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TMI Blog2023 (5) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... r housing accommodation;planning, development or improvement of cities, towns and villages; regulating, or regulating and developing, any activity for the benefit of the general public; or regulating any matter, for the benefit of the general public, arising out of the object for which it has been created We find that our view is supported by the decision in the case of CIT (Exemptions) vs. Gujarat Industrial Development Corporation [ 2023 (4) TMI 392 - GUJARAT HIGH COURT] wherein, the Hon'ble Gujarat High Court, following the decision of the Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority [ 2022 (10) TMI 948 - SUPREME COURT] has dismissed the appeal filed by the Revenue, holding that the matter is squarely covered by the decision of the Hon'ble Supreme Court and no question of law, much less any substantial question of law arises for consideration. It is relevant to note that in the said case, the Senior Standing Counsel appearing for the Revenue fairly submitted that the decision rendered in the case of Ahmadabad Urban Development Authority (supra) would govern the case of the assessee. We, therefore, find that the Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een raised:- A. That the CIT(A) was not justified in upholding the action of the Assessing Officer in denying the exemption claimed u/s 11. B. That both CIT(A) and AO failed to appreciate that the exemption u/s 11 in the previous years had been allowed by the ITAT and approved by P H High Court. Therefore, CIT(A) ought to have allowed this exemption as a judicial discipline. C. That the orders of the AO CIT(A) are against the law and facts of the case. 3. There is a delay of 34 days in filing the appeal. The Assessee, vide its Application dated 15.07.2020, has submitted that the due date of filing of the Appeal fell in the Covid Lock Down Period, which started from 23.3.2020; and that the due date was extended finally upto 31.7.2020. The ld. Counsel for the assessee has submitted on record a copy of the Instructions issued in this regard by the Hd. Qrs. of the ITAT itself. It is submitted that hence, the delay of 34 days be condoned. 4. We have considered the facts and reasoning given in the Assessee s Application for condonation of delay. In view of the explanation given by the Assessee, which is found to be justified, the delay of 34 days in filing the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the trust to be charitable in nature; that further, for assessment year 2014-15, the appeal of the Department before the ITAT Amritsar, in the Assessee s own case, had been dismissed by the ITAT and exemption u/s 11 on the surplus of sale of land and building had been allowed to the Assessee. 7. The aforesaid reply of the Assessee did not find favour with the AO. While passing the assessment order, the AO observed that the aims and objects of the trust with regard to the improvement of the city and providing streets and roads and making provision for drinking water, etc., are covered under general public unity; that however, the activities of the trust with regard to the acquisition of land and development of the land and sale thereof in the shape of plots, flats and commercial booths at market rates, after calling for applications from the public with some registration fee cannot be treated as charitable activities under general public utility ; that the question was whether the activities carried out by the Assessee involved carrying out any activity in the nature of trade, business or commerce or rendering services in relation to the same; that the dictionary definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation, or for the purpose of planning, development or improvement of cities, towns and villages, or for both , was not to be included in computing the total income of a previous year, of any person; and that by omission of section 10 (20A) of the I.T. Act, the clear intention of the legislature was not to give exemption on any income of an authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation, or for the purpose of planning, development or improvement of cities, towns and villages, or for both. Reference was made to Punjab Urban Development Authority Vs. CIT , 103 TTJ (Chd.) 988, Jalandhar Development Authority Vs. CIT , 35 SOT (Asr.) 15 and Jammu Development Authority Vs. CIT , 52 SOT (Asr.) 153. It was observed that Jammu Development Authority Vs. CIT (supra) was upheld by the Hon'ble High Court, as well as by the Hon'ble Supreme Court. It was further observed that the proviso to section 2(15) of the I.T. Act, as amended w.e.f. A.Y. 2016-17, also goes again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of the nature of use or application or retention of income from the Assessee s activities of acquisition of land, development thereof and sale thereof in the shape of plots, flats and commercial booths at market rate, after calling for applications from the public, with some registration fee, could not be said to be for charitable purposes, since the aggregate receipt from such activity during the previous year exceeded 20% of the total receipts of the trust during the previous year. 9. Aggrieved, the Assessee is in further appeal before us. 10. Challenging the impugned order, the ld. Counsel for the Assessee contended that the ld. CIT(A) has erred in confirming denial of exemption u/s 11 of the I.T. Act to the Assessee, failing to appreciate that under circumstances exactly similar to the ones attending the year under consideration, exemption u/s 11 of the Act had been allowed by the ITAT in the earlier years, which action stood approved by the Hon'ble High Court; that the Bench had required the Assessee to clarify as to how the decision of the Hon'ble High Court in the Assessee s own case would apply, in view of the amended provisions of section 2(15) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 396 ITR 323 (Gujarat), holding similar activities of the Ahmedabad Urban Development Authority to be non-commercial in nature and, therefore, the provisions of section 2 (15) of the I.T. Act to be not applicable. 11. The ld. counsel for the assessee has, thus, prayed that the order under appeal be quashed and exemption u/s 11 of the I.T. Act be granted to the Assessee, on allowing the Assessee s appeal. 12. On the other hand, the ld. Departmental Representative ( DR ) has placed strong reliance on the impugned order. It has been contended that as rightly held by the ld. CIT(A), section 13(8) of the I.T. Act talks of non-exclusion of any income u/s 11 and 12 of the Act from total income, if the provisions of section 2(15) become applicable; that the aggregate receipts of the Assessee from its activities of earning income from sale of plots, flats and commercial booths and also earning of income from non-construction fee, transfer fee, penal interest, compounding fee, etc., exceeds 20% of the total receipts; that as such, the amended provisions of section 2(15) of the Act, as brought in by the Finance Act, 2015 w.e.f. 1.4.2016, are clearly applicable to the case; that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appeal No.489 of 2007, been held to be charitable activities by the Hon'ble High Court. 17. The Assessing Officer held that the Assessee MIT s income from construction and sale of residential apartments, commercial flats and booths, rent, interest and fees, etc., which was a regular income, cannot be considered to be income in relation to activities in the nature of advancement of any other object of general public utility; that the income was actually income similar to that derived by a private builder or colonizer; that the facilities, or services, which the Assessee MIT was providing, originated from a desire to earn more profit from the sale of premises; that builders and colonizers also provided such facilities; that the Assessee MIT s main object was only to earn more profit; that the objects/activities of the Assessee MIT were commercial in nature, and not charitable; and that a charitable institution provides services for charitable purposes free of cost, or for symbolic/nominal costs and not for gain, which was not being done in the assessee MIT s case. The Assessing Officer thus added the amount of Rs.1.46 crores, which had been treated by the Assessee MIT as ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2016-17. The Revenue has maintained that the proviso to section 2(15) of the I.T. Act specifically bars any activity of rendering any service for a cess or fee or any other consideration; that this, irrespective of the application and use of the income generated therefrom, meaning thereby, that such receipts, if any are being utilised for a charitable purpose, they would not come within the purview of exempt income; that in this regard, it is also pertinent that section 13(8) of the I.T. Act states that if the provisions of section 2(15) become applicable, any income u/s 11 12 will not be excluded from the total income; that the aggregate receipts of the Assessee trust from the activities of sale of plots, commercial booths, transfer fee, non-construction fee and penal interest, etc., exceed 20% of the total receipts; that therefore, the proviso to section 2(15), as brought in w.e.f. 1.4.2016, is applicable to the year under consideration; that even if for the sake of argument, it were to be considered that the activities of the trust fall under the residuary clause of general public utility , the commercial income from such activities is not be excluded from the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble; that further against judgement dated 23.12.2016, given by the Hon'ble High Court in ITA No. 147/2016, in the case of M/s Improvement Trust Moga an SLP has been preferred by the Department, which is yet to be decided, meaning thereby, that the issue has not yet attained finality; and that the activities carried out by the Assessee trust, by way of construction of flats and commercial booths, sale of plots, construction of colonies, building of shops, etc., are not at all covered under charitable purpose within the meaning of section 2(15) of the I.T. Act, and no such activity is related with public welfare. 22. Here, it would be appropriate to reproduce the relevant portion of the written submissions dated 7.6.2021 filed before us by the Department: 12. Further, the contention of the assessee that all the activities of the trust are charitable in nature and exemption is available under section 2(15) of the Income Tax Act, 1961 and his case is squarely covered by the decision of jurisdictional Punjab Haryana High Court given in the case of Moga Improvement Trust dated 31st October, 2008 and reported in (2009) 308 ITR 361 is not correctly acceptable. The judgeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utility was explained to include all objects which promote welfare of general public. The Hon'ble High Court vide order dated 31.10.2003 held that the assessee is carrying out objects of general public utility i.e 5th limb of section 2(15). The said case law is now inapplicable for the following reasons: - I. The decision was pronounced based on facts as existed and presented before the Hon'ble High Court at that point of time. There are findings that the assessee is not doing any charitable activity but is doing a commercial activity. II. Without prejudice to the above, now there is an amendment in the Act in section 2(15) wherein all entities which are doing activity in the nature of business etc. would be taxable. B. It is also submitted in this respect that SLP has been filed against the judgment of Hon'ble Punjab and Haryana High Court dated 23.12.2016 in ITA No 147/2016 in case of M/s Improvement Trust Moga, decision of which is pending till date but leave has been granted by the Hon'ble Apex Court, which means that the issue has not attained finality 19. . The activity carried out by way of construction of flats, commercial boot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of land is not an absolute or independent power; that it is a power to be exercised by the assessee in the discharge of the statutory duties imposed on it by the Punjab Town Improvement Act; that section 28(2) stipulates that the scheme under the Act may provide for a variety of things including the disposal of land belonging to the assessee; that the power of disposal of land is, therefore, in furtherance of, connected with and in relation to a scheme under the PTI Act, and not an absolute power independent of and unconnected with the assessee s statutory functions under the Act. 26. It was held that advancement of the object of general public utility is the predominant purpose of the assessee; that town improvement in the title Punjab Town Improvement Act, 1922 sums up the predominant activity of the assessee, as well as the purpose for its establishment; that the preamble of the Act, titled An Act for the improvement of certain areas , states whereas it is expedient to make provision for the improvement and expansion of towns in Punjab . ; that almost every section in Chapter IV of the PTI Act clearly indicates that the assessee trust is established for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity, as envisaged by the proviso to section 2(15) of the Income Tax Act, as applicable to the year under consideration. 30. It was held that the Government of Punjab cannot be said to have established the assessee trust and conferred upon it public responsibilities and duties of the nature specified in the Punjab Town Improvement Act as a camouflage for its commercial, trade and business ventures; that the trust has been created and incorporated under section 3 of the PTI Act for a public purpose; and that the activities of the trust doubtlessly fall within the meaning of the words charitable purpose in section 2(15) of the Income Tax Act. 31. It was held that mere profit making on account of certain incidental or ancillary activities of the trust does not disentitle it to the exemptions; that the trust, which is constituted under the Punjab Town Improvement Act, is likely to make profit on account of its commercial or business activities, such as when it disposes of its land, as required by section 28(2)(iii) of the PTI Act; that this, however, does not take it out of the definition of charitable purpose in section 2(15) of the I.T. Act; that though trade, commerce and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other. Both are creatures of statute. Whereas the Assessee trust has been established under the Punjab Town Improvement Act, 1922, the latter body was formed under the Gujarat Town Planning and Urban Development Act, 1976 (the Gujarat Town Planning Act , for short). The purpose, duties and functions of the Assessee Improvement Trust have been discussed in extenso in the preceding paras. Yet, to reiterate succinctly, the trust has been set up for the public purpose of town improvement. The AUDA, as mandated by the Gujarat Town Planning Act, has to carry out development of the urban area, as an Urban Development Authority, having jurisdiction as per the Notification issued by the State Government. 35. The following are the functions of the AUDA: (i) To undertake the preparation of development plans under the provisions of GTP Act, for the urban development area; (ii) To undertake the preparation and execution of town planning schemes under the provisions of this Act, if so directed by the State Government; (iii) To carry out surveys in the urban development area for the preparation of development plans or town planning schemes; (iv) To guide, direct and assist the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 40. It was observed by the Hon'ble High Court that the AUDA, Ahmedabad is constituted as an Urban Development Authority, constituted by the State Government, in the exercise of powers vested under section 22 of the Gujarat Town Planning and Urban Development Act; that the powers and functions of the AUDA as Urban Development Authority are as per section 23 of the Gujarat Town Planning Act; that the AUDA as an Urban Development Authority is required to undertake the development of the urban area having jurisdiction as per the Notification issued by the State Government. It was observed that prior to Assessment year 2002-03, the AUDA was enjoying the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the Municipal Commissioner of the Municipal Corporation, if any, functioning in the urban development area, exofficio (vii) a member secretary to be appointed by the State Government who shall also be designated as the Chief Executive Authority of the Urban Development Authority; that thus, the constitution of the Urban Development Authority is subject to the control of the State Government; that the powers and functions of the Urban Development Authority are contained in Section 23; that considering Section 40 of the Gujarat Town Planning Act, the Town Planning Scheme prepared by the Urban Development Authority, which has been prepared subject to sanction by the State Government for development of the Urban Development Area, also provides for roads, open spaces, gardens, recreation grounds, schools, markets, greenbelts, dairies, transport facilities, public purposes of all kinds, drainage, inclusive of sewerage, surface or subsoil drainage and sewage disposal, lighting; water supply, etc.; that the Town Planning Schemes also provide for historical or national interest or natural beauty, and of buildings actually used for religious purposes; that the Schemes also provide for rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc.; and that the Tribunal has also not properly appreciated the reasons for selling the plots by holding public auction, i.e., (1) to avoid any further allegation of favouritism and nepotism and (2) so that maximum market price can be fetched, which can be used for the development of the Urban Development Area. 44. It was taken note of that in Khoday Distilleries Ltd. v. State of Karnataka , 1 SCC 574, the Hon'ble Supreme Court has held that the primary meaning of word trade is the exchange of goods for goods or goods for money. 45. It was noted in the case of Andhra Pradesh v. Abdul Bakshi and Bros. , 15 STC 644 (SC), the Hon'ble Supreme Court has held that the word business is of indefinite import and in a taxing statute, it is used in the sense of an occupation or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit. 46. It was noted that in the case of Institute of Chartered Accountants of India Vs. DGIT (Exemptions) , 347 ITR 99 (Del.), the Hon'ble Delhi High Court has held that an activity would be considered business if it is undertaken with a profit motive, but in some c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose ; that obviously, this was not the intention of the Parliament and, hence, it was proposed to amend the law to exclude the aforesaid cases; that genuine charitable organizations will not be affected in any way; and that the expressions business , trade or commerce , as used in the first proviso to section 2(15) thus must be interpreted restrictively and where the dominant object of an organisation is charitable, any incidental activity for furtherance of the object would not fall within the expressions business , trade or commerce . 47. It was noted that in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association 121 ITR 1 (SC), the Hon'ble Supreme Court has held: that the test to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit; that where profit-making is the predominant object of the activity, the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those standards, through accreditation and continuing supervision through inspection, etc., cannot be considered as trade, business or commercial activity, merely because the test procedure, or accreditation involves charging of such fees; and that it cannot be said that the public utility activity of evolving, prescribing and enforcing standards, involves the carrying on of trade and commercial activity. 50. It was noted that in GS1 India Vs. DGIT (Exemptions) 360 ITR 138 (Delhi), it was held: that the legal terms, trade , commerce or business in section 2(15) mean activity undertaken with a view to make or earn profit; that profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce; that business activity has an important pervading element of selfinterest, though fair dealing should and can be present, whilst charity or charitable activity is the anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles; that charity is driven by altruism and desire to serve others, though element of self-preservation may be present; that for charity, benevolence shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration; that in both the activities, i.e., the activity in the nature of trade, commerce or business, or the activity of rendering any service in relation to any trade, commerce or business, the dominant and prime objective has to be seen; that if the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business, or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'; and that on the other hand, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. 52. Their Lordships held that applying the said decisions to the facts of the case and with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade, commerce or business and, hence, it cannot be regarded as an activity for charitable purpose in view of the proviso to section 2(15) of the I.T. Act, is to be held in favour of the Assessee AUDA and against the Revenue. 57. It was observed that so far as regards the other question, i.e., whether while collecting the cess or fees, the activities of the AUDA can be said to be rendering any services in relation to any trade, commerce or business, for the reasons stated while discussing the first issue, merely because the AUDA is collecting cess or fees which is regulatory in nature, the provisions of section 2(15) of the I.T. Act shall not be applicable; and that as observed, neither there is any element of profiteering, nor can the same be said to be in the nature of trade, commerce or business. 58. It was noted that in DIT (Exemptions) v. Sabarmati Ashram Gaushala Trust , 362 ITR 539 (Guj.), the Gaushala Trust was engaged in breeding milch cattle and improving the quality of cows and oxen and other related activities; that the AO denied exemption u/s 11 of the I.T. Act to the Trust on the ground that considerable income was generated from the activities of milk producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any trade, commerce or business; that it had been stated that whether the purpose is a chartable purpose will depend on the totality of the facts of the case; and that it had been stated that ordinarily, Chambers of Commerce and similar organisations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as advancement of any other object of general public utility. 60. It was noted that in consonance with such assurance given by the Finance Minister on the floor of the House, the Central Board of Direct Taxes issued Circular No. 11 of 2008, dated 19.12.2008 [308 ITR (St.) 5] explaining the amendment, stating that the newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility , i.e., the fourth limb of the definition of charitable purpose contained in section 2(15), that hence, the said entities will not be eligible for exemption u/s 11 or under section 10 (23C) of the Act if they carry on commercial activity, and that whether such an entity is carrying on any activity in the nature of trade, commerce or business is a que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63. Their Lordships observed that as emerges from the statutory provisions, as explained in the speech of the Finance Minister and the CBDT Circular, the activity of a trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to any trade, commerce or business for a cess, fee and / or any other consideration; and that it is not aimed at excluding the genuine charitable trusts of general public utility, but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose. 64. It was further observed that in the case of the AUDA Gaushala Trust, all these were the objects of general public utility and would squarely fall under section 2 (15) of the Act; that profit making was neither the aim, nor the object of the Trust; that it was not its principal activity; that merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, this would not render the activity to be in the nature of trade, commerce or business; and that as clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c., and the entire control is with the State Government and the accounts are also subjected to audit and there is no element of profiteering at all, the activities of the AUDA can-not be said to be in the nature of trade, commerce or business, and that, therefore, the proviso to section 2 (15) of the Act is not applicable and, hence, the AUDA is entitled to exemption u/s 11 of the I.T. Act. 68. The matter was carried before the Hon'ble Supreme Court by way of appeal by the Department. We will note here, briefly, the rival contentions relevant to the case of the present Assessee as raised before the Hon'ble Supreme Court. 69. It was contended on behalf of the Department that statutory corporations, agencies, boards and authorities may trace their origins to specific Central or State laws; that however, if their activities are akin to or in the nature of business, or trade, or they provide services to businesses or trade, for consideration, fee or even cess (since they may be enabled to do so by law), they have to fulfill the mandate and restrictions under Section 2(15), especially proviso (ii); that as per the decision of the Hon'ble Supreme Court in New Delhi M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions, and limitations while granting an exemption from taxation; that exclusions are not based on mere objects of a trust, but on whether the purpose of the trust is advancement of any other object of general public utility ; that therefore, it cannot be said that one has to look only at the objects to determine if it constitutes charitable purposes for section 2(15) of the I.T. Act. It was contended that the reference to the terms business, trade or commerce and service in relation to such activities are meant to imply that profit motive should be completely absent. 70. On behalf of the Assessees, it was contended that in the case of a trust, which is a statutory corporation, it is obligatory on the part of the assessee to use the monies received for public utility purpose and the price fixation of lands/plots sold by them is also regulated through statutory regulations, due to which, such activities qualify the test of general public utility; that in keeping with the decision of the Delhi High Court in Greater Noida Industrial Development Authority , [2018] 406 ITR 418 (Delhi), there is need to distinguish commercial activity and charging and payment of fee, service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as the activities involved are mainly charitable and for advancement of public utility, its purposes are deemed to be charitable even if it carries on some business or tradelike activities for the purpose of generating income; that what is important is whether the main or dominant purpose of business or activity is motivated by profit, where it is so, the entity is debarred from claiming that it is a charity and cannot claim the benefit of tax exemption; that in keeping with CIT (Add.) v. Surat Art Silk Cloth Manufacturers Association , [1980] 121 ITR 1 (SC), that the main purpose or principal objective or motivation for the activity should not be to carry on trade or business, rather it should be to advance the purpose of general public utility; that if such a purpose is fulfilled, the carrying on of some activity which might result in surplus, would not disentitle the entity from the benefit of tax exemption. 71. It was submitted that in the absence of profit motive, the activity is not trade, commerce or business within the meaning of the first proviso to Section 2 (15) of the IT Act, 1961; that in the present context, the activities do not amount to trade , commerce o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax exemptions claimed by trusts for their income from business activities, provided the trusts were created thereon. Their Lordships then examined the relevant provisions of the Income Tax Act, 1961, as amended from time to time, as interpreted by the Supreme Court. Specifically, the provisions of sections 2 (15), 10, 11, 12, 12A, 12AA and 13 were gone into in extenso. Section 2(15) was interpreted in much detail. 75. The question as to what kinds of income or receipts of the following categories of assessees may not be characterized as derived from trade, commerce, or business, or in relation to such activities, for a consideration, was decided: (i) Statutory corporations, authorities or bodies (ii) Statutory regulatory bodies/authorities (iii) Trade Promotion bodies, councils, associations or organizations (iv) Non-statutory bodies - ERNET, NIXI and GS1 India (v) State cricket associations (vi) Private trusts 76. We will now reiterate, briefly, the interpretation and conclusion of the Hon'ble Supreme Court, as held applicable to the category of Statutory corporations, authorities or bodies established by Statutes, to which category the present Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of business, trade or commerce, in the actual course of fulfilling its objectives, the income from such business, should not exceed the limit defined in subclause (ii) to the proviso. 79. It was observed as follows:- Classically, the idea of charity was tied up with eleemosynary. However, charitable purpose and charity as defined in the Act have a wider meaning where it is the object of the institution which is in focus. Thus, the idea of providing services or goods at no consideration, cost or nominal consideration is not confined to the provision of services or goods without charging anything or charging a token or nominal amount. This is spelt out in Indian Chamber of Commerce (supra) where this court held that certain GPUs can render services to the public with the condition that they would not charge more than is actually needed for the rendering of the services may be it may not be an exact equivalent, such mathematical precision being impossible in the case of variables, - may be a little surplus is left over at the end of the year the broad inhibition against making profit is a good guarantee that the carrying on of the activity is not for profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and corporations may be entitled to, if mandated to collect or receive; that during the course of hearing, the Counsel had highlighted that statutory boards and corporations have to recover the cost of providing essential goods and services in public interest, and also fund large scale development and maintain public property; that these would entail recovering charges or fees, interest and also receiving interest for holding deposits; that it had been further pointed out that in some cases, income in the form of rents having regard to the nature of the schemes which the concerned board, trust or corporation may be mandated or permitted to carry on, has to be received; that for instance, in some situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents; that the answers to these are that the definition ipso facto does not spell out whether certain kinds of income can be excluded; that however, the reference to specific provisions enabling or mandating collection of certain rates, tariffs or costs would have to be examined; that generically, going by statutory models in enactments (under which corporations boards o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided that (i) the activities of trade, commerce or business are connected ( actual carrying out inserted w.e.f. 01.04.2016) to the achievement of its objects of GPU; and (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be trade, commerce, or business or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of cess, or fee, or any other consideration towards trade, commerce or business . In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration i.e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of commercial activity . However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and seeking exemption under Section 10(23C) or other provisions of the Act. 83. As for the application of the interpretation, it was reiterated by the Hon'ble Supreme Court that: At the cost of repetition, it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have to be examined whether the quantitative limit has been breached. 86. The question is whether the parameters laid down by the Hon'ble Supreme Court are met in the present case. In the case of the Assessee trust, for A.Y. 2011-12, the High Court has followed its own judgement in the case of Moga Improvement Trust , wherein the specific provisions of the Punjab Town Improvement Act, 1922, that is, the provisions enabling the mandatory collection stipulated by the Act, were examined. It was held that almost every section in Chapter IV of the PTI Act clearly indicates that the Assessee Moga Improvement Trust is established for the purpose of advancement of the object of general public utility, and that not only that, the entire Act in general indicates this to be the reason for and the basis of the establishment of the trust (Page 605, placitum 77 of the Report). 87. It is not the case of the Department that the above position has undergone any change whatsoever post A.Y. 2011-12, upto A.Y. 201617, i.e., the year under consideration, or beyond. This position is in full compliance of the Supreme Court directive of the receipts being in accordance with the mandate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation pro bono public by ascertaining minimum cost to the end consumer. 91. It is also seen that as per the Budget Speech of the Hon'ble Finance Minister, for A.Y. 2023-24, pursuant to the aforementioned Supreme Court judgement in Ahmedabad Urban Development Authority ,w.e.f. 1.4.2004, a new section, i.e., section 10 (46A) is slated to be incorporated in the Income Tax Act, so as to exempt any income arising to a body or authority, or Board or Trust or Commission, not being a company, which has been established or constituted by or under a Central of State Act with one or more of the following purposes, namely:- (i) dealing with and satisfying the need for housing accommodation; (ii) planning, development or improvement of cities, towns and villages; (iii) regulating, or regulating and developing, any activity for the benefit of the general public; or (iv) regulating any matter, for the benefit of the general public, arising out of the object for which it has been created. [source : 330 CTR (Statutes) 257] 92. Further, we find that our aforesaid view is supported by the decision of the Hon'ble Gujarat High Court in the case of CIT (Exemptions) vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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