The ACIT (Exemptions), Circle-1, Ahmedabad V. Gujarat Industrial Development Corporation, Gandhinagar

ITA 106/AHD/2020

AI Insights

The case involves multiple appeals by the Revenue against the Gujarat Industrial Development Corporation (GIDC) concerning the denial of tax exemptions under Sections 11 and 12 of the Income Tax Act, 1961 for the assessment years 2012-13, 2013-14, and 2016-17. The primary legal issue was whether the activities of GIDC, which included the sale of land and development of industrial estates, constituted 'trade, commerce, or business' under the Act, thereby disqualifying it from the exemptions. The Tribunal considered previous judgments by the Gujarat High Court and the Supreme Court, which had ruled in favor of the Corporation, recognizing its activities as charitable and not commercial. Consequently, the Tribunal dismissed the Revenue's appeals, aligning with the judicial precedents that supported the Corporation's stance.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114270 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 29-01-2020
• Other Referred Cases: ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority, CIT Vs Fr. Mullers Charitable Institutions, Sheth Mafatlal Gagalbhai Foundation Trust Vs. DIT (E), Gurdayal Berlia Charitable Trust Vs ITO, S.P. Memorial Trust Vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Benefit of exemption
• Section: 12; 11; 143(3); 234B; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The ACIT (Exemptions), Circle-1, Ahmedabad (Appellant) Vs Gujarat Industrial Development Corporation Block No. 4, 2 nd Floor, Udyog Bhavan, Sector-11, Gandhinagar-382010 PAN: AABCG8033D (Respondent) Gujarat Industrial Development Corporation Block No. 4, 2 nd Floor, Udyog Bhavan, Sector-11, Gandhinagar-382010 PAN: AABCG8033D (Appellant) Vs The DCIT, (Exemptions), Circle- 1, Ahmedabad (Respondent) Assessee Represented: Shri S.N. Soparkar, Sr. Adv. & Shri Dhrunal Bhatt, and Ms. Urvashi Shodhan, A.R. Revenue Represented : Shri A.P. Singh, CIT-DR ITA Nos: 105, 106 & 11/Ahd/2020 Assessment Years: 2012-13, 2013-14 & 2016-17 ITA No: 1866/Ahd/2019 Assessment Year 2016-17 I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 2 Date of hearing : 05-04-2023 Date of pronouncement : 09-06-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- ITA Nos. 105 & 106/Ahd/2020 are filed by the Revenue as against the separate Appellate orders both dated 29.11.2019 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad, arising out of the assessment orders passed under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2012-13, 2013-14. 2. ITA No. 11/Ahd/2020 is filed by the Revenue and ITA No. 1866/Ahd/2019 is filed by the Assessee as against the Appellate order dated 14.10.2019 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad, arising out of the assessment order passed under section 143(3) of the Act relating to the Assessment Year (A.Y) 2016-17. Since common issues are involved in all these appeals, the same are disposed of by this consolidated order. Therefore Assessment Year 2012-13 is taken as the lead case for the sake of convenience. 3. The brief facts of the case is that the assessee is a Corporation established under the Gujarat Industrial Development Act, 1962 and carrying out the development of industrial estate, roads, drainage, wager supply, etc as I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 3 General Public Utility (for short G.P.U.). For the Assessment Year 2012-13, Assessment order was passed under section 143(3) of the Act on 25-03-2015, wherein the AO has observed that the assessee is involved in activity of sale of land/plots, hence it is carrying out activities of advancement of general public utility in the nature of trade, commerce, business and accordingly he applied proviso of section 2(15) and income was assessed as regular business income. Further, the AO has denied exemption claimed u/s. 11 and 12 of the Act and demanded tax thereon. On appeal the main issue regarding applicability of proviso of section 2(15) was confirmed by the CIT (Appeals) vide order dated 11-07- 2014. On further appeal, the Co-ordinate Bench of the Tribunal vide its order dated 10-11-2017 in ITA No. 2700/Ahd/2016 has held that activities of the assessee are for charitable purposes as contemplated in section 2(15) of the Act. The Hon'ble ITAT further observed that all the other issues raised in the appeals filed by assessee as well as by the Revenue would require re-examination in the light of conclusion drawn in favour of the assessee towards applicability of section 2(15) of the Act and thereby remitted the case to the file of the Ld. A.O. 3.1. In the meantime, the Hon'ble Gujarat High Court has adjudicated the matter of the assessee, in Tax Appeal Nos. 380, 381 and 382 of 2017 dated 28-06-2017. These three tax appeal pertain to AY 2009-10 to AY 2011-12 wherein I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 4 the Hon’ble High Court framed the following Question of Law: [A] Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in allowing the assessee's appeal, negating the finding of the CITG) as well as the Assessing Officer denying the benefits of Section 11 and 12 of the Income Tax Act? [B] Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in giving the benefit of section 11 and 12 which the Assessing Officer disallowed by invoking the provision of Section 2(15) r.w.s. 13(8) of the Act. 3.2. The Hon'ble Gujarat High Court relying on its judgment in assessee’s own case held that the activities of the assessee are for charitable purpose and eligible for exemption u/s. 11 of the Act observing as follows: “...17. Applying aforesaid decision to the facts of the case on hand and the objects and purpose for which the assessee Corporation is established and constituted under the provisions of the Gujarat Industrial Development Act, 1962 and collection of fees or cess is incidental to the object and purpose of the Act, and even the even the case would not fall under the second part of proviso to Section 2(15) of IT Act. As the activities of assessee is for advancement of any other object of general public utility, the same can be for “charitable purpose” and therefore the assessee Corporation shall be entitled to exemption under section 11 of the Act. No error has committed by the learned Tribunal in holding so. We are in complete agreement with the view taken by the learned Tribunal. 18. In view of the above and for the reasons aforestated, no substantial question of law arises. All these Tax appeals deserves to be dismissed and are accordingly dismissed.” 3.3. For the subsequent assessment years, the Hon'ble High Court in Revenue’s tax Appeal nos. 535, 536, 537 539 of 2018 dated 07-08-2018 has again decided the I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 5 appeals in favour of the assessee relating to the Assessment Years 2012-13 & 2013-14, even in those judgments, there is no direction for re-examination of other issues by the Assessing Officer. 3.4. In this background, the AO has issued show cause notice dated 22-12-2018 which is reproduced at para-9 of the assessment order, wherein he has asked the assessee to state as to why income earned by the assessee corporation on sale of land/plots should not be treated as commercial activity and hit by section 2(15) of the Act and why exemption claimed under sections 11 & 12 should not be disallowed. 3.5. The assessee has filed its reply vide letter dated 24- 12-2018, wherein it has drawn the attention of the AO regarding passing of various appellate orders by Hon’ble ITAT, Ahmedabad as well as Hon'ble Gujarat High Court. However, this explanation of the assessee has not been accepted by the Ld. AO and he once again applied the provisions of section 2(15) of the Act and relied on various Tribunal decisions and held that the activities of the assessee are not for charitable purpose. The A.O. further observed as Revenue’s SLP before Hon’ble Supreme Court is pending judgment and in order to keep the issue alive, the A.O. held that activity of the assessee is not charitable in nature. Thus the AO has re-computed the income of the assessee and assessed the total income as if the assessee I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 6 carried out business activity by denying the exemption claimed u/s. 11 and 12 of the Act and demanded taxes thereon. 3.6. Aggrieved against the assessment order, the assessee filed appeal before Ld. CIT(A). During the second round of appeal, the Ld. CIT(A) after considering Gujarat High Court judgment in assessee’s own case held as follows: “....5.6 On perusal of the material available on record, it is found that the AO has passed the impugned order on the basis of order of Hon'ble ITAT, Ahmedabad and computed the income of the appellant corporation as if it is carrying out business activity. It is found that Hon'ble ITAT, Ahmedabad has categorically held that activities of the trust are charitable in nature as per provisions of section 2(15) of the Act. The Hon'ble ITAT has only directed the AO to adjudicate other issues in the light of provisions of section 2(15) after considering conclusion drawn in favour of the appellant. In entire order of the Hon'ble ITAT, there is no mention of any direction regarding taxing such income as business income or denying exemption under section 11 and 12 of the Act. The plea of the AO that he has computed income in this manner to give effect to order of Hon'ble ITAT is incorrect as he was required to compute income of the appellant as is computed in the case of a charitable institution and after applying provisions of section 11 and 12 of the Act. It is found that during the course of assessment proceedings, the appellant vide letters dated 20 th October, 2018 and 24 th December, 2018 has brought on record the fact that Hon'ble Gujarat High Court has already dismissed departmental appeal for present assessment year and held that activities carried out by the appellant are charitable in nature. This fact is even accepted by the AO in impugned assessment order as well as in the remand report referred supra and still strangely has not computed income as per provisions of section 11 and 12 of the Act only on the ground that the department has filed an SLP before the Hon'ble Supreme Court and the matter has not attained finality. This observation of the AO cannot be accepted in view of binding decision of Hon'ble Gujarat High Court in the appellant's own case, it is a matter of fact that the Hon'ble Gujarat High Court in its order has not given any direction for adjudicating the other issues in the light of I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 7 favorable decision as per section 2(15) of the Act as held by the Hon'ble ITAT and this fact is also admitted by the Assessing Officer at para-6 of the remand report. It is observed that as decision of the Hon'ble Gujarat High Court was rendered prior to passing of impugned order and as this matter was already on record of the AO, hence there was no reason for him to compute the income ignoring the provisions of section 11 and 12 of the Act and such computation made by the AO is against the observations made by the appellate authorities referred supra. It is brought on record by the ARs of the appellant that even while passing the order giving effect of A.Y. 2011-12, the AO has computed income as shown in return of income. Considering these facts, the AO is directed to treat the activities of the appellant for advancement of any other object of general public utility for "charitable purpose" and therefore, the appellant corporation shall be entitled to exemption under Section 11 of the Act. In view of these facts, all these grounds of appeal are allowed. 6. The appellant in ground nos. 5 to 16 has challenged the computation of income as made by the AO in impugned order. As the entire issue involved in the appeal is adjudicated in favour of the appellant in preceding paras, these grounds of appeal have become infructuous, hence the same are not required to be adjudicated and accordingly, they are dismissed. 9. Ground no.17 of appeal against charging of interest u/s 234A. 234B and 234C of the Act being mandatory and consequential to the determination of total income is dismissed.” 4. Aggrieved against the Appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal in ITA No. 105/Ahd/2020 for A.Y. 2012-13: 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in directing the AO to treat the activities of the assessee advancement of any other object of general public utility is charitable in nature, negating the findings of the Assessing officer that the assessee clearly covered by the provisos to section 2(15) r.w.s 13(8) of the Act and the assessee has forfeited all the exemption of section 11 and 12 of the Act in place to uphold the decision of AO? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing the premium on land and shades of Rs.13,65,83,14,363/- in view of applicability of provisions of section 2(15) I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 8 r.w.s 13(8) of the Act and thereby rendering the assessee ineligible for claim of exemptions under section 11 &12 ? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing the issue of carry forward and set off of deficit of current year against the income of the subsequent years, considering it as application of income u/s. 11(1)(a) in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing unpaid leave encashment in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in allowing the provision for diminution of investment of Rs.6,58,500/- in view of applicability of provisions of section 2(15) r.w.s 13(8) of the Act in place to uphold the decision of AO on merits? 5. Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submitted before us copy of the Supreme Court Judgment in Civil Appeal No. 21762 of 2017 in the case of ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority and Ors. dated 19/10/2022 which has settled the issue by dismissing the Revenue’s appeal in D. Nos. 39525/2017, 15525/2019, 21237- 2019; 15488/2019; 15489/2019 and 21237/2019; CA Nos. 3971- 3972/2018, 170/2019; SLP (C) No. 15055/2019 vide Para 254(ii) of the judgment as follows: “....254. In accordance with the foregoing discussion, and summary of conclusions the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiala Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot Improvement Trust Improvement Trust, Hansi, and the Special Leave Petitions filed against the Gujarat Maritime Board168 and Karnataka Water Supply and Drainage Board are rejected. (ii) The revenue's appeals against Ahmedabad Urban Development Authority, the Gujarat Housing Board, the Gandhinagar Urban I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 9 Development Authority, Rajkot Urban Development Authority, Surat Urban Development Development Authority, Jamnagar Area Development Authority, and the Gujarat Industrial Development Corporation are rejected. Likewise, the revenue's appeals against Agra Development Trust, UP Awas Evam Vikas Parishad, Raebarel, Development Authority, Rajasthan Housing Board, Mangalore Urban Development Authority; Mathura Vrindavan Development Authority, Meerut Development Authority, Belgaum Development Authority". Moradabad Urban Development Authority, Yamuna Expressway Industrial Development Authority, Greater Noida Industrial Development Authority, New Okhla Industrial Development Authority and Karnataka Industrial Areas Development Board are rejected.” 6. The relevant operative portion of the Hon’ble Supreme Court judgment are as follows: “.....D. What kinds of income or receipts may not be characterized as derived from trade, commerce, business or in relation to such activities, for a consideration (i) Statutory corporations, authorities or bodies 176. It would be essential now to deal with certain kinds of receipts which GPU charities, typically statutory housing boards, regulatory authorities and corporations may be entitled to, if mandated to collect or receive. During the course of hearing, learned counsels highlighted that statutory boards, and corporations have to recover the cost of providing essential goods and services in public interest, and also fund large scale development and maintain public property. These would entail recovering charges or fees, interest and also receiving interest for holding deposits. It was further pointed out that in some cases, income in the form of rents– having regard to the nature of the schemes which the concerned board, trust or corporation may be mandated or permitted to carry on, has to be received. For instance, in some situations, for certain kinds of properties, the boards may be permitted only to lease out their assets and receive rents. 177. The answers to these, in the opinion of this court, are that the definition ipso facto does not spell out whether certain kinds of income can be excluded. However, the reference to specific provisions enabling or mandating collection of certain rates, tariffs or costs would have to be examined. Generically, going by statutory models in enactments (under which corporations boards or trust or authority by whatsoever name, are set up), the mere fact that these bodies have to charge amounts towards supplying goods or articles, or rendering services i.e., for fees for providing typical essential services like providing water, distribution of food grains, distribution of medicines, maintenance of roads, parks etc., ought not to be I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 10 characterized as “commercial receipts”. The rationale for such exclusion would be that if such rates, fees, tariffs, etc., determined by statutes and collected for essential services, are included in the overall income as receipts as part of trade, commerce or business, the quantitative limit of 20% imposed by second proviso to Section 2(15) would be attracted thereby negating the essential general public utility object and thus driving up the costs to be borne by the ultimate user or consumer which is the general public. By way of illustration, if a corporation supplies essential food grains at cost, or a marginal mark up, another supplies essential medicines, and a third, water, the characterization of these, as activities in the nature of business, would be self-defeating, because the overall receipts in some given cases may exceed the quantitative limit resulting in taxation and the consequent higher consideration charged from the user or consumer. ..................... 185. As far as boards and corporations which are tasked with development of industrial areas, by statute, the judgments of this court, in Shri Ramtanu Cooperative Housing Society (supra) and Gujarat Industrial Development Corporation (supra) have declared that these bodies are involved in ‘development’ and are not essentially engaged in trading. In Shri Ramtanu Cooperative Housing Society (supra) this court, by a five judge bench, held that the Maharashtra Industrial Development Corporation is not a trading concern, and observed as follows: “These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and management of the Corporation Such a Corporation set up by the shareholders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the Act for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 11 out of any business or trade but out of sole purpose of establishment, growth and development of industries. 17. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The found of the Corporation consists of moneys received from the State Government, all fees, costs and charges received by the Corporation, all moneys received by the Corporation from the disposal of lands, buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner. The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct. The Corporation accepts deposits from persons, authorities or institutions to whom allotment or sale of land, buildings, or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appointed by the State Government. These provisions in regard to the finance of the Corporation indicate the real role of the Corporation viz. the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation. There are various departments of the Government which may have excess of income over expenditure. ************** ******** ********* 20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in this State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estate or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 12 towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one.” 186. In Shri Ramtanu Cooperative Housing Society (supra) no doubt, this court did not have to decide whether the Maharashtra Industrial Development Corporation was entitled to tax exemption. However, it examined the provisions of the Act, and the ratio, that such industrial development corporations are not engaged in trading, is binding. Like in that case, here too, the concerned state Acts (Gujarat Industrial Development Act, 1962 and the Karnataka Industrial Areas Development Act, 1966) tasked the boards with planning and development of industrial areas. Their personnel are appointed under the enactments and are deemed to be public servants. The state government is empowered to acquire land, in exercise of eminent domain power, for their purposes; their audits are by the Accountant General of the concerned state, or auditors appointed by the state. They are authorized by law, to levy rates and charges, for the services they provide, on pre-determined basis. In the light of these provisions, clearly, these boards and authorities perform objects of general public utility; and they are not driven by profit motive. 187. There is a two-fold distinction between the now-deleted Section 10(20A) and the newly added Section 10(46) (w.e.f. 01.06.2011). Firstly, that the erstwhile Section 10(20A) applied to a limited class of undertaking i.e., the bodies, or corporations, constituted by or under any law-confined to the planning and development of housing infrastructure. However, the newly added Section 10(46) is wider in comparison and the activities of any body or authority or board constituted by or under any central or State Act with “the object of regulating or administering any activity for the benefit of the general public”, has broader import. In a sense, the newly added Section 10(46), resembles a GPU category charity classified under Section 2(15). The second distinction is that Section 10(20A) did not bar any board, or corporations, etc. from indulging in commercial activities. However, sub-clause (b) of Section 10(46) imposes such a bar, and the concerned body cannot claim tax exemption if it engages in commercial activity. 188. The manner in which GPU charities has been dealt with under the definition clause, i.e., Section 2(15), indicates that even though trading or commercial activity or service in relation to trade, commerce or business appears to be barred – nevertheless the ban is lifted somewhat by the proviso which enables such activities to be carried out if they are intrinsically part of the activity of achieving the object of general public utility. Furthermore, in the case of GPU charities there is a quantified limit of the overall receipts, which is permissible from such commercial activity. In the case of local authorities and corporations covered by Section 10(46) no such activities are seemingly permitted. I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 13 189. As was observed in the earlier part of this judgment – while considering whether for the period 01.0.2003 - 31.05.2011, statutory boards, corporations, etc. could have lawfully claimed to be GPU charities, this court has observed that the nature of such corporations is not to generate profit but to make available goods and other services for the benefit of public weal. If such corporations (falling within the description of Section 10(46)) applied to the Central Government for exemption, the treatment of their receipts, should be no different than how such receipts can and should have been treated for the purposes of determining whether they are GPU charities, during the period when Section 10(46) was not in existence. Furthermore, this court is of the opinion that having regard to the observations in Gujarat Maritime Board case (supra), the denial of exemption under one category cannot debar such corporations from claiming income exempt status under another category. (b) Summary in relation to statutory authorities/corporations 190. In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under Section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. (ii) Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the advancement of objects of general public utility, therefore are entitled to be considered as charities in the GPU categories. (iii) Such statutory corporations, boards, trusts authorities, etc. may be involved in promoting public objects and also in the course of their pursuing their objects, involved or engaged in activities in the nature of trade, commerce or business. (iv) The determinative tests to consider when determining whether such statutory bodies, boards, authorities, corporations, autonomous or selfgoverning government sponsored bodies, are GPU category charities: (a) Does the state or central law, or the memorandum of association, constitution, etc. advance any GPU object, such as development of housing, town planning, development of industrial areas, or regulation of any activity in the general public interest, supply of essential goods or services - such as water supply, sewage service, distributing medicines, of food grains (PDS entities), etc.; I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 14 (b) While carrying on of such activities to achieve such objects (which are to be discerned from the objects and policy of the enactment; or in terms of the controlling instrument, such as memorandum of association etc.), the purpose for which such public GPU charity, is set-up - whether for furthering the development or a charitable object or for carrying on trade, business or commerce or service in relation to such trade, etc.; (c) Rendition of service or providing any article or goods, by such boards, authority, corporation, etc., on cost or nominal mark-up basis would ipso facto not be activities in the nature of business, trade or commerce or service in relation to such business, trade or commerce; (d)where the controlling instrument, particularly a statute imposes certain responsibilities or duties upon the concerned body, such as fixation of rates on pre-determined statutory basis, or based on formulae regulated by law, or rules having the force of law, setting apart amenities for the purposes of development, charging fixed rates towards supply of water, providing sewage services, providing food-grains, medicines, and/or retaining monies in deposits or government securities and drawing interest therefrom or charging lease rent, ground rent, etc., per se, recovery of such charges, fee, interest, etc. cannot be characterized as “fee, cess or other consideration” for engaging in activities in the nature of trade, commerce, or business, or for providing service in relation in relation thereto; (e) Does the statute or controlling instrument set out the policy or scheme, for how the goods and services are to be distributed; in what proportion the surpluses, or profits, can be permissively garnered; are there are limits within which plots, rates or costs are to be worked out; whether the function in which the body is engaged in, is normally something a government or state is expected to engage in, having regard to provisions of the Constitution and the enacted laws, and the observations of this court in NDMC; whether in case surplus or gains accrue, the corporation, body or authority is permitted to distribute it, and if so, only to the government or state; the extent to which the state or its instrumentalities have control over the corporation or its bodies, and whether it is subject to directions by the concerned government, etc.; (f) As long as the concerned statutory body, corporation, authority, etc. while actually furthering a GPU object, carries out activities that entail some trade, commerce or business, which generates profit (i.e., amounts that are significantly higher than the cost), and the quantum of such receipts are within the prescribed limit (20% as mandated by the second proviso to Section 2(15)) – the concerned I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 15 statutory or government organisations can be characterized as GPU charities. It goes without saying that the other conditions imposed by the seventh proviso to Section 10(23C) and by Section 11 have to necessarily be fulfilled. (v) As a consequence, it is necessary in each case, having regard to the first proviso and seventeenth proviso (the latter introduced in 2012, w.r.e.f 01.04.2009) to Section 10(23C), that the authority considering granting exemption, takes into account the objects of the enactment or instrument concerned, its underlying policy, and the nature of the functions, and activities, of the entity claiming to be a GPU charity. If in the course of its functioning it collects fees, or any consideration that merely cover its expenditure (including administrative and other costs plus a small proportion for provision) - such amounts are not consideration towards trade, commerce or business, or service in relation thereto. However, amounts which are significantly higher than recovery of costs, have to be treated as receipts from trade, commerce or business. It is for those amounts, that the quantitative limit in proviso (ii) to Section 2(15) applies, and for which separate books of account will have to be maintained under other provisions of the IT Act. IV. Summation of conclusions 253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the 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. 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 (1) the activities of trade, commerce or business are connected ("actual carrying our..."inserted w.ef. 01.04.2016) to the achievement of its objects of GPU: and (1) 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); I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 16 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 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 2015), has not been breached. Similarly, the insertion of Section 13(5), seventeenth proviso to Section 10(230) 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.I. 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 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 I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 17 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 seeking exemption under Section 10(23C) or other provisions of the Act. 6.1. Thus the Ld. Senior Counsel submitted that the assessee’s activities are for General Public Utility in the nature of charitable nature and eligible for exemption u/s. 11 & 12 of the Act, which was confirmed by the Hon’ble Gujarat High Court and the Revenue appeals on the same are now dismissed by the Hon’ble Supreme Court. Therefore the other Grounds raised by the Revenue becomes infructuous and academic. Hence the same does not require any adjudication and liable to be dismissed. 7. Per contra, the Ld. D.R. appearing for the Revenue supported the order of the Lower Authorities and could not sight any adverse inference in the judgment passed by the Hon’ble Supreme Court. 8. We have perused the materials available on record and the judgments passed by the Hon’ble Supreme Court and the High Court of Gujarat respectfully following the same, we hold that the activities of the assessee for advancement of any other object of ‘General Public Utility’ for charitable purpose and therefore the assessee corporation shall be entitled to exemption u/s. 11 of the I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 18 Act. It is further clarified by the Hon’ble Suprme Court in the very same case of ACIT vs. Ahmedabad Urban Development Authority reported in [2022] 144 taxmann.com 78 (SC) wherein it has been clearly held that the Revenues Appeals are dismissed as far as statutory Corporations/Boards observing as follows: “....3. It was urged on behalf of the revenue, that the clarification it seeks is necessary, because in Para 253H and in Para 254, it has been precluded from examining the facts and assessing the concerned assessment years, in relation to the assesses in these appeals. It was urged that the conclusions recorded in the judgment and those in the said two paragraphs, preclude it from dealing with the assessments of parties before this court and furthermore, the dismissal of the revenue's appeals will preclude an examination of the merits for these assesses in future, as well. 4. A plain reading of the conclusions recorded in Para 253(A), (B), (C), (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- Sh in relation to the assessment years in question, whereas in Para 253 (F), the court remitted the matter for examination and orders by the assessing officer. Similarly, the conclusion in Para 253 G. was conclusive with respect to the claim of private trusts, the appeals were dismissed. These conclusions are accurately reflected in the final, operative directions in Para 254. In Para 254 (i) to (iv), the conclusions recorded are against the revenue. However, in Para 254 (v), (vi), (vii) and (vii), the conclusions, are in favour of the revenue. 5. The reference to application of the law declared by this court's judgment, therefore, has to be understood in the context, which is that they apply for the assessment years in question, which were before this court and were decided; wherever the appeals were decided against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for.” 8.1. Thus it is seen from the above judgment in Miscellaneous Application, wherever the Revenue’s appeals are dismissed they are to be treated as final. Respectfully following the same, we hereby dismiss the appeal filed by the Revenue. I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 19 9. In the result, the appeal filed by the Revenue in ITA No. 105/Ahd/2020 is hereby dismissed. ITA No. 106/Ahd/2020 for A.Y. 2013-14 and ITA No. 11/Ahd/2020 for A.Y. 2016-17 10. Since identical grounds are raised by the Revenue in ITA Nos. 106/Ahd/2020 & 11/Ahd/2020 relating to Assessment Years 2013-14 & 2016-17, respectfully following the decision passed in ITA No. 105/Ahd/2020 for the Assessment Year 2012-13, these two appeals filed by the Revenue are also dismissed. ITA No. 1866/Ahd/2019 (Assessee’s Appeal for A.Y. 2016-17 11. The Grounds of Appeal raised by the Assessee are as follows: 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the appellant's ground of appeal that, for all practical purposes, it is an agent of the State Government of Gujarat and, therefore, by virtue of the provisions contained in Article 289 of the Constitution of India, it cannot be subjected to assessment and levy of tax under the Income-tax Act, 1961 (hereinafter referred to as "Act"). 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that the receipts from premium on land given on lease are recurring and operational receipts, thereby considering 40% of lease income as revenue receipt in the present assessment year. 3.1 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the Assessing Officer that the appellant has violated the provisions of section 11(5) of the Act with regard to the investment made in Gujarat Alkalies & Chemicals Limited and Gujarat Lease Finance Limited, thereby attracting the provisions of section 13(1)(d) of the Act. 3.2 Without prejudice to the foregoing, the learned CIT(A) has erred in not considering the decision of Hon'ble Gujarat High Court (Jurisdictional Court) in the case of Commissioner of Income-tax Vs. Orpat Charitable Trust [2015] 55 taxmann.com 211 while applying the provisions of section 13(1)(d) of the Act. I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 20 12. At the outset, the Ld. Senior Counsel stated that Ground No. 1 & 2 raised by the assessee are not pressed. Recording the same, Ground No. 1 & 2 are hereby dismissed. 13. Regarding Ground No. 3, the assessee violated the provisions of Section 11(5) of the Act with regard to the investments made in Gujarat Alkalies and Chemicals Ltd. (GACL) and Gujarat Lease Finance Ltd. (GLFL) thereby attracting provisions of section 11(1)(d) of the Act. The Ld. Senior Counsel submitted that the Ld. CIT(A) followed identical disallowance made by the Assessing Officer in the case of Gujarat Maritime Board (GMB) relating to the Assessment Year 2013-14, wherein GMB also made investments in GACL and GLFL, both are not treated as ‘public sector companies’ as per Section 11(5)(vii) r.w.s. 2(36A) of the Act. Therefore the investments made by the assessee in these two companies namely GACL and GLFL violated the provisions of section 11(5) thereby attracting provisions of section 13(1)(d) of the Act. However the Ld. CIT(A) held that there is no investment made by the assessee during the Assessment Year 2016-17 in GACL and GLFL and only dividend income of Rs. 2,26,39,830/- on past investment has been received. Therefore the Ld. CIT(A) restricted this amount only, while giving effect to the appellate order. 13.1. The Ld. Senior Counsel further submitted that this issue is been considered by Co-ordinate Bench of this Tribunal in the case of Gujarat Maritime Board for the Assessment Year 2016-17 in ITA No. 171/Ahd/2020 dated 29.03.2023 wherein the Hon’ble Court held that violation of section 13(1)(d) cannot lead to denial of I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 21 exemption u/s. 11 and 12 of the Act to the total income of the trust. Thus the Ld. Counsel pleaded the assessee trust would not disentitle the complete benefit of section 11 and 12 of the Act. 14. Per contra, the Ld. D.R. appearing for the Revenue supported the order passed by the Lower Authorities and requested to uphold the same. 15. We have perused the orders passed by the lower authorities as well as the Co-ordinate Bench decision in the case of Gujarat Maritime Board (cited supra), the Co-ordinate Bench after considering the Karnataka High Court judgment in the case of Fr. Mullers Charitable Institutions, Jurisdictional High Court in the case of S.P. Memorial Trust and Mumbai High Court judgment in the case of Sheth Mafatlal Gagalbhai Foundation Trust allowed the issue in favour of the assessee observing as follows: “.....12. We have heard the rival contentions and perused the material on record. Section 13(1)(d) provides that exemption from tax to charitable or religious trust / institution will be forfeited if any funds of the trust / institution are invested or deposited, otherwise than in any one or more of the forms or modes specified therein. We observe that the Karnataka High Court, in the case of CIT Vs Fr. Mullers Charitable Institutions [2014] 363 ITR 230 (Karn) held that perusal of section 13(1)(d) of the Act makes it clear that it is only the income from such investment or deposit, which has been made in violation of section 11(5) of the Act, that is liable to be taxed and violation of section 13(1)(d) does not result in denial of exemption under section 11 to the total income of the assessee trust. The aforesaid judgement of Karnataka High Court is based on the judgement of Bombay High Court, in the case of DIT(E) Vs. Sheth Mafatlal Gagalbhai Foundation Trust [2001] 249 ITR 533 (Bom). In the case of Jamsetji Tata Trust Vs JDIT (E) [2014] 101 DTR (Trib) 305 (Mum), it was held that violation of section 13(1)(d) deprives exemption only to the income from investments not permitted under section 11(5) and not to the entire income of the trust, if the other income of the trust, otherwise fulfils the condition for exemption. Therefore, the exemption under section 11 would still be available to the assessee in respect of income, to the extent the same is derived in conformity to section 11 and applied during the year for the purposes of the trust. In the case of Gurdayal Berlia I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 22 Charitable Trust Vs ITO [1990] 34 ITD 489 (Bom), it was held that non- fulfilment of the condition of investment under section 11(5) cannot deprive the trust of exemption of its other income, which has already been granted to it in the earlier years. The non-fulfilment of the condition under section 11(5) would only make a portion of the relevant income as specified under section 164(1), liable to tax. The jurisdictional Gujarat High Court in the case of CIT v S.P. Memorial Trust in Tax Appeal number 187 of 2005 vide order dated 13-11-2004 also allowed this issue in favour of the assessee. While passing the order, Gujarat High Court observed as under: “5. Having heard learned advocates for the parties we are of the opinion that the Tribunal was justified in upholding the order passed by CIT(A). The CIT(A) has very clearly observed that the provisions of Section 11(l)(a) are very clear and provide that the income derived from the property held under trust shall not be included in the income to the extent it is applied for the charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which the restriction u/s 11(5) applies. The Tribunal has relied upon its own decision on a similar issue rendered in ITA No. 644 to 646/Rjt/2003 dated 22.12.2003. We are in complete agreement with the reasonings adopted by the CIT(A) as well as Tribunal. 6. Even otherwise, the law on the subject is also well settled. In the case of Fr. Mullers Charitable Institutions (supra) the Karnataka High Court has held that a perusal of section 13(l)(d) of the Income-tax Act, 1961 makes it clear that it is only the income from such investment or deposit which has been made in violation of section 11(5) of the Act that is liable to be taxed and violation under section 13(l)(d) does not result in denial of exemption under section 11 to the total income of the assessee and that where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of section 13(l)(d) of the Act, tax shall be levied on the relevant income or part of the relevant income at the maximum marginal rate. Therefore, we do not see any reason in interfering with the impugned orders. 7. In the premises aforesaid, question raised in the present appeals is answered in favour of assessee and against the revenue. Appeals stand dismissed accordingly.” 12.1 In view of the aforesaid legal precedents, in our considered view, only the relevant income falling within the mischief of section 13(1)(d) of the Act will lose the benefit of exemption under section 11 and 12 of the Act and the balance of the total income of the trust will remain eligible for the benefit of exemption under section 11 of the Act. In other words, violation of section 13(1)(d) cannot lead to denial of exemption under section 11 and 12 of the Act, to the total income of the trust.” I.T.A Nos. 105, 106 & 11/Ahd/2020 & Ors. A.Ys. 2012-13, 2013-14 & 2016-17 Page No ACIT(Exemptions) vs. Gujarat Industrial Development Corporation 23 15.1. Respectfully following the above judicial precedents, the grounds raised by the assessee is hereby allowed. As there is no new investments made by the assessee both in GACL and GLFL during the present assessment year, the disallowance shall be restricted only to the dividend income of Rs. 2.26 crores only and exemption u/s. 11 and 12 of the Act cannot be denied to the assessee. Thus the ground no. 3 raised by the assessee is allowed. 16. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the open court on 09 -06-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 09/06/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद