Bangalore Development Authority, Bangalore V. DDIT, Bangalore

ITA 789/BANG/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7349 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR PRA DEEP KUMAR
• Assessee Lawyers: S ANNAMALAI
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Benefit of exemption; Condonation of delay; Cancellation of registration; Revenue expenditure; Capital expenditure
• Section: 143(3); 12A; 32; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.789/BANG/2014 ASSESSMENT YEARS : 2010-11 BANGALORE DEVELOPMENT AUTHORITY, T CHOWDAIAH ROAD, KUMARA PARK WEST, BENGALURU-560 020. PAN AAALB 0060 D. VS. THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTIONS) RANGE-17, BENGALURU APPELANT RESPONDENT APP ELLANT BY : SHRI S ANNAMALAI, ADVOCATE RESPONDENT BY : DR. PRADEEP KUMAR, CIT(DR) DATE OF HEARING : 29.04.2019 DATE OF PRONOUNCEMENT : 03.05.2019 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER D ATED 28/2/2014 OF CIT(A), MYSURU RELATING TO ASST. YEAR 2010-11. 2. THERE IS A DELAY OF ABOUT 37 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE REASONS FOR THE DELAY IN FILING THE APPEAL HAVE BEE N EXPLAINED IN AN AFFIDAVIT FILED BY THE COMMISSIONER OF BANGALORE DEVELOPMENT AUTHOR ITY (BDA) WHICH IS THE APPELLANT IN THIS APPEAL. IT HAS BEEN MENTIONED IN THE AFFIDAVIT THAT THE ASSESSEE CLAIMED THE BENEFIT OF EXEMPTION U/S.SEC. 11 OF THE INCOME TAX ACT, 1961 (ACT) AND FILED A RETURN OF INCOME FOR ASST. YEAR 2010-1 1. THE BENEFIT OF EXEMPTION U/S 11 AND 12 OF THE ACT WAS DENIED BY THE AO WHO CAME TO THE CONCLUSION THAT THE ACTIVITIES OF THE ASSESSEE WERE IN THE NATURE OF BU SINESS AND THEREFORE THE OBJECTS ITA NO.789/BANG/2014 PAGE 2 OF 20 THE ASSESSEE WERE NOT CHARITABLE NATURE AS PER THE PROVISO TO SEC. 2(15) OF THE ACT WHICH DEFINES THE EXPRESSION CHARITABLE PURPOSE. CONSEQUENTLY, THE AO TREATED THE SURPLUS AS PER THE PROFIT AND LOSS ACCOUNT AS I NCOME CHARGEABLE TO TAX. THE SURPLUS AS PER THE INCOME AND SURPLUS ACCOUNT WOULD NOT ARISE IF A SUM OF RS.4,84,71,49,000/- WHICH WAS CLAIMED BY THE ASSESS EE AS REVENUE EXPENDITURE WOULD HAVE BEEN ACCEPTED BY THE AO. ANOTHER ADDITIO N WAS AN ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF REFUND S MADE ON CANCELLATION OF SITES ALLOTTED IN EARLIER YEARS. THE ABOVE 2 ADDITIONS W ERE DELETED BY THE CIT(A) BUT THE MAIN GRIEVANCE OF THE ASSESSEE THAT IT WAS EXISTIN G FOR A CHARITABLE PURPOSE AND IT WAS ENTITLED TO THE BENEFITS OF SEC 11 OF THE ACT WAS DENIED BY THE CIT(A). IT IS IN THIS BACK GROUNDS THAT THE ASSESEE APPROACHED MR. A SHANKAR ADVOCATE FOR PROFESSIONAL ADVICE REGARDING FILING OF APPEAL AGAI NST THE ORDER OF CIT(A), EVEN THOUGH THERE WOULD BE NO TAX IMPLICATIONS PURSUANT TO THE ORDER OF THE CIT(A). IT HAS BEEN STATED THAT DUE TO HIS NON-AVAILABILITY, T HERE WAS A DELAY IN GETTING HIS ADVICE AND HE HAD ADVISED THE ASSESSEE THAT AN APPE AL SHOULD BE FILED AGAINST THE ORDER OF CIT(A). THIS IS HOW THE DELAY IN FILING T HE APPEAL HAS BEEN EXPLAINED. 3. THE LD COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM THAT THE DELAY IN FILING OF APPEAL SHOULD BE CONDONED. 1. HONBLE APEX COURT IN THE CASE OF COLLECTOR, LAND A CQUISITION VS. MST. KATIJI AND OTHERS (198) 167 ITR 471 2. CONCORD OF INDIA INSURANCE CO. LTD., VS. SMT. NIRMA LA DEVI AND OTHERS 118 ITR 507 3. RADHA KRISHNA RAI VS. ALLAHABAD BANK & OTHERS [2009 ] 9 SUPREME COURT CASES 733. 4. WE HAVE HEARD SUBMISSION OF THE LD COUNSEL FOR T HE ASSESSEE. KEEPING IN MIND THE PRINCIPLE LAID DOWN IN THE AFORESAID DECIS IONS THAT INTEREST OF JUSTICE IS ITA NO.789/BANG/2014 PAGE 3 OF 20 PARAMOUNT AND A LIBERAL APPROACH IN SUCH MATTERS OF CONDONATION OF DELAY SHOULD BE ADOPTED, SO LONG AS THERE IS NO LACK OF BONAFIDE S OR DILIGENCE, WE ARE SATISFIED THAT THE DELAY IN FILING THE APPEAL WAS DUE TO REAS ONABLE AND SUFFICIENT CAUSE AND THE DELAY IN FILING THE APPEAL DESERVES TO BE CONDO NED. WE ACCORDINGLY CONDONE THE DELAY IN FILING THE APPEAL. 5. AS FAR AS THE MERITS OF THE CASE OF THE ASSESEE IS CONCERNED, THE LD COUNSEL OR THE ASSESSEE SUBMITTED THAT GROUND 4 IF ADJUDICA TED WILL RENDER THE ADJUDICATION OF OTHER GROUNDS AS ACADEMIC AND PRAYED FOR ADJUDIC ATION OF GROUND NO.4 WHICH READS AS FOLLOWS:- 4. GROUND ON APPLICABILITY OF PROVISO TO SECTION 2 (15) AND RELATED GROUNDS. (A) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLD ING THAT THE PROVISO TO SECTION 2(15) OF THE ACT IS APPLICABLE T O THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. (B) THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT CONSIDERING THAT THE APPELLANT FALLS WITHIN SEVERAL LIMBS OF CH ARITY AS DEFINED IN SECTION 2(15) OF THE ACT AND HENCE OUGHT NOT TO HAVE APPLIED THE PROVISO TO THE FACTS OF THE APPELLANTS CASE. (C) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN LAW IN DENYING THE EXEMPTION AS A CHAR ITABLE INSTITUTION FOR THE REASON THAT APPELLANT IS CARRYI NG ON BUSINESS. THE INFERENCE DRAWN FOR HOLDING THAT THE APPELLANTS ARE DOING BUSINESS ARE PURELY ARBITRARY AND PURELY ON SUSPICI ON AND SURMISE DEVOID OF FACTUAL FOUNDATION. (D) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT NOT TO HAVE DENIED EXEMPTIONS FOR CHARITABLE PURPOS E AS THE ITA NO.789/BANG/2014 PAGE 4 OF 20 APPELLANT DO NOT FALL UNDER SECOND PROVISO TO SECTI ON 2(15) OF THE ACT. (E) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE TAKEN INTO ACCOUNT THE SPEECH OF THE FINANC E MINISTER WHICH INDICATE THE OBJECT AND DRIFT OF THE AMENDMEN T IN AS MUCH AS THAT GENUINE CHARITABLE TRUSTS ARE NOT HIT BY TH E PROVISO TO SECTION 2(15) OF THE ACT. (F) WITHOUT PREJUDICE THE AUTHORITIES BELOW OUGHT T O HAVE GRANTED EXEMPTION IN RESPECT OF THE OTHER LIMBS OF CHARITY BY APPLYING THE PRINCIPLES OF APPORTIONMENT AND OUGHT TO HAVE GRANTED PROPORTIONATE RELIEF IN RESPECT OF THE OTHE R LIMBS OF CHARITY BEING RELIEF TO THE POOR ETC. ON THE FACTS AND CIRCUMSTANCE OF THE CASE. (G) WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT F ALL UNDER FIRST TO FIFTH LIMB OF THE DEFINITION OF CHARITABLE PURPO SE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. AS FAR AS GROUND 4 RAISED BY THE ASSESEE IS CONC ERNED, THE FACTS ARE THAT THE ASSESSEE IS A STATUTORY BODY BY NAME BANGALORE DEVE LOPMENT AUTHORITY, A STATUTORY BODY CONSTITUTED UNDER THE BANGALORE DEVELOPMENT A UTHORITY ACT, 1976 (BDA ACT). THE ASSESSEE CLAIMED THE BENEFITS OF EXEMPTI ON UNDER SEC.11 OF THE ACT ON THE GROUND THAT IT WAS EXISTING FOR CHARITABLE PURP OSE AS DEFINED IN SEC.2(15) OF THE ACT. SECTION 2(15) OF THE ACT HAS BEEN AMENDED BY F INANCE ACT, 2010 W.E.F. 01.04.2009 (I.E., W.E.F. ASSESSMENT YEAR 2009-10). IT IS NOT IN DISPUTE THAT THE ASSESSEE IS EXISTING FOR THE FOLLOWING PURPOSES MEN TIONED IN THE DEFINITION OF CHARITABLE PURPOSE U/S.2(15) OF THE ACT VIZ., ADVA NCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. BY THE AFORESAID AMENDMENT, A PRO VISO HAS BEEN INSERTED TO THE DEFINITION OF CHARITABLE PURPOSE IN SEC.2(15) OF THE ACT, WHICH READS AS FOLLOWS:- ITA NO.789/BANG/2014 PAGE 5 OF 20 2(15)CHARITABLE PURPOSE INCLUDES RELIEF OF THE P OOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WAT ERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FRO M SUCH ACTIVITY] THUS THE PROVISO TO SECTION 2(15) (SUPRA) CLEARLY S PECIFIED THAT IF ANY CHARITABLE ORGANIZATION RECOGNIZED UNDER SECTION 12A OF THE AC T (I)WERE TO CARRY OUT ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS OR (II)WERE TO CARRY ON ANY ACTIVITY OF RENDERING SERVICE IN RELATION TO ANY TR ADE, COMMERCE OR BUSINESS. FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, THEN IRRESP ECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH AC TIVITY, SUCH ACTIVITY SHALL NOT CONSTITUTE ACTIVITY / ACTIVITIES OF CHARITABLE PURP OSE OR NATURE, DESPITE THE FACT THAT THE SAME ARE CARRIED OUT OR PERFORMED FOR THE ADVAN CEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY. 7. THE AO WAS OF THE VIEW THAT THE ASSESSEES ACT IVITIES ARE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT, INTRODUCED W.E.F. 01.04.2 009 BY FINANCE ACT, 2010, CONSEQUENTLY HE DENIED THE ASSESSEE THE EXEMPTION C LAIMED UNDER SECTION 11 OF THE ACT AND BROUGHT TO TAX THE ASSESSEES INCOME FROM A SSESSMENT YEAR 2009-10 ONWARDS. THE AO, HAS LAID EMPHASIS ON THE FACT THA T THE OBJECTS OF THE ASSESSEE AS PER BDA ACT, WAS TO DEVELOP THE CITY OF BANGALORE A ND AREAS ADJACENT THERETO. THE AO AFTER REFERRING TO THE INCOME AND EXPENDITUR E ACCOUNT OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE DERIVES INCOME FROM SELL ING SEVERAL CATEGORIES OF PROPERTIES TO THE PUBLIC. HE HAS OBSERVED THAT THE FOCUS OF THE ASSESSEE HAS BEEN MORE ON SELLING SITES BY AUCTION TO THE HIGHEST BID DER AND WAS NOT FOR PROVIDING ITA NO.789/BANG/2014 PAGE 6 OF 20 AFFORDABLE HOUSING TO THE PUBLIC. THIS IS THE MAIN REASON FOR THE AOS CONCLUSION THAT THE ASSESSEE WAS CARRYING ON BUSINESS AND THER EFORE WAS NOT EXISTING FOR CHARITABLE OBJECT AS LAID DOWN IN THE PROVISO TO SE C.2(15) OF THE ACT. THE AO HAS ALSO PLACED RELIANCE ON SCHEDULE-15 OF THE PROFIT A ND LOSS ACCOUNT OF THE ASSESSEE WHICH SHOWS INCOME FROM RENT OF SHOPS, GROUND RENT, DEVELOPMENT CHARGES ETC. THE AO HAS DRAWN THE FOLLOWING INFERENCES TO COME T O CONCLUSION AS ABOVE: (I) THE ASSESSEE IS MAINLY ENGAGED IN DEVELOPMENT O F SITES AND HOUSES AND SALE OF THE SAME TO GENERAL PUBLIC AT LA RGE BY WAY OF COLLECTING CONSIDERATION AND IN RESPECT OF CORNER S ITES AND FLATS, SALE TRANSACTIONS ARE DONE THROUGH AUCTION SALE WHE REIN HIGHEST BIDDER WILL ONLY GET THE ELIGIBILITY TO OWN THE SIT ES OR FLATS. (II) THE ASSESSEE IS GENERATING HUGE AMOUNT OF PROFITS Y EAR AFTER YEAR FROM SALE OF SITES AND FLATS INDICATING THAT THE ASSESSEE IS CARRYING OUT THE ACTIVITIES AS A BUSINE SS VENTURE RATHER THAN CHARITABLE ORGANIZATION. (III) THE ASSESSEE IS NOT APPLYING THE HUGE AMOUNT OF PRO FITS GENERATED FROM THE ACTIVITIES TOWARDS ANY CHARITABL E ACTIVITIES SUCH AS RELIEF OF POOR, EDUCATION, MEDICAL RELIEF A ND OTHER OBJECTS OF ADVANCEMENT OF THE GENERAL PUBLIC UTILIT Y AND SUCH SURPLUS IS BEING INVESTED IN FIXED DEPOSITS IN ORDE R TO EARN INTEREST INCOME. (IV)THE ACTIVITIES OF THE ASSESSEE AND THE GENERATI ON OF PROFITS ON ACCOUNT OF THE SAME ARE AKIN TO THE ACTIVITIES C ARRIED ON BY REAL ESTATE COMPANIES, PROPERTY DEVELOPERS, INFRAST RUCTURE FIRMS ETC., AND THEREFORE, THE ACTIVITIES OF THE ASSESSEE ARE SQUARELY FALL UNDER THE AMBIT OF ACTIVITIES WHICH ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. ACCORDINGLY, THE ACTIV ITIES OF THE ASSESSEE ARE HIT BY THE FIRST PROVISO BELOW SECTION 2(15). 7. ON APPEAL BY THE ASSESSEE, THE CIT(A) UPHELD THE STAND TAKEN BY THE AO. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS RAISED GROUND NO.4 BEFORE THE TRIBUNAL . 9. AT THE TIME OF HEARING OF THE APPEAL IT WAS AGRE ED BY BOTH THE PARTIES THAT IDENTICAL ISSUE HAD COME UP FOR CONSIDERATION IN AS SESSEES OWN CASE FOR ASST. YEAR ITA NO.789/BANG/2014 PAGE 7 OF 20 2012-13 IN ITA NO.1104/BANG/2017 AND THIS TRIBUNAL VIDE ITS ORDER DATED 22/3/2019 HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SEC. 11 OF THE ACT AND THAT ITS ACTIVITIES CANNOT BE SAID TO FALL WITHIN T HE AMBIT OF PROVISO TO SEC. 2(15) OF THE ACT. THE TRIBUNAL HELD AS FOLLOWS:- 5.8.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS / S UBMISSIONS PUT FORTH AND PERUSED THE MATERIAL ON RECORD PLACED BEF ORE US; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. AT THE OUTSET, WE HAVE PERUSED SECTION 14 OF THE BDA ACT, 1976, WHICH SPECIFIES TH E OBJECTS OFBDA AND THE SAME IS EXTRACTED HEREUNDER: 14. OBJECTS OF AUTHORITY:THE OBJECTS OF THE AUTHO RITY SHALL BE TO OMOTE AND SECURE THE DEVELOPMENT OF THE BANGALORE METROPOLITAN AREA AND FOR THAT PURPOSE TH E AUTHORITY SHALL HAVE THE POWER TO ACQUIRE, HOLD, MA NAGE AND DISPOSE OF MOVABLE AND IMMOVABLE PROPERTY, WHETHER WITHIN OR OUTSIDE THE AREA UNDER ITS JURISDICTION, TO CARR Y OUT BUILDING, ENGINEERING AND OTHER OPERATIONS AND GENE RALLY TO DO ALL THINGS NECESSARY OF EXPEDIENT FOR THE PURPOS E OF SUCH DEVELOPMENT AND FOR PURPOSES INCIDENTAL THERETO. 5.8.2 A PLAIN READING OF THE AFORESAID OBJECTS WOU LD SHOW THAT PRIMA FACIE, THE SAME DOES NOT CONTAIN THE FIR ST FIVE LIMBS OF SECTION 2(15) OF THE ACT NAMELY, RELIEF OF THE POOR , EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST). HOWEVER , THE CLAIM OF THE ASSESSEE THAT EVEN THOUGH THESE FIVE LIMBS ARE NOT SPECIFICALLY PROVIDED FOR IN SECTION 14 OF THE BDA ACT, THE OBJE CTS ENUNCIATED INVOLVED PRESERVATION OF ENVIRONMENT, PRESERVATION OF WATER BODIES, PRESERVATION OF FOREST AREAS, ETC., APPEARS TO HAVE MERIT; FOR IT IS A FACT THAT PLANNED URBAN DEVELOPMENT CANNOT TAKE PLA CE OR BE DONE WITHOUT DUE CONSIDERATION BEING GIVEN TO THE PRESER VATION OF THE ENVIRONMENT, WATER BODIES LIKE LAKES, STREAMS, ETC. , AND FOREST AREAS. 5.8.3 AT PARA 5.9 OF THE IMPUGNED ORDER, THE CIT(A ) STATES THAT SHE IS UNABLE TO ACCEPT THE ARGUMENT OF THE AS SESSEE THAT THE ACTIVITIES UNDERTAKEN BY IT RELATED TO THE DEVELOPM ENT OF PARKS, LAKES ITA NO.789/BANG/2014 PAGE 8 OF 20 AND GREENERY COME UNDER THE FIRST FOUR LIMBS OF THE DEFINITION AS PER SECTION 2(15) OF THE ACT AND NOT THE FIFTH LIMB. S HE WAS OF THE VIEW THAT THE DEVELOPMENT OF LAKES, PARKS AND GREENERY H AVE BEEN UNDERTAKEN ONLY AS PART OF LAYOUT DEVELOPMENT AND C OULD BE CONSIDERED FOR ENHANCING THE COMMERCIAL VALUE OF TH E LAYOUTS DEVELOPED BY THE ASSESSEE. WE OBSERVE FROM THE FIN ANCIAL STATEMENTS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR, T HAT IT HAS EXPENDED AN AMOUNT OF RS.2095.24 LAKHS ON PLANTING OF ONE CRORE SEEDLINGS IN THE GREEN BELT AREA FOR IMPROVEMENT OF THE ENVIRONMENT. FURTHER, IT IS ALSO SEEN THAT THE ASSESSEE HAS EXPE NDED A SUM OF RS.2997.42 LAKHS TOWARDS DEVELOPMENT OF LAKES. IN THE LIGHT OF THE ABOVE FACTS ON RECORD, THE CONTENTIONS OF THE AO AN D CIT(A) THAT THE ASSESSEE HAS NOT CARRIED OUT ANY OF THE ACTIVITIES SPECIFIED / CONTAINED IN THE FIRST FIVE LIMBS OF SECTION 2(15) OF THE ACT IS NOT CORRECT. THE ASSESSEE HAS DEFINITELY CARRIED OUT T HE ACTIVITY OF PRESERVATION OF ENVIRONMENT AND WATER BODIES. IN O UR VIEW, THE CONCLUSION OF THE CIT(A) THAT THE DEVELOPMENTS ON T HESE FRONTS ARE DONE ONLY TO ENHANCE THE COMMERCIAL VALUE OF THE LA YOUT DEVELOPED IS UNTENABLE IN THE LIGHT OF THE FACTS OF THE CASE ON HAND. 5.9.1 THE QUESTION OF WHETHER ALLOTMENT OF SITES A ND FLATS TO THE ECONOMICALLY WEAKER SECTIONS OF SOCIETY CONSTIT UTES RELIEF FOR THE POOR IS PERHAPS A DEBATABLE ISSUE. RELIEF FOR THE POOR DOES NOT NECESSARILY MEAN GIVING SOMETHING FREE OF COST TO T HE POOR. IT ALSO INCLUDES PROVIDING THEM THINGS AT A CONCESSIONAL RA TE. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHICH OF THOSE SEC TIONS OF SOCIETY CAN BE SAID TO BE POOR AS PER SECTION 2(15) OF THE AC T. WHETHER THE WORD POOR CAN MEAN ONLY THOSE WHO ARE BELOW THE OFF ICIAL POVERTY LINE OR DOES IT INCLUDE ALL THOSE WHO ARE ECONOMICA LLY WEAKER, BUT NOT NECESSARILY BELOW THE POVERTY LINE. 5.9.2 IN THIS CONTEXT, IF ONE WERE TO OBSERVE THE ACTIVITIES OF EDUCATIONAL AND MEDICAL INSTITUTIONS, WHICH IN THE EYES OF LAW, ARE CONSIDERED AS CHARITABLE INSTITUTIONS, IT IS NOT NE CESSARY THAT EDUCATIONAL / MEDICAL ASSISTANCE IS TO BE GIVEN FRE E ONLY TO THOSE BELOW THE POVERTY LINE. IT WILL SUFFICE IF EDUCATI ON / MEDICAL ASSISTANCE IS PROVIDED AT CONCESSIONAL RATES. IN F ACT, THE HONBLE APEX COURT HAS LAID DOWN WHERE DIFFERENT SLABS OF F EE STRUCTURE IS APPROVED FOR DIFFERENT CATEGORIES / SEGMENTS OF STU DENTS WHO ARE ADMITTED. IN FACT, RECENTLY THE GOVERNMENT OF INDI A TOO HAS DECLARED RESERVATION IN GOVERNMENT JOBS IN THE COUNTRY TO AL L SECTIONS OF THE ITA NO.789/BANG/2014 PAGE 9 OF 20 CITIZENRY WHO ARE ECONOMICALLY BACKWARD; I.E., TO T HOSE WHOSE FAMILYS ANNUAL INCOME IS LESS THAN 8 LAKHS; WHICH IS A CONCESSION TO PEOPLE WHO ARE CONSIDERED ECONOMICALLY BACKWARD BUT NOT NECESSARILY BELOW THE POVERTY LINE. IN OTHER WORDS , IT IS NOT MANDATORY THAT POOR CONFINES ITSELF TO THOSE SECT IONS BELOW THE POVERTY LINE AND THAT RELIEF MEANS PROVIDING SOME THING FREE OF COST. IN THIS BACKGROUND, IT COULD BE SAID THAT THE RULES THAT GOVERN THE ALLOTMENT OF SITES ARE SO FORMED IN ORDER TO FACILI TATE THE ECONOMICALLY WEAKER SECTIONS OF SOCIETY TO PURCHASE THESE SITES. IN THE CASE OF CONSTRUCTION OF FLATS, IT IS CLEAR FROM THE VERY SCHEME AND THE NAME THEREOF, THAT THESE FLATS ARE MEANT ONLY F OR THE ECONOMICALLY WEAKER SECTIONS OF SOCIETY. 5.9.3 WE ALSO OBSERVE THAT THE FINDING OF THE AO I N PARA 6.20(III) OF THE ORDER OF ASSESSMENT, AND WHICH IS IMPLIEDLY ENDORSED BY THE CIT(A) IN THE IMPUGNED APPELLATE ORDER, I.E. , THAT (III) THE ASSESSEE IS NOT APPLYING THE HUGE AMOUNT OF PROFIT GENERATED FROM THE ACTIVITIES TOWARDS ANY CHARITABLE ACTIVITIES SU CH AS RELIEF OF POOR, EDUCATION, MEDICAL RELIEF AND OTHER OBJECTS OF ADVA NCEMENT OF GENERAL PUBLIC UTILITY AND SUCH SURPLUS IS BEING IN VESTED IN FIXED DEPOSITS IN ORDER TO EARN INTEREST INCOME IS ALSO NOT CORRECT IN AS MUCH AS IT IS EVIDENT FROM THE FINANCIAL STATEMENTS OF THIS YEAR THAT THE ASSESSEE HAS SPENT AN AMOUNT OF RS.278,78,43,00 0/- (DISALLOWED BY THE AO PARA 15.20 OF ASSESSMENT ORDER AND REFL ECTED INT EH COMPUTATION OF TOTAL INCOME) ON ACTIVITIES THAT FAL L UNDER THE HEAD ADVANCEMENT OF GENERAL PUBLIC UTILITY LIKE CONSTR UCTION OF GRADE SEPARATORS, PRR BRIDGES ON FLYOVERS, RENOVATION AND REMODELING WORKS, MAINTENANCE OF BBMP FACILITIES, DEVELOPMENT OF LAKES, ETC. BE THAT AS IT MAY, IF ONE WERE TO PERUSE THE OBJECT FOR WHICH THE ASSESSEE, VIZ., BDA WAS CONSTITUTED, IT IS CLEAR TH AT THE INTENT AND PURPOSE IS FOR PLANNED URBAN DEVELOPMENT OF BANGALO RE CITY AND NOT WITH THE PURPOSE OF PROFIT MAKING; I.E., THE ACTIVI TY OF FORMATION OF LAYOUTS AND ALLOTMENT OF SITES IS ONLY CARRIED OUT WITH THE PRIMARY AND MAIN OBJECT TO ENSURE PLANNED DEVELOPMENT OF BA NGALORE CITY AND NOT WITH THE INTENTION TO MAKE PROFITS. 5.9.4 THE HONBLE APEX COURT IN THE CASE OF BAREND RA RAY AND OTHERS VS. ITO (1981) 129 ITR 295 HAS HELD THAT THE WORD BUSINESS IMPLIES COMMERCIAL TRANSACTIONS WITH A V IEW OF MAKING PROFITS AND GAINS THEREFROM. THEREFORE, CARRYING ON BUSINESS CONNOTES SOME SUBSTANTIAL, SYSTEMATIC AND ORGANIZED ACTIVITY WITH THE ITA NO.789/BANG/2014 PAGE 10 OF 20 OBJECT OF MAKING GAIN AND PROFIT THEREON, WITH THE INEVITABLE CONTROL AND DIRECTION VIS--VIS SUCH ACTIVITY OF BUSINESS. PROFIT MOTIVE IS SURELY THE ESSENCE OF TRADE, COMMERCE OR BUSINESS A ND THEREFORE IN SITUATIONS AND CIRCUMSTANCES IN WHICH SERVICES ARE RENDERED WITHOUT A PROFIT MOTIVE, SUCH RENDERING OF SERVICE WILL NOT HAVE ANYTHING IN COMMON WITH TRADE OR COMMERCE OR BUSINESS. IF ONE WERE TO TEST THE PROVISO TO SECTION 2(15) OF THE ACT AGAINST THE BAC KGROUND OF A RECOGNIZED CHARITABLE ORGANIZATION, THEN ONE HAS TO SEE WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO MAKE PROFI T OR WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT CHARITABLE PURPOSES AND NOT PROFIT MAKING. 5.9.5 THE HONBLE APEX COURT IN THE CASE OF SURAT ART SILK ORGANISATION VS. CIT (121 ITR 1), HAS HELD THAT A C HARITABLE ORGANIZATION CANNOT BE EXPECTED TO BALANCE ITS ACCO UNTS IN SUCH A MANNER THAT THE INCOME FOR THE YEAR MATCHES EXACTLY WITH ITS EXPENDITURE. IT IS INEVITABLE THAT IN CARRYING ON THE ACTIVITIES, CERTAIN SURPLUS MAY ENSUE. THE EARNING OF SUCH SUR PLUS, IN ITSELF, WOULD NOT MEAN THAT THE ORGANIZATION EXISTED FOR PR OFIT. THE HONBLE APEX COURT WENT ON TO OBSERVE THAT EVERY ASSOCIATIO N REQUIRES FUNDS FOR EXPANDING THE RANGE OF ITS ACTIVITIES (FOR EXAM PLE; AN EDUCATIONAL INSTITUTION MAY REQUIRE ADDITIONAL INFRASTRUCTURE U NDER WHICH MORE CLASS ROOMS CAN BE SET UP / CREATED). IF PROFITS A RE GENERATED TO SUPPORT AND EXPAND THESE ACTIVITIES, THEN IT CANNOT , IN THE VIEW OF THE HONBLE APEX COURT, BE HELD THAT THERE IS A PROFIT MOTIVE INVOLVED TO DENY THE EXEMPTION. FROM THE ABOVE RATIO OF THE DE CISION OF THE HONBLE APEX COURT, IT IS CLEAR THAT IT IS THE BASI C MOTIVE BEHIND THE ACTIVITY, WHICH IS IMPORTANT TO BE CONSIDERED; WHET HER IT IS ONE WITH PROFIT MOTIVE OR NOT. MERELY BECAUSE SURPLUS IS GE NERATED FROM A PARTICULAR ACTIVITY, IT CANNOT BE SAID THAT SUCH AC TIVITY IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. WHAT NEEDS TO BE SEEN IS, WHAT THE INTENT AND PURPOSE OF STARTING SUCH ACTIVI TY IS. IN THE CASE ON HAND, THE BDAS EMBARKATION OF THE ACTIVITY OF S ETTING UP OF RESIDENTIAL LAYOUTS, INCLUDING THE ACTIVITY OF SALE OF SITES AND FLATS, IS DEFINITELY NOT WITH A VIEW TO EARN PROFIT, BUT TO E NSURE PLANNED URBAN DEVELOPMENT AND ALSO TO ACCOMPLISH A SOCIAL OBJECTI VE OF PROVIDING AN OPPORTUNITY TO ECONOMICALLY WEAKER SECTIONS OF S OCIETY TO BE ABLE TO OWN A RESIDENCE ON THEIR OWN. 5.10.1 WE FIND THAT THE VIEW OF THE AO IN (IV) OF P ARA 6.20 OF THE ORDER OF ASSESSMENT AND WHICH IS IMPLIEDLY ENDORSED BY THE CIT(A) ITA NO.789/BANG/2014 PAGE 11 OF 20 IN THE IMPUGNED ORDER; I.E., THAT (IV) THE ACTIVIT IES OF THE ASSESSEE AND THE GENERATION OF PROFITS ON ACCOUNT OF THE SAM E ARE AKIN TO THE ACTIVITIES CARRIED ON BY REAL ESTATE COMPANIES, PRO PERTY DEVELOPERS, INFRASTRUCTURE FIRMS, ETC., AND THEREFORE, THE ACTI VITIES OF THE ASSESSEE SQUARELY FALL UNDER THE AMBIT OF ACTIVITIES WHICH A RE IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. ACCORDINGLY THE ACTI VITIES OF THE ASSESSEE ARE HIT BY THE FIRST PROVISO TO SECTION 2( 15); IS IN OUR OPINION RATHER SUPERFLUOUS IN NATURE. NO DOUBT, IT IS A FACT THAT ONE WILL SEE A LOT OF SIMILARITIES IN THE ACTIVITY OF T HE ASSESSEE VIS--VIS THAT OF A REAL ESTATE DEVELOPER. HOWEVER, THE ISSU E TO BE CONSIDERED IS, NOT WHETHER THE ACTIVITY OF THE ASSESSEE IS SIM ILAR TO THAT OF THE PRIVATE REAL ESTATE DEVELOPER OR NOT, BUT WHETHER T HE UNDERLYING PURPOSE OF THE ACTIVITY IS THE SAME AS THAT OF THE PRIVATE REAL ESTATE DEVELOPER, I.E., MAKING AND MAXIMIZATION OF PROFIT. IN THE CASE OF THIS ASSESSEE; VIZ., BDA, THE UNDERLYING MOTIVE / O BJECTIVE IS NOT MAKING AND MAXIMIZING OF PROFITS, BUT PLANNED DEVEL OPMENT OF BANGALORE CITY. IT IS IMPORTANT IN THIS CONTEXT TO NOTE THE FACT THAT CONCERNED INCOME TAX AUTHORITIES HAVE RECOGNIZED TH E ASSESSEE AS A PUBLIC CHARITABLE ORGANIZATION BY GRANT OF REGISTRA TION UNDER SECTION 12A OF THE ACT SINCE 26.03.2003 AND THAT THE ASSESS EES OBJECTS CLAUSE, I.E., SECTION 14 OF THE BDA ACT HAS NOT UND ERGONE ANY CHANGE OR MODIFICATION SINCE ITS ENACTMENT; WHICH IS WHAT MUST HAVE PROMPTED THE INCOME TAX DEPARTMENT TO TAKE THE VIEW THAT IT WAS CHARITABLE IN NATURE. IN OTHER WORDS, THE INCOME T AX DEPARTMENT CONSIDERED THE ASSESSEE, BDA TO BE COVERED BY THE PROVISIONS OF SECTION 2(15) OF THE ACT. 5.10.2 IT IS AFTER THE INTRODUCTION OF THE PROVISO TO SECTION 2(15) OF THE ACT THAT THE INCOME TAX DEPARTMENT TOOK A VIEW THAT THE ACTIVITY OF BDA WAS IN THE NATURE OF TRADE, COMMERCE OR BU SINESS AND CANCELLED THE REGISTRATION, GRANTED UNDER SECTION 1 2A OF THE ACT, VIDE ORDER DATED 08.11.2011. THE ASSESSEES REGISTRATIO N UNDER SECTION 12A OF THE ACT HOWEVER STOOD RESTORED BY A DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER IN ITA N O.12/BANG/2012 DATED 10.04.2015. IN THIS PREVAILING FACTUAL MATRI X, THERE IS NO CHANGE IN THE OBJECTS AND THE ONLY ISSUE WHICH APPA RENTLY PROMPTS REVENUE TO TAKE THE VIEW IT HAS TAKEN, I.E., THAT T HE ACTIVITY OF THE ASSESSEE IS HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT; IS THE FACT THAT THE ACTIVITY OF THE ASSESSEE HAS RESULTED IN H UGE SURPLUS OR PROFITS. IN OUR VIEW, THE FACT OF SURPLUS OR SHORT FALL IS NOT TO BE RECKONED AS THE TEST FOR APPLICABILITY OF THE PROVI SO TO SECTION 2(15) OF THE ACT; BUT RATHER, WHETHER THE ACTIVITY IS EMB ARKED UPON SOLELY ITA NO.789/BANG/2014 PAGE 12 OF 20 WITH THE VIEW TO EARN PROFIT OR NOT; WHICH THE AO A ND CIT(A) HAVE NOT DONE. 5.10.3 IN SUPPORT OF THE ASSESSEES CONTENTIONS, TH E LEARNED AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING J UDICIAL PRONOUNCEMENTS: (I) AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ACIT (EXEMPTIONS) (2017) 396 ITR 323 (GUJ.); (II) JAIPUR DEVELOPMENT AUTHORITY VS. CIT (2014) 5 2 TAXMANN.COM 25 (JAIPUR TRIB.) (III) HARIDWAR DEVELOPMENT AUTHORITY VS. CIT (2015 ) 57 TAXMANN.COM 6 (DLEHI TRIB.) (IV) CIT VS. LUCKNOW DEVELOPMENT AUTHORITY (2013) 38 TAXMANN.COM 246 (ALLAHABAD) (V) CIT VS. JODHPUR DEVELOPMENT AUTHORITY (2017) 7 9 TAXMANN 361 (RAJ.). 5.10.4 WE FIND THAT THE AFORESAID JUDICIAL PRONOUNC EMENTS RELIED UPON BY THE ASSESSEE ARE THOSE OF OTHER URBAN DEVEL OPMENT AUTHORITIES, IN WHOSE CASES ALSO THE AO HAS TAKEN T HE VIEW THAT THE ACTIVITIES OF CITY DEVELOPMENT ARE HIT BY THE PROVI SO TO SECTION 2(15) OF THE ACT. REFERRING TO THE ABOVE CITED CASES, WE FIND THAT IN THE CASE OF AHMEDABAD DEVELOPMENT AUTHORITY (2017) 396 ITR 323, THE HONBLE GUJARAT HIGH COURT HAS UPHELD THE APPEAL OF THE ASSESSEE, BY OVERRULING THEREIN THE DECISION OF THE AHMEDABAD TRIBUNAL IN THAT CASE. IN THE CASE OF LUCKNOW DEVELOPMENT AUTHORITY (2018) 39 TAXMANN.COM 246, THE HONBLE ALLAHABAD HIGH COURT H AS UPHELD THE DECISION OF THE LUCKNOW BENCH OF ITAT WHICH WAS IN FAVOUR OF THE ASSESSEE. WE FIND THAT IN THE ABOVE JUDICIAL PRONO UNCEMENTS CITED BY THE ASSESSEE, THE FACTS ARE IDENTICAL TO THAT OF TH E ASSESSEE IN THE CASE ON HAND; THAT THE AOS IN THESE CASES HAVE TAKEN A V IEW THAT THE ACTIVITY IS IN THE NATURE OF TRADE, COMMERCE OR BUS INESS AND HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AND THE ASSESSE ES HAVE GOT RELIEF AT THE HIGHER APPELLATE FORUMS, VIZ., THE HONBLE H IGH COURTS AND / OR TRIBUNALS. ITA NO.789/BANG/2014 PAGE 13 OF 20 5.10.5 IN SUPPORT OF THE VIEW / CONTENTION THAT THE ACTIVITIES OF THE ASSESSEE ARE SQUARELY HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT AND IS CONSEQUENTLY NOT ELIGIBLE AND TO BE CLAIMED EXEMPTION UNDER SECTION 11 OF THE ACT, THE AO HAS PLACED RELIANCE O N THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) JAMMU DEVELOPMENT AUTHORITY VS. UOI IN ITA NO. 164/2012, CMA/2/2012 (J & K HIGH COURT); (II) PUNJAB URBAN PLANNING AND DEVELOPMENT AUTHORI TY (103 TTJ 98) (ITAT CHANDIGARH); (III) INDORE DEVELOPMENT AUTHORITY ITA NO.366/IN D/2008 (ITAT INDORE). (IV) IMPROVEMENT TRUST VS. CIT, BHATIRDA (41 TAXMA NN.COM 403) (ITAT AMRITSAR). THE ABOVE CITED CASES RELIED UPON BY THE AO FIND ME NTION IN THE IMPUGNED ORDER OF ASSESSMENT AND THE AO HAS BRIEFLY DISCUSSED THESE JUDICIAL PRONOUNCEMENTS THEREIN. WE FIND FROM THE DISCUSSIONS THEREIN THAT IN ALL THESE CITATIONS, THE ISSUE INVO LVED WAS THE CANCELLATION OF REGISTRATION UNDER SECTION 12A OF T HE ACT AND NOT ASSESSMENTS MADE ON THE BASIS THAT THE ACTIVITIES I N THOSE CASES ARE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT. IN OUR VIEW, THESE JUDICIAL PRONOUNCEMENTS CANNOT BE APPLIED TO THE AS SESSEE IN THE CASE ON HAND FOR THE REASON THAT THE ASSESSEES REG ISTRATION UNDER SECTION 12A OF THE ACT WHICH WAS CANCELLED BY THE C IT(EXEMPTION), HAS SINCE BEEN RESTORED BY A CO-ORDINATE BENCH OF T HIS TRIBUNAL, BY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. KARN ATAKA INDUSTRIAL AREA DEVELOPMENT BOARD (ITA NO.261/2013 DATED 07.11 .2014). IN THAT LEGAL VIEW OF THE MATTER, THE JUDICIAL PRONOUN CEMENTS RELIED UPON BY THE AO WOULD NOT COME TO THE RESCUE OF REVE NUE IN THE CASE ON HAND. FURTHER, IN VIEW OF THE DECISION OF THE H ONBLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS (88 ITR 1 92) (SC), IT IS JUDICIALLY CORRECT TO FOLLOW THE DECISIONS OF HON BLE HIGH COURTS OF GUJARAT AND ALLAHABAD WHICH SUPPORT THE CASE OF THE ASSESSEE (SUPRA), WHEN THE SAME ARE IN FAVOUR OF THE ASSESSE E; DESPITE THERE BEING DECISIONS CONTRARY BY OTHER HIGH COURTS; WHEN THERE IS NO DECISION OF THE JURISDICTIONAL HIGH COURT AGAINST T HE ASSESSEE. IN ITA NO.789/BANG/2014 PAGE 14 OF 20 VIEW OF THE FACTUAL AND LEGAL MATRIX OF THE CASE, A S DISCUSSED ABOVE, WE HOLD THAT THE ACTIVITIES OF THE ASSESSEE, I.E., BANGALORE DEVELOPMENT AUTHORITY ARE NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT. HAVING HELD SO, WE DIRECT THE AO TO ALLOW THE ASSESSEE THE BENEFITS OF SECTION 11 OF THE ACT WHILE GIVING EFFE CT TO THIS ORDER. CONSEQUENTLY, GROUNDS RAISED BY THE ASSESSEE ON THI S ISSUE ARE ALLOWED. 10. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUN AL, WE ARE OF THE VIEW THAT THE ASSESSEES ACTIVITIES HAVE TO BE REGARDED AS CHARIT ABLE IN NATURE. THE ASSESEE WOULD BE ENTITLED TO THE BENEFITS OF SEC. 11 OF THE ACT, WE HOLD ACCORDINGLY AND ALLOW GROUND NO.4. 11. THE ASSESEE HAS FILED APPLICATION FOR ADMISSION OF THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL WHICH READS AS FOLLOWS:- 1. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESS ED ON AN INCOME OF MORE THAN THE RETURNED LOSS OF RS.137,52,78,000/- O N FACTS AND CIRCUMSTANCES OF THE CASE. 2. DENIAL OF DEPRECIATION ON THE GROUND THAT THE SA ME HAS BEEN CLAIMED AS APPLICATION OF INCOME WITHOUT PREJUDICE, THE AUTHORITIES BELOW IS NOT JUS TIFIED IN LAW IN HOLDING THAT THE ASSETS HELD BY THE APPELLANT PRIOR TO FINA NCIAL YEAR 2008-09 IS ALREADY CLAIMED AS APPLICATION OF INCOME AND CONSEQ UENTLY THE APPELLANT IS NOT ENTITLED TO CLAIM DEPRECIATION ON THE SAID A SSETS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. (RELIANCE IS PLACED ON T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT-ILL VS. RA JASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA, CIVIL APPEAL NO.7186 O F 204 (SC) DATED 13. 12.2017). 3. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE APPELLANT IS PERFORMING THE FUNCTIONS OF THE STATE AND CONSEQUEN TLY NOT A PERSON FOR THE PURPOSE OF INCOME-TAX AND NOT EXIGIBLE TO INCOME-TA X ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.789/BANG/2014 PAGE 15 OF 20 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 12. THOUGH THESE GROUNDS WERE NOT RAISED BEFORE THE CIT(A), THE GRIEVANCE PROJECTED IN THE ADDITIONAL GROUNDS ARISE OUT OF T HE ORDER OF THE AO HENCE, THE SAME IS ADMITTED FOR ADJUDICATION KEEPING IN MIND T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION 229 ITR 383 (SC) 13. AS FAR AS THE MERITS OF THE ADDITIONAL GROUNDS OF APPEAL IS CONCERNED, THE LEARNED COUNSEL ARGUED ONLY FOR ADJUDICATION OF GRO UND RELATING TO DENIAL OF DEPRECIATION ALONE AND NO ARGUMENT WERE ADVANCED ON OTHER ADDITIONAL GROUNDS. THE ASSESSEE IS A CHARITABLE TRUST WITH OBJECTS TO PROVIDE EDUCATION BY RUNNING SEVERAL EDUCATIONAL INSTITUTIONS. IN THE COURSE OF ASSESSMENT U/S. 143(3) OF THE ACT FOR AY 2009-10 THE AO NOTICED FROM THE DETAILS OF DEPRECIATION CLAIMED, THAT THE DEPRECIATION WAS CLAIMED ON ASSETS, THE COST OF ACQ UISITION OF THE SAID ASSETS HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE TOWARDS APPLICATION OF FUNDS TOWARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUC H. ACCORDING TO THE AO, ALLOWING SUCH A CLAIM WOULD AMOUNT TO ALLOWING DOUB LE DEDUCTION. ON THE FACTS OF THE PRESENT CASE, HE WAS OF THE VIEW THAT THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 IT R 43 IS SQUARELY APPLICABLE, WHEREIN IT HAS BEEN CATEGORICA LLY HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED IN RESPECT OF CAPITAL EXPENDIT URE ON SCIENTIFIC RESEARCH, NO DEPRECIATION IS ALLOWABLE U/S 32 ON THE SAME ASSET. 14. THE ASSESSEE POINTED OUT THAT HON'BLE HIGH COU RT OF KARNATAKA IN THE CASE OF ALL SAINTS CHURCH, 148 ITR 786 (KAR) AND SOCIETY OF SISTERS OF ST. ANN, 146 ITR 28 (KAR) HAS TAKEN THE VIEW THAT WHERE CAPITAL EXPENDITURE ON ACQUISITION OF ITA NO.789/BANG/2014 PAGE 16 OF 20 DEPRECIABLE ASSET IS CONSIDERED AS APPLICATION OF I NCOME FOR CHARITABLE PURPOSE, ALLOWING DEPRECIATION ON THE VERY SAME CAPITAL ASSE T WOULD NOT AMOUNT TO DOUBLE ALLOWANCE. THE ASSESSEE ALSO POINTED OUT THAT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFF ERENT SET OF FACTS. 15. THE AO HOWEVER, HELD THAT ALLOWANCE OF DEPRECI ATION WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMPTION AS APPLI CATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION AND DOUBLE BENEFIT ON THE SAME ASS ET. THE AO REFERRED TO THE DECISION OF THE OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST O F ACQUISITION OF DEPRECIABLE ASSET WAS ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AMOUNTS TO DOUBLE DEPRECIATION AND THEREFORE DEPRECIATION CANNOT BE A LLOWED. THE AO ALSO DISTINGUISHED THE CASES CITED BY THE ASSESSEE. 17. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, W HO RELIED ON THE ORDER OF AO. WE HAVE CONSIDERED THE ORDER OF THE AO. IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN THE CASE OF DDIT(E) V. CUTCHI MEMON UNION (2013) 60 SOT 260 BANGALORE ITAT , WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL. IN THE AFORESAID CASE, THE ASSESSEE CLAIMED DEPRECIATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT CAPITAL ASSET, COST OF ACQUISITION WAS CONSIDERED AS APPLIC ATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWING DE PRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELIANCE ON TH E DECISION OF HON'BLE SUPREME COURT IN ESCORTS LTD. (SUPRA) . THE CIT(A), HOWEVER, ALLOWED THE CLAIM OF ASSESSEE. ON FURTHER APPEAL BY THE REVENUE, THE TR IBUNAL HELD AS FOLLOWS:- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING INCOME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PR ESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE ITA NO.789/BANG/2014 PAGE 17 OF 20 VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR O BSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBIT ED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE IN STITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISIONS ON THAT ISSUE AND ALS O THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITA L ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCTIONS UNDER DIFFERE NT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTI FIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAI M FOR DOUBLE DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KARNATAK A HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR) , WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIA TION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME . IN VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INT ERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENU E IS DISMISSED. ITA NO.789/BANG/2014 PAGE 18 OF 20 18. THE HONBLE SUPRME COURT HAS NOW SETTLED THE AF ORESAID ISSUE IN THE CASE OF CIT-ILL VS. RAJASTHAN AND GUJARATI CHARITABLE FOUND ATION POONA, CIVIL APPEAL NO.7186 OF 204 (SC) DATED 13. 12.2017 IN FAVOUR OF THE ASSESSEE . WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINCE BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INS ERTION OF SUB-SECTION (6) TO SECTION 11 OF THE ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 19. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PROS PECTIVE AND WILL APPLY ONLY FROM A.Y. 2015-16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) HAS TO BE REVERSED. C ONSEQUENTLY GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MAY, 2019 . SD/- SD/- (JASON P BOAZ) ( N.V. VASUDE VAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, 3RD MAY, 2019. / VMS / ITA NO.789/BANG/2014 PAGE 19 OF 20 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.789/BANG/2014 PAGE 20 OF 20 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..