2022 (7) TMI 490 - ITAT VARANASI

Exemption u/ 11 - claim denied as assessee is maximizing profits by selling the properties by auction, where the person offering maximum bid price is sold the property, and hence the assessee is a commercial enterprise existing solely for profits, and is not a charitable entity within the meaning of Section 2(15) - perusal of the audited accounts of the assessee will reveal that it is engaged in business - assessee is a State Government body constituted by separate Act of State Government - object of the assessee are of general public utilities for management, regulation and control of infrastructure falling within Varanasi - HELD THAT:- As the assessee is rendering various services for which necessary charges are recovered by assessee, which are in discharge of onerous and vast responsibilities entrusted to the assessee under the 1973 State Act, more particularly sub-division of property, plan charges, receipt against map sanction and regularization, compounding charges, strengthening charges, development charges sewerage charges, water charges, Malwa fees, land use conversion, F.A.R Fees, map charges etc. - The assessee has also earned income from allotted properties, which obviously is part of its activities to sell properties under various schemes,to carry out planned development of the development area under its jurisdiction. Much is said by Revenue as to earning of interest income by the assessee which as per Revenue shows that the assessee is earning income on commercial lines and thus now entitled for exemption u/s 11, as is reflected in its audited accounts for the year under consideration (placed in paper book filed by the assessee, which is now placed on record in file)

The assessee, like, LDA in the case of Lucknow Development Authorit [2013 (9) TMI 570 - ALLAHABAD HIGH COURT] was also constituted under the provisions of 1973 State Act, and its activities are paramateria with the activities of LDA.Thus, it could be said based on detailed analysis of the 1973 State Act, activities carried on by the assessee and ratio of aforesaid decisions, that the assessee is engaged in the advancement of object of general public utility, the predominant object being town planning and development of development area under its jurisdiction, in a planned manner, and not otherwise, with no profit motive, while sale of properties etc. being ancillary objects to its predominant object and the assessee is not engaged in any business, trade or commerce.

The assessee authority is also constituted under same statute viz. 1973 State Act, and after perusing the vast and onerous responsibilities assigned to the assessee-authority under the 1973 State Act, its audited financial statements and activities carried on by the assessee as elaborately discussed in the preceding para’s of this order, we are also of the considered view that the assessee authority predominant purpose is to tackle problems of town planning and urban development in a planned manner, and not otherwise, with no profit motive as its object, while sale of properties etc. are merely ancillary objects for attainment of main and predominant objects, and it could be said that the assessee is not engaged in any trade, commerce or business.

Thus we hold that the assessee is a charitable entity u/s 2(15) of the 1961 Act, being engaged in the advancement of object of general public utility, with the predominant object of tackling problems of town planning and urban development in a planned manner, and shall be eligible for exemption u/s 11 of the 1961 Act. Thus, the appeal filed by the assessee stand allowed.