IMPORTANT POINT
Proviso to Section 2(15) of the Act shall not be applicable so far as assessee AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act.

ORDER :

R.M.CHHAYA, J.

1. Heard Mr. Manish Bhatt, learned Senior Advocate assisted by Mrs. Mauna Bhatt, learned advocate for the appellant –revenue.

2. By this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the “Act” for the sake of brevity) the appellant – Revenue has challenged the order dated 15.11.2019 passed by the Income Tax Appellate Tribunal, B Bench, Ahmedabad in ITA No.2427/AHD/2017 for AY 2011-12.

3. The following noteworthy facts emerge from the record of the appeal.

3.1. That the respondent –assessee filed it return of income for the Assessment Year 2011-12 on 31.3.2012 and declared total income as NIL. On assessment being made under Section 143(3) of the Act, the Assessing Officer by its order dated 28.12.2016 assessed the total income of the respondent –assessee at Rs.33,86,60,680/-. The AO came to the conclusion that assessee was engaged in the Area Development and Town Planning and carrying out the activity of general public utility. According to the AO, the respondent –assessee was not carrying out any charitable activities and was squarely covered by proviso 1 & 2 to Section 2(15) r/w Section 13(8) of the Act and ultimately came to the conclusion that the respondent-assessee is not eligible for any of the exemption claimed under Section 11 and 12 of the Act and accordingly passed assessment order in question. The respondent –assessee filed an Appeal before the CIT(A), which came to be partly allowed vide order dated 21.8.2017 subject to directions contained in para 9 of the order. Being aggrieved and dissatisfied with the order dated 21.8.2017 passed by the CIT(A), the Revenue has preferred Appeal before the Income Tax Appellate Tribunal, which also came to be dismissed vide order dated 15.11.2019.

3.2. The Revenue in this appeal has raised the contention to the effect that the Tribunal as well as CIT(A) have committed an error in coming to the conclusion that activity carried on by the respondent –assessee are charitable in question and has raised the following substantial questions of law

“A. Whether on facts and circumstances of the case and in law, the Hon’ble Tribunal was justified in holding that the activities of the assessee are not in the nature of commerce/trade under Section 11 & 12 of the Act without considering the fact that the assessee is involved in widespread commercial activities which is covered under first and second proviso to section 2(15) of the Act?

B. Whether on facts and circumstances of the case and in law, the Hon’ble Tribunal was justified in allowing the benefit of exemptions under Section 11(1)(a) of the Act of Rs.26,89,11,833/- being capital receipts/grants from Government of Gujarat without appreciating the fact that the assessee is covered by the provisions of Section 2(15) r.s13(8) of the Act ?

C. Whether on facts and circumstances of the case and in law, the Hon’ble Tribunal was justified in allowing the benefit of exemptions under Section 11 of the Act on Rs.52,10,391/- being receipts towards development fund without appreciating the fact that the assessee is covered by the provisions of Section 2(15) r.w 13(8) of the Act ?

D. Whether on facts and circumstances of the case and in law, the Hon’ble Tribunal was justified in allowing the benefit of exemptions under Section 11 of the Act on Rs.6,45,38,452/-/- being capital expenditure without appreciating the fact that the assessee is covered by the provisions of Section 2(15) r.w 13(8) of the Act ?

4. The case put forward and substantial questions of law raised in this appeal are squarely covered by the judgment in case of Ahmedabad Urban Development Authority vs. Assistant Commissioner of Income Tax (Exemption) reported in 396 ITR 323 (Guj). Before adverting to the substantial question of law raised in this appeal, it would be appropriate to refer to relevant provisions of the Gujarat Town Planning and Urban Development Act, 1976 (hereinafter referred to as the “Town Planning Act”). The respondent-