DCIT (Exemptions), Circle-2, Ahmedabad V. Jamnagar Area Development Authority, Jamnagar,

ITA 435/AHD/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9365 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt; Benefit of exemption; Capital expenditure
• Section: 143(3); 11A; 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 435/AHD/2018 (ASSESSMENT YEAR : 2013-14) DY. CIT(EXEMPTIONS), CIRCLE-2, AHMEDABAD. VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY, 1 ST FLOOR, DR. HEDGESHWAR COMMERCIAL COMPLEX, NEAR M.P. SHAH COLLEGE, SAT RASTA, JAMNAGAR 361 001. [PAN NO. AAALJ 0188 Q] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SATISH SOLANKI, SR. D.R. RESPONDENT BY : SHRI VIMAL DESAI, A.R. DATE OF HEARING 01/10/2019 DATE OF PRONOUNCEMENT 03/10/2019 O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE PERTAINING TO THE ASSESS MENT YEAR (AY) 2013-14 IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 9, AHMEDABAD (CIT(A) FOR SHORT) DATED 20.12.2017. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LD. CIT(A) HAS ERRED IN THE LAW AND ON FACTS I N CONSIDERING THE ACTIVITY OF THE ASSESSEE IS ENGAGED IN THE DEVELOPMENT OF URBAN ARE A OF JAMNAGAR WHICH IS IN THE NATURE OF ADVANCEMENT OF GENERAL PUBLIC UTILITY AND HIT BY THE NEW INTRODUCED PROVISO FIRST AND SECOND OF SEC.2(15) OF THE ACT. 2. THE LD CIT(A) HAS ERRED IN THE LAW AND ON FAC TS IN ALLOWING THE BENEFIT OF EXEMPTIONS U/S.11 IGNORING THE FACT THAT THE ASSESS EE IS INVOLVED IN WIDESPREAD COMMERCIAL ACTIVITIES IN NATURE OF BUSINESS. - 2 - ITA NO.435/AHD/2018 DCIT(E) VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY ASST.YEAR 2013-14 3. THE LD CIT(A) HAS ERRED IN THE LAW AND ON FAC TS IN DELEING THE ADDITION OF RS.43,30,488/- AND RS.1,67,12,083/- MADE ON ACCOUNT OF DEVELOPMENT FUND AND SERVICE & AMENITIES FEES CONSIDERING THE CAPITAL RE CEIPTS WOULD BE PART OF BALANCE SHEET AND NOT INCOME OF THE ASSESSEE. 4. THE LD CIT(A) HAS ERRED IN THE LAW AND ON FAC TS IN DIRECTING THE AO TO ALLOW THE ADDITION OF RS.41,19,764/- CONSIDERING THAT A CAPIT AL EXPENDITURE BY A PERSON NEED NOT BE A CAPITAL RECEIPT OF THE PERSON RECEIVI NG THAT AMOUNT WHICH THE ASSESSEE HAS RECEIVED FOR THE DISCHARGE OF ITS OBJE CTS. 5. THE LD CIT(A) HAS ERRED IN THE LAW AND ON FAC TS IN ALLOWING THE ACCUMULATION OF RS.1,62,53,404/- U/S.11(2) AND ACCUMULATION @15% OF RS.1,63,39,242/- U/S.11(1)(A) OF THE ACT WITHOUT APPRECIATING THE FA CT THAT ONCE THE PROVISO TO SECTION 2(15) IS APPLICABLE, THE BENEFIT OF SECTION 11 AND 12 CANNOT BE ALLOWED FURTHER. 6. THE REVENUE CRAVES TO ADD, ALTER, AMEND, MODIF Y, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, IN NECESSITY SO ARISE. 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE CASE OF THE ASSESSEE IS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) WAS FRA MED BY THE ORDER DATED 29.03.2016. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT MADE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF DEVELOPMENT FUND, SERVICE AND AMENI TIES FEES AND ALSO MADE DISALLOWANCE OF ACCUMULATION U/S 11A & 11(1)(A) OF THE ACT. FURTHER, DISALLOWANCE OF CAPITAL EXPENDITURE WAS MADE. AGGRIEVED AGAINST THI S THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A) WHO AFTER CONSIDERING THE SUBMISSION PARTLY ALLOWED THE APPEAL THEREBY THE LEARNED CIT(A) FOLLOWING DECISIO N OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ASST. COMMISSIONER OF INCOME TAX IN TAX APPEAL NO.423 OF 2016 WITH 424 OF 2016 TO TAX APPEAL NO.425 OF 2016 WITH CIVIL APPLICATION (OJ) N O.211 OF 2016 IN TAX APPEAL NO.423 OF 2016 TO CIVIL APPLICATION (OJ) NO.213 OF 2016 IN TAX APPEAL NO.425 OF 2016 DECIDED THE ISSUE RELATED TO ADDITIONS MADE ON ACCO UNT OF DEVELOPMENT FUND, SERVICE AND AMENITIES FEES IN RESPECT OF THE ISSUES ALSO DECIDE D THIS ISSUE OF ACCUMULATION U/S 11(2) OF - 3 - ITA NO.435/AHD/2018 DCIT(E) VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY ASST.YEAR 2013-14 THE ACT AND CAPITAL EXPENDITURE IN FAVOUR OF ASSESS EE. AGAINST THIS THE REVENUE HAS PREFERRED THE PRESENT APPEAL. APROPO TO THE GROUND RAISED IN THIS APPEAL I.E. GRO UND NOS. 1 TO 5, THE LEARNED DR HAS PLACED RELIANCE ON THE ASSESSMENT ORDER. ON THE CON TRARY, THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS AS MADE BEF ORE THE LEARNED CIT(A). THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LEARNED CIT( A) ARE AS UNDER: 1 . THE APPELLANT IS A LOCAL AUTHORITY [HEREINAFTER REFERRED TO AS THE 'APPELLANT AUTHORITY'] CONSTITUTED UNDER THE PROVISIONS OF GUJ ARAT TOWN PLANNING AND URBAN DEVELOPMENT ACT, 1976 . 2. THE APPELLANT AUTHORITY UNDERTAKES ACTIVITIES VIZ. PREPARATION OF DEVELOPMENT PLANS UNDER THE PROVISIONS OF THE ACT FOR THE DEVEL OPMENT OF AREA, PREPARATION OF TOWN PLANNING SCHEMES, CARRYING OUT SURVEYS IN THE DEVELOPMENT AREA FOR PREPARATION OF DEVELOPMENT PLANS OR TOWN PLANNING S CHEMES, LEVY AND COLLECT FEES AS PRESCRIBED BY REGULATIONS FOR SCRUTINY OF DOCUME NTS FOR PERMISSION FOR DEVELOPMENT, EXECUTE WORKS IN CONNECTION WITH SUPPL Y OF WATER, DISPOSAL OF SEWAGE AND PROVISION OF OTHER SERVICES AND AMENITIE S ETC. 3. THE APPELLANT AUTHORITY IS GRANTED REGISTRATION U/S . 12A BY THE COMMISSIONER OF INCOME TAX, JAMNAGAR VIDE NUMBER CIT . J/TECH/12A(A)/66/2003-04/3484 ON 17.03.2005 WITH EFFECT FROM 01.04.2002. 4. THE APPELLANT AUTHORITY FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 23.03.2010 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING EXEMPTION U/S. 11 OF THE ACT. 5. COPIES OF ACKNOWLEDGEMENT OF RETURN, COMPUTATION OF INCOME, AUDITED ANNUAL ACCOUNTS WITH AUDIT REPORT IN FORM 10B, NOTICE OF A CCUMULATION IN FORM NO. 10 ARE ENCLOSED HEREWITH AT PAGE NO. 1-13. 6. IN THE ASSESSMENT FINALIZED VIDE ORDER U/S. 143(3) DATED 29.03.2016, THE A.O. DETERMINED TOTAL INCOME OF THE APPELLANT AT RS. 5,7 7,54,980/- AFTER MAKING FOLLOWING VARIATIONS TO THE RETURN OF INCOME: - 4 - ITA NO.435/AHD/2018 DCIT(E) VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY ASST.YEAR 2013-14 SR. NO. NATURE OF DISALLOWANCE AMOUNT (I N RS.) 1 ADDITION ON ACCOUNT OF INCOME NOT OFFERED FOR TAXATION 1.1. DEVELOPMENT FUND 43,30,488/- 1.2. SERVICE AND AMENITIES FEES 1,67,12,083/- 2,10, 42,571/- 2. DISALLOWANCE 2.1. ACCUMULATION DISALLOWED U/S 11(2) OF THE ACT 1,62,53,404/- 2.2. ACCUMULATION DISALLOWED U/S 11(1)(A) OF THE ACT 1,63,39,242/- 2.3. DISALLOWANCE OF CAPITAL EXPENDITURE 41,19,764/ - 3,67,12,410/- ASSESSED TOTAL INCOME 5,77,54,981/- RE: SUBMISSIONS ON MERITS 7. DURING THE COURSE OF RE-ASSESSMENT PROCEEDI NGS, THE APPELLANT WAS ASKED TO SHOW CAUSE AS TO WHY THE ACTIVITY OF THE APPELLANT AUTHO RITY SHOULD NOT BE TREATED AS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND ACCOR DINGLY FIRST PROVISO TO SECTION 2(15) SHOULD NOT BE APPLIED. 8. THE A.O. HOWEVER DID NOT APPRECIATE THE ABOV E SUBMISSIONS IN PROPER PERSPECTIVE AND CONTENDED THAT APPELLANT AUTHORITY FUNCTIONS WI TH PROFIT MOTIVE AND ITS ACTIVITIES ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND AS PER PROVISO TO SECTION 2(15), THE ACTIVITIES CARRIED ON BY THE APP ELLANT AUTHORITY CANNOT BE CONSIDERED AS CHARITABLE AND THEREFORE IT IS NOT EL IGIBLE FOR EXEMPTION U/S. 11 TO 13 OF THE ACT. 9. WE RESPECTFULLY PLACED RELIANCE ON THE DECISI ON OF THE HON'BLE JURISDICTIONAL GUJARAT HIGH COURT DATED 02.05.2017 IN CASE OF SIMI LAR AUTHORITY VIZ. AHMEDABAD URBAN DEVELOPMENT AUTHORITY (AUDA) VS. ACIT (EXEMPT IONS) WHEREIN THE HON'BLE HIGH COURT HAS BEEN AS UNDER: 'APPLYING THE AFORESAID DECISION TO THE FACTS OF TH E CASE ON HAND AND THE OBJECT AND PURPOSE FOR WHICH THE ASSESSEE IS ESTABL ISHED / CONSTITUTED UNDER THE PROVISIONS OF THE GUJARAT TOWN PLANNING A CT AND COLLECTION OF FEES AND CESS IS INCIDENTAL TO THE OBJECT AND PURPO SE OF THE ACT, EVEN THE - 5 - ITA NO.435/AHD/2018 DCIT(E) VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY ASST.YEAR 2013-14 CASE WOULD NOT FALL UNDER SECOND PART OF PROVISO TO SECTION 2(15) OF THE ACT. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCES O F THE CASE, WE ARE OF OPINION THAT THE LEARNED TRIBUNAL HAS COMMITTED A G RAVE ERROR IN HOLDING THE ACTIVITIES OF THE ASSESSEE IN THE NATURE OF TRA DE, COMMERCE OR BUSINESS AND CONSEQUENTLY HOLDING THAT THE PROVISO TO SECTIO N 2(15) OF THE ACT SHALL BE APPLICABLE AND THEREFORE, THE ASSESSEE IS NOT EN TITLED 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 B E APPLICABLE SO FAR AS ASSESSEE AUDA IS CONCERNED AND AS THE ACTIVITIES OF THE ASSESSEE CAN BE SAID TO BE PROVIDING GENERAL PUBLIC UTILITY SERVICE S, 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. IN VIEW OF THE ABOVE AND FOR THE REASONS STATED ABO VE, THE IMPUGNED ORDER PASSED ORDER PASSED BY THE LEARNED TRIBUNAL IN RESP ECTIVE APPEALS FOR DIFFERENT ASSESSMENT YEAR ARE HEREBY QUASHED AND SE T ASIDE. ACCORDINGLY, ALL THESE APPEALS ARE ALLOWED AND ANSWERED BOTH THE QUESTIONS IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. NO COSTS.' A COPY OF DECISION IS ENCLOSED HEREWITH AT PAGE NO. 14-70 10. IN APPELLANT'S OWN CASE, THE CIT(A) HAS ALL OWED THE DEDUCTION U/S. 11 OF THE ACT IN A.Y. 2009-10 TO A.Y. 2011-12 AND A.Y. 2014-15. A CO PY OF ORDER OF A.Y. 2009-10 IS ENCLOSED HEREWITH AT PAGE NO. 71-118 11. IN VIEW OF THE ABOVE, IT IS PRAYED BEFORE YO UR HONOUR THAT THE APPELLANT AUTHORITY SHOULD BE ALLOWED THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. DURING THE COURSE OF HEARING, THE LEARNED DR FAIRLY CONCEDED THAT ALL THESE ISSUES WE RE BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AU THORITY VS. ASST. COMMISSIONER OF INCOME TAX (SUPRA). THE FACTS ARE IDENTICAL IN T HE PRESENT CASE AS WELL THE REVENUE HAS NOT BROUGHT TO OUR NOTICE ANY OTHER BINDING PRECEDE NT. WE, THEREFORE, FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT R ENDERED IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY (SUPRA). WE DO NOT SEE ANY INFIRMITY IN THE FINDING OF THE LEARNED CIT(A) SAME IS HEREBY AFFIRMED. GROUNDS RAI SED IN THIS APPEAL ARE REJECTED. - 6 - ITA NO.435/AHD/2018 DCIT(E) VS. JAMNAGAR AREA DEVELOPMENT AUTHORITY ASST.YEAR 2013-14 4. GROUND NO.6 IS GENERAL IN NATURE HENCE NO SEPARA TE ADJUDICATION IS REQUIRED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.435/AHD/2018 FOR THE A.Y. 2013-14 IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 03/10/2019 SD/- SD/- ( WASEEM AHMED ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 03/10/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-9, AHMEDABAD. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 01.10.2019 (DICTATION PAGES 3) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 01.10.2019 3. OTHER MEMBER. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 01.10.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER