Rajasthan Housing Board , Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 594/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Rajasthan Housing Board cuke The DCIT Janpath, Jyoti Nagar, Vs. Circle- 6 Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAALR 0046 F vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal, CA jktLo dh vksj ls@ Revenue by : Mrs. Rolee Agarwal (CIT-DR).

lquokbZ dh rkjh[k@ Date of Hearing : 06/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27 /02/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A)-II, Jaipur dated 16-03-2012 for the assessment year 2008-09

wherein the assessee has raised following grounds.

''1. The ld. CIT(A) has erred on facts and in law in not allowing exemption u/s 10(2) of the Act by not treating the appellant as 'local authority'.

2 ITA No. 594/JP/2012

Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

2. The ld. CIT(A) has erred on facts and in law in holding that the appellant is not entitled to exemption u/s 11 and 12 of the I.T. Act, 1961

2.1. The ld. CIT(A) has erred on facts and in law in considering the amount utilized by the assessee towards its objective being utilized not out of the income but out of other monies without any basis and justification. He has further erred in ignoring the audit report of the Chartered Accountant in the prescribed statutory form certifying the application of income by the appellant

3. The ld. CIT(A) has erred on facts and in law in not directing the Assessing Officer to grant the benefit of Section 36(1)(xii) of the Act on acceptance of application filed before the Central Govt. for notification in official gazette under the said clause.''

2.1 Brief facts of the case are that the assessee 'i.e. Rajasthan Housing

Board is established by Govt. of Rajasthan pursuant to and in accordance

with the provision of Rajasthan Housing Board Act, 1970 with the

principal objectives of ''to provide for measures to be taken to deal with

and satisfy the need of housing accommodation in the state of

Rajasthan''. Accordingly the assessee functions with the main objective

of providing low cost housing accommodation to the public of Rajasthan 3 ITA No. 594/JP/2012 Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

on cost/ marginal profit and below cost to the economically weaker

sections of the society.

2.2 Ld. Counsel for the assessee contends that the issue in question is

squarely covered by ITAT order dated 4-5-2012 in ITA No. 100/JP/2012

which is passed after passing of the impugned order by the ld. CIT(A)

dated 16-03-2012, consequently ld. CIT(A) did not have the benefit of

ITAT order. By the said order ITAT following its earlier dated 31-03-

2009 in ITA No. 1599/JP/2008 held the assessee to be eligible for

exemption u/s 11/12 of I T Act by following observations:-

''9. The objectives of the institution have already been examined by the Tribunal who directed to grant registration to the present institution. There is no doubt in this regard. Therefore, Ld. CIT was not justified in holding that in view of amended provisions of section 2(15), the Institution does not remain a charitable institution and, therefore, the objectives of the institution also does not remain as charitable and accordingly withdrawal of registration, in our considered view, was not justified.

10. On similar facts, in the case of Gujarat Cricket Association, Ahmedabad vs DIT(E) (supra), the Tribunal by passing a detailed order has held that the registration cancelled by DIT(E) on the basis of amended provisions of section 2(15) of the Act was not justified as amended provisions does not fall within the permissible limit of section 12AA(3) of the Act and accordingly the order of DIT(E) was considered bad in law and the appeal of the Institution was allowed.

4 ITA No. 594/JP/2012 Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

11. In the case of Cane Development Council, Mawana vs CIT (supra) similar view has been expressed by Delhi Bench of the Tribunal. It has been held that objectives of the institution does not fall under the provisions of section 2(15) and therefore, the assessee was entitled to registration u/s 12AA of the Act. In view of the discussion of ours and in view of the decision of Tribunal, we are of the view that Ld. CIT was not correct in withdrawing registration already granted by the order of the Tribunal to the Institution. If in any year, the gross receipts of the Institution exceeds Rs. 10 lakhs or Rs. 25 lakhs, as the case may be, then in that year, the Assessing Officer is empowered to examine the allowability of exemption u/s 11 but the same has no effect on granting the registration u/s 12AA of the Act. Accordingly, we set aside the order of Ld. CIT and restore the registration already granted u/s 12AA of the Act. Thus,, the appeal of the Institution is allowed.''

It is further contended that once the assessee is entitled to exemption u/s

11 and 12, the next issue is how the application of income is to be

computed in arriving at the income. In this connection the assessee has

filed the audit report in Form No.10B showing the computation of

income u/s 11. As per Annexure to this report the income of the Board

of Rs.42,95,36,433/- before income tax, disallowance u/s 43B and

40(a)(ia) has been applied to the extent of Rs.56,73,33,163/- towards the

object of the Board. The AO has however sought to deny the application

of income claimed by the assessee on the ground that it has not

considered the deposit received and recovery from debtors in considering 5 ITA No. 594/JP/2012 Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

the application of income. It is submitted that the increase in debtors

cannot be reduced from the application of income as the debtors arise

when the sales are booked. The sale is already considered in

income/receipt and therefore the reduction in debtors cannot be reduced

from the application of income. Similarly the deposits received do not

constitute income of the assessee being in the nature of earnest money

deposited by the prospective allottees or by the contractors towards the

work which is to be repaid or adjusted against the income/ expenditure.

These are neither the income of the assessee nor would go to reduce the

application of income. Therefore, the deposits received and recoveries

from the debtors cannot be reduced from the amount of application of

income. Further, the AO has considered the surplus at Rs.44,61,86,515/-

without considering the depreciation of Rs.1,66,50,082/- and income tax

payment of Rs.18,08,60,576/-, which is incorrect. Hon'ble Delhi High

Court in case of DIT Vs. Indraprastha Cancer Society 1I2 DTR 345

(2014) dated 18-11-2014 after considering the amendment made by

Finance (No.2) Act, 2014 held that a charitable institution which has

purchased capital asset and treated the amount spend on the purchase of

capital asset as application of income, is entitled to claim depreciation on 6 ITA No. 594/JP/2012 Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

the sale of capital asset utilized for business. Similarly, Hon'ble Gujarat

High Court in 162 ITR 612 held that all outgoings including income tax

have to be deducted in computing the income of the trust. Therefore, after

considering the depreciation and income tax paid the surplus would be

Rs.24,86,75,857/- as against Rs. 44,61,86,515/-considered by the lower

authorities. Both the lower authorities have assumed that amount applied

by the assessee towards its objective is not out of income but out of the

deposits received or recoveries from debtors. The ld. CIT(A) has further

held that loan and advances given and amount transferred to suspense

account (work) is not application of income. It is submitted that the

assessee has repaid the loan of Rs. 3.70 crores which is application of

income as held by Karnataka High Court in case of CIT vs. Janma Bhumi

242 ITR 457. Similarly the advance include payment of income tax of Rs.

18,08,60,576/- which is to be considere4d as application of income as

held by Madras High Court in 153 ITR case it is not reduced in arriving

the surplus of the assessee. At the same time the deposit received or

recovery of debtors is not income as explained above and therefore the

same cannot be reduced from the application of income. In view of

above, the AO be directed to assess the income of the assessee at Rs. Nil 7 ITA No. 594/JP/2012 Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

u/s 11 of the Income Tax Act, 1961. It is claimed that assessee's income

being exempt u/s 11 and 12 of the Act. There will be no taxable income.

In any case, the deduction u/s 36(1)(xii) denied by the ld. CIT(A) is

eligible to the assessee even without registration u/s 11 and in accordance

with Notification (sent by registered post on 6-05-2007) issued in the

official gazette.

2.3 The ld. DR is heard.

2.4 We have heard the rival contentions and perused the materials

available on record. This Bench of ITAT in its two earlier orders

including the one for the same assessment year has held that the assessee

would be eligible for benefits of Section 11 and 12. The ld. CIT(A)

passed the impugned order without benefit of ITAT order dated inasmuch

as the impugned order is passed by the ld. CIT(A) on 16-03-2012.

Consequently, the issue of applicability of Section 11 and 12 including

the issue of sec 36(1)(xii) stands decided in favour of the assessee and the

matter is restored back to the file of the AO to extend the benefit of

Section 11 and 12 to the assessee in accordance with law. 8 ITA No. 594/JP/2012

Rajasthan Housing Board vs. DCIT, Circle- 6, Jaipur .

3.0 In the result, the appeal of the assessee is allowed for statistical

purposes

Order pronounced in the open court on 27/02/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 27th FEB, 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Rajasthan Housing Board , Jaipur

2. izR;FkhZ@ The Respondent- The DCIT, Circle- 6, Jaipur

3. vk;dj vk;qDr¼vihy ) @ CIT(A), Jaipur

3. vk;dj vk;qDr@ CIT, Jaipur

4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

5. xkMZ QkbZy@ Guard File (ITA No.594/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar