TMI Blog2018 (3) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Resultantly, the writ petition is allowed and the impugned order is set aside and quashed. The petitioner’s activities, it is held, are not “commercial activity” within the meaning of clause (b) to Section 10(46) of the Act. Directions are issued to the respondents to accordingly issue the necessary notification under the aforesaid Section in respect of the "specified income" within a period of three months from the date a copy of this order is received. - Writ Petition (Civil) No. 732/2017 - - - Dated:- 26-2-2018 - MR. SANJIV KHANNA MS. PRATHIBA M. SINGH JJ. Petitioner Through: Mr. Balbir Singh, Sr. Advocate with Mr. Jasmeet Singh, Ms. Rubal Maini, Mr. Nitesh Shrivastava, Mr. Naman Joshi, Mr. Hemant Jain Mr. Sunil Gupta, Advocates. Respondents Through: Ms. Ripu Daman Bhardwaj, CGSC Mr. T.P. Singh, Advocate for UOI. Mr. Zoheb Hossain, Sr. Standing Counsel Mr. Deepak Anand, Jr. Standing Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for exemption under Section 10(46) of the Act:- 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. 4. The respondents, vide impugned order dated 8th June, 2015, have rejected the petitioner s prayers for issue of notification of exemption under Section 10(46) of the Act in respect of the aforesaid income for the following reasons:- 3. The applicant (Greater Noida Industrial Development Authority) has been constituted under Section 3 of the Uttar Pradesh Area Development Act, 1976 (U.P. Act No. 6 of 1976). 4. The objects of the applicant are to undertake works relating to housing schemes and land development schemes and include acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant s case and hence the basic requirements of sub clause (b) of clause (46) of Section 10 does not seem to be fulfilled in the applicant s case. 9. Thus the applicant does not fulfill the conditions as prescribed for grant of notification under the provisions of Section 10(46) of the Income Tax Act, 1961. 10. Thus, in view of the above, I am directed to convey that the applicant M/s Greater Noida Industrial Development Authority has not been found fit for notification u/s 10(46) of the Income Tax Act, 1961 by the Central Government and is hereby rejected. 5. In this writ petition, we have to examine whether the petitioner was/is carrying on any commercial activity and therefore does not fulfill the negative stipulation of clause (b) to Section 10(46) of the Act. In order to decide the controversy, we would first like to reproduce Section 10(46) of the Act, which reads:- 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- xxxxx (46) any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of regulating or administering activities for the benefit of general public. We have not examined these aspects nor interpreted the words regulating or administering and whether the activities of the petitioner would fall within the ambit and scope of the said expressions. We have examined and answered the question whether or not the petitioner was/is engaged in any commercial activity . 7. Impugned order holds that the expression is not engaged in any commercial activity has not been defined and for Section 10(46) no distinction can be drawn between commercial activity undertaken with profit motive or otherwise. The contention that the petitioner does not operate and function for profit or with intent to earn profit and carries on sovereign function in the notified area and provides municipal services were not relevant and germane to clause (b) to Section 10(46) of the Act. Hence, the petitioner would not fulfill the basic requirement of clause (b) to Section 10 (46) of the Act for grant of exemption notification. 8. The petitioner, it is accepted, as noticed above, is a body established under Section 3 of UPID Act. It has been established by the State of Utta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the power to acquire land for industrial development by agreement or through acquisition proceedings, prepare a plan, demarcate and develop sites for industrial, commercial and residential purpose. According to the plans prepared, the petitioner provides infrastructure for industrial, commercial and residential purposes, provides amenities, allocates and transfers the plots by way of sale, lease or otherwise, regulates erection of buildings, setting up of industries, etc. The word amenities has been defined in clause (a) to Section 2 of the UPID Act to include roads, water supply, street lighting, power supply, sewerage, drainage, etc. 10. As per Section 20 of the UPID Act, the petitioner is mandated to maintain its own funds, which shall consist of money received from the State Government by way of grants, loans, advances or otherwise or from other sources by way of loans and debentures. Funds can also consist of fees, tolls and charges received by the petitioner under the Act and money received from disposal of land, building and properties both movable and immovable and money by way of rents and profits. Sub-section (2) to Section 20 of the UPID Act stipulates that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility and assigned it a narrow meaning. With respect to the learned Judges deciding Major Radha Krishan case [(1996) 3 SCC 507 : 1996 SCC (L S) 761] we find ourselves not persuaded to assign such a narrow meaning to the term. Impracticable is not defined either in the Act or in the Rules. In such a situation, to quote from Principles of Statutory Interpretation (Chief Justice G.P. Singh, 7th Edn., 1999, pp. 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, engaged in, or concerned with, commerce. 2. having profit as a primary aim rather than artistic etc. value; philistine . (The Concise Oxford Dictionary). 15. In Punjab University Vs. Unit Trust of India Ors. (2015) 2 SCC 669, reference was made to Stroud s Judicial Dictionary, in which the word commercial has been defined and it was held: Commercial .-(1) Commercial action includes any cause arising out of the ordinary transactions of merchants and traders and, without prejudice to the generality of the foregoing words, any cause relating to the construction of a mercantile document, the export or import of merchandise, affreightment, insurance, banking, mercantile agency and mercantile usage. (2) An incorporated canal company whose profits arose from tolls, was held a commercial company , or a company associated for commercial purposes , and, as such, liable to become bankrupt under the Joint Stock Companies Act, 1844. 23. Thus, the words commercial purpose would cover an undertaking the object of which is to make a profit out of the undertakings. In the present case the services of UTI were availed by the complainants for the betterment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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, facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities 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 and Another versus Director General of Income Tax (Exemptions), Delhi and Others, [2012] 347 ITR 99 (Del) referring to the meaning of the terms commerce and business , it was held as under:- 33. 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 may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved. The charge or incidence of tax can be on the economic activity , whereas under the Act, i.e. the Income Tax Act, the charge is on income. Word business , it was observed, is an etymological chameleon and it suits its meaning to the context in which it is found. It is not a term of legal art. This, as observed above, is equally true when we judicially interpret and define the expression commercial activity in the context of an enactment. 20. This view has been followed and further elucidated in GS 1 India versus Director General of Income Tax (Exemption) and Another, [(2014] 360 ITR 138 (Del) wherein referring to the question of business or commercial activity, it was held as under:- 25. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on payments by way of rent. The contention raised was that the aforesaid payments made by the writ petitioner therein were exempt being income under Section 10(20) of the Act, being income of a local authority. Section 10(20), which came up for interpretation in the said case, reads as under:- 10. Incomes not included in total income in computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included: (1) agricultural income; *********** (20) the income of a local authority which is chargeable under the head ―Income from house property Capital gains or Income from other sources or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area. Explanation :- for the purposes of this clause the expression local authority means- (i) Panchayat as referred to in clause (d) of Article 234P of the Constitution, or (ii) Municipality as referred to in clause (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsions and contours associated with the expression commercial activity , we would like to pen down why and for what reason, we perceive and believe that wider definition or criteria of economic activity should not be applied when we interpret the said expression commercial activity for the purpose of Section 10 (46) of the Act. 26. Object and purpose behind Section 10(46) is to by way of a notification exempt specified income earned by an authority/body established by or under a statutory enactment, or constituted by Central or State government with the object of regulating or administering any activity for the benefit of general public. These stipulations are the primary and constitute the core of the provision. Clause (b) of Section 10(46), which states that such authority/body must not be engaged in any commercial activity, should be interpreted in harmony and symmetrically with clause (a) of Section 10(46) to fulfil the primary objective. This exemption provision is predicated on the assumption that the authority/body satisfying and meeting requirements of clause (a) of Section 10(46) would earn and have taxable income under the heads stated in Section 14 and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 2(15), vide earlier judgments including Commissioner of Income Tax versus Surat Art Silk Cloth Manufacturers Association, (1980) 121 ITR 1(SC) would not be apposite and constitute affirmative precedent in view of the strict mandate and contrary language of clause (b) to Section 10(46) of the Act. Any commercial activity undertaken with profit motive even if with the intent to feed and to be utilised in activities for the benefit of general public would result in disqualification under clause (b) of Section 10(46) of the Act. 31. Thus, there is need to distinguish commercial activity which constitutes disqualification under clause (b) to Section 10(46) of the Act, and charging and payment of fee, service charges, reimbursement of costs or consideration for transfer of rights for performing and undertaking regulatory or administrative duties for general public interest, when these are not guided and undertaken with profit motive or intent. In other words, if an authority/body created and established under a statutory enactment or constituted by Central or State government, charges and is paid for regulating and administrating any activity for which it was establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 clause (b) to section 10(46) of the Act. Exemption would not be available and granted to a body or authority, which is carrying on a commercial activity with intent and motive to earn profit even when the profit and income earned is with the object to sub-serve the object of general public utility. In other words, profits which arise even when utilized for and to feed the charitable purpose i.e. the general public interest, would result in disqualification/ ineligibility. 34. One can urge that the interpretation given by us would mean and imply that Section 10 (46) and the provisions relating to charity under Section 2 (15) read with Sections 11 to 13 of the Act would overlap. Overlapping to some extent is possible. However, Section 10 (46) of the Act is a specific provision dealing with body or authority etc. created or constituted by the Central or State Government or under the Central or State enactment. Further, exemption under the said provisions could be restricted to only specified types or categories of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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