Spandana Rural and Urban Development Organisation v. Assessment Unit

Counsel for the petitioner: SRI AKRUTI AGARWAL Counsel for the Respondents No.'t to 3: SRI VIJHAY K. PUhlNA, SENIOR S.C. FOR INCOME TAX I)EPARTMENT Counsel for the Respondent No.4: THE DEPUTY SOLICITOR GENEIIAL OF INDIA The Court made the following: ORDER THE HON'BLE THE CHIEF JUSTICE SRI APARESH KUMAR SINGH TTIE HON'BLE SRI JUSTICE G.M.MOHIUDDIN AND Writ Petition No.28734 of 2025 ORDER: Ms.Akruti Agarwal, learned counsel for the petitioner. Mr.Vijhay K.Punna, learned Senior Standing Counsel for Income Tax Department appears for respondents No. 1 to 3, virtually.

2. The petitioner - assessee has assailed the order dated 23.08.2025 passed on the stay application by the Commissioner of Income Tax (Exemption), Hyderabad [for short, the CIT (Exemption)'], in respect of the outstanding amount ol Rs.53,7 4,67 ,12O I relatable to the assessment year 2023-24.

3. The impugned order reads as under: .GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT CIT (EXEMPTION), ITYD I \ "-*r \.. - l To, SPANDANA RURAL AND URBAN DEVELOP,IENT ORGANISATION Plot N").31 and 32. Ramky Selenium To$,ers Tcq'cr-A, Cround Floor. Financial Dist.Manuu S O GACHIBOWT-I HYDERABAD 5OOO32, Telangana P,AN: AABTS9855J Asscssment 2023-24 Dated: 23lOa 12025 DIN & Letter Noi rTBA I CONI I N | 1,', 2611079923L09 1 I I 2023 - Sir/ Madar-/ N{ 1r;. Subject:Online service of Orders - Letter Sub: Decision on Payment - Reg.- Stay Application Request for Partial This is with reference to your application for stay of colle:tion of taxes, submitted before the Commissioner of Inconre Tax (Exemptions), H1'derabad. As per this the demand payabk are as under: 2023 24 Outstanding demand 53,74,67,120 After carefulb, exarnining all relevant facts aad circumstances of your case, and also considering the rccent order of the l:tron'ble Andhra Pradesh High Court in the case of M/s- The Gene;qt and Technicct[ Education societg (lA No. 1 of 2025 in W.P.No. 1 2728 of 2025) and .,rlso considering the Hon'ble High Court of Te angana order in the case of Zoos and Parks Authotitg of Telangana t. CI'L'(E) (2024) 467 ITR 235 (Tetangana)(HC), your stay application ha s been considered It is, therefore, decided that your stay petition is considcred provided you pay atr arnount of Rs.SOOOOOOO/- on ot before 01.O9.2023 and produce copies of chailans before the Assessing Officer of your case and marked. a copy ;o the undersigned. Plcase note thilt if you fail to company with this directiv( by the due da:e, the Assessing Officer will be at liberty to ioitiate \ .-.-.---_-€<. l coercive recovery proceediugs uadet Section 226131 of tbe I.T.Act, 1961 urithout any further cotnmunication. Further you are informed to treat this matter with urgency and ensure compliance within the stipulated timeframe to avoid any furthc'r action by the Department. BAI-A KRISHNA BATTU I,A CIT (EXEMTTION), HYD"

4. Learned counsel for the petitioner has drawn the attention of this Court to the stay application, which is at Annexure PB.

5. The relevant part of the stay application is also extracted hereunder: "3. F'or AY 2023-24 the assessee filed its return of income on 30-11-2023 u/s 139{4A) admitting NIL income. The case was selected for compulsory scrutiny for verifying six issues mentioned on pages I and 2 of the assessment order. During the course of assessment proceedings, the assessee filed evidences required and also clarifications on various issues raised by the AO. The assessment was completed u/s 143(3) r,w.s. l44B vide order dated 20-03-2025 and the total income rvas determined at Rs. 93,38,67,867 l- by making addition on t$.o grounds i.e., Rs. 4,68,28,7881- representing surplus income and addition of Rs.88,70,39,O79 / - being capital expenditure disallowed u/s 13(10) r.rv.s l3(8). The penalty proceedings u/ s 270A were also initiated- 4. From the assessment order, it may kindty be seen the addition made by the AO are on misinterpretation of provisions of section 2(15) and section 13 of lncome Tax Act. It is apparent that the additions made by the AO is totally \ I .l .-E \ ---- unwarranted and not sustairiable in appeal. The assessee has already challcnged the assessment order in appeal bef,;re CIT(AI, NFAC, which is pending. 5. In arriving at the said conclusion, the AO has totally misconstrued thc activity of thc appcllant in extending loarls to women of economically rveaker sections of society, rvho would not get these loans for want of surcty from financial institutions. In this regard, para 4.9 and 4.1O are reproducr:d.

4.9 "The target of the assessee is not charit_v but to identify those necdy people who are not able and unawa re/ illiterate to take the finance from banking sectors/NBFC, The assessec grab those persons and given loan to those needy persons by charging at the higher rate of interest and the asscssee takes the benefit of their need/urgency. It has also lessencd its risk to a lower amount of Rs.5OO00/ and charging the exorbitant rate of intcrest al aroun<1 221o. In such condition, thc elemcnt of charity is totally missing."

4. 10 "ln vierv of the discussion in atiove paras,. it rs concluded that Ihe assessee has not carried out any charitable activities as delined u/s 2(15) of the Act. The activity of the assessee are clearly of the nature of trade, commerce or business as defined in proviso of section 2(15) of the Act." \

6. In this regard, the assessce rvould like to rely on the orci<:r of the tlon'ble l.ligh Court of Andhra Pradesh in its own case for AY 2005-06 in IT'TA No,304 of 2013 wherein the Hont'le High Court, while confirming the order of the Honble ITAT in ITA No.364/Vi212009, held as under: We have gone through the judgment and order of tlte learned Tribunal and we have heard the learned counscl appearing for the appellant. The learned Tribunal hrrs concluded on fact that the activities of the assessee are in tlle I I I l nature of charitable activities. [t has been further held on appreciation of fact that micro finance activity in the instant case is a charitabte activity- Learned Tribunal has also relied on the judgment of the Bangalore Bench of the Tribunal on identical fact that the micro financing to the poor people is a charitable activity. Under such circumstances, the assessee was granted exemption under Sec.l1 of the [ncome Tax Act. The learned Tribunal further found that in order to achieve the main purpose of the charitable activity, the assessee has joined hands with some other financial organizations and banks. Such steps to collect mcney for micro hnancing, does not defeat the real object in order to deprive it of the excmption. We do not find any infirmity or illegality in the judgment and order of the learned Tribunat, which is based on the fact-finding and such facts attract the provision of exemption.

7. The copies of the orders of the Honble High Court and the Hon'ble ITAT are enclosed herewith for your ready reference. Since the basic facts of the present year are exactly the same. Since the appellant society has been doing the same activity year after year, denial of benefit u/s I I and 13 by the Ld. AO is uncalled for and the order so passed is against the order of the jurisdictional High Court in the assessee's own case- [t is therefore, requested that stay may kindly be granted till the disposal of the appeal."

6. Learned counsel for the petitioner submits that the assessing authority, uide assessment order dated I \ 2O.O3.2O25, has made two additions by disallowing surplus of income and capital expenses under Section I 3 ( I O) read with Section 1 3 (8) of the Income-tax Act, 6 1961 (for short 'the Act'). He further submits that the petitioner is a charitable orgar-risation hav:Lrg been granted exemption under Scction l2A of the Act. lt is submitted that the petitioner organisation provides unsecured small advalces/ loans and other basic financial services to the poor and lorr income householls for their investment in micro-en t erprises so as to raise their inccme levels and impr,,.ve their living standards. Therefore, it is submitted lhat the High Court of Judicaturc, Andhra Pradesh, Hyrterabad, in its judgment dated lO.O7.2Ol3 in I.T.T.A.N,r.304 of 2013 relating to assessment year 2005-06 ha: upheid the linding of the learned Income 'lax l\ppellate Tribunal that the activities are in the nrrture of charitable activities. It is further held on app -eciation of fact that micro financing in the instant czrse ls a \ \ charitable activity. Under such circumstan,:es, the I assessee ',vas granted exemption under Section 11 of the Act. Such stcps to collect money for micro financing do not defeat the real object in order to l deprive it of the exemption. It is submitted that the judgment dated 1O.07.2013 rendered by the Andhra Pradesh High Court in ITTA No.304 of 2Ol3 has also been quoted in the stay application preferred by the petitioner. Hou,ever, the CIT (Exemption) by way of a cryptic order without dealing with the specihc grounds urged by the petitioner in the stay application and vvhether the petltioner has been able to make out a prima facie case and that the plea of financial hardship is substantiated by the petitioner, has proceeded to direct the petitioner to pay an amount of Rs.B,OO,OO,OOO/- on or before 01.09.2025, failing which, recovery proceedings under Section 226(3\ of the Act would be initiated without any further communication. Being aggrieved thereby, the present Writ Petition has been filed. 7 . It is submitted that the impugned order does not address the relevant factors required to be taken into consideration while dealing with an application for stay I I I 8 I of the demand or for partial payment. Therelore, the impugned order may be set asidc.

8. lra:red counsel for the Revenue has sc rrght to draw the attention of this Court to the ass,: ssment order in order to justify that the additions and disallowances made in the return of incorne fileC by the petitioner are proper in the eye of law. Flcwever, learned counsel for the Revenue has not becn able to dispel thr: submission of the petitioner tl'at the impugned order does not reflect any considerirtion on the specific grounds urged by the petitioner for stay of the dema:nd. He, however, also submits th,Lt in a similar case. this Court has remanded the 1r- iltter to the CIT (Exemption) for passing fresh orrler. He submits that if the matter is remitted to rhe CIT (Exemptiorr), he can consider the specific :rounds urged by the petitioner for stay of the outs t-anding demand or partial payment. \ I t 9 - I I 9 . We have heard learned counsel for the parties and taken note of the relevant materials placed on record.

10. Reference is made to the order dated 19.09.2025 passed in W.P.No.28228 of 2025 by this Court in respect of similar order passed on stay application by the CIT (Exemption). This Court linds that the order impugned in the present case also is cryptic and does not reflect any application of mind to the specific grounds urged by the petitioner in the stay application. 1 1. Taking into account the aforesaid facts and circumstances o[ the case, the impugned order is set aside. The matter is remitted to the CiT (Exemption) to pass fresh orders in accordance with law dealing with specific grounds urged b-v the petitioner in its stay application in a reasonable time, preferably, within a period of four (O4) \ ,eeks lrom the date of receipt of a copy of this order. t0

12. Accordingly, the instant Writ Petition is rlisposed of. There shall be no order as to costs. Miscellaneous applications pending, if any, shall stand closed q,3?i'3tt#,t$[ / c. //TRUE COPY// SECTION OFFICER To lnco me Ta E- 2nd Floor, ent Unit' No.401 '

1. Th e ASSESSM Room Center, Delhi-11 0 003 Bas heerbagh, Hyderabad. Telangana 2 The Commiss ioner of lncome Tax (ExemPtions x Departm RamP. Jaw ah arlz,l Nehru Sta llational e-Assessment dium, New :1o6r, fi3yakar Bhavan' ). 2"0 hief Co mmissioner of lncome Tax' (Er.emPtions)' R'No 2504' C E-2.

3. Th al C 5th Floor, e Prinr;tP Block 2 New Delhi ivic Centre ' of Finance' Government of Inriia ' 5. One CC to M/s AKRUTI AGARWAL, Advocate [OPUCI MinistrY New De lhi-1 10 0 Secretary' Block'

4. The 0'1 . One CC to SRI VIJHAY K PUNNA, Senior S'C for ncome Tax DePartment Union of lndia' North to the Deputy Solicitor General of lndia [OPIJC] 6 ioPuci 7. One CC 8. Two CD CoPtes MP TKSI HIGH COURT DATED 2310912025 ORDER WP.No.287.34 of 2025 'Il -i- a:\1 11 friEtt ;19 ,.1, :1.-.-aa-, \. -1': DISPOSING OF THE WRIT IDETITION WITHOT'T COSTS .\o rI l I