DCIT, EXEMPTION CIRCLE, GHAZIABAD, GHAZIABAD V. AGRA DEVELOPMENT AUTHORITY, AGRA

ITA 1438/DEL/2025

AI Insights

The case involves multiple appeals by the Deputy Commissioner of Income Tax (DCIT) against the Agra Development Authority concerning the taxability of the Authority's income for several assessment years. The core issue was whether the activities of the Agra Development Authority, which included development and sale of properties, constituted 'charitable purposes' under Section 2(15) of the Income Tax Act, 1961, thereby qualifying for tax exemptions under Sections 11 and 12. The CIT(A) had previously ruled in favor of the Authority, a decision contested by the Revenue in the Tribunal. The Tribunal's decision relied heavily on precedents set by the High Court and Supreme Court, affirming the charitable status of similar statutory bodies.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840243 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Appeal Filed On: 08-03-2025
• Other Referred Cases: Lucknow Development Authority vs. CIT, Ahmedabad Urban Development Authority vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SINGH
• Assessee Lawyers: RAJINDER KAUR; RELYING
• Keywords: Set aside; Business income; Business expenditure; Question of law; Capital Gains; Charitable institution; Benefit of exemption; Maximum Marginal Rate
• Section: 148; 143(3); 11; 12AA; 12A; 63; 12

Judgement Text

"1 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘E’ NEW DELHI BEFORE SHRI YOGESH KUMAR U.S, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No. 1461/Del/2025 ( A.Y 2012-13) ITA No. 1462/Del/2025 ( A.Y 2014-15) ITA No. 1463/Del/2025 ( A.Y 2016-17) ITA No. 1438/Del/2025 ( A.Y 2017-18) ITA No. 1439/Del/2025 ( A.Y 2018-19) DCIT Exemption Circle, CGO Complex, Hapur Chungi, Ghaziabad, Uttar Pradesh (APPLICANT) Vs. Agra Development Authority Jaipur House, Civil Lines, Agra, Uttar Pradesh PAN: AAALA0081F (RESPONDENT) ORDER PER YOGESH KUMAR, U.S. JM: The captioned Appeals are filed by the Revenues against the orders of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 12/12/2024pertaining to Assessment Years A.Y 2012-13, A.Y 2014-15, A.Y 2016-17, A.Y 2017-18 and A.Y 2018-19 respectively. 2. As the Department preferred the captioned Appeals against single Assessee having identical issues to be decided, the above appeals are heard together. For the sake of convenience grounds of Appeal for Assessment Year 2012-13 are reproduced as under:- Appellant by Sh. Deepak Singh, Adv Respondent by Ms. Rajinder Kaur, CIT DR. Date of Hearing 25.02.2026 Date of Pronouncement 27.02.2026 Printed from counselvise.com 2 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority “1. The Ld. CIT(A) has erred in law and facts for the reason that the ld. CIT (A) has failed to appreciate correct facts of the case that the authority is engaged dominantly in the activity of development and sale of properties. Besides, it is observed that the aggrégate value of receipts from the activities referred to in the first proviso of section 2 (15) of the Act. 2. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CIT (A) has failed to appreciate correct facts of the case that the assessee does not fulfill the criteria for 'charitable purpose' and its activities cannot be regarded for charitable purposes due to the reason of being the nature of trade or commerce. 3. The Ld. CIT(A) has erred in law and facts for the reason that the Ld. CIT (A) has failed to appreciate correct facts of the case that the assessee has not fulfilled the conditions of section 11(2), though Form No. 10 has been filed but the source does not specify the amount set apart / accumulated. Similarly, as per section 11(4A), no separate books of accounts have been maintained and even violation of conditions specified under section 11(5) have been made. 4. The Ld. CIT(A) has also failed to appreciate the fact that the AO has rightly disallowed an amount of Rs. 25,20,38,704/- towards Infrastructure Fund which was directly credited to Infrastructure fund without crediting it to Income & Expenditure account as the same was should be in accordance with the government circular which defines the mode of usage of this fund and the method of creation as well. 5. The order of Ld. CIT(A) be cancelled and the order of the AO be restored.” 3. Brief facts of the case are that, the Assessee is an Urban Development Authority constituted under the U. P Urban and Planning and Development Act, 1973. The Assessee was constituted with the aim to promote and secure the development of areas under jurisdiction and the Assessee is registered u/s 12A the I.T. Act, 1961. In the years under consideration, Assessee filed the return of income disclosing income of Rs. Nil and claimed exemption u/s Printed from counselvise.com 3 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority 12A/12AA of the I.T. Act. The assessing officer in his Assessment Order has held that the activities carried out by the Assessee are not in the nature of charitable activities. Consequently, the AO taxed the income of the Assessee at maximum marginal rate. 4. Aggrieved by the assessment orders for Assessment Years 2012-13, 2014-15, 2015-16, 2017-18 and 2018-19, Assessee preferred Appeals before the Ld. CIT(A). The Ld. CIT(A) vide orders dated 12/12/2024, allowed the Appeals of the Assessee. As against the orders of the Ld. CIT(A), the Department preferred the captioned Appeals. 5. The Ld. Department's Representative vehemently contended that the Ld. CIT(A) failed to appreciate correct facts of the case that the Assessee is engaged dominantly in the activity of development and sale of properties. Besides, it is observed that the aggregate value of receipts from the activities referred to in the first proviso of section 2 (15) of the Act, thus relying on the assessment orders, sought for allowing the Appeal. 6. Per contra, the Ld. Department's Representative submitted that the Ld. CIT(A) has allowed the Appeal of the Assessee by relying on the settled position of law in the case of Lucknow Development Authority reported in (2014) 265 CTR 0433 and other judicial precedents. Printed from counselvise.com 4 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority Therefore, the Ld. CIT(A) committed no error in allowing the Appeal of the Assessee, thus submitted that the Appeal of the Revenue is liable to be dismissed. 7. We have heard both the parties and perused the material available on record. The Ld. CIT(A) deleted the addition made by the A.O. in all the above Assessment Years by relying on the Judgment of Hon'ble High Court in the case of Lucknow Development Authority. For the sake of ready reference, relevant portion of the order of the Ld. CIT(A) for Assessment Year 2017-18 is reproduced as under:- “5.4 The arguments of the AO and of the appellant on the impugned issue has been examined. In support of its claim, the appellant furnished the copy of assessment order dated 12.03.2024 for the A.Y. 2022-23 passed u/s 143(3) of the Act wherein the AO has accepted the status of the appellant as charitable organization. The stand of the AO on the impugned issue in subsequent years is testimony to the fact that the appellant was an organization engaged in charitable activities. 5.5 The appellant informed that the AO had requested the Ld. CIT Agra to cancel the registration of the appellant u/s 12AA of the Act on the ground that the appellant was engaged in the activities in the nature of trade and business. The issue was examined by the Ld. CIT and he withdrew the notice of cancelation. The appellant has furnished the evidences in this regard. It is seen that the power to cancel the registration lies with the CIT/PCIT and he has accepted the activities of the appellant as not constituting trade and commerce. 5.6 Like the appellant, the AO in the case of Lucknow Development Authority denied the claim of exemption. The matter was carried in Printed from counselvise.com 5 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority appeal. The identical issue in the case of Lucknow Development Authority arose before the jurisdictional High Court. The Hon’ble High Court in the case reported in (2014) 265 CTR 0433 has held as under: “On 22.04.2010, a Coordinate Bench of this Court has admitted the Appeal No. 149 of 2009, on the following substantial question of law:- \"Whether keeping the facts and circumstances of the case, the Tribunal had committed substantially illegal by holding that the income of the assessee is exempted under Section 11 of the Income Tax Act, though there is no condition that no profit should be earned by its activities and the profit earned will not be distributed amongst the stake holders and the finding of the Tribunal with regard to exemption under Section 12 of the Act is also substantially illegal ?\" On 26.03.2010, a Coordinate Bench of this Court has admitted the Appeal No.31 of 2010, on the following substantial question of law:- \"Whether by assuming registration under Section 12AA of the Income Tax Act and exempting income of the Assessee without considering the dispute in terms of Sections 11, 12 & 13 of the Income Tax Act coupled with nature of activities, the Tribunal has acted arbitrarily or substantially illegally ?\" On 16.12.2010, another Coordinate Bench of this Court has admitted the Appeal No.114 of 2010 on the following substantial question of law:- \"Whether the learned Income Tax Appellate Tribunal was correct in law in holding that without exhausting the provisions contained in section 143(2) of the Act the proceedings initiated by the Assessing Officer by issuing notice u/s 148 of the Act were not valid in the given facts and circumstances of the case\". Remaining two appeals were connected with the above-mentioned appeals. The facts and circumstances in all the appeals are identical. Hence, all the appeals are disposed of by this consolidated order for the sake of Printed from counselvise.com 6 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority brevity. However, the dates, figures, etc. have been taken from the leading ITA No. 149 of 2009 for adjudication of the present appeals. The brief facts of the case (ITA No. 149 of 2009) are that for the assessment year under consideration, the assessee has filed its return showing the NIL income and claimed exemption under Section 11 of the Income Tax Act, 1961, being an \"Authority\" as was notified by the Government of Uttar Pradesh under Section 4 of Uttar Pradesh Planning and Development Act, 1973 (for short, \"the Act\"). However, for the assessment year under consideration, the AO while passing the assessment order under Section 143(3) of the Act has observed that the assessee is not eligible for the benefit under Section 11 of the Act. The AO, finally, assessed the entire income as business income for the purpose of taxation. Being aggrieved, the assessee has filed appeal before the CIT(A), who after examining the entire issue directed the AO to compute the income of the assessee in the manner specified under Section 11 of the Act, by observing that on registration under Section 12AA has been granted to the assessee, the AO is bound by such grant of registration and he has necessarily computed the income under Section 11 of the Act by taking the different report in Form-10B. Not being satisfied, the Department has filed the appeal before the Tribunal and the Tribunal vide its impugned order has dismissed the appeals filed by the Department and as such, the Department has preferred the present appeals. With this backdrop, Sri D. D. Chopra, learned counsel for the Department has justified the orders passed by the AO. He submits that the assessee had applied for the registration as charitable institute under Section 12AA of the Act before the CIT, and the same was granted in pursuance to the orders dated 25.07.2005, passed by the Tribunal. Learned counsel further submits that while passing the assessment order under scrutiny, the Assessing Officer examined the nature of activities of the assessee and came to the conclusion that the entire activities of the assessee during the year under consideration are beyond the purview of charitable purposes and the income earned by the Printed from counselvise.com 7 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority assessee is not eligible for the benefits available under Section 11 of the Act. So, the Assessing Officer has assessed the income as business income and taxed accordingly. It is also a submission of the learned counsel that in case of a trust, if there is income derived from property held under trust or from voluntary contributions and to ascertain whether in the case of the assessee the character of income falls under any one of the two categories envisaged in Sections 11(1)(a), (b), (c), and (d), the factual activities being carried outby the assessee is to be examined. The assessee is engaged in the activity of acquiring land, development of plots and construction residential as well as commercial 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.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 objects/activities of the assessee were commercial in nature and they did not involve any charity; (iv)assessee also auctions plots at market rate and this does not involve any charity; and (v) in every activity of the assessee there was a scent of commercialization/profit motive and Printed from counselvise.com 8 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority infrastructure/facilities provided by assessee are also provided by private builders also. Learned counsel also submits that in view of above, the Tribunal has grossly erred in holding that the assessee authority was not established for commercial purposes, but for charitable purposes. Lastly, he made a request that the impugned orders passed by the Tribunal may kindly be set aside and restore the order passed by the Assessing Officer. On the other hand, Sri S.K. Garg, learned counsel for the assessee has supported the impugned order. He submits that as per Section 4 of the Uttar Pradesh Planning and Development Act, 1973, the assessee's object is \"an act to provide for the development of certain areas of Uttar Pradesh according to plan and for matters ancillary thereto\". The Act declared the assessee is an \"Authority\" under Section 7. The objects of the Authorities are as under:- \"7. Objects of the Authority-The objects of the Authority shall be to 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, mange 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 authorizing the disregard by the authority of any law for the time being in force. \"Learned counsel also submits that as per Section 58 of the Act, in case of dissolution of the authority, the entire assets will be vested with the State Government. So, no profit of interest is involved. Printed from counselvise.com 9 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority Up to the assessment year 2002-03, the assessee was also enjoying exemption from income tax, under Section 10(20A)of the Act, which reads as under:- \"Section 10.-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (20) the income of a local authority which is chargeable under the head \"Income from house property\", \"Capital gains\" or \"Income” from other sources\" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity within or outside its own jurisdictional area\". Explanation.-For the purposes of this clause, the expression \"local authority\" means- (i) Panchayat as referred to in clause (d) of Article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of Article 243P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in Section 3 of the Cantonments Act, 1924 (2 of 1924)\". So, the income was exempted from the taxation. Following the deletion of Section 10(20A) and insertion of Explanation in Section 10(20) by the Finance Act, 2002, applicable w.e.f. 01.04.2003, the assessee was advised to seek registration under Section 12A of the Act, which at the relevant time read as:- \"Section 12A. The provisions of Section 11 and Section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- Printed from counselvise.com 10 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under Section 12AA: Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Section 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied; (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. [(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of Section 11 and 12 shall Printed from counselvise.com 11 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.]\" Finally, learned counsel submits that the assessee's income is for \"charitable purposes\" as defined in Section 2(15) of the Act, which cover the objects for \"advancement of any other object for General Public Utility\". Section 2(15) of the Act is reproduced as under:- \"Section 2(15) \"charitable purpose\" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility [***]\" It is also a submission of the learned counsel for the assessee that the term \"objects of general public utility\" had been extensively dealt with and defined, to meant that where the objects of an institution cover the public at large or a section of public the objects are to be held to the \"objects of general public utility\" as meant in Section 2(15) of the Act. For this purpose, he relied on the ratio laid down in the case of Additional CIT, Gujarat vs. Surat Art Silk Cloth Manufacturer Association, (1980) 121 ITR 1. According to learned counsel, in the case of CIT vs. Lucknow Industrial Development Authority, Lucknow in ITA No. 156 of 2008 (copy of which is available on record), the Hon'ble High Court has held that the assessee being a \"Statutory Authority\" which was established under the Uttar Pradesh Industrial Area Development Act, 1976, is entitled to registration under Section 12AA of the Act. Similarly, learned counsel also relied on the ratio laid down in the case of CIT vs. KrishiUtpadanMandiSamiti, (2011) 331ITR 154, where it was observed that the Samiti is entitled for the registration under Section 12AA of the Act. Lastly, he Printed from counselvise.com 12 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority made a request that the appeals filed by the department may kindly be dismissed. 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 to register these institutions under Section 12A. In view of the objects, there is no good reason forholding that statutory bodies could not be treated as \"charitable\" within the meaning of Section 2(15). The object of the\" Authority\" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 &13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treated to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolute orconclusive. It is subject to control of Sections 60 to 63. If it is found by keeping in view the provisions of Sections 60 to 63 that it is not so includible then such income does not qualify for any relief. Printed from counselvise.com 13 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority The contention that the assessee are earning profit has no merit as per the ratio laid down in the case Sarafa Association vs. CIT, [2007] 294 ITR 262 (MP), where it was observed that \"the promotion of commercial trade is a charitable purpose under Section 2(15) of the Act\". In the case of Director, ITO vs. Govinda, 315 ITR 237 (Mad), it was observed that the construction of commercial complex by charitable trust is eligible. If the objects of the \"Authority\" is charitable as public utility then the benefit being a charitable trust is eligible as per the ratio laid down in the case of CIT vs. Gujarat Maritime Board, [2007] 295 ITR 561 (SC), where it was observed that:- \"... in Section 2(15), namely, \"any other object of general public utility\". From the said decisions it emerges that the said expression is of the widest connotation. The word \"general\" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [CIT vs. Ahmedabad Rana Caste Association, [1983]140 ITR 1 (SC)]. The said expression would prima facie include all objects which 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 Printed from counselvise.com 14 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority 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 the homeless people within the State of U.P. The management and control of the Authority is essentially with the State Government and there is no profit motive as the income earned by the Authority is deployed for the development of the State. Further, it may be mentioned that Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of Sections 11 & 12 as provided in Section 12A. Therefore, once the procedure is complete as provided in sub-section (1) of Section 12AA and a certificate is issued granting registration to the trust or institution the certificate is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution, and (ii)about the objects of the trust or institution. Section 12A stipulates that the provisions of Sections 11 & 12 shall not apply in relation to income of a trust or an institution unless the conditions stipulated therein are fulfilled. Thus, granting of registration under Section 12AA denotes that the conditions laid down in Section 12A stand fulfilled. The effect of such a certificate of registration under Section 12AAA, therefore, cannot be ignored or wished away by the Assessing Officer by adopting a stand that the trust or Printed from counselvise.com 15 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority institution is not fulfilling the conditions for applicability of Sections11 & 12. In the case of Gestetner Duplicators P. Ltd. vs. CIT [1979] 117 ITR 1 (SC), the Apex Court was called upon to determine as to whether the contribution made by the employer should be treated as a business expenditure, the requirement being contribution should be made to a recognized provident fund. Needless to mention that this Hon'ble Court in the case of CIT vs. M/s. U.P. Forest Corporation Ltd., in Income Tax Appeal No. 70 of 2009 observed that the Forest Corporation being an statutory entity is entitled for the registration under Section12A of the Act. The said observations was upheld by the Hon'ble Apex Court vide its order dated 12.05.2011 in Special Leave Petition No. (Civil) No. 2590/2011. We may also like to refer a C.B.D.T. Circular No. 11/2008 dated 19.12.2008, wherein the applicability of the commercial activities in respect of charitable purpose has been clarified. The said circular is reproduced as below:- \"2.2. 'Relief of the poor' encompasses 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 as commercial activity, subject, however, to the conditions stipulated under Section 11(4A) or the seventh proviso to Section10(23C), which are that – (i) the business should be incidental to the attainment of the objectives of the entity, and Printed from counselvise.com 16 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority (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 noncommercial 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 assessee-trust are admittedly charitable in nature. Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15). There is no material/evidence brought on record by the revenue which may suggest that the assessee was conducting its affairs on commercial lines with motive to earn profit or has deviated from its objects as detailed in the trust deed of the assessee. In these facts and circumstances of the case, the proviso to Section 2(15) is not applicable to the facts and circumstances of the case, and the assessee was entitled to exemption provided under Section 11 for the relevant assessment year. From the record, it also appears that the \"Authority\" had been maintaining infrastructure, development and reserve fund IDRF as per the notification dated 15.01.1998, the money transferred to this funds is to be utilized for the purpose of project as specified by the committed having constituted by Printed from counselvise.com 17 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority the State Government under the said notification and the same could not be treated to be belonging to the \"Authority\" or the receipt is taxable nature in its hands. For this reason also, it appears that the funds are utilized for general utility. Moreover, in the instant case, the Assessing Officer has not given any defective in computation of income as per Section11 as submitted in Form-XB, but observed that the activities of the assessee are not charitable. The activities of the assessee’s are genuine. So, then it is so, then we find no reason to interfere with impugned orders passed by the Tribunal. The same are hereby sustained along with reasons mentioned therein. The answer to the substantial questions of law are in favor of the assessee and against the department. In view of above, all the appeals filed by the department are dismissed, as stated above.” 5.7 The case of the appellant is identical to the case reported above. Thus, the Hon’ble jurisdictional High Court has decided the impugned issue which is in favour of the appellant. The Hon’ble Apex court in the case of Ahmedabad Urban Development Authority (Civil Appeal no. 21762 of 2017) had an occasion to deal with the identical issue. In this case the appellant was also a co-respondent. The Hon’ble Supreme Court in its Decision dated 19.10.2022 has held as under: “IV. Summation of conclusions 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the Printed from counselvise.com 18 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority interpretation of the changed definition of “charitable purpose” (w.e.f. 01.04.2009), as well as the later amendments, and other related provisions of the IT Act. A. General test under Section 2(15) A.1. It is clarified that an assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration (“cess, or fee, or any other consideration”); A.2. However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that (i) the activities of trade, commerce or business are connected (“actual carrying out…” inserted w.e.f. 01.04.2016) to the achievement of its objects of GPU; and) (ii) the receipt from such business or commercial activity or service in relation thereto, does not exceed the quantified limit, as amended over the years (Rs. 10 lakhs w.e.f. 01.04.2009; then Rs. 25 lakhs w.e.f. 01.04.2012; and now 20% of total receipts of the previous year, w.e.f. 01.04.2016); A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be “trade, commerce, or business” or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of “cess, or fee, or any other consideration” towards “trade, commerce or business”. In this regard, the Court has clarified Printed from counselvise.com 19 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority through illustrations what kind of services or goods provided on cost or nominal basis would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. A.4. Section 11(4A) must be interpreted harmoniously with Section 2(15), with which there is no conflict. Carrying out activity in the nature of trade, commerce or business, or service in relation to such activities, should be conducted in the course of achieving the GPU object, and the income, profit or surplus or gains must, therefore, be incidental. The requirement in Section 11(4A) of maintaining separate books of account is also in line with the necessity of demonstrating that the quantitative limit prescribed in the proviso to Section 2(15), has not been breached. Similarly, the insertion of Section 13(8), seventeenth proviso to Section 10(23C) and third proviso to Section 143(3) (all w.r.e.f. 01.04.2009), reaffirm this interpretation and bring uniformity across the statutory provisions. B. Authorities, corporations, or bodies established by statute B.1. The amounts or any money whatsoever charged by a statutory corporation, board or any other body set up by the state government or central governments, for achieving what are essentially ‘public functions/services’ (such as housing, industrial development, supply of water, sewage management, supply of food grain, development and town planning, etc.) may resemble trade, commercial, or business activities. However, since their objects are essential for advancement of public purposes/functions (and are accordingly restrained by way of statutory provisions), such receipts are prima facie to be excluded from the mischief of business or commercial receipts. This is in line with the larger Printed from counselvise.com 20 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority bench judgments of this court in Ramtanu Cooperative Housing Society and NDMC (supra). B.2. However, at the same time, in every case, the assessing authorities would have to apply their minds and scrutinize the records, to determine if, and to what extent, the consideration or amounts charged are significantly higher than the cost and a nominal mark-up. If such is the case, then the receipts would indicate that the activities are in fact in the nature of “trade, commerce or business” and as a result, would have to comply with the quantified limit (as amended from time to time) in the proviso to Section 2(15) of the IT Act. B.3. In clause (b) of Section 10(46) of the IT Act, “commercial” has the same meaning as “trade, commerce, business” in Section 2(15) of the IT Act. Therefore, sums charged by such notified body, authority, Board, Trust or Commission (by whatever name called) will require similar consideration – i.e., whether it is at cost with a nominal mark-up or significantly higher, to determine if it falls within the mischief of “commercial activity”. However, in the case of such notified bodies, there is no quantified limit in Section 10(46). Therefore, the Central Government would have to decide on a case-by-case basis whether and to what extent, exemption can be awarded to bodies that are notified under Section 10(46). B.4. For the period 01.04.2003 to 01.04.2011, a statutory corporation could claim the benefit of Section 2(15) having regard to the judgment of this Court in the Gujarat Maritime Board case (supra). Likewise, the denial of benefit under Section 10(46) after 01.04.2011 does not preclude a statutory corporation, board, or whatever such body may be called, from claiming that it is set up for a charitable purpose and Printed from counselvise.com 21 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority seeking exemption under Section 10(23C) or other provisions of the Act.” 5.8 If the case of the appellant is examined in the light of the above quoted judgements, it is seen that the activities of the appellant are in the nature of charitable activity and its profits are exempted. 5.9 The appellant was carrying out sovereign function for the state. Development of areas is the responsibility of the state. These functions were carried out by the state through the appellant Local Authority which was created and empowered by the Act of the state. Carrying out sovereign functions cannot be equated with carrying out trade and commerce for profits. Therefore, the appellant could not be treated as an organization conducting trade and commerce for profits. 5.10 In view of the above discussion and position of law as decided/laid out by Hon’ble Apex Court, it is held that the AO was not justified in holding that the appellant is not engaged in charitable activities. Further the AO was not justified in denying the benefit of exemption to the appellant and treating its receipt/income as taxable. Accordingly, the ground no. 1 and 2 of appellant’s appeal are allowed. 6. Ground Nos. 3 to 8 of appeal are relating to treating the surplus of Rs.31,58,43,289/- as income of the appellant and taxing it. 6.2 In ground No.1 and 2, it has been held that the profits/surplus in the income and expenditure account of the appellant are exempted. It is not the case of the AO that the consideration charged by the appellant are significantly higher than the cost and a nominal markup. In the instant case the AO has not examined the issue as to whether the Printed from counselvise.com 22 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority consideration for sale or services charged by the appellant body are significantly higher. The AO has not examined any comparable and arrived at the conclusion that the considerations are significantly higher. As the AO has not deliberated upon the impugned issue and as the issue donot emanate from the assessment order, therefore, the same need not be adjudicated in appellate proceedings. Consequently, the appeal in respect of ground no.3 to 8 are allowed. 7. In view of the above discussion, the appeal of the appellant is “Allowed”. 8. Considering the fact that the Ld. CIT(A) has relied on the ratio laid down by the Hon'ble High Court in the case of Lucknow Development Authority, in the absence of any factual differences brought on record by the Revenue and also in the absence of any contrary decision brought to the notice of the Bench, we find no reason to interfere with the findings and the conclusion of the Ld. CIT(A). According, the Grounds of Appeal of the Revenue are dismissed as meritless. 9. In the result Appeals of the Revenue are dismissed. Order pronounced in the Open Court on this 27th Day of February, 2026 Sd/- Sd/- (AMITABH SHUKLA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27/02/2026 R. Naheed * Printed from counselvise.com 23 ITA Nos. 1461, 1462, 1463, 1438 & 1439/Del/2025 DCIT Vs. Agra Development Authority Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "