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TMI Blog2024 (7) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... utory provision enables the CBDT to certify the specified income of a body or authority constituted under a Central, State or Provincial enactment or one which is created by the Union or the State Governments with the object of regulating and administering any activity for the benefit of the general public and which is not engaged in any commercial activity to be exempt from taxation with the income so specified not being liable to be included in its total income of the previous year. 2. The impugned order has come to be passed based on an application made in November 2011 by NOIDA for being accorded the requisite certification under Section 10 (46) of the Act. The record would reflect that since the said application had remained pending for a considerable period of time, the petitioner was constrained to approach this Court by way of W.P.(C) 5574/2020 which came to be disposed of on 24 August 2020 with the Court directing the CBDT to decide the petitioner's application within 12 weeks. 3. As would be evident from a reading of the order impugned before us, the CBDT has principally drawn an adverse inference in light of NOIDA having extended loans to various entities. This becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statements furnished by the Authority shows that there are huge Loans and approximately Rs. 5,000 crores that have been advanced in FY 2018-19 and more than Rs. 5000 Crores in FY 2017-18 to various entities including private parties, which have no direct, immediate and fundamental connection with the role, objective, function and duties of the applicant. The applicant has earned huge interest income to the tune of Rs. 793 crores in AY 2018-19 and approx Rs. 350 crores in AY 2017-18. It is pertinent to mention that the money and funds received by the applicant are to be used for only planned development of the Municipal Services which shall be in the nature of public good. In fact, it is observed that the applicant Authority has advanced loans to private parties like M/s Amarpali Silicon City out of its funds. The activities of advancing such loans is in contravention of section 20 (2) of the UPID Act which provides that the fund shall be applied towards meeting the expenses incurred by the Authority in the administration of this Act and for no other purposes. Since, both the income and application of money as discussed in the above table has no bearing with the objectives of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be notified for the purpose of section 10 (46): a. Grants received from the State Government b. Moneys received from the disposal/90 years lease of immovable properties c. Moneys received by the way of lease rent & fees or any other charges from the disposal/ 90 years lease of immovable properties d. The amount of interest earned on the funds deposited in the banks e. The amount of interest /penalties received on the deferred payment received from the Allotees of various immovable properties. f. Water, sewerage and other municipal charges from the Allotees of various immovable properties. Thanking You. Yours faithfully For New Okhla lndustrial Development Authority Authorised Signatory G.P. Singh Finance Controller NOIDA" 7. In a related development, the Allahabad High Court while ruling on ITA No. 107/2016 and other connected cases in CIT(E), Lucknow vs. M/s Yamuna Expressway Industrial Development Authority 2017 SCC OnLine All 3848, and which batch included an appeal involving the writ petitioner as one of the respondent authorities, came to hold that the respondents could not be said to be carrying on any activity aimed at generation of profits and directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , fee, sale consideration, etc., it has to be used in discharge of objectives and functions provided under UPIAD Act, 1976, for the benefit of general public. xxxx xxxx xxxx 71. The entire discussion, if we summarise, can be placed in a small arena of judicial analysis, that is, a body or institution which is functioning for advancement of objects of general public utility and its activities are not in the nature of trade, business or commerce and also not a sheer profit making, such institution is entitled to claim itself to be constituted for "charitable purposes" and seek registration under section 12A (1) of the Act, 1961." 8. Reverting to the application that was made by the writ petitioner, the CBDT in terms of its letter of 03 September 2013 sought an explanation with respect to the petitioner qualifying the requirements of Section 10 (46). This was responded to by the petitioner providing various details as embodied in its replies dated 18 and 31 October 2013. Further representations in support of the application which were made were submitted before the CBDT on 20 June and 30 July 2018. 9. It becomes pertinent to note that the Greater Noida Industrial Development Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;Impracticable' is not defined either in the Act or in the Rules. In such a situation, to quote from Principles of Statutory Interpretation (Chief Justice G.P. Singh, 7th Edn., 1999, pages 258-59): When a word is not defined in the Act itself, it is permissible to refer to dictionaries to find out the general sense in which that word is understood in common parlance. However, in selecting one out of the various meanings of a word, regard must always be had to the context as it is a fundamental rule that 'the meanings of words and expressions used in an Act must take their colour from the context in which they appear'. Therefore, 'when the context makes the meaning of a word quite clear, it becomes unnecessary to search for and select a particular meaning out of the diverse meanings a word is capable of, according to lexicographers'. As stated by Krishna Iyer, J. : 'Dictionaries are not dictators of statutory construction where the benignant mood of a law, and more emphatically, the definition clause furnish a different denotation.' In the words of Jeevan Reddy, J. : 'A statute cannot always be construed with the dictionary in one hand and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners contended that the Corporation was a trading one. The reasons given were that the Corporation could sell property, namely, transfer land ; that the Corporation had borrowing powers ; and that the Corporation was entitled to moneys by way of rents and profits. Reliance was placed on the report of the Corporation and in particular on the income and expenditure of the Corporation to show that it was making profits. These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their directors for the regulation and management of the Corporation. Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one." 17. There are a number of decisions of the Delhi High Court on interpretation of the expression "in the nature of trade, commerce or business" in the proviso to section 2 (15) of the Act, for an institution carrying on the aforesaid activities is not a charitable institution under the residual category of advancement of any other object of general public utility. In Institute of Chartered Accountants of India v. DGIT (Exemptions) (2012) 347 ITR 99 (Delhi) referring to the meaning of the terms "commerce" and "business", it was held as under (page 123): "Section 2 (15) defines the term 'charitable purpose'. Therefore, while construing the term 'business' for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term 'business' is intended for the purpose of interpreting and applying the first proviso to section 2 (15) of the Act to include any transaction for a fee or money. An activity would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act, i.e., the Income-tax Act, the charge is on income. The word "business", it was observed, is an etymological chameleon and it suits its meaning to the context in which it is found. It is not a term of legal art. This, as observed above, is equally true when we judicially interpret and define the expression "commercial activity" in the context of an enactment. xxxx xxxx xxxx 22. Now we would turn to the two decisions in the case of the petitioner itself. The first decision is by the Allahabad High Court in CIT (Exemption) v. Yamuna Expressway Industrial Development Authority/Greater Noida Industrial Development Authority reported in (2017) 395 ITR 18 (All). This was a case relating to registration under section 12AA read with section 2 (15) of the Act. The nature of activities undertaken by the petitioner were extensively examined and considered and the contention raised by the Revenue was rejected. In other words, the petitioner was entitled to registration under section 12AA read with section 2 (15) of the Act. xxxx xxxx xxxx 25. Having considered varied and different dimensions and contours associated with the expression "commercial activity", we would like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be more acceptable and in consonance with the legislation in question. 29. At the same time it is apparent that all and every authority/body established by or under the statutory enactments or by Central or State Governments with the object of regulating and administering any activity for the benefit of public are not entitled to claim exemption, for otherwise sub-clause (b) of section 10 (46) would become superfluous and obtuse. We have to delineate and define the scope and ambit of disqualification envisaged by the words "any commercial activity" in sub-clause (b) of the said section. In the absence of any clear statutory definition elucidating these words, we have to outline a definitive and clear standard and test to be applied. 30. Any activity undertaken with profit motive and intent would be certainly commercial activity. Authorities/bodies set up or created by the Government with commercial purposes and objects are not entitled to exemption. This cannot be debated and challenged. Equally, reference to expansive and wider interpretative meaning attributed to the expression "charitable purpose" defined in section 2 (15), vide earlier judgments including Addl. CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those who can afford, would be contrary to general public interest specified and stipulated in sub-clause (a) of section 10 (46) of the Act. 33. Therefore, we do not agree with the respondents that interpretation of the expression "any commercial activity" would include within its ambit and scope any activity for which fee, service charges or consideration is charged and paid. Equally, we would also not accept the specious and wide definition predicated only on the end use of the funds/income, and not the commercial manner in which income/funds are generated. The determinative test to be applied is to examine and answer whether or not the activity for which fee, service charge or consideration was charged and paid, was intrinsically associated, connected and had immediate nexus with the object of regulating and administering the activity for the benefit of general public. Further, the activity should also not run on commercial lines, i.e., with the profit motive and intent to earn profit but given the regulatory and administrative role assigned to the body or authority, the activity must be and should be for meeting and complying with the responsibility and mandate of the role pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out and rendering the said activities is directly connected with the role and statutory mandate assigned to the petitioner. It has not been asserted and alleged that these activities were or are undertaken on commercial lines and intent. The petitioner does not earn profits or income from any other activity unconnected with their regulatory and administrative role. Income in the form of taxes, fee, service charges, rents and sale proceeds is intrinsically, immediately and fundamentally connected and forms part of the role, functions and duties of the petitioner." 10. The judgment rendered in GNIDA was assailed by the respondents before the Supreme Court by way of SLP (Civil) No. 34332/2018 which ultimately came to be dismissed on 25 November 2019. Undisputedly, the specified income of GNIDA came to be consequently notified on 23 June 2020. The petitioners also rely upon the certification which was granted by the Board in favour of the M/s Yamuna Expressway Industrial Development Authority [YEIDA], yet another body which owes its creation to the UPID Act on 24 April 2020. It is in the aforesaid backdrop that NOIDA assails the validity of the impugned order. 11. Appearing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s meeting the expenses incurred by the Authority in the administration of this Act for no other purposes. (3) Subject to any directions of the State Government, the Authority may keep in current account of any Scheduled Bank such sum of money out of its funds as it may think necessary for meeting its expected current requirements and invest any surplus money in such manner as it thinks fit. (4) The state Government may, after due appropriation made by Legislature by law in that behalf, make such grants, advances and loans to the Authority as that Government may deem necessary for the performance of the functions of the authority under this Act, and all grants, loans and advances, made shall be on such terms and conditions as the State Government may Determine. (5) The Authority shall maintain a sinking fund for the repayment of moneys borrowed under sub-section (5), and shall pay every year into the sinking fund such sum as may be sufficient for repayment within the period fixed of all moneys so borrowed. (7) The sinking fund or any part thereof shall be applied in, or towards, the discharge of the loan for which such fund was created, and until such loan is wholly discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of sole purpose of establishment, growth and development of industries. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one." 15. Our attention was also drawn to a more recent decision rendered by the Supreme Court in CIT vs. Ahmedabad Urban Development Authority (2023) 4 SCC 561 and where, in the context of statutory bodies, it was pertinently observed as under: - "206.4. The determinative tests to consider when determining whether such statutory bodies, boards, authorities, corporations, autonomous or self-governing government sponsored bodies, are GPU category charities: 206.4.1. Does the State or Central law, or the memorandum of association, constitution, etc. advance any GPU object, such as development of housing, town planning, development of industrial areas, or regulation of any activity in the general public interest, supply of essential goods or services - such as water supply, sewage service, distributing medicines, of foodgrai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther it is subject to directions by the Government, etc. concerned. 206.4.6. As long as the statutory body, corporation, authority, etc. concerned while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e. amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit [20% as mandated by the second proviso to Section 2 (15)] - the statutory or government organisations concerned can be characterised as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10 (23-C) and by Section 11 have to necessarily be fulfilled. 206.5. As a consequence, it is necessary in each case, having regard to the first proviso and seventeenth proviso (the latter introduced in 2012, w.r.e.f. 1-4-2009) to Section 10 (23-C), that the authority considering granting exemption, takes into account the objects of the enactment or instrument concerned, its underlying policy, and the nature of the functions, and activities, of the entity claiming to be a GPU charity. If in the course of its functioning it collects fees, or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on - i.e. whether it is at cost with a nominal markup 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)." 16. The grounds which form the basis for rejection of the petitioner's application were then assailed by Mr. Singh, who submitted that the various loans and advances extended by the petitioner to other governmental entities were made pursuant to directions and instructions issued by the Government of Uttar Pradesh and which NOIDA was statutorily obliged to comply with by virtue of Section 41 of the UPID Act. The details of the various directions and the corresponding documents which are sought to be relied upon to contend that the loans were in fact granted basis the directives of the State Government have been provided in a tabular statement which is extracted hereinbelow: - "STATE GOVERNMENT INSTRUCTIONS FOR EXTENDING LOANS TO STATE BODIES AND AGREEMENTS WI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.04.2008 between NOIDA and Uttar Pradesh Rajkiya Nirman Nigam ("UPRNN") for 'construction of boundary wall to secure Sector 95, Noida'. 10. Memorandum of Understanding dated 16.10.2014 between NOIDA and Uttar Pradesh Rajkiya Nirman Nigam ("UPRNN") for 'appointment of UPRNN as consultant in NOIDA's project of constructing a Hospital at Sector 39, Noida'. 11. Memorandum of Understanding dated 27.02.2009 between NOIDA and Uttar Pradesh Rajkiya Nirman Nigam ("UPRNN") for 'laying pipeline and UGR of 80 qusec for the Ganga Jal Pariyojana'. 12. Official Noting by NOIDA for release of Rs.1,73,79,115/- to Uttar Pradesh Power Corporation Limited ("UPPCL") for development work in Sector 70, Noida. 17. Proceeding along these lines, Mr. Singh further disclosed that the loans given to the UP Rajkiya Nirman Nigam was for carrying out engineering and construction works on behalf of the petitioner. It was further submitted that the sale and purchase of land, buildings and other connected activities are intrinsic to the regulatory and administrative role which is assigned to the authority by virtue of the various provisions of the UPID Act. According to Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents and details whereof have been set forth in tabular form as under: - "QUERIES BY CBDT AND RESPONSES BY NOIDA QUA NATURE OF ACTIVITY S. PARTICULARS (of correspondence by the Department Revenue) RESPONSE (of NOIDA-Petitioner) 1. Revenue's letter dated 27.5.2013, enquiring about the nature of activity carried out by NOIDA and they are commercial in nature? NOIDA's CA's letter dated 19.6.2013 stating specifically the functions carried out by it as per the mandate of UPIAD Act, 1976, are for the benefit of the general public and not commercial in nature. 2. Revenue's letter 3.9.2013 requesting from NOIDA details in prescribed format including nature of activity and if they are commercial in nature? The Balance Sheets for the last 3 year were also sought for in Sl.18 of the prescribed format NOIDA's CA's letter dated 18.10.2013 providing details as sought in prescribed format, explaining that the nature of NOIDA's activity was not commercial and sought time to furnish the Balance Sheet for last three years. NOIDA's CA's letter dated 31.10.2013 wherein the copies of Balance Sheets for the last three years - 2008-09, 2009-10, 2010-11 were provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being advanced by the petitioner to other entities, whether they be governmental or otherwise. Learned counsel also relied upon Section 20 (2) of the UPID Act and on the basis whereof he submitted that the funds standing in the hands of the petitioner are liable to be applied only towards meeting expenses incurred in the administration of the said Act and for no other purpose. In view of the above, it was his contention that the activities undertaken by the petitioner by way of advancing money to other entities or generating interest income would clearly not fall within the protective umbrella of Sections 6 and 20 of the UPID Act. 24. It was further submitted that a reading of Para 7.1 to 7.5 of the impugned order itself would indicate that the petitioner had been undertaking such activity with sufficient regularity and thus being liable to be viewed as a profit-making activity which was undertaken, and which would clearly fall in the category of commercial activity. In view of the aforesaid, it was Mr. Bhatia's submission that the application made with reference to Section 10 (46) of the Act was rightly rejected. 25. Insofar as the decision of this Court in GNIDA is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation with respect to the amount of interest income that was earned from bonds, shares and fixed deposits. Insofar as this aspect is concerned, one must also bear in mind that such interest income was not a head in respect of which the benefit of Section 10 (46) had been claimed. As would be evident from a perusal of the heads of specified income in respect of which exemption had been sought, it is manifest that interest income did not form part thereof. 29. Notwithstanding the above and bearing in mind the undisputed position that the claim of the petitioner had remained pending right from 2011 coupled with the fact that parties have had the opportunity to place the entire material before this Court in these proceedings, we find no justification to fault the respondents solely on this score. Moreover, since learned counsels for parties have had an occasion to address submissions on the merits and pertaining to all facets of the dispute which arises, we proceed further. However, and before we proceed to evaluate the primary questions which arise, it would be beneficial to advert to the relevant provisions of the UPID Act which would govern. 30. The UPID Act, as would be ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own fund to which shall be credited- (a) all moneys received by the Authority from the State Government by way to grants, loans advances or otherwise; (b) all moneys borrowed by the Authority from sources other than the State Government by way of loans or debentures; (c) all fees, tolls and charges received by the Authority under this Act; (d) all moneys received by the Authority from the disposal of lands, buildings and other properties movable and immovable; and (e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other sources; (2) The fund shall be applied towards meeting the expenses incurred by the Authority in the administration of this Act for no other purposes. (3) Subject to any directions of the State Government, the Authority may keep in current account of any Scheduled Bank such sum of money out of its funds as it may think necessary for meeting its expected current requirements and invest any surplus money in such manner as it thinks fit. (4) The state Government may, after due appropriation made by Legislature by law in that behalf, make such grants, advances and loans to the Authority as that Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final. (3) The State Government may, at any time, either on its own motion or an application made to it in this behalf, call for the records of any case disposed of or order passed by the Authority or the Chairman for the purpose of satisfying itself as to the legality or propriety of any order passed or direction issued and may pass such order or issue such direction in relation thereto as it may thin fit. Provided that the State Government shall not pass on order prejudicial to any person without affording such person a reasonable opportunity of being heard. (4) Every order of the State Government made in exercise of the powers conferred by this Act shall be final and shall not be called in question in any court." 35. Section 58 provides for the consequences which would ensue pursuant to the dissolution of an authority created under the Act and makes the following provisions: - "58. Dissolution of Authority - (1) Where the State Government is satisfied that the purposes for which the Authority was established under this Act have been substantially achieved so as to render the continued existence of the Authority in the opinion of the State Government unnecessary, that Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be extended to YEIDA as well as the U.P. State Handloom Corporation Ltd. in terms of approvals and Board resolutions which have been placed on the record. The payments made to UP Rajkiya Nirman Nigam was explained to be in the context of the latter's appointment as a consultant for development activities to be undertaken in different residential sectors falling within the industrial development area as well as in connection with the construction of houses in different sectors. Similar was the explanation which was proffered with respect to the loans and credit facilities extended to Agra Development Authority, the U.P. State Industrial Development Corporation and the U.P. State Bridge Corporation Ltd. The fact that the aforesaid facilities were extended pursuant to directives of the State Government was neither questioned nor doubted by the respondents before us. Despite the explanation so proffered, the respondents have proceeded to reject the claim for grant of exemption under Section 10 (46) taking the position that the loans and advances extended by the petitioner were liable to be viewed as commercial activity. 39. It becomes pertinent to note that Section 41 of the Act cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the IBC to administer the affairs of M/s Amarpali Silicon City, a corporate debtor which was undergoing CIRP. The aforesaid payments have been explained by the petitioner as being payments made to meet the proportionate cost of debt resolution and restructuring. On an overall consideration of all of the above, we find that there clearly appears to be no justification for the respondent taking the view that the loans and advances were being extended on a routine basis. Regard must be had to the fact that the extension of those credit facilities were themselves prompted by clear directives of the Government of U.P. This was thus not an activity or a venture which was undertaken by the petitioners with a motive to earn profit. 42. We also bear in consideration the unequivocal assertion of the petitioners that the interest income was liable to be ploughed back to its own fund for the purposes of undertaking development activity and discharging the various statutory obligations placed upon it under the UPID Act. In our considered opinion, a prudent deployment of funds and investments, surplus or otherwise, which may enable a statutory authority to earn a reasonable return and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be placed under the broad genre of trade, commerce or business. The Court in GNIDA noticing the decision handed down by the Constitution Bench in Shri Ramtanu Co-operative Housing Society Ltd. had observed: "16. Way back in 1970, a Constitution Bench of five judges in Shri Ramtanu Co-operative Housing Society Ltd. v. State of Maharashtra (1970) 3 SCC 323, had examined the validity of Maharashtra Industrial Development Act, 1961 (3 of 1962) and in that context had referred to the functions performed by the Maharashtra Development Corporation, which was to establish and manage industrial estate on selected basis and to develop industrial area selected by the State Government and for this purpose acquire and transfer land by way of sale, lease, etc,. The contention of the petitioner therein that the Corporation established would be a trading one or a commercial corporation was rejected in the following words: "16. The petitioners contended that the Corporation was a trading one. The reasons given were that the Corporation could sell property, namely, transfer land ; that the Corporation had borrowing powers ; and that the Corporation was entitled to moneys by way of rents and pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment of industries in the State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one." 45. The Court in GNIDA while expounding upon the meaning to be assigned to the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) 258 ITR 70 (SC) ; (2002) 126 STC 288 (SC) can be applied. The six indicia stipulated in Customs and Excise Commissioner v. Lord Fisher (1981) 2 All ER 147 ; [1981] STC 238 are also relevant. Each case, therefore, has to be examined on its own facts. In view of the aforesaid enunciation, the real issue and question is that whether the petitioner-institute pursues the activity of business, trade or commerce. To our mind, the respondent while dealing with the said question has not applied their mind to the legal principles enunciated above and have taken a rather narrow and myopic view by holding that the petitioner-institute is holding coaching classes and that this amounts to business." 46. The phrase "in the nature of trade, commerce or business" was then explained to entail the undertaking of any activity with a profit motive. This was further elaborated upon with the Court observing as under: "19. After extensively referring to the judgments of the Supreme Court in State of Punjab v. Bajaj Electricals Ltd. (1968) 70 ITR 730 (SC), Barendra Prasad Ray v. ITO (1981) 129 ITR 295 (SC), CIT v. Lahore Electric Supply Co. Ltd. (1966) 60 ITR 1 (SC) and State of Gujarat v. Raipur M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment with the object of regulating or administering any activity for the benefit of general public. These stipulations are primary and constitute the core of the provision. Sub-clause (b) of section 10 (46), which states that such authority/body must not be engaged in any commercial activity, should be interpreted in harmony and symmetrically with sub-clause (a) of section 10 (46) to fulfil the primary objective. This exemption provision is predicated on the assumption that the authority/body satisfying and meeting requirements of sub-clause (a) of section 10 (46) would earn and have taxable income under the heads stated in section 14 and therefore would apply and seek exemption. Perceptively, when no fee or consideration is charged and paid, the authority/body would not have any income (except interest or other income from investments) and, hence, would not require an exemption notification under section 10 (46) of the Act. Sub-clause (b) of section 10 (46) does not require and mandate that interest income or the like alone would be exempt. 27. Clause (46) of section 10 of the Act exempts specified income from the charge. Only specified income is granted exemption and exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act." 48. Of significance are the following observations appearing in paragraphs 31 & 32 of the report: "31. Thus, there is need to distinguish commercial activity which constitutes disqualification under sub-clause (b) of section 10 (46) of the Act, and charging and payment of fee, service charges, reimbursement of costs or consideration for transfer of rights for performing and undertaking regulatory or administrative duties for general public interest, when these are not guided and undertaken with profit motive or intent. In other words, if an authority/body created and established under a statutory enactment or constituted by Central or State Government, charges and is paid for regulating and administrating any activity for which it was established and set up, sub-clause (b) is not contravened and breached. Where, however, an authority/body established is with a commercial intent and objective, i.e., on commercial lines, and intends to or earn profits as one of its goals, it would falter under sub-clause (b) and would be denied registration. Authority/body satisfying the requirements of sub-clause (a) can also be denied registration if it carries on any commercial activity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the authority, body etc. exemption would not be denied in view of sub-clause (b) of section 10 (46) of the Act. Exemption would not be available and granted to a body or authority, which is carrying on a commercial activity with intent and motive to earn profit even when the profit and income earned is with the object to sub-serve the object of general public utility. In other words, profits which arise even when utilized for and to feed the charitable purpose, i.e., the general public interest, would result in disqualification/ineligibility. 34. One can urge that the interpretation given by us would mean and imply that section 10 (46) and the provisions relating to charity under section 2 (15) read with sections 11 to 13 of the Act would overlap. Overlapping to some extent is possible. However, section 10 (46) of the Act is a specific provision dealing with body or authority etc. created or constituted by the Central or State Government or under the Central or State enactment. Further, exemption under the said provisions could be restricted to only specified types or categories of income and not all incomes. The petitioner-assessee cannot be denied benefit of section 10 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Authorities" render their activities in the nature of trade, business or commercial so as to exclude them from the definition of "charitable purposes" by application of proviso to section 2 (15) of the Act, 1961. It was also observed that there are two features, which are normally not found in trading Corporation (1) that the sums payable to the Corporation are recoverable as arrears of rent under the Act and (2) on dissolution, assets vest in and liabilities become enforceable against the State Government. The court also said that underlying concept of trading Corporation is buying and selling, but in the case of the Corporation under the aforesaid Act, there was no aspect of buying or selling. Corporation carries out the purpose of Act, i.e. development of industries in the State. Constructions of buildings, establishment of industries by letting building on hire or sale, acquisition and transfer of land, in relation to establishment of industrial estates, or development of industrial areas and setting up of industries, it cannot be said to be relating to land or buildings for the reason that State is carrying out the object of Act with the Corporation as an agent in setting up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents. 194. The answers to these, in the opinion of this Court, are that the definition ipso facto does not spell out whether certain kinds of income can be excluded. However, the reference to specific provisions enabling or mandating collection of certain rates, tariffs or costs would have to be examined. Generically, going by statutory models in enactments (under which corporations boards or trust or authority by whatsoever name, are set up), the mere fact that these bodies have to charge amounts towards supplying goods or articles, or rendering services i.e. for fees for providing typical essential services like providing water, distribution of foodgrains, distribution of medicines, maintenance of roads, parks, etc. ought not to be characterised as "commercial receipts". The rationale for such exclusion would be that if such rates, fees, tariffs, etc. determined by statutes and collected for essential services, are included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by the second proviso to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective definition. It, therefore sought exemption, as a GPU category charity claiming that it was controlled by objects of general public utility having regard to the provisions of its parent Act i.e. the Gujarat Maritime Board Act. This Court refuted the argument of the Revenue that if a corporation did not fall within the definition of "local authority" it could not claim to be a GPU charity. It was held that Section 10 (20) and Section 11 of the 1961 Act operate in totally different spheres. Even if the Board is not considered as a local authority, it is not precluded from claiming exemption under Section 11 (1) of the 1961 Act. Therefore, the Court read Section 11(1) in light of the definition of the words "charitable purposes" as defined under Section 2 (15). This Court also relied upon the ruling in A.P. SRTC v. CIT [A.P. SRTC v. CIT, 1971 SCC OnLine AP 253 : (1975) 100 ITR 392] where APSRTC - constituted under the Road Transport Corporation Act, 1950 - having regard to the objectives of the Act, was held to be a GPU charity, thus entitling it to exemption in terms of the IT Act. 197. In the light of these decisions, it is evident that the Revenue's narrow constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o commercial activity, appears to be in the nature of a complete bar to activities which are akin to commerce or business, yielding profit. However, what needs to be kept in mind is that the object of Section 10 is to remove from the taxable net, an entire class of receipts of income. Given this object of Section 10, the interpretation of "commercial" activity has to be on the same lines as in the case of income derived by GPU charities, in the course of their actual functioning, by involving in activities in the nature of trade, commerce or business. Thus, if statutory corporations within Section 10 (46) derive their income by charging a nominal markup over the cost of service rendered or goods supplied, meant to recover the costs of the activities they engage in primarily or to achieve the object for which they were set up, such as development of housing, road infrastructure, water supply, sewage treatment, supply of foodgrains, medicines, etc. with or without regulatory powers, the mere fact that some surplus or gain is derived would not disentitle them from the benefit of Section 10 (46). 200. In this context, it would be useful to consider the judgment of the Delhi and Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maharashtra, (1970) 3 SCC 323] this Court, by a five-Judge Bench, held that Maharashtra Industrial Development Corpn. [CCE v. Maharashtra Industrial Development Corpn., 2017 SCC OnLine Bom 10021, paras 10-12] is not a trading concern, and observed as follows : (Shri Ramtanu Coop. Housing Society case [Shri Ramtanu Coop. Housing Society Ltd. v. State of Maharashtra, (1970) 3 SCC 323], SCC pp. 328-29, paras 16-17 & 20) "16. These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and management of the Corporation. Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Corporation. There are various departments of the Government which may have excess of income over expenditure. *** 20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in this State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposes such a bar, and the body concerned cannot claim tax exemption if it engages in commercial activity. 204. The manner in which GPU charities have been dealt with under the definition clause i.e. Section 2 (15), indicates that even though trading or commercial activity or service in relation to trade, commerce or business appears to be barred - nevertheless the ban is lifted somewhat by the proviso which enables such activities to be carried out if they are intrinsically part of the activity of achieving the object of general public utility. Furthermore, in the case of GPU charities there is a quantified limit of the overall receipts, which is permissible from such commercial activity. In the case of local authorities and corporations covered by Section 10 (46) no such activities are seemingly permitted. 205. As was observed in the earlier part of this judgment - while considering whether for the period 1-4-2003 - 31-5-2011, statutory boards, corporations, etc. could have lawfully claimed to be GPU charities, this Court has observed that the nature of such corporations is not to generate profit but to make available goods and other services for the benefit of public weal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association, etc.), the purpose for which such public GPU charity, is set up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc. 206.4.3. Rendition of service or providing any article or goods, by such boards, authority, corporation, etc. on cost or nominal markup basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce. 206.4.4. Where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the body concerned, such as fixation of rates on predetermined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing foodgrains, medicines, and/or retaining monies in deposits or government securities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2 (15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act." 52. Indisputably, NOIDA, the petitioner herein, has been constituted under the UPID Act with the avowed objective of undertaking developmental activities in an industrial development area. It is in that sense acting as an arm and an adjunct of the State charged with undertaking planned development in the industrial development area. In that connection, the petitioner undertakes planning and development of the area, acquires land and property, engages in construction of housing units or industrial units. In order to fulfil the aforesaid objectives, it is provided funds by the State Government and additionally creates a corpus from the revenue and receipts genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the UPID Act and function on lines identical to the petitioner. The Court also takes into consideration the exemption granted to various government bodies in respect of similar specified income. This is evident from the table appearing in Para 52 of the writ petition and which is reproduced hereinbelow: - S.N. Entity & Notification Specified Income 1. Competition Commissions of India. Notification dated 19.2.2016 and a) Amount received from government grants; b) fees received under the Competition Act, 2002; c) interest accrued on Government grants and interest accrued on fees received under the Competition Act, 2002. 2. Punjab State Electricity Regulatory Commission Notification dated 10.4.2015 (a) amount received in the form of processing fee for determination of tariff; (b) amount received in the form of licence fee; (c) amount in the form of petition fee; and (d) amount of interest income earned on bank deposits. 3. Rajasthan State Pollution Control Board Notification dated 10.4.2015 (a) amount received in the form of government grants; (b) amount received as license fees and fines; (c) interest earned on government grants, license fees and fines. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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