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TMI Blog2020 (4) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 955/Ahd/2016 concerning AY 2012-13 as a lead case for adjudication. ITA No. 955/Ahd/2016 - AY- 2012-13 (Assessee's appeal) 4. The grounds of appeal filed by the assessee read as under: "1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad have erred in holding that assessee is not entitled to the benefit of sections 11 & 12 of the Income-tax Act, 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as Ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad have erred in holding that first & second proviso to section 2(15) of the Act, 1961 is applicable in the assessee's case. 3. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer as well as Ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad have erred in disallowing exemption of INR 37,50,00,000/- claimed u/s 11(2) of the Act. 1961 & deduction of INR 9,10,65,153/- claimed on account of income u/s 11(1)(a) of the Act 1961." 5. When the matter was called for hearing, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds shall be used for the purpose of providing infrastructural facilities. 5.1 It was further submitted that as per section 2(15) of the Act. 1961, an assessee is considered as a charitable institution if it is involved in any of the following purposes, namely: * Relief of the poor. * Education. * Medical relief. * Preservation of environment (including watersheds, forests and wildlife). * Preservation of monuments or places or objects of artistic or historic interest. * Advancement of any other object of general public utility. 5.2 Further, it was contended that the first proviso to section 2(15) of the Act states that advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on ■ any activity in the nature of trade, commerce or business; or ■ any activity of rendering any service in relation to trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. It was thus contended that the first proviso to section 2(15) shall apply in respect of only last limb of section 2(15). Thus, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with supply of water, disposal of sewerage and provision of other services and amenities, could be said to be providing general public utility services within meaning of section 2(15) and, thus, can claim for exemption of income under section ll of the Act. 5.7 The Hon'ble Gujarat High Court held that: "From the various provisions of the Town Planning Act. it can be gathered that assessee has been constituted as Urban Development Authority under the provisions of section 22 of the Town Planning Act. The purpose and object of constitution of the Urban Development Authority is proper development or re-development of urban area. Even Urban Development Authority consists of (i) a Chairman to be appointed by the State Government; (ii) such persons, not exceeding [four in number] who are members of the local authority or authorities functioning in the urban development area, as maybe nominated by the State Government; (iii) three officials of the State Government, to he nominated by that Government, ex officio; (iv) the Presidents of the district panchayats functioning in the urban development area, or, as the case maybe, part thereof, ex officio; (v) the Chief Town planner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority is permitted to sale the said plots/lands to the extent of 15 per cent of the total area to meet with the expenditure towards drainage, roads, gardens, schools, markets, water supply etc. So that maximum price can be fetched and the same can be utilized for the development of the Urban Development Area and so as to avoid any allegation of favouritism and nepotism, the plots are sold by public auction. It is required to be noted the entire amount realized by the assessee being Urban Development Authority either by selling plots or by recovery of some fees/charges, Urban Authority is required to use only for the purpose of development in the Urban Development Area and not for any other purpose. The Tribunal has observed and held that as the assessee is selling the plots, to the extent of 15 per cent of total area, by public auction and gets maximum amount, it amounts to prof hering and therefore, the activities of the assessee can be said to be in the nature of business. However, while holding so. Tribunal has not properly appreciated the object and purpose of permitting the Urban Development Authority to sell the plots, maximum to the extent of 15 per cent of the total a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering at all, the activities of the assessee cannot be said to be in the nature of trade, commerce and business and, therefore, proviso to section 2(l5) of the Act shall not be applicable so far as assessee is concerned and, therefore, the assessee is entitled to exemption under section II of the Act. [Para 14] Now, so far as another question which is posed for the consideration of this Court i.e. whether while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assessee is collecting cess or fees which is regulatory in nature, the proviso to section 2(15) of the Act shall not be applicable. As observed hereinabove neither there is element of profiteering nor the same can be said to be in the nature of trade, commerce or business. [Para 15] Having regard to the facts of the case and purpose for which the assessee is established/constituted under the provisions of the Gujarat Town Planning Act, collection of fees and cess is incidental to the object and purpose of the Act. and, thus, the case would not fall under second part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are regulatory fees and are incidental to the object and purpose of the Act. It was thus contended that the case would not fall under second part of proviso to section 2(15) of the Act. Therefore, proviso to section 2(15) of the Act shall not be applicable so far as assessee is concerned and, therefore, the assessee is entitled to exemption under section 11 of the Act. 5.9 Coming to the specifics, it was contended that as per section 11(2), where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Act if the trust fails to apply the entire income of the year. Therefore, the addition is not justified as SUDA is eligible to claim INR 9,10,65,153/- as 15% deduction u/s 11(1)(a) of the Act as the application of funds need not be more than 85%. 5.11 It was next contended that the Commissioner of Income-tax (Appeals) - 9. Ahmedabad has passed an order for A.Y. 2009-10, A.Y. 2010-11, A.Y. 2011-12. A.Y. 2013-14 and A.Y. 2015-16 granting the assessee the benefit of deduction under section 11 r.w.s. 2(15). The Commissioner of Income-tax (Appeals) - 9, Ahmedabad in the order has stated that "The main issue raised by the appellant [SUDA] is covered by the latest judgment of Hon'ble Gujarat High Court in the case of AUDA v. ACIT in ITA No. 423, 424, 425 of 2016 dated 02.05.2017. ...... Both, i.e. the appellant and AUDA are constituted as Authorities under the Gujarat Town Planning and Urban Development Act, 1976. The powers and functions of both the authorities have been laid down under the said Act and are identical in nature. Nowhere in the order of assessment the AO pointed out that the appellant [SUDA] has undertaken functions beyond the mandate of Gujarat Town Planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held as follows: "Held, that the object and purpose of permitting the Authority to sell the plots to a maximum extent of 15% of the total area, was to meet the expenditure for providing infrastructural facilities like gardens, roads, lighting, water supply, drainage system, etc. The reasons for selling the plots by holding public auction were; (a) to avoid any further allegation of favoritism and nepotism and (b) so that the maximum market price could be fetched, which could be used for the development of the urban development area. Considering the fact that the assessee was a statutory body, an Authority constituted under the provisions of the Act, to carry out the object and purpose of Town Planning Act and collected regulatory fees for the object of the Acts, no services were rendered to any particular trade, commerce or business; and whatever income was earned by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) was required to be used only for the purpose to carry out the object and purpose of the Town Planning Act and to meet the expenditure of providing general utility service to the public such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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