Case Law Details
DCIT (Exemption) Vs Rajkot Urban Development Authority (ITAT Ahmedabad)
ITAT Ahmedabad held that exemption u/s. 11(1)(2) and 11(1)(a) of the Income Tax Act duly admissible to Rajkot Urban Development Authority (RUDA) since the activities were not commercial in nature.
Facts- The assessee, Rajkot Urban Development Authority (RUDA), is a local authority established under the Gujarat Town Planning and Urban Development Act, 1976. The appellant is registered u/s. 12AA of the Income Tax Act, 1961, which grants it certain exemptions typically available to charitable or public utility organizations. For the relevant A.Y., the assessee filed its income tax return, declaring a total income of Nil after claiming exemptions u/s. 11(1)(2) and 11(1)(a) of the Income Tax Act.
During the assessment proceedings, AO denied exemption u/s 11(1)(2) and 11(1)(a) of the Income Tax Act to the assessee. CIT(A) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the CIT(A), following the decision of the Hon’ble Gujarat High Court in the case of the Ahmedabad Urban Development Authority (AUDA), had correctly allowed the assessee’s appeal for the assessment years 2009-10 to 2014-15, affirming that its activities were of a public utility nature and not commercial in nature.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi vide order dated 07.12.2023 passed for A.Y. 2016-17.
2. The Revenue has taken the following grounds of appeal:-
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of Rs.8,64,81,230/- made by Assessing Officer and holding that the activities of the assessee were not covered by the proviso to section 2(15) r.w.s. 13(8) of the Act and it was eligible for the benefits of section 11 and 12 of the Act ignoring the guidelines laid down by Hon’ble Supreme Court of India regarding significantly high mark-up in the case of ACIT vs Ahmedabad Urban Development Authority dated 19.10.2022 reported in [2022] 143 taxman.com 278 (SC) and ACIT(E) vs. AUDA dated 03.11.2022 in MA no. 1849 of 2022?”
3. The brief facts of the case are that the assessee, Rajkot Urban Development Authority (RUDA), is a local authority established under the Gujarat Town Planning and Urban Development Act, 1976. The assessee is responsible for carrying out planned development in designated areas as identified by the Government of Gujarat. In fulfilling its duties, the assessee undertakes various infrastructural activities for public utility, such as constructing roads, bridges, drainage systems, and providing water supply services. The appellant is registered under section 12AA of the Income Tax Act, 1961, which grants it certain exemptions typically available to charitable or public utility organizations. For the relevant assessment year, the assessee filed its income tax return on 16th August 2016, declaring a total income of Nil after claiming exemptions under sections 11(1)(2) and 11(1)(a) of the Income Tax Act. Specifically, the assessee claimed an exemption of ₹6,51,84,506/- under section 11(1)(2) and ₹2,12,96,721/-under section 11(1)(a) of the Act. The return was processed under section 143(1) of the Act without any modifications. However, the case of the assessee was subsequently selected for scrutiny under the CASS (Computer Assisted Scrutiny Selection) system. During the assessment proceedings, the Assessing Officer (AO) questioned the assessee’s claim for exemption under sections 11(1)(2) and 11(1)(a) of the Act, contending that the assessee’s activities were in the nature of trade, commerce, or business. The AO was of the view that the assessee’s operations were covered under the first proviso to section 2(15) of the Income Tax Act, which imposes restrictions on exemptions for entities involved in trade or business activities, even if they claim to serve a charitable purpose. Accordingly, the Assessing Officer denied exemption under sections 11(1)(2) and 11(1)(a) of the Income Tax Act to the assessee.
4. In appeal before CIT(Appeals), the assessee submitted that this issue had been previously addressed in relation to earlier assessment years (200910 to 2015-16), here the Hon’ble Commissioner of Income Tax (Appeals) [CIT(A)] had earlier ruled in favor of the assessee, on identical set of facts. The CIT(A), following the decision of the Hon’ble Gujarat High Court in the case of the Ahmedabad Urban Development Authority (AUDA), had allowed the assessee’s appeal for the assessment years 2009-10 to 2014-15, affirming that its activities were of a public utility nature and not commercial in nature. Despite these legal precedents, the AO chose not to follow the Gujarat High Court’s decision in the present assessment year, citing the fact that the Department had filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court against the AUDA decision. As a result, to maintain consistency in the Department’s stance, the AO disallowed the exemption claimed by the assessee for the current assessment year, despite the favorable rulings in earlier years.
5. In light of these facts, CIT(A) allowed the appeal of the assesse with the following observations:
“6.1 I have considered all the submissions / contentions / submitted till date, the assessment order as well as the various judiciary orders relied upon by the appellant. The appellant has disputed the finding of the AO that the appellant is not eligible to any of the exemptions claimed u/s 11 and section 12 of the Act, The AO has held in the assessment order that with the introduction of section 13(8) of the Act w.e.f 01.04.2009, the appellant’s case being squarely covered by the proviso of section 2(15) of the I T Act is not eligible for exemption available u/s 11 and section 12 of the Act.
6.2 The submissions of the appellant have been quoted above wherein the above action of the AO has been challenged. The appellant along with its submissions has furnished a copy of the order of the Hon’ble ITAT ‘B’ Bench, Ahmedabad in its own case in ITA No 3/Ahd/2020 13.09.2023 for AY 2015-16. In this order, the Hon’ble ITAT ‘B’ Bench Ahmedabad. has observed as under:
“The Ld. AR submitted that as regards to ground nos. 1 & 3 the same is now decided by the Hon’ble Supreme Court in favour of the assesses in assessee’s own case wherein the lead matter was decided in case of ACIT vs. Ahmedabad Urban Development Authority, 449 ITR 1. As far as ground no 2 is concerned, the same is consequential in nature to ground nos, 1 & 3.
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the issue contested in the present appeal is decided by the Hon’ble Supreme Court in the case of ACIT vs. Ahmedabad Urban Development Authority (Supra) and the observations made by the Hon’ble Supreme Court are as follows:-
“………….. 254. In accordance with the foregoing discussion and summary of
conclusions the numerous appeals are disposed of as follows: (i) The revenue’s appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiaia Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot. Improvement Trust, Improvement Trust, Hansi, and the Special Leave Petitions filed against the Gujarat Maritime Board and Karnataka Water Supply and Drainage Board are rejected. (ii) The revenue’s appeals against Ahmedabad Urban Development Authority, the Gujarat Housing Board the Gandhinagar Urban Development Authority, Raikot Urban Development Authority, Surat Urban Development, Development Authority, Jamnagar Area Development Authority, and the Gujarat Industrial Development Corporation are rejected. Likewise, the revenue’s appeals against Agra Development Trust, UP Awas Evam Vikas Parishad, Raebareli Development Authority, Rajasthan Housing Board, Mangalore Urban Development Authority: Mathura Vrindavan Development Authority, Meerut Development Authority, Be/gaum Development Authority. Moradabad Urban Development Authority, Yamuna Expressway Industrial Development Authority, Greater Noida Industrial Development Authority, New Okhla Industrial Development Authority and Karnataka Industrial Areas Development Board are rejected.”
8. As regards to factual aspects are concerned, the Hon’ble Apex Court has categorically mentioned that the activities are coming under the purview of Section 11(2) and Section 11(1)(a) of the Act and, therefore, the assessee therein including the assessee before us is entitled for claiming exemption under Section 11 & 12 of the Act. The relevant observations made by the Hon’ble Apex Court are as under :-
” ……3. It was urged on behalf of the revenue, that the clarification it seeks is necessary, because in ‘Para 253H in Para 254, it has been precluded from examining the facts and assessing the concerned assessment years, in relation to the assesses in these appeals. It was urged that the conclusions recorded in the judgment and those in the said, two paragraphs, preclude it from dealing with the assessments of parties before this court and furthermore, the dismissal of the revenue’s appeals will preclude an examination of the merits for these assesses in future, as well.
4. A plain reading of the conclusions recorded in Para 2.53 (A), (B), (C), (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- Shin relation to the assessment years in question, whereas in Para 253 (F), the court remitted the matter for examination and orders by the assessing officer. Similarly, the conclusion in Para 253 G. was conclusive with respect to the claim of private trusts, the appeals were dismissed. These conclusions are accurately reflected in the final, operative directions in Para 254. In Para 254 (i) to (iv), the conclusions recorded are against the revenue. However, in Para 254 (v), (vi). (vii) and (vii), the conclusions, are in favour of the revenue.
5. The reference to application of the law declared by this court’s judgment, therefore, has to be understood in the context, which is that [hey apply for the assessment years in question, which were before this court and were decided wherever the appeals were decided against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgement, having regard to the facts of each such assessment year. In view oi this discussion, no further clarification is necessary or called for.”
6. The Ld. DR could not point out any contradictory facts in the present appeal to that of the decision taken by the Hon’ble Apex Court in case of ACIT vs. Ahmedabad Urban Development Authority (supra). Therefore appeal of the Revenue is dismissed.
7. In the result, appeal filed by the Revenue is dismissed.”
6.3 It is further noticed that this is of recurring nature the same is being contested by the appellant from A.Yrs. 2009-10 to 2015-16. The appellant has also submitted that for the AYs 2009-10 to 2015-16, its appeals at the Appellate stage have been decided by the Department in its favour. Further, revenue’s appeals against the appellant have been dismissed at the ITAT, High Court and Supreme Court stage. The appellant has also furnished copies of the orders in its own for AYs 2014-15 & 2015-16. On going through orders, it is seen that the grounds raised for the present year are identical to that of those years.
6.4.1 Since the facts and circumstances of the case for AYs 2014-15 & 2015-16 are identical to that of for the year under consideration, respectfully following the decision of the Hon’ble ITAT ‘B’ Bench Ahmedabad (supra) dated 13.09.2023 for AY 2015-16 as also the decisions of the then CIT(A) for AYs 2014-15 & 2015-16, ground no. 1 of the appeal of the relevant year is allowed.”
6. The Revenue is in appeal before us, against the order passed by Ld. CIT(A).
7. On going through the facts of the instant case, we are of the considered view that the Ld. CIT(A) has correctly allowed the appeal of the assessee in light of the decision of Ahmedabad Tribunal in assessee’s own case for the immediately preceding year i.e. A.Y. 2015-16 in ITA No. 3/Ahd/2020, wherein on identical set of facts the Ahmedabad Tribunal had allowed the appeal of the assessee after taking into consideration the decision of Hon’ble Supreme Court in AUDA case. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.
8. In the result, the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 05/11/2024
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