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TMI Blog2017 (5) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... h, learned ITAT has held that the activities of appellantassessee cannot be said to be for"charitable purpose" within the definition of Section 2(15) of the Income Tax Act and therefore, not entitled to deduction claimed under Section 11 of the Income Tax Act, the assessee has preferred the present Tax Appeal No. 423 of 2016 to consider the following questions of law. "(1)Whether the Income-tax Appellate Tribunal has erred in law and on facts in holding that the activity of the appellant was in the nature of trade, commerce or business and hence it cannot be regarded as activity for charitable purpose in view of the proviso to section 2(15) of the Income-tax Act, 1961? (2) Whether the Income-tax Appellate Tribunal has erred in law and on facts in disallowing the claim of exemption of the appellant under section 11 of the Income-tax Act, 1961, and assessing the income of the appellant under sections 28 to 44 of the Income-tax Act, 1961?" 2.1. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT passed in ITA No.647/AHD/2014 for AY 201011, by which, learned ITAT has held that the activities of the appellantassessee cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 23 of the Town Planning Act. As per Section 23 of the Town Planning Act, the AUDA as a Urban Development Authority is required to undertake the development of the Urban Area having jurisdiction as per the Notification issued by the State Government. The function of the AUDA as Urban Development Authority are as under: (i) To undertake the preparation of development plans under the provisions of this Act, for the urban development area; (ii) To undertake the preparation 2 [and execution] of town planning schemes under the provisions of this Act, if so directed by the State Government; (iii) To carry out surveys in the urban development area for the preparation of development plans or town planning schemes; (iv) To guide, direct and assist the local authority or authorities and other statutory authorities functioning in the urban development area in matters pertaining to the planning, development and use of urban land; (v) To control the development activities in accordance with the development plan in the urban development area; 3 [(va) to levy and collect such security fees for secrutiny of documents submitted to the appropriate authority for permission for developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to Section 2(15) of the Act. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) confirming the disallowance made under Section 11A of the Act, the assessee preferred appeal before the learned ITAT. By impugned judgment and order, the learned ITAT has dismissed the said appeal by observing that considering the proviso to Section 2(15) of the Act, the assessee shall not be entitled to deduction under Section 11 of the Act as the activities of assesee can be said to be in the nature of trade, commerce and business. 4.2. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT, the assessee has preferred the present Tax Appeal No. 423 of 2016 to consider the following question of law. "(1) Whether the Income-tax Appellate Tribunal has erred in law and on facts in holding that the activity of the appellant was in the nature of trade, commerce or business and hence it cannot be regarded as activity for charitable purpose in view of the proviso to section 2(15) of the Income-tax Act, 1961? (2) Whether the Income-tax Appellate Tribunal has erred in law and on facts in disallowing the claim of exemption of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstituted as an Urban Development Authority under the provision of Section 22 of the Town Planning Act to carry out the development of the area included in the Urban Development Plan / Scheme. It is submitted that therefore, the assessee has been performing the statutory duty to carry out the development work in the urban area, for which, the Urban Development Authority has been constituted by the State Government. 7.3. Shri Soparkar, learned Senior Advocate for the assessee has taken us to various provisions of the Town Planning Act in support of his submissions that activities of the assesseeAUDA is the statutory duty under the provision of Town Planning Act and therefore, activities carried out by the assesseeAUDA cannot be said to be in the nature of trade, commerce or business. It is vehemently submitted that therefore, the activities of the assesseeAUDA cannot be said to be in the nature of trade, commerce and business and therefore, the proviso to Section 2(15) shall not be applicable. It is submitted that it cannot be disputed that the services provided by the appellant assessee can be said to be providing public utility and therefore, the activities of the assesseeAUDA c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Corporation i.e. buying and selling , there is no aspect of buying or selling by the Corporation. That the Corporation carries out the purpose of the Act, namely development of Industry in the State. 7.7. It is further submitted by Shri Soparkar, learned Senior Advocate for the assessee that assessee cannot be denied the benefit of being a charitable institution on the ground of that its objects involve "the carrying on of an activity in the nature of trade, commerce or business. It is submitted that even the circular issued by the CBDT dated 19.12.2008 also clarifies that the amendment to Section 2(15) is meant to cover only those commercial establishments who hide their real identity as a "mask" of charity. 7.8. Shri Soparkar, learned Senior Advocate has heavily relied upon the decision of the Director of Income Tax (Exemption) vs. Sabarmati Ashram Gaushala trust reported in 362 Itr 539 (Guj), more particularly, para 5 to 9 and 12 and 13 as well as decision of the Delhi High Court in the case of Institute of Chartered Accountants of India vs. Direct General of Income Tax (Exemptions), Delhi reported in 347 ITR 99 (para 14 to 33) in support of his submissions that the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of 15% of the Urban Development Area, is required to be used by the assessee only to carry out the development work and other amenities / facilities to be provided like road, drainage, street light etc. It is submitted that therefore, the activities carried out by the assessee cannot be said to be profitering and / or in the nature of trade, commercial or business. In support of his above submission, he has relied upon the decision of the Division Bench of this Court in the case of Ahmedabad Green Belt Khedut Mandal vs. State of Gujarat through Secretary reported in 2001(1) GLR 888 (para 37 & 38(. 7.11. It is submitted by Shri Soparkar, learned Senior Advocate for the assessee that by permitting the AUDA to sell the plots that is on element of profiter has been negatived by the Hon'ble Supreme Court in the case of Ahmedabad Municipal Corporation and Another vs. Ahmedabad Green Belt Khedut Mandal reported in (2014) 7 SCC 357. It is submitted that therefore, also the activities carried out by the assessee cannot be said to be in the nature of trade, commerce or business, which can take away the assessee from the purview of charitable institution / charitable purpose as per Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri Manish R Bhatt, learned Senior Advocate for the Revenue. 8.1. It is vehemently submitted by Shri Manish R Bhatt, learned Senior Advocate for the Revenue that in the facts and circumstances of the case learned Tribunal has rightly held that the activities of the appellant were in the nature of trade and commerce and therefore, the activities cannot be said to be for charitable purpose in view of proviso to Section 2(15) of the Act. 8.2. It is vehemently submitted by Shri Manish R Bhatt, learned Senior Advocate for the Revenue that the main object of the Appellant-assessee is contribution towards planned and controlled development for the entire urban development area and clearly such activity falls under the category 'advancement of general public utility'. It is submitted that however, when the activities of the assessee can be said to be in the nature of trade, commerce and business, considering the proviso to Section 2(15), the activities of the assessee cannot be said to be for charitable purpose and therefore, the assessee is not entitled to exemption as claimed. 8.3. It is vehemently submitted by Shri Manish R Bhatt, learned Senior Advocate for the Revenue th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the quality of the cows and oxen. The income was generated by the assessee from the activity of milk production and sale thereof. The assessee was thus marketing products which were incidental to its main activity of improving breeding of milch cows, and therefore, it was held as noncommercial activity. It is submitted that therefore, in the aforesaid facts, the Division Bench has held that "merely because while carrying out activities for the purpose of achieving objects of trust, certain incidental surpluses were generated, would not render activity in nature of trade, commerce or business". It is submitted that in the aforesaid decision the Division Bench considered the CBDT circular of 11/2008 dated 19122008 in which, it has been clarified that the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of 'public utility'. It is submitted that thereafter after taking into account the object of the trust, which was admittedly charitable in nature, this Court has held that surplus generated was wholly secondary in the case of the assesse Sabarmati Ashram Gausha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Draft Town Planning Scheme, and (iv) fifteen per cent for sale by appropriate authority for residential, commercial or industrial use depending upon the nature of development. 15% land would vest in the Assessee, i.e.AUDA. C. However, such land of 15% of share retained out of 40% appropriated from the original land owners is not free of cost. The cost is incurrence of expenditure on the development of remaining 85% of the land. The land owners have sacrificed their 40% land, the potentiality of 60% would increase. In other words, relinquishment value, representing 40% of the land by the land owners, would be compensated by enhancing the value of balance 60% land being developed land in a township. D. As per Section 52(3) of the T.P. Act, the Town Planning Officer shall estimate the cost of this scheme (development) and the contribution to be levied on each owner of the plan is to be notified. It is wrong to suggest that the Assessee got the land free of cost. The cost of land is embedded in the expenditure required to be incurred on development of scheme. E. Supposing, after notification of the scheme, the law had stipulated and the government had decided to outsource th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng noted the above facts and activities of the assessee which is in the nature of trade or business, the learned Tribunal has rightly applied proviso to Section 2(15) of the Act and has rightly held that the activities of the assessee cannot be said to be "charitable purpose". 8.10. It is further submitted that by Shri Bhatt, learned Senior Advocate for the Revenue that it is true that the assessee has helped in planned development in vicinity of Ahmedabad. It is submitted that however if a private developer would have been given the same mandate by the government, it would have done equally better. It is submitted that the assessee is also required to make a planned development of the city under a scheme approved by the State Government. It is creating a number of infrastructure facilities and public utility services are being rendered. It is submitted that these services are also being provided for a fee or consideration. It is submitted that in the final scheme of things, the Authority does incur a cost for such land which may be adjusted against the recoveries due to the assessee or against the amount payable for the area by way of compensation. It is submitted that the mode o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that nature of the activities of the assessee are no different from that of a developer of a real estate. It is submitted that difference in the scale of operation or the mode of recovery or degree of profits or how such profits are utilised would not alter the nature of the activity. 8.13. t is further submitted by Shri Bhatt, learned Senior Advocate for the Revenue that the object of the proper development or redevelopment of any urban area is of the state government and the choice of either constituting an authority for the development or entrusting it to a third party is of the Government. It is submitted that the object of the urban development is of the State Government. It is submitted that the Authority is only carrying out and executing the state's object. It is submitted that there are many activities in the nature of infrastructure development like roads, power, housing, etc where the government, instead of constituting an authority, enters into agreement with Infrastructure Development companies. It is submitted that these private companies are allowed to recover their cost and earn profits as a concessionaires or the Govt. may also make direct payments. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration and analyzed the background and framework of the law governing taxability of charitable institution. 8.16. It is submitted that definition of "charitable purpose" as contained in Section 2(15) originally enacted was circumscribed by the expression 'any other object of general public utility not involving carrying on any activity for profit." It is submitted that this expression had created various difficulties to certain institutions. The restrictions provided in the phrase "not involving carrying on any activity for profit' was omitted by the Finance Act, 1983 w.e.f. 01.04.1984, but another restrictions was imposed on the business activities carried out by any "charitable institution". It is submitted that these restrictions were introduced by way of subsection (4A) of section 11 of the Act. That the assessee, who was in the business also is required to keep separate books of account for business activities under subsection( 4) of Section 11 of the Act. That certain instrumentalities of the State like local authorities, housing boards, urban development authorities, various boards like tea board, coffee board, rubber board etc. were enjoying blanket exemption fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is submitted that therefore, even proviso to Section 2(15) of the Act is not read as the revenue suggest and / or as the learned Tribunal has read, intention of the Parliament to omit Section 10(20A), Section 10(23) and 10(29) of the Act will be frustrated. 8.17. It is further submitted by Shri Bhatt, learned Senior Advocate for the Revenue that Parliament has subsequently revisited the issue, and a complete exemption of their income has again been provided to them under section 10 by introduction of clause (46) by Finance Act, 2011 w.e.f. 1.6.2016. It is submitted that said section provides that the specified income to a board, authority, body or trust, established/constituted by the Central/State Government for the benefit of general public will be exempt from tax, subject to its nonengagement in any commercial activity, and also subject to its being notified by the Central Government for the purpose. It is submitted that therefore, assessee could apply for exemption under section 10 after 1.6.2016. It is submitted that however for the earlier years, the pre-amended provisions will apply and the Assessee will have to pass the test of proviso to section 2(15). It is submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of any other object of general public utility". It is therefore succinct that the authorities like the appellant will have to fulfill the conditions laid down in the proviso in order to claim the activities to be charitable in the nature. It is submitted that the proviso do not specify that the activities carried on by the appellant need to be with profit motive to be not deemed to be charitable. It is submitted that all it states is that the activities should be in the 'nature of trade, commerce or business'. 8.20. Shri Bhatt, learned Senior Advocate for the Revenue has relied upon the decision of the Delhi High Court in the case of Indian Trade Promotion Organization vs. Director of Income Tax (Exemption) reported in (2015) 371 ITR 333 (Delhi)(para 45 to 48) and decision of the Punjab & Hariyana High Court in the case of Tribune v. Commissioner of Income Tax, Chandigarh, 390 ITR 547 (Punjab and Haryana) (para 48 to 61), in support of his submissions that considering the definition of "business" contained in Section 2(13) of the Act even the activities of the assessee can be said to be business activities. Making above submissions and relying upon the following decisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, mining, or other operations in, or over, or under land or the making of any material change in any building or land or in the use of any building or land, and includes layout and subdivision of any land; Section 2(xxviii):"Urban development authority" means an urban development authority constituted under section 22; Section 2(xxix):"Urban development area" means an area declared to be an urban development area under section 22. Section 22: Declaration Of Urban Development Area And Constitution Of Urban Development Authority : ( 1) Where the State Government is of opinion that the object of proper development or redevelopment of any urban area or group of urban areas in the State together with such adjacent areas as may be considered necessary, whether covered under a development area already declared as such under section 3 or not, will be best served by entrusting the work of development or redevelopment thereof to a special authority, instead of to an area development authority, the State Government may, by notification, declare such area to be an urban development area and constitute an authority for such area to be called the urban development authority of that area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea development authority in the said subsection shall be construed as references to an urban development authority. Section 23: Powers And Function Of Urban Development Authority : (1) [The powers and functions of] an urban development authority shall be:( i) To undertake the preparation of development plans under the provisions of this Act, for the urban development area; (ii) To undertake the preparation [and execution] of town planning schemes under the provisions of this Act, if so directed by the State Government; (iii) To carry out surveys in the urban development area for the preparation of development plans or town planning schemes; (iv) To guide, direct and assist the local authority or authorities and other statutory authorities functioning in the urban development area in matters pertaining to the planning, development and use of urban land; (v) To control the development activities in accordance with the development plan in the urban development area; 3 [(va) to levy and collect such security fees for secrutiny of documents submitted to the appropriate authority for permission for development as may be prescribed by regulations;] (vi) To execute works in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or relaying out of land, either vacant or already built upon; (b) The filling up or reclamation of lowlying, swampy or unhealthy areas, or levelling up of land; (c) Layout of new streets or roads, construction, diversion, extension, alteration, improvement and closing up of streets and roads and discontinuance of communications; (d) The construction, alteration and removal of buildings, bridges and other structures; (e) The allotment or reservation of land for roads, open spaces, gardens, recreation grounds, schools, markets, greenbelts, dairies, transport facilities, public purposes of all kinds; (f) Drainage, inclusive of sewerage, surface or subsoil drainage and sewage disposal; (g) Lighting; (h) Water supply; (i) The preservation of objects of historical or national interest or natural beauty, and of buildings actually used for religious purposes; (j) The reservation of land to the extent of ten per cent. or such percentage as near thereto as possible of the total area covered under the scheme, for the purpose of providing housing accommodation to the members of socially and economically backward classes of people; 2 [3 [(jj) (a) the allotment of land from the total area covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment charges or otherwise;] (b) All moneys derived from its undertakings, projections and other sources; (c) Such amount of contributions from local authorities as the State government may specify from time to time to be credited to the fund of the authority. (2) The fund of an appropriate authority shall be applied towards meeting( a) Expenditure incurred in the administration of this Act; (b) Cost of acquisition of land for the purposes of this Act; (c) Expenditure for any development of land in the development area; (d) Expenditure for such other purposes as the State Government may direct. (3) An appropriate authority may keep in current account with the State Bank" of India or any other bank approved by the State Government in this behalf, such sums of money out of its fund as may be prescribed and any money in excess of the said sum shall be invested in such manner as may be approved by the State Government. (4) The State Government may, make such grants, advances and loans to an appropriate authority as the State Government may deem necessary for the performance of its functions under this Act and all grants, loans and advances so made shall be made on such terms and conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctioning in the urban development area, exofficio;] (vii) a member secretary to be appointed by the State Government who shall also be designated as the Chief Executive Authority of the Urban Development Authority. Thus, the constitution of the Urban Development Authority is subject to the control of the State Government. The powers and functions of the Urban Development Authority as contained in Section 23 are reproduced herein above. Considering Section 40 of the Town Planning Act, the Town Planning Scheme prepared by the Urban Development Authority which has been prepared subject to sanction by the State Government for development of the Urban Development Area, also provide for roads, open spaces, gardens, recreation grounds, schools, markets, greenbelts, dairies, transport facilities, public purposes of all kinds; drainage, inclusive of sewerage, surface or subsoil drainage and sewage disposal; Lighting; Water supply etc. The Town Planning Scheme also provide for historical or national interest or natural beauty, and of buildings actually used for religious purposes. The Scheme are also provide for reservation of land to the extent of ten percent, or such percentage as near t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid any further allegation of favoritism and nepotism and (2) so that maximum market price can be fetched, which can be used for the development of the Urban Development Area. 12.1. At this stage decision of the Hon'ble Supreme Court in the case of Ahmedabad Green Belt Khedut Mandal (supra) ((2014) 7 SCC 357) is required to be referred to. Before the Hon'ble Supreme Court, it was contended on behalf of original land owners whose lands were included in the TP Scheme that by permitting the Area Development Authority / Urban Development Authority to sell 15% of the total area, by that the Urban Development Authority will be making profit, the Hon'ble Supreme Court has negatived the aforesaid and has observed that the activities of the Urban Development Authority / Area Development Authority while selling the land to the extent of 15% to the total area covered under the scheme cannot be said to be profitering. It is observed and held that sale upto 15% is from total area covered under the scheme and not in respect of every plot of land. In order to generate financial resources for the development of infrastructure, the salable plot for residential, commercial and ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: "An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established / proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business." 12.6. In the aforesaid decision, after considering the decision of the Hon'ble Supreme Court in the case of Commissioner of Sales Tax vs. Sai Publication Fund reported in (2002) 258 ITR 70(SC), it is held by the Delhi High Court that "thus, if the dominant activity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business." In para 64, 67, 69, 70, 71 and 72 the Delhi High Court has observed and held as under: "64. It is not necessary that a person should give something for free or at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profitmaking is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charitable purpose. But where the predominant object of the activity is to any out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely be cause some profit arises from the activity.' 70. Although in that case the statutory provisions being considered by the Supreme Court were different and the utilisation of income earned is, now, not a relevant consideration in view of the express words of the first proviso to section 2(15) of the Act, nonetheless the test of dominant object of an entity would be relevant to determine whether the entity is carrying on business or not. In the present case, there is little doubt that the objects of the activities of the petitioner are entirely for charitable purposes. WP(C) 1872/13 Page 48 of 55 Finally in ICAI(II) (supra), this court, with reference to H. Abdul Bakhi and Bros (supra) observed as under: 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to frame rules or regulations, exercise coercive powers, including inspection, raids; they possess search and seizure powers and are invariably subjected to Parliamentary or legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility. The prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc., cannot be considered as trade, business or commercial activity, merely because the testing procedures, or accreditation involves charging of such fees. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, involves the carrying on of trade or commercial activity." 12.8. Circular No.11 of 2008 issued by the CBDT fell for consideration by the Delhi High Court in the case of M/s G.S. 1 India v. Director General of Income-tax (Exemption) and Another : WP(C) 7797/2009, decided on 26.09.2013 (2013) 219 Taxman 205. It is held that even as per the said circular, proviso to Section 2(15) of the Act is applicable to assessee, who are engaged in commercial activities i.e. carrying on business, trade or commerce, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial value of benefits in comparison to the fee, purpose and object behind the fee etc. are several factors which will decide the seminal question, is it business? 27. As observed above, fee charged and quantum of income earned can be indicative of the fact that the person is carrying on business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. The petitioner has to be substantially selfsustaining in longterm and should not depend upon government, in other words taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under WP(C) 1872/13 Page 53 of 55 the residuary clause general public utility. The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counterpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case on hand and with respect to the activities of the AUDA Ahmedabad Urban Development Authority under the provisions of the Gujarat Town Planning Act by no stretch of imagination, it can be said that the activities of the assessee (AUDA) can be said to be in the nature of trade, commerce or business and / or its object and purpose is profiteering. Merely because under the statutory provisions and to meet with the expenditure of Town Planning Scheme and / or providing various services under the Town Planning Scheme, such as road, drainage, electricity, water supply etc. if the assessee is permitted to sale the plots (land) to the extent of 15% of the total area under the Town Planning Scheme and while selling the said plots they are sold by holding the public auction, it cannot be said that activities of the assessee is profiteering, to be in the nature of trade, commerce and business. 13.1. In the case of Lucknow Development Authority, Gomti Nagar (supra), it is held by the Allahabad High Court that the activities of the authority cannot be said to be in the nature of trade, commerce or business and / or profiteering and therefore, proviso to Section 2(15) of the Act shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities. The Assessing Officer denied the exemption to the trust under Section 11 of the Act on the ground that considerable income was generated from the activities of milk production and sale and therefore, considering the proviso to Section 2(15) of the Act, the said Trustassessee was denied the exemption under Section 11 of the Act. While holding that the activities of the assessee trust still can be said to be for charitable purpose within the meaning of Section 2(15) of the Act and same cannot be said to be in the nature of trade, commerce or business for which proviso to Section 2(15) of the Act is required to be applied. In para 6, 7, 8 and 12, it is observed and held as under: 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term Charitable purposes and applies only to cases of advancement of any other of general general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with nonmembers, their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of public utility. 15.1. Applying the aforesaid decision to the facts of the case on hand and the object and purpose for which the assessee is established / constituted under the provisions of the Gujarat Town Planning Act and collection of fees and cess is incidental to the object and purpose of the Act, even the case would not fall under second part of proviso to Section 2(15) of the Act. 15.2. Considering the aforesaid facts and circumstances of the case, we are of opinion that the learned Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to Section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under Section 11 of the Act. For the reasons stated above, it is held that the proviso to Section 2(15) of the Act shall not be applicable so far as assesseeAUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitled to exemption under Section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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