SHIMOGA URBAN DEVELOPMENT AUTHORITY,SHIMOGA V. INCOME TAX OFFICER, WARD-5, SHIMOGA

SA 32/BANG/2025

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The case involves the Shimoga Urban Development Authority (the appellant) seeking a stay on the outstanding tax demand for the assessment years 2016-17 to 2018-19, totaling Rs. 9,72,73,567. The appellant argued that it is a local authority under the Karnataka Urban Development Authority Act, 1987, engaged in public utility activities without profit motives, and thus exempt from income tax under section 10(46) of the I.T. Act. The Income Tax Officer (the respondent) opposed the stay, citing non-compliance with section 254 of the Act and the absence of registration under section 12 of the Act, which would allow for tax exemption under section 11. The Tribunal considered the arguments and decided to grant a conditional stay, emphasizing the need for a 20% payment of the outstanding demand to ensure compliance and maintain the stay.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41179 (ITAT-BANGALORE)
• Appeal Type: Stay Application
• Pronouncement Date: 02-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Ahmedabad Urban Development Authority vs. [2022] 449 ITR 1 (SC)
• Laws Referred To: Karnataka Urban Development Authority Act, 1987, I.T. Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: BALRAM R. RAO
• Keywords: Opportunity of being heard
• Section: 143(3); 11; 12

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER SP Nos.31 to 33/Bang/2025 [ in ITA Nos.2118 to 2120/Bang/2024 ] Assessment years : 2016-17 to 2018-19 Shimoga Urban Development Authority, 1, SUDA Complex, 100 feet Road, Vinobanagar, Shivamogga – 557 204. PAN: AAALS 2328H Vs. The Income Tax Officer, Ward 05, Shimoga. APPELLANT RESPONDENT Appellant by : Shri Balram R. Rao, Advocate Respondent by : Shri Subramanian S., Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 28.03.2025 Date of Pronouncement : 02.04.2025 O R D E R Per Laxmi Prasad Sahu, Accountant Member These stay petitions are filed by the assessee seeking stay of outstand demand for all the three years of Rs. 9,72,73,567 relating to assessment years 2016-17 to 2018-19 as under. The issues are similar, therefore, all these cases were heard together and disposed of by this common order. SP Nos.31 to 33/Bang/2025 Page 2 of 5 Amount Rs. AY 2016-17 Outstanding Demand 3,54,42,367 Amount already paid 7,23,262 AY 2017-18 Outstanding Demand 4,13,50,327 Amount already paid 9,38,533 AY 2018-19 Outstanding Demand 4,30,51,042 Amount already paid 19,22,544 2. The ld. counsel further submitted that assessee has a good prima facie case in favour of assessee and it is a fit case for granting stay. He further submitted that assessee is a local authority established under the Karnataka Urban Development Authority Act, 1987 having jurisdiction over Shimoga District. The objects of the authority are planning, promoting and securing the development of the urban area and for these purposes the authority shall have the power to acquire, hold, manage and dispose of movable and immovable property whether within or outside the urban area under its jurisdictions, to carry out building engineering and other operations and generally to do all things necessary or expedient for the purpose of such development and for purposes incidental thereto. No budgetary support is provided to the authority. The authority is established for the planned development of the urban areas. Formation of new layouts is also one of the activities carried out by the authority to provide sites at affordable prices. There is no profit motive in the activities of the authority. The analysis of the projects implemented by the authority clearly shows no profit has been earned and in fact loss has been incurred in many projects. The Karnataka Urban Development Authority Act of 1987 does not mention about earning profits from the activities of the authority. SP Nos.31 to 33/Bang/2025 Page 3 of 5 3. He further submitted that the case of the assessee is squarely covered by the judgment of the Hon’ble Apex Court in the case of Ahmedabad Urban Development Authority reported in [2022] 449 ITR 1 (SC) by holding that statutory corporations, boards, authorities, commissions, etc. in housing development, town planning, industrial development sectors are involved in advancement of the objects of general public utility and are therefore entitled to be considered as charities in general utility categories as defined in section 2(15) of the I.T. Act. Hence the present case is exempt from payment of taxes and income of the assessee is exempt u/s. 10(46) of the Act and the assessee is not involved in any commercial activity. 4. The ld. counsel for the assessee further submitted that the AO has issued notice u/s. 226 of the Act dated 12.02.2025 to the assessee’s banker viz., Canara Bank, Vinoba Nagar, Shimoga and stayed the operation of the bank accounts of the assessee i.e., Account Nos. 29070101006445 & 2907010089 for payment of demand of Rs.9,72,73,567 as under:- A.Y. Demand u/s. Date of order Outstanding demand 2016-17 143(3) 11/12/2018 2,83,53,893 2017-18 143(3) 28/01/2021 3,30,80,264 2018-19 143(3) 28/01/2021 3,58,39,410 He submitted that if the operation of bank account is lifted, then the assessee will pay 10% of the outstanding demand. SP Nos.31 to 33/Bang/2025 Page 4 of 5 5. On the other hand, the ld. DR relied on the order of lower authorities and submitted that payment of 10% of the demand as undertaken by the ld. counsel for assessee is against the provisions of section 254 of the Act and therefore stay should not be granted. The ld. CIT(Appeals) has rightly dismissed the appeal of the assessee observing that section 2(15) is not appliable to the assessee and the judgment relied by the ld. counsel for the assessee is not appliable to the present facts of the case and every case has its own facts. The assessee is not registered u/s. 12 of the Act and therefore the provisions of section 11 will not be applicable to the assessee. The ld. DR further submitted that there is no provisional or earlier registration granted prior to the order dated 14.5.2020 granting registration and he submitted that if the assessee complies with the provisions of section 254, then only stay may be granted. 6. We have heard the rival submissions and perused the material available on record. A perusal of the provisions of section 254(1) shows that the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. After analysing the facts, considering the submissions made by both the parties and also material placed on record, we cannot brush aside the fact that the assessee has paid very little amount towards the demand. During the course of hearing the ld. counsel for the assessee has conceded to pay 10% of the total outstanding demand subject to lifting of attached bank accounts and we are not in agreement with the same. Accordingly, we direct the assessee to pay 20% of the total SP Nos.31 to 33/Bang/2025 Page 5 of 5 outstanding demand in three instalments by 15.4.2025. The AO is directed to lift the attachment of the bank accounts of the assessee with Canara Bank, Vinoba Nagar Branch, Shimoga and thereafter the assessee will pay 20% of the outstanding demand. Stay is granted subject to this condition of payment of 20% of the outstanding demand by 15.04.2025 as above. After lifting of bank accounts the assessee has to make payment of 20% of the outstanding tax amount. If the assessee does not comply this condition, the AO may continue with the attachment of the bank accounts of the assessee and stay will be automatically vacated. 7. In the result, the stay petitions are disposed of in the above terms. Pronounced in the open court on this 02nd day of April, 2025. Sd/- Sd/- ( KESHAV DUBEY) ( LAXMI PRASAD SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 02nd April, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "