Dy. Director of Income-tax (Exemption) v. Ahmedabad Urban Development Authority
[Citation -2020-LL-0217-71]

Citation 2020-LL-0217-71
Appellant Name Dy. Director of Income-tax (Exemption)
Respondent Name Ahmedabad Urban Development Authority
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 17/02/2020
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags eligible for exemption • charitable institution • principle of mutuality • general public utility • charitable activities • charitable activity • commercial activity • search and seizure • charitable purpose • profit motive
Bot Summary: In the aforesaid decision, after considering the decision of the Hon'ble Supreme Court in the case of Commissioner of Sales Tax vs. Sai Publication Fund reported in 258 ITR 70(SC), it is held by Page 4 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT the Delhi High Court that thus, if the dominant activity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business. Business activity has an important pervading element of self interest, though fair dealing should and can be present, whilst charity or charitable activity is antithesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. 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. 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. Under Page 18 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT 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. 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, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.


C/TAXAP/273/2011 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 273 of 2011 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/ and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Sd/ 1 Whether Reporters of Local Papers may be allowed NO to see judgment ? 2 To be referred to Reporter or not ? NO 3 Whether their Lordships wish to see fair copy NO of judgment ? 4 Whether this case involves substantial question NO of law as to interpretation of Constitution of India or any order made thereunder? DY. DIRECTOR OF INCOME TAX (EXEMPTION) Versus AHMEDABAD URBAN DEVELOPMENT AUTHORITY Appearance: MRS MAUNA M BHATT for Appellant(s) No. 1 MR B S SOPARKAR for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 17/02/2020 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of Income Tax Act, 1961, is at instance of Revenue and is directed against Page 1 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT order passed by Income Tax Appellate Tribunal, 'A' Bench, Ahmedabad, dated 5th August 2010, in ITA No.1835/Ahd/2010 for Assessment Year 2007-08. 2. This Tax Appeal came to be admitted on following substantial questions of law : Whether Tribunal below committed substantial error of law in cancelling order of Director of Income Tax (Exemption) passed under Section 12-AA(3) of Income Tax Act, by totally overlooking amendment effected in nature of first proviso to Section 2(15) of Act, with effect from April 01, 2009. 3. In view of judgment rendered by coordinate bench of this Court in case of very same assessee in Tax Appeal No.423 of 2016 and allied Tax Appeals, this Tax Appeal should fail and is liable to be dismissed. 4. We find reference of judgment rendered by coordinate bench of this Court in case of Ahmedabad Urban Development Authority, in judgment rendered by coordinate bench of this Court in case of Commissioner of Income Tax v. Gujarat Industrial Development Corporation (Tax Appeal No.380 of 2017 with Tax Appeal No.381 of 2017 to Tax Appeal No.382 of 2017, decided on 28th June 2017). We quote para-16 of said judgment thus : 16.1 In para 12.2 to 15.1 of said decision, Division Bench of this Court has observed and held as under :- Page 2 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT 12.2 Whether activities of appellant AUDA can be said to be in nature of trade, commerce or business as occurring in first proviso to Section 2(15) of Act, few decisions of Hon'ble Supreme Court as well as other High Courts are required to be referred to at this stage. 12.3 In case of Khoday Distilleries Ltd & Ors. vs. State of Karnataka & Ors., reported in (1995) 1 SCC 574, Hon'ble Supreme Court had occasion to consider word "trade". In said decision, Hon'ble Supreme Court has held that "the primary meaning of word "trade" is exchange of goods for goods or goods for money". 12.4 In case of State of Andhra Pradesh vs. Abdul Bakhi & Bros., reported in 1964(5) STC 644 (SC) while considering word "business", Hon'ble Supreme Court has held that "the word "business" was of indefinite import and in taxing statute, it is used in sense of occupation, or profession which occupies time, attention or labour of person, and is clearly associated with object of marking profit". 12.5 In case of Institute of Chartered Accountants of India (supra) while considering whether activities of Indian Trade promotion organization can be said to be in nature of "business", despite Page 3 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT fact that said organization was collecting rent for providing space at trade, fair and exhibitions and though was receiving income by way of sale of tickets and income from tickets and sale in Pragati Maidan etc., after considering various decisions of Hon'ble Supreme Court as well as decisions of other High Courts, it is held that activities of said organization cannot be considered as "business". While holding so, Delhi High Court has observed and held as under: activity would be considered 'business' if it is undertaken with profit motive, but in some cases, this may not be determinative. Normally, profit motive test should be satisfied, but in given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that activity undertaken is in fact in nature of business. 12.6. In aforesaid decision, after considering decision of Hon'ble Supreme Court in case of Commissioner of Sales Tax vs. Sai Publication Fund reported in (2002) 258 ITR 70(SC), it is held by Page 4 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT Delhi High Court that "thus, if dominant activity of assessee was not business, then any incidental or ancillary activity would also not fall within definition of business." In para 64, 67, 69, 70, 71 and 72 Delhi High Court has observed and held as under: 64. It is not necessary that person should give something for free or at concessional rate to qualify as being established for charitable purpose. If object and purpose of institution is charitable, fact that institution collects certain charges, does not alter character of institution. 67. expressions trade, commerce and- business as occurring in first proviso to section 2(15) of Act must be read in context of intent and purport of section 2(15) of Act and cannot be interpreted to mean any activity which is carried on in organized manner. purpose and dominant object for which institution carries on its activities is material to determine whether same is business or not. purport of first proviso to section 2(15) of Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for consideration or fee. object of introducing first proviso is to exclude organizations Page 5 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT which are carrying on regular business from scope of charitable purpose. purpose of introducing proviso to Section 2(15) of Act can be understood from Budget Speech of Finance Minister while introducing Finance Bill 2008. relevant extract to Speech is as under : Charitable purpose includes relief of poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose. Obviously, this was not intention of Parliament and, hence, I propose to amend law to exclude aforesaid cases. Genuine charitable organizations will not in any way be affected.' expressions business, trade or commerce as used in first proviso must, thus, be interpreted restrictively and where dominant object of organization is charitable any incidental activity for furtherance of object would not fall within expressions business, trade or commerce. 69. In case of Addl. Commissioner of Page 6 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT Income Tax v. Surat Art Silk Cloth Manufacturers : [1980] 121 ITR 1 (SC), Supreme Court held as under: test which has, therefore, now to be applied is whether predominant object of activity involved in carrying out object of general public utility is to sub-serve charitable purpose or to earn profit. Where profit making is predominant object of activity, purpose, though object of general public utility would cease to be charitable purpose. But where predominant object of activity is to any out charitable purpose and not to earn profit, it would not lose its character of charitable purpose merely be cause some profit arises from activity. 70. Although in that case statutory provisions being considered by Supreme Court were different and utilization of income earned is, now, not relevant consideration in view of express words of first proviso to Section 2 [15] of Act, nonetheless test of dominant object of entity would be relevant to determine whether entity is carrying on business or not. In present case, there is little doubt that objects of activities of petitioner are entirely for charitable purposes. Page 7 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT WP(C) 1872/13 Page 48 of 55 Finally in ICAI(II) (supra), this court, with reference to H. Abdul Bakhi and Bros (supra) observed as under : 71. Although, it is not essential that activity be carried on for profit motive in order to be considered as business, but existence of profit motive would be vital indicator in determining whether organisation is carrying on business or not. In present case, petitioner has submitted figures to indicate that expenditure on salaries and depreciation exceeds surplus as generated from holding coaching classes. In addition, petitioner institute provides study material and other academic support such as facilities of library without any material additional costs. Supreme Court in case of State of Andhra Pradesh v. H. Abdul Bakhi and Bros. (supra) held as under: expression "business" though extensively used word of indefinite import, in taxing statutes it is used in sense of occupation, or profession which occupies time, attention and labour of person, normally with object of making profit. To regard activity as business there must be course of dealings, either actually continued or contemplated to be continued with profit motive, and not for sport or pleasure. Page 8 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT 72. There is nothing on record to indicate assertion of petitioner that its activities are not fuelled by profit motive is incorrect. Absence of profit motive, though not conclusive, does indicate that petitioner is not carrying on any business. 12.7. Identical question came to be considered by Delhi High Court in case of Bureau of India Standard vs. Director General of Income Tax (Exemptions) reported in (2013) 212 Taxman 210 (Delhi). In said decision, Delhi High Court was considering whether activities of Bureau of Indian Standards (supra) in granting licenses and trading certificates and charging amounted to carrying on business, trade or commerce and while considering said question, it is observed as under: In these circumstances,rendering any service in relation to trade, commerce or business cannot, in opinion of Court, receive such wide construction as to enfold regulatory and sovereign authorities, set up under statutory enactments, and tasked to act as agencies of State in public duties which cannot be discharged by private bodies. Often, apart from controlling or parent statutes, like BIS Act, these statutory bodies (including BIS) are empowered to frame rules or regulations, Page 9 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT exercise coercive powers, including inspection, raids; they possess search and seizure powers and are invariably subjected to Parliamentary or legislative oversight. primary object for setting up such regulatory bodies would be to ensure general public utility. prescribing of standards, and enforcing those standards, through accreditation and continuing supervision through inspection etc., cannot be considered as trade, business or commercial activity, merely because testing procedures, or accreditation involves charging of such fees. It cannot be said that public utility activity of evolving, prescribing and enforcing standards, involves carrying on of trade or commercial activity. 12.8 Circular No.11 of 2008 issued by CBDT fell for consideration by Delhi High Court in case of M/s G.S. 1 India v. Director General of Income-tax (Exemption) and Another : WP(C) 7797/2009, decided on 26.09.2013 (2013) 219 Taxman 205. It is held that even as per said circular, proviso to Section 2(15) of Act is applicable to assessee, who are engaged in commercial activities i.e. carrying on business, trade or commerce, in garb of 'public utilities' to avoid tax liability as it was noticed that object 'general public utility' was sometimes used as mask or device to hide true purpose, which was 'trade, commerce or business'. Thus, it is evident that introduction of proviso to Section 2(15) by virtue of Finance Act, Page 10 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT 2008 was directed to prevent unholy practice of pure trade, commerce and business entities from masking their activities and portraying them in garb of activity with object of general public utility. It is not designed to hit at those institutions, which had advancement of objects of general public utility at their hearts and were charity institutions. attempt was to remove masks from entities, which were purely trade, commerce or business entities, and to expose their true identities. In case of M/s G.S. 1 India (Supra), in para 21, 22 and 27, Delhi High Court has observed and held as under : "21. ... As observed above, legal terms, trade, commerce or business in Section 2(15), mean activity undertaken with view to make or earn profit. Profit motive is determinative and critical factor to discern whether activity is business, trade or commerce. court further held : 22. Business activity has important pervading element of self interest, though fair dealing should and can be present, whilst charity or charitable activity is antithesis of activity undertaken with profit motive or activity undertaken on sound or recognized business principles. Charity is driven by altruism and desire to serve others, though element of self Page 11 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. antiquated definition of charity, which entails giving and receiving nothing in return is outdated. mandatory feature would be; charitable activity should be devoid of selfishness or illiberal spirit. Enrichment of oneself or self-gain should be missing and predominant purpose of activity WP(C) 1872/13 Page 52 of 55 should be to serve and benefit others. small contribution by way of fee that beneficiary pays would not convert charitable activity into business, commerce or trade in absence of contrary evidence. Quantum of fee charged, economic status of beneficiaries who pay, commercial value of benefits in comparison to fee, purpose and object behind fee etc. are several factors which will decide seminal question, is it business ? 27. As observed above, fee charged and quantum of income earned can be indicative of fact that person is carrying on business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. petitioner has to be substantially Page 12 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT self-sustaining in long term and should not depend upon government, in other words taxpayers should not subsidize said activities, which nevertheless are charitable and fall under WP(C) 1872/13 Page 53 of 55 residuary clause general public utility. impugned order does not refer to any statutory mandate that charitable institution falling under last clause should be wholly, substantially or in part must be funded by voluntary contributions. No such requirement has been pointed out or argued. practical and pragmatic view is required when we examine data, which should be analyzed objectively and narrow and coloured view will be counter-productive and contrary to language of Section 2(15) of Act. 12.9 While upholding constitutional validity of proviso to Section 2(15) of Act, Division Bench of Delhi High Court in case of Indian Trade Promotion Organization vs. Director of Income Tax (Exemption) in WP(C) No.1872 of 2013 decided on 22.01.2015 has observed in para 58 as under: "As defined in Section 2(15) cannot be construed literally and in absolute terms. It has to take colour and be considered in context of Section 10(23C)(iv) of said Act. It is also clear that if literal interpretation is given to Page 13 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT proviso to Section 2(15) of said Act, then proviso would be at risk of running fowl of principle of equality enshrined in Article 14 of Constitution India. In order to save Constitutional validity of proviso, same would have to be read down and interpreted in context of Section 10(23C)(iv) because, in our view, context requires such interpretation. correct interpretation of proviso to Section 2(15) of said Act would be that it carves out exception from charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration. In both activities, in nature of trade, commerce or business or activity of rendering any service in relation to any trade, commerce or business, dominant and prime objective has to be seen. If dominant and prime objective of WP(C) 1872/13 Page 54 of 55 institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in nature of trade, commerce or business or indirectly in rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim Page 14 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT its object to be 'charitable purpose'. On flip side, where institution is not driven primarily by desire or motive to earn profits, but to do charity through advancement of object of general public utility, it cannot but be regarded as institution established for charitable purposes. 13. Applying aforesaid decisions to facts of case on hand and with respect to activities of AUDA Ahmedabad Urban Development Authority under provisions of Gujarat Town Planning Act by no stretch of imagination, it can be said that activities of assessee (AUDA) can be said to be in nature of trade, commerce or business and/or its object and purpose is profiteering. Merely because under statutory provisions and to meet with expenditure of Town Planning Scheme and/or providing various services under Town Planning Scheme, such as road, drainage, electricity, water supply etc. if assessee is permitted to sale plots (land) to extent of 15% of total area under Town Planning Scheme and while selling said plots they are sold by holding public auction, it cannot be said that activities of assessee is profiteering, to be in nature of trade, commerce and business. 13.1 In case of Lucknow Development Authority, Gomti Nagar (supra), it is held by Allahabad High Page 15 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT Court that activities of authority cannot be said to be in nature of trade, commerce or business and/or profiteering and therefore, proviso to Section 2(15) of Act shall not be applicable. 13.2 Similar, view has been expressed by Rajasthan High Court in case of Commissioner of Income Tax-I, Jodhpur vs. Jodhpur Development Authority, Jodhpur Tax Appeal No. 63 of 2012 decided on 5.7.2016. 14. Considering aforesaid facts and circumstances and more particularly, considering fact that assessee is statutory body Urban Development Authority constituted under provisions of Act, constituted to carry out object and purpose of Town Planning Act and collects regulatory fees for object of Acts; no services are rendered to any particular trade, commerce or business; whatever income is earned / received by assessee even while selling plots (to extent of 15% of total area covered under Town Planning Scheme) is required to be used only for purpose to carry out object and purpose of Town Planning Act and to meet with expenditure while providing general utility service to public such as electricity, road, drainage, water etc. and even entire control is with State Government and even accounts are also subjected to audit and there is no element of profiteering at all, activities of Page 16 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT assessee cannot be said to be in nature of trade, commerce and business and therefore, proviso to Section 2(15)of Act shall not be applicable so far as assessee is concerned and therefore, assessee is entitled to exemption under Section 11 of Income Tax Act. Therefore, question no.1 is to be held in favour of assessee and against revenue. 15. Now, so far as another question which is posed for consideration of this Court i.e. whether while collecting cess or fees, activities of assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for reasons stated above, merely because assessee is collecting cess or fees which is regulatory in nature, proviso to Section 2(15)of Act shall not be applicable. As observed herein above neither there is element of profiteering nor same can be said to be in nature of trade, commerce or business. At this stage, decision of Division Bench of this Court in case of Sabarmati Ashram Gaushala Trust (supra) is required to be referred to. In case before Division Bench, assessee Trust Sabarmati Ashram Gaushala Trust was engaged in activity of breeding milk cattle; to improve quality of cows and oxen and other related activities. Assessing Officer denied exemption to trust under Section 11 of Act on ground that considerable income was generated from activities of milk production and sale and therefore, considering proviso to Page 17 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT Section 2(15) of Act, said Trust-assessee was denied exemption under Section 11 of Act. While holding that activities of assessee trust still can be said to be for charitable purpose within meaning of Section 2(15) of Act and same cannot be said to be in nature of trade, commerce or business for which proviso to Section 2(15) of Act is required to be applied. In para 6, 7, 8 and 12, it is observed and held as under : 6. legal controversy in present Tax Appeal centers around first proviso. In plain terms, proviso provides for exclusion from main object of definition of term Charitable purposes and applies only to cases of advancement of any other of general general public utility. If conditions provided under proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from definition of charitable trust. However, for application of proviso, what is necessary is that entity should be involved in carrying on activities in nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for cess or fee or any other consideration. In such situation, nature, use or application, or retention of income from such activities would not be relevant. Under Page 18 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT circumstances, important elements of application of proviso are that entity should be involved in carrying on activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for cess or fee or any other consideration. Such statutory amendment was explained by Finance Ministers speech in Parliament. Relevant portion of which reads as under : I once again assure House that genuine charitable organizations will not in any way be affected. CBDT will, following usual practice, issue explanatory circular containing guidelines for determining whether any entity is carrying on any activity in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether purpose is charitable purpose will depend on totality of facts of case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by amendment and their activities would continue to be regarded as advancement of any other object of general public utility. 7. In consonance with such assurance given by Finance Minister on floor of House, Page 19 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT CBDT issued Circular No. 11 of 2008 dated 19th December 2008 explaining amendment as under : 3. newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility ie., fourth limb of definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of Act if they carry on commercial activities. Whether such entity is carrying on any activity in nature of trade, commerce or business is question of fact which will be decided based on nature, scope, extent and frequency of activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on ground that their objects are for charitable purpose as these are covered under any other object of general public utility. Under principle of mutuality, if trading takes place between persons who are associated together and contribute to common fund for financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to persons forming such association is not Page 20 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT chargeable to tax. In such cases, there must be complete identity between contributors and participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under purview of proviso to section 2(15) owing to principle of mutuality. However, if such organizations have dealings with non members, their claim to be chargeable organizations would now be governed by additional conditions stipulated in proviso to section 2(15). 3.2 In final analysis, however, whether assessee has for its object advancement of any other object of general public utility is question of fact. If such assessee is engaged in any activity in 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 case, object of general public utility will be only mask or device to hide true purpose which is trade, commerce or business or 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. Page 21 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT Assessees, who claim that their object is charitable purpose within meaning of section 2(15), would be well advised to eschew any activity which is in nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business. 8. What thus emerges from statutory provisions, as explained in speech of Finance Minister and CBDT Circular, is that activity of trust would be excluded from term charitable purpose if it is engaged in any activity in nature of trade, commerce or business or renders any service in relation to trade, commerce or business for cess, fee and/or any other consideration. It is not aimed at excluding genuine charitable trusts of general public utility but is aimed at excluding activities in nature of trade, commerce or business which are masked as charitable purpose. 12. All these were objects of general public utility and would squarely fall under section 2 (15) of Act. Profit making was neither aim nor object of Trust. It was not principal activity. Merely because while carrying out activities for purpose of achieving objects of Trust, certain incidental surpluses were generated, would not Page 22 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT render activity in nature of trade, commerce or business. As clarified by CBDT in its Circular No. 11/2008 dated 19th December 2008 proviso aims to attract those activities which are truly in nature of trade, commerce or business but are carried out under guise of activities in nature of public utility. 15.1. Applying aforesaid decision to facts of case on hand and object and purpose for which assessee is established/constituted under provisions of Gujarat Town Planning Act and collection of fees and cess is incidental to object and purpose of Act, even case would not fall under second part of proviso to Section 2(15) of Act. 15.2 Considering aforesaid facts and circumstances of case, we are of opinion that learned Tribunal has committed grave error in holding activities of assessee in nature of trade, commerce or business and consequently holding that proviso to Section 2(15) of Act shall be applicable and therefore, assessee is not entitled to exemption under Section 11 of Act. For reasons stated above, it is held that proviso to Section 2(15) of Act shall not be applicable so far as assessee-AUDA is concerned and as activities of assessee can be said to be providing general public utility services, assessee is entitled to Page 23 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 C/TAXAP/273/2011 JUDGMENT exemption under Section 11 of Act. Both questions are therefore, answered in favour of assessee and against revenue. 5. Appeal is accordingly dismissed. substantial question of law is answered in favour of assessee and against Revenue. (J. B. PARDIWALA, J.) (BHARGAV D. KARIA, J.) MOINUDDIN Page 24 of 24 Downloaded on : Tue Apr 21 10:34:32 IST 2020 Dy. Director of Income-tax (Exemption) v. Ahmedabad Urban Development Authority
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