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Exemption u/s 11 & 12 of I-T Act cannot be denied to a charitable organization merely because it generated some profit: HC

2019-TIOL-1499-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

Case Tracker
GUJARAT HOUSING BOARD Vs DCIT    [ITAT]

R/Tax Appeal No. 184 Of 2019

COMMISSIONER OF INCOME TAX
(EXEMPTIONS)

Vs

GUJARAT HOUSING BOARD (GHB)

J B Pardiwala & A C Rao, JJ

Dated: June 25, 2019

Appellant Rep by: Mrs Mauna M Bhatt (174)
Respondent Rep by: 
None

Income tax – Sections 2(15), 11, 12 & 13(8)

Keywords – exemption benefit – incurring of profit

THE Revenue Department preferred the present appeal challenging the action of ITAT in setting aside the issue of deduction/exemptions u/s 11 & 12 of the I-T Act, without appreciating that the activities of the assessee authority were covered by First & Second proviso to section 2(15) of the I-T Act and thus not entitled to exemption u/s 11 & 12 as per provisions of section 13(8) of the Act.

On appeal, the HC held that,

Whether entitlement to exemption u/s 11 & 12 should not be denied to any charitable organisation merely because it was earning some profit – YES: HC

++ the Tribunal has taken a view and had ensured that the activities of AUDA are at par with the activities of the Gujarat Housing Board. The view taken is that the activities of the assessee are covered u/s 2(15). The endeavour on the part of Revenue’s counsel is to bring the case within the proviso. His submission is that the Gujarat Housing Board might be constructing residential houses for a weaker section of the society or to put it in other words for backward class of the society but, ultimately, it earns profit out of it. In the opinion of this Court, what is sought to be submitted by the counsel seems to have been taken care of by the decision of this Court.

Revenue’s appeal dismissed

JUDGEMENT

Per: J B Pardiwala:

1. This Tax Appeal under Section 260-A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Appellate Tribunal dated 16.11.2018 in ITA No. 3297/Ahd/2016 for the Assessment Year 2012-13 = 2018-TIOL-2438-ITAT-AHM.

2. The Revenue has proposed the following as the substantial question of law arising in this Tax Appeal :

“Whether the Appellate Tribunal has erred in law and on facts in setting aside the issue of deduction/exemptions u/s. 11 & 12 of the Act, without appreciating that the activities of the assessee authority are covered by first and second proviso to section 2(15) of the Act and thus not entitled to exemption u/s 11 and 12 as per provisions of section 13(8) of the Act?”

3. We take notice of the fact that the Appellate Tribunal while dismissing the appeal filed by the Revenue against the order passed by the CIT(A) placed strong reliance on a decision of this Court in the case of Ahmedabad Urban Development Authority vs. PCIT (Exemption) in ITA No.423 to 425 of 2016 dated 02.05.2017 = 2017-TIOL-1372-HC-AHM-IT and CIT vs. Gujarat Industrial Development Corporation reported in (2017) 83 taxmann.com 366 (Gujarat) = 2017-TIOL-1337-HC-AHM-IT. The two decisions of this Court referred to and relied upon by the Appellate Tribunal are in connection with the activities undertaken by the Ahmedabad Urban Development Authority. The Appellate Tribunal has taken view and had ensured the activities of AUDA are at par with the activities of the Gujarat Housing Board. The view taken is that the activities of the assessee are covered under Section 2(15) of the Act. The endeavour on the part of Ms. Bhatt, the learned senior standing counsel appearing for the Revenue is to bring the case within the proviso. The submission of Ms.Bhatt is that the Gujarat Housing Board might be constructing residential houses for a weaker section of the society or to put it in other words for backward class of the society but, ultimately, it earns business and earns profit out of it. In our opinion what is sought to be submitted by Ms.Bhatt seems to have been taken care of by the decision of this Court.

4. It also appears that with respect to Gujarat Housing Board itself on the very same proposed question of law, a coordinate Bench of this Court dismissed the appeal relying on the decision of this Court in the matter of AUDA. It is brought to our notice that the issue is now pending before the Supreme Court. We may quote the order passed in Tax Appeal No.752 of 2018 in the case of Commissioner of Income Tax (Exemption) vs. Gujarat Housing Board, decided on 02.07.2018 :

“[2.0] Heard Mrs. Mauna Bhatt, learned Advocate appearing on behalf of the revenue. At the outset, it is required to be noted that as such by the impugned order and after having noted the decisions of this Court in the case of Ahmedabad Urban Development Authority Vs. ACIT (Exemption) in ITA No.423 to 425 of 2016 dated 02/05/2017 = 2017-TIOL-1372-HC-AHM-IT and CIT Vs. Gujarat Industrial Development Corporation reported in (2017) 83 Taxmann.com 366 (Gujarat) = 2017-TIOL-1337-HC-AHM-IT, learned Tribunal has restored the issue to the file of the Assessing Officer to conclude the issue de novo. No question of law arises. We do not propose to interfere with the impugned order of remand. On the basis of the material on record, which may be before the learned Assessing Officer, the Assessing Officer may consider the applicability of the aforesaid two decisions vis-a-vis the activities being carried out by the assessee. Under the circumstances, present Tax Appeal deserves to be dismissed and is accordingly dismissed.”

5. In view of the aforesaid, the question proposed cannot be termed as a substantial question of law involved in this Tax Appeal. In the result, this appeal fails and is hereby dismissed.

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