Ita/100/2014 Of M/S Amritsar Improvement Trust v. Commissioner Of Income Tax Ii, Amritsar And Anr

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.100 of 2014 (O&M)Date of decision: (06.08.201 M/s Amritsar Improvement Trust Vs, .....- Appe Commissioner of Income Tax II, Amritsar ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Salil Kapoor, Advocate,Mr. Rishab Kapoor, Advocate.Mr. Varun Gupta, Advocate in ITA Nos.100 and 111 of 2014. Mr. Devinder Pal Suri, Advocate forMr. Rohit Sood, Advocate in ITA Nos.19 of 2012, 24 and 25.ot 2013, Mr. G.S.Hooda, Advocate for the revenue( Bathinda). Mr. Denesh Goyal, Advocate for the revenue (Amritsar). Ajay Kumar Mittal,J, 1.This order shall dispose of a bunch of 8 appeals bearing ITANos.19 of 2012, 24, 25, 229 of 2013, 18, 24, 100 and I11 of 2014, asaccording to the learned counsel for the parties, the primary issue involvedin all these appeals relates to the charitable nature of the activities of theappellant-Improvement Trust though the substantial questions of law ITA No.100 of 2014 claimed in connected appeals are in varied terms. However, the facts arebeing extracted from ITA No.100 of 2014, ODITA No.100 of 2014 has been preferred by the appellantImprovement Trust under Section 260A of the Income Tax Act, 1961 (inshort, “the Act’) against the order dated 24.22.2014, Annexure A.9 passeunder Section 254(1) of the Act by Income Tax Appellate Tribunal, Amritsar(an short, “the Tribunal’) in ITA No.636/(ASR)/2013, claiming followingsubstantial question of law:- a) Whether 1n view of the facts and circumstances of the case,the appellant trust established under Punjab Improvement Act1922 exists for charitable purposes under the Act? b) Whether 1n view of the facts and circumstances of the case,the Tribunal has erred in law and on facts in upholding theorder of CIT(A) 1n denying the claim of exemption underSection Il of the Act on the ground that appellant does notexist for charitable purpose when no such issue was underconsideration before the Tribunal? c) Whether in view of the facts and circumstances of the case,the tribunal has erred in law and on facts in denying the claimof exemption under Section 11 of the Act on the ground thatsame has been disallowed in assessment year 2006-07 andassessment year 2007-08 when facts of such assessment yearsare distinguishable? d) Whether respondent has in view of the facts andcircumstances of the case erred in law and on facts in notadjudicating the additional grounds raised by the appellant afteradmitting it? e) Whether in view of the facts and circumstances of the case,the Tribunal has erred in law and on facts in holding thatappellant did not file evidence with reference to expenditurebefore the CIT(A) when same has been filed before him? 1) Whether on the facts and 1n the circumstances of the case, thetribunal has erred 1n law and on facts in upholding the order ofAssessing Officer without deciding the addition on meritswhen the same has been challenged before 1t? g) Whether on the facts and in the circumstances of the case,the findings arrived at by the Tribunal are perverse, in as muchas no reasonable person correctly informed of the provisions oflaw would come to such a conclusion’ h) Whether on the facts and in the circumstances of the case,the Tribunal has erred in law and on facts in not deleting theadditions on merits without even discussing the issues whenthe same were argued in detail particularly when it itself 1n itsearlier order had permitted it? 1) Whether on the facts and 1n the circumstances of the case, thetribunal has erred 1n law and on facts in upholding the order ofAssessing Officer without deciding the addition on meritswhen the same has been challenged before 1t? g) Whether on the facts and in the circumstances of the case,the findings arrived at by the Tribunal are perverse, in as muchas no reasonable person correctly informed of the provisions oflaw would come to such a conclusion’ h) Whether on the facts and in the circumstances of the case,the Tribunal has erred in law and on facts in not deleting theadditions on merits without even discussing the issues whenthe same were argued in detail particularly when it itself 1n itsearlier order had permitted it? 3]A few facts relevant for the decision of the controversy,involved as narrated in ITA No.100 of 2014 may be noticed. The appellanttrust was constituted under the Punjab Town Improvement Trust Act, 1922(in short, “the 1922 Act’). The main activity of the appellant trust 1s that ofpurchase of land and after development of the area, the sale of 1mmovableproperties both residential and commercial. It applied for registration underSection 12A of the Act on 17.3.2006 which was refused by Commissionerof Income Tax (CIT) but vide order dated 22.2.2008, Annexure A.1, thesame was granted by the Tribunal. The said order was upheld by this Courtvide order dated 31.10.2008, Annexure A.2. The assessee filed its return ofincome for the assessment year 2004-05 at loss of v594.92 lacs. Noticeunder Sections 143(2) and 142(1) of the Act was issued to the assessee. TheAssessing Officer disallowed claim for exemption under Section 11 of theAct on the ground that registration under Section 12A was rejected by theCIT. The Assessing Officer referred the matter to special audit under Section ITA No.100 of 2014 142(2A) of the Act with the approval of CIT on 23.2.2006. The AssessingOfficer on the recommendation of special auditor framed assessment underSection 143(3) of the Act and made addition of=a14,34,10,160/- vide orderdated 6.12.2006, Annexure A.3. The appellant challenged the said orderbefore the Commissioner of Income tax (Appeals) [CIT(A)]. The appeal wasdismissed by the CITI(A) vide order dated 22.12.2008, Annexure A.4,Agerieved by the order, the assessee filed appeal before the Tribunal. Videorder dated 26.6.2009, Annexure A.5, the Tribunal referred the matter to theCIT(A) for reconsideration. The CIT(A) vide order dated 18.3.2011,Annexure A.6 sent the appeal of the assessee to the Assessing Officer inremand proceedings and directed him to examine as to the applicability ofSections 11 and 12 of the Act. The appellant went in appeal before theTribunal. The Tribunal vide order dated 3.9.2012, Anenxure A.7 set asidethe order of CIT(A) on the ground that first appellate authority 1.e. CIT(A)did not have power to set aside the matter and allowed the appeal ofrevenue. Vide order dated 4.10.2013, Annexure A.8, the CIT(A) disallowedthe claim of exemption under Section 11 of the Act. Feeling aggrieved, theappellant filed appeal before the Tribunal. Vide order dated 24.2.2014,Annexure A.9, the Tribunal dismissed the appeal and decided the issueagainst the assessee. Hence the instant appeals by the appellant trust. 4We have heard learned counsel for the parties and perused therecord. 4]The core or real controversy raised herein, aS we perceive,relates to two issues. Firstly, whether the appellant-trust 1s an institutionwhich carries on charitable activities within the meaning of section 2(15) of ITA No.100 of 2014 4We have heard learned counsel for the parties and perused therecord. 4]The core or real controversy raised herein, aS we perceive,relates to two issues. Firstly, whether the appellant-trust 1s an institutionwhich carries on charitable activities within the meaning of section 2(15) of ITA No.100 of 2014 the Act and secondly in case the appellant trust 1s engaged in the activity ofadvancement of any other object of general public utility, can it be deniedexemption in view of proviso to section 2(15) of the Act which wasintroduced with effect from April 1, 2009, whereby exception has beencarved out in respect of charitable activities which involves the carrying onof any activity in the nature of trade, commerce or business or any activityof rendering any service in relation to any trade, commerce or business for acess or fee or any other consideration, irrespective of the nature of use orapplication or retention of the income from such activity. The validity of theassessment framed can be examined thereafter. 6.Learned counsel for the appellant relied upon judgments ofDelhi High Court in Institute of Chartered Accountants of India andanother vs. Director General of Income Tax (Exemptions) and others,(2012) 347 ITR 99 and.Bureau ofIndian Standards vs. Director GeneralofIncome Tax (Exemptions)(2013) 358 ITR 78 and Gujarat High Court in| Director of Income Tax (Exemption) vs. Sabarmatit Ashiana GaushalTrust(2014) 362 ITR 539 to contend that the amendment shall take effectfrom 1.4.2009 and would be applicable for assessment year 2009-10onwards. According to the learned counsel, the amendment was notapplicable to the period prior thereto. Support was also drawn fromcirculars of the Board bearing Nos.1/2009 dated 27.3.2009 and 11 of 2008dated 19.12.2008. It was also contended that the Tribunal had erroneouslyadjudicated the issues against the assessee even without adverting to theprovisions of the 1922 Act as the assessee was not carrying on business,trade or commercial activity. In the absence of any finding based on the ITA No.100 of 2014 provisions of the 1922 Act, the order of the Tribunal was unsustainable andthe matter was required to be remanded to the Tribunal to adjudicate afreshafter taking note of the aforesaid contentions and the pronouncements.TdOn the other hand, learned counsel for the revenue supportedthe order passed by the Tribunal. 8After hearing learned counsel for the parties, in our opinion,the matter requires to be remitted to the Tribunal to adjudicate the issueregarding the nature of activities of the appellant trust whether they are inthe nature of charitable within the meaning of Section 2(15) of the Act inrespect of assessment years in question or not, keeping in view thearguments raised by the learned counsel for the appellant-assessee and topass fresh orders relating to assessment proceedings thereafter inaccordance with law. 11.Accordingly, the impugned orders passed by the Tribunal in allthe appeals are set aside and the matter is remanded to the Tribunal todecide the same afresh in the light of the submissions made by the learnedcounsel for the appellant after affording an opportunity of hearing to theparties in accordance with law. Needless to say, anything observedhereinbefore shall not be taken to be expression of opinion on the merits ofthe controversy. Sincere efforts shall be made to decide the matterexpeditiously. As a result, all the appeals stand disposed of, (Ajay Kumar Mittal)Judge August 06, 2014 .4 g (Fateh Deep Singh)Judge