TMI Blog2022 (3) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the public. From the development undertaken by the appellant Authority, public is benefited at large. It is clear that the benefits of development undertaken by the appellant Authority is not restricted to an individual or particular group of individuals for which its objects should be considered charitable under forth limb of section 2(15) of Income-tax Act. Words other objects of general public utility have been decided in catena of decisions. The said expression is widest of connotation. Words general in the said expression is pertaining to a whole class. If the primary purpose and the predominant object are to promote the welfare of the general public, the purpose would be charitable purpose. Lucknow Development Authority is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in the nature of rendering any service in relation to any trade, commerce or business for a fee or any other consideration. The nature of activities of the assessee Authority, the purpose and manner of its formation and the objects for which it has been created goes to show that it is not engaged in carrying on any activity in the nature of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are similar and crux of grounds of appeals is the action of learned CIT(A) by which he has affirmed the action of the Assessing Officer whereby he has disallowed the exemption u/s 11 of the Act. The assessment in the years 2014-15 to 2016- 17 has been completed u/s 11 of the Act whereas assessment in the year 2013-14 has been completed u/s 147 read with section 143(3) of the Act. The assessment in the year 2013-14 was earlier completed u/s 143(3) of the Act wherein exemption u/s 11 was denied for the assessment year 2013-14 again the Assessing Officer completed the assessment u/s 148 of the Act and made further disallowances u/s 40(a)(ia) of the Act. These appeals were heard together therefore, for the sake of completeness a consolidated order is being passed. For the sake of completeness, the grounds of appeals in these appeals are reproduced below: ASSESSMENT YEAR 2013-14 (I.T.A. No.185) 1. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in passing the order which is unlawful, unjustified and against the principles of natural justice. 2. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in passing the order with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as already held that the object of the appellant are the objects of General Public Utility falling in the definition of charitable purposes as given in section 2(15) of the I.T. Act (iii)accordingly, the appellant has already been held to be eligible for registration under section 12A in terms of the aforesaid order of the Hon ble ITAT 8. That the Ld. Commissioner of Income-tax (Appeals) was obliged to follow the rule of law relating to taxation and compute the income of the appellant on the basis of statement of income as based on the audit report in form 10-B, as was applicable in its case, by virtue of its being registered under section 12A of the Income-tax Act. (a)That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming addition of ₹ 41,94,07,414/- that was transferred to IDRF because appellant had been maintaining Infrastructure Development Reserve Fund (IDRF) as per the Notification dated 15.01.1998 , and money transferred to this fund were to be utilized for the purposes of projects as specified by a committee formed by the State Government itself under the said Notification, and the same could not be treated to be belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 11read with section 12, 12A and 13 on the grounds that the activities carried on by the appellant were profit making activities not falling under charitable purposes as envisage under section 2(15) of the Income-tax Act. 5. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in disallowing the exemption u/s 11, 12 and 13 read with first Proviso to section 2(15) on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) of Income-tax Act, 1961. 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by not treating the appellant as Charitable Institution, even though the same has already been adjudged to be so by the Hon ble Allahabad High Court in its judgement dated 16.09.2013 in the case of Commissioner of Income-tax-I v. Lucknow Development Authority in ITA no. 149 of 2009 for A.Y. 2005-06 alongwith ITA No. 60 of 2010 for A.Y. 2006-07 in its own case. 7. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by disregarding the following judgements in case of Moradabad Development Authority which was also constituted under the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipts of taxable nature in its hands and also because the money was collected under IDRF, to the extent the same belonged to appellant, had duly been accounted for in the audited books of accounts and shown in Balance Sheet. This amount is held under trust for being utilized as and when requisition was made by the committee formed by the State Govt., as per the principle laid down by the Hon ble apex Court in the case of CIT (Central) Vs. Bijli Cotton Mills (P) Ltd., reported in (1979)116 ITR 60, and the same could not have been treated to be the income in the hands of Appellant liable for taxation. 10. The Ld. Assessing Officer has erred in law and on facts in making addition of ₹ 20,20,17,466/- on account of prior period expenses. 11. That the Ld. Assessing Officer has erred in law and on facts in making disallowance of Provision for Development expenses of ₹ 31,48,19,010/-. 12. The Ld. Assessing Officer has erred in law and on facts in making addition of ₹ 17,04,441/- on account of interest on late deposit of TDS. 13. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in wrongly setting aside the issue re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA no. 149 of 2009 for A.Y. 2005-06 along with ITA No. 60 of 2010 for A.Y. 2006-07 in its own case. 6. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts by disregarding the following judgments in case of Moradabad Development Authority which was also constituted under the same Act as that of the appellant Authority and whose objects were the same as that of the appellant Authority: a. Judgment of Hon ble Allahabad High Court dated 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Judgment of Hon ble ITAT, Delhi dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 and c. Order of Ld. Commissioner of Income-tax (Appeals), Moradabad for A.Y. 2015-16 dated 28.01.2019 7. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming total addition of ₹ 3,32,43,01,768/- against the Computation of income at NIL as made by the appellant was founded on the following undisputed facts (i) the appellant is an authority duly notified as such under the Urban Planning and Development Act, 1973, by the State Government, for attainment of objects of General Public U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the State Govt., as per the principle laid down by the Hon ble apex Court in the case of CIT (Central) Vs. Bijli Cotton Mills (P) Ltd., reported in (1979)116 ITR 60, and the same could not have been treated to be the income in the hands of Appellant liable for taxation. 10. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming disallowance of Provision for Development expenses of ₹ 1,49,03,71,043/-. 11. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in wrongly setting aside the issue regarding verification of following expenses to the file of Ld. Assessing Officer despite of the fact that all the bill/ voucher were produced before him: a. Audit fee of ₹ 2,00,00,000/- b. Flood Control expenses of ₹ 10,00,00,000/- c. Development of villages expenses of ₹ 12,29,00,000/- 12. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming disallowance of Deposit Work of ₹ 70,86,35,607/-. 13. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming disallowance of expenses u/s 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 03.05.2017 in ITA No. 3 of 2017 for the A.Y. 2009-10 b. Judgement of Hon ble ITAT, Delhi dated 04.01.2018 in ITA Nos. 4631 and 4632/Del/2017 for A.Ys. 2012-13 and 2013-14 and c. Order of Ld. Commissioner of Income-tax (Appeals), Moradabad for A.Y. 2015-16 dated 28.01.2019 7. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the total addition of ₹ 3,38,44,60,747/- against the Computation of income at NIL as made by the appellant was founded on the following undisputed facts (i) the appellant is an authority duly notified as such under the Urban Planning and Development Act, 1973, by the State Government, for attainment of objects of General Public Utility (ii)the Hon ble ITAT in its own case, in ITA No. 686/Luc/06, order dated 25.07.2005 has already held that the object of the appellant are the objects of General Public Utility falling in the definition of charitable purposes as given in section 2(15) of the I.T. Act (iii)accordingly, the appellant has already been held to be eligible for registration under section 12A in terms of the aforesaid order of the Hon ble ITAT (iv) in pursuance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing order which is contrary to the facts and law. ASSESSMENT YEAR 2016-17 (I.T.A. No.439) 1. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in passing the order which is unlawful, unjustified and against the principles of natural justice. 2. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on facts in passing the order without giving adequate opportunity of being heard and without considering the written submission made before him. 3. That the Ld. Commissioner of Income-tax (Appeals) erred in law and on facts in denying exemption under section 11read with section 12, 12A and 13 on the grounds that the activities carried on by the appellant were profit making activities not falling under charitable purposes as envisage under section 2(15) of the Incometax Act. 4. That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in disallowing the exemption u/s 11, 12 and 13 read with first Proviso to section 2(15) on the ground that the appellant is hit by the provisions of section 13(1)(c) read with section 13(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant as charitable in nature. That the Ld. Commissioner of Income-tax (Appeals) was obliged to follow the rule of law relating to taxation and compute the income of the appellant on the basis of statement of income as based on the audit report in form 10-B, as was applicable in its case, by virtue of its being registered under section 12A of the Income-tax Act. 9. That the Ld. Commissioner of Income-tax (Appeals) was obliged to follow the rule of law relating to taxation and compute the income of the appellant on the basis of statement of income as based on the audit report in form 10-B, as was applicable in its case, by virtue of its being registered under section 12A of the Income-tax Act. (a)That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of ₹ 23,76,03,136/- transferred to IDRF because appellant had been maintaining Infrastructure Development Reserve Fund (IDRF) as per the Notification dated 15.01.1998 , and money transferred to this fund were to be utilized for the purposes of projects as specified by a committee formed by the State Government itself under the said Notification, and the same could not be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of area may constitute Development Authority for the purposes of the Act to promote and secure the development of the development area according to the Plan. Also, all the members of the Development Authority are either appointed by State Government or are ex-officio of different departments of State Government. 3. The objects of the Authority have been defined under section 7 UPUPD Act. The Section 7 reads as under: The objects of the Authority shall be promote and secure the development of the development area according to plan and for that purpose the Authority shall have the Power to acquire, hold, manage and dispose of land and other property, to carry out building, engineering, mining and other operations, to execute works in connection with the supply of water and electricity to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto: Provided that save as provided in this Act nothing contained in this Act shall be construed as authorising the disregard by the Authority of any law for the time being in force. 4. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and for the following reasons, stated in the assessment order, the Assessing Officer did not grant exemption u/s 11 of the Act. A.Y. 2013-14 i. The assessee is not a charitable organization as in Uttar Pradesh Urban Planning Development Act, 1973 words like charity, poor, economically weaker, subsidy/ subsidized, assistance, uplift are mentioned. ii. The income is from disposal of immovable property, interest, rent, cess etc. and hence, its activities are on commercial lines akin to private contractor, real estate developers and colonizersand hence, not qualify test laid by Supreme Court in case of Surat Art Silk Cloth Manufacture Association (1997) 121 ITR 1. iii. Local Authority definition under section 10(20A) of Income-tax Act by Finance Act, 2002 excluded Development Authority. iv. Assessee does not qualify the test laid by Supreme Court in case of Andhra Pradesh State Road Transport Corporation [(1986) 159 ITR 1] as in accordance with Section 58 of Uttar Pradesh Urban Planning Development Act, 1973 all the properties, funds and dues on dissolution of LDA will vest with State Government and it would be in the discretion of State Government to utilize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee invited our attention to the detailed written submissions and made summarized arguments from written submissions. It was submitted that the activities of the assessee have not changed since its inception and it has been decided by the Tribunal in ITA No. 690/LUC/2003 dated 25.07.2005 and Hon ble Allahabad High Court vide order in ITA No. 18 of 2006 dated 27.09.2013 and ITA No. 149 of 2009 for AY 2005-06 and ITA No. 60 of 2010 for AY 2006-07 dated 16.09.2013 in its own case that the activities of the assessee are charitable in nature. Learned counsel for the assessee, from the written submissions, invited our attention to the following sections of U.P. Urban Planning and Development Act, 1973 (hereinafter referred as UPUPDA) under which the assessee was incorporated by U. P. State Government. i. Members are ex-officio Government Officers of U.P. State Government - Section 3 of UPUPDA. ii. Object is town planning and urban development - Section 7 of UPUPDA. iii. Submission of master plan/ zonal plan mandatory for approval from State Government - Section 10 of UPUPDA. iv. Land and buildings cannot be used in contravention of plans- Section 16 of UPUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Authority (YEIDA) dated 21.04.2017 wherein the Hon'ble court held that YEIDA was engaged in charitable activity after in depth analysis on what would construe charitable activity and whether the income from disposal of immovable property, cess/ fee and other such considerations would cease it from having its objects of general public utility for grant of registration u/s 12AA of Income-tax Act. It was submitted that Hon'ble Court, in the case of YEIDA, has considered the insertion of proviso to section 2(15) of the Act and has followed the judgment of Hon'ble Allahabad High Court in the case of assessee itself. It was submitted that this order was common order for YEIDA and Greater Noida Industrial Development Authority (GNIDA). It was submitted that GNIDA had also applied before CBDT for certificate under 10(46) of Income-tax Act and its plea was rejected. The Hon ble Delhi High Court in a Writ Petition (Civil) No. 732/2017 dated 26.02.2018 held that the activities of GNIDA were not commercial in nature and hence, directed CBDT to grant certificate for the same. While deciding the said matter it came to the notice of Hon ble Court that GNIDA received money by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit as upheld by jurisdictional High Court and hence, the assessee qualifies the test laid by Supreme Court in case of Surat Art Silk Cloth Manufacture Association (1997) 121 ITR 1. Learned counsel for the assessee further submitted that all the cases relied upon by Revenue to hold that activities of the assessee are commercial in nature, does not apply to the facts and circumstances of assessee. It was submitted by learned counsel that at the time of judgment of Andhra Pradesh State Road Transport Corporation [(1986) 159 ITR 1 (SC)], there was no provision in the Income-tax Act as to what would happen on dissolution or transfer of assets by a charitable trust. However, now the accreted income is made taxable in hands of assessee on dissolution / transfer in contravention of the provisions of section 115TD of Income-tax Act inserted by Finance Act 2016. As on date the assessee is operational and there is no notification from U.P. State Government of its intention to dissolve assessee (LDA). Learned counsel for the assessee, differentiating the case of Jammu Development Authority relied upon by revenue against it, submitted that the case of Jammu Development Authority was for can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining infrastructure development reserve fund wherein, in accordance with notification of Government, the assessee has been crediting the funds instead of routing through the profit loss account as this amount has to be spent for the purposes of projects as specified by a committee framed by State Government and authorities below, while denying exemption u/s 11 have disallowed this amount also which is not in accordance with law and have further made certain disallowances, which is not in accordance with law and which needs to be deleted. 6. Learned D. R., on the other hand, vehemently supported the orders of the authorities below and submitted that the objects of the assessee may at first appear to be of general public utility, however, sale and purchase of property that too through auction or draw, charging interest on late payments, collecting fee cess, make it a commercial transaction. Hence, in light of Surat Art Silk Cloth Manufacturers Associates (121 ITR 1 [1979]) within terms and conditions stipulated u/s 2(15), it cannot be said to be a charitable organization. Learned D. R. placed reliance in the case of Andhra Pradesh State Road Transport Corporation (1986) 159 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of MDA YEIDA and submitted that these questions of law are similar to the issues involved in these appeals. With regard to reliance placed by the Revenue in case of Jammu Development Authority, it was submitted that the case of Jammu Development Authority is on cancellation of registration u/s 12AA and in case of assessee, the registration was never cancelled. As regards case law of Kanpur Development Authority, it was submitted that the said order has been recalled by Hon'ble Tribunal vide order dated 17/02/2018. 8. We have heard the rival parties and have gone through the material placed on record. The main objective of the assessee authority is to develop houses at affordable cost for the public and to develop public utilities. The assessee Authority was created by enactment of Uttar Pradesh Urban Development and Planning Act, 1973 by Notification No. 1892/XXXVI- 2-21(DA)-72 dated 13.09.1974. In Uttar Pradesh Urban Development and Planning Act, it is mentioned that this Act is being enacted to tackle the problems of town planning and urban development. The assessee Authority has been constituted by the State Government and assessee Authority has no power to take de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved, all the decisions are made within the ambit of law for the overall development of the city, however, private colonizers/ Real Estate Developers, focus mainly on their personal benefits. 9.1 Due to these reasons the development work undertaken by the assessee authority cannot be compared with the development work undertaken by the private colonizers / Real Estate Developers. The assessee has also carried out various projects in the city of Lucknow for the welfare of general public which a private colonizer will never do. i. Numerous parks in the city like Lohia Park in Gomti Nagar, Neebu Park, Hati Park, in Chowk and various other parks in Lucknow were build and are maintained by the appellant Authority. Further, the Gomti River Front developed in Lucknow is now being maintained by the appellant Authority. The parks developed by appellant Authority are open for public irrespective of the place where they live, however, a Real Estate Developer only develops the park that are in its premises and these parks are accessible to its customers only. ii. Roads, sewage system, etc. which are build and street lights which are installed by the appellant Authority for the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a valid charitable trust. Therefore, irrespective of the fact that LDA receipts include consideration from sale of property, rent, interest, etc., LDA has to be considered as charitable trust in light of abovementioned judgments of Hon ble Supreme Court and Hon ble Allahabad High Court in its own case since its predominant object are to promote welfare of general public and L.D.A. cannot be compared with and treated like a real estate developer. Treating L.D.A. like a real estate developer will defeat the very purpose of establishing L.D.A. by an Act of Legislatures. 9.3 From the above facts, it is clear that the Lucknow Development Authority is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in the nature of rendering any service in relation to any trade, commerce or business for a fee or any other consideration. The nature of activities of the assessee Authority, the purpose and manner of its formation and the objects for which it has been created goes to show that it is not engaged in carrying on any activity in the nature of trade, commerce or business. The objects of the assessee Authority do not, expressly or impliedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above extract that the intent of the Finance Minister in bringing such an amendment is to target those nongenuine NGOs who carry on activities in the nature of trade or business under the grab of charity. The appellant Authority is a Government body. It does not fall under the category of non-genuine NGOs. The Learned Assessing Officer has taken a narrow and myopic view, by holding that the assessee Authority is carrying on business, which needs to be corrected. 9.7 While dealing with cases such as of L.D.A., a Government body, a narrow and myopic view should not be adopted. While interpreting the terms trade, commerce or business, in the Commentary on Income Tax Law by Chaturvedi Pithisaria, business has been defined / explained as under (Page 1321; Vol I; Fifth edition): (1) Business The word business is one of large and indefinite import and connotes something which occupies the time, attention and labour of a person normally with the object of making profit [JesselM.R. In smith V. Anderson, (1880) 15 Ch D 247, 258; State of Andhra Pradesh v. H. Abdul Bakshi Bros, (1964) 15 STC 644, 547 (SC); CIT v. MotilalHirabaiSpng.And Wvg. Co. Ltd., (1978) 113 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on continuously in an organized manner with a set purpose and with a view to earn profit is business [CIT v. M.P. Bazaz, (1993) 200 ITR 131, 135, 136 (Ori)]. Also see, Khoday Distilleries Ltd. v. State of Karnataka, JT 1994 (6) SC 588, 625-26. (ii) Meaning and Concept of Trade and Commerce In the Commentary on Income Tax law by Chaturvedi Pithisaria, trade and commerce have been defined as under (Page 1323; Vol 1; Fifth Edition): Trade or Commerce- The definition of 'trade' does not find its place in the Act. The dictionary meaning of 'trade' as per dictionary of Webster's New Twentieth Century Dictionary, (Second edition), means amongst others, 'A means of earning one's living, occupation or work'. In Black's Law Dictionary also trade' means a business which a person has learnt or he carries on for procuring subsistence or profit; occupation or employment, etc. [CIT v. Assam Hard Board Ltd., (1997)224 ITR 31.8, 320 (Gauh)]. Trade in its primary meaning is the exchanging of goods for goods or goods for money; in its secondary meaning it is repeated activity in the nature of carried business on with a profit motive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that the two essential requirements for any activity to be considered asbusiness are (i) it must be a continuous course of activity; and (ii) it must be carried on with a profit motive. Similar findings have been made in the following case laws: (1) Barendra Prasad Ray v. ITO (1981) 129 ITR 295 (SC) (2) LalaIndra Sun In Re (1940) 8 ITR 187 (Alld) (3) NarasinghaKar CO. v, CIT (1978) 113 ITR 712(Ori) 9.11 From the aforesaid, it is clear that the appellant Authority is not engaged in carrying on any activity in the nature of trade, commerce or business or any activity in rendering any service in relation to any trade, commerce or business in as much as profit motive is one of the essential conditions of business, trade or commerce as stated above, whereas the L.D.A. has no profit motive. It has been running schemes for various sections of the society in pursuance of the Constitution of India under which every State Government is responsible for Town Planning and for the welfare of the public. Alongwith with affordable houses public utilities are developed as per the plan of the State Government. In recent times houses are being provided to economically w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of sale consideration, sundry receipts, interest, rent etc. is arising out of sole purpose of growth and development of the areas and not to earn profit. 11. We further find that in the case of assessee itself in assessment year 2005-06, the Hon'ble Allahabad High Court in a bunch of cases vide order dated 16/09/2013 has held the assessee to be engaged in charitable activities. Though the year involved in this case is before the insertion of proviso to section 2(15) but the Hon'ble High Court held that even after insertion of proviso to section 2(15), the assessee cannot be said to be engaged in carrying on business activities. The relevant findings of Hon'ble court are reproduced below: We have heard learned counsel for the parties and gone through the material available on record. It is undisputed fact that the assessee is a Statutory Authority which was established under the provisions of the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee were enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [CIT vs. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity [Addl. CIT vs. Surat Art Silk Cloth Manufacturer Association [1980] 121 ITR 1 (SC)]. Applying the ratio laid down in the case of CIT vs. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC), where of in the present case, the Autonomous Authority was established for the purpose of predominant of development the area and provide to shelter to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). The aims and objects of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by not considering the amended provision of Section 2(15) of the Income Tax Act, 1961. In which there is a provision for charging tax if total receipt of entities engaged in advancement of general public utility exceeds ₹ 10 Lakh. Whereas the assessee has shown excess of income over expenditure of ₹ 16,69,28,027/- by sales of Plots, shops and flats and its activities are in the nature of trade, commerce or business and amended provision of section 2(15) of the Income Tax Act 1961 is squarely applicable in this case. (b.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified by ignoring the fact held 2 in the case of M/s Safdurjung Enclave Educational Society Vs. Municipal Corporation Delhi (1992) 3 SCC 390, in which the Hon'ble Supreme Court of India has held that the activities run on commercial lines do not fall within the ambit of charitable object. (c.) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of the CIT(A) and ignoring the fact that the activities of the authority are hit by Section 2(15) of Income Tax Act, 1961 and therefore the applicant is not entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een constituted under the same Act of Uttar Pradesh Urban Development and Planning Act, 1973 and its objects are similar to the objects of the assessee. Therefore, this judgment of Hon'ble Allahabad High Court in the case of Moradabad Development Authority is directly applicable to the assessee. The arguments of Revenue that in this case the issue before the court was not regarding denial of assessment u/s 11 of the Act but was on the issue of grant of registration u/s 12A of the Act is not correct. 11.2 To negate the arguments of the Revenue that the case law of Yamuna Expressway related to only for registration u/s 12A of the Act, it is important to visit the questions of law framed by Hon'ble Allahabad High Court in the case of Yamuna Expressway Industrial Development Authority, which for the sake of completeness are reproduced below: (i) Whether on the basis of the facts of the case and the law applicable, the Tribunal was justified in allowing the appeal and issuing a direction to the authority concerned to register the respondent as being entitled to exemption under the provisions of section 12AA of the Income Tax Act, 1961 and read with section 2(15) thereof ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 01/10/2021 and 16/09/2021 has allowed the appeal of the assessee and has granted exemption u/s 11 of the Act. As regards the argument of Revenue that assessee has violated the provisions of section 13, we find that the act of the assessee in allowing some rebate to it s employees and reservation of some plots for it s employees does not amount to violation of section 13 as section 13(1)(c) states that income of the trust or organization will not be exempt u/s 11, if any, of the funds or income of the trust is used or applied directly or indirectly for the persons referred to in sub section (3) of section 13. Sub section (3) of Section 13 is reproduced below: (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely:- (a) the author of the trust or the founder of the institution; [(b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution upto the end of the relevant previous year exceeds [fifty thousand] rupees;] (c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act whereas in the cases before us the assessee has given benefit to employees who are not specified persons as mentioned in section 13(3) of the Act. 11.6 In the case law of Maruti Centre for Excellence, the assessee was rendering training to its members who, in turn were giving donations to the assessee exceeding an amount of ₹ 50,000/- therefore, those persons were the persons listed in sub-clause (b) of Section 13(3) and that is why that case law was decided in favour of the Revenue whereas in the present case, it is undisputed fact that the assessee was allowing discount to its employees, therefore, this case law is not applicable. As regards the applicability of case law of Noida Entrepreneurs Association, we find that in that case a CBI inquiry had been conducted and there were gross violation of funds of the assessee which is not in the present case. Therefore, in view of the above, we hold that the assessee had not violated the provisions of section 13(3) of the Act. In view of the above facts and circumstances and judicial precedents, we hold that the assessee is eligible for exemption u/s 11 of the Act and Assessing Officer is directed to allow the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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