-deleted Section 10(20A) and the newly added Section 10(46) (w.e.f. 01.06.2011). Firstly, that the erstwhile Section 10(20A) applied to a limited class of undertaking i.e., the bodies, or corporations, constituted by or under any law-confined to the planning and development of housing infrastructure. However, the newly added Section 10(46) is wider in comparison and the activities of any body or authority or board constituted by or under any central or State Act with “the object of regulating or administering any activity for the I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 13 benefit of the general public”, has broader import. In a sense, the newly added Section 10(46), resembles a GPU category charity classified under Section 2(15). The second distinction is that Section 10(20A) did not bar any board, or corporations, etc. from indulging in commercial activities. However, sub-clause (b) of Section 10(46) imposes such a bar, and the concerned body cannot claim tax exemption if it engages in commercial activity. 188. The manner in which GPU charities has been dealt with under the definition clause, i.e., Section 2(15), indicates that even though trading or commercial activity or service in relation to trade, commerce or business appears to be barred – nevertheless the ban is lifted somewhat by the proviso which enables such activities to be carried out if they are intrinsically part of the activity of achieving the object of general public utility. Furthermore, in the case of GPU charities there is a quantified limit of the overall receipts, which is permissible from such commercial activity. In the case of local authorities and corporations covered by Section 10(46) no such activities are seemingly permitted. 189. As was observed in the earlier part of this judgment – while considering whether for the period 01.0.2003 - 31.05.2011, statutory boards, corporations, etc. could have lawfully claimed to be GPU charities, this court has observed that the nature of such corporations is not to generate profit but to make available goods and other services for the benefit of public weal. If such corporations (falling within the description of Section 10(46)) applied to the Central Government for exemption, the treatment of their receipts, should be no different than how such receipts can and should have been treated for the purposes of determining whether they are GPU charities, during the period when Section 10(46) was not in existence. Furthermore, this court is of the opinion that having regard to the observations in Gujarat Maritime Board case (supra), the denial of exemption under one category cannot debar such corporations from claiming income exempt status under another category. (b) Summary in relation to statutory authorities/corporations 190. In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. (ii) Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 14 advancement of objects of general public utility, therefore are entitled to be considered as charities in the GPU categories. (iii) Such statutory corporations, boards, trusts authorities, etc. may be involved in promoting public objects and also in the course of their pursuing their objects, involved or engaged in activities in the nature of trade, commerce or business. (iv) The determinative tests to consider when determining whether such statutory bodies, boards, authorities, corporations, autonomous or selfgoverning government sponsored bodies, are GPU category charities: (a) Does the state or central law, or the memorandum of association, constitution, etc. advance any GPU object, such as development of housing, town planning, development of industrial areas, or regulation of any activity in the general public interest, supply of essential goods or services - such as water supply, sewage service, distributing medicines, of food grains (PDS entities), etc.; (b) While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; (c) Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce; (d)where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposits or government securities and drawing interest therefrom or charging lease rent, ground rent, etc., per se, recovery of such charges, fee, interest, etc. cannot be characterized as “fee, cess or other consideration” for engaging in activities in the nature of trade, commerce, or business, or for providing service in relation in relation thereto; I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 15 (e) Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a government or state is expected to engage in, having regard to provisions of the Constitution and the enacted laws, and the observations of this court in NDMC; whether in case surplus or gains accrue, the corporation, body or authority is permitted to distribute it, and if so, only to the government or state; the extent to which the state or its instrumentalities have control over the corporation or its bodies, and whether it is subject to directions by the concerned government, etc.; (f) As long as the concerned statutory body, corporation, authority, etc. while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit (20% as mandated by the second proviso to Section 2(15)) – the concerned statutory or government organisations can be characterized as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10(23C) and by Section 11 have to necessarily be fulfilled. (v) As a consequence, it is necessary in each case, having regard to the first proviso and seventeenth proviso (the latter introduced in 2012, w.r.e.f 01.04.2009) to Section 10(23C), that the authority considering granting exemption, takes into account the objects of the enactment or instrument concerned, its underlying policy, and the nature of the functions, and activities, of the entity claiming to be a GPU charity. If in the course of its functioning it collects fees, or any consideration that merely cover its expenditure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. 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. I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 16 General test under Section 2(15) 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 (1) the activities of trade, commerce or business are connected ("actual carrying our..."inserted w.ef. 01.04.2016) to the achievement of its objects of GPU: and (1) 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 2015), has not been breached. Similarly, the insertion of Section 13(5), seventeenth proviso to Section 10(230) 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 B.I. 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 grain, development and town I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 17 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 a 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. 6.1. Thus the Ld. Senior Counsel submitted that the assessee’s activities are for General Public Utility in the nature of charitable nature and eligible for exemption u/s. 11 & 12 of the Act, which was confirmed by the Hon’ble Gujarat High Court and the Revenue appeals on the same are now dismissed by the Hon’ble Supreme Court. Therefore the other Grounds raised by the Revenue becomes I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 18 infructuous and academic. Hence the same does not require any adjudication and liable to be dismissed. 7. Per contra, the Ld. D.R. appearing for the Revenue supported the order of the Lower Authorities and could not sight any adverse inference in the judgment passed by the Hon’ble Supreme Court. 8. We have perused the materials available on record and the judgments passed by the Hon’ble Supreme Court and the High Court of Gujarat respectfully following the same, we hold that the activities of the assessee for advancement of any other object of ‘General Public Utility’ for charitable purpose and therefore the assessee corporation shall be entitled to exemption u/s. 11 of the Act. It is further clarified by the Hon’ble Suprme Court in the very same case of ACIT vs. Ahmedabad Urban Development Authority reported in [2022] 144 taxmann.com 78 (SC) wherein it has been clearly held that the Revenues Appeals are dismissed as far as statutory Corporations/Boards observing as follows: “....3. It was urged on behalf of the revenue, that the clarification it seeks is necessary, because in Para 253H and in Para 254, it has been precluded from examining the facts and assessing the concerned assessment years, in relation to the assesses in these appeals. It was urged that the conclusions recorded in the judgment and those in the said two paragraphs, preclude it from dealing with the assessments of parties before this court and furthermore, the dismissal of the revenue's appeals will preclude an examination of the merits for these assesses in future, as well. 4. A plain reading of the conclusions recorded in Para 253(A), (B), (C), (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- Sh in relation to the assessment years in question, whereas in Para 253 (F), the court remitted the matter for examination and orders by the assessing officer. Similarly, the conclusion in Para 253 G. was conclusive with respect to the claim of private trusts, the appeals were dismissed. These conclusions are accurately reflected in the final, operative directions in I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 19 Para 254. In Para 254 (i) to (iv), the conclusions recorded are against the revenue. However, in Para 254 (v), (vi), (vii) and (vii), the conclusions, are in favour of the revenue. 5. The reference to application of the law declared by this court's judgment, therefore, has to be understood in the context, which is that they apply for the assessment years in question, which were before this court and were decided; wherever the appeals were decided against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for.” 8.1. Thus it is seen from the above judgment of the Hon’ble Supreme Court in Miscellaneous Application, wherever the Revenue’s appeals are dismissed, they are to be treated as Final. Respectfully following the same, we hereby dismiss the appeal filed by the Revenue. 9. In the result, the appeal filed by the Revenue in ITA No. 2434/Ahd/2017 is hereby dismissed. ITA No. 2378/Ahd/2017 (Assessee’s appeal for A.Y. 2014-15) 10. Now we take assessee appeal, the Grounds of Appeal filed by the Assessee in ITA No. 2378/Ahd/2017 reads as under: 1 Ld. CIT (A) erred in law and on facts directing AO to verify & compute the income of appellant as per guidelines narrated by him though holding the activities of assessee authority not covered by proviso to Sec. 2(15) of the Act following judgment of Hon'ble Gujarat High Court. 2 Ld. CIT (A) erred in law and on facts holding that grants received by the appellant for generic purpose or which are not project specific then these grants are to be considered in the nature of voluntary donation and are to be included as income of the appellant u/s 12 (1) of the Act. 3 Ld. CIT (A) erred in law and on facts in holding that the appellant will not be eligible to claim accumulation @ 15% u/s 11(1)(a) of the Act on grants I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 20 received for a specific purpose or a project that is capital in nature since these receipts are capital receipts and do not form part of the income. 4 Ld. CIT (A) further erred in law and on facts in holding that the appellant cannot claim capital expenditure made out of these specific grants for asset creation as application of income towards its objects. 5 Ld. CIT (A) erred in law and on facts in holding that the appellant cannot claim depreciation on fixed assets created out of grants given for specific purpose as application of income. 6 Ld. CIT (A) erred in law and on facts directing AO to treat funds received under provisions of GTPUD Act like Development charges. Betterment charges, Impact fees, Amenities fees, Scrutiny fees, Zoning fees as well amount received from premium on lease of Plot of land and receipts from sale of land/ shops etc. as income of the appellant irrespective of the fact that the appellant treated them as balance sheet item. 7 Ld. CIT (A) erred in law and on facts in holding that if funds received under various categories as per provisions of GTPUD Act are treated as capital receipts then appellant cannot claim accumulation @ 15% u/s 11(1)(a) on such receipts, cannot claim capital expenditure out of these receipts as money applied towards its objects as application of income and cannot claim depreciation on fixed assets created out of these receipts. 8 Ld. CIT (A) erred in law and on facts directing AO to verify & apply rate of depreciation on the basis of normal commercial principles & not as per section 32 of the Act which will not be applicable to exempt person. 9 Ld. CIT (A) erred in law and on facts in holding that application of income shall precede accumulation by directing AO to allow accumulation u/s 11(1)(a) of the Act from income remaining after deducting amount applied for the objects of the appellant. 10 Ld. CIT (A) further erred in law and on facts in directing AO to firstly allow the set off of deficit carried forward from earlier year then amount applied during the year and after these adjustments to allow appellant accumulation @ 15% u/s. 11(1)(a) from the surplus left if any. 11 Ld. CIT (A) erred in law and on facts to hold that appellant will not be allowed accumulation of income either u/s 11(1)(a) @ 15% of u/s 11(2) along with carry forward of deficit. 12 In view of the judgment of Hon'ble Gujarat High Court in appellant's case, ld. CIT (A) ought to have granted exemption in toto as claimed u/s 11/12 of the Act & ought to have directed AO to allow accumulation at 15% of gross receipts permissible as per law. I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 21 13 Levy of interest u/s 234B & 234C of the Act is not justified 14 Initiation of penalty proceedings u/s 271(1)(c) of the Act is not justified. 11. At the outset the Ld.Senior Counsel Shri S.N. Soparkar appearing for the assessee submits that ground no. 1 & 2 is covered in favour of the assessee by the Hon’ble Supreme Court judgment in assessee’s own case reported in 449 ITR 1 (SC). Regarding Ground nos. 3, 4, 6, 7 & 12 the same are consequential and covered in favour of the assessee pursuant to the Supreme Court Judgment in assessee’s own case (cited supra), hence the same are not pressed. Ld. D.R. could not dispute the above submission thus the Ground No. 1 & 2 is allowed in favour of the assessee and Ground Nos. 3, 4, 6, 7 & 12 are dismissed as not pressed. 12. Ground Nos. 5 claim of depreciation on fixed assets created out of grant given for specific purpose as application of income. This issue is also covered in favour of the assessee by Hon’ble Supreme Court in the case of CIT Vs. Rajasthan & Gujarati Charitable Foundation Poona reported in 402 ITR 441 (SC). Per contra, the Ld. D.R. appearing for the Revenue could not bring any contra decision on this issue, therefore he supported the order passed by the Lower Authorities. 13. We have given our thoughtful consideration and perused the materials available on record. The Hon’ble Supreme Court of India in Rajasthan & Gujarati Charitable Foundation Poona held that in case of assessee-charitable institution registered u/s. 12A, even though expenditure incurred for acquisition of capital assets was I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 22 treated as application of income for charitable purposes u/s. 11(1)(a) of the Act, yet depreciation would be allowed on such assets so purchased before 01.04.2015. There was no specific provision in this behalf in the Income Tax Act and vide Finance Act No. 2/2014 amendment in Section 11(6) of the Act which became effective from the Assessment Year 2015-16, which amendment is prospective in nature. 13.1. Respectfully following the above Supreme Court judgment and the Assessment Year involved herein namely A.Y. 2014-15 depreciation is allowable to the capital assets and thus the grounds raised by the assessee is allowed in favour of the assessee. 14. Regarding Ground No. 8, Ld. CIT(A) directed A.O. to verify and apply rate of depreciation on the basis of normal commercial principles and not as per section 32 of the I.T. Act. In this connection, Ld. Senior Counsel drawn our attention to the decision of the Cuttack Bench in the case of Paradip Port Trust Vs. Additional Commissioner of Income-tax reported in 20 taxmann.com 311 (Cuttack) wherein the Co-ordinate Bench of this Tribunal held that permanent way, wharves, roads and boundaries which were serving some special purpose of working of assessee- port were to be treated as ‘plant and machinery’ and depreciation on the same was to be allowed at rate of 15% on those fixed assets. Thus the Ld. CIT(A) is not correct in holding that the rates of depreciation as per Section 32 of the I.T. Act will not be applicable to the assessee case. I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 23 15. The Ld. D.R. appearing for the Revenue could not bring any contra decision, thereby supported the order passed by the Ld. CIT(A). 16. We have given our thoughtful consideration and perused the materials available on record. The Co-ordinate Bench of the Tribunal held that the fixed assets served some special purpose of the working of the assessee and thereby considered as ‘plant and machinery’ in the working process of the assessee. The Ld. CIT(A) has not justified in holding that the income of exempt person has to be calculated on the basis of normal commercial principles and by Rule of accountancy. 16.1. Respectfully following the above judicial precedent, we hold that the assessee is entitled to claim the depreciation as ‘plant and machinery’ as the assessee in promoting public objects which are activities in the nature of trade, commerce or business but without commercial motive. Thus the ground no. 8 raised by the Assessee is hereby allowed. 17. Ground no. 9 namely the application of income shall precede accumulation by directing A.O. to allow accumulation u/s. 11(1)(a) of the Act, from income remaining after deducting amount applied for the objects of the assessee trust. 17.1. In this connection, Ld. Counsel drawn our attention to the decision of the Co-ordinate Bench in the case of Gnyan Dham Vapi Charitable Trust Vs. DCIT (Exemptions) in ITA No. 2208/Ahd/2018 dated 19-08-2020 observing as follows: “...8.1 Under s.11 of the Act, income derived from property held under trust wholly for charitable or relates purposes shall not be included in the total income subject to certain conditions. On a combined reading of Section 11(1)(a) and Section 11(2) of the Act, it emerges that the trust is allowed to accumulate 15% of its income I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 24 without any time limit and balance 85% can be set apart for specified period to five years. In the instant case, the assessee in the assessment year in question as well as in some other assessment years have made spendings in excess of its receipts resulting in certain deficit. Owing to excess spending over receipts, a peculiar situation has arisen in the present case towards the manner of computation of quantum of deficit eligible to be carried forward for set off in subsequent assessment years having regard to statutory permission towards 15% accumulation under s.11(1)(a)/11(1)(b) of the Act without any time limit. 8.2 To delineate on the issue, it may be pertinent to note that in order to be eligible for claiming exemption, it is essential that the income of the trust is applied for charitable objects. A charitable trust or institution is required to apply at least 85% of income derived from trust property towards charitable purposes. If the income spent on charitable or religious purposes during the previous year falls short of 85% of the income derived during the year, such shortfall may be subjected to tax in certain circumstances. Hence, a statutory obligation has been cast on beneficiary trusts to utilize at least 85% of the income derived from the trust property unless accumulated or set apart for application in subsequent years subject to certain stipulated conditions. Section 11(1)(a) & (b) r.w.s. 11(2) of the Act however grants an entitlement to a charitable trust to retain or accumulate 15% of income derived from property held in trust without any time limit and is thus benevolent in nature. In this backdrop, it is noticed that the situation herein is quite opposite. The assessee in the instant case has, in fact, utilized its income for charitable purposes in excess of its receipts without any accumulations resulting in certain ‘deficits’. The CIT(A) has applied the governing principles of Section 11(1)(a) of the Act to a totally converse situation of excess spending rather than accumulation and has brought down the entitlement of deficits carry forward. 8.3 Ostensibly, the assessee has not availed the entitlement of accumulation of 15% of income in the instant case. Needless to say, the statutory postulations towards accumulation of 15% of income for indefinite period is an entitlement or a right of absolute nature vested upon the assessee but, however, cannot be regarded as an obligation envisaged in law. The law applicable to accumulation of income cannot be extended to application thereof. Where an assessee trust has made excess application of its income, the option or entitlement vested upon an assessee to accumulate 15% for indefinite period in our view cannot operate as an obligation enforceable against it in the absence of accumulation. The method of computation of deficit to be truncated artificially 15% based on an entitlement (opposed to an obligation) as suggested by first appellate authority is totally devoid of any logic. This would tantamount to application of concession conferred on assessee in a reverse manner and thus put the assessee in a worser position in the event of accelerated application of receipts for salutary purposes. The action directed by CIT(A) has the effect of deprivation of concession granted and is repugnant to the intended outcome. The Pune Bench of Tribunal in Maharshi Karve Stree Shikshan Samstha Karvenagar vs. ITO 174 ITD 591 (Pune) has also essentially held that relaxations conferred under s. 11(1)(a)/(b) r.w. Section 11(2) of the Act to the extent of 15% of income would not nullify the entitlement of such absolute nature by way of reduction in quantum of deficit. We thus have no hesitations to quash the observations of the first appellate authority towards exclusion of 15% of income for the purposes of determination of quantum of deficit to be carried forward for set off in ensuing years in accordance with law.” I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 25 17.2. Ld. Senior Counsel further relied upon Pune Bench decision in the case of Maharshi Karve Stree Shikshan Samstha Karvenagar Vs. ITO wherein it has been held as follows: “IT: Exemption under section 11(1)(a) i.e... 15 per cent of income, is absolute exemption and application of section 11(2) does not extend to nullify said absolute exemption IT: Where in relevant assessment year application of income, is more than receipts of year, excess application of income i.e., expenditure in hands of assessee, can be carried forward to succeeding year” 17.3. Respectfully following the above ratio of the decisions of the Co-ordinate Benches of the Tribunals, we hereby set aside the order passed by the Ld. CIT(A) and held that when application of income is more than receipts of year, excess application of income i.e., expenditure in the hands of the assessee can be carried forward to succeeding Year. Thus the ground no. 9 raised by the assessee is hereby allowed. 18. Regarding ground nos. 10 & 11, Ld. CIT(A) directing A.O. to firstly allow the set off of deficit carried forward from earlier year then amount applied during the year and after these adjustments to allow appellant accumulation @ 15% u/s. 11(1)(a) from the surplus left if any. 18.1. In this connection, Ld. Senior Counsel submitted this issue is covered in favour of the assessee by Hon’ble Supreme Court in the case of CIT(E) Vs. Subros Educational Society reported in 303 CTR 1 (SC) wherein Revenue’s Misc. Application was dismissed by observing any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off I.T.A Nos. 2434 & 2378/Ahd/2017 A.Y. 2014-15 Page No ACIT vs. Ahmedabad Urban Development Authority 26 against income of subsequent years by invoking Section 11 of the Income Tax Act. 18.2. Respectfully following the Apex Court judgment, we here set aside of the Ld. CIT(A) on this count. Thus the Ground Nos. 10 & 11 filed by the assessee are allowed. 19. Regarding ground nos. 13 & 14 namely levy of interest u/s. 234B & 234C and initiation of penalty proceedings which are consequential in nature and the same does not require any adjudication as the main appeal is allowed in favour of the assessee. 20. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the open court on 16 -06-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 16/06/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / 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 अपीलȣय अͬधकरण, अहमदाबाद
AI Insights
The case involves cross appeals by the Revenue and the Assessee, Ahmedabad Urban Development Authority (AUDA), against the appellate order passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad. The primary issue was whether AUDA's activities, which include urban development and town planning, fall under the proviso to Section 2(15) of the Income Tax Act, which limits the exemption for entities engaged in trade, commerce, or business. The Tribunal considered the judgments of the Gujarat High Court and the Supreme Court, which had previously ruled in favor of AUDA, confirming its status as a charitable entity not engaged in trade or commerce. The Tribunal's decision also addressed specific issues related to the computation of income, application of grants, and the claim of depreciation on assets.
