In a recent ruling, the Supreme Court ( SC ) found that the Rajasthan High Court erroneously granted benefits under Section 10(20) instead of under Sections 11 and 12 of the Income Tax Act, 1961, which the Jaipur Development Authority originally claimed. The Supreme Court remanded the matter for fresh consideration.
The Commissioner of Income Tax (Exemptions) filed an appeal in the High Court of Rajasthan against the Jaipur Development Authority regarding the exemption under Section 11 of the Income Tax Act.
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The case arose from the proceedings for the assessment year 2009-2010 where additions of Rs. 79.76 crores were made rejecting the claim of charitable status under Section 11 of the Income Tax Act, 1961.
On appeal, the CIT(A) allowed the appeal of the Jaipur Development Authority and that was upheld by the Income Tax Appellate Tribunal ( ITAT ). Aggrieved, the Commissioner of Income Tax (Exemptions) approached the High Court.
The High Court had initially dismissed the Department’s appeal but the Supreme Court later remanded the matter back for fresh consideration.
The High Court reconsidered the matter. The main issue was the applicability of Sections 11 and 12 of the Income Tax Act. Referencing the Supreme Court ruling in the case of Assistant Commissioner of Income Tax vs. Ahmedabad Urban Development Authority, the High Court held that the activities of Jaipur Development Authority qualified as charitable based on the Supreme Court’s principles regarding public functions of statutory authorities.
The Assessing Officer’s alternative treatment of income under Section 11(3) was deemed unnecessary due to the decision on charitable status. The High Court dismissed the appeal of the Income Tax Department.
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Om appeal, the bench comprising Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh reviewed related appeals on similar grounds. The court explained that the Jaipur Development Authority never claimed exemption under Section 10(20) of the Income Tax Act.
The Supreme Court found that the High Court had erred in granting relief under Section 10(20) and remanded the cases for fresh consideration under Sections 11 and 12 of the Income Tax Act, 1961. The Supreme Court mandated the High Court to complete the reevaluation within six months. The appeal of the Commissioner of Income Tax (Exemptions) was allowed.
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