9911796707
TMI Blog2025 (4) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso to Section 2 (15) is not applicable in the case of the assessee wherein as per records, the assessee is engaged in business of buying, developing and selling of lands, plots, flats and developed properties rendering the order perverse?" 2. The aforesaid questions of law have arisen for consideration on the following factual background:- 3. The Raipur Development Authority, the respondent herein / assessee, is a statutory authority constituted by the State of Chhattisgarh in accordance with the provisions contained in Section 38 (1) of the Chhattisgarh Nagar Tatha Gram Nivesh Adhiniyam, 1973 (for short, 'the Act of 1973'). The Act of 1973 was enacted to make provision for planning and development and use of land; to make better provision for the preparation of development plans and zoning plans with a view to ensuring town planning schemes are made in a proper manner and their execution is made effective, to constitute Town and Country Planning Authority for Proper implementation of town and country development plan, to provide for the development and administration of special areas through Special Area Development Authority, to make provision for the compulsory acquisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate as may be specified therein and the authority shall stand dissolved accordingly. 5. The respondent/assessee filed return of income declaring total income as nil for the assessment year 2011-12. Return was processed under Section 143 (1) of the Income Tax Act, 1961 on 30-3-2013 and the case was selected for scrutiny under compulsory criteria with the approval of the Chief Commissioner of Income Tax, Raipur. Accordingly, notice under Section 143 (2) of the IT Act was issued on 26-9-2012 and further notice under Section 142 (1) was issued on 26-12-2013 with a questionnaire upon which in response to the said notice, the assessee through its representative attended the hearing and ultimately, on 30-3-2014, order under Section 143 (3) of the IT Act was passed by the Assessing Officer (AO) wherein the AO had made addition of Rs. 21,62,94,042/- as per the provisions contained in Section 2 (15) read with Section 13 (8) of the IT Act taking into account the objects of the assessee Authority as contained in the Act of 1973. The respondent/assessee was granted its registration under Section 12AA of the IT Act on 16-1-2008. 6. Feeling dissatisfied with the order of the Assessing Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purely commercial nature where profit motive is involved. He would rely upon the decision of the Supreme Court in the matter of Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority (2023) 4 SCC 561 to buttress his submission and would also submit that the substantial questions of law be answered in favour of the Revenue and against the assessee and the appeal be allowed. 9. Mr. Ashish Shrivastava, learned Senior Counsel appearing for the respondent herein/assessee Raipur Development Authority, would submit that the two authorities - CIT (Appeals) and the ITAT have concurrently and rightly held that the proviso to Section 2 (15) of the IT Act would not be applicable as the assessee Authority is constituted under Section 38 (1) of the Act of 1973 and its functions are enumerated in Section 38 (2) of the Act of 1973 and the State Government has complete control over the assessee Authority and it is not conducting its affairs solely on commercial line with a motive to earn profit and there is not an iota of evidence brought on record to hold that the assessee Authority is involved in the commercial activity with a motive to earn profit. He would f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year;" 13. In the second proviso, the reference to ten lakhs was substituted, and the figure of rupees twenty-five lakhs, was inserted, by the Finance Act, 2011 (w.e.f. 1-4-2012). By the Finance Act, 2015 (w.e.f. 1-4-2016), the first two provisos to Section 2 (15) were deleted, and instead, the following proviso was inserted:- "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup of individuals would be a charitable purpose (CIT v. Ahmedabad Rana Caste Assn. (1982) 2 SCC 542 : 1982 SCC (Tax) 151 : (1983) 140 ITR 1). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity (CIT v. Surat Art Silk Cloth Manufacturers' Assn. (1980) 2 SCC 31 : 1980 SCC (Tax) 170 : (1980) 121 ITR 1)." 16. Furthermore, a three-Judge Bench of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11 (4-A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2 (15), has not been breached. Similarly, the insertion of Section 13 (8), seventeenth proviso to Section 10 (23-C) and third proviso to Section 143 (3) (all w.r.e.f. 1-4-2009), reaffirm this interpretation and bring uniformity across the statutory provisions. B. Authorities, corporations, or bodies established by statute 274. The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the State Governments or Central Government, for achieving what are essentially "public functions/services" (such as housing, industrial development, supply of water, sewage management, supply of foodgrain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng regard to the judgment in Gujarat Maritime Board's case (supra). 18. Coming to the facts of the case in light of the principles of law laid down by their Lordships of the Supreme Court in Gujarat Maritime Board's case (supra) followed in Ahmedabad Urban Development Authority's case (supra), it is quite vivid that in the instant case, the Assessing Officer held that the proviso to Section 2 (15) of the IT Act would be applicable to the assessee Authority and also suggested to amend Sections 10 (23C), 13 & 143 of the IT Act and further held that the aggregate of receipt is 1,30,19,74,412/- would attract Rs. the proviso to Section 2 (15) of the IT Act and therefore directed addition of Rs. 21,62,94,042/- which was overturned by the CIT (Appeals) holding that there is no material on record that the assessee was conducting its affairs solely on business lines with a motive to earn profit and further held that the first proviso to Section 2 (15) of the IT Act would not be attracted which has been affirmed by the ITAT by holding that in absence of tangible material on record that the assessee Authority is conducting its affairs solely on commercial lines with a motive to earn profit, ..... 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