M/s Karnataka Industrial Areas Development Board , Bangalore V. Deputy Commissioner of Income Tax (Exemptions) , Bangalore

ITA 254/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1827 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C KHINCHA
• Keywords: Depreciation; Charitable institution; Benefit of exemption; Set aside
• Section: 143(3); 142(1); 143(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BENGALURU BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 254 & 255 /BANG/20 19 (ASSESSMENT YEAR: 2013-14 & 2014-15) KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD, NO.49, 4 TH & 5 TH FLOOR, KHANIJA BHAVAN, RACE COURSE ROAD, BENGALURU-56001. PAN:AAATK 1305 J VS. APPELLANT DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS) BENGALURU. RESPONDENT APPELLANT BY : SHRI P.C.KHINCHA, CA RESPONDENT BY : SHRI PRADEEP KUMAR, CIT(DR) DATE OF HEARING: 14/05/2019 DATE OF PRONOUNCEMENT: 17/06/2019 O R D E R PER PAVAN KUMAR GADALE, JM: THE ASSESSEE HAS FILED THE APPEALS AGAINST DIFFERE NT ORDERS OF THE CIT(A)-14 FOR THE ASSESSMENT YEARS 20 13-14 AND 2014-15 WHERE ISSUES ARE IDENTICAL AND SIMILAR. TH EREFORE, FOR THE SAKE OF CONVENIENCE, THEY WERE HEARD TOGETHER A ND COMMON CONSOLIDATED ORDER IS BEING PASSED. 2. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP ITA NO.254/BANG/2019. AT THE TIME OF HEARING, LEARNED AR HAS ITA NOS.254 & 255/BANG/2019 PAGE 2 OF 10 NOT PRESSED GROUND NO.3 AND ALSO RAISED ADDITIONAL GROUNDS OF APPEAL WHICH ARE ADMITTED. THE LD. AR ARGUED ONLY O N THE GROUND OF DENIAL OF EXEMPTION U/S 11 OF THE ACT WH EREAS THE OTHER GROUNDS OF APPEAL ARE ON THE ADDITIONS MADE B Y THE AO BY DENYING THE EXEMPTION. AND RESTRICTED HIS SUBMIS SIONS ON THE DENIAL OF EXEMPTION 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN ASSOCIATION OF PERSONS AND FILED THE RETURN OF INCO ME BELATEDLY ON 5/12/2013 AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT,1961 ['T HE ACT' FOR SHORT]. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. THE CASE WAS REFERRED FIR SPECIAL AUD IT U/S 142(2A) OF THE ACT. WRIT PETITION WAS FILED BY THE ASSESSEE BEFORE THE JURISDICTIONAL HIGH COURT. THE HONBLE C OURT PASSED INTERIM ORDER DATED 5/7/2016 STAYING THE PROCEEDING S INITIATED BY THE AO U/S 142(2A). SUBSEQUENTLY, TH E HONBLE HIGH COURT HAS QUASHED 142(2A) PROCEEDINGS FOR BOTH THE ASSESSMENT YEARS BY ORDER DATED 02/01/2018. WRIT AP PEAL WAS FILED BY THE REVENUE BEFORE THE DIVISION BENCH OF THE HONBLE KARNATAKA HIGH COURT. AO, SUBJECT TO OUTCO ME OF THE WRIT APPEAL, HAS PROCEEDED IN THE ASSESSMENT PROCEE DINGS AND ITA NOS.254 & 255/BANG/2019 PAGE 3 OF 10 AO HAS DENIED THE CLAIM OF EXEMPTION U/S 11 AND MAD E ADDITION AND ASSESSED THE TOTAL INCOME OF RS.36,802 ,75,496/- BY ORDER U/S 143(3) OF THE ACT DATED 28/2/2018. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FI LED AN APPEAL WITH THE CIT(A). THE CIT(A) HAS DISMISSED T HE APPEAL. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. THE LEARNED A R HAS ARGUED THAT THE CIT(A) ERRED IN CONFIRMING DENIAL O F EXEMPTION U/S 11 BY APPLYING THE PROVISIONS OF 2(15 ) OF THE ACT. THE LEARNED AR FURTHER SUBMITTED THAT A SIMILA R ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE F OR ASSESSMENT YEARS 2009-10 AND 2010-11 AND FILED COPI ES OF THE ORDERS AND MATERIAL FOR ALLOWING THE CLAIM. CON TRA, LEARNED DR FILED WRITTEN SUBMISSIONS AND SUPPORTED THE ORDE R OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. PRIMA FACIE, AS ENVISAGED BY THE LEARNED AR, WE FOUND THAT THE ISSUE BEFORE US IS IDENTICAL TO THE EARLIER YEARS VIZ.,2009-10 AND 2010-11 WHERE AO HAS DENIED EXEMPT ION U/S 11 AND MADE THE ADDITIONS. THE LD.AR RIGHTLY B ROUGHT TO THE KNOWLEDGE OF THE TRIBUNAL, IN THE ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.378/BANG/2013, DA TED ITA NOS.254 & 255/BANG/2019 PAGE 4 OF 10 04/09/2015, THE TRIBUNAL HAS CONSIDERED THE FACTS A ND CIRCUMSTANCES AND THE DISPUTED ISSUE AND MADE OBSER VATIONS THAT THE ASSESSEE IS ENTITLED FOR BENEFITS OF EXEMP TION U/S 11 AT PARAS.44 TO 49: 44. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE PURPOSE FOR WHICH THE ASSESS EE EXISTS IS FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE FACT THAT THE ASSESSEE ENJOYED REGISTRATION U/S.12AA OF THE ACT IN THE PAST IS ITS ELF SUFFICIENT TO COME TO THIS CONCLUSION. THE WITHDRAW N OF REGISTRATION U/S.12AA OF THE ACT WAS ONLY CONSEQUEN T TO THE INTRODUCTION OF THE PROVISO TO SEC.2(15) OF THE ACT BY THE FINANCE ACT, 2008. THEREFORE, THE QUESTION THAT WE NEED TO BE ANSWERED IS AS TO WHETHER THE PROVISO TO SEC.2(15) OF THE ACT WOULD BE APPLICABLE TO THE CAS E OF THE ASSESSEE. 45. WE SHALL NOW UNDERSTAND THE APPROACH TO BE ADOPTED IN COMING TO THE CONCLUSION AS TO WHETHER T HE PROVISO TO SEC.2(15) OF THE ACT WILL BE APPLICABLE TO THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE HONBL E DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION VS. DGIT(EXEMPTION) AND OTHERS 371 ITR 333 (DELHI). THE LEARNED COUNSEL FOR THE ASSESSEE H AS PLACED STRONG RELIANCE ON THIS DECISION TO SUPPORT HIS PLEA THAT THE PROVISO TO SEC.2(15) OF THE ACT IS NOT APP LICABLE TO ASSESSEE. THE FACTS OF THE CASE BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION (SUPRA) WAS THAT THE ASSESSEE IN THAT CASE ENJOYED THE BENEFIT OF EXEMPTION U/S.10(23C)(IV) OF THE ACT. SEC.10(23C)(IV) PROVIDES ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF ANY OTHER FUND OR INSTITUTION E STABLISHED FOR CHARITABLE PURPOSES WHICH MAY BE APPROVED BY TH E PRESCRIBED AUTHORITY, HAVING REGARD TO THE OBJECTS OF THE FUND OR INSTITUTION AND ITS IMPORTANCE THROUGHOUT I NDIA OR THROUGHOUT ANY STATE OR STATES, SHALL NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE PRESCRIBED AUTHORIT Y WITHDREW THE APPROVAL GRANTED TO THE ASSESSEE CONSE QUENT TO THE INSERTION OF THE PROVISO TO SEC.2(15) OF THE ACT, ON THE GROUND THAT THE ASSESSEE WAS DERIVING RENTAL INCOME FROM LETTING OUT SPACE FOR RENT DURING TRADE FAIRS AND E XHIBITIONS, ITA NOS.254 & 255/BANG/2019 PAGE 5 OF 10 WAS DERIVING INCOME FROM SALE OF TICKETS AND INCOME FROM FOOD AND BEVERAGE OUTLETS. THE SAID WITHDRAWAL WAS CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE DELHI HIGH COURT. THE HONBLE DELHI HIGH COURT HAD TO GO INTO THE QUESTION AS TO THE SCOPE OF THE PROVISO TO SEC.2(15 ) OF THE ACT. THE HONBLE DELHI HIGH COURT HAS LAID DOWN THE FOLLOWING VERY IMPORTANT PRINCIPLES AS TO HOW THE P ROVISO TO SEC.2(15) OF THE ACT HAS TO BE INTERPRETED:- (I) THE PROVISO TO SEC.2(15) OF THE ACT INTRODUCED BY VIRTUE OF THE FINANCE ACT, 2008 WITH EFFECT FROM 01.04.2009 HAS TWO PARTS. THE FIRST PART HAS REFERE NCE TO THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE SECOND PART HAS REFERENCE TO ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. BOTH THESE PARTS A RE FURTHER SUBJECT TO THE CONDITION THAT THE ACTIVITIE S SO CARRIED OUT ARE FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OR USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITIES. IN OTHER WORDS, IF, BY VIRTUE OF A CESS OR FEE OR ANY OTHER CONSIDERATION, INCOME IS GENERATED BY ANY OF THE TWO SETS OF ACTIVITIES REFERRED TO ABOVE, TH E NATURE OF USE OF SUCH INCOME OR APPLICATION OR RETENTION O F SUCH INCOME IS IRRELEVANT FOR THE PURPOSES OF CONSTRUING THE ACTIVITIES AS CHARITABLE OR NOT. (II) IF AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS CARRIED ON AND IT GENERATES INCOME, THE FACT THAT SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES , WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOUL D NONETHELESS NOT BE REGARDED AS BEING CARRIED ON FOR A CHARITABLE PURPOSE. IF A LITERAL INTERPRETATION IS TO BE GIVEN TO THE PROVISO, THEN IT MAY BE CONCLUDED THAT THIS FACTWOULD HAVE NO BEARING ON DETERMINING THE NATURE OF THE ACTIVITY CARRIED ON BY THE PETITIONER. BUT, IN DECIDING WHETHER ANY ACTIVITY IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, IT HAS TO BE EXAMINED WHETHER THERE IS AN ELEMENT OF PROFIT MAKING OR NOT . SIMILARLY, WHILE CONSIDERING WHETHER ANY ACTIVITY I S ONE OF RENDERING ANY SERVICE IN RELATION TO ANY TRA DE, COMMERCE OR BUSINESS, THE ELEMENT OF PROFIT MAKING IS ALSO VERY IMPORTANT. ITA NOS.254 & 255/BANG/2019 PAGE 6 OF 10 (III) THE MEANING OF THE EXPRESSION 'CHARITABLE PURPOSES' HAS TO BE EXAMINED IN THE CONTEXT OF INCOME, BECAUSE, IT IS ONLY WHEN THERE IS INCOME THE QUESTION OF NOT INCLUDING THAT INCOME IN THE TO TAL INCOME WOULD ARISE. THEREFORE, MERELY BECAUSE AN INSTITUTION, WHICH OTHERWISE IS ESTABLISHED FOR A CHARITABLE PURPOSE, RECEIVES INCOME WOULD NOT MAKE IT ANY LESS A CHARITABLE INSTITUTION. WHETHER THAT INSTITUTION, WHICH IS ESTABLISHED FOR CHARITABLE PURPOSES, WILL GET THE EXEMPTION WOULD HAVE TO BE DETERMINED HAVING REGARD TO THE OBJECTS OF THE INSTITUTION AND ITS IMPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES. (IV) MERELY, BECAUSE AN INSTITUTION DERIVES INCOME OUT OF ACTIVITIES WHICH MAY BE COMMERCIAL, THAT DOE S, IN ANY WAY, AFFECT THE NATURE OF THE INSTITUTION AS A CHARITABLE INSTITUTION IF IT OTHERWISE QUALIFIES FO R SUCH A CHARACTER. (V)MERELY BECAUSE A FEE OR SOME OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY AN INSTITUTION, IT WOUL D NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, TH EN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALS O NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE O R BUSINESS. IF THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT TO DO CHARITY, THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD NOT APPLY. (VI)IF A LITERAL INTERPRETATION WERE TO BE GIVEN TO THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTIC LE 14 (THE EQUALITY CLAUSE ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION). COURTS SHOULD ALWAYS ENDEAVOUR TO UPHOLD THE CONSTITUTIONAL VALIDITY OF A PROVISION A ND, IN DOING SO, THE PROVISION IN QUESTION MAY HAVE TO BE READ DOWN, AS POINTED OUT ABOVE. (VII)SECTION 2(15) IS ONLY A DEFINITION CLAUSE. SECTION 2 BEGINS WITH THE WORDS, IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE EXPRESSION 'CHARITABLE PURPOSE' APPEARING IN SECTIO N 2(15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTION 10(23C)(IV). WHEN THE EXPRESSION 'CHARITABL E ITA NOS.254 & 255/BANG/2019 PAGE 7 OF 10 PURPOSE', AS DEFINED IN SECTION 2(15) OF THE SAID A CT, IS READ IN THE CONTEXT OF SECTION 10(23C)(IV) OF TH E SAID ACT, WE WOULD HAVE TO GIVE UP THE STRICT AND LITERA L INTERPRETATION SOUGHT TO BE GIVEN TO THE EXPRESSION 'CHARITABLE PURPOSE' BY THE REVENUE. (VIII) THE EXPRESSION 'CHARITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CONSTRUED LITERALLY AND IN ABSOLUTE TERMS. THE CORRECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF T HE SAID ACT WOULD BE THAT IT CARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. IN BOTH THE ACTIVITIES, IN THE NATUR E OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT TO BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN INSTITUTION I S NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT B UT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITAB LE PURPOSES. (EMPHASIS SUPPLIED) 46. IT CAN BE SEEN FROM THE VARIOUS PROVISIONS OF THE KIAD ACT WHICH WE HAVE SET OUT IN THE EARLIER PART OF THE ORDER THAT THE DOMINANT AND PRIME OBJECTIVE OF THE ASSESSEE IS NOT PROFIT MAKING. PRIOR TO THE INTRODU CTION OFTHE PROVISO TO SECTION 2(15) OF THE ACT, THERE WA S NO DISPUTE THAT THE ASSESSEE WAS ESTABLISHED FOR CHARI TABLE PURPOSES. WE SHALL NOW TAKE A LOOK AT THE INCOME AN D EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.3.2009 OF THE ITA NOS.254 & 255/BANG/2019 PAGE 8 OF 10 ASSESSEE. THE INCOME SIDE OF THE ACCOUNT SHOWS THAT THE MAIN COMPONENT OF INCOME OF THE ASSESSEE IS DERIVED IN THE FORM OF INTEREST OF RS.131.17 CRORES. SCHEDULE P TO THE INCOME AND EXPENDITURE ACCOUNT SHOWS THE BREAK-UP O F THE INTEREST RECEIPT BY THE ASSESSEE. THE INTEREST ON FIXED DEPOSITS IS RS.120.90 CRORES. THE EARNEST MONEY DEP OSIT GIVEN BY THE ALLOTTEES ARE PARKED BY THE ASSESSEE I N FIXED DEPOSIT AND THOSE DEPOSITS HAS EARNED THE AFORESAID INTEREST INCOME. THEREFORE THERE CAN BE NO PROFIT E LEMENT IN EARNING THIS INTEREST INCOME. BESIDES THE ABOVE, THE OTHER COMPONENTS OF INTEREST ARE INTEREST FROM ALLO TTEES, PENAL INTEREST FROM ALLOTTEES, INTEREST ON STAFF LO AN, INTEREST FROM SB AND OTHERS, INTEREST ON SEED MONEY, DIVIDEN D RECEIVED AND INTEREST ON INCOME TAX REFUND. THE OTH ER COMPONENT OF INCOME IS GAIN ON DISPOSAL OF LAND, SA LE OF APPLICATION FORMS, RECOVERIES OF FINES AND PENALTIE S, INTEREST, OTHER RECEIPTS, RENT, FORFEITURE OF DEPOS ITS, WATER SUPPLY CHARGES. THE INCOME FROM SALE OF LAND IS RS. 18.69 CRORES. THE EXPENDITURE INCURRED BY THE ASSESSEE COMPRISES OF REPAIRS AND MAINTENANCE, ADMINISTRATIV E EXPENSES, WATER AND ELECTRICITY CHARGES, SPECIAL AN D OTHER CHARGES, DEPRECIATION. IF THE GAIN ON DISPOSAL OF L AND OF RS.18.69 CRORES WHICH IS THE PRIMARILY OBJECT OF TH E ASSESSEE AND EXPENDITURE IN THE FORM OF ADMINISTRAT IVE EXPENSES OF RS.15.42 CRORES AND 10.61 CRORES WHICH ARE FIXED EXPENSES AND NECESSARY TO CARRY ON THE PRIMAR Y OBJECT ALONE ARE CONSIDERED THAN THERE WOULD BE LOS S. THIS BY ITSELF WOULD DEMONSTRATE THAT THE ASSESSEE DOES NOT EXIST FOR PROFIT. 47. THE MAIN AIM AND OBJECT FOR WHICH THE ASSESSEE WAS ESTABLISHED IS TO (A) PROMOTE RAPID AND ORDERLY DEVELOPMENT OF INDUSTRIES IN THE STALE. (B)ASSIST I N IMPLEMENTATION OF POLICIES OF GOVERNMENT WITHIN THE PURVIEW OF KIAD ACT. (C) FACILITATE IN ESTABLISHING INFRASTRUCTURE PROJECTS.(D)FUNCTION ON NO PROFIT - NO LOSS BASIS. FOR THE ABOVE PURPOSE, THE ASSESSEE (A)ACQUIRE LAND AND FORM INDUSTRIAL AREAS IN THE STATE.(B)PROVIDE BASIC INFRASTRUCTURE IN THE INDUST RIAL AREAS.() ACQUIRE LAND FOR SINGLE UNIT COMPLEXES.(D)ACQUIRE LAND FOR GOVERNMENT AGENCIES F OR THEIR SCHEMES AND INFRASTRUCTURE PROJECTS. THE DOMI NANT AND MAIN OBJECT OF THE ASSESSEE IS CHARITABLE AND N OT FOR MAKING PROFITS. ITA NOS.254 & 255/BANG/2019 PAGE 9 OF 10 48. A LOOK AT THE INCOME STREAM OF THE ASSESSEE CLEARLY REVEALS THAT ALL THE ACTIVITIES FROM WHICH THE ASSE SSEE DERIVES INCOME ARE AN INHERENT PART OF THE MAIN OBJ ECT OF THE ASSESSEE. IT IS CLEAR FROM THE FACTS OF THE CAS E THAT PROFIT MAKING IS NOT THE DRIVING FORCE OR OBJECTIVE OF THE ASSESSEE. RATHER THE PURPOSE FOR WHICH THE ASSESSEE WAS CREATED IS TO REGULATE AND DEVELOP DRINKING WATER A ND DRAINAGE FACILITIES IN THE URBAN AREAS OF THE STATE OF KARNATAKA AND FOR MATTERS CONNECTED THEREWITH. THIS MAKES IT CLEAR THAT ANY INCOME GENERATED BY THE ASS ESSEE DOES NOT FIND ITS WAY INTO THE POCKETS OF ANY INDIV IDUALS OR ENTITIES. IT IS TO BE UTILIZED FULLY FOR THE PURPOS ES OF THE OBJECTS OF THE PETITIONER. 49. KEEPING IN MIND THE ABOVE FACTUAL ASPECTS AND THE PROVISIONS OF THE KIDA ACT, AND PRINCIPLE LAID DOWN IN THE AFORESAID DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA PROMOTION ORGANIZATION (SUPRA), IN OU R VIEW, WILL CLEARLY SHOW THAT THE ASSESSEE DOES NOT DRIVEN PRIMARILY BY DESIRE OR MOTIVE TO EARN PROFITS BUT T O DO CHARITY THROUGH ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY. THE ASSESSEE IS OPERATING ON NO PROFIT BAS IS. THIS IS SUBSTANTIATED BY THE ACTUAL INCOME RECEIVED ON OPER ATIONS OF THE ASSESSEE AND THE EXPENDITURE INCURRED SET OU T IN THE EARLIER PARAGRAPHS OF THIS ORDER. THE PROVISO TO SE C.2(15) OF THE ACT IS THEREFORE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. WE THEREFORE HOLD THAT THE ASSESSEE IS EN TITLED TO THE BENEFITS OF SEC.11 OF THE ACT. THE AO HAS NOT D ISPUTED THE CONDITIONS NECESSARY FOR ALLOWING EXEMPTION U/S .11 OF THE ACT, EXCEPT THE APPLICABILITY OF PROVISO TO SEC .2(15) OF THE ACT. IN VIEW OF OUR CONCLUSIONS THAT THE SAID P ROVISO IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE, WE HOLD THAT THE ASSESSEES INCOME IS NOT INCLUDIBLE IN THE TOTAL IN COME AND THEREFORE THE INCOME RETURNED BY THE ASSESSEE IS DI RECTED TO BE ACCEPTED. WE FIND THERE IS NO CHANGE IN FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE AND APPLY THE DECISION AND SET ASIDE O RDER OF THE CIT(A) AND WE HOLD THAT THE PROVISIONS OF SECTION 2 (15) ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND FOLL OW THE ITA NOS.254 & 255/BANG/2019 PAGE 10 OF 10 JUDICIAL DISCIPLINE AND DIRECT THE ASSESSING OFFICE R TO ALLOW THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT TO THE ASSES SEE AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 7. SINCE THE FACTS OF THE CASE FOR ASSESSMEN T YEAR 2014- 15 ARE IDENTICAL TO THE ASSESSMENT YEAR 2013-14. H ENCE, THE DECISION TAKEN BY US FOR ASSESSMENT YEAR 2013-13 WI LL EQUALLY APPLY TO ASSESSMENT YEAR 2014-15 WITH MUTATIS MUTANDIS AND ALLOW THE EXEMPTION U/S 11 OF THE ACT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. IN THE RESULT, ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2019. SD/- SD/- (JASON P BOAZ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E : 17/06/2019. SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE