TMI Blog2021 (5) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... table in nature. These activities were undertaken by the assessee on account of the mandate given to it to do generalize charitable activities for the planned development of the city. These are regulatory and development activities which were done by the assessee and the receipt of the revenue was on account of the said activities. The predominant character of the activities continues to be that of the state and therefore the element of welfare and charity is inbuilt. In the light of the above we hold that these activities also charitable in nature From the reading of section 18 of the Development Act, it is clear that, the authorities entitled to transfer, dispose of and use the land in the manner provided by the state government or in any other manner as deemed fit. In our considered opinion, the giving of building on rent, parking space, sale of tender document for the purpose of development etc are having direct nexus with the obligation of the assessee under the act. The receipt of the amount on account of the above said activities are related to the statutory and state function of the assessee authority. In our view the above said activities were undertaken by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 GROUNDS OF APPEALS 2-20 2 BACK GROUND FACTS 21-23 3 SUBMISSIONS OF AR 23-24 4 WRITTEN SUBMISSIONS BY AR 25-67 5 SUBMISSIONS BY DR 68-98 6 FINDINGS AND DISCUSSIONS 98-114 These appeals of the assessee and Cross appeal filed by the revenue are against the order of ld. CIT (Appeals). In these appeals a common issue is involved and for this reason, they are being disposed of by this Composite order. Facts for convenience are being taken from ITA No. 216/Agra/2016 for A.Y. 2011-12. 2. The Grounds of the appellant are as under: 1. Because the Ld. CIT(Appeals) has erred in law and on facts is not treating the status of appleant as AOP (Trust). 2. Because the Ld. CIT(Appeals) has erred in law and on facts in holding that provision of Sec 2(15) of LT.Act 1961are applicable to appellant and further holding the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in confirming the addition of ₹ 39,34, 135 in respect of old outstanding entries in bank reconciliation statement. (9) Because the Ld. CIT(Appeals) has erred in confirming the addition of ₹ 36,31,60,509 in respect of liabilities shown under the head sale of properties . The CIT(Appeals) further erred in confirming the defective method of calculation of said liabilities as adopted by the AO. (10) Because the Ld. CIT(Appeals) has erred in confirming the addition of ₹ 25,20,348 for alleged non inclusion of other receipts under infrastructure fund. (11) Because the Ld. CIT(Appeals) has erred in confirming the addition ₹ 3,86,45,090 in respect of interest on for alleged non inclusion in the income of the appellant. (12) Because the Ld. CIT(Appeals) has erred in confirming the disallowance of ₹ 35,99,93,000 being the payment made to UP Jal Nigam for sewage system. (13) Because the Ld. CIT(Appeals) has erred in confirming the addition of ₹ 2,64,68,984 in respect of Interest on FOR out of Path Kar receipts. (14) Because the order appealed against is contrary to the facts, law and principles of natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , both in law and on facts, in confirming the action of Assessing Officer in completing the assessment under Chapter IV of the Income tax Act and invoking provisions of section 145(3) in the absence of any income under the head Profit and Gains of business or Profession or Income from other sources . The completion of assessment under Chapter IV and invoking provisions of section 145(3) is wholly illegal in the facts and circumstances of the case of the appellant. 6. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of ₹ 24,68,23,586/- out of addition of ₹ 42,24,51,350/- made by the Assessing Officer. The Ld. CIT(A) further erred in law in making disallowances of ₹ 3,86,48,071/- out of establishment expenses, ₹ 2,75,75,256/- out of administrative expenses and ₹ 60,86,001/- out of amortization/depreciation. while working out the addition as sustained by him. The addition made by Ld. CIT(A), tantamount to enhancement which is wholly illegal and contrary to established judicial precedence. The addition may kindly be directed to be deleted. 7. Because, without prejudice to the ground no.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and on facts, in sustaining the addition of ₹ 23,850/- by holding the amount transferred from Computer Account to Repair Account as capital expenditure and allowing depreciation thereon. Ld. CIT(A) failed to appreciate that the transfer entry has no effect on the revenue and as such the same could have been directed to be deleted. 14. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of ₹ 33,649/- by holding the amount transferred from Computer Account to Repair Account as capital expenditure and allowing depreciation thereon. Ld. CIT(A) failed to appreciate that the transfer entry has no effect on the revenue and as such the same could have been directed to be deleted. 15. Because the Ld. CIT(A) erred, both in law and on facts, in restoring the matter to the file of Assessing Officer in respect of addition of ₹ 42,33,679/- made by the Assessing officer on the basis of bank analysis. Ld. CIT(A) was wholly incorrect in rejecting recasted balance sheet / BRS and directing the Assessing Officer to verify the correctness of genuine evidence on record. The direction is wholly unjustified. The addition may k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,734/- out of ₹ 97, 15,100/- made by the assessing officer under the head Other Expenses . The entire expenses are supported by books of accounts. The same has arbitrarily been rejected by the authorities below. The addition is wholly illegal which may kindly be directed to be deleted. 22. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of ₹ 11,05, 721 /- out of ₹ 2,02,84,966/- made by the assessing officer under the head Advance adjustment . The entire amount is supported by books of accounts. The same has arbitrarily been rejected by the authorities below. The addition is wholly illegal which may kindly be directed to be deleted. 23. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining the addition of ₹ 3,08,576/- out of ₹ 3,25,366/- made by the assessing officer under the head excess amount taken in ledger than the actual . The supporting evidence has arbitrarily been rejected by the authorities below. The addition is wholly illegal which may kindly be directed to be deleted 24. Because the Ld. CIT(A) erred, both in law and on facts, in sustaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The supporting evidence has arbitrarily been rejected by the authorities below. The addition is wholly illegal which may kindly be directed to be deleted. 30. Because the Ld. CIT(A) erred, both in law and on facts in giving direction to assessing officer for verification and to take decision about taxability of amount lying in the reserve fund. The Ld CIT(A) has exceeded his authority while giving such direction, particularly when no addition was either made or proposed by the assessing officer. The direction of Ld.CIT(A) has resulted into fresh addition of ₹ 11,36,19,196/- while giving effect of the order of CIT(A) u/s 251. The direction as well as addition in wholly illegal which may kindly be directed to be deleted. 31. Because the appellant craves leave to alter/ modify grounds before or at the time of hearing of the appeal. ITA No. 439/Agra/2015 (1) Because Ld.CIT(A) has erred in law and on facts in holding the activities of the appellant as activity in the nature of trade business or commerce and that the appellant is rendering services in relation to trade, business or commerce. The Ld.CIT(A) failed to appreciate that all the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The addition is wholly illegal and contrary to tho evidence available on record, which may kindly be directed to be deleted. (6) Because the CIT (Appeal) has erred in law and on facts in confirming addition of ₹ 2,09,78,877/- in respect of old outstanding entries in the bank reconciliation statement. The Ld. CIT(A) failed to appreciate that the amount are bank to bank transfer, relates to earlier years and that the liability had not ceased.The addition is wholly illegal and contrary to the evidence available on record. The same may kindly be directed to be deleted. (7) Because Ld.CIT (Appeal) has erred in law and on facts in confirming addition of ₹ 31,60,94,320/-in respect of alleged recoveries under liabilities in balance sheet. The Ld.CIT (Appeal) failed to appreciate necessary evidence together with explanation and has on arbitrary and hypothetical considerations confirmed an estimated sale and profit thereon. He failed to appreciate that this addition amounted to double taxation. The addition being unsupported by any material on record, may kindly be directed to be deleted. 8) Because Ld.CIT (Appeal) has erred in law and on facts in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86,421/- in respect of non production of vouchers for deposit in the bank account. The Ld.CIT (Appeal) has deliberately ignored thesupporting voucher which were filed before him and which were also produced before the A.O. and were test checked by the AO. Ld.CIT (Appeal) further failed to appreciate that the deposit were already disclosed in the receipts under respective heads of income. The addition made as unexplained deposits in the bank accounts under section 69 is wholly illegal and contrary to the facts and material available on record. As such the same c' 1not be treated as unexplained deposits in the bank accounts u/s 69. The disallowance is wholly illegal. The same may kindly be directed to be deleted. (14) .Because The CIT (Appeal) has erred in law and on facts in confirming the addition ₹ 46,05,670/- in respect of non production of vouchers. The appellant has never denied the availability of vouchers in respect of captioned expenditure. The non production of any voucher does not lead to the inference that primary evidence is not available. The AO arbitrarily refused to entertain the vouchers, which were produced before him. The disallowance is wholly ill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/-, on account of under section 69A of the IT Act, without appreciating the fact of the case that amount of ₹ 57.68,605/- debited by the bank but not found recorded in the books of account of the assessee. (vii) That, the Ld.CIT(A) has erred in law on facts by deleting the addition of ₹ 36,50,000/- out of total addition of ₹ 54,77.,878/-, on account of fictitious expenses, by ignoring the fact that cheques issued on the same dates were not cleared upto 31.03.2009 and fictitious expenditure was being claimed by the assessee to satisfy the conditions of section 11 of the IT Act, 1961. (viii) That, the Ld.CIT(A) has erred in law on facts by deleting the addition of ₹ 76,18,731/- out of the total addition of ₹ 1,20,81,971/-, on account of expenses, by ignoring the facts brought on record by the AO that assessee has failed to produce the related vouchers claimed as paid for construction of properties sold. (ix) That, the Ld.CIT(A) has erred in law on facts by deleting the addition of ₹ 22,92,683/-,on account of interest income, without appreciating the fact of the case that there is no base to calculate the interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is a orbiter dicta as per CBDT circular no. 10/DV/2013 dated 16.12.2013. (xvii) That, the CIT(A) has erred in law by deleting the addition of ₹ 3,02,7 4, 196/-, on account of payment made and no tax was deducted as per Section 40(a)(ia) of the IT Act, as per decision of H'onble High court Allahabad in the case of CIT vs Victor Shipping services Pvt Ltd which is a orbiter dicta as per CBDT circular no. 10/V/2013 dated 16.12.2013. (xviii) That, the CIT(A) has erred in law by deleting the addition of ₹ 2,26,41,971/- , on account of section 40(a)(ia) of the IT Act, without appreciating the fact that by the CBDT circular F.No.275/73/2007IT(B) dated 30 06 2008 it has beenclarified that tax is to be deducted on the gross amount inclusiveof service tax where the payment is being made u/s 194J. (xix) That, the ld. CIT(A) has erred in law by deleting the additions. on account of various expenses not verified by original bills/vouchers, without appreciating the fact of the case. (xx) That the appellant craves leave to add or delete or alter or modify any one or more ground (s) of appeal during the appellate proceedings. (xxi) That th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption to the assessee (appellant) u/s 11 has been denied by the AO in view of proviso to section 2(15) read with section 13(8), therefore the assessee's income has been assessed under the head income from Business or Profession' and such total income of the assessee has been termined after making addition of unsubstantiated expenditure and the receipts not counted for by the assessee. After doing so, the AO has computed the total income of of the assessee. 2. Feeling aggrieved by the order passed by the assessing officer, the assessee had preferred the appeal before the CIT(A) on various ground mentioned in the order passed by the CIT(A), however the CIT(A) has not agree to the submission of the assessee and pass impugned order.. 3. Feeling aggrieved by the order passed by the CIT(A) the assessee is in appeal before us on the ground reproduced herein above. SUBMISSIONS OF AR 4. The Ld.AR for the assessee had submitted that the activities of the assessee are charitable in nature and the assessee was doing these activities in accordance with the act, which has created the assessee for the purpose of regulating managing and orderly behaviours of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the appellant as charitable. [CIT (A) Page No 26 to 97(A.O. Page No 15 to 25).] (1) Appellants activities are charitable in nature- Moradabad Development Authority The jurisdictional honourable Allahabad High Court recently in the case relating to assessment of income of Moradabad Development Authority has held its activities as charitable in nature u/s 2(15) of the Act. It followed the preposition as laid down in Yamuna Expressway Authority wherein as a matter of principle it had held the activities of development authorities to be charitable in nature u/s 2(15) of the Act. The above decision of the High Court in the case of Moradabad was followed by the honourable ITAT Delhi in ITA No. 4631 4632 Dt.04.01.2018 in the a case relating to assessment of income of Moradabad Development Authority. CIT vs. LUCKNOW DEVELOPMENT AUTHORITY( 2014) 265 CTR (All) 0433 Allahabad High Court decision in appeal No 657 of 2007 in the case of CIT vs. HapurPilakhua Development Authority and various other such authorities by a common order decided on 29.8.2016 and similarly in Yamuna Expressway Authority the honourable Jurisdictional High Court has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Trade Promotion Organization vs D.G.(374 ITR 333) GS1 vs. D.G. (360 ITR 138) Institute of Development of Research Banking Technology Vs. ADI (E) (Page 17-26 of P.B.-1) (5) The non admission of SLP by the honourable Supreme Court in case of Jammu Development Authority is not binding on lower courts as has been held by the honourable Supreme Court in Indian Oil Corporation Ltd. vs. State of Bihar Ors . (1987) 167 ITR 897 (SC) ITA NO 177/ 2014 Ground No 2 3 REGULATORY AUTHORITY 1. Without prejudice to following submissions , it may be mentioned that the matter under appeal is fully covered by your honour s decision in Jhansi Development Authority (JDA). The facts of this case are identical to JDA. Both Agra Development Authority ( ADA) and JDA were established as a regulatory Authority under U.P Urban Planning Development Act 1973 for development of urban areas . Recently Honourable ITAT Delhi in Aligarh Development Authority has also held its activities as charitable in nature. U.P Urban Planning Development Act 1973 ( herein after called as Development Act) Reasons for the enactment.- (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Compulsory acquisition of land.- (1) If in the opinion of the State Government any land is required for the purpose of development or for any other purpose, under this Act the State Government may acquire such land under the Provisions of the Land Acquisition Act, 1894: Provided that any person from whom any land is so acquired may after the expiration of a period of five years room the date of such acquisition apply to the State Government for restoration of that land to him on the ground that the land has not been utilized within the period for the purpose for which it was acquired, and if the State Government is satisfied to that effect it shall order restoration of the land to him on re-payment of the charges which were incurred in connection with the acquisition together with interest at the rate of twelve in connection with the acquisition together with interest at the rate of twelve per cent per annum and such development charges as if any may have been incurred after acquisition. (2) Where any land has been acquired by the State Government, that Government may, after it has taken possession of the land transfer the land to the Authority or any local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed b the Authority from source y the State Government by way of loans or debentures; (c) all 1[fees, tolls and charges] received by the Authority under this Act: (d) all moneys received by the Authority from the disposal of lands, buildings and other properties, movable and immovable and (e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other source, (2) The fund shall be applied towards meeting the expenses incurred by Authority in the administration of this Act and for no other purpose; (3) Subject to any directions of the State Government, the Authority may keep in current account of any Scheduled Bank such sum of money out of its fund as it may think necessary for meeting its expected currents requirement and invest any surplus money in such manner as it thinks fit. (4) The State Government may, after due appropriation made by Legislature by law in that behalf, make such grants, advances and loans to the Authority as that Government may deem necessary for the performance of the functions of the Authority under this Act and all grants, loans and advances made shall be on such term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other structure whether fixed or movable and whether of a permanent or temporary nature or any fixture which shall be erected, or set in or upon or over any street or upon or over any open channel, drain. well or tank contrary to the provisions of this Act. Any stall, chair, bench, box, ladder, bale, board or shelf of any other thing whatever placed, deposited, projected, attached or suspended in, upon, from or to any place in contravention of this Act. 26-D. Penalty for not preventing encroachment .- Whoever specially entrusted with the duty to stop or prevent the encroachment or obstruction under this Act or any other Act, rules or bye-laws wilfully or knowingly neglects or deliberately omits to stop or prevent such encroachment or obstruction shall be punishable with simple imprisonment for a term which may extend to one month or with fine which may extend to ten thousand rupees or with both. 27. Order of demolition of building.- (1) Where any development has been commenced or is being carried on or has been completed in contravention of the Master Plan or without the permission approval or sanction referred to in Section 14 or in contraventi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of carrying out the provisions of this Act. -------------- 29.Conferment of other powers on the Authority.- After a Master Plan or Zonal Development Plan has come into operation under section 12, the Development Authority or its Vice-Chairman shall have such other powers and functions exercisable by the local authority concerned or its Chief Executive Officer, as the case may be, under the enactment constituting that local authority subject to such exceptions or modifications, as the State Government may by notification in the Gazette specify. 41. Control by State Government.- (1) The [Authority),the Chairman or the (Vice-Chairman] shall carry out such directions as may be issued to it from time to time by the State Government for the efficient administration of this Act. (2) If in, or in connection with, the exercise of its powers and discharge of its functions by the [Authority, the Chairman or the Vice-Chairman) under this Act any dispute arises between the authority, the Chairman or the Vice-Chairman) and the State Government the decision of the State Government on such dispute shall be final. (3) The State Government may, at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly granted exemption under those heads of income. The heads of income held charitable by the Ld. CIT(A) include (a) Interest on FDR s (b) Interest on loan to employees (c) Stamp Duty (d) Development Charges and similar charges. (page 111to 115 of CIT(A)) (2.1) Moradabad Development Authority The jurisdictional honourable Allahabad High Court recently in the case relating to assessment of income of Moradabad Development Authority has held its activities as charitable in nature u/s 2(15) of the Act. It followed the preposition as laid down in Yamuna Expressway Authority, wherein as a matter of principle it had held the activities of development authorities to be charitable in nature u/s 2(15) of the Act. (Page NO 43 to 45) The above decision of the High Court in the case of Moradabad was followed by the honourable ITAT Delhi in ITA No. 4631 4632 Dt.04.01.2018 in the a case relating to assessment of income of Moradabad Development Authority. (2.2) That in CIT v/s Yamuna Expressway Industrial Development Authority, rendered by the Jurisdictional Honourable Allahabad High Court in case relating to various Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... places and sale thereof. The sales are also undertaken through auction process and sold to the highest bidder to earn more and more profits. The said activities are trade in nature and liable to tax. Thus, the activities being in the nature of trade and as such the benefit which is extended to charitable activities are not available as per the ratio laid down in the cases of P.C. Raja Ratam Institution vs. Municipal Corporation of Delhi, (1990) 181 ITR 354 (SC); and Christian Children Fund Inc. vs. Municipal Corporation of Delhi, (1994) 4 SCC 377 . 10. Learned counsel further argued that the assessee is not on different footing from private colonizers and was making huge profits by giving compensation for land which is less than the market value of the actual land owners. As regards the claim of providing public amenities, private colonizers were also providing similar facilities. According to learned counsel, (i) assessee is a huge profit making agency for which it is taking money from general public; (ii) assessee did not engage in any charitable and if assessee developed any institution of public importance, the cost was recouped from the public at large; (iii) the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section 10(23C), which are that- (i) the business should be incidental to the attainment of the objectives of the entity, and (ii) separate books of accounts should be maintained in respect of such business. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on non-commercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to section 2(15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order) (3) Parameters for determining whether an activity is charitable That for determining whether the activities of an institution are charitable in nature, the honourable Supreme Court in various judicial pronouncement from time to time has laid down the principle that if the primary purpose of the institution was advancement of objects of general public utility it would remain charitable even if sum incidental or ancillary activity or the purpose for achieving the main purpose was profitable in nature. (3.1) Five Member Bench of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association {1980} 121 ITR 1/[1979] 2 Taxman 501 held that not involving the carrying on of any activity for profit go with object of general public utility and not with advancement . It is the object of general public utility which must not involve the carrying on of any activity for profit and not its advancement or attainment. What is inhibited by these last ten words is the linking of activity for profit with the object of general public utility and not its linking with the accomplishment. The profit of the assessee could be utilized only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity by itself is not vulnerable, when the proceeds are to be utilized for the same purpose of education. Cross-subsidisation is an accepted mode of raising funds for charity. Where a hospital was charging fees at commercial rates from well-to-do patients in the pay wards, it was held, that the surplus was utilized for the benefit of the other patients should justify the inference, that it was not business with profit motive. (3.5) The Hon'ble Apex Court in the case of CIT vs. Andhra Chamber of Commerce - (1965) 55 ITR 722 - laid down the principle that if the primary purpose of institution was advancement of objects of general public utility, it would remain charitable, even if some incidental or ancillary activity or the purpose for achieving the main purpose, was profitable in nature. It was held as follows: That if the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g. promotion of or opposition to legislation concerning that purpose was contemplated. It was only for the purpose of securing its primary aims that it was mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government of India or the State Governments for improving the accounting and budgetary systems in these local bodies. The expertise of the Foundation in carrying out research in this field was sought to be utilized. Therefore, it could not constitute business/commercial activity. Merely because some remuneration was taken by the Foundation for undertaking these projects that would not alter the character of these projects, which remained research and consultancy work. Most of the amount received qua these projects was spent on the project and the surplus, if any, is used for advancement of the objectives for which the Foundation was established. (3.9) The Hon'ble Supreme Court in the case of CIT v. A.P. State Road Transport Corporation [1986] 159 ITR 1 held as under: .......It is now firmly established by the decisions of this court in Surat Art Silk Cloth Manufacturers Association's case [1980] 121 ITR 1 (SC) and Bar Council of Maharashtra's case [1981] 130 ITR 28 (SC), that the test is What is the predominant object of the activity--whether it is to carry out a charitable purpose or to earn profit? If the predominant object is to carry out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the institution in question . If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business . It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object of promoting trade and commerce not for itself, but for the nation- both within India and outside India. Clearly, this is a charitable purpose, which has as its motive the advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the said Act would not apply. We say so, because, if a literal interpretation were to be given to the said proviso, then it would risk being hit by Article 14 (the equality clause enshrined in Article 14 of the Constitution). It is well- settled that the courts should always endeavor to upheld the Constitutional validity of a provision and, in doing so, the provision in question may have to be read down, as pointed out above, in Arun Kumar and others v. Union of India and Others: 2007 (1) SCC, 732 Para 55. It would be appropriate to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the 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. (3.12) The Hon'ble Delhi High Court in the case of GSI Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is exchange of merchandise, specially on large scale . In ordinary parlance, trade, and commerce carry with them the idea of purchase and sale with a view to make profit. If a person buys goods with a view to sell them for profit, it is an ordinary case of trade. If the transactions are on a large scale it is called commerce. Nobody can define the volume, which would convert a trade into commerce. For the purpose of the first proviso to section 2(15), trade is sufficient, therefore, this aspect is not required to be examined in detail. The word business is the broadest term and is encompasses trade, commerce and other activities. Section 2(13) of the Income-tax Act defines the term business as under : 2. Definitions.--. . .(13) 'business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The word business is a word of large and indefinite import. Section 2(13) defines business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The intention of the Legislature is to make the definition extensive as the term inclusive h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this proviso also. In other words, the proviso will not give rise to any new controversy which had not been in the past. The further words used in the proviso, that for a cess or fee or any other consideration, have to be read along with the nature of activities, i.e., trade, commerce or business. When an institution is carrying on activities in the nature of trade, , commerce or business obviously it will be charging fee, etc. It may be charging fee even when rendering/providing services as part of charitable activity in order to supplement its income for carrying on charitable activities. In that case the proviso will not have any implication as the activities would not be in the nature of trade, commerce or business. Accordingly, the proviso inserted in the definition of 'charitable purpose' will not substantially have any impact on the meaning of charitable purpose. It further held Needless to mention, the ratio laid down in the cases Surat Art Silk Cloth Manufacturers Association, Aditanar Educational Institution and American Hotel and Lodging Association Educational Institute is that mere existence of surplus from the activity does not mean that it will cease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax (Exemption) Ors., (2013) 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: .....The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave petition by the Supreme Court by a nonspeaking order would not operate as res judicata by observing that- When the order passed by this Court was not a speaking one, it is not correct to assume that this Court had necessarily decided implicitly all the questions in relation to the merits of the award, which was under challenge before this Court in the special leave petition. A writ proceeding is a wholly different and distinct proceeding. Questions which can be said to have been decided by this Court expressly, implicitly or even constructively while dismissing the special leave petition cannot, of course, be reopened in a subsequent writ proceeding before the High Court. But neither on the principle of res judicata nor on any principle of public policy analogous thereto, would the order of this Court dismissing the special leave petition operate to bar the trial of identical issues in a separate proceeding, namely, the writ proceeding before the High Court merely on the basis of an uncertain assumption that the issues must have been decided by this Court at least by implication. It is not correct or safe to extend the principles of res judicata or constructive res judicata t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions of State include regulation of construction, development of infrastructure in the city, urban planning and its execution and control, providing civic amenities like roads, parks, sewage system and water supply to the public at large. It also includes providing housing to its citizen at reasonable rate . State function includes the collection of taxes/fees for meeting the finances in carrying out the above said duties/functions of the state . It is noteworthy that a portion of state revenues like stamp duty, besides other funds from the Government is diverted to the ADA primarily for the development of infrastructure in the city which is a substantial proof of ADA being the executor of functions of the State Government Functions which are for the benefit of public at large and are thus essentially charitable in nature. All the activities being in the nature of State activities is for the general public utility even if involves the monies being received from the citizens at large and is by very nature a Charitable activity . (6.4) That following functions of appellant fall under function of state and not business function: (A) - Development of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public utility . (6.5) That assesse is a statutory authority established for the purpose of conducting functions of State as enumerated above. Statutory bodies like assessee are empowered to frame rules or regulations, exercise coercive powers, including inspection, raids; they possess search and seizure powers , they can launch prosecution of persons not complying with the rules and regulations and are invariably subjected to legislative oversight. The primary object for setting up such regulatory bodies would be to ensure general public utility. The regulation of building, town planning ,enforcing those regulations and continuing supervision through inspection etc., and for attaining the larger objective of proper town planning assesse also develops colony and constructs and provides houses at reasonable rates and all such activities cannot be considered as trade, business or commercial activity, merely because in doing so some surplus is created. It cannot be said that the public utility activity of evolving, prescribing and enforcing standards, involves the carrying on of trade or commercial activity. (6.6) That ADA is governed by Uttar Pradesh Urban Planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (6.9) In Bureau of Indian Standards V. Director General of Income-tax (Exemptions): (2013) 212 Taxman 210(Delhi ), the court, while considering whether the activities of the Bureau of Indian Standards in granting licences and trading certificates and charging of the fee amounted to carrying on business, trade or commerce, held as under:- 73. 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 co- ercive 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at Calcutta. On appeal to the Privy Council, Lord Macmillan observed as follows : But their Lordships do not agree with the learned Chief Justice in his rejection of the view that the sums paid by the appellant to his step-mother were not income' of the appellant at all. This is their Lordships' opinion is the true view of the matter. When the Act by s. 3 subjects to charge all income' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the Court by charging the appellant's whole resources with a specific payment to his step-mother has to that extent diverted his income from him and has directed it to his step-mother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands. In Prince Khanderao Gaekwar vs. CIT (1948) 16 ITR 294 (Bom) there was a famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of her 2 annas and 8 pies share and that the partner was under a legal obligation to pay that amount. COMMISSIONER OF INCOME TAX VS. TOLLYGUNGE CLUB LTD. 1977CTR (SC)195, (1977)107 ITR 776(SC) Income-chargeability-Assessee, a club, levying a surcharge over and above admission fee- Same earmarked for local charities-Merely because surcharge is levied from ever race- goer who wants admission, it does not become part of price for admission-it is a payment made for specific purpose-Resolution was passed at the general meeting of assessee for levying surcharge- It was, therefore, clearly impressed with an obligation in the nature of trust for being applied to local charities-Hence, it got diverted before it reached the hands of assessee and at no stage became a part of its income. JIT PAL X-RAYS (P) LTD. S. COMMISSIONER OF INCOME TAX (2204)186 CTR (ALL) 541: (2004) 134 TAXMAN 62 (ALL) Income-Diversion by overriding title-Payment to wife of transferee of business by way of overriding charge created under the sale deed-Assessee company acquiring running business of One HS- It was stipulated in the sale deed itself that over and above sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g from its gross profit in that year- (a) interest that is overdue; (b) managerial expenses; (c) contributions to the provident fund or the gratuity fund off the employees; (d) interest on loans and deposits; (e) audit fee; (f) working expenses which include repairs, rents, taxes and depreciation of property; (g) contribution to the fund created for writing off unadjusted bad debts and losses: ---------------------------------------------------------------------------------- (2) Subject to such conditions as may be prescribed, the balance of the net profits may be utilised for all or any of the following purposes namely - (a) payment of dividend to members on their paid-up share capital at a rate [not exceeding twenty per cent]; (b) payment of bonus to members on the amount of volume of business done by them with the society, to the extent and in the manner specified in the rules or the bye-laws; (c) constitution of, or contribution to, [* * *], building fund, rural improvement fund or any other fund as may be specified in the rules or the bye-laws; (d) donation of amounts not exceeding 5 per cent for any charitable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, cannot be regarded to be a regulatory body discharging the Government function and working as an arm of the Government. Had it been a regulatory body, it must have been authorized and incorporated under a separate Act of the Parliament as part of the Government Dept. for regulating the exhibition of film, hosting of film festival, shooting of the films and providing licence and control over the multiplexes and the picture theatres. The institution is not authorized under any law and not been incorporated as such. ---------------------------------------------------------------- the learned AR vehemently relied on the decision of Himachal Pradesh Environment Protection Pollution Control Board (supra). This decision is also not applicable in the present case as in the case before us the institution is engaged in an activity in the nature of trade, commerce or business and also the activity of rendering service in relation to trade, commerce or business for a consideration while in that case, the assessee was not rendering any service in relation to any trade, commerce or business, rather it was discharging regulatory function for controlling pollution and collecting the fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the definition of business activity has to have a profit motive , mere generation of surplus in an activity will not render such activity as business activity. The Ld. CIT(A) has stated that mere profit motive is not the only criterion for rendering an activity as business but at the same time he has not given any logic or reasoning in the facts of appellant s case to establish its activities as business. (8.5) Page 91 CIT(A) 9.11 The Special Auditor in his special audit report submitted u/s.142(2A) has also given his finding in point no.10 of his report that there are many activities of the assessee(appellant) which are in the nature of trade, commerce or business in which the assessee was engaged and earned income during the previous relevant to the assessment year under consideration and the said activities are as follows: Point 10 Violations of provisions of section 12A/12AA and Section 11. As per Section 2(15) of the Income Tax Act, 1961, following activities are included for charitable purposes : (i) Relief of the poor (ii) Education (iii) Medical relief, and (iv) the advancement of any other obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from Stamp Duty : ₹ 1633.33 L. Misc. Income : ₹ 66.73 The above activities are in the nature of business activities and the same cannot be said to be for charitable purposes within the meaning of Section 2(15) of the Income Tax Act, 1961. We have also given our specific comments on violation of provisions of Section 11 of the Act at point no. 1 above. (page of 217-221of PB-4) After examination of the activities of the assessee (appellant) and keeping in view the provisions of section 2(15) read with proviso, the Special Auditor has confirmed that the above activities are in the nature of business activities and the same cannot be said to be for charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961. (8.6) Appellant s Contention Sec 142(2A) of I.T.Act 1961 as it stood on 28.12.2011 when the matter was referred to special auditor. 2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Planning Development Act 1973 specifically provides that appellant authority shall carry out development work. Sections 7, 17 and 18 make such specific provisions regarding development. (C) At the time of registration u/s 12AA nature of activities were examined as has been clearly spelt out by Honourable Allahabad High Court in the case of HapurPilakhuwa Development Authority, wherein the nature of activities were considered as business activity by the CIT for the purpose of rejection of registration, while the Honourable High Court held the activities as charitable. (E) For accumulation of income for future application F.No.10 has been filed from time to time as and when required in different years. The A.O. or CIT(A) has not found anything to the contrary on this issue hence the issue is not in dispute. (10) Section 2(15) of IT.Act 1961 (15) charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant are to be treated charitable in nature even if it involves advancement of any other object of public utility. As per various rulings of the jurisdictional Honourable Allahabad High Court , the nature of activities carried out by various Development Authorities which are identical to the activities of the appellant have been held to be charitable in nature. Hence, the first proviso does not apply to the appellant. The second proviso comes into play only after the application of the first proviso. Moreover, it will only restrict the application of first provisio to the cases where receipts are below ₹ 10 lakhs. (10.2) Finance Bill 2008 Amendment of section 2 3. In section 2 of the Income-tax Act,- ( a ) in clause ( 1A ), after Explanation 2, the following Explanation shall be inserted with effect from the 1st day of April, 2009, namely:- Explanation 3. -For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income; ; ( b ) for clause ( 15 ), the following clause shall be substituted with effect from the 1st day of April, 2009, namely:- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum Explaining Finance Bill 2008 RATIONALISATION AND SIMPLIFICATION MEASURES Streamlining the definition of charitable purpose Section 2( 15 ) of the Act defines charitable purpose to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10( 23C ) or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the advancement of an object of general public utility as is included in the fourth limb of the current definition of charitable purpose . Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase advancement of any other object of general public utility , it is proposed to amend section 2( 15 ) so as to provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2009-10 and subsequent years. (10.7) Memorandum Explaining Finance Bill 2010 Definition of charitable purpose For the purposes of the Income-tax Act, charitable purpose has been defined in section 2(15) which, among others, includes the advancement of any other object of general public utility . However, the advancement of any other object of general public utility is not 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. The absolute restriction on any receipt of commercial nature may create hardship to the organizations which receive sundry considerations from such activities. It is, therefore, proposed to amend section 2(15) to provide that the advancement of any other object of general public utility shall continue to be a charitable purpose if the total receipts from any activity in the nature of trade, commerce or business, or any activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 11. That recently your honours in the case of Jhansi Development Authority have held its activities to be charitable in nature. The activities of the appellant are identical in nature and both the authorities were estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the nature of use or application, or retention, of the income from such activity;' (Emphasis supplied by us) 36. There are two limbs of the above proviso to section 2(15) of the Act, introduced w.e.f. 1.4.2009, i.e. the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of: (a) 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, (b) irrespective of the nature of use or application, or retention, of the income from such activity;' 37. The above amendment was carried in section seeks to overcome the decisions of the hon'ble Supreme Court in the cases of 'Surat Art Silk Cloth Mfg.' (supra) and 'Thanthi Trust' (supra) as relevant to the period post substitution of the section 11(4A) of the Act. Firstly, the position that the carrying of business incidental to the attainment of the objectives of the trust as was allowable to the intuitions u/s 11(4A) carrying the activity under the all the limbs of section 2(15) of the Act is no more available to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, if such organizations have dealings with the non-members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to s. 2(15). 3.2 In the final analysis, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes. In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business. Each case would, therefore, have to be decided on its own facts, and generalizations are not possible. An assessee who claims that their object is 'charitable purpose' within the meaning of s. 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of general public utility involves 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, it will be out of the definition of the word charitable purposes . The Hon'ble high court held that a wider meaning ought not to be given to these words especially in a taxing statute. The Hon'ble High Court observed that if a trade or business for a commercial activity did not result in profit, it would not be necessary to deal with the same in the Income Tax Act. The hon'ble High Court observed that there was nothing in the Act and particular in section 2 (15) thereof that indicated that the Legislature contemplated a trade or a business or a commercial activity other than for profit. The Hon'ble High Court in this respect referred to the several judgments of the Delhi High Court including in the case of Bureau of Indian Standards v. DGIT(Exemptions) [2013] 358 ITR 78/212 Taxman 210/[2012] 27 taxmann.com 127, The Institute of Chartered Accountants of India v. DGIT (Exemptions), [2013] 358 ITR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) wherein it has been held that while c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal validity of the proviso, the same would have to be read down and interpreted in the context of Section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities 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. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the 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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the predominant object of the trust or institution is the deciding factor , if the profit is the pre-dominant motive, purpose and object of the assessee Trust then its activities cannot be considered for charitable purposes as per the definition of charitable purposes in the light of newly inserted proviso w.e.f. 1.4.2009. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. 43. From the above discussion and in the light of decisions rendered by the Delhi High Court in the cases as discussed above and of the Jurisdictional Pb. Hry. High court in the case of 'The Tribune Trust' (supra) the position that has emerged is that as if the new proviso to section 2(15) has never been brought in and has been rendered redundant or otiose. The theory of predominant object or activity and incidental income therefrom can well be applied as per the provisions of section 11(4A) of the Act and as interpreted by the Supreme Court in the case of 'Thanthi Trust' (supra) and several High Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with retrospective effect from 1.4.2009; now the section read as under: '2 (15) charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: 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, 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 10 lakh rupees or less in the previous year.' (emphasis supplied by us) 45. to 51 .. 52. A corresponding amendment has also been brought in section 10(23C) of the Act inserted by the Finance Act, 2012, w.r.e.f. 1-4-2009 adding the following proviso added: 10. In computing the total income of a previous year of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of The Tribune Trust (supra) have been delivered subsequent to the introduction of the second proviso to section 2(15) of the Act, however in none of the above referred to decisions there is any discussion about the effect of the introduction of second proviso to section 2(15) of the act and subsequent amendments thereto, amendments brought in section 10(23C), section 13 and section 143 of the Act. Though the courts of law have interpreted the first proviso to section 2(15) taking not consideration the hardships faced by the institutions genuinely involved in carrying out the charitable activities and thereby did not go by the literal meaning of the words of the provisions and interpreted the provision to mitigate the hardship to such institutes and to bring rational to the definition of charitable purposes and thereby holding that the crucial words in the nature of trade, commerce or business find mentioned in the second proviso have the same meaning as was ascribed to the words not for making profits' as were there in the originally introduced provisions of section 2(15) in the 1961 Act. However, in our view, that was perhaps never the intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended purposes for which they have been introduced by the legislature in the statute. 55. It is to be noted that the section 2(15) as it stood post insertion of the first proviso w.e.f.1.4.2009, the charitable purposes included relief to the poor, education, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic interest and advancement of any other object of general public utility. The first proviso does not control or restrict the definition of 'charitable purposes' in respect of trust carrying out the activity such as relief to poor, education, medical relief, preservation of monuments etc. as specifically mentioned. However section 11(4A) do put restriction on business activity of such institutions and provides that the same should be incidental to their main objects. Sub-section 4A of section 11 neither makes inoperative or redundant the provisions of section 2(15) nor of sub-section 4 of section 11. On the other hand the provisos to section 2(15) only put restrictions on the benefits available to the trusts carrying on the advancement of any other object of general public utility which also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utility, whereas, the provisions of section 11(4) still holding good for the institutions carrying in the activity in respect of first three limbs i.e. relief to poor, education and medical relief. However in the subsequent decision in the case of Thanthi Trust (supra) , the supreme court applied the plain literal meaning to the more stringent provisions of sub-section 4A of section 11 as these stood during the period from AY 1984-85 to AY1991-92 and held that sub-section 4A restricts the benefits under section 11, despite noticing the existence of the provisions of sub-section 4 of section 11 on the statute. The latter decision of the Supreme Court in the case of Thanthi Trust (supra), in our view, cannot be ignored or overlooked, while interpreting the newly amended provisions of section 2(15) of the Act, especially the second proviso, which also strives to control the benefit available to the institutions involved in the activity of advancement of any other object of general public utility and not of the institutions carrying out the activity in respect of other limbs, to which the provisions of amended sub-section 4A to section 11 continue to apply. 57. Anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines as was given in the case of 'Surat Art Silk Cloth Mfgr. Assn' (supra) by the Hon'ble Supreme Court. The Hon'ble Supreme Court in the case of 'Surat Art Silk Cloth Mfgr. Assn' (supra) in para 11 of the decision has held that in the ordinary course, the different interpretation should not be done if the words of the statute taken could not alter the meaning of a statutory provision where such meaning is plain and unambiguous, but they can certainly help to fix its meaning in case of doubt or ambiguity. The Hon'ble Supreme Court thereafter discussed as to what would be the consequence of the construction of the provisions contained for on behalf of the Revenue and held that in such an event no trust or institution whose purpose is promotion of object to general public utility would be able to carry on any business, even though such business is held under trust or legal obligation to apply its income wholly to the charitable purpose carried on by the trust or institution. However, the Hon'ble Supreme Court held that in such an event the provisions of section 11 (4) would be rendered wholly superfluous and meaningless. The High Courts of Delhi and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lone. However, the leverage provided to the institution by way of insertion of second proviso would prompt us re-think and re appraise about the literal interpretation of the section. The subsequent amendments brought in section 10(23C), section 13 and section 143 of the act with retrospective effect from 1.4.2009, the date on which the first proviso comes in effect, also cannot be ignored or rendered redundant. As it stands, post insertion of second proviso, allows the institutions to carry on the incidental activity in the nature of trade, commerce or business while pursuing objects of general public utility of the trust or institution, but restricts the receipts to a specified limit. The said limit perhaps was made so as to allow only genuine institutions to claim exemptions who were carrying out the activity of charitable purposes and their motive is not to earn huge profits. 60. Now, let us, assume that the interpretation that the income derived by the Trust from ancillary commercial activity while carrying out the pre-dominant object of general public utility is totally exempt as stood canvassed by the Ld. Counsel for the assessee in the light of the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure development and boosting the economy of the country. A manufacturer of medicine will also so claim that medicines are made by him with the object of providing people of country the essential and useful drugs for fighting dreaded disease and sickness and even lifesaving drugs and also contributing towards improvement of health of the people for advancement of object of general public utility. A road contractor will also claim that the road maintained or constructed by it, though with profit motive are for the advancement of object of general public utility as it ease mode of transport not only of the people but also of the goods and other material. Even a general merchant, opening shop in a rural area or village may claim that though it is doing the retail business with the motive of profit, however, it is also doing the activity of general public unity by way of making available different goods on day to day need and necessity of the people of the village who otherwise would have to travel large distances to get the same. The taxation limits fixed by the Department will fail and the taxation in respect of such persons doing different business will star t only if their receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or retention of the income from such activity. That, however, by the insertion of the second proviso w.e.f. 01.04.2009 the rigour of the first proviso has been diluted and that the first proviso will not apply even if the trust carrying on business activities in the course of its dominant activities for the purpose of advancement of any other objects of general public utility and the gross receipts from such activities is ₹ 10.00 lacs or less in the previous year. However where the gross receipts of a charitable institution, from its business activities exceeds limit of ₹ 10 lakhs, assessee will not be entitled for exemption or other admissible tax benefits for that relevant year but it does not result in cancellation of its registration as charitable institution. The above view, now has been affirmed by the Hon'ble Bombay High Court in the case of DIT (Exemption) v. North Indian Association [2017] 79 taxmann.com 410/246 Taxman 318/393 ITR 206 wherein the Hon'ble High court while further relying upon its another decision in the case of DIT (Exemption) v. Khar Gymkhana [2016] 385 ITR 162/240 Taxman 407/70 taxmann.com 181 (Bom.) has duly taken note of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation rather than to read any or each of them in contradiction of each other making the other provision/s redundant and inoperative leading to confusion, anomaly and absurdity. Therefore, these provisions are to be read as each provision of the section supplement to other and not supplant the other and so that a reasonable construction may be arrived at and applied as may be intended by the Parliament while introducing the above provisions in the Statute. 69. In our view, when we read the aforesaid relevant provisions of the different but related sections in harmony to each other, a valid and proper construction can be arrived giving a meaning interpretation. 69 (1) . The introduction of second proviso to section 2(15) of the Act, as discussed above, has removed the anomalies which have occurred due to the aforesaid different provisions present in the statute. The proposition that if any surplus is generated from business activity which is again ploughed back for the activities of the trust exemption u/s 11 is to be allowed has been done away with by the crucial words irrespective of the nature of use or application, or retention, of the income from such activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be in negative. Whether a particular activity is in the nature of trade, commerce or business is to be examined taking into consideration the nature of activity, the object and purpose of such activity, the volume of such activity and the nature and volume of the receipts and further the application thereof also. Every receipt of income, in our view, cannot be termed as activity in the nature of trade, commerce or business. 69(3). Moreover the restriction placed in the first proviso is only in respect of the institutions or trusts carrying out the activity for the advancement of any other object of Public Utility, and not in respect of activity for the other limbs of section 2(15). Hence, it cannot be said that the first proviso controls, restricts or bars any institution established for charitable purposes for carrying out the objects or activities in respect of other limbs and generating incidental income also therefrom. 69(4). Moreover, the anomaly, if any, has been removed with the introduction of second proviso to section 2(15) of the Act wherein the income from incidental or ancillary commercial activity has also been allowed and included while carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the institution carrying of object of advancement of general public utility, which also involves the activity of carrying of business, trade or commerce generating ancillary or incidental income. However, by the insertion of second proviso to section 2(15) as amended from time to time, the anomaly, if any, has been removed. 70. A harmonious construction of these amended provisions will lead to the conclusion that each of the provisions are in aid to and supplement each other. In our view, a reasonable and meaningful construction that may be arrived now is that as per the provisions of section 2(15) of the Act, 'charitable purposes' on the first part will include relief to the poor, education, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic inter est and advancement of any other object of general public utility and further as per the provisions of section 11(4) of the Act, such trust or institution can hold business assets also. However, as per the provisions of section (4A), such business for profit should be incidental to the attainment of the objectives of such trust or institution and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the first part of definition of 'charitable purposes' as defined u/s 2(15) of the Act viz. for the objects of relief to the poor, education yoga, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic interest and are also carrying on the business activity which is incidental to the attainment of objective of such trust or institution [as provided u/s 11(4A)], they are entitled to claim exemption of their income including the income from incidental business activity under section 11 of the Act subject to compliance or fulfilment of the otherwise required conditions including inter alia registration of such trust or institution u/s 12 A of the Act or maintaining of separate books of account regarding business activity as per the provisions of section 11(4A) of the Act etc. and subject to the applicability of the relevant provisions of section 11, 12 and 13 of the Act, irrespective of the quantum of income earned from such incidental business activity. In other words, there is no cap or limit prescribed for such receipts to be eligible for claiming exemption from taxation u/s 11 of the Act. As discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). These restriction put under the provisos to section 2(15) are applicable only to the activity of advancement of any other object of general public utility. 72. However, even after holding that the harmonious reading of the related provisions of the Act, as discussed above, will lead to the conclusion that it cannot be said that any of the related section is in contradiction to the other or in any manner making inoperative or redundant the other, we still are of the view, that there remains still an anomaly which has not been addressed by the Parliament till date by way of introduction of the suitable provision. Suppose the income from incidental and ancillary activity of an institution in the course of carrying out of activity for advancement of object of general public utility crosses the limit, as prescribed for different assessment years as per the provisos to section 2(15), can it be said that such an institution will not be an institution carrying out the objects for 'charitable purposes'. For example for the assessment year 2009-10, the total receipts of an institution from the ancillary activity in the shape of trade and commerce or business are ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncillary commercial activity cannot, in our view, be controlled or restricted by way of measuring or controlling the activities with golden scale or to say to check the same on day to day basis and the stop carrying out the incidental activity, which otherwise may be necessary to achieve the main object of general public utility, the moment the receipts touch the threshold. The Hon'ble Supreme Court in the case of Surat Art Silk Cloth Manf. Assn. (supra) has held, It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realization but would also reflect unsound principle of management. The same analogy can well be applied in the facts and circumstances as discussed above. 6. Ld DR had further submitted that, in the case of the assessee,AGRA DEVELOPMENT AUTHORITY [2019] 106 taxmann.com 111 (SC)/[2019] 264 Taxman 26 (SC) the Jurisdictional High Court had concluded as under : 60. Having considered the arguments so made by learned counsel for the parties on question no.2, we find, in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;advancement of any other object of general public utility'. In respect of such an assessee it had been provided (by amendment), if the activity in respect of which it claimed exemption, be in the nature of trade, commerce or business or any other activity rendering any service in relation of any trade, commerce or business for consideration, such activity shall not constitute an activity of charitable purpose. However, the second proviso to Section 2(15) of the Act (introduced by Finance Act, 2010 with effect from 1.4.2009), created an exception to the first proviso. Thus, the first proviso to Section 2(15) of the Act would not apply in the event, the receipt from activities referred to in the first proviso did not exceed ₹ 10,00,000/-, in a previous year. 65. Upon a co-joint reading of both the provisos to Section 2(15) of the Act, the legislative intent appears not to allow exemption to an assessee who may engage in an activity mentioned in the first proviso to Section 2(15) of the Act, if his receipts for a previous year exceed ₹ 10,00,000/-. At the same time that benefit is not to be denied to such an assessee it his receipts in the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(15) of the Act. On the other hand Section 12AA(3) of the Act if invoked in the case of an assessee would disentitle an assessee to claim the exemption irrespective of the quantum of his receipts from any activity. 70. The Act therefore neither contemplates an inviolable right to claim exemption solely on the strength of a registration certificate nor does the Act appear to contemplate that in case of an opinion being formed by the Commissioner that an assessee is engaged in an activity specified in the first proviso to section 2(15) of the Act, he must necessarily seek to cancel the registration granted by him earlier. In fact, the Act carves out a middle path by allowing the registration to stand but it's benefit to be deprived in assessment proceedings in certain specified circumstances. 71. In this regard we also notice, the Bombay High Court, in the case of DIT (exemption) v. North Indian Association [2017] 393 ITR 206/246 Taxman 318/79 taxmann.com 410 (Bom.) had the occasion to consider a similar issue. In that case, the registration granted under Section 12A of the Act was sought to be cancelled in view of amendment made to Section 2(15) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y usefully reproduce the relevant extract of Circular No. 21 of 2016, dated May 27, 2016, which reads as under (see [2016] 384 ITR (St.) 180 ) : (3) Temporary excess of receipts beyond the specified cut off in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution requiring cancellation of registration already granted to the trust or institution. Hence, section 13 of the Act has been amended vide Finance Act, 2012 by insert ing a new sub-section (8) therein to provide that such organisation would not get benefit of tax exemption in the particular year in which its receipts from commercial activities exceed the threshold whether or not the registration granted is cancelled. This amendment has taken effect retrospectively from April 1, 2009 and accordingly, applies in relation to the assessment year 2009-10 onwards. (4) In view of the aforesaid position, it is clarified that it shall not be mandatory to cancel the registration already granted under section 12AA of a charitable institution merely on the ground that the cut off specified in the provision to section 2(15) of the Act is exercised in a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the activities of the trust or Institution are not genuine nor can it be said that the activities of the trust or institution are not being carried out in accordance with objects of the Trust or Institution and, therefore, the two conditions stipulated under the provisions of sub-section (3) of section 12AA of the Act which empowers the authority to cancel the registration, do not exist in the present case. Further, we note that the Madras High Court in Tamil Nadu Cricket Association v. DIT (Exemptions) [2014] 360 ITR 633 (Mad) has also taken a similar view . ' (emphasis supplied) 73. We are in respectful agreement with the view taken by the Bombay High Court in the case of North Indian Association (supra). The cancellation of registration would not be automatic or natural or the only consequence of the receipts (arising from an activity specified in the first proviso to Section 2(15) of the Act), exceeding ₹ 10,00,000/- in any previous year. In case of the assessee before us to whom registration under Section 12A of the Act had been granted before incorporation of the provisos to Section 2(15) of the Act, in the event of its receipts from activities specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and thereafter the third provision to section 12 AA should be applied . If the total receipt from such activities are found to be more than the threshold limit fixed by the act, than consequences as provided by the act should follow. He had drawn our attention to the following prahraphs of CIT(A) order, wherein the lower authority had dealt with these issues and came to conclusion that the activites of the assessee are not charitable in the following manner : 4.5 In order to consider the issue, I have given my meticulous thoughts to The Uttar Pradesh Urban Planning and Development Act, 1973 (UPUPO Act, 1973) along with various sources of income of the assessee, as given in income and expenditure statement, from which following facts emerge out suggesting that the activities of the assessee are hit by newly introduced first proviso to section 2(15) a. The assessee is engaged in acquiring land from the farmers, converting the land use, plotting the land and selling it at higher price thereby making a profit. The assessee also sells such land to colonizers and builders for further development and constructions. The assessee received ₹ 16,36,08,451/ - (sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment charge' as the charge levied on private developer Uls 38A for the development of land. Section 38A says that the Authority shall levy and collect city development charge from a private developer who has been given a license to develop land in a development area. Attention is drawn to schedule 12 of the Annual Statement which says that the assessee collected the said charges ie., External Development Charges ₹ 17,71,12,259/- and Internal Development Charges ₹ 18,82,160/- during A. Y. 2011-12. This charge is collected from a private developer who in turns develops and profits from such business. This activity clearly attracts the new proviso as it is an activity of rendering service in relation to a trade or business . h. Section 38A of UPUPD Act, 1973 provides for land use conversion charge for the change of land use in the MASTER PLAN. This section enables the authority to charge money when non-agricultural land is converted to residential or commercial land or Residential land is converted to commercial land thereby increasing its valuation. This charge is paid by general public including the colonizers and builders who acquire agriculture land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the fact that the objects of the assessee may be hit by the proviso to section 2(15) cannot have any bearing on the grant, denial or withdrawal of the registration under section 12AA. 15. It is also important to bear in mind the fact that in terms of the second proviso to Section 2(15), which was introduced by the Finance Act 2010 with retrospective effect from 1st April 2009, the legal proposition set out in first proviso to section 2(15) cannot come into play if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year . Clearly, therefore, in order that the benefits under section 11 are declined to the assessee on the ground that it is engaged in such activities as may be hit by the first proviso to Section 2(15), not only the assessee must be engaged in carrying out such activities as may hit the first proviso to Section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s misused in any manner under the garb of charity and any institution be allowed to become richer and richer under the garb of charity by making it a non-tax payable organization. A charitable institution provided services for charitable purposes free of cost and not for a gain. In the present scenario, similar activities are performed by big colonizers/ developers who are earning a huge profit. If this registration is granted, than anybody will claim the exemption from tax. If the accounts of the assessee are analyzed, it has turned into a huge profit-making agency for which it is taking money from the general public. If any institution of public importance like schools, community centers are created/ developed. the assessee in charging the cost of it from the public at large and the money is coming from the coffer of the Government. it can be said that object/ activities of the assessee are more of commercialized nature and no charity is involved in it. At the time, if these facilities are not provided, then nobody 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 adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a necessary component but not sufficient condition for claiming exemption u/s 11 which is permissible only when the assessee fulfill the conditions as laid down in section 11 and section 13 of the Act. It is notable that the AO has plenary powers to examine the allowability of exemption under section 11 where the proviso to section 2(15) is attracted, even if the assessee has got registration u/s 12A before considering the benefit of exemption. As the assessee does not fulfill the criteria for 'charitable purpose', its activities , as discussed above cannot be regarded for charitable purposes, rather the same are in the nature of trade or commerce . 13 With regard to the nature of commercial activities stated aforesaid, my findings further get support from the provisions of section 13(8) of the Act, which in expressApart from the above, Hon'ble jurisdictional High Court has held vide its several pronouncements that the registration u/s 12A is no guarantee for exemption uls 11. The exemption uls 11 will depend upon the activities which are carried on in that particular year in the light of provisions of section 2(15) of the IT Act 5.15 Thus in substance, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled for in the order of AO on this issue. Thus, as a result, Ground Nos. 2 3 of assessee are dismissed. 8. It was submitted that in the light of the above the appeals of the assessee are required to be dismissed the appeal of the revenue required to be allowed. FINDINGS 9. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. As per the special auditor the activities of the assessee, which were, not charitable in nature,were duly captured by the CIT(A) in paragraph 9.11 to the following effect: 9.11 The Special Auditor in his special audit report submitted u/s.142(2A) has also given his finding in point no.10 of his report that there are many activities of the assessee(appellant) which are in the nature of trade, commerce or business in which the assessee was engaged and earned income during the previous relevant to the assessment year under consideration and the said activities are as follows: Point 10 Violations of provisions of section 12A/12AA and Section 11. As per Section 2(15) of the Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 451.63 J. Cycle/Scooter/Car Stand Charges : ₹ 79.97 K. Income from Stamp Duty : ₹ 1633.33 L. Misc. Income : ₹ 66.73 The above activities are in the nature of business activities and the same cannot be said to be for charitable purposes within the meaning of Section 2(15) of the Income Tax Act, 1961. We have also given our specific comments on violation of provisions of Section 11 of the Act at point no. 1 above. (page of 217-221of PB-4) After examination of the activities of the assessee (appellant) and keeping in view the provisions of section 2(15) read with proviso, the Special Auditor has confirmed that the above activities are in the nature of business activities and the same cannot be said to be for charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961. 10. The assessee in his reply before the CIT(A) as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarging the essential and integral function by the assessee authority i.e. to acquire the land, development and then transfer/dispose of in the manner provided by the act. The primary activity of the assessee is acquisition of land and development of it and the inflow of the money is on account of that. To say in other words the prime motive of the assessee for selling the land/plots was not there as that of the developer but the prime motive and purpose of the assessee was to develop the land after acquiring it or without requiring it to fulfil the aims and objects of the development act. The reasons for enactment of the development act are reproduced herein above, for the sake of completeness, we, may mention that the objects of the authority are to promote and security development of the development area according to plan and for that purpose the authority has power to acquire, hold, management dispose of the land and other properties, to carry out building, engineering, mining and other operation related to supply of water and electricity and disposal of sewage and to provide and maintain other services and emeritus and generated to necessary or expedient for purpose of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramount consideration.It has been stated by this Court in Kasturi Lal's case (supra): It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State, such an action would be both unreasonable and contrary to pubic interest. The government, therefore, cannot, for example, give a contract or sale or lease out its property for a consideration less than the highest that can be obtained from it, unless of course, there are other considerations which render it reasonable and in public interest to do so. (emphasis supplied by us ) 39. The law has been succinctly stated by Wade in his treatise, Administrative Law: The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependants, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese activities are charitable in nature. These activities were undertaken by the assessee on account of the mandate given to it to do generalize charitable activities for the planned development of the city. These are regulatory and development activities which were done by the assessee and the receipt of the revenue was on account of the said activities. The predominant character of the activities continues to be that of the state and therefore the element of welfare and charity is inbuilt. In the light of the above we hold that these activities also charitable in nature. At this stage we may refer to section 18 of U.P Urban Planning Development Act 1973 which provides as under : 18. Disposal of land by the Authority or the local Authority concerned.- (1 ) Subject to any directions given by the State Government in this behalf, the Authority or, as the case may be, the local Authority concerned may dispose of any land acquired by the State Government and transferred to it, without undertaking or carrying out any development thereon; or any such land after undertaking or carrying out such development as it thinks fit. to such persons, in such manner and subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation etc are to organize tournaments on commercial lines and earn revenue . Both are having different set of responsibilities, obligation, regulatory regime and purpose of discharging their duties . 51 Similarly the Judgment in the matter of Agra Development (supra), relied upon by the revenue is also not applicable ,as there was no finding of fact by the Court in this case rather , court in para 63 had recorded as under; 63. In our view, the Tribunal should have considered whether the registration could have been cancelled because the assessee was not pursuing a charitable purpose . If the Tribunal found that the registration granted to the assessee was liable to be cancelled because it had not engaged in any activity in pursuance of charitable purpose , then, the date from which such registration could be cancelled, would become relevant and be given effect to. At present, there is no finding of the Tribunal as to the merits of the matter. ( emhasis supplied by us ) There is no cavil, for the applicability to proviso to section 2 of the Act ,in case the revenue receipt from the such activities exceeded the threshold limit provided by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1 The Division Bench after considering the catena of decisions on the subject, has further observed thus: 14. Considering the aforesaid facts and circumstances and more particularly, considering the fact that the assessee is a statutory body Urban Development Authority constituted under the provisions of the Act, constituted to carry out the object and purpose of Town Planning Act and collects regulatory fees for the object of the Acts; no services are rendered to any particular trade, commerce or business; whatever the income is earned/received by the assessee even while selling the plots (to the extent of 15% of the total area covered under the Town Planning Scheme) is required to be used only for the purpose to carry out the object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to the public such as electricity, road, drainage, water etc. and even the entire control is with State Government and even accounts are also subjected to audit and there is no element of profiteering at all, the activities of the assessee cannot be said to be in the nature of trade, commerce and business and therefore, proviso to section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of charitable trust. However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration. Such statutory amendment was explained by the Finance Ministers speech in the Parliament. Relevant portion of which reads as under : I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether any entity is carrying on any activity in the nature of trade, comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions stipulated in the proviso to section 2(15). 3.2 In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 8. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench was pleased to allow the appeal filed by the respondent-assessee. 7. Thus, the functions of the respondent assessee are for charitable purposes and for general public utility and therefore, the respondent assesseee is entitled to exemption under section 11 of the Act. In view of the judgment of the Division Bench in the case of Ahmedabad Urban Development Authority (supra), no different view needs to be taken in this appeal. The larger question of reopening is however kept open. Appeal is dismissed. Substantial questions of law as framed are answered in favour of the assessee and against the Revenue. No costs. 55. Similar view were also expressed by Karnatka High Court in the matter of Karnataka Industrial Area Development Board2020] 121 taxmann.com 88 (Karnataka) 8. The Tribunal, inter alia by taking into account the provisions of the Act, has held that the primary and dominant object of the assessee is not profit making. It has further been held that income side of income and expenditure account shows that the main component of income of the assessee is derived in the form of interest of ₹ 131.17 crores and the interest of fixed depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view favorable to assessee should be followed . Hence respectfully Following the decision of the Gujrat High Court in the matter of. SUDA (supra) and in the matter Karnataka Industrial Area Development Board 2020] 121 taxmann.com 88 (Karnataka), we allow Ground no.3 of the appeal of the assessee . 19. Therefore respectfully following the decision of the coordinate bench in the matter of JHANSI DEVELOPMENT AUTHORITY ( supra) we hold that the assessee activities like Income from sale of plots/ lands ,Freehold conversion income, interest income from instalments, development charges, building plan sanction fees, lease rent , income from stamp duty , Building rent, Sale of masterplan book/tender form, Cycle/scooter/car stand charges and Miscellaneous income were discharged by the assessee in accordance with the objects of the Development Act 1973 and other statutory obligations , and therefore we have no hesitation to hold that all these activities are charitable in nature.The activities of the assessee in receipt of amount from such activities cannot be examined in isolation, as the assessee was propelled to do all these activities under the statutory obligation under Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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