Income Tax Appellate Tribunal - Jaipur
Acit(E), Jaipur vs Jaipur Development Authority, Jaipur on 11 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ ITA No. 899/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2009-10
The ACIT (Exemption) Circle, cuke M/s Jaipur Development
Jaipur Vs. Authority, JLN Marg, Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAATJ 4598 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Shyamlal Agarwal (CA)
Shri Tarun Agarwal (CA)
jktLo dh vksj ls@ Revenue by : Shri H.V. Gurjar (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 03.01.2017
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 11/01/2017.
vkns'k@ ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the Revenue against the order of Ld. CIT(A)-III, Jaipur dated 25.07.2016 for A.Y. 2009-10 wherein following two grounds of appeal have been taken by the Revenue.
(1) On the facts and circumstances of the case and in law the CIT(A) has erred in allowing the exemption u/s 11 of the Act by holding that the activities of the appellant authority are charitable even though the amended provisions of section 13(8) r.w.1st and 2nd proviso of section 2(15) of the Act are attracted.
(2) On the facts and circumstances of the case and in law, the CIT(A) has erred in allowing the benefits of set apart u/s 11(2) of the IT Act, 1961 deleting the addition of Rs. 79,76,39,913/- as unspent amount in spite of the fact that the provisions of section 11(2) r.w.s. 11(3)(c) attracted as assessee was not granted exemption u/s 11.
ITA No.899/JP/2016ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority
2. Briefly the facts of the case are that the assessment was originally completed u/s 143(3) of the Act whereby the AO assessed income of the assessee as per normal provisions of the Act denying the exemption claimed by the assessee u/s 11, 12 &13 f the Income tax Act. The reason given by the AO was that in assessment year 2009-10, the definition of charitable purposes u/s 2(15) has been changed and CIT, Jaipur vide its order dated 29.12.2011 has withdrawn the registration u/s 12AA of the Act. Hence the assessee was held not entitled to exemption u/s 11, 12 & 13 of the Act. Subsequent to the passing of the assessment order u/s 143(3) of the Act, on further verification of record, it was found that in the balance sheet, the assessee has shown set apart/ accumulated balance u/s 11(2) which was not utilised for the purpose of the objects of the trust upto the end of assessment year. As the assessee was not eligible for claiming exemption u/s 11 and accordingly the closing balance set apart was to be brought to tax u/s 11(3)(c) of the Act. Accordingly the assessment proceedings were reopened u/s 147 of the Act and notice u/s 148 was issued on 29.03.2014. Subsequently, after considering the submission of the assessee, the assessment order u/s 147/143(3) was issued on 23.03.2015. During the course of reassessment proceedings, the assessee submitted that the ITAT, Jaipur Bench vide its order dated 30.09.2014 in ITA No. 182/JP/2012 has directed to grant registration u/s 12AA we.f. A.Y. 2009-10 and as such the proceedings initiated u/s 147 are not maintainable and also accumulated balance/set apart is not taxable u/s 11(3)(c) of the Act. The AO however, did not accept the said submission of the assessee stating that the decision of the ITAT, Jaipur Bench dated 30.09.2014 has not been accepted by the department and an appeal u/s 260 has been filed before the Hon'ble Rajasthan High Court which is pending for adjudication. Accordingly, the assessee's contentions that it is registered u/s 12AA of the Act was not accepted by the AO. Further the 2 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority AO stated that in subsequent years i.e A.Y. 2010-11 and 2011-12, the assessee has not been allowed the benefit of exemption u/s 11 due to invoking of proviso to section 2(15) of the Act and the same were relied upon by the AO for the year under consideration. Accordingly the assessee was held not eligible for claiming exemption u/s 11 and closing balance accumulated/ set apart of Rs. 79,76,39,913 was added to the total income.
2. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) challenging the action initiated u/s 147 as well as denying the benefit of section 11(2) of the Act. Regarding validity of action u/s 147 of the Act, the ld. CIT(A) noted that at the time of issuance of notice u/s 148, registration of the assessee u/s 12A had been withdrawn and therefore, the AO was right in taking action u/s 147 as he has reason to believe that benefit u/s 11 was not allowable to the assessee. Regarding disallowance of benefit u/s 11(2) was concerned, the ld. CIT(A) noted that the AO denied the claim of the assessee for the reason that registration of the assessee u/s 12A had been withdrawn by the Commissioner and further the order of ITAT restoring the registration has been opposed by the department and an appeal u/s 260A of the Act is pending for decision before the Rajasthan High Court. The ld. CIT(A) thereafter referred to the decision of ITAT in ITA No.182/JP/2012 dated 30.09.2014 wherein the registration u/s 12A was restored and held that the benefit u/s 11 & 12 has to be given to the assessee even though the departmental appeal is pending before High Court. Against the said decision of the Ld. CIT(A) the revenue is in appeal before us.
3. The ld. AR submitted that the matter is clearly covered by the decision of Hon'ble ITAT in ITA No. 380, 381 & 382/JP/2016 dated 22.11.2016 wherein the registration u/s 12AA was restored from A.Y. 2009-10. It was further submitted that the Hon'ble ITAT in the context of original proceedings u/s 3 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority 143(3) of the Act for the impugned assessment year i.e 2009-10 has allowed the assessee the benefit of exemption u/s 11 & 12 of the Act and the ld AR took us through the relevant findings of the Coordinate Bench in ITA No. 427/JP/13 and ITA No. 447/JP/2013 for A.Y. 2009-10 dated 04.01.2016 which was pronounced subsequent to restoration of registration under section 12AA wherein the relevant findings are contained at para 6 of its order which are reproduced as under:
"6. The assessee has been granted registration by the order of the Coordinate Bench in ITA No. 927/JP/2007 order dated 30/05/2008 w.e.f. 14/3/2007 wherein the Coordinate Bench has held that the assessee's activities are charitable and are not covered u/s 2(15) of the Act. Therefore, the Assessing Officer is directed to give benefit of Section 11 and 12 of the Act to the assessee. The income of the assessee is to be assessed on the real income basis which has been accrued to the assessee during the year under consideration. The appellant had changed method of accounting during the year under consideration but the same has been found more accurate and scientific to determine the assessee's income. Therefore, change of accounting is bonafide and same cannot be rejected on the ground that the assessee had claimed more expenses during the year under consideration. The case law relied by the assessee is squarely applicable. A change in the method of accounting should not be rejected for reasons that it would result in bringing into accounts in one year the losses of several years as held in the case of CIT Vs. Eastern Bengal Jute Trading Co. Ltd. (1978) 112 ITR 575 (Cal.) Accordingly change of the accounting policy is allowed.
The assessee has claimed depreciation on fixed assets which is also allowable as held by the various courts in case of Trust where the assessee first made income for application of acquiring of assets and thereafter claiming depreciation on it. Accordingly, we allow the assessee's appeal and dismiss the revenue's appeal."
4. Further, the ld. AR drawn our reference the decision of this very Bench for A.Y. 10-11, 2011-12 & 2012-13 wherein again the matter was examined at 4 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority great length and the assessee was held eligible for exemption u/s 11 & 12 of the Act.
5. The Ld. DR supported the order of the AO and stated that the department is in appeal against the earlier orders of the Coordinate Bench before the Hon'ble Rajasthan High Court. At the same time, he fairly agreed that the matter is covered by the decision of the Coordinate Benches referred supra.
6. We have heard the rival contentions and perused the material available on record. The issue of eligibility of the assessee to claim exemption under section 11 and 12 of the Act has already been examined by the Coordinate Bench for the impunged assessment year in the context of original assessment proceedings completed u/s 143(3) of the Act. Apparently, the notice u/s 148 was issued on 29.03.2014 and thereafter reassessment proceedings were completed on 23.03.2015 much before the order was pronounced by the Coordinate Bench on 04.01.2016 and the AO was therefore not having the benefit of considering the decision of the Coordinate Bench where the assessee was held eligible for exemption under section 11 and 12 of the Act. Further, in the context of subsequent assessment years, this Bench has recently examined this subject matter in terms of eligibility of the subject assessee in terms of claiming exemption u/s 11 & 12 of the Act and the matter has again been decided in favour of the asesssee. The relevant findings are contained at para 14 & 15 of order dated 22.11.2016 which are reproduced as under:
"(14). Further, the ld AR has drawn our reference to recent jurisdictional High Court decision in case of Jodhpur Development Authority (supra) and submitted that the ratio of the said decision squarely applies in the instant case. In order to determine whether the facts of the instant case 5 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority are pari-materia with the facts brought up before the Hon'ble High Court, we have gone through the Jaipur Development Authority Act, 1982. Section 16 of the JDA Act provides that the main objects of the Authority shall be to secure integrated development of the Jaipur Region and for that purpose functions of the Authority shall inter-alia include Urban Planning including preparation of Master Development Plan and Zonal Development Plans and carrying out surveys for the purpose and also making alterations therein as may be deemed necessary;
formulation and sanction of the projects and schemes for the development of Jaipur Region or any part thereof, execution of the project and schemes directly by itself or through a local authority or other agency, coordinating execution of projects or schemes for the development of Jaipur Region; supervision or otherwise ensuring adequate supervision over the planning and execution of any project or schemes the expenses of which in whole or in part are to be met from Jaipur Region Development funds; preparing schemes and advising the concerned authorities department and agencies in formulating and undertaking schemes for development of agriculture, horticulture, floriculture, forestry, dairy development, transport communication, schooling, cultural activities, sports, medicine, tourism and similar other activities; undertaking housing activity in Jaipur Region provided that the delineation of responsibility for housing between Rajasthan Housing Board and the Authority will be made by state government effective from the date fix by it; to acquire, hold, manage and dispose of property, movable or immovable as may be deemed necessary; to enter into contracts, agreements or arrangements with any person or organization as it deem necessary; to prepare Master Plan for traffic control and management, devise policy and programmes of action for smooth flow of traffic and matters connected therewith; and to do all such acts and things which are necessary for the furtherance of the objects for which the authority is established. Further, as per the provisions of section 55 of JDA Act, for the purpose of discharging the statutory functions, "The Jaipur Region Development Fund" is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, 90% share of tax recovered on land and building situated within the Jaipur Region, income derived from premium on second and subsequent sale of vacant land, income from 6 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority levy on vacant land, all fees, costs and charges received by the Authority under this Act or any other law for time being in force, all money received by Authority from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment, development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source or from donations. Further, section 58 of the JDA Act provides that all property, funds and other assets vesting in the Authority shall be held and applied by it for the purposes and subject to the provisions of the Act.
(14.1) It is thus noted that the main objects of the Jaipur Development Authority and the functions/activities to achieve such objectives are pari-materia with that of the Jodhpur development Authority. Further, the entire funds of the Jaipur Development Authority is mandatorily required to be utilized for discharging the functions to achieve the object of integrated development of Jaipur Region. In light of above, the decision of Hon'ble Rajasthan High Court in case of Jodhpur development authority and others (supra) squarely applies to the Jaipur Development Authority where the Hon'ble High Court has held that the "predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression advancement of any other objects of general public utility within the definition of section 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under section 12A read with section 12AA of the Act of 1961." The said decision thus support the case of the Jaipur Development Authority for being eligible to claim exemption u/s 11 & 12 of the Act.
(15). Further, on perusal of assessment order, it is observed that limited ground on which exemption under section 11 and 12 of the Act was denied was on account of non-registration under section 12AA of the Act. Nothing has been brought on record to suggest that besides non-registration under section 12AA, the assessee has failed to fulfil any other conditions as envisaged u/s 11, 12 and 13 of the Act by virtue of which it shall be denied the exemption under section 11 & 12 of the Act. In fact, on perusal of assessment order, it is noted that the Assessing officer has noted in context of grant of Rs 2,50,00,000 to Amber 7 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority Development Authority and of Rs 3,82,10,322 to Jaipur Metro Rail Corporation Limited that "these expenses would be admissible as application of income if it was to be considered exempted under section 11, 12 and 13 and as the benefit of section 11 is not admissible, the sum paid to these two institutions as grant would not be admissible" and hence added back to assessee's income. Similar is the position in respect of other disallowances except for an amount of Rs 1,57,56,523 which has been allowed in the earlier years and disallowance thereof confirmed by the ld CIT(A). It is thus clear that the Revenue has not disputed any of these expenses as application of income (except Rs 1,57,56,523 which was already allowed in earlier years) for want of fulfilment of any of the conditions specified under section 11, 12 and 13 of the Act. Regarding applicability of section 13(8), we have already held above that in view of proviso to section 2(15) not applicable in the case of the assessee, provisions of section 13(8) would not be applicable."
In light of above, we do not see any reason to interfere with the order of the ld CIT(A). The assessee is held eligible for exemption u/s 11 of the Act as well as the benefit of section 11(2) shall be available to assessee. The grounds of appeal taken by the Revenue are thus dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 11/01/2017.
Sd/- Sd/-
(KUL BHARAT) (VIKRAM SINGH YADAV)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 11/01/2017
Pillai
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ACIT, Circle (Exemptions), Jaipur
2. izR;FkhZ@ The Respondent- M/s Jaipur Development Authority, Jaipur 8 ITA No.899/JP/2016 ACIT, Circle(Exemption) Jaipur vs. Jaipur Dev. Authority
3. vk;dj vk;qDr@ CIT -III, Exemptions, Jaipur
4. vk;dj vk;qDr¼vihy½@The CIT(A)-III, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 899/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.9