Statutory urban development authorities' activities qualify as charitable under section 2(15) if advancing general public utility without profit motive or significant mark-up over costs, eligible for section 11 exemption despite property sales.

ORDER

PER YOGESH KUMAR, U.S. JM:

The captioned Appeals are filed by the Revenues against the orders of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 12/12/2024pertaining to Assessment Years A.Y 2012-13, A.Y 2014-15, A.Y 2016-17, A.Y 2017-18 and A.Y 2018-19 respectively.

2. As the Department preferred the captioned Appeals against single Assessee having identical issues to be decided, the above appeals are heard together. For the sake of convenience grounds of Appeal for Assessment Year 2012-13 are reproduced as under:-

“1. The Ld. CIT(A) has erred in law and facts for the reason that the ld. CIT (A) has failed to appreciate correct facts of the case that the authority is engaged dominantly in the activity of development and sale of properties. Besides, it is observed that the aggrégate value of receipts from the activities referred to in the first proviso of section 2 (15) of the Act.

2. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CIT (A) has failed to appreciate correct facts of the case that the assessee does not fulfill the criteria for 'charitable purpose' and its activities cannot be regarded for charitable purposes due to the reason of being the nature of trade or commerce.

3. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CIT (A) has failed to appreciate correct facts of the case that the assessee has not fulfilled the conditions of section 11(2), though Form No. 10 has been filed but the source does not specify the amount set apart / accumulated. Similarly, as per section 11(4A), no separate books of accounts have been maintained and even violation of conditions specified under section 11(5) have been made.

4. The Ld. CIT(A) has also failed to appreciate the fact that the AO has rightly disallowed an amount of Rs. 25,20,38,704/- towards Infrastructure Fund which was directly credited to Infrastructure fund without crediting it to Income & Expenditure account as the same was should be in accordance with the government circular which defines the mode of usage of this fund and the method of creation as well.

5. The order of Ld. CIT(A) be cancelled and the order of the AO be restored.”

3. Brief facts of the case are that, the Assessee is an Urban Development Authority constituted under the U. P Urban and Planning and Development Act, 1973. The Assessee was constituted with the aim to promote and secure the development of areas under jurisdiction and the Assessee is registered u/s 12A the I.T. Act, 1961. In the years under consideration, Assessee filed the return of income disclosing income of Rs. Nil and claimed exemption u/s 12A/12AA of the I.T. Act. The assessing officer in his Assessment Order has held that the activities carried out by the Assessee are not in the nature of charitable activities. Consequently, the AO taxed the income of the Assessee at maximum marginal rate.

4. Aggrieved by the assessment orders for Assessment Years 2012-13, 2014-15, 2015-16, 2017-18 and 2018-19, Assessee preferred Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated 12/12/2024, allowed the Appeals of the Assessee. As against the orders of the Ld. CIT(A), the Department preferred the captioned Appeals.

5. The Ld. Department's Representative vehemently contended that the Ld. CIT(A) failed to appreciate correct facts of the case that the Assessee is engaged dominantly in the activity of development and sale of properties. Besides,