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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 ..... t 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 generated and received in the course of its operations. It is manifest from a reading of the various provisions of the UPID Act that the petitioner acts primarily as an agent of the Government obligated to undertake planned development of areas placed under its control. It cannot possibly be viewed as being a corporation intended to have been incorporated for a profit or commercial motive. The provisions of the UPID Act as well as the material placed before us clearly dispels any notion of the petitioner being a hardcore trading corporation as some precedents have chosen to describe commercial enterprises. As the Constitution Bench in Shri Ramtanu Coop. Housing Society aptly observed, bodies like the petitioner, are intended to act as an architectural agent of development and growth. The respondents have clearly erred in holding that the loans and advances extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated in terms of Section 10 (46) of the Income Tax Act, 1961 [Act] . The aforenoted statutory 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act. 7.3 The financial 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 tabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome are requested 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Authority [GNIDA], yet another entity constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 statute in the other. Regard must also be had to the scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purposes of the Act are development of industries in the State. The Corporation consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tates 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 be considered 'business' if it is undertaken with a profit motive, but in some cases this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to pen down why and for what reason, we perceive and believe that a wider definition or criteria of economic activity sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority/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. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC) would not be apposite and constitute affirmative precedent in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 prescribed and assigned. If the answer is in favour of the authority, body etc. exemption would not be denied in view of sub-clause (b) of section 10 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 in support of the writ petition, Mr. Balbir Singh, learned Senior Counsel addressed the following submissions. Mr. Singh contended that NOIDA is an authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 discharged it shall not be applied for any other purpose. 13. Mr. Singh submitted that the petitioner is in one sense a wing of the State Government itself constituted for the purposes of regulating and undertaking p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate 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 of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial 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 foodgrains (PDS entities), etc. 206.4.2. While carrying 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 consideration that merely cover its expenditure (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, amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment 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 WITH STATE INSTRUMENTALITIES FOR PUBLIC WORKS S. DOCUMENT WHICH WAS BASIS OF THE DISBURSEMENT (Loan or advance or expense contribution in insolvency proceedings) 1. Letter dated 18.05.2001 of the Principal Secretary to NOIDA directing it to provide loan of ₹10 Crores to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N 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 ₹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. Singh, the profits or surplus generated from such activities as well as any interest earned from loans and advances are reapplied by the petitioner exclusively for the purposes of undertaking activities in furtherance of the functions specified in Section 6. Viewed in light of the above, Mr. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provided. 3. Revenue's letter dated 25.4.2014 requesting from NOIDA details in prescribed format (same as above). The Balance Sheets for 2010-11, 2011-12 and 2012-13 were also sought for. NOIDA's CA's response letter dated 7.5.2014 providing details as sought in prescribed format with detailed supporting ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministration 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, it was Mr. Bhatia s contention that the aforesaid judgment had been rendered in a completely distinct and distinguishable set of facts and that while rendering judgment in that matter, this Court was not called upon to examine whether advancement of loans or investment of funds for the purposes of earning interest would satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 evident from its Preamble, provides for the constitution of a statutory authority for the development of certain areas in the State of U.P. into industrial and urban townships and for matters connected therewith. The expression industrial development area is defined by Section 2(d) to mean an area declared as such by the State Government by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 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 Government may by notification in the Gazette declare that the authority shall be dissolved with effect from such date as may be specified in that notification and the Authority shall be deemed to be dissolved accordingly. (2) From the said date (a) all properties, funds and dues which are vested in, or releasable by the Authority shall vest in or be reliable by the State Government. (b) all nazul lands placed at the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 clearly obliges the petitioner to act in terms of directions that may be issued to it from time to time by the State Government. Mr. Singh, learned counsel appearing for the petitioner, had also alluded to the development activities undertaken by different authorities of the State of U.P. as being part of a collaborative exercise and a concerted effort to undertake development in the industrial development area and to achieve various de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 same being utilised to aid that entity in the discharge of its statutory obligations cannot be described to be a commercial activity . One cannot lose sight of the fact that the amounts standing to the credit of such bodies is principally public money. It would thus be wholly erroneous and illogical to expect the petitioner to desist from investing surplus or dormant funds to a use which may give rise to economic returns and which in turn c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expression commercial activity as appearing in Section 10 (46) then drew a parallel between the said provision and the Proviso to Section 2 (15) of the Act. It would be pertinent to recall that Section 2 (15) broadly defines what would constitute a charitable purpose. The Proviso thereto then spells out activities which would not amount to the advancement of any other object of general public utility by stipulating that the carrying on of any activity in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 Manufacturing Co. Ltd. (1967) 19 STC 1 (SC), it was held that the term profit motive as per the enactment may not be the sole or relevant consideration to be kept in mind. It may be one of the aspects, as normal commercial or business activity is with the intent to earn profit. For several enactments, concept and principle of economic activity and not profit motive has gained acceptance as in cases relating to taxability under the sales tax, excise duty, value added tax, etc. as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fying 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 excluded from the ambit of the charging section and not all incomes other than those specified. Therefore while granting exemption, the respondents can restrict and specify the income which would be exempt. All incomes earned from varied and different activities need not be granted exemption. 28. Bar and negative stipulation in sub-clause (b) should not be interpreted as forbidding charging of fee, service charge or consideration while regulating and administering the activities for which the authority/body is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 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, i.e., economic activity unconnected and unassociated with the regulatory and administrative purpose for which they were created and established, even when such receipts, income and profit generated is used for undertaking regulatory and administrative functions for the benefit of public. 32. Consequently we would hold that an authority/body satisfying the requirements of sub-clause (a) would not incur disentitlement under sub-clause (b) when it charges and receives money by way of fee, reimbursement or even consideration as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on/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 (46) of the Act for the reason that it may well qualify and would be entitled to benefit under section 2 (15) read with sections 10 to 13 of the Act. 35. The Allahabad High Court in CIT (Exemption) v. Greater Noida Industrial Development Authority (2017) 395 ITR 18 (All) after extensively referring to the statutory mandate and object for which the petitioner authority has been established and also the provisions of the Act, i.e., the Income-tax Act, had observed that the petitioner was to provide amenities and facilities in industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncept 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 industries in the State. Act aims at buildings and industrial town and the Corporation carries out objects of the Act. The court further said that: 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 establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 Section 2 (15) would be attracted thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer which is the general public. By way of illustration, if a corporation supplies essential foodgrains at cost, or a marginal markup, another supplies essential medicines, and a third, water, the characterisation of these, as activities in the nature of business, would be self-defeating, because the overall receipts in some given cases may exceed the quantitative limit resulting in taxation and the consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming 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 construction by which tax exemption is denied on the ground that if an entity is not covered by Section 10 (20-A) or the newly applicable Section 10 (46), it cannot claim benefit as a GPU charity under Section 11, is unsound. These two provisions confer different though overlapping benefits. If an entity does not fulfil the requirement of one provision because it does not answer the description of a body under that provision, that ipso facto is not a bar for it to claim benefit of another provision. 198. Section 10 (46) reincarnated so to say Section 10 (20-A), which had been deleted w.e.f. 1-4-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir 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 Allahabad High Courts in Greater Noida Industrial Development Authority v. Union of India [Greater Noida Industrial Development Authority v. Union of India, 2018 SCC OnLine Del 7536 : (2018) 406 ITR 418] (hereafter GNIDA ) and CIT v. Yamuna Expressway Industrial Development Authority [CIT v. Yamuna Expressway Industrial Development Authority, 2017 SCC OnLine All 3848 : (2017) 395 ITR 18]. In GNIDA [Greater Noida Industrial Development Authority v. Union of India, 2018 SCC OnLine Del 7536 : (2018) 406 ITR 418], the High Court drew a distinction between bodies set up by the Government with commercial purpose and objects whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily, 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 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 wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 202. In Shri Ramtanu Coop. Housing Society [Shri Ramtanu Coop. Housing Society Ltd. v. State of Maharashtra, (1970) 3 SCC 323] no doubt, this Court did not have to decide whether Maharashtra Industrial Development Corporation was entitled to tax exemption. However, it examined the provisions of the Act, and the ratio, that such industrial development corporations are not engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. If such corporations [falling within the description of Section 10 (46)] applied to the Central Government for exemption, the treatment of their receipts, should be no different than how such receipts can and should have been treated for the purposes of determining whether they are GPU charities, during the period when Section 10 (46) was not in existence. Furthermore, this Court is of the opinion that having regard to the observations in Gujarat Maritime Board case [CIT v. Gujarat Maritime Board, (2007) 14 SCC 704 : (2007) 12 SCR 962] , the denial of exemption under one category cannot debar such corporations from claiming income exempt status under an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 and drawing interest therefrom or charging lease rent, ground rent, etc. per se, recovery of such charges, fee, interest, etc. cannot be characterised as fee, cess or other consideration for engaging in activities in the nature of trade, commerce, or business, or for providing service in relation in relation thereto. 206.4.5. Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 generated and received in the course of its operations. It is manifest from a reading of the various provisions of the UPID Act that the petitioner acts primarily as an agent of the Government obligated to undertake planned development of areas placed under its control. It cannot possibly be viewed as being a corporation intended to have been incorporated for a profit or commercial motive. The provisions of the UPID Act as well as the material placed before us clearly dispels any notion of the petitioner being a hardcore trading corporation as some precedents have chosen to describe commercial enterprises. As the Constitution Bench in Shri Ramtanu Coop. Housing Society aptly observed, bodies like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 (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. Haryana Electricity Regulatory Commission Notification dated 10.4.2015 (a) grants and loans made by the Government of Haryana; (b) fees received under the Electricity Act, 2003 (36 of 2003); (c) interest earned on government grants and loans and fees received under the Electricity Act, 2003 (36 of 2003). 5. Uttar Pradesh Electricity Regulatory Commission Notification dated 10.3.2015 (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. 6. Tamil Nadu Water Supply and Drainage Board Notification dated 20.1.2015 (a) centage at rates prescribed by the Government of Tamil Nadu; (b) water charges (at Water Tariff ..... 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