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TMI Blog2019 (12) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... -Do- 2014-15 -Do- 27.12.16 143(3) of the Act 2. As claimed on behalf of the Revenue, the facts are similar and common issues are involved in all assessment years and therefore all six appeals were heard together and disposed of by common order. 3. We shall take Revenue's appeal in ITA No. 2389/Ahd/2017 concerning AY 2009-10 as a lead case for adjudication. ITA No. 2389/Ahd/2017 - AY- 2009-10 4. The substantive grounds of appeal raised by assessee read as under: "1. The Ld. CITCA) has erred in the law and on facts in considering the activity of the assessee as engaged in the development of urban area of Rajkot which is in the nature of advancement of general public utility not hit by the newly introduced first and second proviso to sec.2(15) of the Act. 2. The Ld CIT(A) has erred in the law and on facts in allowing the benefit of exemptions u/s.11 without considering the fact that the assessee is involved in widespread commercial activities in nature of business and the activity of the assessee is covered under first and second proviso to sec.2(15) of the Act. 3. The Ld. CIT(A) has erred in the law and on facts in deleting the addition of Rs. 2,63,896/- by not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessed u/s. 28 to 44 of the Act. On these broad observation, the CIT(A) has allowed the exemption u/s. 11 & 12 of the Act. 7.2 Further, on the issue of source of funds such as grants received from the Government and application thereof under the head 'project fund', the CIT(A) held that as per sections 11(1)(a) and 11(1)(d) as well as 12(1) of the Act, the grants given for the specific purpose cannot be considered as income in the form of voluntary donation and are eligible for deduction u/s.11(1)(d) of the Act. If any voluntary contribution is made with a specific direction, it shall be treated as the capital of the trust for carrying on its charitable activities, and then such income is not liable to tax. As per AS-12, where the government grants leads to creation of fixed assets equals the whole or virtually the whole of the cost of the asset, the asset should be shown in the balance sheet at nominal value or if grants related to depreciable fixed assets may be treated as diverted income which should be recognized in the P&L account on a systematic and rational basis over the useful life of the asset. Accordingly, the CIT(A) held that assessee is eligible for claim the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions, the relevant provisions of the Gujarat Town Planning Act, under which, the Assessee has been constituted as Urban Development Authority and powers and functions of the Assessee as on Urban Development Authority ore required to be considered, so as to appreciate whether the activities of the Assessee being Urban Development Authority can be said to be in the nature of trade, commerce or business ? The relevant provisions of the Gujarat Town Planning Act, under which, the Assessee AUDA has been constituted as Urban Development Authority are as under: Section 2(viii): "Development", with all its grammatical variations and cognate expressions, means the carrying out of any building, engineering, 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 An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xofficio; (vi) the Chief Engineer or Engineers (Public Health) of the local authority or authorities functioning in the urban development area or his or their nominee or nominees, exofficio; 5[(via) the Municipal Commissioner of the Municipal Corporation, if any, functioning in the urban development area, exofficio;] (vii) a member secretary to be appointed by the State Government who shall a/so be designated as the Chief Executive Authority of the Urban Development Authority. (5) The provisions of subsections (5) to (12) of section 5 shall apply in relation to an urban development authority as they apply in relation to an area development authority, with the modification that references to an area 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is(i) In the course of development; 1 [(ii) likely to be used for residential or commercial or industrial or for building purposes; or] (iii) Already built upon, Explanation: For the purpose of this subsection the expression "land likely to be used for building purposes" shall include any land likely to be used as, or for the purpose of providing, open spaces, roads, streets, parks, pleasure or recreation grounds, parking spaces or for the purpose of executing any work upon or under the land incidental to a town planning scheme, whether in the nature of a building work or not. (3) A town planning scheme may make provision for any of the following matters, namely:(a) The laying out or relaying out of land, either vacant or already built upon: (b) The filling up or reclamation of low lying, 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/and for roads, open spaces, gardens, recreati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any Act of the State Legislature or any of the Acts which the State Legislature is competent to amend: Provided that any suspension under this clause shall cease to operate in the event of the State Government refusing to sanction the preliminary scheme, or in the event of the withdrawal of the scheme under section 66. or on the coming into force of the final scheme; (m) such other matters not inconsistent with the objects of this Act as may be prescribed. Section 91: Fund Of The Appropriate Authority : (1) An appropriate authority shall have and maintain its own fund to which shall be credited(a) All moneys received by the authority by way of grants, loans, 1 [advances, fees, development 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four in number] who are members of the local authority or authorities functioning in the urban development area, as may IK: nominated by the State Government; (iii) Three officials of the State Government, to be nominated by that Government, exofficio; (iv) the Presidents of the district panchayats functioning in the urban development area, or, as the case may be, part thereof, exofficio; (v) the Chief Town planner or his representative, exofficio; (vi) the Chief Engineer or Engineers (Public Health) of the local authority or authorities functioning in the urban development area or his or their nominee or nominees, exofficio; 5[(via) the Municipal Commissioner of the Municipal Corporation, if any, functioning 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee is selling the plots, to the extent of 15% of total area, by public auction and gets maximum amount, it amounts to profiteering and therefore, the activities of the Assessee can be said to be in the nature of business. However, while holding so, learned Tribunal has not properly appreciated the object and purpose of permitting the Urban Development Authority to sale the plots, maximum to the extent of 15% of the total area i.e. to meet with the expenditure for providing them infrastructural facilities like gardens, roads, lighting, water supply, drainage system etc. The learned Tribunal has also not property appreciated the reasons for selling the plot by holding public auction i.e.; (1) 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 SCO 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g profit". 12.5 In the case of Institute of Chartered Accountants of India (supra) while considering the whether activities of Indian Trade promotion organization can be said to be in the nature of "business", despite the fact that the said organization was collecting rent for providing the space at trade, fair and exhibitions and though was receiving income by way of sale of tickets and income from tickets and sale in Pragati Maidan etc., after considering the various decisions of the Hon'ble Supreme Court as well as decisions of the other High Courts, it is held that activities of the said organization cannot be considered as "business". While holding so, Delhi High Court has observed and held as under: "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 reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not the intention of Parliament and, hence, I propose to amend , the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected.' The expressions business, trade or commerce as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions business, trade or commerce. 69. In the case of Addl. Commissioner of Income Tax v. Surat Art Silk Cloth Manufacturers Association: [1980] 121 ITR 1 (SC), the Supreme Court held as under: The test which has, therefore, now to be applied is whether the predominant 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 profit making 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 cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the activities of the Bureau of Indian Standards (supra) in granting licenses and trading certificates and charging amounted to carrying on business, trade or commerce and while considering the said question, it is observed as under: " In these circumstances, rendering any service in relation to trade, commerce or business cannot, in the opinion of the Court, receive such a wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of the State in public duties which cannot be discharged by private bodies. Often, apart from the controlling or parent statutes, like the BIS Act, these statutory bodies (including BIS) are empowered 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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , benevolence should be omnipresent and demonstrable but it is not equivalent to self sacrifice and abnegation. The antiquated definition of charity, which entails giving and receiving nothing in return is outdated- A mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity WP(C) 1872/13 Page 52 of 55 should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. Quantum of fee charged, economic status of the beneficiaries who pay, commercial value of benefits in comparison to the tee. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prime objective of the WP(C) 1872/13 Page 54 of 55 institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes." 13. Applying the aforesaid decisions to the facts of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assesses is collecting cess or fees which is regulatory in nature, the proviso to Section 2(15)of the Act shall not be applicable As observed herein above neither there is element of profiteering nor the same can be said to be in the nature of trade, commerce or business. At this stage, decision of the Division Bench of this Court in the case of Sabarmati Ashram Gaushala Trust (supra) is required to be referred to. In the case before the Division Bench, the assessee Trust Sabarmati Ashram Gaushala Trust was 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 Trust assessee was denied the exemption under Section 11 of the Act. While holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be regarded as advancement of any other object of genera! public utility. 7. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under: 3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is advancement of any other object of general public utility ie., the fourth limb of the definition of charitable purpose contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business which are masked as charitable purpose. 12. All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which fire truly in the nature of trade, commerce or business but are carried out under the guise of activities in the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made. 4.5 With reference to treatment of specific project grants, Hon'ble High Court of Delhi has held in the case of DIT vs Society for Development Alternatives 18 taxman.com 364 that grants with specific directions from the Govt. cannot be treated as income. These grants will have to be spent as per the conditions and purpose laid down by the donor. As per sec,12(1) any voluntary contribution received by a trust/institutions created fully for charitable or religious purpose shall for purposes of sec.11 be deemed to be income derived from property held by said trust/institutions and sec 13 shall apply accordingly. However Sec.12(1) has made an exception to the voluntary contributions as deemed income of the trust or institution if such contribution has been made with a specific direction. Further sec.11(1)(a) states: '(a) Income derived from property held under trust wholly for charitable or religious purpose to the extent to which such income is applied to such purposes in India and where any such income is accumulated or set apart for application to such purpose in India, to the extent to which the income so accumulated or set apart is not in excess of 15% of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls with the accounting for Govt. Grants. According to the clause-4 AS-12 the receipt of Govt. Grants by an enterprise is significant for preparation of the financial statements for two reasons. Firstly, if the Govt. Grant has been received an appropriate method of accounting therefore is necessary. Secondly, it is desirable to give an indication to the extent to which the enterprise has benefitted from such grant during the reporting period. Para-5 of AS-12 deals with the treatment of Govt. Grants. It is reproduced below for the sake of convenience :- "Accounting Treatment of Government Grants 5. Capital Approach versus Income Approach 5.1 Two broad approaches may be followed for the accounting treatment of government grants: the 'capital approach', under which a grant is treated as part of shareholders' funds, and the 'income approach', under which a grant is taken to income over one or more periods. 5.2 Those in support of the 'capital approach' argue as follows: (i) Many government grants are in the nature of promoters' contribution, i.e., they are given with reference to the total investment in an undertaking or by way of contribution tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific fixed assets are government grants whose primary condition is that an enterprise qualifying for them should purchase, construct or otherwise acquire such assets. Other conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held. 8.2 Two methods of presentation in financial statements of grants (or the appropriate portions of grants) related to specific fixed assets are regarded as acceptable alternatives. 8.3 Under one method, the grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value. The grant is thus recognised in the profit and loss statement over the useful life of a depreciable asset by way of a reduced depreciation charge. Where the whole, or virtually the whole, of the cost of the asset, the asset is shown in the balance sheet at a nominal value." 6. Finally para-13, 14, 15 are the main paras that have laid down the principles of accounting for Govt. Grants. The same are reproduced below .- "13. Government grants should not be recognised until there is reasonable assurance that (i) the enterprise will comply with the conditions at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave shown certain grants which are not projects specific grants or the grants given for generic purpose. The donor allows appellant to apply these funds for any of its objects. If such grants are received by the appellant which does not have any specific direction for the purpose, then it will have to be considered as voluntary donation and will be included as the income of the appellant u/s.12(1) of the Act. Even if appellant has shown such grants in the balance sheet then the appellant (a) would be eligible to claim expenses out of them as application of income and if the appellant creates fixed assets out of such grants, appellant (b) would be eligible to claim capital expenditure as application of its income and (c) would be eligible to claim depreciation on such fixed assets as application of income. Reliance placed on the judgment of Hon'ble High Court of Gujarat in the case of CIT vs Sheth Manilal Ranchhoddas Vishrarn Bhawan Trust, 198 ITR 598. A.O. is directed to calculate the income of the appellant from the property held by it accordingly. (ii) Further, the appellant might have received certain funds in the form of grants, for a specific purpose or for a specific pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese funds as per the provisions of GTPUD Act. The GTPUD Act authorizes the appellant to receive funds under various categories such as Development Charges, Betterment charges, Impact fees, Amenities fees, Scrutiny fees, Zoning fees etc. These fees/funds or the sources of receipts have been received by the appellant during the discharge of its functions. These are recurring and operational receipts of the appellant. The appellant is required to apply these receipts towards its objects. I am of the considered opinion that a capital expenditure by a person need not be a capital receipt of the person receiving that amount. Therefore, A.O. is directed to consider all these receipts as the income of the appellant irrespective of the fact that it has treated them as balance sheet item. (c) The appellant has to keep in mind that if these receipts arc considered as capital receipts as a balance sheet item then appellant would be eligible to claim deduction u/s 11(1)(d) of the Act on such capital receipts. But since these cannot be a part of the income of the appellant, the appellant (a) cannot claim accumulation @ 15% u/s 11(1)(a) of the Act on such capital receipts. The assets creation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deficit carried forward from earlier year. Then, AO shall reduce the amount applied during the year. If, after the adjustments of carried forward deficit and application of income, the appellant has any surplus of income over the expenditure then the appellant would be eligible to accumulate to the extent of 15% u/s.11(1)(a) from the income. (For example: If appellant earns Rs. 100 in immediate succeeding year and applies Rs. 80 then Rs. 90, i.e. Rs. 10 as earlier year deficit and Rs. 80 being current years application, would be allowed against income of Rs. 100. The remaining Rs. 10 will be allowed to be accumulated u/s 11(1)(a).) And, if there happens to be still any excess income left over, then remaining amount shall be allowed by the A.O. to be accumulated u/s.11(2) of the Act and according to the stipulations mentioned therein i.e. filing of Form 10 and purpose for which accumulation u/s. 11 (2) has been made etc. In short, the AO will not allow accumulation of income cither u/s 11(1)(a) @15% or u/s 11(2) of the Act along with carry forward of deficit. Application of income shall precede accumulation. (viii) If the appellant incurs any expenditure out of the accumula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purpose. 9.4 Vide ground of appeal No.10, the appellant has raised the issue of denial of expenditure incurred on addition to fixed assets and on project expenditure by the A.O. At para-8(i), 8(ii) and 8(v) I have already given directions to the A.O to allow such expenses subject to certain conditions. If the addition to fixed assets has been made from the project specified grants then that expenditure will not be allowable to the appellant as application of income or if the project expenses have been incurred from the project specific grant, again the similar treatment will follow. If the expenses on addition to fixed assets and on project expenses have been incurred from the operational income or the generic grants received by the appellant, then only A.O is directed to allow the expenditure on addition to fixed assets and project expenses as application of income. Therefore, subject to the verification of facts by the A.O, the ground of appeal is allowed for statistical purpose, 9.5 Vide ground No.11 the appellant is also aggrieved by initiation of penalty proceedings u/s.271(1)(c) of IT. Act, It is seen that the A.O. has merely initiated penalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in urban development and town planning. As per the amended definition, the activity of the advancement of general public utility shall not be charitable purpose. Hence, it is hit by proviso first and second of section 2(15) of the Act. Further, it was contended from the details filed by the assessee that: (a) The expenditure on development of Rajkot was incurred from fee collected by the authority and grants from government which resulted in integrated over all development of Rajkot. This, in turn brought to R.U.D.A. extra Revenue and it was this extra Revenue in the form of various 'fees & penalties charged by RUDA, charges on giving land on lease, various rent collected and receipts of miscellaneous nature and interest income from deposits etc. On this back ground, it was very clear that the activity of the Authority is hit by the section 2(15) r.w.s proviso first and second. (b) The assessee is engaged in Urban Development and Town Planning As part of its activities, the assessee develops different projects. For such projects, land is provided by the government along with grant to develop the projects. The said projects/units in said projects are sold given on lease/rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the highest bidder. The land was given on lease not even at its Jantri rate (stamp value), but at a commercial/ market rate. This virtue of the land transactions is very characteristic of commercial activity with a profit motive The said activity of the Assessee can by no stretch of imagination be treated as charitable activity within the meaning of education, medical relief, relief of poor, and preservation of environment or reservation of monuments. The plots of land were acquired from the public at nominal rates and sold to various commercial entities at market rate, and this systematic, regular and organized activity indicates that RUDA is involved in carrying on the activity which is in the nature of trade, commerce or business. Since the assessee has sold the plots of land at a premium and at market rates, to various commercial entities, with a motive to earn profit. Hence, provisos to Sec 2(15) of the Act shall be squarely applicable to the facts of the case. (e) Two major characteristics of any business activity are profit motive and continuity. It was submitted that from the purchase and sale details pertaining to A.Y. 2007-08, 2008-09 and 2009-10, it was clear that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he state's object, it was 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 was 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 was submitted that the income in all such cases would undoubtedly be assessed on profits from business. It was submitted that the mere fact that the same activity is done by an instrumentality of the state will not alter the character of the activity. It was thus submitted that the activity will still be in the nature of business or trade. (i) Further, as can be seen from the financial of the assessee, the cost for the land has been incurred and has been capitalized as cost of acquisition. The said practice is followed from year to year. The assessee has become entitled to sell 15% of the land by virtue of the provisions of the Town Planning Scheme. The said entitlement comes for a cost and has resulted in huge profits. Therefore, the activity in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... body will purchase a plot It can be said that it is a means of attracting the people so that maximum people may apply for the same and the hidden cost is already added, so no charity is involved. At best, the assessee can be said to be an authority created to help it to achieve certain objects. It can be said that it is the duty of the Government to create/provide all these facilities to public at large, which is being done through this agency in a particular area. At the same time, the funds which are provided to the assessee by the Government is again a public money or generated from the public itself, so where is the charity? (c) There are no restrictions as to the application of the assets of the authority on dissolution or winding up. In the case of CIT Vs. Surat Art Silk Cloth Manufactures Association, 121 ITR 1, it was held by Hon'ble Supreme Court that- "Since the income and property of the assessee were liable to be applied solely and exclusively for the promotion of the objects set out in the Memorandum and no part of such income or property could be distributed amongst the Members in any form or utilized for their benefit either during its operational existence or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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