Assistant Commissioner of Income-tax(Exemptions) Vs Ahmedabad Urban Development authority(Supreme Court)

Date-3rd November,2022

The Supreme Court today was hearing a miscellaneous application which was filed by the department seeking clarification in relation to the judgement of the Supreme Court which was pronounced on 19th October, 2022 (original judgement)regarding interpretation of Section 2(15) of Income-tax Act,1961. As the original judgement was related to a bunch of appeals, in paragraph 254 of the original judgement, the Ld Judges had pronounced final judgements in various sub paragraphs wherein some of the appeals of the department were rejected and some of them were allowed. In this review petition the department wanted a clarification to enable the revenue to redo the assessments in accordance with the original judgements for the past and examine eligibility on yearly basis fair the future.
The concern of the revenue arose because of the following Para 253(H) of the original judgement which could have been interpreted that this was applicable in the future.

H. Application of interpretation
H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the assessee’s activities amount to “trade, commerce or business” based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of “trade, commerce or business”, then it must be examined whether the quantified limit (as amended from time to time) in proviso to Section 2(15), has been breached, thus disentitling them to exemption.

However, the court clarified that the assessment years involved in the appeal have already been decided and the future years which are not in appeal will have to be decided in accordance with the principle laid down in the judgement. All Charitable institutions who are engaged in rendering “general public utility” can therefore expect revisitation by the revenue as to its activity in times to come.

Ramesh Patodia
03-11-2022