Commissioner Of Income Tax Exemptions, 3[Rd] Floor, Kailashheights, Lal Kothi, Tonk Road, Jaipur v. Jaipur Development Authority, J.l.n. Marg, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No.218/2017 Commissioner Of Income Tax Exemptions, 3[rd] Floor, KailashHeights, Lal Kothi, Tonk Road, Jaipur ----Appellant Versus Jaipur Development Authority, J.L.N. Marg, Jaipur ----Respondent For Appellant(s) : Mr. Sandeep Pathak, Adv.For Respondent(s): Mr. Siddharth Ranka, Adv. withMr. Rohan Chatter, Adv.Ms. Satwika Jha, Adv. HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE ASHUTOSH KUMAROrder 02/08/2024 1.This appeal is filed against the order of the Income TaxAppellate Tribunal Jaipur (for short ‘the Tribunal’) dismissing theappeal of the Department. 2.The brief facts are that respondent-assessee is engaged indeveloping the area, providing civic amenities and allotment oflands. The income tax return for the assessment year 2009-2010was filed declaring losses. The proceedings under Section 147 ofthe Income Tax Act, 1961 (for short ‘the Act’) culminated in orderdated 23.03.2015 making an addition of Rs.79,76,39,913/-. Itwas held that the respondent was not eligible to claim exemptionunder Section 11 of the Act. The CIT(A) allowed the appeal on25.07.2016. On dismissal of appeal of appellant by the Tribunal on11.01.2017, the present appeal is filed. 3.Earlier this appeal was dismissed by this Court vide orderdated 18.10.2016, the Supreme Court vide order dated 08.08.2022 remitted the matter back for consideration afresh anddecision in accordance with law. 4.While admitting the appeal, the following substantial questions of law were formulated:- “i) Whether on the facts and circumstances of thecase and in law the Hon’ble ITAT has erred in lawin allowing the exemption u/s 11 of the Act byholding that the activities of the assessee arecharitable in nature even though the amendedprovision of section 13(8) r.w. 1st and 2nd provisoof section 2(15) are attracted? case and in law the Hon’ble ITAT has erred in lawin allowing the exemption u/s 11 of the Act byholding that the activities of the assessee arecharitable in nature even though the amendedprovision of section 13(8) r.w. 1st and 2nd provisoof section 2(15) are attracted? ii) Whether on the facts and in circumstances ofthe case and in law the Hon’ble ITAT has erred inlaw in allowing the benefits of set apart u/s 11(2)of the Act, deleting the additions of Rs.79,76,39,913/- as unspent amount in spite of thefact that the provision of section 11(2) r.w.s. 11(3)(c) are attracted as assessee is not grantedexemption u/s 11 & 12 of the Act.?the case and in law the Hon’ble ITAT has erred inlaw in allowing the benefits of set apart u/s 11(2)of the Act, deleting the additions of Rs.79,76,39,913/- as unspent amount in spite of thefact that the provision of section 11(2) r.w.s. 11(3)(c) are attracted as assessee is not grantedexemption u/s 11 & 12 of the Act.? iii) Any other question of law as deemed fit in thefacts and circumstances of the case may also beframed by the Hon’ble Court in the interests ofjustice.”facts and circumstances of the case may also beframed by the Hon’ble Court in the interests ofjustice.” 5.Learned counsel for the respondent submits that thesubstantial question No.1 is covered by the decision of theSupreme Court in the case of Assistant Commissioner of Income Tax (Exemption) Vs. Ahmedabad UrbanDevelopment Authority reported in [(2022) 449 ITR 1 (SC)]. 6.Learned counsel for the appellant is not in a position todistinguish the decision cited. 7.The relevant portion of the judgment is reproduced below:- “B. Authorities, Corporation, or bodies establishedby statute.by statute. iii) Any other question of law as deemed fit in thefacts and circumstances of the case may also beframed by the Hon’ble Court in the interests ofjustice.”facts and circumstances of the case may also beframed by the Hon’ble Court in the interests ofjustice.” 5.Learned counsel for the respondent submits that thesubstantial question No.1 is covered by the decision of theSupreme Court in the case of Assistant Commissioner of Income Tax (Exemption) Vs. Ahmedabad UrbanDevelopment Authority reported in [(2022) 449 ITR 1 (SC)]. 6.Learned counsel for the appellant is not in a position todistinguish the decision cited. 7.The relevant portion of the judgment is reproduced below:- “B. Authorities, Corporation, or bodies establishedby statute.by statute. B.1. The amounts or any money whatsoevercharged by a statutory corporation, board or anyother body set up by the State Government orCentral Governments, for achieving what areessentially ‘public functions/services’ (such ashousing, industrial development, supply of water,sewage management, supply of food grain,development and town planning, etc.) mayresemble trade, commercial, or business activities. However, since their objects are essential foradvancement of public purposes/functions (and/areaccordingly restrained by way of statutoryprovisions), such receipts are prima-facie to beexcluded from the mischief of business orcommercial receipts. This is in line with the largerbench judgments of this Court in RamtanuCooperative Housing Society and NDMC (supra).B.2However, at the same time, in every case theAssessing Authorities would have to apply theirmind and scrutinize the record, to determine if, andto what extent, the consideration or amountscharged are significantly higher than the cost andthe nominal mark-up. If such is the case, then thereceipts would indicate that the activities are in factin the nature of “trade, commerce or business” andas a result, would have to comply with thequantified limit (as amended from time to time) inthe proviso to Section 2(15) of the IT Act. B.3. In clause B of Section 10 (46) of the IT Act,“Commercial” as the same meaning as “trade,commerce, business” in Section 2(15) of the IT Act.Therefore, sums charged by such notified body,Authority, Board, Trust or Commission (by whatevername called) will require similar consideration – i.e.,whether it is at cost with the nominal mark-up orsignificantly higher, to determine if false within themischief of “commercial activities”. However, in thecase of such notified bodies, there is no quantifiedlimit in Section 10(46). Therefore, the CentralGovernment would have to decide on a case-by-case basis whether and to what extent, exemptioncan be awarded to bodies that are notified underSection 10(46). B.4. for the period 01.04.2003 to 01.04.2011, arestatutory corporation should claim the benefit ofSection 2(15) having regard to the judgment of thisCourt in the Gujarat Maritime Board case (supra).Likewise, the denial of benefit under Section 10 (46)after 01.04.2011 does not preclude a statutorycorporation, board, or whatever such body may becalled, from claiming that it is set up for a charitablepurpose and seeking exemption under Section10(23C) or other provisions of the Act.” 8.In view of the law laid down by the Supreme Court inAssistant Commissioner of Income Tax (Exemption) Vs.Ahmedabad Urban Development Authority (supra), thesubstantial question No.1 is answered against the Department. 9.The question No.2 arose as the Assessing Officer after havingheld that the respondent was not eligible for exemption underSection 11 of the Act, proceeded to treat the income to be taxableunder Section 11(3) of the Act. Since the first question has beendecided in favour of the respondent, the second question beingconsequential needs no adjudication. 10.The appeal is dismissed. (ASHUTOSH KUMAR), J 8.In view of the law laid down by the Supreme Court inAssistant Commissioner of Income Tax (Exemption) Vs.Ahmedabad Urban Development Authority (supra), thesubstantial question No.1 is answered against the Department. 9.The question No.2 arose as the Assessing Officer after havingheld that the respondent was not eligible for exemption underSection 11 of the Act, proceeded to treat the income to be taxableunder Section 11(3) of the Act. Since the first question has beendecided in favour of the respondent, the second question beingconsequential needs no adjudication. 10.The appeal is dismissed. (ASHUTOSH KUMAR), J (AVNEESH JHINGAN), J HS/TANISHA/59 Whether Reportable:Yes