Dismissal of SLP Filed against Non-Jurisdictional HC decision on Same Issue would not result in losing Binding force of Jurisdictional HC decision: ITAT [Read Order]

Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that dismissal of the Special Leave Petition (SLP) filed against non-jurisdictional decision of the High Court on the same issue would not result in ceasing the binding force of the jurisdictional decision of the High Court.

In the present case, assessee, an authority formed under the rules and regulations of the Urban Planning and Development Act, 1973, obtained registration under section 12AA of the Income Tax Act, 1961. For the relevant assessment year, assessee has filed return of income declaring total income as nil after claiming exemption under section 11 of the Act.

During the course of assessment proceedings, the Assessing Officer denied the exemption claimed by the assessee by holding that the activities of the assessee were not charitable in nature.

Assessee contended that its activities were of charitable nature and the first provison to section 2(15) was not applicable with the supportive evidence of various judicial pronouncements including certain judgments of the High Court.

After analyzing all the available material facts and records the tribunal bench consists of Judicial Member Sudhanshu Srivastava and Vice President R.S.Syal observed that it is a fact that the assessee was allowed exemption under section 11 of the Act by the tribunal in previous assessment years by 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 which was ignored the AO. However, the said order was challenged by the revenue before the Allahabad High Court and the court was dismissed revenue’s appeal in the light of another judgment of the co0ordinated bench.

The division bench further observed that the above mentioned facts indicate that the assessee has been allowed exemption under the said section in the past. “In the hue of the above discussion, it is amply vivid that the mere dismissal of SLP by the Hon'ble Supreme Court against the judgment of the Hon J&K High Court in the case of Jammu Development Authority cannot be construed as having the effect of elocution of law by the Hon'ble Supreme Court on the subject against the assessee. In other words, the view point of the Department that the mandate of the Hon'ble jurisdictional High Court on the issue has ceased its binding force and hence preference should be given to the judgment of the Hon'ble J&K High Court as SLP against the same has been dismissed, cannot be countenanced. We, therefore, hold that the decision taken by the Hon'ble jurisdictional High Court in several cases including that of the assessee itself holds the field and, accordingly, the benefit of exemption u/s 11 of the Act cannot be denied. The impugned order on the issue is overturned and it is directed to grant exemption u/s 11 of the Act,” the bench added.

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