Income Tax Appellate Tribunal - Jaipur
Deputy Commissioner Of Income Tax (E) ... vs M/S Urban Iprovement Trust, Jaipur on 30 November, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 712/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2013-14.
Deputy Commissioner of Income-tax, cuke Urban Improvement Trust,
(Exemptions), Circle, Vs. UIT Building, CAD Circle,
Jaipur. Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAALU 0110 D
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by: Shri Varinder Mehta (CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Prakul Khurana (Advocate)
lquokbZ dh rkjh[k@ Date of Hearing : 29.11.2018.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/11/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, JM :
This appeal by the revenue is directed against the order dated 22nd February, 2018 of ld. CIT (A), Kota for the assessment year 2013-14. The revenue has raised the following grounds :-
" 1. On the facts and circumstance of case and in law the ld. CIT (Appeals) has erred in allowing benefit of section 10(20) of the Act, by relying upon order of Hon'ble High Court of Rajasthan, Jaipur in the case of UIT, Kota in DBIT No. 73/2011 and 357/2011 dated 25.07.2017, in spite of the facts that income of UIT is not exempt after insertion of explanation 10(20) by the Finance Act, 2002 w.e.f. 01.04.2003.
2. On the facts and circumstance of case and in law the ld. CIT (Appeals) has in allowing benefit of section 10(20) of the Act, by relying upon the decision of Hon'ble High Court's order in the case of UIT, Kota in DBIT No. 73/2011 and 357/2011 dated 25.07.2017 which has not reached its finality.2 ITA No. 712/JP/2018
Urban Improvement Trust, Kota.
3. On the facts and circumstance of case and in law the ld. CIT (Appeals) has erred in ignoring the facts that assessee failed to maintain its books of accounts as well getting audit of the same in accordance to the provisions of section 12A(1)(b) of the Act.
4. The ld. CIT (Appeals) has erred in adjudicating the grounds No.
(s) 3 to 21 in favour of the assessee by treating them being consequential in nature.
5. Any other question of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon'ble Tribunal in the interest of justice.
Ground Nos. 1 & 2 are regarding the benefit of section 10(20) of the IT Act allowed by the ld. CIT (A) by following the decision of Hon'ble Jurisdictional High Court in assessee's own case.
2. We have heard the ld. D/R as well as the ld. A/R and considered the relevant material on record. At the outset, we note that the decision of the Hon'ble Jurisdictional High Court has now been rejected by the Hon'ble Supreme Court in assessee's own case reported as 98 taxmann.com 237 (SC) wherein the Hon'ble Supreme Court has held that assessee trust cannot be considered as local authority as per the definition given in section 10(20) of the IT Act. The relevant finding of the Hon'ble Supreme Court is in para 29 to 40 as under :-
"29. The word "Municipal Committee" as occurring in Section 10(20) Explanation came for consideration before this Court in Agricultural Produce Market Committee Narela v. CIT [2018] 173 Taxman 115/305 ITR 1 (SC). In the above case, this Court had examined the Explanation to Section 10(20) as amended by Finance Act, 2002 and the definition of local authority contained therein. After noticing the definition of local authority as contained in Section 10(20) Explanation w.e.f. 01.04.2003 as well as Section 3(31) of the General Clauses Act, 1897. Following was stated in Paras 30 and 31:--
"30. At the outset, it may be noted that prior to the Finance Act, 2002, the said 1961 Act did not contain the definition of the word "local authority". That 3 ITA No. 712/JP/2018 Urban Improvement Trust, Kota.
word came to be defined for the first time by the Finance Act, 2002 vide the said Explanation/definition clause.
31. Certain glaring features can be deciphered from the above comparative chart. Under Section 3(31) of the General Clauses Act, 1897, "local authority"
was defined to mean "a Municipal Committee, District Board, Body of Port Commissioners or other authority legally entitled to ... the control or management of a municipal or local fund". The words "other authority" in Section 3(31) of the 1897 Act have been omitted by Parliament in the Explanation/definition clause inserted in Section 10(20) of the 1961 Act vide the Finance Act, 2002. Therefore, in our view, it would not be correct to say that the entire definition of the word "local authority" is bodily lifted from Section 3(31) of the 1897 Act and incorporated, by Parliament, in the said Explanation to Section 10(20) of the 1961 Act. This deliberate omission is important."
30. In the above case, earlier judgment of this Court in Union of India v. R.C. Jain, [1981] 2 SCC 308 was considered where this Court had laid down and applied the functional test as to whether a body is local authority or not? This Court laid down that functional test as evolved in R.C. Jain's case (supra) is no more applicable after amendment of Section 10(20) of I.T. Act by Finance Act, 2002. Following was laid down in paragraph 35:--
"35. One more aspect needs to be mentioned. In R.C. Jain, (1981) 2 SCC 308 the test of "like nature" was adopted as the words "other authority" came after the words "Municipal Committee, District Board, Body of Port Commissioners".
Therefore, the words "other authority" in Section 3(31) took colour from the earlier words, namely, "Municipal Committee, District Board or Body of Port Commissioners". This is how the functional test is evolved in R.C. Jain. However, as stated earlier, Parliament in its legislative wisdom has omitted the words "other authority" from the said Explanation to Section 10(20) of the 1961 Act. The said Explanation to Section 10(20) provides a definition to the word "local authority". It is an exhaustive definition. It is not an inclusive definition. The words "other authority" do not find place in the said Explanation. Even, according to the appellant(s), AMC(s) is neither a Municipal Committee nor a District Board nor a Municipal Committee nor a panchayat. Therefore, in our view functional test and the test of incorporation as laid down in R.C. Jain is no more applicable to the Explanation to Section 10(20) of the 1961 Act. Therefore, in our view the judgment of this Court in R.C. Jain followed by judgments of various High Courts on the status and character of AMC(s) is no more applicable to the provisions of Section 10(20) after the insertion of the Explanation/definition clause to that sub-section vide the Finance Act, 2002."
31. This Court further noticed the expression "Municipal Committee" in Clause (iii) of Section 10(20). This Court held that the words "Municipal Committee and District Board" in Explanation were used out of abundant caution. In 1897, when the General Clauses Act was enacted there existed in India Municipal Committees and District Boards, which were discharging the municipal functions in different parts of the country. The expression "Municipal Committee and District Board" were included by amendments incorporated by Finance Act, 2002 to take into its fold those Municipal Committees and District Board which are still discharging municipal functions where no 4 ITA No. 712/JP/2018 Urban Improvement Trust, Kota.
other municipalities or boards to discharge municipal functions have been constituted. In paragraph Nos. 36 and 37 following has been laid down:
'36** . The question still remains as to why Parliament has used the words "Municipal Committee" and "District Board" in Item (iii) of the said Explanation. In our view, Parliament has defined "local authority" to mean--a panchayat as referred to in clause (d) of Article 243 of the Constitution of India and municipality as referred to in clause (e) of Article 243-P of the Constitution of India. However, there is no reference to Article 243 after the words "Municipal Committee" and "District Board". In our view, the Municipal Committee and District Board in the said Explanation are used out of abundant caution.
37. In 1897, when the General Clauses Act was enacted there existed in India Municipal Committees and District Boards. They continued even thereafter. In some remote place it is possible that there exists a Municipal Committee or a District Board. Therefore, in our view, apart from a panchayat and municipality, Parliament in its wisdom decided to give exemption to Municipal Committee and District Board. Earlier there were District Board Acts in various States. Most of the States had repealed those Acts. However, it is quite possible that in some remote place District Board may still exist. Therefore, Parliament decided to give exemption to such Municipal Committees and District Boards. Therefore, in our view, advisedly Parliament has retained exemption for Municipal Committee and District Board apart from panchayat and municipality.'
32. This Court further noticed the constitutional provision of Part IX-A and noticed that any law relating to municipalities in force in a State immediately before the commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, even if inconsistent with the provisions of Part IX-A, shall continue to be in force until amended or repealed by a competent legislature. In Para 39, following has been laid down:--
"39. Similarly, under Part IX-A there is Article 243-ZF which refers to the "Municipalities". This article, inter alia, states that notwithstanding anything in Part IX-A, any provision of any law relating to municipalities in force in a State immediately before the commencement of the Constitution (Seventy- fourth Amendment) Act, 1992, which is inconsistent with the provisions of Part IX-A, shall continue to be in force until amended or repealed by a competent legislature. In our view, Article 243-N and Article 243-ZF indicate that there could be enactments which still retain the entities like Municipal Committees and District Boards and if they exist, Parliament intends to give exemption to their income under Section 10(20) of the 1961 Act."
33. In above case, this Court, thus, has held that the expression "Municipal Committee and District Board" occurring in Clause (iii) of Explanation referred to those bodies, which are discharging municipal functions and power in any part of country and so far has not been substituted by any other Body by any Act of Legislature. The word "Municipal Committee" occurring in Clause (iii) Explanation, thus, has a definite purpose and object. Purpose and object was to cover those bodies, which are discharging municipal functions but are not covered by the definition of municipalities as was required to be constituted by Article 243Q of the Constitution of 5 ITA No. 712/JP/2018 Urban Improvement Trust, Kota.
India. Urban Improvement Trust constituted under the Rajasthan Urban Improvement Act, 1959, thus, cannot be held to be covered by the definition of Municipal Committee as contained in Clause (iii) of Explanation to Section 10(20) of the I.T. Act. Further, as noticed above, prior to deletion of Section 10(20A), Section 10(20A) was a provision which exempted the income of authority constituted in India by or under any law enacted for the purpose of planning, development or improvement of cities, towns and villages or for both. There cannot be any dispute that Urban Improvement Trust, i.e. the assessee was fully covered by the definition of authorities as contained in Section 10(20A) prior to its deletion. When there is a specific deletion of Section 10(20A), the said deletion was for an object and purpose. The Explanatory Notes in Paragraph Nos. 13.1 to 13.4 as noticed above clearly mentioned that "income of certain Housing Boards etc. to become taxable". The deletion of authorities, which were enumerated in Section 10(20A) was a clear indicator that such authorities, which were enjoying exemption under Section 10(20A) shall no longer be entitled to enjoy the exemption henceforth. The deletion of Section 10(20A) thus has to be given a purpose and meaning.
34. This Court in New Okhla Industrial Development Authority v. Chief Commissioner of Income Tax & Ors. (supra), which was a judgment delivered by this very Bench had considered in detail the object and purpose of Section 10(20A), the object and purpose of Finance Act, 2002 amendment adding the Explanation to Section 10(20) and deletion of Section 10(20A).
35. The provisions of Sections 47 and 48 are to permit certain powers of the municipal boards to be performed by the Trust which does not transform the Trust into a Municipal Committee. The power entrusted under Sections 47 and 48 are for limited purpose, for purposes of carrying out the improvement by the Improvement Trusts.
36. Sections 61 to 64 as noticed above are the provisions empowering levy of betterment charges, which is again in reference to and in context of carrying out improvement by the Improvement Trust in urban areas. The Municipal Board, Kota performs its functions, in areas where Municipal Board still exists. There is no reason to accept that Urban Improvement Trust is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii). Coming back to Section 105, which provides for ultimate dissolution of Trust and transfer of its assets and liabilities to the Municipal Board, this provision does not in any manner improve the case of the assessee. When the Trust is dissolved or at dissolution, properties and funds and dues vested in or realisable by the Trust shall vest in and be realisable by the Municipal Board, which is a provision for different purpose and object. The above provision does not support the contention that Improvement Trust is a Municipal Committee as referred to in Clause (iii) of Explanation to Section 10(20) of the I.T. Act.
37. We, thus, are of the view that Scheme of the Rajasthan Urban Improvement Act, 1959 does not permit acceptance of the contention of the appellant assessee that Urban Improvement Trust is a Municipal Committee within the meaning of Section 10(20) Explanation (iii). The purpose and object for expression "Municipal Committee" used in Section 10(20) Explanation (iii) has been explained, as already noticed above, by this Court's judgment in Agricultural Produce Market Committee Narela, (supra).
6 ITA No. 712/JP/2018Urban Improvement Trust, Kota.
38. The entire consideration of the High Court in the impugned judgment is contained in paragraphs 15 to 18 which are to the following effect:--
"15. It is true that the functions which are carried out by the assessee are statutory functions and carry on for the benefit of the State Government for urban development therefore, in our considered opinion, the functions carried out by the authority is a supreme function and fall within the activity of the State Government.
16. In that view of the matter, the judgments which are strongly relied upon by counsel for the department are of no help in the facts of the case as the case relied upon by the department was in respect of industrial corporation which was under
the statute for the purpose of making profit. The fees and other charges which are covered are statutorily for the development of the urban area. In that view of the matter, the judgment which sought to be relied upon by the counsel for the respondents, in our considered opinion, would be of importance and the functions which are carried out by the assessee is statutory function. In our considered opinion, under clause-10(20) & Sub-clause (3) Municipal Committee and District Board are legal entity entrusted by the function of the Government within the control or management of the municipal or local authority and will try to help the assessee.
17. In that view of the matter, the reliance placed by counsel for the department regarding 10(20) and explanation A will not make any difference. Taking into consideration income of authority is under constitution of India vide order enacted either for the purpose of dealing with or setting up the housing scheme for the purpose of planning and development of the improvement of the cities, town and villages or both for which the authority are created to carry out the function of State which are sovereign whereas the urban development and calculation of development charges will fall under the development charges.
18. In that view of the matter, deletion of 20A will not make difference in case of assessee. In our considered opinion, Clause-3 will come in the help of the assessee.
In that view of the matter, we are considered opinion, that the authority assessee is a local authority for the purpose of carrying out of the improvement and development function of the State."
39. The High Court based its decision on the fact that functions carried out by the assessee are statutory functions and it is carrying on the functions for the benefit of the State Government for urban development. The said reasoning cannot lead to the conclusion that it is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii). The High Court has not adverted to the relevant facts and circumstances and without considering the relevant aspects has arrived at erroneous conclusions. Judgments of the High Court are unsustainable.
40. In view of foregoing discussions, we are of the view that judgments of the High Court deserves to be set aside. All the appeals are allowed. In view of setting aside the judgments of the High Court dated 25.07.2017 and 23.10.2017, the order passed by ITAT revives. Parties shall bear their own costs."
7 ITA No. 712/JP/2018Urban Improvement Trust, Kota.
Following the judgment of the Hon'ble Supreme Court in assessee's own case, we set aside the order of the ld. CIT (A), qua this issue and restore the order of the AO.
Ground No. 3 is regarding exemption under sections 11 & 12 of the IT Act.
3. Though the ld. CIT (A) has not decided the said issue, once the benefit of section 10(20) is granted by the ld. CIT (A), however now since the issue of benefit of section 10(20) has been decided against the assessee, therefore, the exemption under section 11 & 12 becomes relevant. The ld. A/R of the assessee has filed the order dated 13.09.2017 of this Tribunal in ITA No. 378/JP/2013 whereby the Tribunal has granted the exemption and directed the ld. CIT (A) to allow the application of the assessee for registration under section 12AA of the Act. In view of the fact that the registration under section 12AA was granted by this Tribunal, therefore, the issue of exemption under section 11 & 12 of the Act is required to be examined and considered. Accordingly, we set aside the matter to the record of the AO for consideration and adjudication of the exemption under section 11 & 12 in respect of the income derived from the property held under Trust.
4. In the result, appeal of the revenue is partly allowed.
Order is pronounced in the open court on 30/11/2018.
Sd/- Sd/-
(foØe flag ;kno) (fot; iky jkWo ½
(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 30/11/2018.
Das/
8
ITA No. 712/JP/2018
Urban Improvement Trust, Kota.
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- The DCIT (Exemptions), Circle, Jaipur.
2. The Respondent - Urban Improvement Trust, Kota.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 712/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 9 ITA No. 712/JP/2018 Urban Improvement Trust, Kota.