Income Tax Appellate Tribunal - Agra
Aligarh Devolopment Authority, ... vs Department Of Income Tax on 27 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER
ITA No. 255/Agra/2013
Asst. year : 2008-09
D.C.I.T., Circle 1, vs. Aligarh Development Authority,
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 year 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 an AOP engaged in the activity of development of Aligarh City. Return declaring Nil income was filed on 29.09.2008. During the course of assessment proceedings the AO vide order sheet 2 ITA No. 255/Agra/2013 entry dated 25.11.2010 required the assessee to explain 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 the assessee that betterment charges, development charges, compounding charges, staking fees, lease rent and free hold charges were charged at the time of approving construction plans in the city. All these fee were charges under various GO's of U.P. Government. The assessee also furnished copies of all the relevant GO's in support of its claim. It was further contended that regulation of construction activity was basically a Government activity which was carried out by Aligarh Development Authority. Hence it was argued that such activities were not in 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 utilized for infrastructure and development of city for 'General Public Utility' only 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 3 ITA No. 255/Agra/2013 overhead and establishment expenses 90% to infrastructure funds. That collection and utilization of fees as explained clearly pointed that the assessee was not carrying out any business or commercial activity. All the activities were for 'General Public Utility' and hence in the nature of charity. 2.2 It was further explained that during the year assessee sold flats for the poorest section of the society in EWS category. This was a purely charitable activity because these flats were sold on non-commercial basis purely for the benefit of the poor as per the guidelines of U.P. Government. It was argued that merely selling of a flat or receiving any consideration from an allottee or customer did not render any activity as carrying on a business or commercial activity. The assessee also furnished cost of EWS flats as per which 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 added 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 surplus 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. 4 ITA No. 255/Agra/2013 2.3 It was further argued by the assessee that amendment 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 submitted that activities of the assessee were accepted as activities of 'General Public Utility' 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. However, the AO rejected the submissions made by the assessee and held the activities sale of ready built flat to EWS as that of business in nature. Therefore, the AO 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 appellate 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 assessment year 2009-10 because the section was amended w.e.f. 01.04.2009. It was further submitted that ITAT granted registration to the assessee u/s. 12AA of the IT Act, therefore, the income of the assessee would be exempt. It was also submitted that the assessee carried out same 5 ITA No. 255/Agra/2013 activities. Therefore, on the principle of consistency 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 reproduced as under :
"The facts of the case as well as submissions made by the appellant have been carefully considered. It is observed that the AO had added surplus at Rs.11,47,730/- on the ground that sale of EWS flats was business activity of the appellant and was rather influenced by the amendment to section 2(15) of the Act brought 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 made 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 Hon'ble ITAT in the appellant's case and as such the AO had accepted the 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 provisions of section 2(15) of the Act. Further as discussed above the appellant 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 not justified in bringing the surplus at Rs.11,47,730/- to tax and thereby made addition. The same is directed to be deleted. The case 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 submitted that since the activities of the assessee were for the construction of flats and selling the same, 6 ITA No. 255/Agra/2013 therefore, it was mainly the business in nature. The ld. DR relied upon the order of the ITAT, Amritsar Bench in the case of Jalandhar Development Authority vs. CIT, 35 SOT 15 (124 TTJ 598).
5. On the other hand, the ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that the nature of activities are same as carried out in earlier years as well as subsequent years. It is submitted that on identical facts, the AO accepted the claim of assessee 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 earlier and subsequent assessment year have been placed on record to show that on surplus derived out of similar activities, the AO accepted similar claim of assessee holding income of the assessee exempt u/s. 11 of the IT Act. He has, therefore, submitted that on principle of consistency also, the ld. CIT(A) was justified 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 7 ITA No. 255/Agra/2013 case of assessee. He has relied upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Lucknow Development Authority, 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 assessee 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 relied upon the proviso to section 2(15) of the IT Act, which was inserted into the Act 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. Thus, the whole basis of the AO would be demolished by these findings of the ld. CIT(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. Copies of audited balance sheet for earlier assessment years and subsequent year have been placed on record to show that on same set of facts, the AO accepted the claim 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 that the Revenue department accepted the claim of assessee for grant of exemption on surplus u/s. 11 of the IT 8 ITA No. 255/Agra/2013 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 Authorities shall have to follow the rule of consistency. We rely upon the decision of Hon'ble Supreme Court in the case of Radhswami Satsang vs. CIT, 193 ITR 321, decision 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 decision 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 deleting the addition. The ld. counsel for the assessee also relied upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Lucknow Development Authority in 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 activities on non- commercial lines with no motive to earn profits, for 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 proviso to section 2(15). The aims and objects of the assessee-trust are 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 deny exemption available under section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are 9 ITA No. 255/Agra/2013 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 assessee. In these facts and circumstances of the case, the proviso to section 2(15) is not applicable to the facts and circumstances of the case, 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 Officer has not given any defective in computation of income as per section 11 as submitted in Form-XB, but observed that the activities of the assessee are not charitable. The activities of the assessee are genuine. 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 with reasons mentioned therein. [Para 30] 6.1 In the case of assessee, the AO has not brought any evidence on record to suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit. The AO merely considering the activities of construction of flats and selling held the same to be business in nature. The decision in the case of Lucknow Development Authority, therefore, clearly applies in favour of the assessee. The ld. DR, however, relied upon the order 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 confirmed by the Tribunal. 10 ITA No. 255/Agra/2013 However, in the case of present assessee, the registration u/s. 12AA is effective and as such, the said decision is not relevant to the 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 dismissed.
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