By TIOL News Service

NEW DELHI, JAN 08, 2018: THE issue is - Whether the binding force of the decisions of the Jurisdiction High Court is lost merely on the ground that the Apex Court dismissed the SLP filed against the non-Jurisdictional HC decision on similar issue. NO is the answer.

Facts of the case

The Assessee-an authority, engaged in real estate business was granted registration u/s 12AA, filed its return for the relevant AY declaring Nil income after claiming exemption u/s 11. In the course of the assessment proceeding, the AO observed that the Assessee was not charitable in nature and, hence, exemption u/s 11 was not available. The Assessee was called upon to explain as to why exemption be not denied. In reply, the Assessee submitted that its activities were of charitable nature hence, the first proviso to section 2(15) was not applicable. However, the AO held that the proviso to section 2(15) was applicable in respect of the development authorities and, hence, exemption u/s 11 was not available. On appeal, the CIT(A) upheld the assessment order.

On appeal, the Tribunal held that,

Whether the binding force of the decisions of the Jurisdiction High Court is lost merely on the ground that the Apex Court dismissed the SLP filed against the non-Jurisdictional HC decision on similar issue - NO: ITAT

++ the Assessee was allowed exemption u/s 11 by the Tribunal for the AYs 2008-09 and 2009-10. The Tribunal considered the effect of proviso to section 2(15) and, thereafter, held that the activities of the Assessee of construction and sale of plots were incidental to the main object of town planning and, hence, exemption u/s 11 was to be granted. The said order of the Tribunal was challenged by the Department before the Allahabad High Court wherein, the Revenue's appeal was dismissed by following another judgment of the co-ordinate Bench in the case of Yamuna Expressway Industrial Development Authority & Ors., in which similar questions were answered against the Revenue;

++ the Assessee has been allowed exemption u/s 11 consistently in the past, either by the AO himself or by virtue of the orders of the Tribunal as by the Allahabad High Court. This settled position ought not to have been ordinarily disturbed;

++ it is amply vivid that the mere dismissal of SLP by the Supreme Court against the judgment of the J&K High Court in the case of Jammu Development Authority cannot be construed as having the effect of elocution of law by the Supreme Court on the subject against the Assessee. In other words, the view point of the Department that the mandate of the jurisdictional High Court on the issue has ceased its binding force and hence, preference should be given to the judgment of the J&K High Court as SLP against the same has been dismissed, cannot be countenanced. Therefore, the decision taken by the jurisdictional High Court in several cases including that of the Assessee itself holds the field and, accordingly, the benefit of exemption u/s 11 cannot be denied. The order on the issue is overturned and it is directed to grant exemption u/s 11.

(See 2018-TIOL-48-ITAT-DEL)