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ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad

20. The ld. Special Counsel has also argued that the ld. CIT(A) , while directing that exemption be allowed under section 11 , did not consider the findings of the AO with respect to section 11(2), section 13(1)(d) and section 13(3). He has pointed out that once the ld. CIT(A) had held that the income of the assessee should be computed in the manner specified in section 11, taking into account information given in the audit report in Form No.10B, he should also have directed the ld. AO to look into the conditions that were required to be fulfilled for grant of exemption under section 11 i.e. the ld. AO ought to have been empowered to examine any possible violations of section 11(2), 13(1)(d) and 13(3), before being compelled to grant the exemption under section 11. In consideration of these arguments, we find that the issue before the ld. CIT(A) was whether, once registration had been granted under section 12AA, could the ld. AO hold that the assessee was a business entity and its income was to be computed as business profit under sections 28 to 44. It was in this context that the ld. CIT(A) held that once an, "institution" or "trust" had been granted registration under section 12AA, its income had to be assessed in the manner laid in section 11and there was no other head of income under which it could be assessed. Thus, he concluded that the computation made by the ld. AO was against the provisions of law and judicial propriety, which could not be sustained. The ld. CIT(A) held that the ld. AO had to restrict himself to the computation of income as provided under section 11 and thereafter he should examine the application of income. We observed that any controversy regarding the eligibility of the assessee for registration under section 12AA of the Act, had already been settled by the Hon'ble Allahabad High Court, Lucknow Bench in favour of the assessee vide its judgments dated 16.09.2013 and 27.09.2013 in ITA Nos. 114/2010 and 16/2006. Therefore, in our opinion, the ld. CIT(A) was perfectly correct in directing the ld. AO to compute the income as per the provisions of section 11. That was not a direction to the ld. AO to grant exemption to the assessee under section 11, but rather a direction to compute the income in a particular manner and examine the application ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad of income. As such, these directions would not have precluded the ld. AO from examining possible violations of section 11(2), 13(1)(d) or 13(3) while determining the eligibility for exemption under section 11. Therefore, we are of the opinion that the additional grounds of appeal that have been filed, are based upon an incorrect reading of the meaning and import of the order of the ld. CIT(A). We further observe that the ld. CIT(A), even while directing the ld. AO to compute the income in the manner laid down under section 11, declined to allow the assessee the benefit of accumulation under section 11(2) in either assessment year because of (i) its failure to specify the purpose for accumulation in assessment year 2007-08 and (ii) its failure to file Form No.10 before the completion before the completion of assessment and also to specify purpose of accumulation in the said form in the assessment year 2008-09. Thus, the ld. CIT(A) has not overlooked the provisions of section 11(2), while directing the ld. AO to compute the income in the manner provided under section 11. Accordingly, additional ground number 2 does not seem to fit with the facts of the case and therefore it is also dismissed. This brings us to additional ground number 3 ie that the Ld CIT(A) has not considered whether the money of the parishad was being invested in the specified modes or not. In this context, we observe that there were no fetters on the ld assessing officer in examining this issue in the course of original assessment or even when the matter was sent back for computing the income in the manner provided under section 11. We notice that even while the Assessing Officer was primarily focused on trying to demonstrate that the activities of the assessee parishad were not charitable, he still found time to go through the accounts to observe that the assessee had applied less than 85% of its receipts during the year and was therefore required to file an application for accumulation of income. Thus, we see no reason why he could not have examined this aspect also. Be that as it may, the Ld AR has very correctly pointed out that an examination of the final accounts itself reveals that the funds are invested in the specified modes. Moreover, we note that as per the provisions of ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad section 58(2) the UPAEVA 1965, the Parishad is obliged by law to keep its funds in the State Bank of India or with the previous approval of the UP Government, in in the UP Cooperative Bank or in a Scheduled bank or in Securities prescribed in section 20 of the Indian Trusts Act 1882. All these, to our mind, constitute valid modes of investment under section 11(5) of the Income Tax Act and therefore in our opinion, there is no occasion to allow the Revenue a further opportunity in this regard. Therefore the third additional ground of appeal is also dismissed. With regard to the issue of possible violation of section 13(3) of the Income Tax Act on account of discount given to employees of the parishad on the valuation of allotted properties and also on account of the reservation provided to them in the allotment of properties, on account of the U.P. Government order dated17.12.1999, we are in agreement with the ld. AR, that the said issue does not arise out of the orders of assessment or out of the orders of the ld. CIT(A) and we cannot agree with the Ld. Special Counsel that the Ld. AO had asked pointed queries in this regard which had not been answered by the assessee, as the same is not revealed by the assessment orders. Be that as it may, the ld. Special Counsel has pointed out that this is a pure legal issue and therefore, can be raised at the present stage of the proceedings. After considering the submissions made by the ld. Special Counsel and considering the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd Vs CIT (1998) 229 ITR 383 (SC) the ground is admitted for adjudication. However, it is observed that the issue has already been decided in favour of the assessee by the Hon'ble ITAT in ITA Nos.630 & 631/Lkw/2016, ITA Nos. 23 & 24/Lkw/2017, ITA Nos.164 & 165/Lkw/2017 and ITA Nos.210 & 211/Lkw/2017 for the assessment years 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15. Furthermore, we have ourselves considered this issue in depth while deciding the case of Ayodhya-Faizabad Development Authority in ITA Nos.518, 519 & 520/Lkw/2018 and ITA Nos. 143, 144 & 145/Lkw/2021 wherein in our order dated 31.01.2025 in para 41as under:

Therefore, in view of our findings in the case of Ayodhya-Faizabad Development Authority and also following the judgment of the ITAT in ITA Nos. 518, 519 & 520/Lkw/2018 and ITA Nos. 143, 144 & 145/Lkw/2021, this additional ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad ground of appeal filed by the Department is dismissed. Accordingly all four additional grounds filed by the revenue in Appeal numbers 532 & 533 of 2014 , stand dismissed.

28. Ground No.2 of the assessee's appeal in both assessment years relates to the decision of the ld. AO and the ld. CIT(A) to direct that sums credited in the, "infrastructure fund" be included in the receipts of the assessee. The assessee has argued that it had no right, title or interest in the sums credited to this fund as the same stood diverted by overriding title in favour of the State Government and therefore, the ld. CIT(A) should have held that the sums in question alongwith the interest thereon were outside the ambit of assessment in the case of the assessee. We have considered the various arguments brought between us by the rival parties and have also considered this issue in our orders in the case of Ayodhya Faizabad Development Authority in ITA Nos. 518, 519 & 520/Lkw/2018 and ITA Nos. 143, ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad 144 & 145/Lkw/2021 for the A.Ys. 2012-13, 2014-15 & 2015-16 & A.Ys. 2016-17, 2017-18 & 2018-19 wherein in paragraph nos. 44 to 48, we have held as under:-

29. Ongoing through the Uttar Pradesh Awas Evam Vikas Parishad Adhiniyam, 1965, we find that section 58(1), section 92(2) and section 93 of the U.P. Awas Evam Vikas Parishad Adhiniyam are, effectively & in substance, para materia to sections 20, 41 and 58 of the U.P.U.P.D.A. 1973 therefore, our findings with regard to the nature of and title to the infrastructure fund created by the Government O.M. dated 15.01.1998, in the case of Ayodhya Faizabad Development Authority, would hold ITA Nos. 532 & 533/LKW/2014 ITA Nos. 534 & 535/LKW/2014 ITA Nos. 21 & 22/LKW/2019 U.P. Awas Evam Vikas Parishad good for the Uttar Pradesh Awas Evam Vikas Parishad also. In the circumstances, we deem it appropriate to restore this matter back to the file of the ld. AO to analyze the nature of the receipts with reference to the O.M. dated 15.01.1998 and therefore take an appropriate decision on the quantum that is required to be routed through the income and expenditure account. Furthermore, in respect of amounts that are required to be routed through the income and expenditure account, we direct that the ld. AO may allow credit for corresponding expenses. Ground No.2 for both assessment years 2007-08 and 2008-09 are accordingly partly allowed, as above.