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SCA/2464/2010 1/ 11 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 2464 of 2010
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA Sd/-
HONOURABLE
MS.JUSTICE H.N.DEVANI Sd/-
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
YES
2
To be
referred to the Reporter or not ? YES
3
Whether
their Lordships wish to see the fair copy of the judgment ?
NO
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? NO
5
Whether
it is to be circulated to the civil judge ?
NO
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AHMEDABAD
URBAN DEVELOPMENT AUTHORITY - Petitioner(s)
Versus
DEPUTY
DIRECTOR OF INCOME TAX (EXEMPTION) - Respondent(s)
=========================================================
Appearance :
MR
S.N. SOPARKAR, SENIOR ADVOCATE WITH MRS SWATI SOPARKAR AND MISS
BHOOMI THAKORE for
Petitioner(s) : 1,
NOTICE SERVED BY DS for Respondent(s) : 1,
MR
M.R.BHATT, SENIOR ADVOCATE WITH MRS MAUNA M BHATT for Respondent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: 22/03/2010
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1. Heard
learned Counsel appearing for both sides. Considering the nature of
controversy and the view that the Court is inclined to adopt, the
petition has been heard finally with the consent of the learned
Counsel for both the sides. Rule.
Learned Counsel appearing for the respondent is directed to waive
service of Rule.
2. The
petitioner is Ahmedabad Urban Development Authority, an autonomous
body constituted under the provisions of The Gujarat Town Planning
and Urban Development Act, 1976. The income of the petitioner was
exempt till Assessment Year 2002-2003 under section 10(20A) of the
Income Tax Act, 1961 (the Act) considering the fact that the
petitioner was engaged in development of urban areas of Ahmedabad.
The said provision was omitted with effect from 1.4.2003 by the
Finance Act, 2002. The petitioner had applied for and had been
granted registration under section 12AA of the Act with effect from
1.4.2002 vide order (in the form of Certificate) dated 23.10.2003 by
the Director of Income Tax (Exemption), Ahmedabad.
3. For
Assessment Years 2003-2004 to 2006-2007 the petitioner filed returns
of income declaring total income at Rs. Nil as the income was exempt
under the Provisions of Section 11 of the Act on the basis of
Certificate of Registration dated 23.10.2003 under section 12AA of
the Act. The Assessing Officer accepted the stand of the petitioner
and assessed the petitioner as a charitable institution entitled to
exemption under section 11 of the Act for all the Assessment Years
upto Assessment Year 2000-2007.
4. For
Assessment Year 2007-2008, the petitioner filed return of income on
22.10.2007 declaring income at Rs. Nil after claiming set-off of
carried forward losses to the extent of income available, i.e.
Rs.1,83,29,82,000/-. The Assessing Officer did not accept the claim
made by the Assessee and came to the conclusion that the claim of
the petitioner for set-off of capital deficit of earlier years and
unabsorbed depreciation was disallowable not being business losses
and unabsorbed depreciation as per the Act. Accordingly, the total
income was assessed at a sum of Rs.1,89,22,49,213/- vide assessment
order dated 30.12.2009 framed under section 143(3) of the Act.
5. The
Assessee has challenged the said assessment by way of Appeal and the
Appeal is pending before the Appellate Authority. In the meantime,
the Assessee sought stay of demand. However, vide communication dated
16.2.2010 (Annexure ‘A’) the respondent informed the petitioner that
the request for stay of demand was accepted partially subject to the
condition that 50% of the demand is paid up by 25.2.2010 failing
which the respondent would initiate coercive measures to enforce the
demand payable by the petitioner. It is this communication which is
primarily challenged in the present petition along with
incidental/alternative prayer to stay the Demand Notice dated
30.12.2009.
6. On
behalf of the petitioner it was submitted that the issue on merits
was concluded in favour of the petitioner by the judgments rendered
by this Court as confirmed by the Apex Court. It was also submitted
that Circular issued by Central Board of Direct Taxes was binding so
far as the respondent is concerned and the respondent was duty bound
to stay the disputed demand till decision of First Appeal. In support
of the submissions reliance has been placed on the following
judgments :
[1] CIT
Vs.Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293
(Guj.)
[2] Hiralal
Bhagwati Vs. CIT (2000) 246 ITR 188 (Guj.)
[3] Asstt.
Commissioner of Income Tax Vs. Surat City Gymkhana, (2008) 300 ITR
214 (SC).
[4] Madhu
Silica Pvt. Ltd. Vs. CIT (1997) 227 ITR 350 (Guj.)
[5]
CIT Vs. Gujarat Maritime Board (2007) 295 ITR 561 (SC).
Attention
was also invited to order dated 3.4.2008 made in Tax Appeal No. 667
of 2007 in the case of CIT Vs. Surat Urban Development Authority,
to submit that on merits the issue was concluded in favour of the
petitioner.
7. On
behalf of the respondent it was contended that as and when the
assessment was taken-up, as recorded by respondent, there was non
cooperation from the petitioner Assessee by not furnishing Profit and
Loss Account as called for and not furnishing details in the format
called for. That though Certificate issued under section 12AA was
cancelled only by order dated 15.2.2010 the same was with effect
from 1.4.2002 and hence the petitioner was not eligible for exemption
under section 11 of the Act and the assessment had correctly been
framed. Therefore, the exercise of discretion by the Assessing
Officer to recover 50% of the demand while staying the balance 50%
of the demand should not be interfered with. Learned Counsel read
extensively from Affidavit-in-Reply dated 12.3.2010 filed by the
respondent to emphasise the stand of the respondent Authority.
8. Considering
the fact that the Appeal filed by the petitioner is pending before
the First Appellate Authority the Court does not intend to observe
anything in relation to the merits of the controversy. Admittedly the
assessment has been framed on 30.12.2009. The Certificate of
Registration granted by Director of Income Tax (Exemption) under
section 12AA of the Act dated 23.10.2003 has been cancelled only on
15.2.2010. In the circumstances, on the date when the Assessment
Order was framed viz., 30.12.2009, the income of the petitioner was
exempt in entirety and the Assessing Officer could not have travelled
beyond the Certificate of Registration granted under section 12AA of
the Act.
9. Section
12AA of the Act lays down the procedure for registration in relation
to the conditions for applicability of sections 11 & 12 as
provided in section 12A of the Act. Therefore, once the procedure is
complete as provided in sub-section (1) of section 12AA of the Act
and a Certificate is issued granting registration to the Trust or
Institution it is apparent that the same is a document evidencing
satisfaction about : (1) genuineness of the activities of the Trust
or institution, (2) about the objects of the Trust or Institution.
Section 12A of the Act stipulates that provisions of sections 11 &
12 shall not apply in relation to income of a Trust or an Institution
unless conditions stipulated therein are fulfilled. Thus granting of
registration under section 12AA of the Act denotes, as per
legislative scheme, that conditions laid down in section 12A of the
Act stand fulfilled.
10. The
effect of such a Certificate of Registration under section 12AA of
the Act, therefore, cannot be ignored or wished away by the Assessing
Officer by adopting a stand that the Trust or Institution is not
fulfilling conditions for applicability of sections 11 & 12 of
the Act. In the case of Gestetner Duplicators P. Ltd. Vs. CIT (1979)
117 ITR 1 (SC) the Apex Court was called upon to determine as to
whether the contribution made by the employer should be treated as a
business expenditure, the requirement being contribution should be
made to a recognized provident fund. In almost similar circumstances,
the Assessing Officer in the said case did not hold in favour of the
employer and the Apex Court while deciding the controversy as to
what constituted Salary observed as under :
…. The facts in the
present case that need be stressed in this behalf are that it was as
far back as 1937 that the CIT had granted recognition to the
provident fund maintained by the assessee under the relevant Rules
under the 1922 Act, that such recognition had been granted after the
true nature of the commission payable by the assessee to its salesmen
under their contracts of employment had been brought to the notice
of the Commissioner and that the said recognition had continued to
remain in operation during the relevant assessment years in question,
the last fact in particular clearly implied that the provident fund
of the assessee did satisfy all the conditions laid down in r.4 of
Part A of the Fourth Schedule to the Act even during the relevant
assessment years. In that situation we do not think that it was open
to the taxing authorities to question the recognition in any of the
relevant years on the ground that the assessee’s provident fund did
not satisfy any particular condition mentioned in r.4. It would be
conducive to judicial discipline and the maintaining of certainty and
uniformity in administering the law that the taxing authorities
should proceed on the basis that the recognition granted and
available for any particular assessment year implies that the
provident fund satisfies all the conditions under r.4 of Part A of
the Fourth Schedule to the Act and not sit in judgment over it .
11. Applying
the ratio enunciated as aforestated to the facts of the present case,
it is apparent that while framing Assessment Order on 30.12.2009 it
was not open to the Assessing Officer to ignore Certificate of
Registration dated 23.10.2003 granted under section 12AA of the Act
by Director of Income Tax (Exemption), Ahmedabad. Therefore, on this
limited count the Assessment Order appears to be without jurisdiction
and the demand in pursuance thereto could not have been sought to be
recovered. The respondent was therefore duty bound to stay recovery
of the demand raised pursuant to Assessment Order dated 30.12.2009
for Assessment Year 2007-2008 till disposal of the First Appeal which
is alrady pending before First Appellate Authority.
12. Accordingly,
the respondent is hereby directed to stay recovery of entire demand
raised in pursuance of Assessment Order dated 30.12.2009 for
Assessment Year 2007-2008 till final disposal of the Appeal pending
before First Appellate Authority.
13. The
petition is allowed accordingly in the aforesaid terms. Rule made
absolute with no order as to costs.
14. At
this stage, learned Counsel for the respondent states that the matter
may be admitted and the demand may be stayed till disposal of the
First Appeal as the Counsel is not agreeable to the final disposal of
the petition. The statement is noted. No further orders are
necessary.
Sd/-
Sd/-
(D.A.
Mehta, J.) (H.N. Devani, J.)
M.M.BHATT
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