Income Tax Officer v. Moradabad Development Authority

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The Tax Publishers2012 TaxPub(DT) 0575 (Del-Trib) : (2012) 043 (II) ITCL 0511 : (2011) 133 ITD 0485 : (2012) 145 TTJ 0746 : (2012) 069 DTR 0329 INCOME TAX ACT, 1961 --Charitable trust--Exemption under section 11Charitable purpose vis-a-vis maintenance of separate books of account--Assessee claimed exemption under section 11 and for that the assessee filed its return declaring total income of Rs. 60. The return was picked up for scrutiny by issuing statutory notices under section 143(2) and 142(1). It was found that the authority was registered under section 12AA by the CIT with effect from 1-4-2003 with the object to promote and secure the development of the development area according to plan and for that purpose, the authority had the power to acquire, hold, manage and dispose of land and other property, to carry out building, engineering, mining and other operations, to execute works in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto. The AO came to the conclusion that the activities carried out are regarding purchase of land and to sell it after developing. Further, it carries on the activities of construction of houses, flats, shops, etc., which are sold. These activities are similar to the activities carried out by dealers, builders and developers of real estate. In other words, the activities are in the nature of carrying on of business. No charitable activity has been carried on by the assessee. In view thereof, the surplus in the building activity amounting to Rs. 85,52,21,356 is held to be liable for tax. The order was challenged in appeal before the first appellate authority, Bareilly. Various arguments were made by the assessee before him. The CIT(A) came to the conclusion that the assessee is entitled to deduction under section 11. For this purpose, he mainly relied on the fact that deduction under section 11 was allowed in past. Held: As assessee was incidentally carried on business to fulfil its main object, the assessee if required to claim exemption the separate books could have been maintained and lower authorities have also not examined the same the issue is therefore, remanded back. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0575 (Del-Trib) : (2012) 043 (II) ITCL 0511 : (2011) 133 ITD 0485 : (2012) 145 TTJ 0746 : (2012) 069 DTR 0329

INCOME TAX ACT, 1961

--Charitable trust--Exemption under section 11Charitable purpose vis-a-vis maintenance of separate books of account--Assessee claimed exemption under section 11 and for that the assessee filed its return declaring total income of Rs. 60. The return was picked up for scrutiny by issuing statutory notices under section 143(2) and 142(1). It was found that the authority was registered under section 12AA by the CIT with effect from 1-4-2003 with the object to promote and secure the development of the development area according to plan and for that purpose, the authority had the power to acquire, hold, manage and dispose of land and other property, to carry out building, engineering, mining and other operations, to execute works in connection with the supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto. The AO came to the conclusion that the activities carried out are regarding purchase of land and to sell it after developing. Further, it carries on the activities of construction of houses, flats, shops, etc., which are sold. These activities are similar to the activities carried out by dealers, builders and developers of real estate. In other words, the activities are in the nature of carrying on of business. No charitable activity has been carried on by the assessee. In view thereof, the surplus in the building activity amounting to Rs. 85,52,21,356 is held to be liable for tax. The order was challenged in appeal before the first appellate authority, Bareilly. Various arguments were made by the assessee before him. The CIT(A) came to the conclusion that the assessee is entitled to deduction under section 11. For this purpose, he mainly relied on the fact that deduction under section 11 was allowed in past. Held: As assessee was incidentally carried on business to fulfil its main object, the assessee if required to claim exemption the separate books could have been maintained and lower authorities have also not examined the same the issue is therefore, remanded back.