D.b. Income Tax Appeal v. Of 4)[Ita-113/2016

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No.113/2016 Commissioner of Income Tax (Exemptions), Kailash Heights,IIIrd Floor, Lal Kothi, Tonk Road, Jaipur-15. ----Appellant Versus Jaipur Development Authority, JLN Marg, Jaipur. ----Respondent For Appellant(s) :Mr.Sandeep Pathak, Adv. For Respondent(s): Mr.Siddharth Ranka, Adv. withMr.Rohan Chatter, Adv. & Ms.SatwikaJha, Adv.Mr.Yuvraj Samant, Adv. & Ms.NehaAmola, Adv. for Jaipur DevelopmentAuthority. 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 Bench, Jaipur (for short ‘the Tribunal’)dated 04.01.2016 allowing appeal of the respondent-JDA anddismissing appeal of the appellant. 2.The brief facts are that respondent-assessee is engaged inmaintaining and developing the civic amenities in the area andalso allotment of lands. The income tax return for the assessmentyear 2009-2010 was filed declaring losses. The case of therespondent was taken up in scrutiny and vide order dated30.12.2011, total taxable income of Rs.1,26,36,80,980/- wasassessed to tax. The appeal of the respondent-JDA was partlyallowed by the Commissioner of Income Tax (Appeals) vide orderdated 28.02.2013. Aggrieved of the Commissioner of Income Tax(Appeals) order, both department and assessee filed appealsbefore the Tribunal. The respondent succeeded and appeal of theappellant was dismissed. Hence, the present appeal. 3.It would be worthwhile to mention that earlier these appealswere dismissed vide order dated 18.10.2016, the Supreme Courtvide order dated 08.08.2022 remitted the matter back forconsideration afresh and decision in accordance with law. 4.While admitting the appeal, the following substantialquestions of law were formulated:- i. Whether on the facts and law, learned ITAT haserred in law in allowing the exemption under Section11 and 12 of the Income Tax Act, 1961 to theAssessee holding that the activities of the Assesseeare‘charitable in nature’ even though the amendedprovision of section 13 (8) read with1stand 2ndproviso of S. 2 (15) are attracted in the presentcase? ii. Whether on facts and law, learned ITAT has erredin holding “the change of accounting policy of theAssessee as accurate and scientific” by ignoring thequalifications made by the auditor of the Assesseeaudit report and Schedule X specifically mentioningthat the effect of changes in the accounting policyhas not be ascertained as per Note 1 of Schedule Xand by ignoring the application of Section 145 (3)and 144 of the Act i.e. the principle of ‘best of myjudgment’ adopted by the AO ? iii. Whether learned ITAT is justified in holding thatthe Assessee is eligible to claimdeduction ofdepreciation on the assets which were claimed asapplication under Section 11of the Income Tax Act,1961 without appreciating the fact that furtherallowance of depreciation on the same asset wouldamount to double deduction / allowance ? iv. Whether learned ITAT is justified in allowing netamount of Rs.269,69,91,775 of the developmentexpenditure and development revenue treating it ascapital expenditure as on the account of change inaccounting policy and further allowing the sum ofRs.21,13,94,421/- out of the establishment andadministrative expenses to the extent of5% of thetotal development expenditure related to suchchange ? v. Whether learned ITAT is justified in allowingexpenses amounting to 5,00,00,000/-as contributionfor Deendayal Medical Hospital assuming them asdonation to charitable institution which would furtherlead to double allowance and allowingRs.1,7422,857/- on account of amortisation ofexpenditure and Rs.1,07,02,423/- on account ofexpenses on shooting range?” iv. Whether learned ITAT is justified in allowing netamount of Rs.269,69,91,775 of the developmentexpenditure and development revenue treating it ascapital expenditure as on the account of change inaccounting policy and further allowing the sum ofRs.21,13,94,421/- out of the establishment andadministrative expenses to the extent of5% of thetotal development expenditure related to suchchange ? v. Whether learned ITAT is justified in allowingexpenses amounting to 5,00,00,000/-as contributionfor Deendayal Medical Hospital assuming them asdonation to charitable institution which would furtherlead to double allowance and allowingRs.1,7422,857/- on account of amortisation ofexpenditure and Rs.1,07,02,423/- on account ofexpenses on shooting range?” 5.Learned counsel for the respondent submits that thesubstantial question No.1 is covered by the decision of SupremeCourt in the case of Assistant Commissioner of Income Tax(Exemption) Vs. Ahmedabad Urban Development Authorityreported in [(2022) 449 ITR 1 (SC)]. 6.Learned counsel for the appellant is not in a position todistinguish the applicability of law cited above. 7.The relevant portion of the judgment is reproduced below:- “B. Authorities, Corporation, or bodies establishedby 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 or significantly 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.” 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), the questionNo.1 is answered against the Department. 9.The first substantial question of law having been answered ain favour of the assessee has ramifications on the other issuesraised in the appeals. Moreover, from perusal of the impugnedorder of the Tribunal it is evident that the other grounds raised inappeals were not dealt with by passing a speaking order. 10.In view of the above, order of the Tribunal dated 04.01.2016for Assessment Year 2009-10 is set-aside and the matter isremitted back to the Tribunal for deciding the appeals afresh inaccordance with law (ASHUTOSH KUMAR),J (AVNEESH JHINGAN),J HS/Tanisha/60