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TMI Blog2017 (5) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the assessee cannot be said to be in the nature of trade, commerce and business The object and purpose for which the assessee is established / constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. Considering all we are of opinion that Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assessee-AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the revenue. - Tax Appeal No. 423, 424, 425 of 2016, Civil Application (O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider the following question of law. (1)Whether the Income-tax Appellate Tribunal has erred in law and on facts in holding that the activity of the appellant was in the nature of trade, commerce or business and hence it cannot be regarded as activity for charitable purpose in view of the proviso to section 2(15) of the Income-tax Act, 1961? (2) Whether the Income-tax Appellate Tribunal has erred in law and on facts in disallowing the claim of exemption of the appellant under section 11 of the Income-tax Act, 1961, and assessing the income of the appellant under sections 28 to 44 of the Income-tax Act, 1961? 2.2. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT passed in ITA No.2335/AHD/2015 for AY 201112, by which, learned ITAT has held that the activities of appellantassessee cannot be said to be for charitable purpose within the definition of Section 2(15) of the Income Tax Act and therefore, not entitled to deduction claimed under Section 11 of the Income Tax Act, the assessee has preferred the present Tax Appeal No. 425 of 2016 to consider the following question of law. (1) Whether the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the execution of works referred to in clause (vi) and for provision of other services and amenities as may be prescribed by regulations;] (vii) To acquire, hold, manage and dispose of property, movable or immovable, as it may deem necessary; (viii) To enter into contracts, agreements or arrangements, with any local authority, person or organisation as the urban development authority may consider necessary for performing its functions; (ix) To carry any development works in the urban development area as may be assigned to it by the State Government from time to time; (x) To exercise such other powers and perform such other functions as are supplemental, incidental or consequential to any of the foregoing powers and functions or as may be directed by the State Government. 3.2. That prior to AY 200203 the assessee was enjoying the exemption under Section 10(20A) of the Income Tax Act. However, subsequently Section 10(20A) of the Act came to be deleted / omitted by the Finance Act, 2002 w.e.f. 1.4.2003. That simultaneously, exemption granted under Section 10(20A) of the Income Tax Act also came to be withdrawn by Finance Act, 2002. Tax Appeal No. 423 of 2016 4.0. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assing in the case of very assessee for AY 201011 201112, which are the subject matter of Tax Appeal Nos. 424 of 2016 and 425 of 2016. 5.0. Therefore, the short question which is posed for the consideration of this Court is whether the activities of the assesseeAUDA can be said to be in nature of trade, commerce and business and hence it cannot be regarded as activity for charitable purpose in view of the proviso to section 2(15) of the Income-tax Act, 1961 ? 6.0. Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the assessee and Shri Manish R Bhatt, learned Senior Advocate has appeared on behalf of the revenue in all these appeals. 7.0. Shri S.N. Soparkar, learned Senior Advocate for the assessee has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in holding that the activities of the assessee is in the nature of trade, commerce and business and therefore, the case of the assessee would fall under the proviso to Section 2(15) of the Act so to as deny the deduction claimed under Section 11 of the Income Tax Act, as Charitable Institute . 7.1. It is vehemently submitted by Shri Soparkar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 11 of the Income Tax Act. 7.4. Shri Soparkar, learned Senior Advocate for the assessee has further submitted that the assessee is entitled to be regarded as charitable institution because the assessee is not a trading corporation and is established under a statute for carrying out the development work that too within four corners of the Town Planning Act. 7.5. Shri Soparkar, learned Senior Advocate for the assessee has further submitted that in the case of Commissioner of Income Tax vs. Gujarat Maritime Board reported in 295 ITR 561 (SC), the Hon'ble Supreme Court has held that Gujarat Maritime Board being a statutory authority established under the provisions of Gujarat Maritime Board Act, 1981 and has been constituted for predominant purpose of development of minor ports within the State of Gujarat and management and control of the Gujarat Maritime Board was essentially with the State Government having no profit motive, Gujarat Maritime Board is entitled to exemption under Section 11 in light of the definition of the words charitable purposes as defined under Section 2(15) of the Act. It is submitted that in the aforesaid decision, it is held that even if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Advocate for the assessee that by impugned judgment and order the learned ITAT has held that activities carried on by the assessee in the nature of trade, commerce or business on one of the ground that the assessee is collecting cess or fees. It is vehemently submitted by Shri Soparkar, learned Senior Advocate for the assessee that the assessee cannot be denied the status of a charitable institution on the ground that it is rendering any service in relation to any trade, commerce or business for a case or a fee or any other consideration because (1) the assessee collects regulatory fee for the objects of the act (2)there is no element of profiteering in the said collection (3) no services are rendered to any particular trade, commerce or business. In support of his above submissions, he has relied upon the following decisions of Delhi High Court. (1) GSI India vs. DGIT reported in (2014) 360 ITR 138 (Delhi) (2) Indian Trade Promotion Organization vs. Director of Income Tax (Exemption) reported in (2015) 371 ITR 333 (Delhi). 7.10. It is further submitted by Shri Soparkar, learned Senior Advocate for the assessee that one another reason assigned by the learned Tribunal whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case Commissioner of Income Tax, Luknow vs. Luknow Development Authority reported in (2013) 38 Taxmann. com 246 (All)and the decision of the Rajasthan High Court in the case of Commissioner of Income Tax I, Jodhpur vs. Jodhpur Development Authority, Jodhpure rendered in Tax Appeal No, 63 of 2012 by which, with respect to other development authorities, the Courts have held that activities carried out by such development authority cannot be said to be in the nature of trade, commerce or business and their activities is for charitable purpose is within the meaning of Section 2(15) and therefore, all such development authorities shall be entitled to exemption / deduction under Section 11 of the Income Tax Act. 7.13. It is submitted by Shri Soparkar, learned Senior Advocate for the assessee that that even otherwise the reasons assigned by the learned ITAT in the impugned judgment and order and while holding that the activities carried out by assessee can be said to be trade, commerce or business are not germane. It is submitted that, the considering the object and purpose for which AUDA has been constituted as Urban Development Authority and considering the activities carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n acquired by the Assessee at a very nominal price in the name of town planning scheme, but have been given lease at a very high premium by means of auction to the highest bidder. (2). The land is given on lease not even at its jantri rate (stamp value), but at a commercial/ market rate. This virtue of the land transactions is very characteristic of commercial activity with a profit motive. The said activity of the Assessee can by no stretch of imagination be treated as charitable activity within the meaning of education, medical relief, relief of poor, and preservation of environment or reservation of monuments. (3). The plots of land were acquired from the public at nominal rates and sold to various commercial entities at market rate, and this systematic, regular and organised activity indicates that AUDA is involved in carrying on the activity which is in the nature of trade, commerce or business. 8.4. It is submitted that since the assessee sold the plots of land at a premium and at market rates, to various commercial entities, with a motive to earn profit, the learned Tribunal has rightly held activities of the assessee as a business transaction. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for judging whether any activity was trade, commerce or business particularly if generating 'surplus' is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. It is submitted that in the present case the principal source of receipts is akin to a real estate developer. It is submitted that learned Tribunal in the impugned judgment and order has discussed the above and brought out this fact in great detail that the assessee functions as an effective and efficient real estate development entity with a view to maximize profit. It is submitted that some of the activities of assessee may be those related to Governance, but a large number of activities and the receipts generated by them were from activities which were in the nature of trade, commerce and business. 8.7. It is further submitted by Shri Bhatt, learned Senior Advocate for the revenue that even from the income expenditure account and Balance sheet it is founed that the appellant was engaged in the business of development, leasing out and sale of plots of land. It is submitted that the plots of land have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to AUDA), could it be urged that infrastructure development company doing similar work, as AUDA was not engaged in the activity in the nature of trade? F. The most crucial factor which proves that the Assessee has been working with profit motive is that the Town Planning Officer is well aware about the cost of development. In spite of that the Assessee has never sold the 15% of the land on cost basis. For example, the Assessee has developed 1500 sq.yards of land in a scheme, the cost to develop a scheme is ₹ 60000/. The Assessee should have allotted 15% of 1500 sq.yards of land at the rate of 400 per sq.yards to the needy persons/institutions by draw of lots. Instead of this, the Assessee has fixed a base price, and thereafter, put the land on auction. It allotted the land to the highest bidder. It has sold the land keeping in view the profit in mind. G. It may be noted that huge profits have been made by the Assessee in these years out of the abovesaid real estate development activity. If that be so, where is the element of charity? The activity of developing roads, park or laying of sewerage land are not to be seen representing a charitable act as the assessee levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of final plot to be allotted to the original owners will not alter the fact that the land is acquired for a cost. It is submitted that by virtue of the provisions of the Town Planning Act, 15% of the total notified area is sold by the appellant and from such sale huge profits are derived. It is submitted that the acquisition and sale of the landa is in the nature of a trade or business and the activity is not different from a normal purchase or sale activity by a real estate developer. 8.11. It is further submitted by Shri Bhatt, learned Senior Advocate for the Revenue that as can be seen from the financial of the assessee, the cost for the land has been incurred and has been capitalized as cost of acquisition. That the said practice is followed from year to year. That the assessee has become entitled to sell 15% of the land by virtue of the provisions of the Town Planning Scheme. That the said entitlement comes for a cost and has resulted in huge profits. That therefore, the activity in respect of 15% of the land sold by the assessee, thus, is in the nature of trade or business and therefore, the first limb of proviso to Section 2(15) of the Act is satisfied. It is submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom business. It is submitted that the mere fact that the same activity is done by an instrumentality of the state will not alter the character of the activity. It is submitted that the activity will still be in the nature of business or trade. 8.14. It is further submitted that the requirement of the provisions is not that there should be a business per se, but the only requirement is that the activity is in the nature of business or trade. The word Business as defined in section 2(13) is of wide import and would cover the activities of the appellant. It is submitted that besides, the condition stipulated in the Proviso to section 2(15) is not the carrying of business per se, but only the activity being in the nature of trade or business which further widens the width and amplitude of the proviso. It is submitted that the learned Tribunal in the impugned judgment and order which discussing at length that an activity in nature of Trade, Commerce or Business has observed following attributes and that the activities of appellant does squarely satisfies each of the same: (i). It should be a continuous and systematic exercise of activity of purchase and sale with a view to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the taxable income. It is submitted that these entities were not regarded as charitable institutions subject to regime of section 11 of the Act, but were given complete exemption under section 10 on their own right. That the present Assessee was enjoying this exemption under section 10(20A), as the said section allowed the exemption to any authority constituted by or under any law enacted for the purpose of planning and development or improvement of cities, town or villages. It is submitted that Section Section 10(20A) of the Act came to be omitted by the Finance Act, 2002 w.e.f. 1.4.2013. Therefore, the exemption enjoyed by the housing board was taken away. It is submitted that similar exemption enjoyed by sports bodies like cricket, hockey, football etc. under section 10(23), the authority for marketing commodities under section 10(29) was also withdrawn under section 10(29) by Finance Act, 2002. Similarly, the scope of local authority enjoying exemption under section 10(20) was limited to only Panchayat, Municipality, Municipal committee and Cantonment board by introducing an exhaustive definition of local authorities, which was hitherto not there, thereby denying any room f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is found to be in the nature of trade, commerce or business, proviso to Section 2(15) of the Act shall be applicable and therefore, activities of the assessee cannot be said to be for charitable purpose and therefore, the assessee is not entitled to exemption as claimed under Section 11 of the Act. 8.18. It is further submitted by Shri Bhatt, learned Senior Advocate for the Revenue that the proviso to Section 2(15) only needs an assessee to carry on activities in the nature of business, commerce or trade irrespective of whether the assessee generates profits from such activities or not and irrespective of whether profit making is prime motive or not. Section 2(15) has defined charitable purpose to include (i) relief of the poor, (ii) education, (iii) medical relief, (iv)preservation of monuments or places or objects of artistic or historic interest and (v) the advancement of any other object of general public utility . It is submitted that the proviso (i) and (ii) to Section 2(15) would apply if the activity of the trust is deemed to be that of advancement of any other object of general public utility The proviso further provides that such activities will not be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the question of law in favour of revenue and against the assessee. 1. Indian Trade Promotion Organization vs. Director of Income Tax (Exemption) reported in (2015) 371 ITR 333 (Delhi). 2. Tribune v. Commissioner of Income Tax, Chandigarh, 390 ITR 547 (Punjab and Haryana). 3. Jammu Development Authority vs. Union of India and ors in ITA No. 164 of 2014 dated 7.11.2013 rendered by the Jammu and Kashmir High Court. 4. Raja Rameshwar Rao Vs._Commissioner of Income Tax reported in 42 ITR 179 (SC). 5. Jalandhar Development Authority vs. CIT reported in (2010) 35 SOT 15 (ARS) (URO) of ITAT Amristar Bench. 9.0. Heard the learned advocates for the respective parties at length. 10. The short but interesting question of law posed for the consideration of this Court in the present appeal is whether the activities of the of the AssesseeAUDA can be said to be in the nature of trade, commerce or business so as to deny the status of the assessee as a charitable institution within the definition of Section 2(15) of the Act ? The second question which is posed for the consideration of this Court is whether the the activity of the assessee can be said to be activity of rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the powers and functions of an area development authority relating to the development or redevelopment of a development area under this Act shall, in relation to such urban development area, be exercised and performed by such urban development authority1*** (2) Every notification issued under subsection (1) shall define the limits of the area to which it relates. 2[(2A) The State Government may, by notification in the Official Gazette, include in or exclude any area from an urban development area, amalgamate two or more urban development areas into one urban development area, subdivide any urban development area into different urban development areas and include such subdivided urban development area in any other urban development area.] (3) Every urban development authority constituted under subsection (1) shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract, and by the said name sue and be sued. (4) The urban development authority shall consist of the following members namely:( i) a Chairman to be appointed by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection with supply of water, disposal of sewerage and provision of other services and amenities; 4 [(via) to levy and collect such fees for the execution of works referred to in clause (vi) and for provision of other services and amenities as may be prescribed by regulations;] (vii) To acquire, hold, manage and dispose of property, movable or immovable, as it may deem necessary; (viii) To enter into contracts, agreements or arrangements, with any local authority, person or organisation as the urban development authority may consider necessary for performing its functions; (ix) To carry any development works in the urban development area as may be assigned to it by the State Government from time to time; (x) To exercise such other powers and perform such other functions as are supplemental, incidental or consequential to any of the foregoing powers and functions or as may be directed by the State Government. (2) The urban development authority may, with the approval of the State Government, delegate 5 [any of its powers and functions] to the local authority or authorities functioning in the urban development area. (3) The urban development authority shall have its offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land from the total area covered under the scheme, to the extent of.( i) Fifteen per cent. for roads, (ii) five per cent. for parks, play grounds, gardens and open space, (iii) five per cent. for social infrastructure such as school, dispensary, fire brigade, public utility place as earmarked in the Draft Town Planning Scheme, and (iv) fifteen per cent. for sale by appropriate authority for residential, commercial or industrial use depending upon the nature of development: Provided that the percentage of the allotment of land specified in paragraphs (i) to (iii) may be altered depending upon the nature of development and for the reasons to be recorded in writing; (b) the proceeds from the sale of land referred to in para (iv) of subclause (a) shall be used for the purpose of providing infrastructural facilities; (c) the land allotted for the purposes referred to in paragraphs (ii) and (iii) of subclause (a) shall not be changed by variation of schemes for the purposes other than public purpose;]] (k) the imposition of conditions and restrictions in regard to the open space to be maintained around buildings, the percentage of building area for a plot, the number, size, height and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be made on such terms and conditions as the State Government may determine. Section 95:Accounts And Audit : (1) An appropriate authority shall maintain proper accounts and other relevant records and prepare an annual statement of accounts including the balance sheet in such form as the State Government may prescribe. (2) The accounts of an appropriate authority shall be subject to audit annually by the Accountant General of the State and any expenditure incurred by him in connection with such audit shall be payable by the authority to the Accountant General. (3) The Accountant General or any person appointed by him in connection with the audit of accounts of an appropriate authority shall have the same rights, privileges and authority in connection with such audit as the Accountant General has in connection with Government accounts and in particular shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect the office of the appropriate authority. (4) The accounts of an authority as certified by the Accountant General or any other person authorised by him in this behalf, together with the audit report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ten percent, or such percentage as near thereto as possible of the total area covered under the scheme, for the purpose of providing housing accommodation to the members of socially and economically backward classes of people. As per Section 40(i)(jj) for the aforesaid purposes certain percentage of total area covered under the scheme are allotted earmarked. Fifteen percent of total area is allotted for the purpose of roads, five percent for parks, play grounds, gardens and open space, five percent for social infrastructure such as school, dispensary, fire brigade, public utility place as earmarked in the Draft Town Planning Scheme and Fifteen percent for sale by appropriate authority for residential, commercial or industrial use depending upon the nature of development. Last Fifteen percent is earmarked under the Town Planning Scheme for sale, by appropriate authority for residential, commercial or industrial use. The appropriate authority / Urban Development Authority is permitted to sale the said plots / lands to the extent of 15% of the total area to meet with the expenditure towards drainage, roads, gardens, schools, markets, water supply etc. So that maximum price can be fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able plot for residential, commercial and industrial use are allotted by the appropriate authority. It is further observed that the provision of the Act have to be read as a whole and therefore, the provision of Section 40(3)(jj)(a)(iv) for sale is to be in consonance / conjointly with other statutory provisions and not in isolation.Under the circumstances, the learned Tribunal has committed gross error in considering the activities of the appellant Urban Development Authority for profiter by selling 15% of the total area and thereby has committed gross error in holding the activities of the assessee in the nature of trade, commerce or business. 12.2. Whether the activities of the appellant AUDA can be said to be in the nature of trade, commerce or business as occurring in the first proviso to Section 2(15) of the Act, few decisions of the Hon'ble Supreme Court as well as other High Courts are required to be referred to at this stage. 12.3. In the case of Khoday Distilleries Ltd and Others vs. State of Karnataka and others reported in (1995) 1 SCC 574, the Hon'ble Supreme Court had an occasion to consider the word trade . In the said decision, the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution. 67. The expressions trade, commerce and ―business as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of charitable purpose. The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this court, with reference to H. Abdul Bakhi and Bros (supra) observed as under: 71. Although, it is not essential that an activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be a vital indicator in determining whether an organisation is carrying on business or not. In the present case, the petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds the surplus as generated from holding coaching classes. In addition, the petitioner institute provides study material and other academic support such as facilities of a library without any material additional costs. The Supreme Court in the case of State of Andhra Pradesh v. H. Abdul Bakhi and Bros. (supra) held as under: The expression business though extensively used a word of indefinite import, in taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee, who are engaged in commercial activities i.e. carrying on business, trade or commerce, in the garb of 'public utilities' to avoid tax liability as it was noticed that the object 'general public utility' was sometimes used as a mask or device to hide the true purpose, which was 'trade, commerce or business'. Thus, it is evident that introduction of proviso to Section 2(15) by virtue of the Finance Act, 2008 was directed to prevent the unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in the garb of an activity with the object of a general public utility. It is not designed to hit at those institutions, which had the advancement of the objects of general public utility at their hearts and were charity institutions. The attempt was to remove the masks from the entities, which were purely trade, commerce or business entities, and to expose their true identities. In the case of M/s G.S. 1 India (Supra), in para 21, 22 and 27, the Delhi High Court has observed and held as under: 21. ... As observed above, legal terms, trade, commerce or business in Section 2(15), mean activity unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counterproductive and contrary to the language of Section 2(15) of the Act. 12.9. While upholding the constitutional validity of the proviso to Section 2(15) of the Act, the Division Bench of the Delhi High Court in the case of Indian Trade Promotion Organization vs. Director of Income Tax (Exemption) in WP(C) No.1872 of 2013 decided on 22.01.2015 has observed in para 58 as under: As defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be in the nature of trade, commerce or business and / or profiteering and therefore, proviso to Section 2(15) of the Act shall not be applicable. 13.2. Similar, view has been expressed by the Rajasthan High Court in the case of Commissioner of Income TaxI, Jodhpur vs. Jodhpur Development Authority, Jodhpur Tax Appeal No. 63 of 2012 decided on 5.7.2016. 14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever the income is earned / received by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electricity, road, drainage, water etc. and even the entire control is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other of general general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of charitable trust. However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Ministers speech in the Parliament. Relevant portion of which reads as under : I once again assure the House that genuine chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with nonmembers, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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