Dy. C.I.T., Circle-1, Aligarh V. Aligarh Devolopment Authority, Aligarh

ITA 255/AGR/2013

• Counselvise Citation: 25520314 RSA 2013
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K AGARWAL
• Assessee Lawyers: WASEEM ARSHAD
• Keywords: Rule of consistency; Retrospective amendment
• Section: 12; 11; 143(3); 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMB ER ITA NO. 255/AGRA/2013 ASST. YEAR : 2008-09 D.C.I.T., CIRCLE 1, VS. ALIGARH DEVELOPMENT AUT HORITY, ALIGARH. RAMGAHT ROAD, ALIGARH. (PAN: AAALA 0082 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K. AGARWAL, ADVOCATE RESPONDENT BY` : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 27.02.2014 DATE OF PRONOUNCEMENT : 28.02.2014 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), MUZAFFARNAGAR DATED 11.04.2013 FOR THE ASSESSMENT Y EAR 2008-09, CHALLENGING THE DELETION OF ADDITION OF RS.11,47,731/- AND HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S. 11, 12 OF THE IT ACT. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N AOP ENGAGED IN THE ACTIVITY OF DEVELOPMENT OF ALIGARH CITY. RETURN DECLARING NI L INCOME WAS FILED ON 29.09.2008. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE AO VIDE ORDER SHEET ITA NO. 255/AGRA/2013 2 ENTRY DATED 25.11.2010 REQUIRED THE ASSESSEE TO EXP LAIN WHETHER THE ASSESSEE WAS HIT BY PROVISIONS OF SECTION 2(15) OF THE ACT. THE AO IN THE ASSESSMENT ORDER HAS REPRODUCED ORDER SHEET ENTRY DATED 25.11.2010 WHICH IS NOT REPEATED HERE FOR THE SAKE OF BREVITY. IN RESPONSE IT WAS CONTENDED BY TH E ASSESSEE THAT BETTERMENT CHARGES, DEVELOPMENT CHARGES, COMPOUNDING CHARGES, STAKING FEES, LEASE RENT AND FREE HOLD CHARGES WERE CHARGED AT THE TIME OF APPRO VING CONSTRUCTION PLANS IN THE CITY. ALL THESE FEE WERE CHARGES UNDER VARIOUS GOS OF U.P. GOVERNMENT. THE ASSESSEE ALSO FURNISHED COPIES OF ALL THE RELEVANT GOS IN SUPPORT OF ITS CLAIM. IT WAS FURTHER CONTENDED THAT REGULATION OF CONSTRUCTI ON ACTIVITY WAS BASICALLY A GOVERNMENT ACTIVITY WHICH WAS CARRIED OUT BY ALIGAR H DEVELOPMENT AUTHORITY. HENCE IT WAS ARGUED THAT SUCH ACTIVITIES WERE NOT I N THE NATURE OF COMMERCIAL OR BUSINESS ACTIVITY. IT WAS EXPLAINED BY THE ASSESSEE THAT FEES CHARGED UNDER VARIOUS HEADS WERE BIFURCATED AS PER U.P. GOVERNMENT ORDER INTO 10% FOR OVERHEAD AND ESTABLISHMENT EXPENSES WHILE THE BALANCE 90% WAS UT ILIZED FOR INFRASTRUCTURE AND DEVELOPMENT OF CITY FOR GENERAL PUBLIC UTILITY ON LY IN THE CASE OF COMPOUNDING THE BIFURCATION BETWEEN OVERHEAD AND INFRASTRUCTURE EXPENSES WERE IN THE RATIO OF 5 50. 2.1. AS PER THE ASSESSEE IT RECEIVES A SHARE FROM U .P. GOVERNMENT OUT OF STAMP DUTY COLLECTION FOR REGISTRATION OF SALE DEED ETC. OUT OF THIS 10% GOES TOWARDS ITA NO. 255/AGRA/2013 3 OVERHEAD AND ESTABLISHMENT EXPENSES 90% TO INFRASTR UCTURE FUNDS. THAT COLLECTION AND UTILIZATION OF FEES AS EXPLAINED CLEARLY POINTE D THAT THE ASSESSEE WAS NOT CARRYING OUT ANY BUSINESS OR COMMERCIAL ACTIVITY. A LL THE ACTIVITIES WERE FOR GENERAL PUBLIC UTILITY AND HENCE IN THE NATURE OF CHARITY. 2.2 IT WAS FURTHER EXPLAINED THAT DURING THE YEAR A SSESSEE SOLD FLATS FOR THE POOREST SECTION OF THE SOCIETY IN EWS CATEGORY. THI S WAS A PURELY CHARITABLE ACTIVITY BECAUSE THESE FLATS WERE SOLD ON NON-COMME RCIAL BASIS PURELY FOR THE BENEFIT OF THE POOR AS PER THE GUIDELINES OF U.P. G OVERNMENT. IT WAS ARGUED THAT MERELY SELLING OF A FLAT OR RECEIVING ANY CONSIDERA TION FROM AN ALLOTTEE OR CUSTOMER DID NOT RENDER ANY ACTIVITY AS CARRYING ON A BUSINE SS OR COMMERCIAL ACTIVITY. THE ASSESSEE ALSO FURNISHED COST OF EWS FLATS AS PER WH ICH COST OF STRUCTURE WAS AT RS.62,83,429/- INCLUDING THE COST OF WOOD WORK AND ELECTRICAL WORK. THE COST OF LAND AND DEVELOPMENT OF PARK AND ROAD WAS FURTHER A DDED TO THE COST OF THE MANYAVAR KANSHI RAM AVAS YOJANA. THE TOTAL SELLING PRICE WAS RS.1,06,50,000/- AND THE TOTAL COST WAS RS.95,02,269/-RESULTING IN S URPLUS OF RS.11,47,731/-. THE SURPLUS WAS TOWARDS THE OVERHEAD AND ESTABLISHMENT EXPENSES WHICH WORKED OUT TO APPROXIMATELY 10%. HENCE AS PER THE ASSESSEE THERE WAS NO PROFIT COMPONENT. ITA NO. 255/AGRA/2013 4 2.3 IT WAS FURTHER ARGUED BY THE ASSESSEE THAT AMEN DMENT TO SECTION 2(5) OF THE ACT WAS NOT A BLANKET BAN FOR INSTITUTION INVOLVED IN ACTIVITIES FOR 12-2008 INSERTED POST AMENDMENT OF SECTION 2(15) STIPULATED THAT THE CHARITABLE NATURE OF THE ASSESSEE WOULD BE DETERMINED ON CASE TO CASE BASIS. THUS IT WAS PLEADED THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION. IT WAS SUBMITT ED THAT ACTIVITIES OF THE ASSESSEE WERE ACCEPTED AS ACTIVITIES OF GENERAL PUBLIC UTIL ITY BY THE AO DURING AYS. 2004-05 AND 2005-06. ACCORDINGLY, AS THERE HAD BEEN NO CHANGE IN NATURE OF ACTIVITIES OR PURPOSES OF THE ACTIVITIES HENCE THE CHARITABLE STATUS OF THE ASSESSEE STOOD PROVED AND ACCEPTED BY THE DEPARTMENT. HOWEVE R, THE AO REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE AND HELD THE ACTIV ITIES SALE OF READY BUILT FLAT TO EWS AS THAT OF BUSINESS IN NATURE. THEREFORE, THE A O BROUGHT THE SURPLUS AT RS.11,47,731/- TO TAX. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APP ELLATE ORDER IN WHICH THE ASSESSEE REITERATED THE STAND TAKEN BEFORE THE AO. IT WAS ALSO SUBMITTED THAT PROVISO TO SECTION 2(15) WAS APPLICABLE FROM ASSESS MENT YEAR 2009-10 BECAUSE THE SECTION WAS AMENDED W.E.F. 01.04.2009. IT WAS FURTH ER SUBMITTED THAT ITAT GRANTED REGISTRATION TO THE ASSESSEE U/S. 12AA OF THE IT AC T, THEREFORE, THE INCOME OF THE ASSESSEE WOULD BE EXEMPT. IT WAS ALSO SUBMITTED THA T THE ASSESSEE CARRIED OUT SAME ITA NO. 255/AGRA/2013 5 ACTIVITIES. THEREFORE, ON THE PRINCIPLE OF CONSISTE NCY ALSO, THE ADDITION IS UNJUSTIFIED. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITIES AS IS CONSIDERED BY THE AO. THE LD. CIT( A), CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL ON RECORD ALLOWED THE APPEAL OF THE ASSESSEE. THE FINDINGS OF LD. CIT(A) IN THE IMPUGNED ORDER ARE RE PRODUCED AS UNDER : THE FACTS OF THE CASE AS WELL AS SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS OBS ERVED THAT THE AO HAD ADDED SURPLUS AT RS.11,47,730/- ON THE GROUND T HAT SALE OF EWS FLATS WAS BUSINESS ACTIVITY OF THE APPELLANT AND WA S RATHER INFLUENCED BY THE AMENDMENT TO SECTION 2(15) OF THE ACT BROUGH T ON THE STATUTE BY THE FINANCE ACT, 2008 WITH EFFECT FROM 01.04.2009. ON THE OTHER HAND IT HAS BEEN VEHEMENTLY ARGUED THAT THE AMENDMENT MA DE TO SECTION 2(15) OF THE ACT WAS NOT FROM RETROSPECTIVE EFFECT BUT ONLY WITH PROSPECTIVE EFFECT. IT IS OBSERVED THAT IN AY 2004- 05 THE CLAIM OF REGISTRATION U/S 12A WAS ALLOWED BY THE HONBLE ITA T IN THE APPELLANTS CASE AND AS SUCH THE AO HAD ACCEPTED TH E DECLARED LOSS. SINCE THE AMENDMENT TO SECTION 2(15) OF THE ACT WAS APPLICABLE FROM AY 2009-10 AND NOT TO THE YEAR UNDER CONSIDERATION, THEREFORE THE AO WAS LEGALLY AND FACTUALLY INCORRECT TO INVOKE PROVI SIONS OF SECTION 2(15) OF THE ACT. FURTHER AS DISCUSSED ABOVE THE AP PELLANT WAS GRANTED REGISTRATION U/S 12A OF THE ACT BY THE HON BLE ITAT FOR AY 2004-05, THEREFORE, SURPLUS DERIVED AT RS.11,47,730 /- WAS EXEMPT U/S 11/12 OF THE ACT. THUS IT IS HELD THAT THE AO WAS N OT JUSTIFIED IN BRINGING THE SURPLUS AT RS.11,47,730/- TO TAX AND T HEREBY MADE ADDITION. THE SAME IS DIRECTED TO BE DELETED. THE C ASE LAWS CITED BY THE APPELLANT SUPPORTS THE CONTENTIONS MADE BY THE APPELLANT. GROUNDS OF APPEAL NOS.1 TO 5 ARE ALLOWED. 4. IN RESULT, THE APPEAL IS ALLOWED. 4. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT SINCE THE ACTIVITIES OF THE ASSESSEE WERE FOR THE CONSTRUCTIO N OF FLATS AND SELLING THE SAME, ITA NO. 255/AGRA/2013 6 THEREFORE, IT WAS MAINLY THE BUSINESS IN NATURE. TH E LD. DR RELIED UPON THE ORDER OF THE ITAT, AMRITSAR BENCH IN THE CASE OF JALANDHAR D EVELOPMENT AUTHORITY VS. CIT, 35 SOT 15 (124 TTJ 598). 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE NATURE OF ACTIVITIES ARE SAME AS CARRIED OUT IN EARLIER YEARS AS WELL AS SUB SEQUENT YEARS. IT IS SUBMITTED THAT ON IDENTICAL FACTS, THE AO ACCEPTED THE CLAIM OF AS SESSEE IN PRECEDING ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 U/S. 143(3). THE COPIES OF ASSESSMENT ORDERS ARE PLACED ON RECORD. HE HAS FURTHER SUBMITTED THAT EVEN IN SUBSEQUENT ASSESSMENT YEAR 2010-11, THE AO ACCEPTED THE SIMILAR CLAIM OF ASSESSEE U/S. 143(3) VIDE ORDER DATED 25.03.2013. COPIES OF THE BALANCE SHEET OF EA RLIER AND SUBSEQUENT ASSESSMENT YEAR HAVE BEEN PLACED ON RECORD TO SHOW THAT ON SUR PLUS DERIVED OUT OF SIMILAR ACTIVITIES, THE AO ACCEPTED SIMILAR CLAIM OF ASSESS EE HOLDING INCOME OF THE ASSESSEE EXEMPT U/S. 11 OF THE IT ACT. HE HAS, THER EFORE, SUBMITTED THAT ON PRINCIPLE OF CONSISTENCY ALSO, THE LD. CIT(A) WAS J USTIFIED IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. HE HAS ALSO SUBMITTED THAT AMENDED PROVISO TO SECTION 2(15) OF THE IT ACT WAS BROUGHT INTO STATUTE W.E.F. 01.04.2009 AND AS SUCH WAS APPLICABLE FROM THE ASSESSMENT YEAR 2009-10, WHICH IS ALSO NOT APPLICABLE IN THE ITA NO. 255/AGRA/2013 7 CASE OF ASSESSEE. HE HAS RELIED UPON THE DECISION O F HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. LUCKNOW DEVELOPMENT AUTHORIT Y, 38 TAXMAN. COM 246. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. IT IS ADMITTED FACT THAT NATURE OF ACTIVITIES OF THE ASSE SSEE ARE SAME AS WERE CARRIED OUT IN EARLIER ASSESSMENT YEARS AND SUBSEQUENT YEAR AS HAVE BEEN CONSIDERED BY THE AO IN ASSESSMENT YEAR UNDER APPEAL. THE AO MAINLY RELI ED UPON THE PROVISO TO SECTION 2(15) OF THE IT ACT, WHICH WAS INSERTED INTO THE AC T ADMITTEDLY W.E.F. 01.04.2009. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE SAID PROVISION IS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL. THU S, THE WHOLE BASIS OF THE AO WOULD BE DEMOLISHED BY THESE FINDINGS OF THE LD. CI T(A). IT IS ALSO ADMITTED FACT THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S . 12AA OF THE IT ACT WHICH IS EFFECTIVE IN THE ASSESSMENT YEAR UNDER APPEAL. COPI ES OF AUDITED BALANCE SHEET FOR EARLIER ASSESSMENT YEARS AND SUBSEQUENT YEAR HAVE B EEN PLACED ON RECORD TO SHOW THAT ON SAME SET OF FACTS, THE AO ACCEPTED THE CLAI M OF ASSESSEE GRANTING EXEMPTION U/S. 11 OF THE IT ACT U/S. 143(3) OF THE ACT. THE AO EVEN IN SUBSEQUENT ASSESSMENT YEAR 2010-11 ACCEPTED THE SIMILAR CLAIM OF ASSESSEE U/S. 143(3) VIDE ORDER DATED 25.03.2013, I.E., AFTER PASSING OF THE IMPUGNED ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION. IT IS, THEREFORE, CLEAR T HAT THE REVENUE DEPARTMENT ACCEPTED THE CLAIM OF ASSESSEE FOR GRANT OF EXEMPTI ON ON SURPLUS U/S. 11 OF THE IT ITA NO. 255/AGRA/2013 8 ACT. IT IS WELL SETTLED LAW THAT EVEN IF PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDINGS, BUT THE INCOME-TAX AUTHORIT IES SHALL HAVE TO FOLLOW THE RULE OF CONSISTENCY. WE RELY UPON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF RADHSWAMI SATSANG VS. CIT, 193 ITR 321, DEC ISION OF M.P. HIGH COURT IN THE CASE OF GODAVARI CORPORATION LTD., 156 ITR 835, DECISION OF DELHI HIGH COURT IN THE CASE OF ESCORTS LTD., 338 ITR 435 AND DECISI ON OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIKAS CHEMI GUM INDIA, 276 ITR 32. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE PRINCIPLE OF LAW, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELET ING THE ADDITION. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF H ONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. LUCKNOW DEVELOPMENT AUTHORITY I N WHICH IN VARIOUS PARAS, IT WAS HELD FOR THE APPLICABILITY OF PROVISO TO SECTION 2(15), THE ACTIVITIES OF THE TRUST SHOULD BE CARRIED OUT ON COMMERCIAL LINES WITH INTENTION TO MAKE PROFIT. WHERE THE TRUST IS CARRYING OUT ITS AC TIVITIES ON NON- COMMERCIAL LINES WITH NO MOTIVE TO EARN PROFITS, FO R FULFILMENT OF ITS AIMS AND OBJECTIVES, WHICH ARE CHARITABLE IN NATURE AND IN THE PROCESS EARN SOME PROFITS, THE SAME WOULD NOT BE HIT BY PRO VISO TO SECTION 2(15). THE AIMS AND OBJECTS OF THE ASSESSEE-TRUST A RE ADMITTEDLY CHARITABLE IN NATURE. [PARA 26] MERE SELLING SOME PRODUCT AT A PROFIT WILL NOT IPSO FACTO HIT ASSESSEE BY APPLYING PROVISO TO SECTION 2(15) AND D ENY EXEMPTION AVAILABLE UNDER SECTION 11. THE INTENTION OF THE TR USTEES AND THE MANNER IN WHICH THE ACTIVITIES OF THE CHARITABLE TR UST INSTITUTION ARE ITA NO. 255/AGRA/2013 9 UNDERTAKEN ARE HIGHLY RELEVANT TO DECIDE THE ISSUE OF APPLICABILITY OF PROVISO TO SECTION 2(15). [PARA 27] THERE IS NO MATERIAL/EVIDENCE BROUGHT ON RECORD BY THE REVENUE WHICH MAY SUGGEST THAT THE ASSESSEE WAS CONDUCTING ITS AFFAIRS ON COMMERCIAL LINES WITH MOTIVE TO EARN PROFIT OR HAS DEVIATED FROM ITS OBJECTS AS DETAILED IN THE TRUST DEED OF THE ASSESS EE. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROVISO TO SECTION 2 (15) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE, AND THE ASSESSEE WAS ENTITLED TO EXEMPTION PROVIDED UNDER SECTION 11 FOR THE RELEVANT ASSESSMENT YEAR. [PARA 28] MOREOVER, IN THE INSTANT CASE, THE ASSESSING OFFICE R HAS NOT GIVEN ANY DEFECTIVE IN COMPUTATION OF INCOME AS PER SECTI ON 11 AS SUBMITTED IN FORM-XB, BUT OBSERVED THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE. THE ACTIVITIES OF THE ASSESSEE ARE GENU INE. SO, THEN IT IS SO, THEN THERE IS NO REASON TO INTERFERE WITH IMPUGNED ORDERS PASSED BY THE TRIBUNAL. THE SAME ARE HEREBY SUSTAINED ALONG W ITH REASONS MENTIONED THEREIN. [PARA 30] 6.1 IN THE CASE OF ASSESSEE, THE AO HAS NOT BROUGH T ANY EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE WAS CONDUCTING ITS AFFAIR S ON COMMERCIAL LINES WITH MOTIVE TO EARN PROFIT. THE AO MERELY CONSIDERING TH E ACTIVITIES OF CONSTRUCTION OF FLATS AND SELLING HELD THE SAME TO BE BUSINESS IN N ATURE. THE DECISION IN THE CASE OF LUCKNOW DEVELOPMENT AUTHORITY, THEREFORE, CLEARLY A PPLIES IN FAVOUR OF THE ASSESSEE. THE LD. DR, HOWEVER, RELIED UPON THE ORDE R OF ITAT, AMRITSAR BENCH IN THE CASE OF JALANDHAR DEVELOPMENT AUTHORITY VS. CIT , IN WHICH REGISTRATION WAS REFUSED BY THE CIT U/S. 12A, WHICH HAVE BEEN CONFIR MED BY THE TRIBUNAL. ITA NO. 255/AGRA/2013 10 HOWEVER, IN THE CASE OF PRESENT ASSESSEE, THE REGIS TRATION U/S. 12AA IS EFFECTIVE AND AS SUCH, THE SAID DECISION IS NOT RELEVANT TO T HE MATTER IN ISSUE. 7. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL . THE SAME IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY