MAHARASHTRA HOUSING & AREA, MUMBAI V. DDIT(Exemp.)-2(1), MUMBAI

ITA 4133/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3520 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 07-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JASMINE AMALSADVALA; NISANT THAKKAR
• Keywords: Charitable institution; Benefit of exemption; Set aside
• Section: 11; 12A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4133/M/2019 ASSESSMENT YEAR: 2015-16 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA), FINANCE CONTROLLER, 4 TH FLOOR, GRIHA NIRMAN BHAVAN, KALANAGAR, BANDRE (E), MUMBAI 400 051 PAN: AAAJM0344H VS. DY. CIT (EXEMPTION) 2(1), 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NISANT THAKKAR, A.R. & MS. JASMINE AMALSADVALA REVENUE BY : DR. YOGESH KAMAT, D.R. DATE OF HEARING : 07.09.2021 DATE OF PRONOUNCEMENT : 13.10.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 31.01.2019 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2015-16. 2. THE ISSUE RAISED IN GROUND NO.1 & 2 IS AGAINST T HE ORDER OF LD. CIT(A) UPHOLDING THE ORDER OF AO WHEREBY THE AO HAS DENIED EXEMPTION UNDER SECTION 11 OF THE ACT ON THE GROUND THAT PROVISO TO SECTION 2(15) OF THE ACT APPLIES TO THE ASSESSEE. ITA NO.4133/M/2019 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA) 2 3. AT THE OUTSET THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CA SE IN ITA NO.894/M/2018 A.Y. 2012-13 AND IN ITA NO.895/M/2018 A.Y. 2014-15 VIDE ORDER DATED 23.11.2020 WHEREIN THE ISS UE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A .R. THEREFORE PRAYED THAT SINCE THERE IS NO CHANGE IN FACTS AND C IRCUMSTANCES IN THE CURRENT YEAR, THEREFORE THE ISSUE MAY KINDLY BE ALLOWED BY FOLLOWING THE ORDER OF CO-ORDINATE BENCH OF THE TRI BUNAL AS STATED ABOVE. 4. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDERS OF AUTHORITIES BELOW AND GROUNDS OF APPEAL THOUGH CAND IDLY AGREEING THAT THE ISSUE IS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSE IN A.Y. 2012-13 & 2014-15. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE CONSOLIDATED ORDER OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.894/M/2018 A.Y. 201 2-13 AND ITA NO.895/M/2018 A.Y. 2014-15 DATED 23.11.2020, WE FIND THAT THE ISSUE OF EXEMPTION UNDER SECTION 11 OF THE ACT HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSE BY DIRECTING THE AO TO ALLOW THE EXEMPTION U/S 11 TO THE ASSESSE. THE OPERATIVE PART IS EXTRACTED BELOW: 9. THE GROUND NO.2 AND 3 OF THE APPEAL ARE TAKEN U P TOGETHER AS BOTH THESE GROUNDS ARE INTERCONNECTED. THE ASSESSEE HAS BEEN C LAIMING THE BENEFIT OF REGISTRATION UNDER SECTION 12A OF THE ACT. THE ASSE SSING OFFICER DENIED THE EXEMPTION AVAILABLE TO THE ASSESSEE UNDER SECTION 1 1 OF THE ACT ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE FALL WITHIN THE MEAN ING OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS SPECIFIED IN P ROVISO TO SECTION 2(15) OF THE ACT. WE FIND THAT FOR THE IDENTICAL REASON BENEFIT UNDER SECTION 11 OF THE ACT WAS DENIED TO THE ASSESSEE IN ASSESSMENT YEAR 2010-11. THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO.6678/MUM/2013. THE TRIBUNAL VIDE ORDER ITA NO.4133/M/2019 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA) 3 DATED 04/06/2019 EXAMINED THE ISSUE OF ASSESSEES E LIGIBILITY TO CLAIM THE BENEFIT OF EXEMPTION UNDER SECTION 11 THREADBARE. IN A DETAILE D ORDER, AFTER CONSIDERING VARIOUS JUDICIALPRONOUCEMENTS AND DIFFERENT FACETS OF THE ARGUMENTS RAISED BY RIVAL SIDES, THE TRIBUNAL CONCLUDED THAT THE ACTIVITIES C ARRIED OUT BY THE ASSESSEE FALL WITHIN THE AMBIT OF CHARITABLE PURPOSE UNDER SECT ION 2(15) OF THE ACT AND THE PROVISO TO SAID SECTION DOES NOT GET ATTRACTED. FOR THE SAKE OF BREVITY THE ENTIRE DETAILED FINDINGS OF THE TRIBUNAL ARE NOT REPRODUCE D, HOWEVER, THE RELEVANT FINDINGS AND OPERATIVE PART OF THE ORDER IS QUOTED HEREIN BE LOW:- 36. FROM THE AFORESAID DISCUSSION AND THE REBUTTAL MADE BY LD. SR. COUNSEL, WE DO NOT FIND THAT THE REASONS CITED BY THE LD. SP ECIAL COUNSEL IN ANY WAY, DIMINISHES THE ASSESSEES CLAIM OR ITS ENTITLEMENT TO CLAIM BENEFIT U/S. 11; OR PERSUADE US TO COME TO A CONCLUSION THAT THE ASSESS EES ACTIVITIES ARE DONE PURELY FOR A PROFIT MOTIVE. WHETHER AN ACTIVITY CON STRUES BUSINESS OR IS IN THE NATURE OF BUSINESS IS LARGELY DEPENDENT UPON TH E FACTOR, WHETHER SUCH ACTIVITY IS ACTUATED BY PROFIT MOTIVE OR NOT. MEREL Y BECAUSE MHADA BUILDS TENEMENTS AND SELLS THEM DOES NOT LEAD TO ANY INFER ENCE THAT MHADAS ACTIVITIES ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. WE HAVE ALREADY DISCUSSED IN DETAIL THAT ASSESSEES ACTIVITY IS NO WAY CAN BE HELD FOR THE PROFIT MOTIVE OR FOR CARRYING OUT SYSTEMATIC BUSINE SS, ALBEIT ALL ITS POLICY AS WELL AS CONDUCT IS TO PROVIDE SHELTER TO THE NEEDY AND POOR PEOPLE IN LINE WITH THE MANDATE OF CONSTITUTION OF INDIA. XXXXX XXXX XXXX 44. THE AFORESAID DECISION CLEARLY CLINCHES THE ENT IRE ISSUE NOT ONLY TO THE NATURE AND SCOPE OF DEFINITION OF CHARITABLE PURPO SES IN SECTION 2(15) BUT ALSO THE SCOPE OF RESTRICTION PROVIDED IN PROVISO T O SECTION 2(15). IF THE PRINCIPLE LAID DOWN BY HONBLE HIGH COURT IS APPLIE D HERE IN THIS CASE, THEN OSTENSIBLY UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE AS DISCUSSED ABOVE, WOULD NOT ONLY BE HELD AS AN INSTI TUTION CARRYING OUT CHARITABLE PURPOSES BUT ITS ACTIVITIES CLEARLY AR E BEYOND THE SCOPE OF RESTRICTIVE PROVISIONS OF THE PROVISO. THE MOST CRU CIAL TEST AND THE FINDINGS WHICH NEEDS TO BE SEEN SPECIFICALLY IF THE PROVISO TO SECTION 2(15) IS TO BE APPLIED IN THE CASES LIKE ASSESSEE IS TO SEE, WHETH ER THEIR ACTIVITIES CAN BE RECKONED AS IN THE NATURE OF TRADE, COMMERCE AND BU SINESS. SOME OF THE TESTS OF APPLICABILITY OF PROVISO IN CASES LIKE THA T OF ASSESSEE WHICH ARE STATUTORY BODIES PROVIDING HOUSING NEEDS TO THE NEE DY AND POOR PEOPLE CAN BE SHORT LISTED IN THE FOLLOWING MANNER: I) IS THE INSTITUTION SUPPORTED/PROMOTED BY THE STA TE? II) IS IT CONSTITUTED UNDER AN ACT OF THE LEGISLATU RE? III) HAS THE INSTITUTION BEEN INCORPORATED FOR IMPL EMENTING THE DIRECTIVE PRINCIPLES ENUNCIATED IN THE CONSTITUTION OF INDIA? IV) ARE THE ACTIVITIES OF THE INSTITUTION CLOSELY R EGULATED AND CONTROLLED BY THE STATE? ITA NO.4133/M/2019 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA) 4 V) HAS THE INSTITUTION BEEN CONFERRED WITH POWERS W HICH A BUSINESSMAN WOULD NEVER ENJOY, SAY, EVICTION OF A T ENANTS OR CLOSURE OF ROADS ETC.? VI) IS THE INSTITUTION REQUIRED TO CARRY OUT ACTIVI TIES LIKE REPAIRS TO BUILDING, DEMOLITION OF DANGEROUS STRUCTURES ETC. W HICH WOULD NOT BE THE DUTIES OF A BUSINESSMAN CARRYING ON BUILDING AC TIVITIES? VII) DOES THE INSTITUTION LOOK AFTER THE ELEMENTARY NEEDS OF A CITIZEN BY PROVIDING BASIC HOUSING? VIII) DOES THE STATE SUBSIDIZE THE ACTIVITIES OF TH E INSTITUTION? IX) IS THE INSTITUTION MANAGED BY GOVERNMENT SERVAN TS OR PRIVATE BUSINESSMEN? X) IS THERE A RESTRICTION PLACED ON WHO CAN PURCHAS E THE PROPERTIES? THAT IS, INCOME CRITERIA HAS TO BE MET, THE APPLICA NT OR HIS FAMILY MEMBER SHOULD NOT ALREADY BE IN POSSESSION OF A HOU SING UNIT? XI) ARE THE PRICES AT WHICH THE INSTITUTION IS TO S ELL ITS PROPERTIES CLOSELY REGULATED AND MONITORED? XII) DOES THE INSTITUTION SELL PROPERTIES AT BELOW THE MARKET PRICE? IF IT SELLS THE PROPERTY AT BELOW THE MARKET PRICE, IS IT SUBSTANTIALLY BELOW THE MARKET PRICE? XIII) IN IMPLEMENTATION OF ITS OBJECTS AND PURPOSE DOES THE INSTITUTION SELL ITS PROPERTIES AT A LOW PRICE AND CONSCIOUSLY AND DELIBERATELY FORGOES THE PROFIT WHICH IT COULD EASILY HAVE MADE. XIV) DOES THE INSTITUTION STICK TO ITS RESOLVE TO S ELL PROPERTIES AT PREDETERMINED RATES EVEN THOUGH THE DEMAND SUPPLY P OSITION FOR HOUSING IS SUCH THAT IT COULD HAVE SOLD THE PROPERT IES AT A MUCH HIGHER RATE? XV) DOES IT SELL PROPERTIES BY INVITING BIDS AND AL LOTTING THE PROPERTY ON THE BASIS OF A DRAW OF LOTS RATHER THAN ALLOTTIN G THE PROPERTIES BY HOLDING AN AUCTION WHICH WOULD ENSURE THE RECEIPT O F THE HIGHEST PRICE? XVI) DOES THE INSTITUTION SELL ITS PROPERTIES PRIMA RILY TO THE ECONOMICALLY LESS FORTUNATE AT A CONCESSIONAL PRICE RATHER THAN THE MAXIMUM PRICE AVAILABLE FROM ANY FREE PURCHASER WHO WOULD OFFER A HIGHER PRICE? XVII) IS THE MAKING OF PROFIT DELIBERATELY SHUNNED? XVIII) DOES THE INSTITUTION CONTINUES TO OPERATE AN D RUN ITS ACTIVITIES AS PER ITS FRAMED POLICY AND RULES AND SELLS ITS PR OPERTIES IN THE MANNER AND AT THE RATES AS PER ITS REGULATIONS EVEN THOUGH THE DEMAND FOR THE PROPERTIES OF THE INSTITUTION FAR EX CEEDS THEIR SUPPLY? IF THE AFORESAID TESTS ARE APPLIED ON THE F ACTS OF THE PRESENT CASE WHICH HAVE BEEN DISCUSSED IN DETAIL HEREINABOV E, THE ONLY INFERENCE /CONCLUSION WHICH CAN BE DRAWN IS THAT TH E ASSESSEE PASSES THROUGH ALL THE TESTS AND IT IS NOT EXISTING OR CARRYING OUT ITS ACTIVITY UNDER THE RESTRICTIVE CONDITIONS AS ENVISA GED IN PROVISO TO SECTION 2(15), I.E., CARRYING OUT ITS ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS WITH PROFIT MOTIVE. XXXX ITA NO.4133/M/2019 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA) 5 XXXX XXXX 48.IN VIEW OF OUR AFORESAID FINDING, WE DO NOT DEE M IT FIT TO ENTER INTO THE SEMANTICS OF OTHER ARGUMENTS AS RAISED BY THE LD. SR. COUNSEL LIKE ASSESSEE BEING A UNIQUE ORGANIZATION, THEREFORE, IT IS TO BE TREATED AS EXISTING FOR CHARITABLE PURPOSE; OR O N THE ISSUE THAT IT IS EXISTING FOR GIVING RELIEF TO THE POOR. OUR FINDING IS MOSTLY CONFINED TO PROVISO TO SECTION 2(15), THAT IS, THE ASSESSEE IS NOT COVERED BY THE RESTRICTION AS ENVISAGED THEREIN AND ITS ACTIVITIES FALL WITHIN ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY , HENCE EXISTING FOR CHARITABLE PURPOSE . 49. FURTHER, THE ISSUES RAISED IN GROUND NO.3 WILL BECOME PURELY ACADEMIC IN VIEW OF OUR FINDING GIVEN ABOVE THAT TH E ASSESSEE IS ENTITLED FOR BENEFIT U/S.11 AND ACCORDINGLY, ITS IN COME AND EXPENDITURE HAVE TO BE COMPUTED IN TERMS OF SECTION 11 TO SECTION 13. 10. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RAISED OBJECTION THAT THE FACTS IN THE IMPUGNED ASSESSMENT YEAR WHETHER ARE SIMILAR TO PRE CEDING ASSESSMENT YEARS IS NOT CLEARLY EMANATING FROM IMPUGNED ORDER. WE DO NO T FIND FORCE IN THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATIVE. THE CIT(A) IN PARA-7.9 OF THE IMPUGNED ORDER HAS OBSERVED THAT THE FACTS ARE SIMILAR. THE CIT(A) HAS NOT GIVEN ITS INDEPENDENT FINDING FOR ADJUDICATING THE ISSUE AND HAS ONLY APPLIED THE REASONING GIVEN BY THE CIT(A) IN ASSESSMENT YEAR 2010-11 TO D ISALLOW BENEFIT OF SECTION 11 OF THE ACT IN THE IMPUGNED ASSESSMENT YEAR. 6. SINCE THE FACTS OF THE PRESENT CASE ARE SAME AS INVOLVED IN A.Y. 2012-13 & 2014-15 AS DISCUSSED ABOVE, WE, THER EFORE ,RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH OF THE TRIBUNAL SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE EXEMPTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE. 7. IN RESPECT OF THE ISSUES RAISED IN GROUND NOS.3 TO 5, THE LD. A.R. SUBMITTED BEFORE US THAT THE LD. CIT(A) HAS NO T DECIDED THESE ISSUES AND THEREFORE THE SAME MAY KINDLY BE R ESTORED TO THE FILE OF THE LD. CIT(A) WITH THE DIRECTION TO DE CIDE THE SAME AFTER AFFORDING A REASONABLE HEARING TO THE ASSESSE E. ITA NO.4133/M/2019 M/S. MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (MHADA) 6 8. ON THE OTHER HAND, THE LD. D.R. FAIRLY AGREED TH AT ISSUES HAVE NOT BEEN DECIDED BY THE LD CIT(A) AND LEAVE TH E MATTER TO THE WISDOM OF THE BENCH SO FAR AS RESTORING OF THE SE ISSUES TO THE FILE OF THE LD. CIT(A) IS CONCERNED. ACCORDING LY, GROUND NOS.3 TO 5 ARE RESTORED TO THE FILE OF THE LD. CIT( A) TO DECIDE AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO TH E ASSESSEE. THE GROUND NOS. 3 TO 5 ARE ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.10.2021. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13.10.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.